A Captain's Berth
Buying or Building Your Own Yacht is a Risky Venture that Requires Long Months of Investigation
From the Print Edition:
Tom Selleck, Winter 95/96
One man wants to replace his "old lady." The other was simply looking for more power.
For Prince Charles and his coterie of advisers, a drama affecting the entire British Commonwealth is still being played out. Debated in Parliament and in the tabloids, the controversy concerns the royal yacht Britannia, whether this aging ship should be modernized or mothballed. In either event, a costly search to find the world's best naval craftsmen is about to begin. Will the work be done close to home in a yard like Scotland's Ailsa-Perth, or in Holland, at such famed yards as Royal Huisman or Feadship? The suspense continues to mount.
On a more modest scale, Steve Florio, president of The Condé Nast Publications, Inc., faced a similar quandary. Leaving The New Yorker magazine in 1994 to assume his new job, Florio, a longtime sailing enthusiast, realized that "my boat could cross the ocean, yet due to my new workload, I didn't have the time to cross the Long Island Sound."
Saddled with a sailboat that didn't fit his lifestyle (or that of most top-level executives), yet still craving the excitement of reaching distant ports, Florio had one option--buying a powerboat. That decision, coming after years of tending to beloved sailboats, was weighty enough for Florio. It was, however, his easiest choice. What followed was a tricky, and potentially financially devastating, journey to boat shows, shipyards and showrooms filled with fast-talking salesmen. He began a search that demanded the keenest of navigational skills, negotiating between his heart and his mind.
Whether yacht buyers have princely aspirations, want a $40 million "corporate tool" for entertaining purposes, or are in Florio's $1 million range, purchasing a new or used boat is a joy complicated by a range of perils and very easily mixed with disaster. That brokered used yacht may seem like an attractive buy in St.-Tropez or Portofino, but out on the open seas, the unschooled buyer may well be presented with a few harrowing surprises.
As for that custom-designed yacht, there's certainly a great feeling of fulfillment from visiting yards to watch craftsmen turn your blueprints into reality. "It's definitely a bit of an ego statement," says Florio, "to watch your own design being born."
Yet that statement can be out of sync with trends in the marketplace, or simply antithetical to efficiently operating a yacht. As for those picturesque boatyards, frequently shadowed by financial crises and unable to deliver at agreed prices, they, too, have spawned a caveat. All too often, buying a boat also means buying the yard.
They don't look like multimillion dollar mistakes. Sitting serenely in the water, their white fiberglass hulls gleaming in the midday sun, the yachts docked at the Derecktor Gunnell shipyard outside Ft. Lauderdale, Florida, seem ready for seagoing adventures. Their engines purr like Ferraris. Crews are busy at work in wide-body salons, polishing rosewood and teak trim that epitomize classical elegance. Even hearty captains appear, striding through pilot houses equipped with the latest electronics, to pronounce everything shipshape.
Brokers will come on board and tell unschooled clients that yachts like these $3 million to $10 million models are a great buy. In many cases it's difficult to determine whether the spiels are sheer flim-flam, or attributable to a broker's lack of experience. The brokerage business has its share of friendly "ushers"--wonderful men to have a drink with, who having recently sold houses or used cars, know little about a boat's interior sound levels, engineering, and true value.
But once all the talk fades, the shiny toys on board can't disguise the fact that many of the yachts here, whatever their price or pedigree, are still mistakes. Badly designed, they lack ample staterooms, quarters for crew, and at worst, are so overweighted with marble heads and flooring that their speed and fuel ranges are decidedly below standard.
After mooring here for months, these yachts will eventually change hands and move on to different ports. Yet, since so many new buyers are entering the market (relatively low fuel costs and an end to the luxury tax are feeding the frenzy), abandoned slots at Derecktor will soon be filled, often by other mistakes, the handiwork of untutored buyers unwilling to heed educated advice.
"I hear about these overpriced, badly conceived boats every week," says Jeff Ferguson, vice president of sales for Christensen Shipyards, Ltd. a boatbuilder based in Vancouver, Washington. Shaking his head as he decries a series of design faults in these Florida-docked yachts, Ferguson continues, "Guys with big egos, the entrepreneurs, think they know everything about building a boat. Instead of surrounding themselves with seasoned people, they stubbornly plunge ahead, without paying due diligence to brokers, the financial condition of yards, what features are hot in the market. So what happens? They wind up with headaches. Boats with design flaws. Boats that become like small businesses to maintain. Yachts which are virtually impossible to sell."
So how does the first-time buyer, often not knowing a thing about beam, draft and composite hulls, avoid taking a bath on his investment? One safe rule of thumb is to initially forget that glitzy custom design, the "statement" of a new yacht, and to enter these waters with an already sea-tested used boat, whatever the design.
Consider this strategy as a trial run, a less expensive way to separate your true needs from the myriad fantasies that surround yachting. Many of us dream about ocean crossings and piloting a hi-tech boat befitting James Bond. But owners are rarely this hands-on (meaning sufficient crew--and quarters for them--are needed). And, if sailing in a sheltered bay is a more likely weekend destination, this reality check will also greatly affect such variables as hull design, draft and engine size. Maintenance is a major consideration: The upkeep of a $20 million yacht can easily cost $2 million a year. These are all factors that will affect your investment.
One way to assess desired features in a yacht is by following what I call the Odysseus route. Strictly for heroes, this approach means combing through newspaper ads, then wandering from one marina to another. Would-be buyers might get lucky and land a fairly priced boat. Then again, by steering such an independent course, they may also be shipwrecked.
Consulting with a broker makes far more sense. But beware of those known as "superman" brokers--newcomers known for ignoring clients' real needs and selling them every flashy feature imaginable. You are better off dealing with veteran agents (recommended by yacht owners, naval architects and others in the industry), brokers adept at writing contracts, assembling crews and most importantly, finding yachts that suit a client's realistic needs.
"I first determine whether a client wants a motor or sailing yacht, and what they're going to do with the boat," says Gerry Hull of Fraser Yachts in Ft. Lauderdale. "If someone is crossing the ocean, the yacht needs a lot of fuel and stability--a deep draft boat. It's easy to get taken in this business. Often a client is just going from Nantucket to the Keys, and only needs a coastal boat."
Brokering boats for 15 years, Hull has a long checklist for prospective buyers. He first wants to know how many guests will typically be on board, so only yachts with a suitable number of staterooms will be considered. This also has an impact on a yacht's chartering potential, for while a 150-footer typically has five luxurious staterooms, it is far more problematic to lease a 70-footer with three staterooms.
The "operational style" of a yacht, whether it is going to be "military fashion"--formal--or more relaxed and open, is equally critical to determining what size yacht to buy. As Hull says, "If an owner wants cordon bleu service, this usually means a larger crew. That raises the issue of where they'll be housed. What type of amenities and quarters? How separate will they be from the owner, guests and staterooms? These concerns are extremely vital, for the crew makes or breaks the yachting experience. A great boat with an unhappy crew makes for a very bad vacation." To ensure that these matters are adequately considered, it's a good idea to hire a captain and travel with him during a search for a yacht.
Once the budgetary issues are resolved, the hunt for a yacht actually begins in earnest. Sitting in his office amid a stack of brochures and next to a computer generating listings of used yachts priced from $200,000 to $50 million, Hull insists, "Today is a great time to be coming into the market. Prices are very realistic. From inflated levels in the 1980s, they've come down to a very attractive range. There are some great boats out there, trading at prices which, if not bargains, will be easily recouped later on."
"The key reason to work with a broker is that he knows the 'comparables,' what boats are available, and what they're selling for," says Steven Kletjian, the CEO of UNICCO, a facilities service firm, who has purchased three boats through Gerry Hull. "A buyer naturally wants to pay as little as possible for the boat and what should be on it. But here, too, a good broker provides price guidelines, and can bring that buyer back to reality."
A note of caution: A buyer must trust the broker implicitly. (A few other agents with good reputations are Bill Sanderson of Camper & Nicholsons of Palm Beach, Florida, and Merle Wood of Merle Wood and Associates in Ft. Lauderdale). The broker is more than just a chaperone, escorting clients around the globe. During this often costly search, which can last from three months to three years, the agent serves as negotiator, an evaluator of naval surveys and, to boost a client's confidence, a hand-holding confidante-cum-psychologist.
"Looking for a boat is kind of a forced march from country to country," says Jeff Chapple, the semi-retired president of Marlin Management Services in Burlington, Vermont, who spent $30,000 on a few months of traveling before finding and buying a 115-foot Codecasa powerboat in Antibes. "You see so many boats, you can't remember them all. But a knowledgeable broker, the non-high pressure type, gets the buyer through this grind. He's a friend, yet he also gets you to think through the entire process."
Once an appropriate yacht is found, the broker negotiates the deal, typically receiving 10 percent of the price from the seller. The adventure, though, isn't over. An experienced broker arranges sea trials and inspections, which necessitates his calling in marine surveyors and machinery experts to write reports detailing everything from the hull's condition to the performance of the electronics. If it's determined that a yacht needs a refitting, a broker will often go back to the seller and renegotiate a final price.
"If the hull or engine needs major work, I want a good price adjustment to compensate for the defect," says Hull, who adds that deals become dicey when repairs hit the mid-six-figure range on $2 million to $5 million boats. Otherwise, "talks usually go smoothly," he says. "Sellers realize that whether it's this buyer or the next one, defects must be fixed. The only deal-breaker is when these repairs are going to take a very long time. Buyers want to go cruising; they don't want to be in a yard for six months."
There's an exhilaration from being in the hunt, the thrill of discovery. But there's also a flip side at times--the disappointments of seeing unimpressive yachts, plus the frustrating twists and turns of stalled negotiations.
Most new buyers, if buoyed by seasoned advisers, find the resiliency (and savvy) to overcome the challenges of a lengthy search. Yet others, after seeing numerous boats, have an epiphany of sorts. Dissatisfied with what's in the water, they decide to buy a new boat; they either go with a production boat or choose the custom route. As Gerry Hull says, "This is another journey. In fact, it's a whole new ball game."
Go to any boat show, and it's easy to think you took a wrong turn into a Miss Universe pageant. Women in bikinis come flying at you, flaunting brochures, champagne, gifts--a whole world of giveaways. Here, talk is cheap. Every boat, to the salesmen manning the exhibits, is the "yacht of your dreams."
A prospective new boat buyer should visit one or two of these shows. It is truly an experience, and along with all the production boats on display, a few reputable custom yachts are mixed in with the glitz and flashing lights. Just be careful. The P.T. Barnums are everywhere.
A planet removed from these noisy jamborees, there's Don Kenniston. A dour type, he picks and chooses his words, but as for a smile, forget it. He just sits in his muted Ft. Lauderdale office next to a few wooden ship models and basks in the magic of tradition.
Kenniston is the president of Feadship America. That might not mean much to the uninitiated, but to the well-heeled, from the crown prince of Abu Dhabi to megamillionaire John Kluge, the Feadship name says it all. Never bad-mouthed in an industry known for rumormongering and back-stabbing, the Feadship is universally regarded as the Rolls-Royce of luxury yachts.
"Quality personified, Feadship simply makes a perfect boat," says Mitchell Gibbons-Neff, president of Sparkman and Stephens, a naval architecture firm that designs boats and serves as a client's representative at a building site. "Feadship is the standard. Everyone wants to be like them, but no one has succeeded."
Built in Holland, the typical Feadship is a 165-foot long steel-hulled yacht, averaging $30 million to $40 million. But that's only the delivery price. While owning one of these classic-looking "super yachts," with mahogany columns, swimming pool and 15 knots cruising speed, brings you into very select company (only four or five are built a year), it is not a hands-on experience. A full-time captain is needed to pilot one of these babies, along with a large crew, which means heady yearly costs (for maintenance, fuel, dockage fees and insurance on a $40 million yacht, the tab is usually about $4 million).
"The Feadship is just not for everybody," Kenniston says. "If a buyer wants to relive the glory days of yachting, the 200-footers the Morgans and Rothschilds enjoyed, we're it. But if he's only going to be sailing on Long Island Sound, there are other nice small boatbuilders."
Which brings us back to those typical buyers seeking a $1 million to $10 million yacht. Should they buy an already-tested production boat with a proven resale value such as a Hatteras (in that case, says Steve Florio, "there'd be 200 of them floating around, all looking the same.") or brave the more adventurous route of custom building? It's a plunge that sometimes takes buyers into a world where the resale value of a boat is at the mercy of a whimsical marketplace, and litigation against underfinanced yards unable to complete a project is commonplace.
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