All at sea, the new trends of superyacht market

Roger Horner, founder of the yacht electronics company, began to notice an unfamiliar trend in the superyacht market this past winter after a heady decade of expansion: customers were calling his Mallorca headquarters to see whether they could cancel or cut back their orders.

If the radar was broken, it had to be fixed. But owners suddenly decided they did not need that fancy new audiovisual entertainment system for their superyacht. The luxuries are being postponed or cut, says Horner.

Less than a year ago, Russian and Gulf billionaires were paying the full asking price for their new superyachts and the fittings. Shipyards had more business than they could handle and the supply of luxury vessels fell woefully short of global demand from ebullient oil magnates, entrepreneurs and hedge fund managers.

The collapse of Lehman Brothers, the US investment bank, and the global economic crisis changed all that in a matter of weeks.

Ferretti, the Italian yachtmaker, recently restructured its debt to stave off administration, while Candover, the UK private equity group, wrote off its whole investment in the company. Among France’s luxury yacht groups, Rodriguez opted for a safeguard procedure, a French legal regime that allows it to continue under normal conditions and to suspend debt repayments temporarily; and Couach sought court protection from creditors.

Prices of new and second-hand yachts and superyachts “ a super-yacht is loosely defined as a boat more than 30m or 100ft long “ fell sharply as the financial crisis deepened.

Bad news but not for everyone. As in the markets for luxury homes and private jets, the crisis has thrown up rare opportunities for anyone with plenty of cash who wants to buy or charter a superyacht.

Today, if you’ve got cash, there’s never been a better time to buy a yacht, says Jamie Edmiston, director of the London-based yacht broker of the same name. Some yachts are being priced at 30 per cent below what they were being priced at a year ago, and in some instances we expect to see prices coming off more than that.

In Palma, Jonathan Syrett of Camper & Nicholsons International, another big broker, agrees. Generally it’s been very slow, he says. I think yachting has been affected quite badly. There most certainly are bargains out there.

Savings can be substantial, whether a buyer covets a new 49ft sailing yacht built by Jeanneau of France (offered by UK yacht broker WestWays at £251,853, or £59,469 off the list price), or the second-hand luxury motor yacht Enterprise V (offered by Edmiston in January at $19.9m, reduced by $2.6m). And these are the asking prices, not necessarily the sums paid.

Nevertheless, it now looks to brokers and charterers as though the superyacht market is recovering from the low point it plumbed in the first two months of this year.

The crisis hit the wallets of almost all classes of yacht buyers, among them investment bankers and those who made their fortunes from high commodity prices. Banks, including administrators of the UK private banking arm of Iceland’s collapsed Kaupthing, further punished the yacht market by withdrawing credit lines for boat purchases.

Martin Redmayne, chairman and editor-in-chief of The Yacht Report, the superyacht bible, estimates that 6-7 per cent of buyers cancelled new orders or otherwise extricated themselves from a purchase, although others simply slowed the production process and extended their payment instalments. The banks across the whole market of yachting just pulled the plug on the financing, he says, confirming that there are deals to be had at shipyards and that there are some bottom-feeders out there eager to buy at a discount.

Redmayne, Edmiston and others say the superyacht market has not collapsed entirely, though they talk of a correction and a return to realistic prices after years in which sellers could dictate the price of yacht and buyers could fund them with an easy loan.

People are still rich, says Edmiston. So you are not going to see people giving yachts away.  I’ve never lost $2bn overnight, but if you do lose out, I’m sure it gives you a cold sweat. But once they get over the shock they go back to living a normal life.

Yet the uncertainty over the fate of the global economy “ along with public hostility towards bankers and other wealthy individuals “ is inevitably affecting the behaviour of the world’s tycoons, whether they own a yacht or plan to charter one in the Mediterranean for, say, €770,000 ($1.08m) a week this summer.

So for instance, naming one’s yacht  and the two tenders (the small boats that ferry passengers to shore) Nipple One and Nipple Two “ as Prince Jefri of Brunei once did “ now looks like an aberration of the vulgar world before the crisis. Prudence and discretion are the new watchwords. “People have told us that they have clients who want to spend money but are embarrassed to, says Horner at.

One way of avoiding too much attention is to charter instead of buy. Outside the high season months of July and August, the crisis has again reduced prices and increased availability. We are seeing people asking for discounts “ and getting them, which is very unusual, says Syrett at Camper & Nicholsons.

And then there is fractional ownership. The concept did not take off when superyacht owners were so wealthy they did not care if their expensive toy lay idle for most of the year, but it may now be coming into its own.

Mike Balfour, founder of Fitness First, one of the world’s largest health club groups, has already invested in a fractional ownership operation for villas and is now involved in YachtPlus, which is selling one-eighth shares in four strikingly original Italian-built motoryachts designed by Norman Foster, the architect. The first was launched in April.

If anybody goes out now and buys a whole boat, people are going to look at them and say: Why? You’re mad’, says Balfour, who owns a 20m yacht built by the UK’s Sunseeker. For the same price or less I’m able to have the joys of a 41m Foster superyacht. Four to five weeks a year on a boat is, frankly, enough.

John Hare, YachtPlus chairman and a former partner at Coopers & Lybrand, the accountancy firm, believes that the crisis has come at a good time for a yacht-sharing operation that will cost each part-owner less than €2m for the purchase and about €200,000 in annual running costs. Takers so far include investors from the US, the UK, Mexico and Hong Kong.

Up until recently, you wouldn’t be seen dead sharing a yacht. Now the game is: How can I cut costs?’,says Hare. You needed doom and gloom to make people start looking at things from a new angle.

Luckily for Hare, and for would-be yacht buyers, doom and gloom are “ like the yachts themselves “ still in plentiful supply.

Source : http://www.ft.com/cms/s/0/40a642f8-5ec7-11de-91ad-00144feabdc0.html?nclick_check=1

Tags: Charter, Economical Crisis

Category: Industry