Thursday, 6th April 2017
Being a three-dimensional object, it is volume, rather than length, that defines a yacht’s size. Hence we refer to a yacht’s value using its price per Gross Tonne or “GT”. We utilise this measurement as estate agents, and property developers may do price per square metre or square foot.
So what price should we expect to pay per GT? The cost of building a superyacht in excess of 500GT today may vary from anywhere around €30,000 per GT to over double that figure. This begs the question: why would anyone entertain paying more than double for the same size of a yacht?
‘Quality’ is too simplistic an answer. One would expect something nearing perfection from shipyards at the highest price point in the market. However, the more value- focused shipyards are constantly striving to enhance their build processes and improve on quality and finish, often using the same suppliers of engines, generators, exhaust systems, air conditioning, water treatment, coating systems and so on. By combining familiar design formulae, standardising build processes and appropriately specifying materials, build costs may be controlled while still maintaining the demanding standards of quality and finish required by both clients and industry. Benetti’s standardised engine room layout being a classic example. Therefore, an owner with a good build team, including a skilled designer and an experienced project manager should be able to build an attractive, well finished and solidly engineered yacht at the more ‘reasonable’ price points.
So where is the additional value at the top end? Many would argue that it’s in the detail. Just close a beautifully finished cabin door on a yacht from a high-end shipyard and feel it hung to the nest tolerance with its impeccably flush hinges and perfectly aligned screws. Note all the chequer plate lining up in a breathtakingly presented engine room or take care to inspect the flawlessly laid teak. At the highest level, clients expect this to represent a build philosophy that extends from their yacht’s over-engineered construction to its meticulously detailed finish. It is this no-compromise approach that delivers the ultimate feeling of owner confidence and satisfies those with a true passion for craftsmanship.
Another justification for higher- end build costs is freedom of expression for both owner and designer - the ability to push boundaries of technology, design and materials in order to achieve something truly special. As in the automotive industry, in which budget and competition drive innovation that trickles down from cars like the Mercedes S-Class to an average family saloon, so do the leading shipyards drive innovation in the yacht sector. One of the many areas we could look at to highlight this is the recent use of glass. The Feadship VENUS, for example, features an entire deck surrounded by toughened glass (the three 10x3 metre panels each side). The award-winning Feadship SAVANNAH, with its stunning semi- submerged “Nemo Lounge” or HAMPSHIRE II, again by Feadship, which entices its guests to “ oat” through its engine room via a spectacular glass conduit.
Asked about the inclusion of a breathtaking underwater observation lounge into a recent launch, Pataq Fadi of Nobiskrug Shipyard explained to me the staggering amount of structural analysis and calculation required to satisfy the safety authorities, before they were able to even commence the groundbreaking lamination and fabrication process of the glass structure and integrate it into the build. “Regulatory bodies are slow at implementing changes because their regulations are based on traditional and well-proven methods and experience. These are the guidance for standardized platforms. Innovative shipyards push the boundaries further!” All these examples exceed previously conceived limits of technology and application, above and below the waterline as well as interior spaces. Stepping aboard any of the yachts built on Lurssen’s 85m “platform” in recent years (Kismet, Solandge, Phoenix II, to name but 3) provides a perfect illustration of this marriage of technology and craftsmanship. All bear totally unique interiors and exteriors while being exquisitely finished throughout.
But let us drag ourselves away from pondering the magic possible for those lucky enough to build at one of the world’s nest shipyards, and take a cooler, more commercial view. Which price point is the smarter investment? Our broad view is that buying at a higher cost per GT is a better investment, and here are two reasons why:
Resale. The highest quality brands sell themselves. Not only do they retain better value, but they generally attract and retain the best crew, enhancing the overall desirability and condition of the yacht. Bas Nederpelt from Feadship has said: “Resale values of our recent yachts are historically higher than any other brand. There is always demand for a pre-owned Feadship.” Having sold two of the three largest Feadships last year, we agree with Bas!
The flight to quality. Looking at the Russian 80m+ market alone from 2011 to 2015, the 2016 Superyacht Intelligence Annual Report tells us that 35% chose to build at Lürssen, 15% at both Feadship and Blohm + Voss and 10% at both Oceanco and Fincantieri. Those that can afford to build in the upper echelons, do. it’s also worth considering the pricing of those builds further downstream when they come to the brokerage market. At CWP we deem it essential not to overvalue: it’s detrimental to owners’ objectives and the market as a whole. We believe value should never be based on a “ finger in the air” or “gut feel” judgement. Pricing by length must be disregarded in favour of GT. Then age, specification, condition and build pedigree all factored in. Naturally, we look at all comparables from the same shipyard, but we also take into account how that shipyard prices and approaches its contracts and what was additional to that contract price (design fees, for example). Were significant changes made to the design during the build process resulting in change order penalties? Most buyers would not wish to pay for additional costs associated with an owner’s change of heart in respect of the original design or specification while in build as they do not normally add tangible value.
We remain adamant that a logical, measurable understanding of value by all parties at the outset is essential to efficiently achieve our client’s objectives. This is borne out by looking at CWP’s recent sales successes which reveal a pattern of faster turnaround from listing to sale while achieving closer to asking prices than many larger competitors.