Sales Continue Through COVID-19

Companies working in the marina market space are seeing an impact from COVID-19, like most every business across the county. It’s not all negative though.

“One theme that we are seeing geographically across the country is that marinas have proven very resilient through the lockdown,” said Dan Grovatt, managing director of Colliers International’s Leisure Property Advisors in Tampa.

Michelle Ash, Simply Marinas owner/broker, said marina owners, associations and publications have placed a strong emphasis on boating safety guidelines and safety plans. “Boating is very active. I know in South Florida, boats are everywhere. The water is the place to go,” Ash said.

However, even some marinas that were able to stay open are feeling a pinch due to the limitations placed on restaurant and hospitality facilities. “We expect limited service at restaurants and reduced occupancies at hotels/motels to continue through 2020 and possibly into 2021, all dependent on the longevity of the crisis, stay-at-home orders, and re-opening orders by state/county of course,” said Brett Murphy, investment advisor/senior marina analyst with Marcus & Millichap’s Leisure Investment Properties Group.

“Likewise, marinas in areas that prosper from heavy tourism will feel the effects of reduced travel, reduced/cancelled charters and other interactive marina experiences that attract visiting guests.”

Marinas also will continue to feel the impact on their day-to-day operations in terms of social distancing practices, direct interaction with customers, cleaning standards and sanitation guidelines.

Marina Market
Early indications for the 2020 marina market were optimistic, and although the coronavirus pandemic has made an impact in some ways, brokers are still seeing market activity.

“While the market has been up and down this year, we cannot be certain that the optimism surrounding 2020 is completely lost,” said Andrew Cantor, managing director, Leisure Property Advisors.

Leisure Property Advisors has continued to have interest and offers on its current listings and has even taken on four new assignments since the COVID-19 related shutdowns. “We are seeing a lot of interest across the board in all price ranges,” said Matt Putnam, managing director. “With all the uncertainty surrounding COVID-19, boating stands out as one of the few activities that allows for social distancing and buyers are recognizing that.”

Ash said Simply Marinas is still seeing enthusiasm among buyers as well. “They are looking at marinas as a viable investment during these times.” Her firm closed on two marina resorts and one smaller marina in March, and marinas were under agreement in April and May.

Following the COVID-19 shutdowns, Marcus & Millichap advised its clients not to put any marinas on the market until at least May or June. One reason was because buyers were not in the position to tour marinas due to stay-at-home orders in many locations. Secondly, they wanted to see if there would be an impact on slip and rack renewals for the season.

“The good news is that it seems slip and rack renewals are going quite well in most markets,” said Jeff Spilman, Marcus & Millichap investment advisor. “We are pleased with how we see things going.”

Spilman said a couple of transactions were put on hold due to the health crisis. In one instance the buyer was on lockdown in New Jersey and could not hire people to do the due diligence. However, the buyer said when the state re-opens he is willing to go back under contract.

Stay-at-home orders limited the firms’ ability to show properties to prospective buyers in person. They relied on technology to create virtual showings, drone videos, high-quality photos, video conferencing and electronic packages. Ash said they did have one buyer fly in on his personal plane to meet with marina sellers. For any in-person showings, they reiterated the need for social distancing while on-site.

Putnam said since Colliers operates nationally, their team was already employing a very “virtual” marketing approach before the COVID-19 regulations made it a necessity. “Our goal has always been to provide a buyer with 90 percent of the information necessary to understand the opportunity prior to them ever setting foot on property,” Putnam said.

Financing
With the ups and downs on the stock market and the overall economy being in a state of flux, it’s unclear at this point how the pandemic might impact financing for marina purchases.
Cantor said some of the deals are moving a bit slower than they might have prior to COVID-19. “Financing is proving to be more of a challenge these days with many capital providers putting a freeze on funding for 60 or 90 days. With that said, buyers with locked-in capital are definitely at an advantage,” Cantor said.

Spilman said there is some concern that lenders are too stretched in manpower right now taking applications for the Payroll Protection Program, SBA loans and grants aimed at helping businesses weather the pandemic’s impact on the nation’s economy.

“Many of the lenders have their staffs working from home which has very much slowed the new loan process. We believe that should normalize soon,” Spillman said.

Cantor said financing for marinas has always been difficult compared to other core commercial asset classes, and the recent volatility of the market has not helped alleviate that. However, there is a possibility that could change.
“Some industry professionals we have spoken to think that, if boat storage continues to be in demand through the pandemic, new opportunities for marina lending could arise as other core asset classes like retail and office may falter,” he said.

Simply Marinas is seeing a similar outcome. “The marina market eventually can be affected by the total picture of the economy. In some ways, it’s wait and see,” Ash said. “However, investors are looking as to where to place their money, and marinas seem to be quite attractive based on the sentiment of buyers contacting us. We are seeing new investors gravitating to the marina space from the office and multi-family sector.”

Looking Forward
Cantor said many marina owners and prospective buyers are optimistic about the demand for marinas and boating. “With the amount of summer travel and vacation plans that have been discouraged or cancelled, people are likely to turn to boating as a safe escape from their homes,” Cantor said.

As buyers consider prospective properties, Cantor said they may now look more closely at the various revenue streams individually, rather than looking at the bottom line as a whole. “Some revenue streams are likely to experience an increase, while others will experience a decrease. Fuel for example will likely increase as more people utilize their boats as a means of social distancing. Restaurant tenants, on the other hand, will likely experience a decline in revenue if they rely heavily on indoor seating,” Cantor said.

Spilman said buyers may have more concerns than usual about the overall economy moving forward or if there is a risk of an extended recession because of COVID-19. “Because most marinas are experiencing particularly good activity this spring, it may prove to enhance the viability of marinas as a good investment. Boat owners have proven to be financially resilient during this health crisis. In some areas of the country, like Florida or warmer states, marinas have been busier than ever,” Spillman said.

Murphy predicted marinas will continue operating their core profit centers (dockage/storage, fuel, service) at a very high level through the remainder of 2020 and into 2021. The profit centers currently limited due to COVID-19 restrictions may return to average levels as the economy moves to a “new normal.” Overall, he expects marina transactions to be at a reduced pace relative to 2018-2019.

“It is hard to speculate what the remainder of the year will look like and even more so, what 2021 will look like,” Grovatt said. “Just two months ago, our country had record levels of employment and economic activity. While it may take some time to get back to those levels of economic strength, we are cautiously optimistic that marinas will continue to show their strength.”