A View from Here

Bill's Sisson's weekly Trade Only blog

Dockominiums: growing trend not so black and white

As public access to the water shrinks, waterfront property is becoming more valuable and rare, bringing the focus of boating accessibility to the forefront. Mention the word “dockominium”, the concept of selling slips rather than leasing, and you will get strong opinions on this topic. This trend has caught the attention of not only trade press, but also mainstream media wishing to garner more information on this topic, which affects their readers who value their boating lifestyle. 

Access to the water is top priority to the association as well as to the industry, and maintaining facilities on the waterfront that serve this purpose is important.  The issue of dockominiums, however, is not black and white.

Some critics view the new trend as financially discriminatory which may eventually price the “average joe” out of the market.  As slips that were once leased are sold, the general consensus is that the slip is then off the market for future rental use and only the wealthy can afford to pay the price tag. 

This, however, does not always hold true.  In some instances slips are being purchased by individuals that don’t yet own a boat but realize the value of access who then place those slips on the rental market right away.  These slips are often managed by the marina in a “shared revenue” program and the slips remain on the market as rentals even though the ownership structure has changed.  In some cases slips have been developed where they may not have otherwise been developed because the dockominium structure was used to finance the project.

Another argument stems from the fact that we live in a free-market society and marina operators/owners should have the right to make decisions on their property that most positively affect their bottom line.  This brings up the counter question, “if we don’t keep our waterways accessible to the public, who will”?

No matter what your view is on dockominiums, it is a trend that is only going to become bigger as the issue of water access becomes more prevalent.  Continuous healthy discussion on this topic will benefit the entire industry as we work together to make it stronger.

Brooke Fishel
Operations Manager
Association of Marina Industries
(202) 737-9774

Comments

9 comments on “Dockominiums: growing trend not so black and white

  1. Tim Keogh

    Another thought to consider is that the conversion of marinas to Dockominiums or Rackominiums is a form of permanent water access preservation. A fee simlpe wet slip or dry stack unit will, for all intents and purposes, remain a wet slip or dry stack unit. It will not be torn down and replaced with condos or retail. I think it is also important to recognize that this business model may not work everywhere. As waterfront values continue to increase it is going to take innovative and creative approaches to the acquistions, operations, and management of our water access facilities.

  2. Kurt Sarac

    As a Marina Owner on the upper Chesapeake Bay, I see the answer (d) ALL OF THESE ABOVE!, When Property values go up, the price of Marina Owner/Slip Owners is raised at a rate that most can even began to imaging. Property Taxes, Increase Value/Insurance increases, Increased Pressures on the Wood, other Products, Coastal changes… This also raises the price for our slips and for the “Condo Test beds”. Now a value of these can put a dollar squeezing on marinas, but also can flood the market with unsold condos with fees to pay. We have a freind that could not sell his for 5 years, and finally jump on a low offer, but only after getting hit with dues, and a large assessment fee… More than other costs. Who is going to pay for the major upgrades, since most of these are newer … via an assessment … over the 10 Years. We have seen the end of the movie, and considered this with our marinas, but choose to move in the direction of the proper service the people with a good product, and fair price. I sure would make more money by putting in condo’s. It would have to be a whole lot to change the ideas of the Service, and “grow Boat for the Youth and Fishermen of DE, MD, PA, VA, NJ . Who is holding Boating, Fishing, and Sailing camps to bring in the next generation. There is no bad answer or rught one either, people decide Value,,, Time is the most valuable resource, and there is cost and time saving/ expense on both sides

    Kurt Sarac
    President
    Covenant Cove Marine Group

  3. Stan Underwood

    This may be a logical evolution in marina slip ownership where waterfront land is scarce and valuable – like Florida. But, considering that most everyone expects a reasonable return on their investments, buyers of dockominiums who treat them as rental income property will necessarily price the rent rates way out of reach of the average boat owner. Like waterfront condos, only the wealthy will be able to afford them.

    But perhaps like ski condos in Vail or Aspen, the resale market may go through downward price adjustments in the next few years.

    Has anyone thought of TIMESHARE DOCKOMINIUMS??? Ski condos went that way, to bring in the middle class. Pay for just the time you need it. I can see a timeshare market for transient boaters, banking and trading their timeshare dockominium weeks here and there…

  4. Tom Duncan

    While we all know what we’re talking about when we say dockominium or rackominium, you need to keep in mind that in order to create a true condominium ownership of individual units, with fee simple ownership, the ground or bottomland under the racks or wet slips needs to be owned, and not leased, no matter from whom (state, US Govt. Army Corp, electric company, etc.). All the conversions over leased lands are put into another form. This usually takes the form of an equity yacht club, cooperative, or other vehicle whereby the use of the rack or slip is via a membership or proprietary lease, or other. Some states, Florida in particular, are beginning to look closely at the “private use” of public lands, and the limiting of public access. Many of those that have been created will revert back, in my pinion, at some point in time. There are a few areas where slip and rack prices have indeed priced many out of the market and out of boating. But there are also areas that the business model does not work and will not work due to economics. There will be some sales, but not all units will sell and the management company will still rent those out at market rates, in order to cover their costs. Soon there will be many unhappy campers (owners of units) that can’t sell their unit for what they paid for it, and things will begin to get back to “normal”. Except for a few key locations, the concept of individual ownership or membership of racks and slips is a temporary speed bump in the road of boating.

  5. Frank G.

    Just an observation – I see a bit of partisanship in a couple posts. I am a boat owner considering (actually I am) buyin a Rackominium. Honestly, I really don’t want to and am happy renting. However, I have seen my pr foot price go from 8 to now going to 12 dollers per foot. Even though my initiall monthly will be more I an;t help but do the math and estimate what it will be in 5 years. And almost all Marinas by me ae going Condo or doing the ‘minium thing. The boat ramps here on the gulf coast are far and packed. I cannot put my boating lifestyle in the hads of ineffective government or greedy developers.

    Help me understand if I have another choice…

  6. sandy berger

    The Dockominium and Rackominium prices in South Fl. are continuously dropping. New developments are having trouble selling their product. Re-sales are weak, and rental prices are starting to drop, not escalate. Beware, much of this dockominium trend is fueled by hype. Several developers have had to slash their prices in half, or change their business model in mid-stream because of price resistence. Much of this reminds me of the internet craze of the late 90′s. I am in the business and believe me,individuals are getting much more saavy about these dockominiums, especially the dry stack. I think that many of these proposed projects will be cancelled, or revert back o rental programs. The dry stack rackominiums are being appraised by the banks in this area at around 50k to 60k. Not in the ridiculous 150k to 250k that these developers are asking for.

  7. Randy Ward

    Docko and rackos are very market driven, many projects are done by a developer who got lost in the hype. ‘I have got to have one’ mentality has and is catching up with a number of the developers who look at a marina projects in a very high rent area and try to project thoses rates in less affluient areas. I see a shaking out of the market in the next couple of years that could be good for the boaters but bad for the developers and their banks.

  8. jim boyle

    I am interested in gathering information regarding the assessment process of rackominiums. I am looking into a project on Lake Michigan and would like to consider the assessment/valauation process. Any advise?

  9. Dale Wentzel

    Obviously, I’ve come to this post about a year late – but if I found it others will continue. It’s a pretty simple equation. If you want to build or purchase a marina that doesn’t have enough slips to support the outrageous purchase price – you either have to make a wise decision not to buy it – or you have to do enough market research that more than supports the dockominium model and long term demand for the area. You also have to be able to price your dockominium product within a reasonable comparison to the market’s rental rates. If there are NO SLIPS at any price in a particular market, well you might be the one lucky greedy person who makes it work by being early and taking the top 4% of the market. What you will find is that when the dockominium/rackominium product is priced correctly it makes more sense to OWN than it does to RENT. Nobody wants to make a mortgage payment that is 3 times what they pay in rent….but a mortgage payment that is 25% to even 40% than current rental will usually make purchasing vs renting a better value after less than 1.5 years.

    The dockominium/rackominium model used wisely is the Marina Owner’s EQUALIZER to higher taxes, higher property costs, ever increasing regulation and compliance issues, rampant insurance costs, etc. etc. They are not right for every situation – in fact, I’d guess close to 35%-40% that I’ve reviewed either should not have converted at all or should have done so differently (possibly only allowing a small number to be purchased to reduce debt – making it an exclusive opportunity and leaving the balance as conventional rental operation with manageable debt)

    There are quite a few more dockominiums than most people realize and the most successful ones were priced fairly to comparable market rents and typically between 30% and 40% of the slips in such facilities are owned by wealthier boaters who have purchased several in the same marina. Many have kept their slips as rentals while they have been appreciating on the Atlantic Coast at an average between 8% to 12% per year over the past 20 YEARS.

    Have some operators and developers completely misread the market, priced their product too high and been dazzled by the big numbers they thought they’d make – you bet they have. I’d venture to say, most of them didn’t even perform a Market Feasibility Study and neglected in-depth due diligence. Sometimes it’s hard not to get sucked in.

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