While Rhode Island is the smallest state in the Nation, it possesses approximately 400 miles of coastal shoreline. Rhode Island is considered to be a "boat friendly" state, as recrea-tional boating is a welcome industry. The State recorded 41,314 boat registrations for 2001, an increase of 1,049 boat registra-tions over year end 2000.

  Approximately 90% of the Rhode Island fleet is comprised of boats under 26 feet in length, and approximately one-third of the State's boat registrations is owned by out-of-staters.

  Rhode Island eliminated the sales tax on used or new boats in 1993. Since that time, dockage space has become scarce in the state, as it is now seen as a sales tax haven for boat buyers, many of them from Connecticut and New York. To avoid paying sales tax on a boat, a buyer must purchase, register, and keep the vessel here. The economic benefits of this tax law has been broad to the local economy.

  Nationwide, less than 3% of the Country's marinas are con-sidered to be of investment grade. While Rhode Island does possess full service marinas, many are classified as the "mom & pop" type variety. Investment grade marinas are typically located in the larger "waterway" states of Michigan, California, and Florida. The warm weather states benefit by almost year-round boating activities, whereas marinas within the state of Rhode Island are faced with generating 75% of their annual retail sales between April 15 to October 15 of each year.

  Over the last decade, marinas have become a popular niche investment. Where once marinas used to be a cottage industry, now many facilities have been purchased by larger players entering the industry. Marinas exhibit typical supply and demand principles as other commercial investment types.

  Currently, boating is growing in popularity, but there is limited access to waterways. In saturated market areas, the only way for owners to expand operations is to buy out competitors.

  Slip rentals are the "number one" income stream for marina facilities. However, to have additional profit centers in order to remain profitable and lucrative given the short boating season here in Rhode Island, many marinas offer services such as boat repairs, fuel sales, inside and outside boat storage, boat and trailer sales, convenience and nautical sales, pump-out facilities, etc.

  As an income-producing operation, marinas are typically evaluated for their investment worth by application of the Income Approach. There are few marina sales when slip demand exceeds supply, as owners are reluctant to sell such good investments during good economic times. Anticipated returns on investments are typically compared to other income-producing types, and capitalization rates ranging from 10% to 11% appear to be the proper price point to buy. Finding comparable sales on which to base pricing is difficult given that land and water values vary greatly from property to property.

  Marinas are usually priced on a per slip basis, or on usable linear footage of slip capacity. Banks typically require a debt service coverage ratio of at least 1.30. Lastly, total annual marina operating expenses can range from 45% to 60% of effective gross income.