Marina Industry Consolidation

Looking back at 2020 and well throughout the first half of 2021, consolidation is very much alive. At the institutional level we have seen numerous single-asset acquisitions and smaller portfolio sales; the success and outlook for these assets has captured the attention of private equity, family offices and REITs all around the country.

FY 2020/1H 2021 Notable Transactions

· Sun Communities, Inc. acquired Safe Harbor Marinas for $2.1B in October 2020 · Safe Harbor Marinas acquired Rybovich and Lauderdale Marine Center · Suntex Marinas recapitalization – this has better positioned Suntex for future acquisitions and growth · Southern Marinas sold 12-marina portfolio in February 2021 (Partnered with new equity shortly after) · Aqua Marine Partners and Prime Marina Group divested of holdings

What Does Consolidation Mean?

First, consolidation is a strong indicator of interest and demand in the marina space. The portfolio “roll-up” strategy is most intriguing to institutional investors because large sums of capital can be put to work at once, fully capitalizing on the attractive yield the asset class has to offer. The Sun Communities, Inc. acquisition of Safe Harbor Marinas, for example, signaled two important factors of competition at this level: 1) the strength of the SHM platform and the virtual irreplaceability or replicability of a similar platform (i.e. scarcity); and 2) investors from other product types have taken interest in the space, creating more competition for great properties. But over the last few years we have seen opportunities to acquire Tier 1 assets quickly diminishing, limiting future opportunity and scalability for new market entrants. Second, consolidation results in subsequent ripples throughout the entire marina industry, largely reflective in overall transaction volume, sales prices, investor target acquisition markets, and how future investors will follow suit. Portfolio sales with strong cash flows and market share (e.g. Loggerhead Portfolio sale in 2019) are less common than smaller 2- and 3-property portfolio sales, but they do exist (most recently with Southern Marinas in Feb. 2021). For instance, in 2019 and 2020 we recorded 14 and 12 marinas involved in smaller portfolio sales, respectively, compared to singled digits in 2018 and near zero in years prior to 2015 (Safe Harbor realized significant growth in 2015-2017).

Better Boater Experience

Considering other effects consolidation may have on individual marinas and the boater experience, we see many, if not all, of these platforms bring in expert management, better amenities and more services at their facilities. New capital also brings the ability to expand (when available) and remedy deferred maintenance that a former owner may not have had the wherewithal to accomplish. While these opportunities are more “B-Class” and occasionally “C-Class” marinas in terms of general condition, they are typically on course to becoming Tier 1 and Tier 2 assets shortly after new ownership upgrades the facilities accordingly. Thus, this is a strategy that can be very lucrative for groups that can successfully acquire the assets, inject the capital for improvements and drive a solid customer base to the property. We note many new entrants to the space coming from other product types as well, namely RV parks, manufactured housing communities and self-storage. While similar in operation to a degree, most of the product types find themselves paired with a marina component in various locations; it is not uncommon for lake marinas to offer RV sites on the uplands, for example. Thus, these investors who are new to the marina space bring an expertise and base knowledge that will serve them well for acquiring more marina-centric assets, to either expand on their core focus or translate knowledge and management experience to the marina asset class. As we look at the second half of 2021 and into 2022, we expect consolidation to continue as capital is more abundant than ever and many new investor groups are in a better position to execute on acquisitions. Furthermore, we are eager to see how this demand impacts the marina market, transaction velocity, and individual “roll-up” strategies moving into 2022.