Marina Management Services, Inc. (MMS) is retooling its workout consulting and management programs to respond to the increasing number of marina projects that are returning to lenders.
Weekly news stories report an increasing number of marina projects that are in various stages of bankruptcy and foreclosure. As a result, MMS has received an increase in inquiries from banks, lending institutions, hedge funds, and developers requesting assistance with troubled projects.
The critical question for lenders to understand is, “What is the true value of the project?” Often times there are only permits, renderings, raw land to deal with, and no ongoing operations in place. In the case of an ongoing operation, the lender, owner or developer needs to step in to stabilize the operation and stop the bleeding cash flow.
This is not the first time MMS has experienced this phenomenon. In the late 1980’s and early 1990’s a similar trend occurred with marinas that were purchased at inflated prices, defaulted, and returned to banks. MMS was called on to stabilize operations while the lenders sorted out exit strategies and current management problems. Unlike the previous cycle, the current trend has greater dollars associated with a larger percentage of projects returning to lenders. “The dockominium and rackominium concept pushed purchase prices for waterfront property and marinas to unprecedented levels. This leaves lenders in a compromising situation as they attempt to wrestle with 5 or 10 million dollar losses,” said Dennis Kissman, President of MMS. “In the late 80’s the dockominium and rackominium concept was not as prevalent and properties were purchased at only 1 to 3 million dollars. The situation is much more severe now.”
MMS agrees with noted economic analysts that it is a very difficult current economic climate to operate within, and some hard decisions must be made for projects to survive. “Reality has set in and, for now, the dockominium and rackominium market has evaporated”, stated Kissman.
Lenders are now left attempting to figure out the best approach to selling or operating the project, or in some cases, they are considering developing parts or the entire project to increase the overall value of the asset before the sale.
MMS is adding value through marina specific consulting services and third-party management contracts to help lenders understand the best option and identify a course of action for these distressed properties.