Grove Point Marinas: Passive Investment Insights by Lunchline Partners

At Lunchline Partners, "The Lunchline Way" is the disciplined philosophy guiding our active pursuit of value creation in the lower middle market (LMM). We focus on strategic "Build-Ups," operational excellence, and leveraging the exponential power of Systems and Culture. While our core strategy involves hands-on engagement with our portfolio companies, we also believe in the power of observation and continuous learning. It was in this spirit that we undertook a passive investment in Grove Point Marinas, a platform dedicated to acquiring and institutionalizing boat storage facilities. This opportunity allowed us to witness, from a different vantage point, many of the compelling attributes we actively seek in industries and investments.

The Marina Industry: Reflecting Core Lunchline Tenets

Our interest in Grove Point Marinas was significantly piqued by how closely the marina industry and the company's strategy mirrored key elements of "The Lunchline Way":

• A Fragmented Market Primed for "Build-Ups": The U.S. marina industry is characterized by highly fragmented ownership, with an estimated 90% of marinas being family-owned businesses and less than 10% under institutional ownership. This presents a classic LMM scenario, ripe for consolidation and optimization  – a core tenet of our "Build-Up" strategy, which is distinct from simple "Roll-Ups." Grove Point Marinas was formed to capitalize on this, aiming to acquire individual assets at attractive valuations compared to scaled portfolios, thereby creating value through multiple arbitrage.

• Asset-Backed, Recurring Revenue with Favorable Dynamics: Marinas generate significant recurring cash flow from storage, which is notably recession-resistant and inflation-protected. This sticky, storage-oriented revenue (Grove Point targets >80%+ of EBITDAM from storage ) aligns with our appreciation for businesses with strong, predictable cash flows and tangible asset backing. Furthermore, the marina industry benefits from attractive supply/demand dynamics: supply has remained largely constant for over a decade due to high barriers to new development, while demand has surged.

• Untapped Operational Potential: Grove Point Marinas targets "mom-and-pop" and absentee-owned facilities, which often present substantial opportunities for operational improvements and value creation. Their strategy includes bringing discounted rental rates (often 10-30% below market) in line with prevailing prices, optimizing marina configurations for additional capacity, and modernizing business operations through technology implementation, budgeting, and cost controls. This approach to unlocking latent value by addressing operational weaknesses and professionalizing businesses is central to "The Lunchline Way."

  
  

A Passive View for Active Learning and Thesis Validation

Our investment in Grove Point Marinas was passive, meaning we were not involved in the day-to-day operations or the direct implementation of their strategic playbook. However, it provided an invaluable opportunity to observe a well-structured approach in an industry that exhibits many of the characteristics we find attractive.

Watching Grove Point Marinas identify and execute on its strategy – acquiring assets at a discount, implementing basic operational improvements to increase revenue and EBITDAM, and aiming for scale in a fragmented market  – served to validate many of the principles we apply in our active investments. The resilience of the asset class, particularly its performance through economic downturns (e.g., no material changes in occupancy during the 2008/2009 recession ), further underscored its appeal.

"The Lunchline Way" is rooted in a commitment to being lifelong learners and continuously expanding our "library cards" of experience. Our passive engagement with Grove Point Marinas was precisely that – a chance to learn and confirm our theses in a dynamic sector. It reinforces our conviction that opportunities abound in the LMM for disciplined, operationally-focused investors to create substantial value. We continue to be enthusiastic about asset classes like marinas, which offer a compelling combination of tangible assets, recurring revenues, and significant potential for value creation through professionalization and strategic build-ups.