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2016 September October Marina World

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FINANCING, VALUATION & INSURANCE Efficiently utilising the marina basin area drives revenue. Gerard McDonough US marinas set to become ‘asset class’ by Gerard McDonough MAI, FRICS The marina industry has seen dramatic improvements over the past few years and lending institutions have taken notice and are actively participating in financing. The notable number of recent transactions in the US marina marketplace is evidence of this progress, and can be attributed first and foremost to a healthy economy and increased interest in boating. Loanto-value ratios are typically in the 65% range, with the Small Business Administration in the 80% range. There has been a strong upswing in investment groups entering the investor demand for marinas here in the marketplace and acquiring marinas, USA. The industry has recovered and is which will ultimately make marinas robust, and that’s expected to continue into their own institutional-type asset in concert with prevailing economic class. This will lead to the availability conditions. Investors have recognised of detailed income and operating how difficult it is to permit a marina expense information for marina assets compared to other asset classes. and allow for more transparency and This effectively ensures the durability more accurate analyses of the marina of the income stream and prevents marketplace. oversupply, which is something that affects other investment-type properties. Investment banks and hedge funds have also recognised this asset class, which will result in further consolidation as larger investment companies enter the marketplace and acquire more marinas functioning under a singular umbrella-type operation. Interestingly, investors won’t have to rely on their local or regional banks to get the funding they’re seeking. The historically ‘mom and pop’ marina industry is transforming, with larger Outside the USA, Australia is already embracing this kind of detailed overview of the industry, giving it the capability to better gauge the health of its own marina industry. The Marina Industries Association (MIA) recently released its 2015 Health of the Australian Marina Industry (HAMI) survey, the purpose of which is to provide the industry with a comprehensive overview of the economic contribution of Australian marinas. Much has changed for the marina industry since the mid-2000s when investors were looking at alternative developments on potential marina sites. The strategy at that time meant that the prices paid weren’t meeting the typical investment returns expected on an income-producing marina property. In today’s marketplace, marinas are being purchased based on their income-producing potential, and as overall demand increases, there may be acquisitions where buyers will also be giving credit to other types of upland development on the site. However, for the most part, seasoned marina and boatyard buyers will be focusing on the income-producing potential of the facilities as opposed to upland development potential. Appraisers consider traditional methods by which market data may be processed into a value indication, such as the cost approach, the sales comparison approach and the income approach. Prior to the development of these, it’s extremely important that the appraiser has a thorough understanding of the physical and location aspects of the facility, such as siltation/dredging requirements in the marina basin area, wind and wave action and potential attenuation issues, condition of the docks and bulkheads, and access to primary waterways. A property conditions report prepared by a qualified marine engineer is highly recommended, particularly for addressing required capital improvements. In property valuation, the cost approach is based upon the proposition that an informed purchaser would not pay more than the cost of producing a substitute property with the same utility as the subject. The cost approach is particularly applicable when the property being appraised involves relatively new improvements that represent the highest and best use of the land, or when relatively unique or specialised improvements are located on the site and there are no comparable properties in the marketplace. The primary issue in applying the - September/October 2016 45

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