Why is it so hard to get a sticker price for a wave pool? It's a whole different game. And I would say the first factor that triggers this extremely cautious position that is ours at Elisa is the soil. Everything starts from the soil. The quality of the soil on which you're going to build is going to drive potentially a go-no-go decision. Because the soil is too weak. The soil has water tables that are really high. The soil has gas pockets, which will bring instability. So you have soils that can actually kill a project. [MUSIC PLAYING] The wave pool mag podcast is made possible due to support from wave pool operators, technology providers, and the growing list of companies doing business in the surf park space. For commercial opportunities, reach out to us at
[email protected]. Thank you, and stay stoked. [MUSIC PLAYING] And welcome to the wave pool mag podcast. My name is Brian. My very special guest today is Batiste Colonque. Batiste, say hello. Hello, everyone. I'm French, obviously. And it's Batiste Colonque. Colonque. And there's a little end-eat. So yeah, Batiste speaks great English now, and then you'll hear a word with a great French accent. But mostly your-- most of your works in English now, isn't it? I would say 90% of my work is in English. Wow. I'd love to have more work in French, business-wise, at least business development-wise. But it's somewhat too much in France. But I still have work in French with my fellow French colleagues, Clemon, and Excel, on engineering and product management. So I do get my share. There must be a nice break. Yes, you get to-- yeah. Yeah, I do work in French, but that is usually with Excel in Clemon. OK. And let's talk about why we're doing the podcast today. It turns out I was doing a story a couple weeks ago, and I emailed you, I need a quick cap ex on a wave pool on an endless surf, 34. And you did not give me an answer. I was upset. I was on deadline. I'm like, how am I going to do this? And then you were gracious enough to take the time and explain to me why it's so hard to give a definitive health to door price on a wave pool. So that'll be the focus of this conversation, all the little variables that a lot of people aren't aware of. So I think it's good that we stop and we pause, and we kind of understand the space, and all the different factors that go in. But first, let's get a quick background on you about. So I've been on French, based in France, working for endless surf since its inception, six, seven years ago now. So from day one, working on engineering design with the early members of the team and Paul and Jeff Schutter, the owners of Whitewater, we belong to. And before that, I've had a few years in the real estate industry on my own, where I actually worked on the client side on trying to develop a surf park in Paris, called La Vague de Rampagne. La Vague de Rampagne. And that's how I actually started deep dating into the surf park industry. And back then, there were only a few options available. And I was honestly in a work environment, working for Bweeg, the French construction company, which was developing that surf park project and more. In such conditions that I was offered the opportunity to try all the technologies, meet with the technology players, meet with early developers or owners and operators of parks like Bristol, Urban, Waco, et cetera. So some say 10 years ago, I started my trajectory in the surf park industry, being actually part of the development team. OK, that gives you a well-rounded background within this industry. Yes, interesting. But it's been an amazing journey. And before that, I was into the surf industry itself. Yeah, you were in-- Yeah, we're in Ripro in Europe. So I've been in my passion for a lot of years now. And that's kind of interesting here in Europe, because you have Bruno Guillaire, who is CEO of Volkham, who's worked with Alaya. And then you, I think we're probably going to see a few more. As the surf industry, for sure, the transition's a little more towards surf parks and wapel. And what's funny is I've worked with Bruno when he was the CEO of Volkham. And I was out Ripro because we tried to have logistics projects together. So I knew Bruno pretty well from those days. Just like I know, Stefanie working for surf town for marketing, for my days at Ripro, because then she was running in Iquita. So let's say that I've seen a lot of dimensions of the surf industry yesterday, a parallel hard goods of goods, and now more of the infrastructure as a fox. That's so fascinating. I think that's a whole other podcast, but the migration of the surf industry towards wapel, some surf parks, because they're really hesitant, except for a few key brands, who really embraced it right off the bat. But they're a lot making the transition, you know, just testing the waters of speed. I would have a lot to say about this. OK, that's for the next one. But I'd love to do it. Yeah. So let's get back to this one on my notes, Batisse, the million dollar question. So first of all, even if the industry's growing, and thanks to the pioneers, the guys like Chris in surf town or the team at Urban, the team at Waco, the team at the wave, or Adelaia, we're still at the early stages of our industry. The construction of these big things, those lagoons, even if it's construction, they're really, really special assets, because they're primarily made of concrete for short, which is obviously not a new material. However, the forces and the stress that they're under, repeatedly, because obviously the end game of this is to produce as many waves as possible, creates gigantic forces at play over and over and over again on the construction. They're upward downward side movements that create a lot of stress, a lot of stress on the construction, a lot of stress on the waterproofing. And every technology is obviously looking at those assets as to be sustainable for 30, 40, maybe 50 years. So obviously the structural engineering that is needed to build assets that will last that long is pretty complex. So it's very much different than saying, I need a Olympic-sized swimming pool in my backyard. Yes, for two reasons. First of all, they've been built forever, to some extent. So there are references for the Olympic pools. For the Olympic pools. And second, they don't endure the same stress. So I think this is why it's easier to get general quotes for how much it's going to actually cost within say four or five or maybe max 10%. I think as regardless the technology, it's a whole different game. And I would say the first factor that triggers this extremely cautious position that is ours at El Licef is the soil. Because these constructions, they're big constructions. They're anything from 10,000 to 20,000 square meters. So you're talking about a big footprint, which will sustain forces that are very different from one area to the other. Different weights, different movements. So the structural engineering and the construction will defer a lot from one area to the other. So the quality of the soil on which you're going to build is going to drive potentially a go-no-go decision.
because the story is too weak, the story has water tables that are really high, the story has gas pockets which will bring instability. And that's interesting because I know at Munich, they had to raise the. Yes. their raise the lagoon. They raise the lagoon, London, that is about to start construction, is also raising the lagoon because one of the challenges in general is you don't want to build across water tables because they're expensive, it's not stable, it requires more engineering, so you want to avoid as much as possible. And those lagoons, they go pretty deep. They go depending on where the deepest point is, they can go down to 6 meter, ground level. 6 meter is in a lot of places, you'll actually dig across one, maybe two water tables. There are areas where. well, it's always expensive, for one. It's expensive to build because you have to build across water. And you'll have to assess how the water is going to react below your lagoon. So what happens when there are heavy rainfalls? Is it going to lift the lagoon, etc. So there's a lot of engineering, a lot of assumptions at stake. Combine with what happens inside the lagoon. So building across water tables is expensive, like where there's a lot of engineering. And even sometimes it's not even authorized to actually build across a second layer of water tables. There are rules and regulations that tell you that second water table is considered as a prime resource. So unless there is a national interest in building across a second water table, you're not allowed to do it. And you self-pact don't qualify, yeah, as an unfortunately. So let's go with. is there an ideal soil? Like what are you looking for? What would be the best case scenario? For some kind of soil is it clay, is it sandy, is it. Anything that is stable, that doesn't react to water, doesn't react to temperature, so that the construction you're going to put on it will not be impacted by what happens below. So clay, for example, will dry when it's dry, so it's going to crack and compress. So obviously the construction potentially is going to crack as well. And concrete cracking can create a lot of damage to the waterproofing, depending on the kind of waterproofing solution you're going to use. Just like clay, when it's raining a lot will actually gain in volume. So it will put a pressure upwards onto the bottom of the lagoon. So it's not great? Not great. Then you have a lot of soils that have gas pockets. Obviously by definition gas pockets are not stable. So same thing, they can create a burst into the concrete. Water tables, we've talked about it. If you go on a lava soil, lava soil will be super stable. But digging through lava soil, which is extremely hard, is going to be expensive. Okay. And then what is the. what are we talking about the difference in price? How much does sandy soil differ in cost to say blasting out bed rocker? So I would say that the same lagoon construction wise can go from costing, let's say, one as a reference point, to three. Wow. And assuming a level one is ten million to build a lagoon, we can go from ten to thirty million. Wow, just on the soil. Yeah, primarily based on soil. Okay. And then there are solutions as well, like, worth the linings and. Yes. To some extent. To some extent. To some extent. So this is why construction, it's a combination of a lot of stuff. When you assess a piece of land. So is the soil good? That's one. Then there's a second one. Is this piece of land located in an area that has a proper axis to grid? Yes. Power grid has access to water because all of a sudden, if say you do have a power grid, but the power grid is like two miles out. You have to pay for that. And I actually did this because Andrew Ross told me this about. Yeah. So a project where they had to have the power come in. Exactly. And another US project had the same. And all of a sudden you have an additional one to three million just for this. Or sometimes you do have access to the power grid, but you don't have access to enough power. So you're going to have to extend and improve. So that's another thing. When you assess a site, you assess the soil, you assess the access to water, you assess the access to energy. But it actually goes deeper than this. For example, when you assess the access to water, you have to assess how much water you can take from the network to fill refill your lagoon. But you also have to assess, okay, in the event I have to drain my lagoon, can the network sustain the amount of water that I have to drain? If not, what do I have to do? Do I have to expand the capacity of this network? Do I have to create tanks, etc., etc. And this all forms part of the capex that comes into the build cost of a lagoon. Yeah, if you have to add systems to the surrounding areas, so you have enough water. Exactly. You have access to the power grid, but you only have, I don't know, like two megawatt available. Most systems would require, if you put in everything, the wave generator, the filtration system, something like three megawatt. But you only have two megawatt. What do you do? Do you extend it? What cost? So first of all, it's a lot of costs. And second, it also is probably going to require a lot of permitting N. Authorization from public bodies, so it's going to take time. Potentially the decision is not going to be favorable. If it is favorable, it's probably disputable. So it can extend the development time by a year, a year and a half, two years. Assuming you can actually pay for it. Or you'll have to consider alternative sources of energy. Solar systems, combined with battery, and then the wave generation will use a combination of grid power and battery systems. So, and this is, Solar assessment, access to utilities, have a big impact on development, both in terms of time, because you may want to assess, reassess a site, because the quality of the service is bad. Or you can, if the land permits it, of course, because it's big enough, you may also play around on where on the land do I position the good? So that it makes sense from a construction perspective, but it also makes sense from an operating perspective. So this is why when people ask us how much does it cost? Without us knowing that level of information, it's a pretty hard answer to give. Plus, at the end of the day, we're not a construction company. So we don't have all the knowledge that it takes. And this is why usually when this exercise of costing the construction is end-of-way, structural engineering, engineering, and so on the experts, etc. etc. So I want to get into that. I have it in our notes. So with the construction, let's address labor and building in different regions. So I know some places it's less expensive to, and other places it's more expensive. Could you talk about that? How many people, how many humans are on a crew to build a wave pool? The biggest hurdle in assessing the cost would be the quality of the land and the access of the land to utilities. Raw materials, inflation, labor costs, obviously there are significant differences. Especially in labor. Raw materials, not so much. Concrete, iron, I'm not saying there are global prices because yes, they are kind of global prices, but then you have to ship them to site, etc., which can create differences. Labor costs, obviously, there are differences. But I would say that do they impact, yes, they impact, but the biggest factor is first and foremost, sorry, and access to utilities. And everything that you'll need to do with that piece of land to actually sustain a construction. The rest, assessing the raw materials once the structural engineering is done.
the labor cost, then you get into a standard cost estimate of a construction. Then there's nothing special. That isn't that hard to ask. No, no, no, no. Once you know your soul, once your structural engineering, a team has actually put together the construction documentation. There are lots of very good companies and professionals that know how to turn this into a very detailed, very reliable, capex estimate. Interesting. Really the high-risk moment is, okay, how is my soil going to sustain this weird construction that will have this mini ocean-like movements repeatedly exactly in the same spot. And once the structural engineers work and understand and turn that into construction documentation, the estimation of the cost themselves are okay. Where usually there is a big gap and this is where we as a brand, we have a responsibility is until this work is done, we cannot put our name on the value. Because and I appreciate it, clients, prospects, look at us as a serious organization, only give information that are sustainable, etc. etc. So if we do give a number, we have to live with it because the clients will remember this. But this number, this very early stage number carries limited value because it will have to sustain the analysis and the work of all that is soil-related and connection to the land, the land to the utilities, which is a big, big unknown for any project. Yeah, yeah, consumers don't like big unknowns. And there are a lot of projects that and I understand when they make an early feasibility, they're going to look at obviously the business itself of revenue and cost to operate and can have estimated profit. And obviously they'll they'll try to estimate how much this thing is going to cost, build by the land, build the do do do do do do do do do do and etc. And early stages because everything is at risk, maybe you don't own the land yet, maybe you're not permitted yet. It will be done with very limited analysis. So assumptions will be very high level. So the quality of the numbers will be very high level as well. And and a lot of projects, especially during the early years of the industry, have actually relied on super high level low analysis estimates to get early funding to develop their project. And by the time they had the money to spend into engineering, soil study, etc. etc. They realized that they needed a couple million more on this million more on that, etc, etc. And all of a sudden you have a development team that has gone to investors said this thing would cost a 30 million total for revenue of eggs and a return investment of five years, six years, seven years. But all of a sudden they come back and say actually the profit and loss account will be the same, but it's not going to cost 30 million, it's going to cost for 80 million. So the concern is obviously very different and that's 10 million is this hefty sum if you're looking at your profit return. Exactly. And and what is happening as the industry grows is more and more the developers of project, they now realize that there is money to be invested very early stages to properly estimate the the capex of the project. And so this is why as a company we're reluctant to give a value because the value is very theoretical. And if I give a value, but I'm also going to give you 20 limitations, only applicable that day on that piece of land, US prices in West California, not even North California, blah, blah, blah. It has no value. Yeah. So let's still define that when developers come to you, they still want to hard and fast number despite all these other variables every time. Every every time. So how every time. So how do you navigate something like that? So what we usually share is reference points. For that kind of land, for that kind of site, for that kind of model, the total capex was. And a little bit by benchmarking, they're going to start having a feel for the magnitude of the investment. So that's one approach where usually there would be an approach that I've seen multiple times where it'd be something like, okay, so the dogoon is say 15,000 square meters out of which there is for the case on the make room. I don't know, 2000 square meters. So this is a complex build. So I have 15,000 square meters, 13,000 simple built, 2000 complex built. Okay, average cost for a complex built is X, Y for a simple built and demon. So it's kind of a rough bottom up approach and that we that will usually give a pretty low value. And when we start sharing real costs from projects, they realize using another method of the rigid that the numbers that they were thinking of are far off. Yeah. And then they understand that if you go to an investor, even if it's for early capital friends and family, if they are challenged, they will have no facts to back up their estimates, which doesn't well, first of all, it's not a sound business. And second, it's not going to reflect so good on the team, so we'll not build the trust that they need to build, especially early stages of development to get this thing across the finish line. So I would say more and more clients know that they will have to spend some money. And you sound like you've acclimated to this process knowing that you can't give a hard and fast number. Was there some point when you first came on board with endless surf where you're like, oh, I'm going to say that one's 20 million, that one's 30 million, that one's 40 million. And then you learn quickly not to do that was there, how was your own journey in that regard. So I was a client first before moving to an list of, and I was given that value. And that's when I was working for Wigid. Wig is a construction company. They're huge. They're huge. Because of their culture and because of the fact that they were looking at something they had never built, they wanted to do themselves a minimum level of engineering to properly cost estimate this thing. And all the more that in addition to their construction background, they were going to the market to get funding. So they didn't want to rely on just one estimate. So they did one internally using their own departments estimation, the departments. And they also went to an outside company, do it. And the value that they came up with, the value that this third party company came up with was twice the value that they were given twice. So, and not that the first value was wrong. It was just that it was a standard ideal condition, etc, etc. except that the site had water tables. It also had a pipe that was going across it. So there was a lot of unknowns around the soil that made this standard desks scenario irrelevant. So you have that experience from the customer side. So you were the customer and you had did you feel kind of burned or just upset or what was your well, obviously, let's say that the value itself was obviously a problem. But it was okay because from day one, the approach by wig was we need multiple estimates before we do anything on the market.
the Cape Excite. Okay, so they were conscious. So there were, yeah, there were no consequences because of this value that was underestimated. But you know, taught me a lesson. Yeah. The construction value is specific to a site. Wow. And of course this was six, seven years. Nearly ten years ago. Ten years ago. So that's why when I joined the E and the surf and with the team with Paul, we were obviously asked those values from day one. We were super cautious on Cape Exc values, but also on the whole feasibility study thing. Because you know, first of all, we're not specialists of market assessments. We're not construction experts. And every site is special. So we have to be cautious. Because as a business, what we say is supposed to mean something. So either we don't say anything, which I do think is better than giving a rough value that has so much precaution around it that at the end of the day, you can't do anything with the value. Right. Right. And we kind of went into this earlier. I wanted to know like as your first hand over the years as CCO at Endless Surf, how your company adjusts. We touched on that a little bit, but that's kind of the interesting point where you're, you know, looking at all these variables, which isn't, you know, if you look at, what am I trying to say, the like sales manual, like you sell something, and it's typically not there to give an open-ended answer, which I'm sure causes some grief, although with developers, I am sure they're aware it's more layered and more complicated. The more the client is real estate literate, the less this is a question. Because they know, they know that they have to know precisely how much the bill costs will be. They know how to assess land in terms of quality of the soil, access to utilities, etc. So the question is becoming less and less relevant. And using benchmark items, it has costed pretty much this there, pretty much this there, blah, blah, blah, that gives a magnitude and that's enough. So the more the industry is growing, the less we have to deal with this question. And to be honest too, it's also kind of a sales filter. If you have a client that is about to invest into a soft back, but that doesn't want to spend a couple hundred thousands to do soil studies, a little bit of engineering early stages to know exactly what's going to happen. It's usually a pretty good indication of how serious they are about the project. So it's also kind of a sanity check on the opportunity itself. And more and more, even non real estate super early stage developers know that they have to spend a little bit of money. So it was gigantic. Let's say five years ago, it was significant three years ago. It's still here now, but it's diminishing for sure. Sure. Right on. So let's talk about over your years at endless serve you've obviously come up with some different business models that suit each product projects uniqueness and their special special needs. Do you want to address that somewhat? Yeah. Yes. When we design and they surf, the design actually is two things. It's obviously the technology that will create the way, make them as as nice, efficient and user friendly as possible. And there is also obviously the lagoon its size, but also its design. And the way we design the two was was done to make sure that any kind of use cases could be enabled. Because if you look at the surf packs we have today, Munich surf town operating for nearly two years now is a very let's say surf centric business model where the revenue is the surfing operations. So it's pretty simple. It has one this nice building around it to enable F and M retail, etc. But it's very surf centric. The Durena on the Red Sea is very different. It's a sports and hospitality complex with a lot of hotels, sales, a lifestyle experience with a lot of beach space around it with cabanas, etc, etc. Kodia in Saudi Arabia, we have the surf pack in the middle of a water park. So all around you have attractions, a cabo with merry weather in Mexico is opening. It's a residential play. So we will have lots all around and out golf course, etc. Bousioc and Brazil is a private club. So it's a high end private club with a lot of services for the club members. Or the point opening is once again a little bit like Munich, a very surf centric. It's the same technology, it's the same lagoon. But the ways we can make the real estate space management that is possible around the lagoon because there's no machinery in the middle, there's no height walls, no nothing can cater to any kind of use cases. Okay, that's a good word. That answer was that. But he's so one that thank you very much for taking time out and explaining this layered question. So now when someone asks me this, how much of a surf park costs I'll be able to to not get them a direct answer or name all the variables. So yeah, so we've gone on with that. And you also mentioned your French is your native language and your accent has improved over the years. I've known you. You're sounding more and more American. And you're the only thing that gives it away is park. Yes, because you say park. But other than that, your accent is great. It's Canadian. Canadian. Yeah, we're from Vancouver, so it's Canadian. Okay, right on. Thank you, Batista. [Music]
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