Ask a true yachtie and they will tell you: when it’s going well, life at sea simply cannot be beaten. It offers freedom, serenity, privacy, natural beauty and, of course, an unrivalled environment for creating memories with friends and family.
When it is going less well, however, things can go very badly indeed. Every person who works in the ‘white boat’ industry has horror stories of owners who have fallen out of love with their yachts and in the process, lost vast amounts of time and money.
It was with this in mind that Spear’s hosted a panel discussion at the Monaco Yacht Show last week, in which leading experts offered advice on how to avoid the pitfalls of yacht ownership and instead, lay the foundation for a long and happy relationship with the pursuit.
Don’t underestimate the cost
There are thought to be just 6,000 superyachts (luxury boats for private use that are 24m or longer) in the world. The price varies significantly from a vessel at the lower end of the spectrum up to record-breaking gigayachts, such as the 180m Azzam, which is the longest luxury yacht in the world. Built by Lürssen, Azzam is thought to be owned by the estate of Abu Dhabi ruler Mohammed bin Zayed Al Nahyan.
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The relationship between length and price is not linear however, explained yacht finance specialist Andy Blundell. The managing director at Close Brothers who was among the experts assembled to speak on the Spear’s panel at the Monaco Yacht Show. With longer, more complicated vessels, ‘it does become quite exponential sometimes,’ Blundell said.
In the middle of the superyacht range, a rule of thumb is that for a boat of around 60m, the price will be €1 million to €2 million per metre – though there is significant variation in the market. The 107m Mar is currently listed for sale at €195 million (excluding VAT) with Edmiston, while the broker is asking €82.5 million (excluding VAT) for the 85m O’Ptasia.
Another industry rule of thumb is to expect running costs to be 10 per cent of the purchase price per year, though costs for larger boats requiring more crew, or older vessels less efficient to run can be significantly higher.
The investment required to join the exclusive global club of superyacht owners, therefore, is a significant one, and not to be made lightly.
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Have a clear idea of the boat you want – and why
‘It’s very important to understand why you want to own a yacht,’ said Camper & Nicholsons broker Carmen Lau. She added that some buyers begin their journey into yacht ownership without having a clear idea of the boat they want or how they will use it. It’s not uncommon for a prospective owner to decide on a particular brand or shipyard, or even style of boat, simply because it’s the same as one owned by a friend.
There are many important considerations to take onboard, including whether the boat will primarily be used for family or as somewhere to invite business contacts, where in the world it will spend most of its time and crucially, whether and how often it may be chartered. All these factors should influence the purchasing decision.
Chartering one’s yacht was a major theme of the Spear’s panel discussion at Monaco Yacht Show.
In order to be used for charter, a vessel must meet certain specifications. The panellists noted that although the income from chartering can be significant, it is heavily dependent on a range of factors.
‘It’s a big decision to expose yourself to that risk,’ said Jonathan Watson, a partner at marine law firm MFB, who explained that there is scope for disputes to arise as a result of making one’s yacht available for charter.
‘I also see how unpredictable charter income can be,’ Watson added. ‘It just needs a technical fault and suddenly you can’t charter. Or your captain suddenly gets poached by another boat and you have to cancel the charter. You may even have to pay damages to charter guests.’
The panellists agreed that chartering a boat for eight weeks would count as ‘a good season’, taking into account fluctuating demand and the fact that a break is required between charters, meaning that booking different guests for consecutive weeks, back-to-back, is usually not possible.
Get the right advice
When new entrants to the market make expensive mistakes it is often a result of getting insufficient or poor quality advice.
A new owner should typically seek the advice of several specialists, including: a broker; a representative of a shipyard (if the boat is brand new); a refitter (if the boat is pre-owned and set to undergo a refit); a financier or lender; a lawyer; a management company or owner’s representative; and, of course, a captain.
‘It might seem expensive at the time,’ said Blundell, ‘but it will save you a fortune in the long run.’
Be strategic about structuring and your choice of flag state
There are various options when it comes to structuring the ownership of one’s yacht.
Most owners opt to own a yacht through a company or some other structure. But the location of the company will have implications for taxes and crucially, for privacy. ‘For some people, confidentiality [is important],’ said Watson. ‘It may be an issue in some jurisdictions. If you set up your company [in certain jurisdictions] it’s very easy to find out who owns that company and the beneficial ownership details. In other jurisdictions, that’s not the case.’
Where the boat itself is registered – its flag state – is also important. There is no need for the company that owns the vessel to be located in the same jurisdiction in which the yacht is registered. But certain administrative requirements are less onerous in particular locations, especially in jurisdictions that are already popular among owners, such as Malta and the Cayman Islands.
Blundell said: ‘If the client is planning to finance their yachts, the choice of jurisdiction and flag can either help or hinder. All the banks have certain internal criteria and [the industry is] generally quite conservative. To use the Marshall Islands as an example, we’re very happy financing a yacht with the Marshall Islands flag, but if the company [that owned the boat] was registered there, we wouldn’t [finance it].’
Treat the crew well
So many considerations that go into purchasing, owning, managing and running a yacht that, sometimes, the panellists agreed, the importance of less tangible things can be overlooked.
One of these is the relationship that the owner and their family has with their captain and crew.
‘When I talk to captains who are longserving and enjoy their jobs, they often talk about their owner or “the boss” in reverential terms.’ said Watson. ‘It can be a great relationship.’
Watson added that some people believe that a degree of distance between owner and crew can be healthy. But, at the same time, he added, ‘you need to treat [crew] well. Pay and conditions are very important and you should not treat them as your “subjects”.’
Carmen Lau of Camper & Nicholsons summarised succinctly: ‘Happy crew, happy boat, happy owner.’
The Spear’s panel discussion at the Monaco Yacht Show was followed by a private reception in the evening, hosted jointly by Spear’s and its sister title, Elite Traveler, in partnership with Le Provençal, the super-prime redevelopment of the historic Art Deco Hotel Le Provençal.
The reception took place aboard a brand new 55m superyacht Agnetha, from leading Dutch shipyard Heesen, which was moored at the Port de Cap d’Ail.
The latest member of Heesen’s 55-metre steel series, Agnetha can accommodate up to 12 guests, with highlights including an 86sqm owner’s suite with a private veranda, office space and walk-in-wardrobe.
In the days following the show, it was announced that the boat had found a buyer.
With thanks to Spear’s partners: The Monaco Yacht Show, Le Provençal, Heesen and Impossible Drinks.
