Sun Communities, a real estate investment trust based in Southfield, Michigan, announced the purchase of 104 marinas in 22 states — including 18 marinas across Connecticut and Rhode Island — in a deal valued at $2.1 billion in cash and stock.
The marinas, currently owned and operated by Dallas-based Safe Harbor Marinas, include locations in Branford, Deep River, Essex, Mystic, Old Saybrook, Stamford, Stratford and Westbrook, and locations in Rhode Island including Barrington, Newport, Jamestown and Wickford, Warwick, and Portsmouth.
With 40,000 members in its network, Safe Harbor is the largest marina enterprise in the United States.
In a conference call on Sept. 29, Gary Shiffman, chairman and CEO of Sun Communities, said that Safe Harbor brings “a diversity in terms of geography and customer base that is expected to further enhance Sun’s earning potential.”
“The transaction with Safe Harbor Marinas is a continuation of our forward-thinking strategic positioning and represents a very compelling growth opportunity,” Shiffman said.
The company also announced that Baxter Underwood, CEO of Safe Harbor, will continue to run the company as an independent subsidiary of Sun Communities.
Sun Communities, currently owns and operates 426 manufactured housing and recreational vehicle communities in 33 states and Ontario, Canada.
Underwood said that marinas produce a predictable, recurring revenue stream from moorings, slips and storage that is similar to that of manufactured housing and RV resorts.
“Approximately ¾ of our annual gross profit is recurring revenue coming from vessel storage and various commercial leases,” he said. “The balance comes from ancillary services like boat maintenance, fuel sales, boat rental, and on-site food and beverage sales.”
During the call, Underwood also said that the marina sector, which generates about $5 billion in annual revenues, is “prime for consolidation.” Of the roughly 4,000 marinas across the United States, just five percent are owned by the top five operators. He said that the demand for slips has steadily increased since 2004, but that there had been almost no new marina development in the U.S. in that time.
Underwood explained that the marina industry has high barriers to entry, including “stringent regulatory hurdles to new construction and limited availability of land along the desirable protected waterways.”
Rives Potts, chief operating officer of Safe Harbor and the former president and CEO of Brewer Yacht Yard Group Inc., in Essex, which merged with Safe Harbor in January 2017, said that his company had been looking for additional capital to finance its growth — Safe Harbor has grown from about 25 or 30 marinas to more than 100 in about four years.
“They’re going to let us run the company in the way that we’ve done pretty well in the past few years but they’re there to help. There’s more capital for buying marinas and fixing up the marinas we have, so we couldn’t be happier,” Potts said. “Basically we’re more of an investment for Sun and we’re going to be completely separate. We’re going to run it with the same people we’ve been running Safe Harbor with for the last four years.”