Boat & Motor Dealer, December 2001

Financial Trends in Marinas—A Personal Observation
by Dennis P. Kissman

I was recently asked my opinion about the financial trends taking place in marinas and what we can look forward to in the coming months. As we all know, comparable information on marinas to establish trends is nearly impossible to obtain and when we can get it we are suspicious as to its source and accuracy. With this in mind, let me say that my comments and conclusions are based strictly on my observations from working in this industry. The degree to which a particular marina may be affected by these trends varies as much as the marinas themselves.  

REFINANCING

There are two areas that I believe will have the greatest impact on this industry in the next few years and maybe well beyond. First, I am aware of more than 30 marinas (and I am sure there are plenty more) where mortgages with balloon payment balances will be coming due within the next 36 months. All of these marinas will require refinancing. This does not sound like a very large number, but in the world of marinas this is enough to impact the entire industry in the United States.

As of the moment, I am not aware of any lenders out there that really understand marinas and are eager to finance marinas on decent terms. Unless this industry has another Harry Neiman backed by a NationsCredit/Bank of America who took the time to understand marinas, I see possible trouble in financing marinas in the future. I do not mean that this was the only source for marina loans, but it became the authoritative source that other lenders looked to when considering the financing of a marina. As of now that source does not exist.  

INSURANCE COVERAGE

The second greatest impact I see this industry facing is the ability to secure proper insurance coverage at an affordable price. In some instances it just is not available at any cost. I know of some marinas in the Southeast United States and Caribbean that have had their property insurance premiums increase as much as 300 percent this year or have had deductibles increased to the point that it is financially impossible for the marina to self insure for the deductible. This can put a marina owner in a very difficult position because if he has a mortgage, the lender requires minimum insurance coverage to cover the loan balance, or it can be called.  

INCREASING PROFITS, REDUCING COSTS

Another disturbing fact that I see happening in this industry is the pressure being placed on profits even if we exclude the insurance premium increases. Over the last several years the economy in general prospered. Yet looking back into the history of some marinas, their profits did not increase along with the prospering economy. Now that it appears the economy may be slowing, especially in the recreation industries for the next couple of years, these marinas have nothing to fall back on because they did not take advantage of the good times.  

There are only two things that have an impact on the profits of a marina. The amount of revenue the marina can generate and the cost to generate that revenue. Both are in the control of the owner. Unfortunately, what often happens is the marina owner is in denial of this fact and oblivious to what is happening around him and thus refuses to take the necessary action either to increase revenues or reduce costs. Continue »