Dallas is becoming a national hub for companies buying up boat storage space from landlocked locations in the middle of the country.
Dallas is home to two of the marina industry's largest companies: Safe Harbor Marina and Suntex Marina Investors. They are buying up marinas across the country, advancing a trend of consolidation that began within the past decade as institutional investors woke up to the stable revenue opportunities that marinas offered.
Near Frisco is the home of Topside, a company founded in 2020 by two former Suntex executives that currently owns three marinas in Texas and Oklahoma. TopSide, its founders and investors believe there is plenty of room to expand in an industry where many companies remain family-owned.
“We're in the early stages of consolidation and it seems like a good place for a lot of people to kind of leverage their capital to consolidate and improve,” said Josh Denerlein, an analyst at Bank of America. ” he said. industry.
A significant portion of the marinas in the United States remain in the hands of families and other independent contractors. Some of the marinas and shipyards that responded are: marina dock age's 2021 industry survey found that nearly three-quarters were owned by family businesses, condominiums, yacht clubs, and similar entities.
But Adam Welch, who researched marinas for Cornell Real Estate Review while earning a master's degree in real estate, said many owners are reaching retirement age. If you don't have children who want to take over the family business, you may be interested in selling.
Companies such as Safe Harbor and Suntex are primed for acquisitions thanks to support from institutional investors, who have grown interested in the industry in recent years.
“The asset class has long been misunderstood,” Safe Harbor CEO Baxter Underwood wrote in an email. “From a seller’s perspective, it has been difficult for owners to exit their marina positions without incurring large taxes. From a buyer’s perspective, most institutional investors do not understand the value drivers. It was.”
Marinas are relatively complex assets, so it wasn't until investors started exhausting other asset opportunities that they started to look more attractive, Denerlein said.
“I think it took a while for people to realize, 'Boats aren't a good investment, but marinas that store boats and work on boats, that's a good investment,'” Dennerlein said.
Safe Harbor and Suntex have similar origin stories. Both were born out of existing marina businesses run by local entrepreneurs. The companies took their current form in 2015, when they secured private equity funding and began acquisition efforts.
After last year's recapitalization, Suntex's largest investor is New York-based Centerbridge Partners. Sun Communities, a real estate investment trust, acquired Safe Harbor in 2020.
Dennerlein said the marina is a natural next step for investors like Sun Communities. Sun has invested heavily in homes and RV parks, which have a lot in common with marinas.
“Demand dynamics are very similar [and] There is very little supply,” Dennerlein said.
Safe Harbor currently owns 131 marinas. Suntex owns 52 of his marinas and operates 16 more through his Westrec subsidiary.
The path to the top involves a combination of separate chains. Suntex's acquisition of Westrec in February included a $400 million investment from Centerbridge, valuing the combined company at $2.5 billion.
But leaders of both companies say marinas are typically purchased from families. That means having conversations that go beyond economics.
“First and foremost, they're looking to preserve their legacy and sell to someone who cares about their team,” Suntex CEO Brian Redmond said. .
What's next?
Safe Harbor and Suntex have grown rapidly but still control a small share of the total market. IBISWorld estimates that there are over 9,700 marinas in the United States.
That means there's still room for companies like Topside, which was founded in 2020 with backing from Dallas-based investors Miramar Equity Partners and TRT Holdings.
“There's a lot of white space, whether it's a large platform or the growth of TopSide,” said Michael Franz, investment director at TRT.
Topside's locally-minded geographic focus is fortuitous, CEO and co-founder Stephen Lane said. The company is expanding nationally, with acquisitions underway that will nearly triple the number of marinas it owns.
Over the past few years, the industry has become increasingly attractive to investors like TRT, which was founded by Dallas billionaire Robert Loring and also owns Omni Hotels & Resorts.
First, the IRS has made marinas more attractive to real estate investment trusts. Although REITs enjoy tax benefits, they must derive a certain percentage of their income from real estate operations, and the agency ruled that income from boat slips and boat storage falls into that category.
Suntex obtained REIT status in 2018. Topside is not a REIT, but Franz said it may become one in the future.
The coronavirus pandemic was also a rising tide that boosted the industry. Recreational boat sales reached their highest level since the Great Recession hit in 2020 as people turned to outdoor activities, according to the National Marine Manufacturers Association.
The increasing presence of chain players is changing the landscape that new boating enthusiasts encounter.
Suntex has a boat club where you can take your boat out even if you don't own one, and its Safe Harbor membership program allows those who keep their boat with the company to park it at any available marina. Lane said Topside is interested in creating a similar membership program once it's large enough.
Consolidation can also result in higher ticket prices. Both Redmond and Lane said there is an opportunity to increase prices on the marinas they buy. But both companies emphasized that they are also investing in real estate to give boaters more of a return.
For example, at its newly purchased marina in the Florida Keys, Suntex plans to invest in additional dry storage, a new dock office, boat storage, and boat rental services.
“If you're providing a great overall experience, you tend to be less concerned about price increases,” Redmond said.
Underwood highlighted the “best-in-class amenities” Safe Harbor offers, including a pool and fitness facility. But the company sets marina prices based on local demand, not amenities, he wrote.
Beyond corporate real estate investments, the dynamics of setting slip prices are likely to remain the same, even if large-scale consolidation occurs. Welch pointed out that many marinas were already local monopolies.
Redmond said the marina's real competition is other entertainment options such as golf, sporting events and movies.
“Everyone has their own home. Everyone has their own workplace,” he said. “And when they have extra time, we want it to be a place they want to hang out and a place they want to bring their friends and family.”
Why Dallas?
It may be a coincidence that landlocked Dallas has become the center of the marina industry. But it helps that Dallas is a center for both private equity and real estate. There are a number of companies that have put money into the marina chain, from TRT Holdings to Koch Real Estate Investments, an early investor in Safe Harbor.
“It seems to me that Dallas has always been a leader in this kind of innovation,” Underwood wrote. “While it is true that this metropolitan area lacks access to coastal boating, it has a storied tradition of institutionalizing the real estate asset class.”
Being home to the industry's two largest companies has also made the region fertile ground for the rise of other competitors. The seeds for Topside were planted at his Suntex, where Lehn recruited future TopSide co-founder Jacob Boan to work with him.
Dallas is centrally located, has an attractive cost of living and is a business-friendly state, Lane noted.
Whatever the reason, the region has secured an unlikely position as the marina capital of the United States. Even after the pandemic boom subsides, the country's marina companies are likely to continue growing.
“This is a very resilient industry,” Franz said. “Whether it’s COVID or the recession, this industry has continued to perform.”
