Selling the Sales in a Down Market
OK, I’ll admit marina sales are almost impossible to get. It’s been a completely barren market for arm’s-length transactions in such states as Maryland and New Jersey. So in this Great Recession, it’s easy to say there haven’t been any sales and move on to the income approach. Does the report even say that? Too many don’t mention it or, as I have seen in great abundance, they just tell you so in a sentence or two and that’s it. Well, I’m sorry to say that’s not it.
Is there any discussion of listings? Believe it or not, getting marina listings is a difficult and time consuming thing to do. The reason is that most marinas are not really listed for sale. Marina owners will give brokers a “one-day” listing if they bring a buyer to see the marina. Most feel a real estate broker doesn’t know didly about a marina, which as I’ve said is a special purpose property. That aside, there are sources such as CoStar and LoopNet that have listing information available for easy viewing or at a nominal fee. If the appraiser doesn’t even mention them, it’s a lazy report.
Of course, the listing prices are usually too high compared to what the marinas are really worth. The appraiser may not find a range that’s reasonable from which to work. If that’s the case, I’d like to see it mentioned. Listings provide the only market evidence for cap rates when there aren’t sales, so they’re useful for the income approach (as you can tell, my opinion of the band of investment or mortgage equity techniques when there is zero marina financing is that they’re misleading and produce misleading results).
The alternative to not using marina listings for cap rates is doing an investor survey. That’s one of the many tools I have in my little goody bag:) I do those surveys in different geographic reasons and I know what cap rates and return on equity the players in the market are willing to accept. But, of course, as I discussed in Part 1, you won’t see any survey for a $2,500 or $3,500 fee because the fee doesn’t warrant the effort.
In Part 4, I’ll sell the sales in an up market. In other words, what to look for in a sales comparison that shows the appraiser isn’t getting accurate results.
