Marinas Are In Demand, But Houseboat Residents Are Treading Water
As prices for traditional commercial property types rise, along with interest rates and the need for profitable yields, investors in the U.S. have gotten more creative, especially in pricey seaside cities, dropping cash for an often overlooked segment of the property market: marinas.
From the San Francisco Bay Area to Clearwater, Florida, and even the landlocked areas in between, marinas are an increasingly popular place to dock capital, with $405M worth of marinas trading hands in 2020. They’re specialized enough that the market isn’t saturated with buyers and the potential revenue streams are diverse, from development opportunities to simple value-add ownership.
But for people living in the houseboats often found in these marinas, the consequences of CRE’s ambitions can mean that even a maritime property isn’t exempt from the nation’s housing squeeze.
Such is the case for residents of the Oyster Cove Marina in South San Francisco, who are facing eviction in October as developer Kilroy Realty plans to build a life sciences campus expansion on the property.
“They've been long-term residents, living as liveaboards for almost 15 years,” said city of South San Francisco Economic Development Coordinator Ernesto Lucero, who is currently working with these residents to help them transition out of the marina and into new housing.
Kilroy purchased the property in 2018. The company notified residents in July that they would face eviction as a result of plans to construct the five-phase Kilroy Oyster Point project on the marina where their houseboats were docked.
Kilroy announced in June that Phase 2 of the project was underway. Around 30 houseboat residents in the marina are set to be evicted by Oct. 15, with Kilroy offering payments of $10K to 14 of the residents.
"We understand the uncertainty that these changes will introduce to our boat owners, which is why we are working with them to make their transition as painless as possible. We are providing all boat owners with four months to prepare for their next move, while offering to waive their rental fees in the interim," a representative from Kilroy said in a statement emailed to Bisnow Tuesday.
“They are just super stressed at the moment. Most of them are over the age of 65. Most were hoping that their residency on the boat was going to be like a long-term solution for them. We're just trying to ensure that we're here to help,” Lucero said.
Kilroy noted in a recent Securities and Exchange Commission filing that Phases 3 and 4 of its Kilroy Oyster Point project, which it estimates will cost over $211M, are still in the pipeline.
Lucero said most of the residents are elderly and fall on the lower end of the income spectrum, relying on Social Security checks to make ends meet.
Now, tenants who were paying $600 in rent for the berth their boat occupies are faced with the possibility of navigating the Bay Area’s challenging rental market. RentCafé calculates the average monthly apartment rent in San Francisco at just over $3K for 800 SF.
The city of Alameda had its own challenges keeping houseboat residents in their floating homes. Earlier this year, the 66 houseboat residents at the Barnhill Marina were under the threat of an eviction by proxy, as new marina ownership, a private entity called Valley Investments – Redwoods LLC, sought to raise berth rents by as much as 178% in some cases, according to the Alameda Sun.
The Alameda City Council held a special session at the end of April, voting 5-0 to extend Alameda’s rent control ordinance to maritime residences, protecting them from further rent hikes and evictions. The city acted quickly after hearing about the rent increases, which were announced to residents on April 1.
“It’s somewhat specific to us, but it is keeping people housed. It's contributing to our housing crisis,” said Marilyn Ezzy Ashcraft, the mayor of Alameda. “This, to me, was just a situation that screamed for needing some fast intervention.”
“All of these people, you know 67 residents, over half of whom are retirees on fixed income being under so much stress we had the ability to do something about it and I thought we should act,” she said.
Bisnow was unable to contact a representative for Valley Investments - Redwoods.
For South San Francisco, Lucero said the city is still in the early stages of determining what assistance programs the houseboat residents might qualify for, but for many, the option to relocate to another marina simply might not exist.
“There’s a marina in Brisbane, for example, which seems to be of interest to a couple of people. And that one has a six-month waiting list. So, I don't know if we have flexibility to move people above other people in the waiting list,” he said.
Meanwhile, demand for marina space continues, with no signs of slowing down.
RSR Capital Advisors, a Clearwater, Florida-based real estate developer, announced plans earlier this year to develop a mix of multifamily, retail, office and hotel property across 15 parcels on Clearwater’s Marina District, after purchasing the land from multiple sellers, according to Business Observer Florida.
The city of San Leandro, California, advanced plans earlier this year to build a 500-unit mixed-use redevelopment on the site of the city’s former marina, in partnership with Cal-Coast Development. A final vote on that project is expected later this year, according to The Real Deal.
And marina giant Suntex, based in Dallas, has been on a buying spree, purchasing property in New York and Florida, as well as its home state of Texas and Oklahoma, proving that oceans aren't necessary for marinas to be worthwhile investments.
However, rental protections for liveaboards, like the ones implemented in Alameda, are few and far between, at least in the Bay Area.
There is hope in the form of proposed legislation at the California state level that could extend an ordinance similar to Alameda’s for the state’s dwindling number of maritime tenants, but it is still in the early stages.
California Assembly Member Mia Bonta in June introduced Assembly Bill 252, which would extend rent control to houseboat residents.
In the meantime, the residents of Oyster Cove are running out of options to maintain their lifestyle.
South San Francisco City Manager Mike Futrell is hopeful that the city can continue to work with Kilroy Realty to extend the eviction timeline for residents, but also notes that its hands are essentially tied.
“Here, Kilroy owns the marina. So, it's a private marina. The city has no ownership interest, or, you know, nothing like that, which is different than when Redwood City went through a similar issue several years ago,” he said.
Futrell is referring to Docktown in Redwood City, where residents faced eviction after the city approved a relocation plan for the 117 houseboat residents in 2017.
As of 2020, all but 10 of the Docktown residents had been evicted, as the legal battle between those holdouts and the city drags on according to KTVU. Developer Watt Communities planned to construct 131 townhomes, as well as retail space on the site, which the Redwood City Council approved.
“The latest report I had, which was a few days ago, was that we believe there are 30 voters that are still without a solution,” Futrell said of the Oyster Cove residents on Aug. 11.
Futrell said that Kilroy has been collegial in its talks with South San Francisco, but unyielding, though it has offered some additional assistance to tenants.
“They did offer three months’ free rent. So, for the period that they announced closure to the actual closure, nobody has to pay rent out there,” he said. “They will tow your boat to a new marina at their expense. So, that's something.”
Futrell stated that the city is also in conversation with the San Francisco Bay Conservation Development Commission, which regulates how many liveaboards can occupy a marina at any given time. The city is currently trying to find the residents a waiver or extension of some kind, but the options are generally very limited, he said.
Ashcraft said she hopes other marina owners might pause when looking at Alameda’s example.
“I hope that it’s a warning to other marina owners who might be tempted to do something similar that OK, look, now Alameda has set this example,” she said.
“And maybe sometime before the end of the year, the state might even agree to include this protection, the statewide rent control ordinance,” Ashcraft said.
“We should be doing what we can to keep people housed.”
UPDATE, AUG. 23, 7:25 P.M. ET: This story has been updated to include comment from Kilroy Realty.