Buying Marina's

Blueone

Blueone

Well-Known Member
SILVER Sponsor
Jan 24, 2007
13,790
Lake Erie, Ohio
Boat Info
2004 420 Sundancer
Engines
Cummins 6CTA 450's
I have watched this company buy Marina's all over the country the last few years. They bought 3 marinas I have been in in just the last 4 years on Erie and St Clair... I have heard both arguments on the return on investment of Marina's...and it just doesn't seem to be worth the risk... but this company seems to have a different equation going on at the rate they are growing. Just found it interesting...

https://shmarinas.com/locations/

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Blueone said:
I have watched this company buy Marina's all over the country the last few years. They bought 3 marinas I have been in in just the last 4 years in Erie and St Clair... I have heard both arguments on the return on investment of Marina's...and it just doesn't seem to be worth the risk... but this company seems to have a different equation going on at the rate they are growing. Just found it interesting...

https://shmarinas.com/locations/

View attachment 63057
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I know nothing of this company, but this scares the hell out of me. I can just see some company buying all of these claiming to be a marina operator all while planning to convert them to condos at huge profit later. Shrinking marina availability will be real in the future.

MM
 
Kind of scary. Especially around here where the number of Marina’s has dwindled over the last generation or so because of the high property taxes and property values.
Lots of independent places have sold out to residential condo or private home developers. Recently heard of another one that is selling off a big chunk of the property. I’d imagine some of the people that docked there will be scrambling for space in the Spring.
 
I have experience with this first hand, and have moved marinas as a result. Profits rule the day and the personal relationships, pride of ownership, care for customer is what was lost when this company took over. And yes, they always were raising the rates without providing increased service or maintenance of the facility. I think we were paying for their acquisition strategy, and could see the dollars pour out of our marina to fund other things. They now have two marinas on the lake and have been attempting to purchase others. A monopoly is in the making if this doesn’t stop. From my personal experience, I am not a fan.
 
I've looked at 2 since 2010 and decided that if they made money is was from creative accounting and expensing costs that should be called capital investment.

In the final analysis you have to take in more money than you pay out to make a profit. One marina was on the TVA lake system in Tennessee and revenue was the problem there. They have decent cashflow from April to about the middle of September, but almost none in the Fall, Winter and early Spring. That creates a high turnover situation because even key employees are laid off in the slow months.

The other marina was on the Gulf Coast and the problem as almost reversed.....great cashflow about 10 months a year but loaded with debt from paying off previous repair/building projects caused by rebuilding storm damage and from State and Federal DEP compliance issues caused by more stringent regulations.

In both cases, too much risk (economic and environmental) and no ability to expand to improve cashflow. Increased revenue handles a lot of the risk, but that depends upon volume and price. Just how much can you increase a shop's labor rate if you are at $90/hour? How much can you raise the price of fuel before you run off more business that you gain? If 98% of your slips are leased in the summer, how can you increase occupancy?

I am too conservative for the risk associated with either "opportunity". Plus, I concluded that even in a well run operation, the potential profit was minimal unless there were other profit centers ancillary to the marina operation like selling and servicing multiple mid to high level brands of boats, motors and accessories in conjunction with the storage and repairs/maintenance, or if the marina had a drawing card like a resort or a very good restaurant nearby.
 
Safe Harbor bought out the narina that I'm currently in on Lake Lewisville. Nice people. Definitely investing in the infrastructure of the marina to improve the appearance and amenities that it offers. I'm confident pricing will go along with it. In the Northern area of Dallas, I ran into the guy/developed a relationship with him who basically started most every marina on all the lakes within a 50 mile radius. Granted he started many in the 60s/70s, however the guy is a millionaire multiple times over. He developed and fabricated his own floating docks in a warehouse that he setup off site. His business was essentially vertically integrated when many didn't even know what that was. So yes, there is profit in it, however, profit margins I'm sure have gone down dramatically over the years. The good thing in Texas is that we typically get 9-10 months in our season here.
 
Shamarinas owns Harborage Marina where I keep my boat (they own high and dry and large floating docks supporting mega yachts). Not super report like, but close to downtown st pete with great restaurants. So far so good, they raised the rental this year by 10%, was 5% increase the previous year. But after shopping around, still cheaper than other places. One location quoted me 845/month for yearly contract for wet slip with cover, but that is over 300$ more than what I pay now. Another marina nearby wanted 625 for dry, but they are at capacity and I’m on the waiting list.
 
The marina I’m at supports mega yachts and they are always full. Seems like if they were not making enough margin, it would be easy to charge more for these mega yachts, there are not that many locations they can store their boat, and if you have a 130’ Yacht for $6m, you can probably afford whatever the marina charges you?
 
Prosideus said:
I have experience with this first hand, and have moved marinas as a result. Profits rule the day and the personal relationships, pride of ownership, care for customer is what was lost when this company took over. And yes, they always were raising the rates without providing increased service or maintenance of the facility.
Click to expand...
That's a bit disheartening to hear... I haven't seen that... They just bought Jefferson Beach this summer and no real changes ....the marina I am in now has been owned by Safe harbor for 2 years....they have invested in the place paving the parking lot and new slips this year...Both places have retained the same management....Hopefully it doesn't turn into your experience.... if it does... boats float :)
 
SHM is pretty smart about their acquisitions. When you have a monopoly on a lake, it's pretty hard for anyone to go elsewhere. It's not like the slips are full of trailerable size boats. They have to be a cash rich organization to be buying up places like they have. Some of the marinas that I have seen for sale are typically priced at 5x-10x annual revenue.
 
Blueone said:
https://shmarinas.com/acquisitions/

Watch the first video....they are not selling the marina... per say... they are investing it. Like I said...I dont get it
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What they are doing is probably best described as a industry roll-up. Instead of companies selling their marinas and paying taxes, they are merging them into the roll-up company and replacing their old equity with new equity in the roll-up company. Using this approach means they don't pay taxes on the "sale" of the company ....they simply have transferred their old equity and deferred their taxes.

They are paying themselves dividends (probably quarterly) every year from the roll-up company. Those dividends are taxed at 15% which is materially below ordinary income (35-40%) which they used to pay themselves.

This happened in the sleepy, low profitability world of office supplies 20 years ago. US Office Products rolled up 200 companies using the same model in a bid to become the "world's largest distributor of office products". All the companies that agreed to merge with the roll-up got equity and almost no cash. USOP paid them handsomely with dividends and went public to raise cash and provide liquidity for their "shareholders". It went bankrupt in 2001.

Why? Because greed takes on many forms. The allure of other people making more money than they did running their marina just sounds great. Think about it.....you barely get by with your marina and these guys show up and pay you twice as much as you earn off your marina today at a much smaller tax rate.

Your equity becomes their equity and you own a piece of a much bigger company.....until it runs out of cash. It all works great until the music stops. Then you lose everything. No more big dividends and your old marina which you put 20 years into belongs to a creditor.
 
I would look it as it real estate play that I have seen in retail. Here is an example. Buy for 10M lose 500k/year on operations and sell for 20M 5 to 10 year's later. Who cares if you lose 2.5M on operations if at the end you net 7.5M on sale after loss. Works great until it winds up going upside-down. Then if does you simply bail with bankruptcy after taking salary for years. Work s great if you have no morals and OPM.

-Kevin
 
PlayDate said:
What they are doing is probably best described as a industry roll-up. Instead of companies selling their marinas and paying taxes, they are merging them into the roll-up company and replacing their old equity with new equity in the roll-up company. Using this approach means they don't pay taxes on the "sale" of the company ....they simply have transferred their old equity and deferred their taxes.

They are paying themselves dividends (probably quarterly) every year from the roll-up company. Those dividends are taxed at 15% which is materially below ordinary income (35-40%) which they used to pay themselves.

This happened in the sleepy, low profitability world of office supplies 20 years ago. US Office Products rolled up 200 companies using the same model in a bid to become the "world's largest distributor of office products". All the companies that agreed to merge with the roll-up got equity and almost no cash. USOP paid them handsomely with dividends and went public to raise cash and provide liquidity for their "shareholders". It went bankrupt in 2001.

Why? Because greed takes on many forms. The allure of other people making more money than they did running their marina just sounds great. Think about it.....you barely get by with your marina and these guys show up and pay you twice as much as you earn off your marina today at a much smaller tax rate.

Your equity becomes their equity and you own a piece of a much bigger company.....until it runs out of cash. It all works great until the music stops. Then you lose everything. No more big dividends and your old marina which you put 20 years into belongs to a creditor.
Click to expand...
Interesting concept. Quite possible that's what they're doing.
 
douglee25 said:
Interesting concept. Quite possible that's what they're doing.
Click to expand...


If you watch the video.....it looks exactly like what they are doing.....I have seen this movie before. The sad part is there is always someone who restarts these old tricks when enough time has passed. The marina industry is a break even business at best for most marinas. When someone shows up and offers you a way out.....it is hard to resist taking it. That is until....it goes bankrupt and you have nothing to show for all the effort you put into it.

One of the guys in the video is a marina investor. His words indicated that they had held the marina long enough and were looking for an exit. Safe Harbor gave them the ability to roll their investment into Safe Harbor and start collecting dividends. It works until the cash runs out....which is usually after they take it public and the original investors cash out.

At that point, those marinas which were part of the roll-up and without valuable real estate will be sold for pennies on the dollar.
 
I'm in a marina that was acquired by Safe Harbor two years ago. Since the acquisition rates have gone up (substantially), they haven't been particularly good about living up to the commitments they've made "very publicly" and folks seem to be leaving pretty quickly for other (cheaper) marinas in the area. This may not be entirely accurate but my perceptions is that we're now the most expensive marina in the area with the highest level of vacancy. Not ideal.

Aside from the negatives the folks they've brought in have all been very solid. Good people. They have made improvements at the marina, they are definitely investing, but their choice of projects seems a bit unusual at times.

I look forward to seeing what the next few years will bring.
 
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Stee6043 said:
I'm in a marina that was acquired by Safe Harbor two years ago. Since the acquisition rates have gone up (substantially), they haven't been particularly good about living up to the commitments they've made "very publicly" and folks seem to be leaving pretty quickly for other (cheaper) marinas in the area. This may not be entirely accurate but my perceptions is that we're now the most expensive marina in the area with the highest level of vacancy. Not ideal.

Aside from the negatives the folks they've brought in have all been very solid. Good people. They have made improvements at the marina, they are definitely investing, but their choice of projects seems a bit unusual at times.

I look forward to seeing what the next few years will bring.
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How do the slip owners feel about the new owners? Are they mostly able to manage their costs through their association budgeting process or do they have to buy services from the people who bought the marina business? About the only negative I've heard from one owner is the price charged for pumps outs is too high.
 
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