Behind the deal: Why Carvana purchased 150 acres in Surprise for a facility that could employ hundreds

Behind the deal: Why Carvana purchased 150 acres in Surprise for a facility that could employ hundreds

 
Article Originally Posted By PhoenixBusinesJournal On December 8, 2021
 
 

Newly released documents have revealed more details about why online car retailer Carvana Co. purchased 150 acres and what it could be envisioning for a new inspection center in Surprise.

In September, Tempe-based Carvana (NYSE: CVNA) purchased the Cactus Commerce Center on the northeast corner of Cactus and Litchfield roads for $25 million. The site was previously owned by Surprise/Dysart Properties LLC.

Known as one of the fastest-growing online used car dealers in the U.S., Carvana has sought approval from Tempe to expand its headquarters and purchased a few acres in Glendale next to Loop 101, most likely for a multiple-story car vending machine.

Through a public records request obtained by the Phoenix Business Journal, city of Surprise documents from June through October show that Carvana, under the codename Project Oliver, was looking to build a 200,000-square-foot reconditioning and inspection center for its cars.

Representatives for Carvana haven't responded to requests for comment regarding its plans for Surprise.

Project could bring at least 500 jobs

The inspection center’s process is like an assembly line layout, where vehicles start at one end of the building and go through a 150-point inspection, documents said, adding that the cars could have oil changed, new tires or brakes installed, new paint and typical vehicular maintenance.

After being serviced and cleaned, the cars are then photographed for sale and stored on the site until purchased online. The proposed facility required about 92 acres of “impervious surface” to maximize the amount of parking for vehicles pre and post-inspection with a total of about 10,000 cars on site.

The facility was projected to create about 500 to 800 jobs with an average hourly wage of $20.74 for positions such as mechanics, paint technicians, drivers, inspection specialists, logistics associates, commercial truck drivers, administrative and management. The company had also announced a company-wide minimum wage of $15 to $16 an hour, documents said.

Most of the jobs would be for entry-level positions like drivers, washers and detailers; skilled mechanics; and paint technicians. Management would make an average hourly wage of $37.36.

 

$64.5 million at full buildout

At full buildout, the cost of development for the project would total an estimated $64.5 million over two years, including the cost of purchasing the site, records show.

The company hoped the proposed project would start operating in the fourth quarter of 2022, records said.

The project parameters were listed in an August request for incentives proposal to Surprise for consideration of potential public sector and utility financial incentives into the overall project cost.

The new inspection facility was part of its plan to build out a national logistics network of vehicle inspection and reconditioning centers to keep up with customer demand, documents said.

The vehicle inspection and reconditioning centers are at the “heart” of the company’s focus to grow its business by growing its inventory, documents said.

The centers also serve a “much larger geography” than the metro in which they sit. As much as 80% to 85% of the vehicle inventory at a center may be destined for out-of-state markets, records show.

At any given time, multiple sites are undergoing due diligence across the country. The keys to a successful site being selected are speed-to-operations and cost efficiency, allowing for Carvana’s rapid expansion while preserving capital wherever possible to fuel the growth, records said.

The large piece of vacant land Carvana purchased is known as Cactus Commerce Center, a BNSF Railway certified rail site that sits adjacent to another 150-acre certified site, Summit Business Park, and is nearby other corporate users such as Amazon, Japanese-owned IRIS USA and Southwest Products.