Serious Real Estate

Lauderdale Marine Center’s 65-acre site on the New River has space for 227 boats, four lifts, and it’s a Foreign Trade Zone
Author:
Publish date:
Since 2015, Lauderdale Marine Center has invested $20 million in infrastructure and other improvements as 
it increases its focus on yachts over 100 feet. 

Since 2015, Lauderdale Marine Center has invested $20 million in infrastructure and other improvements as it increases its focus on yachts over 100 feet. 

As boatyards go, Lauderdale Marine Center has a lot to offer. There are four lifts, 12 feet of draft, and it’s a hurricane-protected location. The center is also a designated Foreign Trade Zone to offer customers tax benefits.

None of that, however, is what most sets Lauderdale Marine Center apart. The differentiating factor is something much simpler: space. “Most yards don’t have the real estate to do what we do,” says CEO Doug West. “Other yards can’t afford to have boats sit for very long. We don’t have to rush anyone back into the water or out of the water. We can let projects take as long as they need to take.”

West’s real estate occupies 65 acres about eight miles up the New River from the southeast Florida coast, which is far enough inland to insulate it from storm surges and the worst winds. There are 227 total spaces, of which 122 are on land. Nineteen of the dry spaces and eight of the in-water spaces are covered by sheds, and in keeping with the yard’s focus on larger vessels, about half of the total can accommodate boats bigger than 100 feet.

The lifts range from 100 to 485 tons, meaning the center can handle boats up to about 180 feet. There is also 150,000 square feet of offices and shop space, which the center rents to 33 marine industry contractors, three yacht brokerages and four builders. The most recent addition is Ferretti America, which announced Aug. 5 that it would open an office, workshop and parts center. A few dozen other contractors are preapproved to work on-site, and outside vendors are welcome without charge as long as they meet requirements for worker’s compensation and liability insurance.

Many yards operate as middlemen, running the refit and sales businesses that come through the door and taking a markup on each, which is why their success is based on turnover. Get ’em in, fix ’em up and get ’em out, so the next paying customer can come in. Lauderdale Marine Center makes its money differently: by collecting rent from the contractors, and dockage and storage fees from boat owners. The owners deal directly with contractors and manage their own work.

The game for Lauderdale Marine Center is not one of churn, but of attendance. “Most of what we do is designed to maximize occupancy levels,” West says.

Safe Port in a Trade War

To help bring in boats, Lauderdale Marine Center in 2017 became the first marine facility in the country awarded status as a Foreign Trade Zone. For retail purposes, it’s not actually part of the United States, so a foreign-flagged vessel won’t have to pay duties, excise taxes or tariffs if it is sold while there, as long as the vessel remains registered in a foreign country.

The current duty on a yacht sale is 1.5 percent plus sales tax, which is capped at $60,000 in Florida. A $4 million sale through Lauderdale Marine Center would cost about $120,000 less than it would at a yard without a Foreign Trade Zone designation. In addition, the designation allows brokers to show foreign boats to U.S. citizens in U.S. waters without buying a boat show bond, another saving that can make a broker’s sales more attractive and more lucrative.

Foreign boatbuilders can build inventory while saving money on duties and taxes by stashing boats at Lauderdale Marine Center until they are sold. As long as the boats are purchased by a foreign owner or registered to a foreign flag, those fees will never have to be paid. And while the owners are awaiting sale, purchases from U.S. retailers — fuel, provisions and the like — are considered exports, which means they also escape various taxes and fees.

“We definitely utilize that advantage,” says Kevin Merrigan, CEO of the brokerage and charter firm Northrop and Johnson. “I’m not sure why more yacht owners don’t. I imagine because it’s just not widely known about yet.”

As of mid-July, about 10 percent of the boats at Lauderdale Marine Center qualified for Foreign Trade Zone status. West expects that percentage to multiply two or three times when the busy season hits this fall. “It’s not a huge part of our business, but it’s an important one,” he says, “especially as the word spreads among boat owners.”

LMC in 2018 became the only marine Foreign Trade Zone in the country with production authority, which means the trade benefits also apply to refit and repair work. That designation provides an even greater advantage, as duties on components brought in from foreign countries — everything from thrusters to furniture — range from 2.5 to 20 percent. Tariffs on steel and aluminum imports also add significant costs for refit work.

The savings on duties at LMC could grow in the near future. The United States has accused the European Union of anticompetitive practices in a grievance filed with the World Trade Organization. If current negotiations between the United States and Europe fail to find a compromise, the Trump administration has threatened to increase tariffs by 25 to 100 percent on numreous items, including many with applications to the marine industry.

“If you bought a boat in Norway or Italy and you want to have it fixed or upgraded with parts from the original builder, that could end up costing a lot extra,” says Gary Goldfarb, chief strategy officer at Interport Logistics, which helped Lauderdale Marine Center apply for Foreign Trade Zone status. “At LMC, you would pay zero extra dollars.”

The center’s lifts can handle 100 to 485 tons. The largest lift can transport yachts to 180 feet.

The center’s lifts can handle 100 to 485 tons. The largest lift can transport yachts to 180 feet.

Location, Location, Location

“The rent for being here is considerably higher than it would be someplace else,” says Chris Brown, the owner of High Seas Yacht Service. “But I look out the window and there’s 20 potential customers sitting right there. I couldn’t get that in some warehouse out past the highway.”

Brown has owned High Seas, with hydraulics and running gear operations, since 2009, and he’s rented space at Lauderdale Marine Center the entire time. He just reopened after a four-week project to expand and upgrade one of the work bays. He says the yard’s address, near Fort Lauderdale-Hollywood International Airport and Interstate 95, makes it convenient to access for workers and clients, and cuts his costs in other ways. “It consolidates management and support,” he says. “Instead of two guys in a truck heading down to Miami, almost all my employees are here almost all the time. I own more golf carts than trucks.”

Merrigan, of Northrop and Johnson, also cites the neighborhood’s benefits. “If a client needs a quote or a crew needs something, it’s all right here, so our brokers don’t have to guess. Plus, LMC is excellent to work with, very helpful. We look at them as a partner.”

That, of course, is exactly how West wants clients to feel. It’s an attitude he has strived to attain since 2015, shortly after The Carlyle Group, a global asset management firm based in Washington, D.C., purchased the property. Since then, the company has spent $20 million on improvements aimed at servicing boats larger than 80 feet.

Those changes include revamping the lineup of contractors on-site for a more strategic mix, incorporating the adjacent Riverbend Marina into Lauderdale Marine Center, and expanding the office space, seawall, docks and work facilities. More recently, the center added an office and meeting space for visiting owners and crews. Given that boats stay for an average of 35 days, those visitors also tend to use the site’s fitness center, restaurant and bar, and West is looking to add additional home-away-from-home comforts. “We own a few residences across the street,” West says. “We’ll develop them into crew housing, but that will be 2020.”

So far, the strategy seems to be working. According to West, the yard is projected to complete 1,600 hundred jobs for 1,300 unique customers in 2019. 

This article originally appeared in the September 2019 issue.

Related