A quick announcement ahead of the episode,
I will be co-hosting a multi-day event
with David Cendra in September.
It's going to be a business breakdowns
and founders collaboration.
And if there's one thing that you learn
from studying these businesses,
from studying founders,
just existing in the business community,
it's that relationships run the world.
And this is gonna be an event tailored
for the investment community.
We're gonna review each application
to ensure it's the highest quality audience.
It's limited in size,
so you do wanna make sure that if you're interested,
you reserve your spot today.
And the event is structured to foster relationships.
It's gonna be on a private location.
The only people on site will be attendees of the conference.
There will be limited main stage talks,
and instead we're gonna have a lot of smaller breakouts,
panels, and significant time
for one-on-one conversations.
All of the details can be found in the show notes,
where there will be a link,
where you can go directly to join Colossus.com slash events.
And I'll leave you with this.
I attended David's event in March of this year, 2024.
And just yesterday, I was looking at my phone
considering this upcoming conference.
And I noticed there were four different people
that I spoke to yesterday
that I had met for the first time at David's conference.
And since then, we've continued to talk,
continue to foster relationships,
and who knows where these relationships might go over time.
When you gather these groups of people
in the right type of environment,
that's where relationships come,
and very interesting things arise.
So please make sure to check out the link in the show notes,
or again, join Colossus.com slash events for more information.
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This is business breakdowns.
Business breakdowns is a series of conversations
with investors and operators
diving deep into a single business.
For each business, we explore its history,
its business model, its competitive advantages,
and what makes it tick.
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as a basis for investment decisions.
I'm Zach Fuss, and today we are breaking down
the US Marina industry.
In the US, there are more than 11,000 marinas
grossing over six billion in sales.
To break down the industry,
I'm joined by David Chesner,
co-CEO of Grove Point Marinas,
and Josh Coplitz, the managing partner
of Thayer Street Partners.
Today, there is a 12 to 1 ratio of registered votes
versus the supply of rentable wet slips and dry storage spaces.
Zoning regulations lead to limited supply growth,
which is led to a sustained backdrop
of strong profitable growth for the industry.
The industry grew through both the great financial crisis
and the COVID pandemic.
It's fragmented and is currently evolving
from a largely local and independent model
to one that is increasingly institutionalizing
as an asset class.
This is lowering the industry's cost of capital
and helping to finance greater industry growth.
To illustrate the unit economics,
we discussed the largest players in the space,
including publicly traded sun communities,
safe harbor marine business.
We hope you enjoy this breakdown.
All right, David and Josh,
thanks for joining us to talk about the Marina business.
I think today's conversation is going to be
somewhat unique in that.
We'll focus on the Marina business,
the economics of it,
why it's an attractive space to invest,
and we'll loosely use some public companies
to guide the conversation
in some of their publicly available financials.
I think just to kick things off,
it'd be great to get a summary of who you guys are,
how you know each other,
the business that you've built together,
and we'll go from there.
Thanks, Zach.
My name's David Chesner.
I'm one of the two co-founders and co-CEOs
of Growth Point Marina's.
And we founded Growth Point in 2021
as a platform to acquire
and institutionalize folks storage facilities.
Today, we own around 20 Marina's in more than 10 states.
They're all in the eastern third of the country.
And our focus is to just continue to acquire more Marina's,
take an institutional approach to ownership.
And at the same time,
we're very focused on always maintaining
and being stewards of the legacy of the prior owners.
Sitting next to me is Josh Coppowitz,
who's the founder of Thayer Street Partners.
I've had the pleasure of knowing Josh for many years,
and he and his firm from the very beginning
have been our partner in the formation of Growth Point.
Hi, I'm Josh Coppowitz.
By way of background,
started my career almost two decades ago,
working in an on-balance-eat investing group
at Goldman Sachs,
where I started investing in financial and business services,
founded Thayer Street about a decade ago.
And today, at Thayer Street,
we're investing in very high recurring revenue businesses
that are growing typically in the lower middle market
in situations where we can partner with a company
either through a minority investment
or a majority investment to really help them grow.
We got interested in the Marina Space Store
on five, six years ago.
Marina's have incredibly high recurring revenue profile.
There's great macro-tale wins.
We had success in a earlier Marina investment
and became even more excited about this actor
and decided to partner with David and Taylor
around the beginnings of Growth Point,
coming out of that first experience.
So Josh, maybe in broad strokes,
just present what the Marina industry represents
had to think about these businesses,
size and scale,
and the market that you guys are addressing.
Sure.
So Marina industry big picture has around 10,000
marinas in the US,
representing about $6 billion of revenue.
And there's imperfect information in this segment,
creates some opportunity and makes it a little more
interesting in our perspective.
But average Marina has plus or minus a hundred slips
and could have a few million dollars of revenue.
The way to think about Marina's are,
there's really two primary components.
One is effectively storage.
So storing boats in the water
or outside the water,
maybe in covered barn or racks that are outdoors,
that looks and feels like a parking garage business
or a high touch personal or self storage business.
And the other component is probably more akin
to a hospitality industry,
which may include a restaurant, a ship store,
boat sales, boat rental, service and repair,
and other ancillary reviews fuel as an example.
And so that side of the business may be a little more cyclical,
it's definitely more seasonal.
And the storage side typically is pretty steady
and consistent.
Ultimately, we think of the Marina industry
as the boat storage industry.
And we also think of it as a differentiated sector
within real estate.
At the end of the day,
the primary driver of the Marina business
is renting out space and exchange for rental payments,
like most other farms of real estate.
But what's unique is that it's typically located
on these incredibly desirable
and also quite frankly irreplaceable pieces of land and water.
And the one thing that I'd add is just that may not be obvious
is the supply demand dynamic is really compelling in the sector.
So basically for every 12 registered voters,
there's one Marina slip.
That dynamic in fact is only getting more pronounced.
So on average, you have one to two percent
of the Marina inventory decline every year
because that land is being redeveloped
into something else.
So it creates a really interesting dynamic with
Marina users.
And then you also have this captive audience
to go and cross sell them one off or other recurring items
if they're storing their boat in that location.
And so if we were going to zoom into what a generic Marina
looks like and feels like from a revenue mix
and margin perspective,
can you present what the industry looks like?
Marina is on average,
have plus or minus 100 slips.
So 100 slots to park a boat.
It will have a mix of revenue where
somewhere between 30 and 80% of the revenue generated
will come from storage related fees.
So that could be an annual or seasonal subscription
that they were paying to park their boat there.
And the balance of the revenues are going to come from those
less recurring items such as boat rental repair,
restaurant, boat store, fuel, et cetera.
Depending on your location,
cost per slip is going to vary tremendously
and depending on the nature of the boats
that are stored,
I may have some variance as well.
So average Marina is generating a couple million dollars
of revenue could be one to six million dollars of revenue.
And we're seeing these Maria's perform such that
they may have a 30 to 40% EBITDA margin.
That margin's going to vary and may exceed
or fall below the range based on the mix of revenue
that they're generating at the site.
Yeah, so if you think about a storage focus Marina,
that storage revenue runs at 100% gross margin
and then depending on the size of the operation,
typically only require a few in personnel,
maybe a general manager and a few dock hands on the labor side.
You of course always will have typical fixed real estate
cost at just property taxes, insurance,
utilities and a little repair and maintenance.
But what you're left with is a really stable high margin business
that also grows nicely over time.
You end up leveraging those fixed costs
and growing your margins.
Now when more of the sales are derived
from these auxiliary services such as fuel or service F and B,
et cetera, the margins are naturally lower.
Now at a Marina specifically, those businesses are,
I think better than those businesses are outside of a Marina
because you have these captive customers in this ecosystem.
A lot of fragmented industries with a strong legacy,
there are operators who are aging and looking to sell.
You guys are acquiring these marinas
and presumably managing them exceptionally well
and improving the operations of the businesses
and vetting fitting from scale.
Can you just explain how once you acquire these businesses,
you can implement some best practices
to help create a stronger mode around what you're building?
Absolutely, Zach.
So this is us specifically.
But first and foremost, when we take over a Marina,
we work really hard to maintain the legacy
that was created beforehand.
The immediate ways to make improvements
that clean up a Marina are, I would say, adding slips.
Often you can add wet, you can build dry,
and it's fairly easy to gauge based on weightless
and demand before acquiring Marina.
And then another thing we always do is update the obsolete.
So that could be reorienting or increasing the linear feet
in order to accommodate larger boats,
which then command higher rental rates
and also allow for a higher boat customer.
And then generally speaking,
we always increase the quality of the facility
and the customer experience.
So that would just be upgrading bars and restaurants
and adding retail and restaurant spaces,
upgrading the service offerings,
beautifying the landscaping, adding in boat clubs.
And just for an example, we have a large property in Kentucky
where we upgraded to high speed five
and installed wireless infrastructure.
So everyone could go off cable and into wireless.
It required capital that the prior owner either didn't have
the time or resources to invest into.
And this not only gave customers an upgrade
to streaming services versus cable,
but also became much more cost-efficient for us
on a go-forward basis.
And then just to give another example,
we have a property in Alabama
where we had some land that was available
to bring in a new restaurant.
And so we brought in a really renowned local restaurant
operator to run it.
And it just totally elevated the entire feeling
and energy of the customer experience.
I think you guys have done a good job
highlighting the supply demand dynamics
and why it's a compelling investment area.
I guess I'd be curious from a build versus by perspective.
My guess is that it is not particularly easy
to go find waterfront property and build a marina.
Curious to the extent that you guys have had success
pursuing such a strategy.
And if not, why is it such that all you can do is acquire
and how do you think about the environment
as a function of that?
So today we have not done a ground up development.
Opportunity we have evaluated them,
but it just not seemed that the economics
have made as much sense as buying already
in place cash flows,
or at least the risk reward on that
has not seemed to make enough sense for us at this moment.
But as far as the challenges associated with development,
they're very significant between stringent regulation
and limits on available land, environmental protection laws,
and course, capital intensity.
All of those factors make it significantly challenging
to develop numerinas.
Yeah, you also have an engineering challenge as well.
Not just any construction company can go
and build a marina, particularly if you have in water storage.
There is some engineering specialization required.
So you need a team that really knows what they're doing.
If you want to do it cost effectively.
And so if you think about your business model,
growth point, and some of the institutional competition,
what are the other scale platforms that are out there,
how big is Sun in the space?
My understanding is that they are a somewhat new
entrant through their acquisition,
but what does the competition look like
to acquire some of these mob and pop marinas?
So just for a little background on the competitive landscape,
greater than 90% of the marinas in the United States
are not institutionally owned still.
So it is the family owned bucket
that is collectively the dominant market participant still.
Sun communities historically was focused,
and still is, on manufactured housing and RV businesses.
And their third leg that they got into in 2020
was getting into marinas by buying safe harbor.
Who is still by a considerable margin,
the largest institutional marina player?
But even they only have 135 marinas
out of, we think, over 10,000 in the United States.
So they're the largest.
They're now owned by a publicly traded gree,
but still very small compared to the overall industry.
Just to name others, there's loggerhead marinas,
which is part of equity lifestyle properties.
Also a publicly traded gree,
and then other well-known and large marina companies,
worthy of mention here are suntex,
which is controlled by centerbridge,
and Igy, who is now also part of publicly traded marine max,
though Igy's operating model is different from the others
as it is much more focused on transient voting.
There's probably another handful or so
of private institutional or quasi-institutially back players
that are aggregating marinas in the US.
I think there's a bit of bifurcation
in the types of marinas that these different groups
are going after.
So you see the larger guys focused on portfolios of marinas
that may have been put together by more local entrepreneurs
or smaller ventures.
And they're also going after very, very large scale marinas
that have 500 to 1,000 slips.
So these assets could be pricing in the tens,
if not hundreds of millions of dollars range.
And most of those deals are brokered.
If you have north of a $50 million asset,
there is likely a well-brokered somewhat efficient process.
There's another walk in the market,
which is more of where I'd say,
group point is focused on,
which includes some assets that are smaller.
They're actually probably the majority of the assets
in terms of count in the country,
but they're smaller.
And because there is in a very developed,
pure-playing marina broker industry
when there are limited numbers of marina bankers,
grow void in some of their competitors,
have to go out and build relationships
and find these on their own.
So you see a bifurcation in terms of the industry players
that are aggregating.
Our view is that if you look out five years from now,
instead of having two players that are public,
that are marina assets,
there's a decent scenario where you can have four or five.
And we know of a few that have plans
of tapping the public markets in the next couple of years,
assuming they continue to scale.
You alluded to the benefit of the real estate
from a tax perspective and the attractiveness to REITs.
Was there something that changed there?
Was it just the institutional nature of the asset class
kind of evolving from mom and pops towards real asset
founders?
I think it's a confluence of both.
So the few scaled institutional players
went through legal confirmation process
around treatment of marine assets in as REITs
in the last five or so years.
So that's become widely accepted
by the regulatory and legal community.
In addition to that, few players that actually
have been able to scale under the radar,
and as they saw liquidity of their own,
the institutional markets are to get
educated on the space and become relatively interested,
particularly because of the low volatility
of many of these assets, particularly marinas
that are focused predominantly on storage.
So given the only real scaled marina business
in the public markets is part of Sun, obviously,
equi lifestyle and marina max have their own.
So if you could look at what they've done today,
can we just spend time talking about what they've
built there and how they continue to grow the platform?
Yeah, so Sun community's acquisition of Safe Harbor
was in 2020, but Safe Harbor had been really almost
had the market to itself for a decade or more.
They had been acquiring marinas one off,
and then also did several portfolio transactions,
which together created the largest marina
consolidated in the world.
And one thing that really stands out
is just that they have very high quality assets,
but in addition, they have a very high quality
and experience management team led by Baxter Underwood.
Second, they're the largest participant
from an institutional older respected by a wide margin.
So it gives them the ability to potentially get
very meaningful synergies on the expense side.
So that could be through shared services,
higher and retain the best regional managers
that are most optimally utilized
and other operational cost synergies.
And while it's only call it 30% of their revenue mix,
it appears to be the fastest growing part of their business.
And we would probably surmise that they'll be able to grow
the revenue on a high single digit basis
and maybe cash low and low double digit basis organically.
And frankly, their best position to be great acquires
of smaller portfolios and one off large assets.
I think the other thing that's interesting to note
is not dissimilar from a lot of other great assets
in the industry, Safe Harbor marinas.
I think this stat is 90% of their radios
have a multi-year way less for members to join.
So you have a loyal customer base that has approaching
that 10-year duration.
They can actually do interesting things
to service the same customer across multiple different marinas,
which is unique.
We're not aware of other Maria platforms that do that.
And they can use some of the structural impediments
that exist in the industry to their advantage.
And if you evaluate the cost of capital of edge
being scaled to the space along with some of the ostensible
network effects, should you have marinas
and highly sought after waterfront areas,
what types of advantages does scale into these businesses?
The most obvious that's pertinent in today's market is debt.
So if you are a scale supplier,
you have a multi-billion dollar value portfolio.
Big banks will take your call.
Bankers will work with you to do a syndicated debt deal
or ABS or over time we think more sophisticated credit
facilities.
And you're going to be able to tap the debt capital markets
in a more efficient and robust way,
more consistently over time.
We see tremendous benefits at growth point,
but a company that's as large as Safe Harbor
with roughly 140 Marina network sees it even more so.
And if you own a single Marina, it might not be beneficial
or economical to dedicate time and resources towards
high quality software, aggregating data on software.
But with scale, you can afford to spread these costs
and investments amongst a diversified asset base.
And that ends up leading to the ability
to improve the customer offering and also providing
attractive ROI.
And so with the scale platform, we think
certainly seeing an art experience
that business works and runs better.
And for example, we have shared managerial services,
paying regional management, accounting and finance,
payables management, contract organization, human resources.
It enables us to see my capital investments and improvements
and expansions that might maybe hinder the first year or two
of cash flow, but greatly enhance it in later years.
Also, I think technology.
So as a scale platform, we've taken the opportunity
to migrate all properties onto a single Marina software
management tool.
It's called Marina Go.
And it's common amongst our marinas, which
enables more organization around our storage spaces
and all of our auxiliary businesses as well.
It enables us to have more sophistication around our data.
It enables us to have more fluidity amongst the
marinas interaction with one another.
We've had an over 20-person team, a management team
that has these great skill sets across operations,
finance and accounting.
And we leverage those skills onto businesses that were
historically family owned with different resources.
So there's really huge benefits to scale and diversity.
And I guess one thing that I also want to touch on is for
sons, say, harbor specifically, as the largest and most
experienced operator, in addition to everything I just
mentioned, they also have this great network of reciprocity
amongst their marinas, which I think is really nice for the
customer experience.
I think the last one to hit on, which is less obvious is
insurance.
So erosion, weather damage, is real on marinas,
creates not immaterial maintenance
kept backs, but when you have a hurricane, tornado, whatever
the natural disaster is, it creates boat and marina
damage.
And you need insurance.
And if you're institutionally owned, you definitely
need insurance.
And if you have a lender, they're going to require you
to have insurance.
As you have scaled their real advantages.
So we're seeing on every insured dollar, we're seeing
costs rise as the insurance market, frankly, hardens for
coastal assets.
And in some cases, late assets, if you have a large
portfolio, you can work with the insurance carriers or,
frankly, go directly to the re-insurance and spread your
risk across locations and be a little more sophisticated,
which could dramatically lower your cost of insurance.
And insurance is not an immaterial expense.
We see insurance as 10%, 20% of the cost structure of
some of these assets.
And if you can look at some of these natural disaster
events that happen with hurricanes, who wears the risk
in that you see these horrible depictions of boats piled up
in waterfront areas, is that something that the marina is
responsible to help compensate for?
It depends.
So in an ideal manner, both the boat owner and the marina
owner are insured.
And so things that relate to the structure of the marina,
the marina owner, unequivocally bears the risk for.
If there's something that is completely idiosyncratic
related to the boat, obviously that's going to be the boat
owner.
There is some gray area in the middle.
And everyone will turn out OK if they're adequately
insured.
The scarier thing that we see is that there are a lot of
one-off marina owners that are relatively underinsured.
And they may not be monitoring the insurance of their
customers.
And so when you have dynamics like that, you could have a
perfect storm of major liabilities.
And we've seen people move to have to sell their business
because there ends up being cash crunch as a result of it.
So we think that all marina owners are going to be more
conscientious of this over time.
Definitely lenders.
And lenders will probably drive this.
But so long as this remains an issue, the bigger guys are
going to win because they're going to be able to spread
their risk.
And so when you think about growth for these businesses
and obviously, son discloses the growth of their marina
business, there's both inorganic and organic growth,
inorganic via acquisition, organics, whatever,
incremental services and slips and pricing that you can
take for providing better service.
How do industry participants grow their businesses?
So I think there's two ways we have observed.
One is as simple as great.
So we see marina owners and operators raising rate in line
or in excess of prevailing storage and other forms of
rental rates in that local area.
I think the second way is adding additional features and
sources of revenue on a site.
As David mentioned, the larger you are, the more centralized
resources you have, the easier it is to implement that.
And that could be adding additional storage slips.
That could be other revenue features that could be
upgrading the site or upgrading slips.
So you could store larger or longer votes.
So it's a combination of site improvement and then also
inflating revenue.
David, what I miss.
Yeah, I would say specifically to target what some
communities has provided.
It's really four key drivers.
It's contractual rent increases, which they've historically
done in the mid-single digits.
They say that they increased occupancy in the last 10
years from 93% to 99%, which is obviously really impressive.
And also a testament to just the demand for the product.
And they've put in almost half a billion dollars in the last
three to four years of capital investment in which they
target double-digit returns.
And that's in the form of these expansions,
rack additions that we talked about.
And then I think their fourth tenant is converting transient
to annual.
They've historically focused a lot on that in their RV
segment, which they've owned for a much longer period of time.
But it's certainly an effective strategy on the marine
side of the business as well.
And if you think about the ratio of votes to slips and the 99%
occupancy that Sun advertises, is it fair to say that much
of the marinas have weightless?
Is there just so much demand for these spots at this point?
It's really an interesting dynamic where the demand for leisure
activities and voting in particular has risen at a very high
rate.
And you have all these baby boomers who are retiring and want
to be on the water as one of the activities that they're
choosing, that their life changes, all sorts of reasons why
people are moving to warm weather climates with lower tax
rates.
So that's part of it.
But on the flip side, the supply of marinas, not only is it not
growing, it's actually tiny.
And so between permitting an environmental and capital
costs and just the lack of availability of places to build
marinas, there are so few in a given year that are built.
But at the same time, you have these incredible waterfront
locations where there actually are parties who see that
and they say, oh, instead of a marina, I'm going to build a
hotel or a condo.
And so the net effect of that has been a shrinking supply of
marinas at the same time that demand is growing.
And that has led to a tremendous amount of weightless
activity.
And it doesn't mean that every marina in the country has
weightless.
But broadly speaking, there are many, many, many, many that do.
I would just add that data is talking in terms of averages.
There are marinas that we've come across and David and his
team have come across.
They don't have weightless at all.
In fact, they have occupancy that is materially below the
90s.
Typically that correlates with one of two things.
One, you're observing some sort of economic weakness in that
area or net migration out of that area.
The second is usually an overlay to that, which is the
owners have not adequately maintained the site.
So slips are dilapidated.
Things may be broken, service experience is weak.
And that material deferred cat-backs is led to, we guess
an occupancy.
This may be somewhat of an obvious question, but given
just the perpetual shortage of space, in some ways, isn't
the business just underpricing its product?
Probably.
If you think about it in some ways, a component of marinas,
it makes this storage side.
It's a ultra-leverd that on population growth,
loss of age and class regulation.
So it's either underpriced today or you'll be able to push
price in excess of those growth factors over a sustained
period of time.
So you should see it in the terminal value.
So if I think about acquisition of these assets, how do
you guys think about financing and valuing them on an
asset by asset basis?
Sure.
So generally speaking, we're seeing these assets being
valued on a cap rate basis.
So based on net operating income, conversely, that could
translate into a multiple of EBIT dam.
But historically, we're seeing smaller assets trade at
between a 7 and 8% cap rate based on in place cash flows,
where larger assets will trade closer to a 6, maybe greater.
In terms of scaled work folios, we're seeing those
trade at somewhere between a 5 and a 6% cap rate.
Public reeds that have this kind of exposure imply a
similar trading value as those scaled work folios.
And just to put it in context, very similar ranges
manufacture housing, which right now trades around
1,5% cap rate publicly and self storage, which is in
the high fives as well.
In terms of financing, we have historically seen assets
get debt on them to the tune of 50 to 60% low and
to cost or low and to value.
Most recently, there was a big public announcement that
SunTex and Center Bridge through a JV were able to
raise $600 million facility with Wells Fargo.
Our understandings, the advance rate is in that range.
And that's for true senior debt price, the senior asset
based debt.
You also see a number of regional banks or super
regional banks that are active in the market, and in
spite of some chopping us in the regional banking market
and chopping us in the lending environment, still see
more than a handful of participants continue to actively
run to the space on a single asset basis.
But it does have a fairly local focus in that case.
And if you think about the durability of these assets,
I'm curious what business performance for
meridas looked like through times of economic distress,
presumably COVID was unique, the financial crisis being
the last example prior to that, what does performance
look like?
It's a great question, Zach, and it's something that
actually really attracted all of us to this industry.
So as you suggested, the last two significant macroeconomic
serious headwinds were both the great financial crisis
as well as COVID.
And the great financial crisis, of course, there were
some merinas businesses that did not make it, but industry
wide, we actually saw in studying the data that the
occupancy did not decline through the grant financial
crisis.
And in fact, over the course of over a year, rates also
did not decline.
Some of the auxiliary businesses were hit a little bit
harder, but the storage component was incredibly
resilient.
And then in COVID, COVID actually ended up being a huge
tailwind for the industry, cultural change to people
focusing on leisure and entertainment and being outdoors,
and moving to locations where they could spend more
time outside and on their boats, et cetera,
prove to be a huge structural change in the
utilization of these properties.
It's just reflecting on some of that, I don't think I have
a good appreciation for how long a customer tends to
stick with their marina.
Presumably, if I own a boat, a couple miles from my home,
I'm not really moving around marinas.
I don't know if there's generally local competition, but
what is that customer relationship like?
Typically, as you described it, which is that someone lives
nearby, there's only a select number of opportunities.
In fact, in one market that we're entering very shortly,
every marine in nearby is actually on 25-year waitlists.
So it's almost a full generation until you can get your boat
into one of these slips.
And of course, not every market's identical.
But broadly speaking, people tend to stay for a very, very
long period of time.
And nutrition is very low because it's an important
component of these people's lives.
And there's just not many opportunities to have a place
to put your boat.
And what do the contracts look like?
Are they monthly, annual, multi-year?
For the marinas that we acquire, the vast majority of
contracts are annual.
There are also occasionally some monthly contracts and
often a few slips that are set aside for transient
days, which while more fleeting on a per day basis,
actually, you charge a significantly higher rate.
And so when you evaluate industry itself, obviously,
you've got an aging population.
You've got, using the parlance of cars, you've got a boat
park that is growing at 12 to 1 relative to the demand for
slips to the supply of boats.
Clearly, there's steady pricing, costs are somewhat
predictable.
What are the key risks in evaluating the industry that you
guys have to be conscious of?
I would say number one, and we touched on it before, is just
climate risks that can lead to more frequent, severe
weather events, which can damage marinas and boats.
And there's changes in water levels and droughts in
certain regions, none any of the regions we're actually
in, but broadly speaking, that does exist.
But to mitigate that risk, we've made sure to be
properly insured and geographically diversified.
And so at any one time, we think the impact from such type
of events should be minimal.
I'd say another bullet point on the bear case would just be
that consumers may cut discretionary spending during
economic downturns.
And that might include recreational activities, such as
boating, and then broadly speaking also.
Lots of marinas in the US have aging infrastructure.
And therefore, they might require significant investment
for maintenance and upgrades.
And there's a cost associated with modernizing a
facility.
And I'd say the midagain here is for a buyer or owner is to
just make sure that we or whoever is the owner does
significant diligence to make sure that their understanding
that the requirements of financially feasible and able
to get a return on.
Typically are concluding question in these conversations
as lessons that you guys have learned through building
this business that can be applied as you evaluate other
investments and build other businesses, maybe from each
of you, what you've learned through this and where you
apply those lessons elsewhere.
Yeah, obviously when anyone's in the trenches spending
25 hours and eight days a week building a business, you'll
learn tons of lessons.
And I honestly mean sincerely in saying I think the very
first thing that any business owner or manager should
focus on is working hard and having good values and treating
people properly.
That should be basic for anything in life.
But I certainly believe that really applies to building
a business.
And then I think most founders would probably say the same
thing here as well, which is just luck favors that
prepared.
So prepare as much as you can for every scenario and do as much
diligence as you can in every situation.
And you're still going to be surprised on a daily basis
with something that happens at a property with personnel
and the more prepared you are and the more ready you are
to adapt to change, the more able you'll be to respond
well to it.
So on my side, I think the takeaways based on our success
today working, let's go for it have been a few fold.
One is nailing the business model and the partner is key.
I'm hopeful we can continue to do other investments or find
other investments at the air street that have touch on
business models equivalent to or at least close to as good
as the Marina model.
And then I think for roll up or asset aggregation plays,
I think the big takeaway that we've seen from the team
has been one really nailing your value ed formula quickly.
So even when it's just a couple assets that you have underway,
refining what the playbook is to owning that asset once
acquired and what the highest priority value enhancement
initiatives are that you need to tackle and refining that
and teaching that to the rest of the team and making that
very repeatable is critically important.
But I think the other area that we appreciate more than ever
before is when you're buying assets from families
and that asset may have some emotional linkage to their legacy,
the family history, memories, local community,
having a lot of integrity in the way you interface
with potential sellers, the way you transact,
the way you manage those assets after the fact
has a really compounding effect in your long term success.
So we've seen David and Taylor and the rest of their team
get a lot of benefit from doing right by the sellers
and building on that reputation.
So now there are folks that are interested in selling
and give growth point a first law or an extra hard look
because they appreciate how their family legacy will be treated.
And sometimes that's easy to forget
when you're sitting in an office building
behind an Excel spreadsheet,
but it actually makes a big difference.
All right, David Josh, this is really a fascinating business
that I presume that given how in the weeds you are of the day
to day and operating these things,
you could talk about it for a couple hours.
But I think this is a great summation, obviously,
to the extent that people are following the story
within Son and its public peers.
There's a lot of information and we appreciate it.
Thanks for having us.
Thanks, Zach.
It was an absolute pleasure and we had a great time.
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