to the availability of detailed income and operating expense information for marina assets on a national scale, and allow for additional transparency and substantially more accurate underwriting analysis. What do lenders look for? What kind of down payment is typical for marina properties? Ash: Lenders like the income producing marinas that can sustain the mortgage. They look at the ability of the borrower, along with the marina's historical income, real estate value, flood and environmental issues. We see that the down payment preferred for marina lending is higher than other income based investments such as multifamily or retail. I would say an average of 25 percent is what we see, unless the borrower is strong, not over leveraged, and has an established relationship with the lender, and in some cases offering other collateral. Under what conditions are lenders most likely to support marina development? Spalding: Lenders are most likely to support marina development in favorable, higher demand locations with both a proven recreational boating customer base and supporting demographics with facilities that can maintain at least 60 to 65 percent of their total revenue from vessel storage rates. How does the boatyard business differ from marinas, when it comes to buying and selling? Spalding: Cap rates for boatyards are typically higher than marinas that are based upon pure vessel storage. As the larger, full-service facilities typically have additional components; i.e., maintenance services, yacht sales and third-party contractor leases, and each have a variety of different risks associated with them. As a result, from a lender's perspective, they are considered to be less desirable revenue streams than pure vessel storage. The profit centers outside of pure vessel storage should typically be valued based upon business valuation metrics (earnings multiplier) as opposed to real estate valuation metrics (cap rates). Ash: Rental/dockage has a lower expense ratio, is easier to manage and has less risk to the average buyer. There has been a trend to prefer larger dockage spaces to reduce risk. Boatyards can also make a great investment to service marinas in a certain area. They generally have a higher expense ratio and may pose a higher risk due to environmental issues; however, capable owners enforce work standards to prevent environmental hazards.
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