How to Buy a Yacht
from
September/October 2007
by Bonnie Azab Powell
David V. Johnson, the chairman of Victor International Corp., a luxury real estate developer headquartered in Auburn Hills, Michigan, has just arrived by private plane at the British Virgin Islands workplace where he spends half his time. As he prepares for a meeting about his company’s latest acquisition, the nearby Biras Creek Resort, he enjoys a spectacular 180-degree view painted in blues and greens: the hills of Virgin Gorda set above the glinting North Sound, a cloudless sky curtaining them both. The temperature on this blissful, breeze-caressed day is in the low 80s.
Tomorrow, if he wants, he can be gazing at a completely different piece of paradise. That’s because Johnson, 57, is sitting not in a corner office but in the sky lounge of his 130-foot motor yacht. The tri-deck
Resolute
, which he and his wife, Pamela, took delivery of in January from the Washington State shipbuilder Westport, has a master stateroom and four guest staterooms, plus accommodations for the five-person crew. There’s a fireplace in the sky lounge and LCD screens inside and out, including a 60-incher that can be viewed from the Jacuzzi.
Thanks to a phone and computer satellite hookup, “I can be connected to the world from any perfect setting,” says Johnson, who’s also on the board of governors of the Urban Land Institute, a nonprofit sustainable-land-use group. “I’ve worked hard my whole life in Michigan, and I’ve always loved the water. This just takes it to a new level.”
The business of building large luxury yachts is enjoying an unprecedented boom, with almost 800 new vessels 80 feet and larger under contract for 2007, according to the “Global Order Book” report by the megayacht magazine
ShowBoats International
. That’s a 15.3% increase in footage, which is how the industry measures these things, since last year. The biggest demand is for boats between 120 and 150 feet, say those in the industry—vessels big enough to serve as both a floating vacation home for the family and a satellite office for a busy executive or board member, but not too big for most marinas.
As with residential real estate, the Internet has made it easy to shop for boats. But buying a large yacht is much more complicated than buying a house, which means that a good broker is even more important. The Yacht Council website has a comprehensive list by area, but yacht-owning friends are the best source of recommendations.
A capable broker’s first task is to explore which boat best suits your needs. “Where do you want to go—Antarctica or the islands? What do you want to do with it—cruise privately, or also put it in the charter market? Or do you want to go sportfishing?” asks Ann M. Avery, a sailboat skipper turned Fort Lauderdale, Florida-based broker with the international brokerage Northrop & Johnson Yachts-Ships. “What’s the configuration of your family or group? How many staterooms would be ideal?”
Your answers to those questions—combined with your budget, of course—will dictate the age, size, and pedigree of the yacht you pick. Avery recommends that first-time buyers charter a boat to see if the lifestyle is really right for them, and then consider buying a previously owned vessel. “A new custom or semi-custom yacht is a serious investment, so it’s good to get a sense of what suits you before you spend top dollar,” she says. A custom boat is built to your specifications from the keel up. A semi-custom, also called a series or semi-production boat, starts with the hull and lets you design the flow of the interior, moving nonstructural bulkheads, choosing different deck layouts, selecting all the finishes and textiles, and so on.
Finding and selling you the right boat is usually just the beginning, says broker David E. Sargus Jr. of Fraser Yachts Worldwide, an international brokerage that not only represents yacht sellers and buyers but also offers a portfolio of management services. A good large-yacht broker will work with maritime attorneys, financial planners, engineers, and other experts to steer you safely through the treacherous waters of registering offshore and deciding where to flag your boat, dealing with international customs issues, financing, and identifying what repairs or remodeling might be necessary to keep or bring the vessel “in class” (up to various codes). The last helps with insurance and also enhances your boat’s resale value—no small thing, since flipping boats has become almost as hot as flipping houses.
A broker can also help you decide whether to offer the vessel for charter to offset costs and keep a crew busy, and can find and screen those crew members if you wish. Yacht brokers who advise their clients properly really earn their commissions. With used boats, 10% is generally split between the selling and listing brokers; with new, either the shipyard or the buyer pays a 5% commission, depending on the contract.
When it comes to price tags, as financier J. P. Morgan famously said upon being prodded about his yacht, “if you have to ask, you can’t afford it.” In the 21st century, the saying should be, “If you have to ask, start with a previously owned boat.” A new 2007 164-foot Westport motor yacht, for example, would set you back $34.5 million, but you could find a 2002 130-footer for $11.9 million and spend a million or two refurbishing the interior to your liking.
The standard financing package for new or used boats requires a 20% down payment and offers a term of up to 20 years. So for a little more than $1 million down, you could shove off in the $6 million, 118-foot 1995 Broward motor yacht
Arriva
, which media mogul Barry Diller has on the market. (Rumors on message boards peg Diller as the mystery owner of the stunning new 305-foot custom German sailboat Eos, a vessel that has the yachting world abuzz.) Or the same down payment could buy you a zippy 98-foot, Italian-made 2005 Azimut motor yacht or a 110-foot Palmer Johnson cruising sailboat. With $30 million to spend, the yachting world is really your oyster. Maintenance costs vary with the age and size of the boat but range from 2% to 10% of its value per year.
There’s also the matter of instant gratification. Demand being what it is at the top European shipyards, which are in Italy and Holland, you can’t take delivery of a fully custom superyacht until 2010at the earliest, according to David Sargus. A custom yacht from Trinity Yachts,the largest U.S. builder, with 18 boats currently under contract, will take almost as long. Even semi-custom boats require patience: If you place an order with the universally revered Dutch shipbuilder Feadship today, one of its $31 million F45 Vantages (about 147 feet, with a choice of four interior décors) won’t be ready until the end of 2008. However, incomplete boats—just the hulls, say—ordered by folks who then go through a change of plans or fortune occasionally become available during the construction phase. Derecktor Shipyards has completed a custom German Frers-designed 150-foot, single-masted sailboat that Dennis Kozlowski, the former (now landlocked) skipper of Tyco International, was having built for $20 million when he ran aground, and is offering it for sale. Interested? A well-connected broker will know the next move.
Whether you need a crew depends on the size of your yacht and on your preference. Two people with experience can manage a boat of up to about 80 feet by themselves, letting a management service take care of regular maintenance and the restocking of fuel and supplies. “Some owners who can afford whatever they want opt for smaller boats that they can run themselves, because they want the privacy,” says Ann Avery. “It’s not like the pilot of a private airplane, who’s just getting you from A to B. You’re living in critical quarters with each other.” The 120- to 150-foot size range is popular right now, because it falls into the sweet spot of boats that can be managed with small crews yet offer separate spaces. Over 200 feet, the crew size and maintenance costs increase much faster than the number of passengers who can be accommodated.
The Johnsons’ tale is typical of how boat owners upgrade. They started out with a 63-foot Sea Ray that David Johnson was able to operate himself. But a trip to Florida’s Ocean Reef convinced him that he should hire a captain, someone capable of navigating unfamiliar waters. His next boat, a 75-foot Sunseeker, had a captain and a steward. As his two daughters got older, 75 feet became a little cramped, prompting a move up to a 112-foot Westport. The Johnsons were so pleased with the level of customer service that they stayed with the Washington shipbuilder for their next boat, the semi-custom
Resolute
, which was built with environmentally friendly wastewater management and other top-of-the-line technology.
The five-person crew he has now, Johnson says, is “sensational,” and the layout of the new boat affords both family and crew private space. He hasn’t stopped taking the helm when he can—“and the captain’s kind enough to let me do the docking,” he says with a chuckle.
