When I ask you to picture in your mind’s eye a resort marina, what do you see?  Palm trees, happy hour from 6 to 8 p.m., joggers, and bikinis?  I should be so creative (oops… I think I am:)  From an appraiser’s perspective, even if that’s the way it appears, that’s not the way I see it.  I picture a large, red question mark because there’s no way of telling what this is until you get out there.

Very Different Strokes for Very Different Folks

You already know there are many types of marinas.  But there are even more types of resort marinas!  The reason is that almost every resort marina is its own market.  Comparing the marina to any other marina is a stretch even on a good day.

Captivated by a Captive Market

Many resort marinas are logistically far away from large and small cities, or the largest towns.  It’s not uncommon to find resort areas surrounded by nothing but open space.  They may have their own airport, as in the case of Hilton Head, South Carolina.  For all these reasons, you usually find transient boaters making up a much larger percentage of total income in these marinas.  There will be more buildings on or nearby, especially restaurants and other entertainment locations.  You’ll find dedicated ship’s store buildings as common, as compared to the ship’s store/office/restroom combinations that are so frequent in typical marinas.  The theme of the place may coincide with the community including a similar construction type and quality.  If you visit it, it will “feel” like a resort marina.  You don’t get that at typical marinas.

Most times, there are things to do within an easy walking distance of the marina.  It can be part of a large master planned community, often with a golf course.  You’ll also find that the quality and responsiveness of management will be better too.  At least, that’s what I’ve found.

The demographics of the boaters will be different.  There’s usually little dry storage because the boaters go where they have their first home.  As in the case of intercontinental waterway resort marinas, the boaters just use their boats to go north or south for the off season.

Resort marinas that are surrounded by master planned communities are especially geared toward the demographics of the community, much more so than just the transient or seasonal boater.  Restaurants and clubs are common, boat sales and repairs much less so.

Valuation Issues

Valuing resort marinas is especially tricky. The mix of what is typically there is almost always different from your general marina. Larger resort marinas will have parking ratios that are far greater than the market and this often results in relatively few buildings on the site compared to typical marinas. There’s more possibility that a portion of the site (especially if it’s used for parking) can be turned into additional residential lots for the community, which requires a whole other type of analysis above and beyond just a marina valuation. There may be few buildings that are leased, so the market value for the unique building mix may be difficult to determine. The tenancies are different and rarely comparable to another facility. For instance, it may be a requirement that a person be a member in a golf course or community and even then, the fees charged could be hefty. Another example is the type that collects mainly or exclusively transient dockage fees. They do it because they can, unlike most marinas that only have a small portion of the docks available for transients, if any. Although there isn’t the boat repair or boat sales operations to value, resort marinas generally have very few competitors in the same class. A true comparable may be a hundred miles away.

What’s It Worth?

As you can guess, I’ve setup the answer for you.  You won’t be able to do a sales comparison.  There won’t be enough resort marina sales.  You can’t compare it to another typical marina, perhaps a boat repair facility or a pure warehousing marina.  There is just not enough comparable data to make a sales comparison.

The cost approach is equally useless.  Who buys resort marinas based on their cost to construct?  Land sales, well, are scarce to say the least.  I never was a fan for using the cost approach to value a marina and I’m even less so for a resort marina.

So you guessed it… it’s all about the income approach.  You’ll be using the income in place.  If there isn’t income in place or there are no financial statements, it’s time to move on to the next appraisal assignment… you really don’t want to put a number on this marina.  Somebody’s got to get the books together before it can be valued accurately.  As for the cap rate and operating expense ratio, that depends on all the above and how investors are thinking.  Sorry, no shortcuts here.  We all have our little secrets, right?

John Simpson, MAI

Two Steps Back, One Step Forward

Up until now, we’ve been talking about Counties.  So if we searched four counties, that’s four hours of time, right?  Not so fast, Tiger.  Many cities and municipalities are incorporated areas.  That means they are separate in many ways from the county.  They might have their own websites and not report sales data online.  They won’t be searchable at the county level.  Now those four hours have increased geometrically.  The odds of getting sales just dropped too.

The Nondisclosure Disclosure

No, that wasn’t a typo.  Here’s another curve ball – there are a handful of “non-disclosure” states where deed prices do not have to be recorded.  So even if you slog through trying to find sales online, that doesn’t mean for sure that you will see their sale prices!  You won’t know if the marina sold for a buck or ten million dollars.  I’ve always been perplexed with this way of thinking.  It takes a lot of time and effort to just get a sale price in these states, and, no, it’s not recouped in the appraisal fee.

Dancing in the Dark

So now we finally get to the part where we have sales data and sale prices.  That isn’t a guarantee that you’ll be able to do a sales comparison approach or even be able to use a single sale!  All that hard work might be for naught.  Wonder why?

Remember what I said about market niches?  You have to do a whole other level of research to figure out if you’ve got a warehouse marina, boat dealership, boat yard, megayacht marina, hotel marina, golf course marina, B&B or Inn marina… you get the point.  Is it a marina with a restaurant or a restaurant marina?  Which is the primary revenue generator and by how much?  It’s all according to your personal definition of “comparable”.

So at this point, you’re hoping to find a website for the marina.  You’ll still likely have to call someone and hope they provide you information over the phone.  That’s another situation where there’s no guarantee but by now, you’re used to it.

So What Are Marina Sales Good For?

At last we have a working set of data you’re ready to plot out in a grid to make adjustments.  Well, I hate to break it to you, but I’ve yet to find a marina owner who does the addition and subtraction.  In the eyes of marina owners, sales are just a rough rule of thumb.  That’s all they’re good for.  When you adjust your sales, you’re going deeper than the market, and possible in a different direction.

Here’s what’s important from the sales comparison approach – price per slip or price per acre as a test of reasonableness to the income approach.  In the current recession, a marina purchaser will always look at the financials to determine market value because upside potential is not financeable.  If there’s much of a business going on at the marina, it’s treated like buying a business – show me the money, or in this case the financial statements.  So if your income approach indicates a market value of $28,000 per slip and your sales show $18,000 to $48,000 per slip… well… you’re in the range.  If your subject appears to be in the same general market niche of your marina comparables, you’ve supported your value indicator just like a market participant.

And that’s what the marina sales are good for.

John Simpson, MAI

As indicated in Part 1, I promised to give you a real example illustrating the time and effort that goes into excluding the sales comparison approach.  It’s almost your lucky day.

Real World = Real Hard

I won’t cite the marina and I’ll omit the state this assignment was in… except to say it wasn’t Maryland or the Mid-Atlantic region.  Most states allow the counties to have their own systems for Assessors to database their sales information.  Nowadays, it’s 50-50 as to whether the county even has an online real estate sales system that you can search.  In this example, three of four counties had sales data online.  ‘Piece of cake, right?  ‘Hope you’re ready for an antacid.

What do we mean when we say searching for online sales?  I’d guess that only 10-20 percent of these counties have a system where you can find commercial properties (as opposed to residential).  In these instances, there is an option to search by commercial property type.  So what we’re talking about is 10-20 percent of 50 percent, which is a 5 to 10 percent chance that you’ll be able to find commercial properties.  Slim pickings, I’d say.

‘Wonder what you get at the other 80-90 percent of online county sales data sites?  You are usually given searching by Tax ID, owner, address, or a combination of the three.  Forget Tax ID – who knows what cryptic string you’ll need to find any property?  You have to know about the sale in the first place to find it, so that defeats the purpose.  Owner name is pure guesswork because many marinas aren’t owned by companies that match the marina name.   Many are personally or family owned.  Probably about 20 percent of marina addresses you can Google return “no record” when searching by address.  Even if you’re lucky enough to get a match, there could be multiple Tax IDs that comprise a marina, so you’re happy if you got the right one.

How much time would it take to search for all marinas in a county that offers its sales data online?  If you do it as often as I have, it will probably take an hour per county.  It takes more for appraisers that don’t appraise as many marinas as I have.  And it’s not like you’ll ID the sales information on every name, probably about 80 percent.  Do the math – the odds on are 50% x 80% or 10-20% (that’s a 4 to 8 percent probability) that you’ll get most marina sales data in any county.

A Mixed Bag a.k.a. Trail Mix

So we’re lucky enough to have a county where the commercial property records are online and we’ve located sales data on 80 percent of the marinas.  Guess what we’re not looking at?

• Multiple buildings and building size – is this a boat dealership or a warehouse marina?  Could this be a boatyard only?  Your online sales records may not be the truth, the whole truth, and nothing but the truth.
• Is there any indication if this is an arm’s-length sale?  Most assessor websites have some sales code reported but too many don’t.  Maybe Uncle Joe bought it.  Maybe it went bankrupt.  Who knows?
• One or more Tax IDs may not show up in your search.  Maybe there are others.  Perhaps there’s a separate Tax ID for the dry stack facility and another for the wet slips.  If you do price per wet slip, you could be off by a large margin if you didn’t catch the dry stack facility on a separate lot. 
• When was the assessor’s website last updated?  Six months ago doesn’t work for you.

In Part 3, we’ll look at some more thorny issues that affect the quality and quantity of marina sales available on the internet, mainly at the assessor level.

John Simpson, MAI

No more abused approach to value do I see than the sales comparison for a marina.  Most appraisers aren’t crazy enough to do a cost approach.  It’s a rare day indeed if it produces a number corroborated by the sales comparison approach or income approach (note that there are situations where the sales comparison approach is useful to a marina and I will discuss it in other parts of this series).  The income approach can usually stand for itself if it uses three or more years of financial statements.  That leaves the sales comparison approach as the “check on value” for a marina.  As Shakespeare would say, “therein lies the rub.”

No Pain No Gain

Let me illustrate my key point by way of example.  Let’s say you want to buy a car.  You have a huge selection to choose from.  Do you go foreign or domestic?  What features do you want?  How much do you want to pay?  These questions and others decide what brand of dealership you visit and what brands you will exclude.  You are essentially a segment of the market, not the market itself.  That’s the way it is with marinas.  The industry is simply an agglomeration of different market niches.  It’s a bottom-up approach, not a top-down one.  Just like you wouldn’t consider a Ford the same as a BMW, treating all marinas as comparable or even comparing them in a sales comparison grid is of exceedingly little usefulness.

A Little Arm Twisting Never Hurt… Much!

Have you ever wondered why appraisers talk so much about the sales comparison approach even before you hire them?  It’s this little thing called USPAP – the Uniform Standards of Professional Appraisal Practice.  We’re required to consider all applicable approaches to value.  The entire USPAP document is oriented toward providing credible results that do not mislead the client.  So what this means is that even if you know and I know the sales comparison approach is not useful or relevant to your marina for reasons discussed in subsequent parts of this blog series, we appraisers are still required to invest time and effort looking for sales.  Yes, that time is built into the fee quote in one form or another.  I share your pain.

In Part 2 I’ll give you a real example to highlight the time and effort that goes into telling you one sentence – that the sales comparison approach wasn’t relevant, would not produce credible results, and was excluded from the report.

John Simpson, MAI