Alaskan lodge transactions require careful consideration for both buyers and sellers. Discover key insights on timing, sale types, and operational decisions from John Herrity with Hayden Outdoors.
Blog by John Herrity – Photos by Hayden Outdoors
Selling Alaskan Lodges
Owning an Alaskan lodge is a dream come true for many families. When the time comes to move on to the next chapter in life and sell the lodge, it’s important to choose an experienced firm that has the experience, marketing reach, and branding to sell a legacy Alaskan lodge. Selling lodges is a completely different animal than an ordinary recreational-property sale. Aside from the obvious remote challenges faced in the marketing and selling of these properties, there are many factors to consider that have a larger-than-normal effect on value. A lodge business may include licensing concessions such as charter-fishing permits or park-access permits.
These high-demand permits add a significant amount of value to lodge assets, and typically traded through a marine broker versed in the process, some 2C charter permits in southeast Alaska are selling in the $250,000 range and up. It’s not uncommon for an Alaskan fishing lodge to hold 3- to 4 of these permits in some cases. Aircraft are another major asset and can be a key component to running a successful lodge. A lower tine de Havilland Beaver can easily reach a million dollars. Guide boats can cost $250,000+ and a typical lodge may have a fleet of 5- to 6 of these. Other assets include vehicles, fishing gear, park-access permits, etc. This all before even valuing the lodge itself.
Preparing For a Sale
Thorough preparation is key when putting an Alaskan lodge on the market. Many lodge owners overlook the importance of proper due diligence, which can lead to complications down the line if an interested party emerges. When selling a lodge, potential buyers will undoubtedly want to review the business’s financial records before proceeding further. Therefore, it’s crucial for owners to have comprehensive financial information readily available for the previous three years.
In addition to financials, providing a detailed list of inclusions is essential for potential buyers to understand exactly what is being offered in the sale. Common inclusions in lodge sales often include boats, website and domain assets, contact information, prior/future guest lists and extensive personal property. Having this information readily available can streamline the negotiation process and provide transparency to potential buyers. Furthermore, addressing any issues that may affect the lodge’s booking rate prior to listing can greatly enhance its appeal to buyers. Buyers are often looking for turnkey operations that they can step into seamlessly, so ensuring that the property is in optimal condition and fully operational can make a significant difference in attracting offers.
Should I Operate This Year?
The decision of whether to continue operating a lodge while it’s on the market is a common concern among lodge owners preparing to sell their business. Maintaining operations during the sales process can have several advantages, particularly when it comes to attracting potential buyers and maintaining the property’s value. One of the primary reasons why operating the lodge during the sales process is beneficial is that it allows potential buyers to access the most up-to-date financial records. Buyers typically seek recent financial data to assess the performance and potential profitability of the lodge. If the lodge is not operational during the sales period, it may deter potential buyers who are eager to begin generating returns on their investment immediately.
Furthermore, continuing to operate the lodge demonstrates transparency with guests and ensures that all future reservations remain valid. This helps maintain the lodge’s booking rate and reassures potential buyers of the property’s viability as a business venture. In many cases, buyers may opt for a “soft transition” period after the sale has been completed. During this time, the seller assists the new owners in learning how to operate the lodge effectively. This not only helps facilitate a smooth transition of ownership but also ensures that the business remains active and operational, further enhancing its appeal to potential buyers.
Timing of a Alaskan Lodge Sale
Selling a lodge in Alaska isn’t necessarily confined to a specific time of year, although weather will play a role in the timing. Proper marketing done at the right time of the year is key to a successful sale. While some regions of the country may have distinct busy seasons for property sales, ironically the market for lodges in Alaska tends to be less tied to seasonal fluctuations. One key consideration for timing a lodge sale is accessibility. If a lodge has challenging access due to weather conditions, it may be prudent to schedule the lodge showings during the months when the weather permits potential buyers to visit the property easily.
This ensures that interested parties can experience the lodge firsthand and fully appreciate its unique features and surroundings. However, it’s essential to emphasize that the readiness of the lodge for sale is far more crucial than timing based on seasons. Ensuring that the property is thoroughly prepared for sale, with up-to-date financial records, comprehensive documentation, and any necessary repairs or improvements completed, is paramount regardless of the time of year.
What Type of Sale: Asset Sale or Stock Sale
Deciding whether to structure a business sale as an asset sale or a stock sale is complicated because the parties involved benefit from opposing structures. Generally, buyers prefer asset sales, whereas sellers prefer stock sales. There are some primary differences between the two structures. An asset sale is the purchase of individual assets and liabilities, whereas a stock sale is the purchase of the owner’s shares of a corporation. While there are many considerations when negotiating the type of transaction, tax implications and potential liabilities are the primary concerns. Within IRS guidelines, asset sales allow buyers to “step-up” the company’s depreciable basis in its assets. For sellers, asset sales generate higher taxes because while intangible assets, such as goodwill, are taxed at capital gains’ rates, other “hard” assets can be subject to higher ordinary income-tax rates.
Through a stock sale, the buyer purchases the selling shareholders’ stock directly thereby obtaining ownership in the seller’s legal entity. The actual assets and liabilities acquired in a stock sale tend to be similar to that of an assets sale. With stock sales, buyers lose the ability to gain a stepped-up basis in the assets and thus do not get to re-depreciate certain assets. Sellers often favor stock sales because all the proceeds are taxed at a lower capital gains rate, and in C-corporations the corporate level taxes are bypassed.
The deal structure of any transaction can have a major impact on the future for both the buyer and seller. Many other factors, such as the company’s structure and the industry, can also influence the decision. It is important for both parties to consult with their lenders, legal counsels, and accounting professionals early in the process to fully understand the issues at hand.
Why Choose Hayden Outdoors
At Hayden Outdoors, we understand the intricacies involved in buying or selling lodges in Alaska. With our wealth of experience in this niche market, we are equipped with the necessary tools and expertise to facilitate smooth transactions for our clients. Purchasing an Alaskan lodge can indeed open new doors, but it’s crucial to navigate the process with care and attention to detail. Hayden Outdoors specializes in bringing buyers and sellers together, ensuring that the transfer of title for such unique and valuable real estate is handled with the utmost professionalism and efficiency.
Our complete approach for lodge properties includes connecting both parties with national commercial title companies, facilitating exchanges through qualified intermediaries, coordinating with appraisers and inspectors, and assisting with securing financing through trusted lenders. Preparation is key in navigating the complexities of lodge transactions, and at Hayden Outdoors, we prioritize this aspect. Our clients can trust us to guide them through each step of the process, whether they currently own a lodge or they are looking to step into the industry.
John Herrity is the proud owner of multiple remote properties in Alaska and has been a commercial and sport fisherman in Alaska for over 30 years.
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