If this were a usual period, your search for the perfect boat may look something like this: Plenty of research reading articles, looking at websites, brokerage sites, visiting boat shows, chatting with like-minded owners, builders, brokers, bankers. Then you’d probably get on board get out on a sea trial or two, get a survey done and finally, sign that contract and enjoy a glass of bubbly.
This is by no means a business-as-usual period, but in spite of social distancing, yard closures and a seesaw stock market, which has shaken the confidence of seasoned investors, there are still many steps you can take toward the purchase of a boat, including closing on a transaction.
While brokers report a notable decline in activity, it is not like nothing is happening. In fact, a lot is happening, including a lot of innovation and workarounds that allow transactions to go on. Westport Yachts, for instance, recently closed on a Westport 130 and a new 50m yacht within a few days. “The client on the Westport 130 knew the boat,” explains Ron Nugent, global marketing director, and the buyer of the new 50 metre based his decision on his previous knowledge of the successful series – he bought hull 15. While each yacht is different, the concept, technology and level of finish are known entities. “The boat was finished in March and he is making a few changes to the interior.” The process in both cases started a few weeks ago and went on as scheduled, without a hitch.
Fraser was having a banner year until early April and while things have slowed down, brokers are doing more than fielding enquiries. “We have sold two yachts during this lockdown period, one just two weeks ago: a 41 metre motor yacht in an in-house deal, which was possible due to the hard work and commitment of the brokers and the new buyer,” says Raphael Sauleau, CEO of Fraser.
The interest is there, and it seems more people have time to look around. On the smaller end of the market, a site like Grow Boating, which promotes the boating lifestyle to newcomers, saw a 30 percent increase in traffic in March from last year. The same is true for the yacht market.
“In general, clients that were keen to buy are still keen to buy. This crisis has given them unexpected time with their families, and it’s made a lot of us realise that family and friends are ultimately what life is all about,” Sauleau says.
Overall, if things are slower and more difficult, where there is a will there is a way. In spite of social distancing mandates, in areas where there is a concentration of inventory and the access to marinas is not forbidden, brokers report that visits are taking place. “There have been discussions between buyer, seller, captain and crew; buyers have come with masks and gloves and captains have followed six feet behind,” says Andrew leBuhn, a broker with Camper & Nicholson.
And where in-person visits are difficult, videos can come to the rescue and the yachting industry has awoken to the possibilities of virtual and digital platforms seemingly overnight.
“We are going to see a lot more social media, videos, online walkthroughs, it’s really going to fast track a new way of marketing, which is more internet-based in real-time,” says Thom Conboy, managing director of Ocean Independence and Heesen Yachts' representative in the US.
And in some cases, virtual experiences may to lead to new contracts and are becoming acceptable tool in closings.
“We are currently doing what might be called a virtual sea-trial in Australia. By this, the seller is producing a video of the entire trial. The buyer will determine if it is sufficient. In this case, the seller wants to sell, and the buyer wants to buy so the parties are working hard to build a nice audio/video record of the yacht. We’ll have to see how that goes,” says Michael Moore, founding partner of Moore & Company, who says his firm has been “surprisingly” busy in the past few weeks.
Horizon Yachts is one of many companies using virtual tours these days as tools to help buyers get a better feel for their boats. In light of recent events, they’ve been promoting to their clients the possibility to conduct live video tours from the comforts of their home.
“We believed we needed a more personal approach, so we invited buyers to set their own time for a real-time virtual viewing,” says Roger Sowerbutts of Horizon Yacht USA. “We set up a time for one of our team to be on board the vessel of choice, then the buyer can guide the tour using FaceTime, Skype or whatever their choice of coms is, and they can say, ‘show me the storage in the galley’ and the team member can open cabinets, pantries, etc. We can now also do this with our global team with an inventory vessel that may be in Australia or Europe.”
Although a bit of an anomaly, it is not unheard of for clients to buy boats without actually touring them in person. “The key question will be is whether the buyer is prepared to put his trust in his team, broker, surveyor and captain,” says Will Bishop, a new construction and sales broker with YPI. More tools are available than ever before to conduct research, although as LeBuhn points out, nothing replaces the experience of touch, feel and smell, especially on a boat with a few miles under the keel.
Some real obstacles, such as restrictions on international travel, can hinder the progress of the transaction for boats outside of the buyer’s immediate area. “I have a boat in St. Lucia that the client has already seen but I can’t get a surveyor there,” says John de Caro, CEO of All Ocean Yachts.
Potentially a sale could happen without a survey. Legally, at least, there is nothing to prevent it. “In the past I have done contracts where there has been no survey,” says Jon Leonida, a partner with Clyde & Co specialized in marine transitional work. “It is not an uncommon method of buying a ship and that often happens if you are a commercial operator and you charter the vessel and you know the vessel well,” he says. And a clause can be added specifying a future date for a survey or sea trial to happen. “What has proven difficult is getting the stamps, certificates and original documents,” says Leonida.
Buying a boat without having a chance to personally see it is risky, says Moore whose firm is handling a couple of litigations resulting from fraudulent misrepresentations. However, he says, “There is a lot a prospective buyer can do to take a lot of risk off the table. For example, all vessel documents, including those issued by third parties as well as the vessel’s own records such as the logs, can be examined. A buyer would want to see if the documents are current and all ship’s inspection certificates, etc. are up to date and to confirm that the vessel is fully and properly insured.” And the credibility of the seller must be established. “Is the seller willing to produce a document from a third party, such as an insurance broker, confirming there have been no claims in the previous 36 months. In these times it is critical to obtain a personal warranty from the seller certifying that all representations and warranties made are backed up by the personal warranty.”
In terms of prices, brokers seem to agree that the current crisis has not had the drastic effect on pricing that the great recession of 2008 had. “2020 started with some great deals on the market; given the current situation, we expect to see this trend continue with some very competitive offers in the months to come. Right now, there seem to be more buyers than ever looking for deals. People are getting tired and ready to go yachting,” says IYC broker Kevin Bonnie. “I don’t really expect it to be a huge discount through the whole marketplace,” de Caro concurs.
This is due in part to expectations that it won’t take long for a rebound. “We expect sales to start to re-boot towards the end of the third quarter onwards,” Seaulau says.
While it is coping and finding workarounds, the yachting industry expects that when restrictions ease in more regions of the world, passionate boaters will find their way back to the water. Until then, there are plenty of ways to enjoy your favourite pastime virtually and numerous tools, as well as brokers at the ready, to answer your questions. This is the perfect time for the research phase. Starting here.
Images courtesy of Jeff Brown