The Leisure Investment Properties Group was featured in a recent article that addresses how marina owners and sellers can benefit by working with the LIPG/marina brokers ahead of a sale.
“In today’s competitive real estate market, cash offers direct from buyer to seller are becoming commonplace. This is true for the housing market, where bidding wars and heart-tugging letters to sellers abound, but marinas are experiencing a bit of the same frenzy. If a buyer approaches you offering cash to buy your marina it may be tempting, but we talked to two brokers who caution that going it alone on a sale may leave cash on the table at the least, or can cause legal headaches at worst.
Most businesses operate with help from a team of experts such as attorneys, accountants, and tax advisors. Brett Murphy of Leisure Investment Properties recommends marinas also bring aboard a marina advisor to provide information on market and operational risks that can affect the value of the business. “For many owners, their marina is their most important asset and accounts for the majority of their net worth. How to create value, preserve equity, and monetize that value is what an advisor should be able to do,” he said.
The Role of the Advisor
The extent an advisor can help varies widely. From providing market research, to offering access to vendor networks, to doing a full strategic analysis, advisors can ensure current operations and exit strategies are on track to meet owner expectations. Michelle Ash of Simply Marinas said that brokers and sellers may come to widely different selling prices. “A broker bases a price on experience, allocating different cap rates or multipliers for different income sources. We account for factors such as location, deferred maintenance, and upside. A seller may not have the same objectivity or experience,” she said.
Specifically, advisors look at financial performance, operational issues, property challenges, and opportunities. Turning to an advisor for this assistance well before a sale can give owners time to make repairs and shore up the books to help ensure a property is at its peak when it’s time to sell.
Unsolicited Offers
Receiving unsolicited offers from prospective buyers is a good sign that other investors will be interested in the marina. Now would be the time to evaluate your long-term goals for life after the marina. How much money do you hope to have, is everyone in the family ready to exit completely, are you ready to jump ship? It may be tempting to take an offer, believing the money saved on not paying brokers fees makes it a good deal, but Ash cautions that the downfall of going it alone outweighs the benefits when it comes to negotiations and getting the highest and best offer. “An experienced broker removes the emotional aspect of selling a marina. A seller may reflect eagerness or not say the right thing that can hinder negotiations and disadvantage the marina owner,” Ash said. A seller may also inadvertently say something to cause an interested buyer to walk away, never to return.
By trying to forfeit broker fees, a marina is also losing professional marketing. “If an unsolicited offer is 15% less than what a competitive marketing process could have generated, the math is clear that the unsolicited offer is disadvantageous for the seller,” Murphy said. In addition, transaction terms and timeline are generally improved through a competitive marketing process. The value of good marketing is that your marina gets noticed by buyers who are the best fit for what you have to offer.
Both Simply Marinas and Leisure Investment Properties have extensive networks of qualified buyers from around the country. The buyers are pre-qualified and often already vetted, making it possible to better match buyer and seller. “We prequalify buyers without offending them so we are not wasting their time either,” commented Ash. Brokers use their networks to create a competitive market where the buyers compete and pay a price they are willing to pay, not just one they may want to pay if there is no competition. “When a buyer goes direct to the seller, they do not want competition and this can result in the owner settling for a price that is equivalent to paying more than what a commission to a broker could have been,” Murphy said.
The Risks of Direct Sales
There are some legal risks to not using an experienced broker as well. Real estate law is complex and varies by location. Brokers have the experience to understand what paperwork needs to be filed and how to do it correctly. They also have working relationships with attorneys they can turn to for assistance.
Incorrect filing or contract mistakes can lead to serious, long-term, and expensive problems. For example, there are legal disclosures that a seller may not know nor reveal to a buyer that could lead to lawsuits if a sale goes through. A marina really can’t be sold “as is” without risk. Brokers have a track record of using the right processes and agreements to protect both the seller and the broker and in maintaining constructive relationships between the parties. “The saying ‘you don’t know what you don’t know’ applies here because brokers see dozens of unique, particular, and sometimes abnormal situations that sellers have likely never encountered. This experience is a benefit for helping sellers achieve the best, fair deal and overcome surprises that could otherwise derail a transaction,” Murphy said.
Selling a marina requires professional marina transaction management. It is not just about presenting the marina to a buyer. The process requires expertise in financial analysis, valuation, strategic consultation to best position the marina for sale, negotiation skills, having the right network of marina buyers that fit a specific marina, understanding contracts, handling the due diligence process, managing consensus with finesse, skills and objectivity, and assisting with the exit and tax strategy. Working with a broker will save you time and effort as well as likely boost your sale price.”
Article Published by Marina Dock Age in April 2022
