BWML leads marina meltdown - New Marinas Unit

New Marinas Unit

Back in 2006, British Waterways New Marinas Unit forecast a massive growth in the need for marina berths. By 2015 it suggested that an extra 11,750 berths were need. It expressed this as 47 marinas each with a capacity of 250 berths.

Worked examples, indicated to potential developers that they could expect nominal pre-tax rates of return (IRR) for newly constructed marinas of between 15% and 18%. Developers worked on the assumption that demand would outstrip supply right up to 2015, but nobody stopped to consider what would happen if the reverse became true and supply outstripped demand.

As a result of British Waterways predictions, new marinas such as Pillings signed NAA agreements whereby 9% of their assumed gross mooring income would pass to the navigation authority.

No marina boom

It was in September 2010, that narrowboatworld first alerted the public to the fact that the ‘marina boom' was going terribly wrong. We noted that over the previous two years berth occupancy of BWML's marinas had fallen from 90% to 81%.

Whilst this was worse than the industry as a whole, private developers were also feeling the pain with both profits and the value of their assets falling. Put simply, it was becoming less expensive to buy a marina than develop one from scratch!

Expansion by acquisition

However, British Waterways had a plan to cash in on the marina industry's problems. In January 2011, its Board approved a plan presented by Finance Director, Philip Ridal (also a director of BWML) to invest an initial £4m (with more to follow) to allow its subsidiary to ‘expand by acquisition'.

The idea was to buy ailing marinas at less than the build cost and apply for planning permission to convert berths for residential use where demand was still supposedly high.

There is no documentary evidence to confirm that Pillings Marina was specifically targeted as part of the ‘expansion by acquisition plan'. However, it is known that British Waterways abandoned court action for non payment of NAA fees in 2011 and it is difficult to think what other reason they might have had for doing this.

Investment halved

Paul Lillie, sole director of the three companies involved in Pillings, has suggested that the investment in his marina was just under £4m. Today, it has been estimated that it would only fetch £2m when sold.

BWML went on to buy just two ailing marinas as ‘part of its expansion by acquisition' plans, but the whole concept now seems to have foundered due to difficulties in obtaining planning permission and unwillingness of existing berth holders to pay more for little increase in benefit.

Conflicting interests

One of the difficulties that CaRT has with marinas, as one marina owner points out, is that it is at the same time a navigation authority, a competitor and for some a landlord.

One of the bizarre outcomes of these conflicting interests is that the advice given to the developers at Red Hill regarding the need for more berths in the area simply did not match the reality of the situation.

Another peculiar twist is that CaRT supported the application. Was this because it gets its full NAA fees irrespective of berth occupancy and has the option of buying it if it fails? Or was it that as a navigation authority it feels that it cannot object on the grounds of ‘need'?

Supported and opposed!

At the same time as supporting the application, it has opposed the application via BWML due to the impact the new marina might have on its own at Sawley!

A classic case of conflict of interests.

CaRT's Board of Trustees are now taking an interest in BWML. In November last year, Vice Chair Lyne Berry asked for more information to be able to assess its financial, operational and reputational impact of its subsidiary.

Not before time!