Selling a commercial property is a process that most real estate investors do not frequently go through. This is particularly true for marina owners, where the real estate supports an operating business that usually also serves as the owner’s day-to-day workplace. While each ownership situation is unique, there are many “unknowns” that are universal to a first-time seller – unknowns that can be expertly navigated with the aid of competent representation, in the form of a marina broker. When you decide to sell you house, one of the first people you think of is a realtor because they bring several benefits to helping you accomplish that goal. When it comes to your marina business, why forgo the benefits of having a marina broker on your side?
Our team of marina advisors and brokers has noticed that many owners are not prepared to sell their marina
after they already made the decision. We identify some of those pitfalls and challenges in this article to show you where you may be leaving money on the table and how competent representation can help you maximize the value of your marina sale.
Where Is the Marina Market Today?
Over the last 18-24 months, the industry has seen record levels of consolidation as institutional capital continues to enter the space in search of yield and diversification. Consolidation means that large investment groups are pursuing strategies to acquire multiple marinas, resulting in a portfolio of marina assets to later be sold as a package. As an owner in a seller’s market, it is an exciting time because your marina may fit the criteria for acquisition by these larger investment capital sources. Yet in our experience, it only takes one or two factors to derail that acquisition potential, making what was thought to be a “perfect fit”, a much larger endeavor to find the right buyer. Examples of “deal-killer” criteria include:
- A less desirable NOI composition.
- Deferred maintenance or “Capex” (expanded on in the article “Preparing Your Marina for Sale”).
- The location is not in a primary market/near large MSA.
Working with a team of experienced advisors who understand the market, have great buyer relationships, transactional experience and understand your specific marina is a huge value-add to a successful transaction. Accentuating the positives and proactively engaging the investment community can make all the difference in selling your marina and achieving the outcome where you can concentrate on the next part of your long-term plan.
What Is An Unsolicited Offer?
To ensure you have the best chance of moving on to the next step in your long-term plan, let’s look at the “unsolicited offer” – or an offer/interest put forth by a perspective buyer when your marina is not actively for sale. This is not an uncommon situation. When you receive an unsolicited offer, this should be a red flag telling you that someone is trying to “rob the bank”. Every buyer in the market wants to sneak in and steal a marina (or any property for that matter) without competition from other buyers driving up the value. Think about it this way: If you wanted to buy another marina, would you rather buy a marina from a seller that does not know the value of his or her asset, while avoiding competition from other buyers who could further drive the price up? Or would you rather buy from a savvy seller who hired great representation and created a marketing process where there are many buyers competing for the asset (ultimately driving up the purchase price)?
The Disadvantages to the Seller
These are common pitfalls that unsolicited offers bring to a seller, and these only touch on the obstacles that can arise from misguided transaction management, improperly vetting the buyer and inexperienced checks on the buyer’s ability to close, ability to achieve financing (when applicable) and business plan for the marina:
- The buyer would not compete with other offers (potentially underachieving market value).
- The buyer pays the price they want to pay vs. the price they would be willing to pay when they know they are competing.
- You waste time waiting for a buyer you know of to step up and move forward with the deal (all while you are ready to sell). [A competent broker’s process would create the urgency necessary for that perspective buyer to treat the process and your property seriously]
- Buyers can “lock up” your property with an LOI or contract since there is no rush for them to move quickly, potentially resulting in your inability of accepting better, stronger offers.
- Buyer may get to contingency removal and re-trade on the price (asks for a lower price because of what was discovered during due diligence). [The seller is then in a weak negotiation position because there is no back-up offer and the seller will usually agree to the buyer’s demand]
Don’t Leave Money on the Table
Many sellers think, “if I accept this unsolicited offer, I won’t pay a commission!” But what the unsophisticated seller does not realize is that more times than not they are accepting a lower price than they would have received if they paid for competent representation that drives up the value. We have seen these deals close anywhere between 15% and 40% lower than what the seller could have received, all to save a few percent in a commission. (In the end, this really equates to a 15%-40% fee!)
By the same token, this equates to leaving money on the table. The marina market has been very active with incredible capital influx, cross-product type buyers and stronger deal terms. This has created a FOMO-like urgency for buyers to acquire marinas, given that one of the biggest barriers to entry for the industry is lack of supply. When the buyer knows they are not competing against anyone else, they are more likely to submit an offer lower than what our competitive marketing process could generate.
By working with the right marina broker, you can avoid these pitfalls that waste your time and potentially leave money on the table.
Not all brokers are created equal, however, so we recommend you do your homework when selecting an advisor and/or broker. Think about what is important to you throughout the process. With competent representation, the money invested through a commission will offset any perceived “cost”, becoming a net benefit to you through:
- Better deal price and terms
- Stronger, qualified buyer relationships
- Less legal hassles and transaction headaches
- Stress-free process that allows you to be hands-off yet still have full transparency into the process
When you work with the Leisure Investment Properties Group, you are partnering with a team of advisors that help you chart the best course of action for achieving your long-term goals. Our Brokerage Division helps every client achieve the best deal possible to reach their goal(s) of comfortably retiring, exchanging into another property, or even paying for their child’s tuition. Losing money is never a good feeling – take the appropriate steps so you do not find yourself leaving money on the table or waiting longer than you would like to move on to the next phase in your long-term plan.
