Marina Dock Age, July/August 1995

How Today’s Marina Buyer Determines Value
by Dennis P. Kissman

When negotiating the sale of a marina, there is usually a wide variation between what the buyer and seller think it is worth. This is not much different from most other real estate transactions with one important exception: There are no comparable marina sales on which to base your opinions. Therefore, to make a deal, both the buyer and seller must realize what they are buying and selling.

A marina is nothing more or less than a single-use group of assets that has a proven income stream. This is what a seller has to offer a buyer. First and foremost, a seller must recognize that from this proven income stream the buyer must service debt and receive a profit for his risk if he is to be motivated to close a deal.

It is on this point that sellers most often get carried away in their exceptions. Sellers are quick to point out that the marina could be producing three or four times the income that it does with just a few little changes. I call this the phantom profit. Although sellers have done nothing to bring in this phantom profit, they expect buyers to pay for it. Assuming no additional investment is required, a prudent buyer may offer a token amount for phantom profit, but not much more than 10 cents to 20 cents on the dollar.

Two things usually add value to a marina and motivate buyers. They are: permits in place to expand the number of berths and/or racks along with necessary space for parking and amenities to support the expansion, upland acreage with permits for development of marine and non-marine income-producing assets.

A buyer will carefully evaluate these two items, determine if there is a market for the addition and estimate the capital and operating cost necessary to produce the additional income. The additional income will then be reduced by a buyers risk factor and net amount will have a multiple applied to it and be added to the value of the marina. If the marina is in need of immediate repair in order to maintain the current level of business, the buyer will deduct dollar for dollar off the asking price. Continue »