3 min read September 2023 — Austin Schell, CEO of PORT 32 Marinas, talked to Invest: about how the growing boating market has placed some pressure on developers to supply the marina services that more and larger boats require. He also talked about the opportunities that PORT 32 has found in redeveloping older marinas to add dry stacks as well as amenities for boat owners.
What is the role of Fort Lauderdale in PORT 32’s business portfolio?
We are predominantly a Florida-based company as the nine marinas that we own and operate are all in Florida and stretch from Jacksonville to Fort Lauderdale. We have five properties on the west coast of Florida and another four on its east coast. Florida is the best boating market in the United States thanks to its high number of boaters, large coastline and the fact that it is a year-round boating market.
Fort Lauderdale is important for us because it has the largest marine industry in North America and is a major destination for the service and repair of superyachts and boats of all shapes and sizes. Fort Lauderdale offers a combination of facilities, such as PORT 32, the Lauderdale Marine Center and Marina Mile Yachting Center, and the availability of technical talent allows any type of work to be done on large vessels.
What factors are influencing the behavior of the U.S. marina market?
There are about 25 professional or institutional pools of capital seeking to invest in the marina sector. Marinas have become a hot sector for professional investors. We went through a period of low interest rates until recently that incentivized real estate investors to find niches that could deliver a greater cash yield for their investments. Manufactured housing, recreational vehicles and marinas were three sectors that benefited from that.
There are only 2,000 marinas on the U.S. coastline, which makes for a limited addressable market. There are also only around 400 marinas in the Atlantic and Gulf coasts that are big enough to handle large vessels and that cater to the premium markets that PORT 32 focuses on. We seek to acquire, redevelop, and optimize the operations of the premium assets in premium markets like Fort Lauderdale, Lighthouse Point, Naples or Marco Island.
What are the most important milestones that PORT 32 has reached in the past year?
2022 was transformational for PORT 32. We brought in a new professional team with a variety of backgrounds in the marina industry as well as technology and luxury goods investing. We aim to build the best marina operator and acquirer, which sets us apart from other investment funds in this sector. Only a handful of companies build the team, infrastructure, technology and systems to run a company in the marina sector.
What are some key challenges that the marina sector faces to serve the growing demand for boating?
There is a limited amount of coastline and the available properties that are suitable to develop a marina and where people would want to keep their boats are few and far between. Additionally, developers need to ask themselves whether it is affordable to develop a marina compared to a hotel or a high-rise condo building that can deliver more height and density. These factors make new opportunities for development scarce. At PORT 32, we believe that there are opportunities in taking marina assets that were developed 20 to 40 years ago, reinvesting in them and building new facilities that can handle an additional supply of boats in a constrained piece of property. Since these properties have a limited amount of waterfront, we build vertically and use dry stacks to achieve additional density.
At the same time, newer and increasingly powerful and affordable engines are propelling larger boats while most of the existing marina infrastructure was not designed to handle these boat sizes. There is a growing demand for premium, longer vessels and only a handful of places with the infrastructure to support them. PORT 32 is focused on building marinas for the next 30 years, which entails strengthening our infrastructure to be able to handle the boat of tomorrow rather than yesterday’s boat.
What role might mixed-use developments that include marinas play in PORT 32’s future developments?
In most of our markets, people want more than just a glorified self-storage for their boats. They want amenities, such as waterfront bars and restaurants, ship stores and pools. At PORT 32, we aim to develop what our customers find valuable. Boaters want marinas that are destinations on their own rather than mere launching points to the water. We have a cool redevelopment project in an entitlement process in Palm Beach Gardens that could be one of the crown jewel marinas of the East Coast. It will support a premium experience that includes retail spaces, boat dealerships, showroom space, office space, service and repair facilities and a great restaurant. This project will be a dry stack marina that is also a destination for people to enjoy.
What is the strategy of PORT 32 to navigate an unfavorable economic environment?
It is important to have an eye toward where we are in economic and credit cycles, but we build 30-year assets and have patient capital behind us. Regardless of what happens economically in the short-term, we expect to have a strong business in the long term and will be able to ride out any bumps in the road. We pay close attention to key indicators, such as consumer performance and boating activity, as well as to the reports of public competitors, which have shown stable occupancy rates, revenue increases in their marina operations and general profitability. We make long-term investments that will add value for our employers and investors, but we are also smart and disciplined regarding how we deploy capital and acquire new properties. We want our new acquisitions to work in any economic environment and not just the best of times.
What are some topics that need to be addressed to ensure that marinas are sustainable in the next 30 years?
Rising sea levels are a real issue that we carefully consider. The forcing function for building and maintaining long-term viable marina properties in today’s world is the insurance market. Insurance risk models are pricing coastal wind risk higher than ever after Hurricane Ian destroyed a lot of capacity in coastal property markets last year. The market will shift toward the properties that are better situated and built to withstand floods and winds. If there is an area where PORT 32 over-invested compared to the rest of the market is in wind protection. Our facilities are built to withstand hurricanes.
What are the outlook and the top growth priorities for PORT 32 in the medium term?
Larger platforms like PORT 32 have the opportunity and the ability to use their scale to reinvest in building a better business. For us, this means adding technological capabilities that empower customers to experience the waterfront more effortlessly and seamlessly. Clients of dry stack marinas usually call in or use an app to reserve the time in which their boats are launched into the water. PORT 32 took that basic functionality and expanded on it. We aim to be the cool place for clients to keep their boats by enabling them not only to arrive easily and step onto their boats but also to have their boats fueled and their drinks iced down and in the palm of their hands. People invest a lot of money on their watercraft, so having an SMS or app notification that a boat has been cleaned and safely put on the rack will help PORT 32 build trust and credibility in our brand.
Considering the ongoing electrification of transportation, what is your perspective on electric boats?
Electric boats exist. The issues are that they are expensive as the electrification of something as heavy as boats costs a lot of money and that the practical range of these boats is limited. These boats can only be used for shorter trips at the moment. At PORT 32, we are considering placing solar panels on our dry barns to offset our electric consumption as well as to power EV-charging and eventually to charge electric boats on site.
For more information, visit:
