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Hot Yachts

The notion of riding the ocean waves for pleasure has never been bigger business, and—between discos, swimming pools, helipads and defense systems—owners never run out of ways to trick out their vessels
By Phil Scott | From Rob Lowe, July/August 2014
Hot Yachts

When is a yacht a yacht, and when is a yacht not? Depends on whom you ask. Was Tony Soprano’s boat Stugots a yacht? According to Jared Neff of Neff Yacht Sales, the fictitious Stugots is a 55-foot Ocean Yacht. She actually has the length—50 feet is yacht minimum—though her hull was popped from a fiberglass mold, and not a custom job welded of steel or aluminum. But in the end the boat is whatever Soprano wants to call her.

Steve Jobs died before finishing his custom-built yacht Venus, but she’s molded in his image. The $140 million, 256-foot-long ship’s aluminum hull has a bow with the smoothly curved corners of an iPhone or an iPod or an iMac. It’s not just skin deep, either: her navigation and controls are powered by seven iMacs.

Until a few months ago, the longest, hottest yacht to ever ply the oceans was Russian Roman Abramovich’s $1 billion, 533-foot Eclipse, which includes two swimming pools, one disco, a miniature submarine (maximum diving depth: 150 feet), a huge master bedroom lined with armor plating and bullet-proof glass, a missile-defense system and a pair of helipads and hangars with helicopters inside. One belongs to the owner, the second to whomever needs it.

Eclipse lost the No. 1 position to Azzam, the 590-footer reportedly bought by Sheikh Khalifa bin Zayed al-Nayan, the President of the United Arab Emirates and Emir of Abu Dhabi, for more than $600 million. She’s armed with drone missiles and swimming pools, and has a luxurious, early nineteenth century Empire decor. The mark for third longest goes to the 482-foot Prince Abdulaziz—owned by the king of Saudi Arabia—which held the record for 22 years. No. 4 is the modestly priced $200 million Rising Sun, 454 feet long. 

For no good reason, let’s compare them with ships from today’s U.S. Navy. The $605 million Azzam is 590 feet long, while a $1 billion Ticonderoga Class cruiser measures 567 feet; Eclipse measures 533 feet compared with the $1.1 billion Arleigh-Burke Class destroyer at 505 feet; and the bargain $200 million Prince Abdulaziz logs in at 482 feet, compared with 445 feet for Oliver Hazard Perry Class frigate, originally priced at $194 million. Not only do they beat the Navy in length, they also win in luxury.

List price for the average 65-foot yacht today runs around $2 million; for 160 feet, the cost jumps to $160 million. “Remember, while a boat is getting longer it’s getting proportionally bigger,” says one builder. “If you take a 150-foot boat and add only 30 percent in length, it typically doubles in size. It’s getting taller and wider.”

Sailing or Cruising

What do you want in a yacht? Motor or sailing? High-speed performance or slow, full-displacement cruising? Sailing yachts feel more natural, and race competitively. Motor yachts provide more space, are typically faster and built to more individualistic designs. And they’re not as hard work.

The current trend: “beach clubs.” Built on the lowest deck or balconies, beach clubs let passengers swim, jet ski, wake board, lounge on deck chairs, float around in inner tubes and just be associated with the sea. Yachts can carry plenty of lounges inside and out, movie theaters, massage rooms, dining rooms, bars, racquetball courts—everything from a cruise ship—only relaxed, uncrowded. The details are invisible.

“One client wanted elephant skin in some places where you normally have things lined with leather,” says one decorator who prefers not to be identified. “There are shower fixtures that could dispense Champagne. On superyachts they have submarine units, defense systems, and anti-paparazzi equipment on board. They’re laser based, and shoot in the direction of the photographer and ruin the photo. If you can imagine it we’ve seen it on a yacht.”

You’ll also want to focus on practical considerations. Will she fit in the dock behind the house? Will the bridge fit, too? How many guests can go for a day’s cruise? How many can stay overnight? What places do you want to go and how distant are they? Can you easily obtain parts during voyages?

That New Yacht Smell

There’s nothing like customizing your brand new yacht. “At the end of the day we’re creating dreams,” says one builder. According to a broker, “We have a pretty thorough interview about what it is the buyer is looking for: how much they want to spend, the size, the number of guests. Does the buyer want something they can live aboard full-time, or just on the weekend? Will they spend more time in the Mediterranean or the Caribbean? Quite a lot of time goes into the design. He adds that boats are often built to accommodate the customers’ interior design plan.

The not-so-great part: The wait for a custom yacht is three to four years, depending on her size and complexity. Traditionally the purchaser pays a percentage of the total cost as the builder reaches certain milestones.

“One similarity between a good car and nice house and a new yacht is craftsmanship and quality of parts,” says Neff. “Also the experience of the yard—there are vast differences in the industry. There are very, very good manufacturers, and very, very, very bad manufacturers.” If we’re talking cost, the least-expensive yachts come from China. Word’s still out on quality, but a new manufacturer’s 98-footer costs around $5 million, while an 86-footer runs $1.2 million. A large part of the savings is labor—the average shipyard worker earns less than $1,000 a month, though the right experience can be hard to come by.

“A custom yacht builder allows people to hire designers that really differ,” says Timothy Hamilton, spokesman for Feadship, whose company builds yachts for celebrities, high-profile people, the wealthy, or people who want to guard their privacy.

Builders may offer you their standard contractual terms, though amendments may be needed. If you choose to have an independent designer develop a unique design, it may be possible for the finished blueprints to be interpreted by a builder in more than one way, so the specifications must be highly detailed. A separate interior designer may be needed, as well as a naval architect and independent technical surveyor—many voices. To ensure everyone’s singing from the same sheet music, incorporate the contracts with these parties into a single agreement.

It’s not just the total cost of the project that must be agreed upon. The buyer may have to make installment payments following the completion of various stages rather than paying at set intervals. The builder will also need to factor in fluctuations in materials costs and exchange rates, to prevent surprises later on.

The yard should be obliged to carry insurance against damage to or destruction of your yacht even before it hits the water. Meanwhile, in the event of a claim, you should have the option of a refund on payments made to the builder or that the insurance pays for repairs.

Legal title may not be allowed to pass until completion. This gives rise to a slim financial risk, which can be elegantly overcome by requesting a bank guarantee on the builder’s obligation to repay installments in the case that the build cannot be completed.

Since everything has to happen with choreographed precision, delays are possible, even likely. But how much delay is acceptable? Agree on the cash deductions to be taken from the installments should the build run late.

Even after you take delivery (where that happens has tax implications, so agree upon it beforehand) the newly completed vessel will have to be formally tested at sea to make sure that the performance matches the specification. Only over time will all the equipment and systems be used and tested in varying weather conditions. So materials and workmanship are usually guaranteed for a period of warranty following delivery. It’s common to agree to some form of financial security or that the last installment be withheld until the end of the warranty period.

Preowned

A preowned starter yacht might be a good buy if she’s your first yacht; you can decide if the yachting life is the life for you. Most owners are sensitive about their preowned yacht, and the names of the yachts’ past owners—and the past owners themselves are reluctant to be named. “We had a yacht owned by Jimmy Buffet, and there was verbiage in the purchase agreement that no one was allowed to use Jimmy Buffet’s name in connection with the yacht,” says one broker. “If this is for an article you have to say ‘Yacht allegedly owned by Jimmy Buffet.’ ”

A preowned vessel actually started the era of modern mega-yachting, and there’s no way of concealing her past: the Christina O, the 300-foot, surplus World War II Canadian frigate bought by Aristotle Onassis for $34,000 and christened after his daughter. Onassis spent $4 million getting her up to yacht speed by installing an art-deco dining room and a pool that converts into a dance floor. He also added plenty of lounges, a spiral staircase and a helipad. Naturally. The bar even has barstools made from the foreskin of a minke whale. Today she’s priced to sell at just $32 million. Because everyone involved is now dead, I can tick off the names from Old Hollywood’s A-List that cruised aboard her: John Wayne, Marilyn Monroe, Greta Garbo, Bette Davis, Frank Sinatra, and don’t forget Elizabeth Taylor and her two-time hubby Richard Burton. Grace Kelly and Prince Rainier of Monaco held their wedding reception on her, and Jackie Kennedy married Aristotle onboard. Jackie O also chose the pastel color scheme and decorated the rooms.

“She’s gorgeous,” says one who’s been there. “But when you go onboard you’re not going to have the amenities you have today.” Being a converted military vessel, Christina O has a narrow hull and so she’ll roll in high seas, especially at anchor. Modern yachts carry stabilization systems to counter the waves. A few of the other compromises that come with such an old yacht include: narrower hallways, small staterooms, lack of onboard boat storage and an air conditioning system that isn’t whisper-quiet. And on Christina O the crew is visible even when they should be out of sight.

JFK may have preferred the smaller Honey Fitz, and FDR liked the security of the steel-hulled USS Potomac, but the USS Sequoia enjoyed intermittent status as presidential yacht across five decades before she ultimately retired the tradition. The 100-footer was bought by Herbert Hoover in 1931 as an austerity measure (annual upkeep for the preceding presidential yacht Mayflower hit $300,000 in 1930). To name a few historic moments that occurred on her decks: Truman’s decision to bomb Hiroshima, Kennedy’s meetings during the Cuban Missile Crisis and Nixon’s negotiation of the SALT I Treaty with Brezhnev.

Jimmy Carter sold her in 1977 in another fit of cost saving (annual upkeep cost taxpayers $800,000). In 2004, the anti-austerity Congress appropriated $2 million to buy back the Sequoia, but the deal fell through and she’s still docked in Washington, D.C., and available to rent.

There is a standard sequence to buying a yacht that is accepted by the global yachting community. Variations from these steps are possible but fairly rare:

Search: Go to boat shows, which are great places to meet people in the industry, like brokers. Or if a yacht becomes available, make a special appointment for a tour. No matter what, find a broker. They are a friendly and invaluable source of knowledge both on yachts and the current market. Remember, like a real estate agent, broker descriptions come without guarantee.

When you’ve finally found the boat you love: Make an offer through your broker on a standard contract. This sales agreement outlines the timing for the sea trial, survey, acceptance and closing. Buyers typically deposit 10 percent of the price into escrow with their broker or attorney. Your offer includes an accurate inventory of the vessel, so take a photographic inventory of the vessel and include that with the offer.

Survey the yacht: Depending on her size, making a survey can take between one and 14 days. During the survey you test all mechanical, electrical and electronics equipment to learn the vessel’s condition and precisely how much the yacht will cost to maintain in the next few years. As part of the survey haul her out of the water. Before, during or after the survey, the prospective buyer can take the yacht out to sea for four hours to test her engines and verify cruise and top speeds, and verify the motion and noise levels throughout her interior. The seller will accept, reject or counter your offer to buy. The first offer is usually rejected, so it will usually take between one and two weeks to agree on an offer.

The buyer submits written acceptance of the vessel. From this point the 10 percent deposit paid is at risk should the buyer not close the sale at the agreed upon closing date. Deficiencies found during the survey are to be included in a conditional acceptance, which gives the seller time to make repairs or allow a financial allowance for the buyer to make repairs. If, for instance, a malfunctioning air conditioning system cannot be repaired prior to closing, a conditional acceptance is signed by both buyer and seller giving, say, $20,000 off the previously agreed-upon price.

Closing is a fairly straightforward exchange of signatures. Key documents: the Bill of Sale, which formally records the transfer of legal title from buyer to seller, and the Protocol of Delivery and Acceptance, which sets out the exact time and date of the transfer, in order that insurance coverage is seamless. The buyer should have a new registration and insurance. The Memorandum of Agreement (MOA) is normally drawn up and signed by both parties. The MOA should list all the equipment included in the sale, including safety and navigation equipment, linen, crockery, works of art and fuel and engine spares, which must be expressly included or excluded. The MOA should cover other matters such as the documentation needed to enable a smooth transfer of legal title, and an agreement on prebooked charter fees.

Crew: Price is no object: Hire the best crew that you can find. Most problems could be overcome by a good crew. They keep the guests safe and healthy; the high seas can turn deadly in a heartbeat. “Four hours off San Diego a piece of insulation in the engine room just got hot and caught fire,” says a current crewmember. “We’re pretty well trained so we went into emergency mode. The thought of having to abandon ship in the middle of the night is terrifying.” The fire was extinguished so quickly that this article could well be the first time the guests or owner learned how closely they came to abandoning ship. That is, if they ever figure out that they were onboard.

Today’s bespoke yachts have expansive, luxurious areas for guests, and hidden corridors where the crew moves in and out, show up from seemingly nowhere to provide proper service, then disappear back into the corridor. “It’s unprecedented,” a guest told me. “The service is unlike anything on earth. There’s a higher crew-to-guest ratio than any hotel or house or whatever. The standard of professionalism is excellent. There’s no service closer in a five-star hotel. It’s really seven stars.”

Like brokers and builders, the crew has it beaten into their brains that silence is golden, loose lips sink ships, and other clichés about keeping one’s mouth shut when the urge to gossip is damn near overwhelming. “Confidentiality,” says a retired crewmember, “that’s a fundamental tenet and a show of respect. We had some pretty well-known people, and some pretty outlandish things. One guest brought on a girl who was calling the chef at 3 a.m. wanting pancakes.” Of course, not only did the crewmember refuse to mention any names, including that of the yacht, but she was reluctant to tell the story. Even though she’s retired.

What’s that worth?

Flagging, AKA Registration: The large majority of yachts are flagged—registered—offshore. Most offshore registries require that the new owner establish a corporation in their jurisdiction that owns the vessel. The beneficial owner is simply the majority shareholder in the corporation. In most cases, by flagging your vessel offshore, you can avoid taxes on the value of the hull. The savings can be significant when compared with the value of the sales tax (TVA or VAT) that would have to be paid. The most popular registries: the Cayman Islands, Marshall Islands and St. Vincent, which offer protected and inexpensive services.

Phil Scott writes on lifestyle and adventure topics for Cigar Aficionado.