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Q & A: Marina Buyers and Sellers Remain Active in 2017 and Beyond

Editor’s Note: Anna Townshend spoke with two professionals in the marina brokerage world to better understand the current marina market for buyers and sellers and what factors will influence the market in the future.


Jason Spalding is a licensed real estate broker with CBRE Marina Services. He has experience selling both marinas and boatyards, as well as other waterfront properties (hotels, resorts and mixed-use developments). A. Michelle Ash is president of Simply Marinas. The company’s team assists with various facets of marina transactions, including sales, marketing, due diligence, valuation, financial analysis, financing and permitting.

How would you describe the marina market in 2017, compared to the last five years?

Spalding: The marina market substantially ramped up in 2017, as compared to the five years prior. Well-situated and marinas of scale with amenities that were on the market during the year, not only received multiple offers, they had extremely competitive rounds of call for offers and rounds of best and final offers.

In general, what factors affect a buyer’s desire to purchase a certain property?

Ash: The majority of prospects have the same acquisition criteria for marinas that are based on: Cap rates that can cover the mortgage and generate stable profits; the upside the buyer can create, or that the owner has not maximized; and the desirability of that specific geographic location that the buyer is seeking due to demographics, lifestyle, or assembling multiple marinas in the same area to maximize efficiencies.
We see cap rates averaging between 7 to 10 percent based on factors including: Historical income as evidenced by the income statements for the last four years; the area/location (as it affects factors such as occupancy, rates and stability); the condition of the marina (the extent that deferred maintenance is needed/or not); upside potential; and financing available.

What do you see happening with the marina market in 2018 and beyond?

Spalding: As a result of the ongoing consolidation within the marina sector, within 2018 and beyond, I believe the industry is heading down a path somewhat similar to that of the mobile home park and self-storage industries. Whereas a handful of entities will control the investment-grade marinas (150 to 200+ slips and/or in-place NOI, net operating income, of greater than $1M) throughout the country, and a dozen or so other entities will attempt to create their own smaller portfolios that either fall under that criteria or may be situated in secondary, non-major metro markets. The end result being that the 15 largest owners nationally end up controlling approximately 30 percent of the overall U.S. marina sector and subsequently start to look internationally for additional acquisitions, branding opportunities and partnerships.

Ash: Lending has been more available over the last couple of years after the economic recovery and due to low interest rates in 2017 and improving economic conditions. Interest rates and tax laws in 2018, and global/economic conditions could change some dynamics moving forward.

What are some of the outside factors (global issues, economics, etc.) that are affecting the marina market and how will it continue or change in the future?

Spalding: Three recent outside factors are: 1) a number of marinas and boatyard officially obtaining a Foreign Trade Zone designation; 2) the International Trade Commission’s potential to impose high import duty on Chinese aluminum in turn directly affecting recreational boating manufacturers bottom line; 3) the recently passed Tax Cuts and Jobs Act and how it influences marina owner/ operator and marine related companies’ decision making throughout 2018. As we are in the initial stages of these matters, I believe it is too early to tell how these factors may truly affect the marina market and if the potential ramifications, positive or negative, will be short lived or transition over time.

Ash: The new tax law will be a factor due to decreased deductions in property tax and mortgage interest. This along with an expected interest rate hike will change the amount of down payment a marina buyer can, or wants to put down, which in turn may affect pricing and the amount of deals done.
Global warming, sea level rise, and increased hurricane activity, have brought flood insurance into focus when purchasing marinas and waterfront assets. In some states, there are new codes for seawall and property elevations for newly constructed facilities.

How is the loan market?

Spalding: The marina industry has seen dramatic improvements over the past few years, and lending institutions have taken notice and are actively participating in financing. The large number of marina portfolio transactions since mid-2015 is evidence of this progress, and can be attributed to a healthy economy and increased private equity interest in the marina sector. Currently within the U.S., marina loan-to-value (LTV) ratios are typically around 65 percent.

Are lenders seeing value in marina waterfront properties?

Spalding: Investment banks have begun to recognize the marina sector and associated value in waterfront properties, due to the recent and ongoing consolidation within the industry. As previously noted, ultimately I believe the marina sector will evolve into its own institutional-type asset class similar to the mobile home park and self-storage industries. This shift will lead

to the availability of detailed income and operating expense information for marina assets on a national scale, and allow for additional transparency and substantially more accurate underwriting analysis.

What do lenders look for? What kind of down payment is typical for marina properties?

Ash: Lenders like the income producing marinas that can sustain the mortgage. They look at the ability of the borrower, along with the marina’s historical income, real estate value, flood and environmental issues. We see that the down payment preferred for marina lending is higher than other income based investments such as multifamily or retail. I would say an average of 25 percent is what we see, unless the borrower is strong, not over leveraged, and has an established relationship with the lender, and in some cases offering other collateral.

Under what conditions are lenders most likely to support marina development?

Spalding: Lenders are most likely to support marina development in favorable, higher demand locations with both a proven recreational boating customer base and supporting demographics with facilities that can maintain at least 60 to 65 percent of their total revenue from vessel storage rates.

How does the boatyard business differ from marinas, when it comes to buying and selling?

Spalding: Cap rates for boatyards are typically higher than marinas that are based upon pure vessel storage. As the larger, full-service facilities typically have additional components; i.e., maintenance services, yacht sales and third-party contractor leases, and each have a variety of different risks associated with them. As a result, from a lender’s perspective, they are considered to be less desirable revenue streams than pure vessel storage. The profit centers outside of pure vessel storage should typically be valued based upon business valuation metrics (earnings multiplier) as opposed to real estate valuation metrics (cap rates).

Ash: Rental/dockage has a lower expense ratio, is easier to manage and has less risk to the average buyer. There has been a trend to prefer larger dockage spaces to reduce risk.
Boatyards can also make a great investment to service marinas in a certain area. They generally have a higher expense ratio and may pose a higher risk due to environmental issues; however, capable owners enforce work standards to prevent environmental hazards.

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