Buyer Sentiment: FY 2020 & 1H 2021
The Marina Asset Class
The marina industry is an increasingly sought-after asset class for many different investor profiles. We have conversations with groups of all equity sizes, ranging from high-net worth individuals and families to private equity, REITs, family offices and other institutional-level players. Over the last few years many institutional-grade platforms realized great success in the industry (Safe Harbor Marinas, Suntex, Southern Marinas, etc.), garnering increased attention from investors who seek strong yields from multiple income streams, with opportunity to build scale. Historically marinas have been a highly fragmented industry (and this holds true today), but there has been tremendous consolidation, primarily with Tier 1 marina acquisitions in the Southeast. While these properties tend to be strong, high-capacity, cash-flowing marinas, there is an abundance of marinas that have benefitted from new investor capital in the $1-$10M range, whether it is a complete re-branding or expansion opportunity that creates opportunity for more boaters to have better access to the water. Marina investments have proven positive results for the end-consumer (boaters), as well as the owner, and 2020 showed consistent growth in sales and consolidation throughout the industry.
· High-Net Worth Individuals
· Private Equity Firms
· Family Offices
When the COVID-19 pandemic hit the U.S. mid-March 2020, investors took a pause as the situation was assessed. The marine industry went on standby until it became clear that marinas would be deemed an essential business – it was around this time that boat dealers started selling out of all new and used inventory, creating a backlog on orders that still exists today. Thus, most facilities remained open across the United States and transactions quickly became more attractive since the marina business was booming. Early on, marinas under contract ran into complications; at best, timelines were extended as third-parties were limited by quarantine and social distancing guidelines, directly impacting Due Diligence tasks,. At worst, the deal completely fell apart. Listings were also temporarily halted early on in the pandemic until timing made sense to create a strong market where investors were in a position to execute on a purchase. Listings already on the market at that time had to adjust their strategies to either make the most of the situation and continue moving forward or withdraw to better situate the property under more favorable timing. Fortunately, it did not take long for the marina industry to find that the pandemic would bring more advantages than adversity, contrary to the position restaurants and hotels unfortunately experienced. Marinas were open, families were taking to the water, and business turned out to be better than ever before.
On the transaction side, we noticed a strong uptick in interest from new investors to the marina space and families that were relocating because of the pandemic. Like the residential housing market, families are seeking lifestyle changes in a new area (predominantly the Southeast) where marinas offer the perfect career change, active retirement, and/or owner-operator investment that in some cases also provided a primary residence on-site.
When working with first-time marina investors (whether private equity funds, experienced commercial real estate investors or individual investors), we always strive to reduce the learning curve through education, information and advisory services. Nevertheless, as interest remained high with opportunities returning to the market and new deals available for purchase, expectations of discounts on pricing began to surface. This created a wide spread between “bid” and “ask” – where a buyer was willing to pay for the property and where an owner was willing to sell. We found that discounts were unwarranted in most situations when the historical levels of ancillary income streams were consistent with low volatility. For the most part, the increase in boating activity directly benefitted boat dealerships, with marinas benefiting from higher wet slip occupancy (and waiting lists), rate increases, fuel sales and boat rentals. These income streams are largely synergistic and a function of boat use, but boat rentals in particular have seen strong growth as the general boating experience has captured the interest of the nation.
While there are concerns that re-opening the economy will result in reduced NOI levels (primarily in fuel sales and boat rentals as people get back to work) in the second half of 2021, we are confident in the residual effect of heightened boat ownership and marina use as lifestyles have changed nationwide. We expect to see this reflected in wet slip/storage occupancies and rates primarily.
With this sentiment in mind, we are optimistic about transactions throughout the remainder of 2021 as more individuals and families seek the perfect active retirement and new institutional investors seek premier assets and yields for their investors.