Should I Stay or Should I Go Now – When to Sell and What to do?

Yes, the title is harkening back to the well-known song by The Clash, which goes something like this:
“Should I stay or should I go now?
If I go there will be trouble.
And if I stay it will be double.
So you gotta let me know,
Should I stay or should I go?”

The words might apply to any number of circumstances, though somehow resonate with the idea that ownership of a marina can seem to be a somewhat masochistic endeavor—if I go there will be trouble, and if I stay, it will be double!

Those potential troubles are well known and can include any of the following.

Financial burdens include:

• Significant maintenance costs: Waterfront properties are susceptible to constant wear and tear from the elements, requiring ongoing investment in repairs and dredging. A major infrastructure update, like replacing bulkheads, can cost tens to hundreds of thousands of dollars, and financing can be difficult to secure.
• Cyclical revenue: Income is often seasonal, with relatively little revenue generated during the off season.
• Unreliable income: In a recession, boat owners may reduce use, put off maintenance or opt out altogether, impacting cash flow.

Significant risks include:

• Natural disasters: Marinas are highly vulnerable to hurricanes, floods and other extreme weather events that can cause catastrophic damage.
• Liability exposure: A combination of water, gasoline and electricity creates major safety hazards. Marina owners also face high liability risks from slip-and-fall accidents, boating incidents and other injuries.

Environmental regulations include:

• Marinas are subject to strict and costly environmental regulations that can change frequently. Failing to comply can result in expensive fines and legal trouble.
• Uninsured damage: Some marinas are underinsured for their docks and buildings, leaving owners financially exposed in a disaster.

Operational challenges include:

• Complex operations: In addition to renting slips, many owners operate repair services, fuel docks, restaurants, or retail stores. Managing these diverse business streams requires significant time and skill.
  Intense customer demands: The boater lifestyle often comes with high expectations for services and amenities, creating a demanding customer base.
• Paperwork and compliance: Owning and operating a marina can involve significant paperwork and bureaucratic hurdles for everything from environmental compliance to booking systems.

When you actually write all those cons down in one place, and I’m sure there are quite a few missing, it does make you stop and think. Yet, despite twice the trouble, I’d venture to say that most marina owners will still, if they have the choice, most often choose to stay. Of course, the number one reason most marina owners choose to stay is that there’s just nothing better than messing around with boats. In essence, owning a marina for many is often seen as a lifestyle investment.

Other items on the pro-staying side might include:

• Pride of accomplishment
• Community and networking: Marinas foster a strong community among boating enthusiasts. Owners get to connect with like-minded people who share a love for the water.
• Potential for high returns: If managed effectively, marinas can certainly be a profitable venture with multiple revenue streams from slip rentals, repairs, retail and hospitality. And in areas with limited waterfront property, demand can consistently outpace supply. The overall industry also has expanded and modernized, and is really starting to meet the needs, desires and demands of the newer boating public, with lots of potential for increased financial rewards.
• Supply scarcity: It is very difficult to build new marinas due to high costs and strict regulations, which limit competition and can give existing marina owners more pricing power.
• Entrepreneurial satisfaction: The role offers independence and a variety of daily tasks, from sales and accounting to public relations and maintenance.
• Providing a pathway for family members who want to carry on the business.
  The satisfaction that comes with providing meaningful hospitality and recreational experiences.
• Earning a good living, while doing what you love.

Thus, we get to the issue on many owner’s minds, particularly with frequent news of marina acquisitions these days: Should I stay with the business or is it time to sell? Of course, this is always going to be a highly personal and case specific decision.

Some of the leading reasons to think about selling can include:

Aging out
Health Issues
No one to pass the business to
Rising costs for regulatory compliance, insurance, utilities, and infrastructure
Lack of reliable help

Ultimately, all businesses need an exit strategy, whether it is to have successors in place who are being prepared to take over, or to sell. Most think we are invincible and will beat the odds, but that is wishful thinking.

Fundamental to any exit strategy has to be putting one’s house in order. This should be undertaken regardless of whether the desire is to continue indefinitely with the business or to sell.

One of the simpler things to do, which can be the most time-consuming and exasperating, is putting one’s paperwork in order. Get all regulatory approvals, including licenses, permits and other approvals, together in one place and ensuring that they are up to date. This includes various permits and approvals, both open and expired, from all levels of government. Adding expiration dates and/or renewal/extension deadlines to your calendar can help avoid significant regulatory troubles.

Also note that while most permits and approvals for in-water or upland structures, dredging, etc., have an expiration date, that initial authorization extends beyond the expiration date as a right to undertake that specific activity. This authorization needs to be assigned at the time of sale or other transfer to the new owner. Some approvals piggyback on other approvals. In the regulatory world the burden of proof that the structures and activities, such as dredging, were fully permitted rests with the property or marina owner/operator, not with the agencies, and some agencies have deleted historical files, which means it is even more important to have the documentation from the past.

Many agencies also have regulations that “grandfather” activities undertaken prior to a certain date. Old photos are super helpful, but most do not have dates unless obtained from historical libraries. Old surveys are very meaningful. Having this information saves major problems when new activities are applied for with agencies that do not have the historical background. Of course, there is also the catch-22 potential where one discovers that new work has been undertaken that has not been formerly approved. This comes to light when new applications are sought, or if a buyer really does their full due diligence.

Copies of underwater and upland land licenses and leases are very important, as they describe what can and cannot be undertaken, and sometimes with several conditions. Ensuring continued compliance is mandatory.
Similarly, making sure fuel tanks are up to date with inspections, compliance and documentation is critical, whether those tanks are buried or above ground, and whether for sale or internal use.

Having operating license(s) and insurance documents up to date and in one place is also desirable. Most importantly, have all customer and supplier contact information up to date.

Curb Appeal
The marina should also be clean, neat and attractive. Inexpensive plantings and colorful facades are simple cosmetic improvements. The cleaner and the neater the facility the happier the customers are, and the better the impression of the facility, which can translate into higher in-water and upland rates, and, of course, higher business and real estate value.

Deferred maintenance items are always an issue. Sometimes they are easily detected, and sometimes they are hard to see. Existing owners know more about what they are, and probably what needs to be undertaken to fix them and the approximate costs. If retaining the property, develop a plan to overcome the deferred maintenance. Many times, this can incorporate other initiatives, such as additional expansions or reconfigurations to better meet the current and evolving markets, which allows increased revenue streams, yielding a more desirable rate of return on the improvements.
If selling, then it is important to describe the facility in the best light possible for added value. However, don’t overdo it with unrealistic exaggerations.

Having credibility in a sale is extremely meaningful and can overcome many obstacles.

In terms of actual sale, there are many variations upon a theme, from an outright purchase to staggered payments, to management contracts, increased payments based upon performance, etc.

We have often been asked, with respect to chains buying private marinas, whether there is a future for independent marinas. My answer is absolutely. While it often seems like every time you turn around, there is another marina being bought by a chain, or even entire chains being bought by other chains or investment groups, the overwhelming majority of marinas are still independently owned.

In the United States, it is typically estimated that there are between 8,000 and 12,000 marinas, totaling some 733,000 to 1.1 million slips. Meanwhile, there are approximately 20 chains of four marinas or more, with only a handful with more than 10 marinas. It is further “guesstimated” that the chains have a total of approximately 96,000 slips, which equates to roughly 10% of the total boats slips, including dry stack.

Indeed, the marina statistics show that there is a long list of independent facilities. They serve both general and niche markets and typically provide more of a family feeling among customers and owners than many of the various chains. Will there be future consolidation of marinas by chains large and small throughout the world? Yes. Will there still be meaningful and financially viable approaches for independents? Without a doubt.

Final Thoughts
Whatever you decide, it’s important to recognize your goals and evaluate your options carefully. Take the time to organize your records, assess your property realistically, and plan for the future—whatever it may hold.

Dan Natchez, CMP, is president of DANIEL S. NATCHEZ and ASSOCIATES Inc. He can be contacted by phone at 914-698-5678, by WhatsApp at 1/914/381-1234, by email at dan.n@dsnainc.com or online at www.dsnainc.com.

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