By Mark Gilman
It’s been well-established that one of the significant benefactors of the pandemic was the boat industry, as sales skyrocketed for those who grew weary of being pent up in their homes.
According to the National Marine Manufacturers Association, sales of boats, marine products and services across the country reached a 13-year high of $47 billion in 2020. The following two years also saw great leaps in sales and even though the urge to buy boats has slowed somewhat in 2023, boats are still a popular recreational ticket item — even in this tough economic climate.
At the same time, commercial real estate (CRE) investment in marinas also remains hot, with limited supply and many boat owners looking for slips. The surprise, however, is the location where many of those marinas are being acquired. This ensures a healthy future for all forms of boat storage and its preeminent sibling, RV storage.
The vision of shorelines and marinas in the U.S. usually aligns with those in coastal sea communities in California and Florida. At the same time, states adjacent to the Great Lakes like Michigan, Minnesota, Illinois, New York and Wisconsin are usually thought of first when contemplating an inland waters boating vacation. But that is changing as well.
Travel & Leisure’s latest “The Best Lake Towns in America” list includes states not necessarily top of mind for water recreation enthusiasts and vacationers, including Idaho, Montana, Missouri and Texas. And not surprisingly, with marinas in short supply for investment, several companies are looking to those types of inland states as investment opportunities.
Texas-based TopSide Marinas recently announced the acquisition of Rock Creek Marina, a 188-acre marina on Lake Perry, positioned between Kansas City, Topeka and Lawrence, Kansas. The company also recently closed on the 4.9-acre April Plaza Marina on Lake Conroe north of Houston, its fifth marina acquisition since its launch in 2021.
With a finite supply of inland marinas, TopSide Co-Founder and CEO Stephen Lehn told Benzinga that purchasing inland marinas not for those without experience dealing with the federal government, and rising insurance rates have kept many out of the market.
“There’s only so much waterfront real estate, and investors have to determine what is the highest and best use. You also have a little more red tape restrictions because what you’re actually purchasing is a leasehold,” Lehn said. “There’s less (investment) competition because it’s a more complicated transaction. Insurance has become a big issue and is worse now than it was six to 12 months ago, but not as high as coastal insurance.”
You can’t buy most inland marinas because the U.S. government owns the lakes, so leases become the order of the day.
“What happens when we reach a deal is we get the leasehold interest signed over to us, which is usually the Army Corps of Engineers, and then extend the lease to make the lender more comfortable,” Lehn said. “Improvements to the marina are part of the transaction. There’s a lot of deferred maintenance with current leaseholders and then raise the rates once the overall experience is improved. But our bread and butter is boat storage.”
TopSide’s success didn’t come without weathering some significant hurdles, like the fact the company was launched six weeks before the pandemic shut everything down.
“We started the company on Jan. 23, 2020, and had a great six-week run,” Lehn said. “But it took us a year before we closed our first transaction. Two things then happened; boating took off and marinas were slammed with business and initially, none had any time to talk to investors like us. It took us a little time to get back on track, and we told them that the financial year they experienced was great, but it’s not going to carry forward like this in the future.”
According to Courtney Chalmers, vice-president of marketing at advertising and software firm Boats Group, boats in 2023 continue to be selling at a brisk pace, if not at the level of the pandemic.
“For the first time in three years, consumer demand has softened; however, our marketplaces’ share of voice is the highest it’s ever been, which is a very positive sign for the health of the industry,” Chalmers told SGB Media. “The effects of the demand and supply chain disruption during the pandemic are also very apparent. Boats continue to move off the market faster, and sales remain higher than before the surge.”
Lehn added that one of the significant improvements companies like TopSide need to undertake is making the slips bigger, as they were initially designed for sailboats, and boats are getting bigger and bigger. The key for marina investors is to have multiple sources of revenue, including “fuel systems, retail, boat services and storage.”
Mark Gilman is a contributor with Benzinga. Benzinga’s Real Estate Offering Screener has the latest private market investments with offerings available for both accredited and non-accredited investors.