ORLANDO - Marina Opportunities 2000, a survey of more than 160 marinas, shows the industry at a crossroads that demands a new business model to reach its profit potential, according to survey author Bruce Blomgren, president of Brandy Marine, an international marina development, management, brokerage and consulting company.

"On the brink of the 21st century, some of the nation's most intrinsically valuable real estate is underperforming, and many marinas are missing their annual profit potential by 4 to 11 percent," Blomgren said. "That helps account for the sizable gap we found between sellers' and buyers' perceptions of what marinas are worth."

With more than 80 percent of the nation's 10,000 marinas still independently owned, the U.S. marina business is still a largely non-standardized, primarily family-owned cottage industry that resists consolidation. When scrutinized with standard real estate valuations, says Blomgren, marinas often fall short in investor return and are thus overlooked as prime investment opportunities.

"The good news it that tremendous opportunities do exist. Marinas are truly real estate's 'sleeper' in terms of waterfront amenity potential and as more profitable businesses for current owners. They also are attractive investments for the institutional buyers who've transformed other industries, providing they are professionally and aggressively managed," Blomgren said.

Brandy's survey of 160 marina owners/partners along the East Coast from Norfolk, Va. to Mobile, Ala. revealed:

A dramatic valuation gap between sellers and buyers: Marinas want to sell on the basis of a 10-11 percent return on their reported financial; buyers want to buy on a cap rate divisible by 12-14 percent.

Capital shortfalls: The majority of marinas in the study lacked meaningful

capital reserve funds; imputing reserves for capital to make them attractive properties diminished selling prices even further.

Antiquated financial data and systems: Marina financial, in most cases, requires re-casting before seeking buyers. Very few had software accounting programs. Most that did had software that was not "marina friendly."

Profit centers approach: Most marinas were not departmentalized into proper "profit centers."

Price rage variability: Selling prices ranged between $3 million and $12 million, averaging $4.5 million.

"Marina properties have lagged other real estate categories' income production and property appreciation," said Blomgren. "It will take a concerted effort for marina owners to take full advantage of opportunities, or exit strategies, over the net three to five years."

"Owners are only beginning to understand the potential of improvement from project planning, from adding profit centers and adopting sophisticated management systems and preventative maintenance programs," said Blomgren. "It's going to require patient investment criteria combined with strategies for cost efficiency, scale of economy and 'outside-of-the-old-box' thinking."

One opportunity, he says, is to use the concept of creating and branding chains of marinas to enhance the investment potential and property value for eventual sale, as other real estate sectors already do. For example, retail mall giant Simon Property Group and Westfield American have begun multifaceted marketing campaigns to place their name on all mall properties they own. Apartment community developers Post Properties and Archstone Communities began this concept of "branding" some time ago.

The survey did show some marinas are actively responding to challenges

such as environmental restrictions on new facilities and real estate demands, while taking advantages of investment opportunities. Some success stories include:

Integrating marinas with surrounding land opportunities. (Grayhaven Marina Complex on the Detroit River recently added 271 condominiums).

Catering to megayachts (vessels longer than 150 feet) and their specialized services as a profitable operational niche.

Marketing, merchandising and promoting effectively to capture broader audiences. (John's Pass Seafood Festival on Florida's West Coast has attracted a full cross-section of land-driven participants for the past 18 years.)

Building loyalty by hosting yachtside events, parades and home or land owner parties and promotions. (Sea Pines on Hilton Head offers dockage to pro-golfers playing in the MCI Heritage Classic and arranged national television interviews yachtside.)

Survey results also pointed to several factors that negatively affect growth if not anticipated or managed. These include environmental impact from public agency and private concern groups, seasonality, competition, time, weather and economics.

Future economic downturns and governmental regulation in a largely nonrepresented industry could spell difficulty for marinas. While the industry is sizable, its only current effective lobby comes primarily from the equipment side, not the service/marina side. Clearly the field has differing agendas, Blomgren said, pointing to the need for a movement to better organize industry leaders.