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Wednesday, 25th September 2013

Financial Times, Tuesday, 24th September 2013 (click here for online article)

Sitting at anchor off the French Riviera resort of Beaulieu-sur-Mer, a short hop from Nice, Issana launches its tenders to pick up visitors who have flown in by private jet from Farnborough airport in southeast England. A Rolls-Royce has whisked them to the quayside.

“You have to experience one of these yachts to understand just what they have to offer,” says Chris Cecil-Wright, founder of broker Cecil-Wright & Partners, which is showing the 55-metre yacht at the Monaco Yacht Show, which begins on Wednesday.

Issana is currently moored in the Port Hercule basin, along with scores of other second-hand yachts selling at big discounts to the prices that owners were seeking just two or three years ago. Another 100 or so yachts for sale are anchored outside the port.

For superyacht brokers, 2013 is seen as a make-or-break year, and the Monaco show, the most prestigious gathering of luxury vessels, is where these hopes will be realised or dashed.

“I do think we’ve turned the corner,” says Mr Cecil-Wright. “We have been working at the bottom of the market for 24 months, but things are looking up. Quality boats are selling again. It’s all about confidence among buyers and I think that’s returning.”

Nicholas Edmiston, chairman of broker Edmiston, says that realism among sellers is a big factor.

“We are placing an emphasis on boats that owners want to sell, and we want to know that owners are serious about that. I am not interested in asking prices. I do not make money on asking prices but on selling prices.”

Educating sellers to face up to market realities has been tough, says Will Christie at yacht brokers YCO. “At the start of the downturn, many buyers stood back, looking for distress sales and rock-bottom deals while sellers often held out for unrealistic prices. The market is now seeing a coming-together on both sides of the deal.”

Sales of second-hand yachts have led to a steady stream of refit business in the past few years as some owners and buyers have chosen to remodel existing yachts rather than to have them designed and built from scratch.

Pendennis, a UK-based shipyard, has more refit work than new building projects, according to Toby Allies, its sales and marketing director. The yard has just spent £20m in three new construction halls and a wet basin. Other builders are also investing.

Azimut Yachts, part of the Azimut Benetti Group, is committing €29m over three years, shifting its production from Turkey and Piacenza to its main site in Avigliana. The move places the company’s strategy squarely within its Italian roots.

Giovanna Vitelli, a board director, says: “Azimut’s owners, workforce, designers, technical staff and production sites are all Italian. We focus on ‘Made in Italy’ because it is what our competitors cannot claim to be.”

The statement is a thinly veiled barb at its closest rival, the Chinese-owned Ferretti Group. China’s interest in European yacht brands was confirmed by last year’s takeover of Ferretti by Shandong Heavy Industry, and the more recent purchase of the UK’s Sunseeker by Dalian Wanda.

The band played “Rule Britannia” on the Sunseeker stand at Southampton Boat Show this month, and Stewart Mcintyre, its managing director, has stressed the Britishness of the company. “It may not be British-owned but it’s British-built,” he says. “The owners are very keen to promote the British brand.”

Competitor Princess Yachts plans to invest £35m developing part of the former naval dockyard in Devonport, Plymouth, that would give it the capacity to build yachts up to 60 metres. While Sunseeker and Princess are optimistic about growth, a smaller UK builder, Sealine, went into administration this year.

The leading Dutch and German yards, meanwhile, report healthy building programmes, even if – in some cases – the order books are not as strong as they were five years ago when the industry was hit by the financial downturn. Builders at the high-end of the market are working for an exclusive club.

“I always say to potential buyers: ‘Never spend more than 10 per cent of your net worth on buying your yacht.’ So if you have €100m, you can afford one at €10m,” says Mr Edmiston. “If you have more than a billion, within reason, you can do what you want.”

According to Forbes magazine, the global economy has produced just over 200 new billionaires in 2013, but only a sprinkling of these will want to buy a new superyacht. “I think the number of people crazy enough to commission one of these yachts is between 30 and 40 a year,” says Henk de Vries, chief executive of Royal de Vries, one of the two Dutch yards constructing yachts under the Feadship brand.

“We are dealing with tremendous egos. Why have a new yacht when there’s a fantastic selection among 1,000 used ones out there? But they want the ultimate boat. In the mind of one owner, he was the painter and we, the shipyard, were the paints and the canvas. That’s how he described it.”

While 2013 saw the launch of the biggest private yacht to date – Azzam, built by Germany’s Lürssen – some yards and brokers believe that the trend among motor yacht buyers in future will be towards quality and efficiency, rather than size.

The downturn hit the industry when some of the biggest yachts were under construction. Every one of the world’s 100 largest superyachts is more than 70 metres in length, and 39 of these was either built or delivered in the past five years, according to the latest Camper & Nicholsons Superyacht Index, produced in collaboration with Superyacht Times.

Heesen, the Dutch yacht-builder, has been working on new hull developments, some of which went into the building of its latest superyacht, Galactica Star. The Dutch Feadship yards, meanwhile, continue to focus on quality.

“Explaining the differences in build that distinguish the very best yachts is not always easy when confronted with a buyer who simply says: ‘I want a bigger yacht,’” says Mr Cecil-Wright.

Size does still matter for sailing yacht buyers, with a number of 100 metre-plus yachts currently being built. Still on the drawing board as Project 380 – but nearing the stage when contracts will be signed, according to the naval architect Ed Dubois – is a giant sloop that, if built, will be the largest Bermudan rig in the world. The 101-metre yacht has been designed with a 125-metre mast that would dwarf London’s Big Ben.

Equally exciting are the technological leaps in size and speed made by the 72-metre wing-sail catamarans that contested the recent America’s Cup.

While the world’s most experienced crews worry that the technologies are in danger of overtaking their efforts to tame this new generation of racing yachts, most believe that there will be no going back to monohulls. Technology pioneered from these yachts will also feed through to other forms of racing.

Despite the optimism, Monaco this week will again be a buyers’ market where potential owners can pick over some of the jewels of the world’s superyacht fleet. While brokers will lay on the VIP treatment for prospective clients, builders are showing some of their latest launches.

Stand-outs include Lürssen’s 88-metre Quattroelle, Heesen’s 65-metre Galactica Star, the 60-metre scimitar-bowed Event from Amels, Perini Navi’s 60-metre sailing yacht, Seahawk, and Palmer Johnson’s 64-metre Lady M.

Looking at these gleaming arrivals, it is hard to believe that yachting has been through the doldrums.

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