I am inundated with foreclosure calls from both sides of the fence.  Owners are calling asking us for advice when the notice of default comes and lenders are calling just as they send these notices out.  After years of very easy lending practices, many marinas are in trouble.  This is especially true for marinas that depend on boat sales for their income stream.

Many marinas are doing fine.  Some would be doing well if they had not over-leveraged themselves over the past few years.  What should both sides do?  Below are some questions each side needs to ask.

For the Lender:

1. Do you really want to manage a marina?  The local Realtor won’t be able to do it for you.  They don’t have the expertise.  Managing a marina is not like managing an office building.  It takes specialized knowledge.
2. Have you considered a renegotiation of terms?  Your loss may be less than a foreclosure if the site is merely over-leveraged.  Outside of the mortgage payment, is it being well managed?
3. If you foreclose upon the project, can you place a value on it as of today?
4. Would the secondary market buy the note with a non-performing marina loan?
5. How long would it take to sell the property?  Marina marketing times are long so if you want it off the books in less than a year, you’ll have to discount the price.  How much depends on the local market.
6. Watch that the repair and maintenance expenses don’t decline to the point where the marina is not being maintained to the same level.  Boaters quickly notice these changes.  Occupancy and rent can be negatively impacted if this situation is prolonged.

For the Owner/Buyer:

1. Communicate, communicate, communicate with the lender!
2. Get an appraisal to negotiate with.  Knowing the value is the only way to know what your position is.
3. Is there equipment that you don’t need?  Can you sell it?
4. What type of expense-cutting plan can you put together?  Are there business units that are cutting into your cash flow?
5. What is the bare bones amount of staff that you need?
6. If you feel the value is materially lower than the assessment, file a tax appeal and lower those taxes.  In most jurisdictions, you can file for more than one year (some specify a maximum of three years, others five).  Not only will your taxes be lower and your net operating income better but you might get a nice government refund check!

In most cases, it is better to try to work together.  There is a point of no return for both sides.  I’ve been called on the same marina for both the borrower and lender and obviously we cannot represent both.  In all the years we’ve been appraising marinas, this has never happened.

Marinas are suffering from the same credit and cash crisis as other forms of real estate, but it is such a specialized use that extra care must be exercised on both sides of the table for the best outcome.