Superyacht buying, selling the ability to negotiate at the highest levels.
In small boat circles, there are dozens of jokes surrounding the ownership of a yacht. One suggests that it is akin to standing under a cold shower shredding banknotes and watching them disappear down the drain. Another suggests that there are only two days of happiness when it comes to boat ownership; the first is the day you hand over the money to buy your yacht, the second is the day you sell her.
Owners of superyachts want the peace of mind that comes with knowing that their investment is being both run safely and efficiently. With more legislation than ever before now applying to yachts, it is essential for owners to surround themselves with those people who have the industry expertise needed to ensure that owning a superyacht remains a pleasure.
The easiest way to upset a yacht broker is to suggest that there is very little about selling superyachts that a real estate or property broker could not work out in less than ten minutes. Whilst the two often do involve large sums of money and the word commission is involved, the truth is that very little else is the same.
Buying or selling a yacht is best done through a brokerage house that is a qualified member of the Yacht Council; that is to say any broker employed should be a member of either MYBA, FYBA or CYB.
When choosing to sell a superyacht most brokers would agree that from the superyacht owners' point of view it is far better to select a single central broker rather than enter into what is referred to as an open agreement. Central agents are more likely to aggressively market the boat and actively promote its sale when they know that it is their responsibility to do so. It is the central agent who, after the sale, divides the commission, splitting it 60% to the selling broker and keeping 40% himself.
As a rule of thumb, owners enter into a one-year agreement with the broker and there is generally a 90-day cancellation clause. Brokers generally bear the brunt of most advertising expenses, but sometimes, when there is a large campaign, the owner is asked to pay towards it, with his contribution subsequently deducted from any commission paid after the sale.
Almost every sale is contingent on two things: a sea trial and then the surveys, which can include dedicated engine surveyors, along with those which look into generators, electronics and even acoustics. Before any sale reaches this point however, hours of negotiation will have taken place and all of it conducted by brokers representing their own party. It is here that experience gained by a broker shows and he begins to earn his fee. It is his knowledge of not only the yacht, but of the yard that built her and the crew that have maintained her, that is so important when the pre-sale negotiation takes place.
A good broker knows what a surveyor is going to find, long before the sixty-page survey report thumps onto the buyer’s desk and puts him off the deal forever. A good broker will have sold this type of yacht before, will know the problems and will manage the expectations of the vendors and purchasers. It is the broker who, having helped agree the offer price, will then draw up the memorandums of sale agreement, which are seldom ever the same from one boat to the next.
Learn to play it right
Fabio Ermetto is the chairman of Fraser Yachts and he believes that to be successful, brokers need expertise and inside knowledge, combined with access to marketing expertise and an extensive database. He says, “For several years the brokerage market has been improving for us and this has been gaining momentum in recent months where we have experienced a more active market with many buyers both for brokerage yachts and new builds. There has been a substantial rise in the number of yachts sold, leading to another great year for Fraser Yachts, which has secured by far the largest share of the superyacht market once again.”
The actual sale commitment begins only when the buyer pays 10% deposit of the negotiated price to the selling broker who holds this sum on account. The sea trial comes first and here it is the seller who bears the cost. If the buyer decides he does not like the boat because she rolls too much or behaves badly in a seaway then he writes a rejection note and gets his money back. If not rejected the sale moves on to the survey.
If the survey throws up nasty points and almost all do, the deal then goes to final price negotiation and here the broker acts as the middleman keeping everyone happy. It is at this point that the broker really earns his money; he has to act as the buffer between two, often headstrong parties, each fighting to get the best deal. If this negotiation is not completed within a specified time period, normally 4 to 6 weeks, the sale is off, the buyer forfeits his deposit and this money is shared between broker and owner who has, after all, had his yacht off the market for a month or so.
When the dealin’s done
Peter Brown, a sales broker with Burgess says, ‘’The large yacht market can appear as a confusing medley of messages, and it is easy for a buyer to become submerged under the huge range of vessels available. The variables of price, builder, condition, age, quality and specification all need to be rationalised and understood, and it is the broker’s job to unravel these whilst ensuring that all of the options are covered and no opportunities are missed. In a busy and rapidly moving marketplace the experience of a well informed and seasoned broker will nurture every stage of the yacht buying process for even the most well informed buyer.’’
Commission commonly paid on the sale of a large yacht is generally calculated on a sliding scale where 10% is paid on the first £10,000,000, 5% on the next £10,000,000 and 2.5% on the balance above £20,000,000.
If that has you leaping for the calculator and planning a new career as a yacht broker, it might be wise to stop for a moment to remember that brokers do have to work very hard to earn any commission at all. While it might seem very glamorous to the outsider, the truth about the job is, as is so often the case, a lot harsher in reality.
There is no doubt that the increase in the popularity of chartering and the advent of new regulations such as ISM (International Safety Management) and ISPS (International Ship and Port Safety) and as the dust begins to settle following the implementation of The Maritime Labour Convention 2006 (MLC), have played timely into the hands of the would-be hand holders and so the career path of yacht manager was formed. “At the turn of the century, ISM came as a rude awakening to many managers as the first piece of legislation which required active shore-based participation” says Adrian McCourt, managing director of Watkins Superyachts.
“With hindsight,” he continues, “This was a walk in the park compared to MLC, which was made doubly harder by a lack of understanding or uniformity in application between flag states. As a consequence, management is no longer a case of shuffling STCW certificates and processing invoices, but an essential feature of ownership and firmly in the spotlight of the discerning owner who has a right to see financial transparency, a seamless service and experienced, resourceful support to the Captain.”
At around the same time as this was happening, the MCA began to take interest in standards of yacht construction and manning, new qualifications for crew came into force and gradually as the face of yachting changed forever and adopted a more sombre and professional level, the manager's role rose to the fore.
“The choice of yacht management company is an important one for the superyacht owner as it can make the difference between a pleasurable and painful ownership experience.
says Will Dallimore, a fleet manager within the Burgess Yacht Management Department.
He suggests an owner ask himself these four questions when making his selection:
1. Does the company have a proven track record in managing yachts of a similar size and operation?
2. Do they have qualified and experienced in-house specialists on every aspect of yacht management or do they have to subcontract responsibilities to outside companies?
3. Is the company a full service provider with a truly international presence?
4. Will the management team go that extra mile to ensure maximum enjoyment and minimum headache for the owner?