With the post-recession market for South Florida marinas heating up, real estate appraiser Walter Duke is counseling marina owners to look carefully at the future.
“After a six- or seven-year hiatus in sales, we are starting to see some marina transactions,” says Duke, 55, president of Walter Duke & Partners of Fort Lauderdale. The economy is fairly robust, and slip occupancy and boat storage rates are higher than they have been. Financing is available from mainstream banks and lenders. Interest rates are low. Economic risk at the moment is modest, he says.
The good times have spurred investor interest, which in turn has driven down capitalization rates of properties — their net operating income divided by present value. That means owners can expect to sell at a price that is fairly high, relative to net income, depending on the property’s marketability, says Duke, a 30-year veteran of appraising commercial properties, including marinas and boatyards.
In some cases buyers plan to convert waterfront properties to residential condominiums, but many others are keeping and developing them for marine use.
“It’s time to take stock in what you [the marina owner] have and have ‘the discussion’ with your partners, with family — with yourself — to see how the business fits in with your [season of life] and the economic cycle,” Duke says.
Is it time to sell the marina? It may be if the business struggled through the Great Recession and the owner neither has the resources to develop its income potential while times are good nor is ready to carry it through the next recession or plans to retire soon, he says.
Duke, a former mayor and now a commissioner in Dania Beach, Fla., a community where boatyards, marinas and boat dealerships are bulwarks of the economy, says the evidence is strong that marina properties are back in play.
- This spring, the 150-slip Bayshore Landing Marina, formerly Monty’s Marina, and associated businesses in the heart of Coconut Grove sold for about $8 million.
- In July 2014, Sergio Rok, Jimmy Tate and investors Rialto Capital Management and RCI Marine bought out the 48-year lease of the 250-slip Bahia Mar Resort & Marina, home of the Fort Lauderdale International Boat Show, and plan major improvements to the property while preserving the boat show and marina there.
- This past July, The Carlyle Group, a global real estate investment group, purchased the 50-acre Fort Lauderdale Marine Center — a boatyard, marina and service facility with 156 wet slips, 2,000 feet of linear megayacht dockage, 19 covered sheds and 50 tenants — for $147 million, after buying several small marinas and hotels in the Florida Keys.
- In June, an affiliate of Atlantic Marina Holdings bought the PGA Marina Center on the Intracoastal Waterway in Palm Beach Gardens for $24 million. The new owners plan to upgrade the facility and add 150 dry slips to the 400 wet and dry slips already there.
- In August, Grove Bay Investment Group acquired the lease from the city of Miami for Grove Key Marina and Scotty’s Landing at Dinner Key and plans to invest $10 million in the marina, restaurants, a pier and two historic Pan American Airways hangars to create a new waterfront complex called The Harbor.
- In July, the Caloosa Cove Resort and Marina, an Islamorada time-share with a marina, drystack, restaurant and lounge, changed hands in a $10 million deal.
- In June, The Related Group and an affiliate of Rubina Properties of New York declined to renew Apex Marine’s lease on a New River property where Apex had been servicing yachts and said it will build a 36-story, 349-unit apartment tower — the second phase of the New River Yacht Club.
“We’re seeing developers looking at building new marinas and boat barns,” Duke says. “But the costs are high, and there are only so many waterfront locations. Permitting is tough.”
Redeveloping or upgrading an existing marina often makes more sense, so the hunt is on for marinas that are ready for a change of ownership and direction.
Duke advises marina owners to ask themselves five questions when they consider a sale.
Question No. 1: Where are we in the economic cycle? Duke says the region has seen several years of economic expansion, and he expects at least two more before contraction sets in. That means if you sell your property now, the next owner has a couple of years of good times to upgrade. If you wait too long, that window of opportunity could close.
Question No. 2: What is your marina’s market position? Is it a big-boat marina, small-boat? How does it stack up against other marinas in services and amenities? Does it command high rates, low rates? Is its market position limiting its income? A marina’s position in the market will determine how marketable it is.
Question No. 3: Does your marina have any development potential? Do its size, location and the market it serves offer potential for upgrading the marina and growing income? If so, do you have the resources to make it happen? If not, the development potential could make it an attractive property for a buyer who does have the resources.
Question No. 4: How competitive is your marina in your market? If it’s not competitive and needs significant upgrades, do you have the money or borrowing capacity to undertake them? If not, might this be a good time to sell it to someone who does?
Question No. 5: Are you in a position to endure another recession? During the Great Recession many owners hung on to workers they couldn’t afford because they felt responsible for them, and it just about sank them, Duke says. The marinas survived, but barely. “They don’t want to go through that again,” he says.
If a sale beckons, “the market is telling me this seems like a good time,” Duke says.
This article originally appeared in the December 2015 issue.