Marina Occupancy Sinking in Rough Economic Waters

If the weather is nice, more than a few people are likely to spend today relaxing on their boats moored in Southern California harbors. But Harry L. Nelson Jr. worries that, for some of the boaters, it will be their last such New Year’s Day visit.

Nelson, who owns six marinas, says he is the largest private marina operator on the West Coast. His marinas, with a capacity of 2,400 boats, are in Ventura, Oxnard, Alameda, San Diego and Ft. Bragg in California and in Cabo San Lucas at the southern tip of Mexico’s Baja peninsula.

On average, he enjoys a 91% occupancy rate at his facilities, which operate on beachfront properties leased from local government agencies. So one might think that Nelson, 62, who runs the marinas through his Almar Ltd. holding company in Rolling Hills Estates, need only sit back and collect the rent.

The trouble is, occupancy at Nelson’s marinas, notably in Ventura and San Diego, is starting to slip--no pun intended. Nelson blames the drop on the weakening economy and ever-escalating costs, which he passes on to his tenants in the form of ever-escalating rents.

He frets that, as the economy remains sluggish, more and more people who owned boats during the go-go ‘80s will now be forced to sell them or put them on trailers--creating more vacancies at his marinas.

“Right now, I’m concerned about Ventura, because in the last two or three months, the occupancy rate has gone from about 97% to 89% or 90%,” Nelson said. His marina there, called Ventura Isle Marina, has about 700 berths.

“We’re seeing it by delinquent receivables (late rental payments), and in what I call a lesser use of your boat,” he said. “The activity in these two harbors”--Ventura and nearby Channel Islands--”has in my view substantially fallen off from what it was nine months ago.”

Nelson’s situation illustrates how even a somewhat sheltered business--boaters have only a few marina operators to choose from in many harbors--can be pinched by a slowing economy. That’s because a boat, after all, is not a necessity for most people and is an expensive item that can be forgone if money gets tight.

Marina rents can account for a quarter of the yearly cost of maintaining a boat, Nelson said. Even if a boater rents one of Nelson’s cheaper berths in Ventura for $235 a month, that’s $2,820 a year, or 25% of the $11,280 in total annual costs. So if the boater uses his vessel only twice a month, that’s nearly $500 per ride. (The cost varies widely, of course, depending on the type of boat and how often it’s serviced.)

Nelson has steered his marinas through rough seas before, having bought some of his properties when they were broke. He was forced to take one--the Anacapa Isle Marina in the Channel Islands Harbor--through a bankruptcy court reorganization in the late 1970s to straighten out its debts.

Whether his current occupancy problem is unique to the Ventura marina or signals an industrywide slowdown is unclear. Some other marina operators, such as Jerome Snyder, who runs the 370-slip Marina City Club in Marina del Rey, said they’re still nearly full.

But overall in Marina del Rey, there’s apparently a decline under way. There was a 4.4% vacancy rate among the 5,173 available boat berths on Dec. 1, up from 2.7% a year earlier, according to the Los Angeles County Beaches and Harbors Department. The latest rate was nearly equal to the 4.3% rate that existed in December, 1987, two months after the stock market crash.

Nelson’s boaters pay between $235 and $360 a month to rent berths in Ventura County, depending on the size of their boat, and he acknowledges running the most expensive marinas in the area. (People who live on their boats pay an extra $100 per person per month, and Nelson limits those boats to no more than 10% of his tenants.)

He contends that he charges more in Ventura because he provides better amenities--such as docks, restrooms and landscaping--than other marinas. Also, Nelson’s boaters can roam from Ft. Bragg in Northern California south to Mexico and use the facilities at each of his marinas along the way at no extra charge.

But some boaters apparently aren’t swayed enough by Nelson’s amenities to stay in his Ventura marina. There, Nelson is trying to stop the slippage in occupancy by focusing on larger boats that presumably are owned by more affluent tenants--those that can afford to keep their boats and their marina berths whether economic times are good or bad.

Nelson said he and many other marina operators have long served the 25- or 30-foot boat, a size common 20 years ago and one the nouveau riche might start with today. But he’s rebuilding part of Ventura Isle Marina--at a cost of $3.2 million--with more slips that can handle 40- and 45-foot boats.

“We’re taking out the small and putting in the big,” he said. “The market’s in the big boats. What good does it do to have 75 vacant 25-foot slips? In the meantime, there are big boats wandering around saying, ‘Can you take me?’ ”

(Nelson said the terms “slip” and “berth” are commonly interchanged but a berth is an available space for a boat, whereas a slip might be able to accommodate two or four berths, or boats.)

Richard Parsons, general manager of the Ventura Port District, said Nelson’s plan to build bigger slips as part of a strategic shift is based mostly on necessity. Nelson’s 20-year-old docks in Ventura “are in bad shape,” not because of neglect but simply old age, he said. “I don’t think he’d be doing this if the docks weren’t falling apart,” Parsons said.

Nelson was a lawyer who specialized in distressed businesses before he got into the marina business in 1973, when he and his two longtime partners--Robert Hedberg and the late John D. Betz, a former part-owner of the Philadelphia Phillies baseball team--bought the Ventura Isle Marina for just under $2 million.

At the time, Ventura Isle was broke and only partially rebuilt following a flood in 1969 that wiped out the facility. He next bought Anacapa Isle Marina in 1975 and purchased most of his other marinas in the early 1980s. He also bought marinas in Newport Beach and Olympia, Wash., but later sold them.

Despite being wealthy, Nelson is not an ostentatious man. He drives a 1987 Toyota Cressida, spends little time on boats and eschews a car phone because “then somebody would be able to reach me in the car.” But he’s also known as a stickler for details.

Nelson also is blunt and was willing to shed some light on the financial aspects of his marinas, even though Almar is a private company.

His six marinas currently generate about $9 million in gross annual revenue, from which he pays his general operating costs, debt payments, property taxes and insurance. All of his marinas carry some debt, he said. In the case of Ventura County, his rent payments to local government eat up 20% to 25% of his income--$535,000 this year in Ventura and $465,000 in Channel Islands.

Nelson technically has 50-year ground leases for each of his marinas. He owns and operates the marinas built on those properties. The rent he pays to local government is usually based on a percentage of each marina’s gross revenue, but each marina also has a minimum rent it must pay.

If occupancy at Nelson’s marinas drops too low, his income might fall below his own rent, giving him negative cash flow. But Nelson said the drop in occupancy “would have to double from where we are now” for that to happen, something he doesn’t foresee.