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A Captain's Berth

Buying or Building Your Own Yacht is a Risky Venture that Requires Long Months of Investigation
Edward Kiersh
From the Print Edition:
Tom Selleck, Winter 95/96

(continued from page 1)

Production boats do have a few advantages. A prospective buyer can walk into a showroom, and instead of working off blueprints, will usually see a 50- to 80-footer on display. There is also the instant gratification of quicker delivery, plus the knowledge that a company like Hatteras or Bertram has built numerous boats like the one you have selected. As Richard Bertram and Co.'s Alan Stowell says, "There is no learning curve in production boats as there is in custom. All the mistakes and flaws have long been ironed out," at least at the major companies.

The typical production boat, such as a Bertram 50-foot sport fishing craft costing $1.1 million, is about 50 percent cheaper than a similarly equipped custom craft. Since these boats are designed to meet certain mainstream tastes, they have a predictable resale value.

But don't think that these boats can't be customized on the interior. Some owners of Hatteras yachts, which has had a custom yacht series since 1989, are as involved in the building of their yachts as anyone who chooses to go the full custom route. Hatteras offers pre-cast fiberglass hull yachts in various sizes between 92 and 130 feet for between $5 and $10 million; the interior options include everything from three-deck spiral staircases to hot tubs and saunas, and owners can select finishing sufaces to suit their budgets.

Nevertheless Florio opted for the custom route. Deciding to "put his signature on every piece of wood," Florio opted for a custom-built boat "I can run and fix myself without any crew." Before he reached that conclusion, he scoured the marketplace; went to seven builders, numerous boat shows, and three naval architects; and saw a flotilla of 50- to 160-footers, including a Feadship "with all the [on-board] toys."

It was a tiring one-year search, and because he constantly had to balance fantasies with his checkbook, Florio came to a few realizations that are instructive for other new boat buyers.

He first determined the size of the boat, and his budget, deciding upon a $1 million 50-footer, to be built at the Alden Yacht shipyard in Portsmouth, Rhode Island. "Romance cuts into clear thinking," says Florio. "Buyers just can't walk into yards with a blank check on their foreheads. You must know what details you really want [changing orders delays construction and inflates construction costs]. If you don't hire a firm like Sparkman and Stephens to supervise the whole damn thing, or find a reputable boatbuilder, you can easily be sold a bill of goods."

A yacht's design and its performance standards (speed, interior sound levels, etc.) will not only determine the cost of a project, but also influence resale value. Since yachts are normally kept for two to five years, protecting an investment is crucially linked to such specs as the number of staterooms and type of engine, and to yachting's most provocative four-letter word: the composition and construction of the H-U-L-L.

Here, instead of one universally accepted design formula, there is only loud debate. At Christensen, which mainly builds semicustom hulls, Jeff Ferguson says, "Fiberglass, a composite, is today's hot material. It's literally maintenance-free, lighter and far stronger than other materials."

But John Todd, the Ft. Lauderdale-based director of sales for Burger Boat of Manitowoc, Wisconsin, disagrees. "Perfection comes with an all-aluminum hull. Aluminum is stronger and more easily shaped into an efficient hull. It's faster with far less horsepower."

Steel has its own advantages, particularly its ability to withstand collisions and groundings. So the buyer is left with a dizzying choice. As Sparkman and Stephens' Gibbons-Neff suggests, "The only thing a buyer can do is weigh the options with an independent consultant. Fiberglass demands less maintenance, yet aluminum and steel are stronger. It's a tough call."

Besides consulting with boat designers and surveyors, buyers wrestling with design questions should talk to boat owners, sail makers (if building a sailboat) and other independent craftsmen. They aren't wedded to specific designs or materials, and can talk about a shipyard's financial condition, what it's like to deal with a certain contractor and whether they have reliable follow-up service.

Salespeople in boatyards are also talkative. Eager to praise their own specialties (Alden Yachts shipyard, for example, is known for fiberglass 43- to 76-footers, while Abeking & Rasmussen, based in Lemwerder, Germany, primarily builds 70- to 150-foot steel and aluminum boats), they're equally quick to point out their competitors' shortcomings.

Visiting a number of these yards is crucial to choosing a builder. Besides providing a look at different product lines, these visits determine whether a buyer feels comfortable with the staff and craftsmen. It is a long relationship--building a boat typically takes 18 to 24 months--so you have to have faith in these people. You must be convinced there will be no surprises ahead, for too many companies will take advantage of new buyers.

Most of the chicanery, if not outright lying, involves pricing estimates. Owners of undercapitalized yards will knowingly underestimate the price of a project to get the job (and the substantial deposit). Of course, the boat cannot be completed at this price, so the buyer is left with only unpleasant choices. He can either sue the company, walk away from the project, or pump more money into it. The latter is often the worst-case scenario, for it can mean a buyer's assuming a builder's debts, and his becoming a yard owner.

As Alden president David MacFarlane says, "One worry is to build a boat in a yard that's not up to a project financially. Then the buyer has to finance the yard. But even if a builder is able to deliver the boat, there's another reason to be wary of all the slick salespeople in this business. The buyer has to make sure that company will be around to service the boat."

Amid all the conflicting claims of superior workmanship and performance, how does a buyer avoid the financial equivalent of Davy Jones' locker? Along with visiting yards and consulting with naval architects, buyers should consider the following recommendations from industry experts:

* Don't be misled by how long a company has been in business. An established boatbuilder might be known for excellence in the 60- to 90-foot range. Yet it could still be in virgin territory when it comes to the engineering specs of building a larger yacht in a different material.

* Equate boatbuilding with starting a new business. Do a Dun and Bradstreet report on the boatyards being considered for the project (even a well-known company could be experiencing financial problems). Also get client references from boatbuilders. Talking with previous customers will give you a sense about a firm's track record of meeting delivery dates, handling repairs, etc.

"When the instruments weren't working perfectly, Alden got to me," Florio recalls. "It wasn't 'No, you fix it and send us a bill.' They would've had a guy in a plane coming to me that day if I needed it."

* Be realistic about your design wish list and stick to it. Change orders cost money and delay construction. So profile your project early on, from the type of engineering and electronics to the number of staterooms. Then hold fast. Don't turn a $1 million boat into a $1.8 million project, which, according to Christensen's Ferguson, "becomes an $800,000 resale disaster."

* Ask about guarantees. They differ from builder to builder.

* Get a lawyer who specializes in marine contracts and deals. Besides fine-tuning such contractual guarantees as delivery date, noise and speed levels, he'll negotiate the complicated issue of "building a boat to class"--or having its specs certified by Lloyd's or another classification society. Bringing a society's surveyors to a yard inflates construction costs (and renowned yards are already known for building to certain standards). But certification may increase resale value. It is worth considering.

In the end, though, after consultations with experts run their course, reason often gives way to the purely romantic: speaking with craftsmen and watching projects evolve in the boatyards. For some buyers, accessibility to those yards means a site in New England or the Northwest. For others, Florida or a European locale is more alluring. That's the funny thing about a custom project: Choosing a builder may hinge on simple logistics.

After still more decision making, inevitable complications during construction, and the last installment payment, the big moment finally arrives--the buyer watches his boat splash into the water. He has survived a two- to three-year journey rife with challenges.

For many, it is worth it. "You have more than just a yacht," says Florio. "Building a boat is really a badge of honor. It says you've made it to a certain point in life."

Many new owners, the "entrepreneurs" as they're called in the business, will immediately try to sell their boat to turn a quick profit. The advantage here for the next buyer is that the boat is already in the water. But again be wary. If a boat is badly reviewed by the brokerage community, a new $8 million to $9 million yacht may end up being pedaled for $7 million.

Owners such as Florio, who had previous ownership experience and sought comprehensive advice from numerous sources, take delivery with quite different aspirations: the sheer enjoyment and excitement of cruising from port to port.

During those passages, he'll often reflect upon going the customizing route, and savor one of boating's great pleasures. "I'll retreat to my little cockpit," he says, "watch the sun set, and light up a cigar."

Edward Kiersh is a writer living in Florida.

The Charter Trap

Many new buyers enter the market believing in the great myth of yacht chartering, that false assumption of confusing a yacht with a piece of property that can be regularly leased to generate cash flow.

It does make financial sense to "rent" your yacht during those periods of the year when you are not using it. The receipts from these charters will help defer the substantial upkeep costs of a large yacht, and also have the tangential benefit of keeping your crew happy. For every time a boat is chartered, the crew typically receives handsome tips from the people onboard.

Yet you shouldn't buy a yacht thinking it's going to be a cash cow. The reality is that a yacht has a limited "window of opportunity" for charters (Christmas, Easter and the summer months), at best 12 to 16 weeks out of each year. But during that period there's also the "transition" time between charters, when yachts are serviced and prepped for a new group of guests. So even an active boat (popularized by brochures and agents) is only chartered 10 to 12 weeks annually. What this means is that a 150-foot boat, if chartered for $50,000 to $115,000 a week, typically grosses between $500,000 to $1.2 million yearly, a sum that still falls short of covering all upkeep costs.

As one broker says with a laugh, "You invest in a yacht for pleasure, not to make money. If you think you can make money, think again. You'd be better served if you stuck your money under a rock in the backyard."

--EK


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