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Now the latest R.E. insanity, dock flipping!

Old 05-20-2007, 11:23 PM
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Default Now the latest R.E. insanity, dock flipping!

Boating now gets more expensive with dock speculators!
Investors moor hopes to boat-slip sales, rentals

Palm Beach Post Staff Writer

Sunday, May 20, 2007

Last year, Drew Burris bought four boat slips in Charleston, S.C. He's now looking at picking up a few more in South Florida.

No, he doesn't have a fleet of vessels needing homes. But he's banking that a lot of boaters do.

Slip investing
• With more Florida boat slips hitting the real estate listings, marina developers are citing annual appreciation rates of 6 percent to 45 percent.

• Wet slips, sold by the foot, are going for $1,500 to $13,000 a foot, with South Florida drawing the highest prices.

• Dry stacks generally are priced based on length, width and height, and can vary from $100,000 to $300,000.

"It's a great investment play," he said. "I've seen the prices continue to escalate as more and more people move closer to the coast. ... It's a good way to park your money into a boat slip, have it rented and in the future realize a capital gain."

The 35-year-old Charleston man makes his money in real estate, investing in a variety of commercial properties. Boat slips are the latest addition to his portfolio.

As growing numbers of marinas opt to sell rather than lease their slips, these so-called "dockominiums" are drawing interest from more than boaters. Touting rising values, some marina developers are pushing the high-priced spaces to a new brand of customer: the real estate investor.

It's a no-brainer, they say, especially in Florida, where increasing numbers of boaters face a dwindling supply of boat storage.

Slips are being offered up as the new real estate hot spot, an alternative in a slow market.

"There's frustration in the marketplace, certainly with single- and multi-family homes and especially in South Florida. They've fallen out of love with the residential side of the business, and they're looking for other creative places to put their money," said Dunston Powell, sales manager for Charleston, S.C.-based Atlantic Marina Holdings, LLC, which is drawing investor attention for new marinas planned in Palm Beach Gardens and Fort Lauderdale.

"People who are smart in the real estate industry know that the supply-and-demand fundamentals in the marine industry are better than any other product in real estate," Powell said.

The farther south, higher the price

Florida has nearly a million registered boaters, the highest total in the nation. But growing numbers of marinas have been displaced by condominiums, hotels and other non-marine uses in recent years, making slips scarce.

Palm Beach County has more than 43,000 registered boaters and only about 6,500 wet and dry slips. On the neighboring Treasure Coast, Martin and St. Lucie counties have about 30,000 registered boaters and only about 4,300 slips.

Several marina developers pushing new projects say that means boat slips will only go up in value, citing annual appreciation rates ranging from 6 percent to 45 percent.

"The condo market is soft because it's saturated. Too many condos, not enough buyers. That's not a problem for slips," said Steeven Knight, founder and chief executive of the Fort Myers-based Yacht Clubs of the Americas. "More and more boaters keep moving to Florida, while more and more slips keep disappearing."

Knight is banking on that storage shortage to drive slip sales for his yacht clubs. His 3-year-old company has spent millions of dollars buying marinas around the state, with plans to build a chain of luxury private marinas.

He has bought eight marinas, including a site in Martin County's Rio community. He's selling the wet slips for as much as $10,000 a foot, while dry stacks are priced around $125,000 to $250,000, depending on size.

So far, about 15 percent of his buyers are investors, some picking up multiple slips in different locations.

The majority of slip buyers are still boaters looking to secure a permanent spot for the vessels, but some of the investor interest comes from beyond the boating world.

"People are buying these slips and they may not have ever had a boat," said Brooke Fishel, operations manager for the Association of Marina Industries, based in Washington. "They know they're buying limited property. Water access is only going to diminish, so it's obviously a great investment for people who can afford to buy the slips."

The debate over selling or leasing slips divides many in the marina business. Lease proponents say selling slips limits water access to the rich. Slip sellers say it's the only way today for marinas to stay in business because of the climbing values of waterfront property.

Slip prices vary widely based on location. In Florida, the farther south, the higher the price.

Wet slips generally are sold by the foot. In Florida, prices range from $1,500 a foot to $13,000 a foot, with the top end usually found in the Keys. Dry stacks, which are priced based on length, width and height, vary from $100,000 to $300,000.

The notion of selling boat slips started in Florida in the 1980s, but the idea didn't gain much steam right away.

The recent supply woes have given new life to sales, however. And the idea is catching on in coastal states such as Georgia and the Carolinas, the marina association's Fishel said.Slips are sold in a variety of ways, depending on the ground beneath them.

While often called dockominiums, most wet slips are not sold in the same fashion as condominiums. That's because the state owns 98 percent of the bay bottom in the Intracoastal Waterway and Florida's lakes, said Boca Raton lawyer Dennis Hillier, who sets up slip-sale programs for marinas.

So most wet slip sales today are set up as long-term leases of the state-owned submerged land or as club membership programs, said Hillier, who set up the first such program in 1992.

However, dry slips, or "rackominiums," can be sold as fee-simple real estate transactions.

Brokers, developers and marina management firms around the country have launched Web sites with sales listings for dockage. Some are marketing directly to investors, lauding slips' lease potential and their resale value.

Some skeptical of large returns

Others aren't as bullish. Boat slips saw a rapid rise in prices during the past few years, partially driven by speculation. But prices have leveled off, leaving some wondering whether the sales trend will continue.

Marty Laven has made slip sales his business. The real estate broker started The Dockominium Group, based in Fort Pierce, in 2001.

Most of his buyers are boaters looking for spots to keep their 50- or 60-foot vessels. Laven sees the value for a boater who needs a dock, but he's skeptical of the investor and the promise of large returns.

Prices peaked in 2005, and some slips have sold since for less than their original price, Laven said. In early 2006, he listed a 130-foot slip in Jupiter for $1.2 million, or $9,231 a foot. It's now reduced to $775,000.

"It doesn't make sense to buy one of these things and hope that you can sell it on the upside," he said. "Nobody's going to make money in three to five years. The prices are too high."

Slips generally are not a quick flip, but a long-term investment, said Hillier, now an attorney with the Greenburg & Traurig law firm's Boca Raton office. Many investors will lease their slips, but that's not where the value is.

"The prices are so high, you're not going to make any real return on leasing your slip," Hillier said. "You make your money on the resale."

Although boat slips have appreciated as much as 45 percent annually in recent years, sales have slowed during the past year, said James Wilson, owner of the Appraisal Co. of Key West, which specializes in slip appraisals.

"I own a dry slip and rent it out," he said. "I have always thought of it as a great investment because of supply and demand."

Many dry-stack marinas are in the works in which developers are selling the rack spaces. Pre-construction speculation for these projects has been particularly brisk, said Fort Lauderdale broker Ginger Hornaday, who launched AquaMarine Realty in March to tap the marina and slip market.

But it's unclear whether this market will hold its value like the wet slips, brokers say.

"It is a new product for the real estate market, so it's too early to answer that question," Hornaday said.

Some of these marinas, including Knight's Yacht Clubs and Atlantic's Harborage Club in Fort Lauderdale, boast five-star amenities in addition to boat slips, which drives up prices.

Atlantic has not set prices for its proposed Palm Beach County marina, but its Fort Lauderdale project is offering pre-sales for $150,000 to $250,000 for a dry slip, Powell said. About 20 percent to 30 percent of buyers are investors, he said.

"Some have bought 15 slips from us at a time," he said. "It's kind of on everyone's radar now."
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