Marinas require extensive due diligence to stay afloat.
Even in today's real estate environment, specialty properties such as marinas hold a
particular attraction in select markets and appeal to certain investors. But purchasing
a marina is not like buying a retail strip center or a self-storage facility. While
careful due diligence is necessary for all properties, it is vital for a property that
is half-submerged in water. In this case, what you can't see can sink the entire
Performing due diligence assessments for the acquisition of marina properties is
very different from other types of commercial real estate projects. Each marina is
unique with respect to its location, design, market, amenities, and operation. Since
the majority of a marina is water-based, these properties are more susceptible than
other real estate to damage caused by the coastal/marine environment. Therefore, it is
essential to perform proper due diligence prior to investing in a marina property,
regardless of the type and quality of information the seller provides.
In addition, properly performed due diligence equips investors with valuable
knowledge that can be used to their advantage. For example, knowing any design flaws or
structural damages can serve as a negotiating tool with sellers to reduce the sales
price. Likewise, having a permanent record of the facility's condition can be
advantageous in case of future insurance claims or property sales. Being aware of any
permit restrictions as well as large capital costs or potential limitations associated
with expansion reduces the investment's risk and provides a means to validate the
venture's profitability. A due diligence assessment can also serve as a guide for
future maintenance and capital improvements.
Due Diligence Checklist
A proper due diligence assessment covers all of the engineering, environmental,
regulatory, and economic aspects of the marina. The assessment should be performed by a
team of knowledgeable, experienced consultants with marina-specific expertise in the
engineering design, regulatory environment, and economics of the industry.
Since the purpose of due diligence is to confirm the property's economic
viability, the investor needs to know the property's probable expenses and
income. Understanding the following can help to predict expenses and income:
- capital costs required to make upgrades to the facility or to meet the
investor's intended vision;
- repair and maintenance costs associated with maintaining the facility such as
maintenance dredging and periodic inspections of the structures;
- operating and management costs for running the day-to-day business;
- predicted income generated from slip rates;
- slip mix occupancy and any seasonal fluctuations;
- absorption; and
- other services or products offered.
Just because a marina exists at the location doesn't mean that it should be there or
that it was designed correctly when built. One of the most important design aspects of
a marina is the ability to protect the docks and vessels berthed at the facility from
wind-driven waves, swell, vessel wake, ice, debris, and strong current.
To confirm that the facility is adequately protected, a coastal engineer should
perform an initial site analysis. Analyzing wind, wave, and water-level data provides
the information necessary to evaluate whether the docks and wave attenuators are
designed for the correct wave heights and oriented for optimum vessel
After reviewing any available information provided by the owner, the engineers
conduct a walk-through survey. The purpose of this inspection is to identify and
document the condition of the structures, estimate the extent of damage and
deterioration, make recommendations and cost estimates for required repairs and
maintenance, estimate the expected remaining service life of the structures, and make
recommendations for the type and frequency of future inspections.
The typical components found at a marina property include both water-based and
land-based structures and systems. When evaluating the water-based structures, the
inspection should be performed at low tide, since the corrosion rate is much higher in
the intertidal and splash zones. An underwater dive inspection should also be
The marina's layout can pose limitations on the size and type of vessels that
can enter and berth at the facility and dictate future expansion opportunities. The
expansion potential is influenced by engineering and design and
environmental/regulatory conditions that directly impact the economics. The extent of
these limitations should be evaluated even if the investor intends to maintain the
marina as-is. Owning a marina that has opportunities for growth and expansion is more
valuable than owning a marina that poses limitations for future investors.
Environmental/regulatory due diligence assessment involves evaluating any potential
or currently existing environmental liabilities associated with owning the marina
property and knowing whether local or federal environmental or regulatory restrictions
prevent future improvements to the marina facilities. Typical standards followed
include the ISO 14015 and ASTM 1528.
The environmental components include water quality, sedimentation, wetland impacts,
protected species, protected vegetation, and contamination of soils and/or marine
sediments. For example, soil contamination is often found in boat service yards near
buildings that house or that previously housed dry cleaning services.
The regulatory aspects include the evaluation of land and water (submerged land)
property surveys, planning and zoning regulations, regulatory permits, required
licenses, contracts, easements and restrictions, and navigation setbacks.
A market overview should be conducted for the marina facility by a marina
consultant, even if the property appears to be profitable and there are no plans to
make any changes or expansions. The investor who envisions making any changes to the
existing slip mix and/or upland facilities should perform a more-detailed market
analysis to confirm whether there is a market need.
The construction costs associated with building a small-craft marina are expensive
and increase considerably when involving mega yachts. Boats larger than 98 feet require
deeper water, wider fairways and entrance channels, greater loads, bigger piles, and
higher-capacity utility service. To estimate expansion or redevelopment costs, the
consultant must first develop conceptual layouts that are based on the ideal slip mix
for the current market.
Buyers should know the estimated capital costs for improvements, along with slip
rates and operational costs, prior to purchasing a facility. These values should be
entered into a financial pro forma to model the total profit or losses to understand
the return on investment.
The operations portion of the evaluation includes analyzing the way the facility is
managed and the associated costs. Management issues to consider include the
- What security measures are currently in place at the facility with respect to
restricted entry and protection of the boats from vandalism and theft?
- Have there been any previous incidents of theft and vandalism at the
- Is the lighting adequate?
- What are the current operational costs for the marina facility?
- What costs could increase in the future?
- How will costs change if the marina layout is redeveloped and/or new staff is
These due diligence assessments apply to both freshwater and saltwater marinas and
should be performed by consultants familiar with a specific location. In addition,
potential marina buyers should also investigate legal and insurance issues before
Kelly Rutkowski Hubbard is an associate at International Waterfront Consultants LLC
in Jacksonville, Fla. Contact her at email@example.com.