Boat & Motor Dealer / Marina Dock Age, December 2002

Financing Marinas in Difficult Times
by Dennis Kissman

Through the years the industry has seen ups and downs when it comes to securing financing. In the 1990s, we had two lenders, NationsBank and Debis Financial, who took the time to understand the intricacies of marina operations and the risks associated with each profit center. This industry should thank Harry Nieman, now retired from Bank of America, and Holmes Simons, formerly with Debis Financial. Both made it possible for marinas to be sold and refinanced. It was their credibility and understanding of the industry that gave confidence to other lenders to make marina loans, as well. (Holmes Simons has recently returned to marina mortgage brokering.)  

Mortgage brokers put the borrower and lender together for a fee. I’m often solicited by mortgage brokers who tell me they have lending sources, but it usually takes only a few minutes to conclude that these brokers do not know this industry. If you do business with an ordinary mortgage broker, chances are it will cost you money without any positive results.

At present, the outlook appears somewhat bleak for financing or refinancing, but it is not impossible. It just takes more work on the part of the marina owner. We must face the fact that there are not a lot of marinas compared to other types of commercial property. To give a lender (or any investor) the comfort level needed to write the check will require good documentation.

Let’s explore some ways to structure a marina sale to obtain financing for a buyer. There are three basic approaches.

The (traditional) first method is to structure the deal to sell the business and property together. The second is to value the property only, and place no value on the business. The third way is to sell the business and retain the property. Of the three approaches, the easiest to finance is the second, where the deal is structured as a land deal only. This approach works because land values can be easily established based on comparable sales. Sometimes this is hard for a seller to understand that the business he worked hard to build for so many years essentially has no value. Unfortunately, this is the fact of life for many owners.

To sell a business, one needs impeccable financial records that can be verified. Unfortunately, in my experience, there are very few marinas that can qualify. Tax returns are a must, and the business will be traded based on some cap rate or multiple of earnings. Continue »