Would You Buy a Dolphin Resort in Mexico?

0:00Hey, welcome to Acquisitions Anonymous. is the internet's number one podcast about buying, selling, and investing in small businesses. Today's deal that we went through had five of us here. And good news and bad news for you guys. I did most of the talking, but anyway, I was pretty excited about it. We did a failed dolphin experience in Cancun. One of the craziest deals I've seen in a while, and it went to pretty cool places. So check out the episode and see what you think about the deal and hear what we thought about it. Here you go.

0:31Hello, another episode of Acquisitions Anonymous. We don't have 100 % ears anymore. And thumbs downing on just the plus inventory. Are you ready to take a leap into business ownership, but you don't know where to start? Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking to buy their dream business. Founded by Harvard MBA and acquisition expert Walker Deibel, the lab is your fast track to success in the search diligence and acquisition process. With hands-on support, world-class resources, and a community of like-minded entrepreneurs, acquisition lab gives you the tools and confidence to navigate every step of the journey.

1:05And we're proud to call Walker and Chelsea, the labs director, longtime friends of the podcast. They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream a reality. Visit acquisitionlab.com today to learn more and schedule your free consultation. And when you do be sure to tell them the acquisitions anonymous podcast sent you. Mills, how are you, buddy? Before we hit record, Michael goes dolphins or elevators? elevators will be next week that's a good deal dolphins or elevators hey hello bankruptcy sale okay we just we just hit record too so you're you're coming okay i'm excited well okay guys i hold up i gotta get my microphone close now can you hear me better we this is the deal second most likely in the history of the podcast to end you end you up naked in a ditch somewhere in the jungle so i want to pitch this to you guys hey boy i can't wait i love ending up in a ditch naked in the jungle would you like to be in the trailer isn't it the first deal the the number one deal that gets you that way i think was also located in central america wasn't it and it was a It was the, hold on.

2:25It was the casino that later we found out was a brothel. That was the issue. All right. So this one is from Keen Summit Capital Partners. It showed up in my email today, which shows you guys how classy I am that this deal was said to me. It is a bankruptcy sale. It is a dolphin aquarium and real estate. And it says land in Mexico, three unique parcels. It It is a bankruptcy auction in Mexico. The property is in the area of Cancun. Bid deadlines are November 21st, and the auction is November 25th, subject to bankruptcy court approval. Keene Summit Capital Partners has been retained by Leisure Investment Holdings, LLC, the debtor, pursuant to a bankruptcy court order to market the following real estate.

3:09So all the stuff, it is in Cancun, so Riviera Maya, Mexico, and it's land in the Riviera Maya. so that's like you fly into cancun and you go there so it's 1.8 acres next to the go grand hotel outlet in riviera maya and it is the largest luxury outlet mall in latin america recently opened in 2023 and 2024 it is only eight minutes from the cancun airport the land is mixed uh commercial it has part part of it includes also i'm sorry the additional thing next to it It is a 3.9-acre property with a 71 ,000-square-foot dolphin habitat. It has frontage on the Agarian Reform Highway, and you can get it there.

3:49And so basically, there are these three lots together, two of which are undeveloped and one of which is developed, and the other one is a dolphin habitat. All right, that's it. And it's called the Marineland Dolphin Adventure. Oh, they actually also have other ones as well. Oh, no, that's a different one. Okay. So anyway, this is the bankruptcy sale thing. They have multiple listings on the same page for some reason. So I started to read the second one. Are we getting dolphins? Dolphins included? Heather's saying, if there's dolphins included, yes. If the dolphins were euthanized, then yeah. Have you guys ever been part of a bankruptcy proceeding or a bankruptcy auction?

4:36As a lender, which is sort of different. Yes. Yeah, you were coming after them. I got involved in one where a competitor company went bankrupt when the owner of it committed suicide. And it was a really bizarre thing where we enlisted an attorney and the guy was like, look, you're never going to win this because basically it looked like the people that own the land underneath the competitor were going to go after all the assets. And he's like, just don't bother. So that's as far as I made it. Right. I think that's the problem. There's competing liens in any kind of bankruptcy situation. It's all about the court sorting out who's going to get paid and in what order.

5:22And so I guess my concern here is that this is real estate in Mexico. And to my knowledge, and I could be wrong about this, I don't think you can get title insurance in Mexico quite the way you can here in the U.S. And so in the U.S., if you did something like this, well, you'd at least be insured in your lien, you know, your title. And these are messy title situations. So that's my first concern is that you're in a messy title situation in a foreign country. That's a great point. It's interesting. They have a link to the bankruptcy notice, which it's a Mexican property, but the bankruptcy notice is in Delaware.

5:59Very interesting. So it was probably a, it was probably a, a U S entity and a U S lender, but part of the collateral was just this, you know, Mexican asset is what they listed as. Interesting. I, uh, I did due diligence, a site visit, uh, on a business that we were trying to buy a business from somebody who had bought it out of bankruptcy. And I like that place in the value chain a little bit better. It's kind of like trying to buy real estate at a tax auction where you're bidding on the lien. And if then the property holder doesn't pay in the next 12 months, then you have a quick claim deed and you end up coming up with the property.

6:47That is a very difficult thing to do as like the first mover. But I really like the idea of somebody buying this, handling all the legal, handling, getting clean and clear title to it, and then buying it from them. Have I ever talked to you, speaking of tax lien sales, have I ever talked to you about my adventure in tax lien sales that I did in my 20s? Oh, who wants to hear about this? Some people were going out and partying in their 20s. Michael was having adventures in tax lien sales. Okay. So... So tax liens, right, if you don't pay your taxes, they put a tax lien on it, and then other people can come along and buy that tax lien.

7:25In most jurisdictions, like here in Texas, there are very strong regulations that protect you as a person if you don't pay your taxes. Like even if I buy your tax lien in Texas, you refuse to pay it after several years. I foreclose on your property. Even after I foreclose, basically the person who didn't pay their taxes has up to three years to pay their taxes off and get their property back from you. So it basically creates this situation where it's actually really difficult to make money or to know what you're going to do with the property when you own tax liens. You're hoping to just basically collect the interest on the state's or the county's behalf.

8:02There are some counties that are much more liberal about the regulations of what happens if you foreclose on somebody for not paying their taxes after you buy their tax lien. And one of those was in El Paso County, Colorado. auto. And so in the 2000s, my cousin would go to the auction and I'd give him money on my behalf and he'd go buy tax liens for me and him on properties. And basically the hope was that somebody would not pay their taxes and after a couple of years, you foreclose on it and then you just get to keep it. And so you were kind of this happy at one point when you did get paid because I don't know, 15 or 20 tax liens making 10 % or 12 % apiece.

8:43But the other point you were like, oh, I got paid on that one. I was going to get a property, a$200 ,000 vacant lot for two grand if you bought the taxes. So ultimately, we stopped doing it just because it's relatively small amounts of money you're deploying. It's$500,$600,$700 here. But yeah, it was good times back in the day. Wild West. Is it still doable, Michael? I think they changed the rules to make it more tougher, but I'd have to go look. This was like 15 years ago, 17 years ago, I did this. I know people who still do it in South Carolina. I mean, it gets, it gets posted publicly. There's a list of all the, you know, delinquent taxes.

9:21You have to do a ton of due diligence. And a lot of it is like sight unseen. You know, you're just trying to ascertain, you know, exactly where the value might be, but the people who do it are really, really good at it. But the, the house that I bought, the, somebody had basically paid like$3 ,000 all in and got this piece of property. And I bought it from them for$30 ,000, but the house was actually worth 60. But it was just this like very complicated process. And bankruptcy to me is very, very similar where if you have not done this before, you would be a fish out of water and you're going to get absolutely taken to the cleaners.

9:57But if you know how to do this, there's a lot of value that can be added, just like anything that's difficult. Like if you were doing remediation of contaminated sites for environmental issues, that's really hard to do unless you've done it like 25 times and you know all the hoops to jump. Yeah. Well, bankruptcy exists in the court system is like this whole parallel other court system where there are very few, if any, opportunities for appeal. Basically, the judges are the last great dictatorship in the United States is like these bankruptcy court judges. They just make these arbitrary fairness judgments and all this kind of stuff.

10:37So to your point, every time I've waded into something like this, Mills, the first thing I did was go find somebody who's an experienced lawyer in bankruptcies because this is like the dark arts. You don't know unless you have a guide. I think when you're doing due diligence on something like this, the question that looms in the back of my mind is, what do I bring to the table that makes me think that I can actually run a dolphin resort better than the people who were doing it before and ran it into the ground. Was that a question for Heather? I mean, I think I could. I'm thinking I could. Heather, what makes you intimately qualified to be a proprietor of a dolphin resort?

11:16Oh, I just like them. So it'll work somehow. It'll somehow it'll work itself out. Yeah. It's like if you love what you do, you never work a day in your life. I only have one thing to say to that response, which is, how do I invest? I saw a term in the bankruptcy document that you had up, I thought was interesting, called stocking horse bidder. And I had to look it up. And it's in bankruptcy cases, a stocking horse bid refers to a deal with a potential buyer that is hidden from the public creditors and the courts, Usually when a company is preparing to file bankruptcy, it chooses an entity from a pool of interested bidders to make the first bid to buy the company assets.

12:01The selected bidder sets the pace for the other bidders. Stalking horse bidder. Never heard it before. Didn't know that. I think this one's interesting because, so Michael, you were sharing something and this is just because I'm a Florida kid growing up. So this is the marine land. This is why it was down at the bottom. It's like these are the guys that own the marine land in St. Augustine. and so my brain instantly goes to all the videos you see of all the like killer whales that have been abandoned for all alone um and actually two just got freed this week apparently maybe from this site um because they're whoever it was they were in bankruptcy um i didn't actually click for details but i think that what's interesting to me is i've having grown up in florida and like my there's a marine land over where my mom used to live and then you drive by and there'd never be people there right and it's like to mills's point is if you're going to buy a business like that this what's the plan because obviously you should not be buying this with the plan of it having it be an adventure land with dolphins that you can you know have fun with because that didn't work very largely it didn't work in all of these locations that they're now selling as part of the bankruptcy.

13:14And I'm just curious what the use would be, right? They're selling it as real estate, basically like buy it and into something. My brain instantly went to like wedding venues, right? It's beachfront property next to, you know, an outlet mall. So then I was like, well, it's not a hotel, it's an outlet mall. So that's a little different vibe. But I just think it's interesting and then the fact that it's in mexico brings up a gazillion questions in my head about mexican law and like well you know what are the regulations that you're subject to with owning a dolphin adventure park um or like if if you buy this i'm curious like marine land has giant um tubs or whatever you want big pools right that the animals live in like are you buying those that where now you're going to have to, if you try to repurpose the land, the cost of relocating the dolphins, because let's just assume they're still there, and then destroying all the infrastructure.

14:18I don't know, man. It's so much bigger than just the bankruptcy purchase of the land. Yeah, look. You could do some pretty weddings there, I'm sure, and offer the bride and gift with the dolphins. Yeah. Come to Mexico and get married with the dolphins. I could see a pitch there. Yeah, Bill, should we go ahead and go to the get found in a ditch part of this deal? This is cartel country. When Michael sent this out to our group chat, I was like, whoa, this is the winner for ditch risk, which we coined on the pod several years ago when we reviewed the Mexican brothel casino. So, Michael, what is the official definition of ditch risk in a deal?

15:01I don't know. This? what does it what does it mean to say this deal has ditch risk oh it means you're wading into an environment where some bad dudes are going to show up at your front door and you're gonna they're gonna find your body in a ditch somewhere um because you're because you're not paying off the right people or you're not in the wrong you're in the wrong business entirely and you know some gringos wading into a dolphin and land habitat in cancun like feels feels right up there. Yeah. I mean, there are, so I have a friend who operates a business in the Philippines and he has a staffing business.

15:40He has functionally a skyscraper in the Philippines, hundreds of people there and he'll staff the people there and you can rent them basically. So it's a staffing agency in the Philippines. And I was talking to him and he's like, oh yeah, we have a bribery budget. Like absolutely. Every single month, like you got to know who you got of grease or like your power gets turned off, you know, all of this stuff or like everybody that's parking at your building gets a ticket or one day there's a cop in front and says that nobody can come in. And that is functionally one of the services that he is providing is he's abstracting away all of the local messy operations.

16:19So you can just have an employee overseas and pay monthly for them and they'd have a place to go, et cetera. But in so many countries, I mean, we really take it for granted here in the United States that we have rule of law and generally uncorrupt politics, or at least our corruption is more above board. We have a brand of American corruption, wherein we donate to their reelection campaigns. But we don't have, you know, naked, under the table bribery corruption. But many, most other countries do. I mean, especially kind of third world style. So if you're going to have a physical asset or a business entity in these places, you kind of need to learn the rules and follow them.

17:02And you hope that the way you learn the rules is not when a guy in a trench coat shows up on your door. Congratulations, you're the new owner of the Dolphin Habitat. You owe us 10 % of revenue every month. Yeah, they didn't tell you in due diligence. Sucks for you. Yeah, which they won't tell you in due diligence. It's not, you know, it's not above board. Hey, Michael here. This episode is brought to you by Toninson Accounting Services, the leading provider of quality of earnings reports for small and mid-sized business deals. Every year, their team reviews over$500 million in transactions, and the reports are trusted by buyers, bankers, sellers, and brokers nationwide.

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18:07I mean, if you stack up the hierarchy of difficulty on this, just let's just say you were trying to buy a piece of real estate in Mexico that comes with its own complications. Now you're buying a piece of real estate in Mexico that is in a foreclosure auction. So you're not going to get access to all the info that you need at a time. And it has defunct operating businesses, you know, probably multiple revenue chains. This is three different parcels, some of them operating, some of them raw land. My mind just goes to like, what was the pitch deck to the investors like, like five or 10 years ago when this was like, guys, like it's going to be such a good deal.

18:51We're going to do a dolphin lagoon in Mexico. Like they were promised the world, you know, and the pro forma looked amazing. Like every pro forma always does. And now fast forward here, here we are, you know, even, even more so that there's a lender, You know, at least investors have upside. This isn't bankruptcy court for a lender to try to liquidate this asset. So the equity investors are wiped out, but a lender is trying to get some of their money back. I can't fathom a lender in the U.S. doing this. I wonder what kind of lender that would be fascinating to know. The bankrupt party here is the local entity, but was it run by somebody that runs the same thing in Miami or in California or in Florida?

19:35So you would think it's maybe less crazy to go, hey, we run this dolphin show here in Florida. It does great. There's a ton of tourism in Riviera Maya. It's the Cancun Air Force right there. We're going to rubber stamp the thing, clone it out. We got this perfect property right by the beach. There's this huge mall right there. We're just going to drop it right there. We'll bring a couple of our dolphins so they can train the other ones, you know, or whatever. And you're good to go. So I could see how, and maybe the debt is, I mean, it's secured by the land. It's perversely, weirdly easy to get a mortgage and not debt on an operating business.

20:10So maybe that's why, how they, that's maybe what happened to you. Yeah. Could be. There's, there's your list of creditors. My goodness. Oh boy. Okay. We've got to. Holy cow. what a mess leisure investments holding triton investments holdings ms leisure company icarus investment holdings several spanish entities or mexican entities essay de cv mainland leisure inc i mean the cap table and the lean structure on this thing seems insane i think we should also talk about the other thing is this is a business type whose time has come and gone like it all the peak moment when things like sea world or things like this ended was when you know blackfish came out i don't know if you guys saw that documentary in 2018 12 years ago i was gonna say yeah it's a it's a shift of the industry for for yeah like who wants to take their i don't want to take my kids to go see some flipper trapped in a backyard pool like that's that doesn't sound entertaining or what i want to be teaching my kids fun looks like this is a very quick cursory review and I'm not sure if this is true, but it looks like a death potentially with a lack of successor is what's causing this to happen.

21:27So it sounds like if I read it very quickly correctly, like the primary owner operator died, then his wife took over, she died and there was no clear successor. So that's what ended them in bankruptcy. Again, that was quick cursory, like standing articles died or failed to pay the protection racket but i think i like and michael you pointed at what was in my head that i was going to bring up a second ago was like that i think it's interesting because these are historic this is the conversations i literally was just having with the member these are historically uh well-performing industries it's been around for a very very long time.

22:07And I know that as buyers, we take comfort in historical performance. However, there needs to be some recognition, right? Especially as you see downtrending performance in industries about what's causing that. And in this, I do think that it's a cultural shift, right? We have moved away from valuing the experience of watching caged sea animals. And so this industry, in general, has seen a decline in performance. And so I think it's just a good learning moment to say, like, just because something's been around for 100 years or 50 years doesn't mean it's going to be around for another 20. You need to make sure that you're doing a deep dive into how the market's performing and what our values and norms are as a society and make sure that you're applying some critical thinking skills there.

22:58That sounded rude. I didn't mean it that way, but you know what I mean. so so i i googled this after i chat gpt'd it but the new the new york post has been all over this uh basically doing exposés on the conditions that they had the dolphins living in and that there was lots of dolphin death uh five bottlenose dolphins died within eight months right before bankruptcy just kind of like and this was a place it wasn't just a dolphin habitat thing you would actually go swim with the dolphins here but i'm wondering if those deaths are are following the lack so it said that the husband died like years 2018 maybe and then the wife died in 2014 and then they declared bankruptcy in 2015 it's like if no one knew what was and this is the importance of succession planning right if no one knew what to do then yeah this is they're gonna die right like everything's gonna go to to you know a mess we'll just say right so you guys like to steal off that's what i'm hearing love it i love it even imagine a scenario like if somebody paid me a million dollars and i didn't have to actually have any cash outlay i don't think i would do that yeah yeah it's a nightmare it's not something it doesn't pass the uh it doesn't pass the cocktail party test where you're like oh what do you do oh i trap dolphins and while they're alive i let humans swim with them i'd make them dance for my own entertainment it.

24:25I mean, your kids would be so proud. So, but you're not buying this as a dolphin habitat, right? You're buying this to flip it, fill in the pools and build a Riviera Maya beach resort. It's clearly what's going on. It's obviously like, okay, so then it comes down to real estate and real estate's all about location. And one of those parcels is like in the middle of the, you know, the luxury, you know, retail outlet or whatever that they say. And you can see it's just a raw piece of land in and amongst a larger development. Why in the world isn't the mega developer who developed the luxury retail thing scooping it up?

25:07And they might. They might be who you're bidding against. But I just think, you know, I like buying real estate. I only buy real estate in my backyard because that's all I know. There are people who buy stuff sight unseen and they underwrite things that they've never or will never see or touch. That's just a really difficult thing to do in Mexico at a bankruptcy auction, you know, and for all the reasons we've said. I mean, historically, Cancun was the safest part of Mexico because supposedly all the cartel money was planted into these resorts in Cancun. But, you know, recently, like at least in my friend circle, people used to go to Cancun all the time aren't going anymore because there's all these anecdotes of people walking down, you know, men walking down the beach and firing machine guns into the resorts.

25:57Like that, you know, a few episodes like that and people aren't going anymore. And, you know, I think this has clearly become cartel country and there's just, you're either, you're either on their side or you're a victim waiting to happen. And that's, that's what's going on. Rule of law, critical to all forms of capitalism is the foundation on which all capitalism is built. I actually, I had a friend who he, so this is an interesting aside, I was with him last week and he has a company called New Story and they build affordable housing in Mexico. And I said, well, what is your cartel strategy?

26:31And he goes, well, we just don't do business in the towns where the cartels are. It's his whole strategy. But we were talking, we kind of put together that, you know, capitalism is the source of kind of all human flourishing, You know, you can look at kind of where capitalism gets introduced and just societies, you know, explode in a positive way. Life expectancies increase, you know, all infant mortality goes down, et cetera. Like capitalism is like the best thing that has ever happened to humans, period. But the prerequisites for capitalism are first rule of law and second functioning capital markets.

27:05So a big part of what he does is use he does business in places in Mexico that have good rule of law. and he oftentimes is issuing like some of the first mortgages and like cleaning up the title to these properties and making them mortgageable and bringing in the capital to so people can actually get mortgages. And once you have rule of law and you have a function in capital markets, meaning you can originate mortgages, then you can build houses, then you can build communities, then you can have local business and kind of everything starts rolling from there. But I thought it was really interesting to think about sort of the necessary substrates of capitalism, which are rule of law and functioning capital markets.

27:44So next time people are bagging on, you know, saying that, oh, we'll just let this thing slide or, oh, we're going to pursue a non-market based solution to that problem. Remember property rights and functioning capital markets are the thing on which all of our capitalism is built. And if you don't have those, you can't buy your dolphin park in Mexico because you can't be sure that you'll keep it. If this was in Canada, we'd all be like, cool. But it's the other end of the spectrum. And I interviewed a candidate for an executive role about three months ago. And I'm going through and learning the guy's story.

28:19And he was massively overqualified for the role. Massively overqualified. And he'd been an executive and a CEO in Mexico. And he was married to an American woman. And they had just picked up during the pandemic and moved everything to the United States. and I was like why'd you do that like you had this amazing career this whole network he went to like the Harvard of Mexico and he talked about within six weeks a six week period his best friend had been murdered by the cartel for not paying them off in Guadalajara and his father in law had been murdered in Puerto Vallarta area for not allowing the cartel to ship drugs off of his property he had told him you know give him a middle finger and said no.

29:02And he and his wife just couldn't stay in Mexico anymore. So the guy basically had been running these 60, 80,$120 million companies as CEO, had a great life living in Mexico City. And basically they felt like they needed to run from the entire country and ended up here in Houston. And it was just like, wow, life comes at you pretty fast sometimes. I think that's one important note on this is the risk-reward trade-off. The person who ends up doing this, if it goes well, they probably like 20 or 30 X their money, you know, like it's just going to trade for such an attractive price because of all the risk that is priced in that nobody's doing this for like, you know, an 8 % cap rate or something crazy.