Edition 2 - The family issue
Yachting has rocketed in popularity in response to the pandemic, as high net worth individuals (HNWIs) look for holiday and lifestyle options that offer both freedom and safety.
The freedom to travel anywhere, the lack of crowds and the comfort of a luxury yacht: it’s not hard to see why demand for yachts has soared since the pandemic began.
Ashley Spencer Hurrell, Founder of Spencer Buley Group & NZE Energy, says: “If you want to get away from Covid, what’s better than being on a private yacht?”
The freedom to roam has always been a significant part of the appeal of yachting, but as borders closed at the beginning of the pandemic and travel restrictions remain unpredictable, its attraction has grown further.
Richard Lambert, Head of Sales at Burgess, says the ability to remain in control has boosted interest in ownership: “It’s a very safe environment − we’ve seen an increase of people who were previously chartering yachts decide to move into ownership.”
But while the attractions are obvious, yachting isn’t quite as easy as setting sail and dropping anchor. Most countries closed ports at some point during the pandemic and space at the most popular destinations is often limited. Plus, quarantine rules still may apply.
However, Lambert points out: “People are subject to the same restrictions but you can quarantine on board. And there is always pressure on certain ports at the height of the season but you can always anchor easily. There’s usually a way around things.”
For those new to yachting, both Lambert and Spencer Hurrell advise trying it first. “Chartering is a good way in, to get to know what type of boats you like,” says Lambert.
Once potential owners have a few trips under their belt, they often look to buying a second-hand yacht before embarking on the process of designing a new build.
“We’re looking at a lot of expedition yachts – great escape, go everywhere vehicles. Another big one for us is sustainable and green yachts.”
While many yacht buyers will have a family office looking after their assets, working with a brokerage firm is an option for buyers exploring the market. Lambert says: “A good broker will know the market and can guide from a pricing standpoint. If it’s second hand, they’ll also have a good knowledge of the history of the yacht.” To complete a purchase, legal advice should be sought, and a surveyor instructed. Lambert explains: “A super yacht is a complex asset with perhaps 10 or 20 crew – it’s a small business. There’s a lot going on and you need to make sure the transition is smooth and handled correctly.”
Sarah Allan, a Partner specialising in yachting and shipping law at Penningtons Manches Cooper, says: “Given the international dimension, specialist maritime legal advice is essential whether you are considering chartering, buying or building. We often work closely with family offices, yacht brokers and managers to provide the tailored advice that they need.” Considerations include where the yacht is registered, its ownership structure and whether it is built and maintained to class regulations. Depending on how the yacht is used, tax advice will be necessary on whether and when tax becomes due and payable.
Equally, the right captain and crew is important. A yacht manager will manage operation and maintenance, not only ensuring regulatory compliance, but also maintaining the value of the asset. Yacht managers can also give an indication of the likely annual running costs of a yacht, which a purchaser will want to have in mind for financial planning.
Allan explains: “Inevitably the larger the yacht, or the more complex and ground-breaking the design, the greater the need to engage a wider team of experts.” However, only the buyer can know what they want out of their yachting experience, and this often evolves as they become more experienced. Asking other peers or professionals in the industry can be a good way to pick up information. Whilst there are undeniable logistical hurdles in owning a superyacht, many HNWIs looking for privacy and safety while also enjoying a sense of adventure see these as worth overcoming.
Spencer Hurrell says that “knowledge, experience and trust really come into play” for new build projects. Career-focused individuals may not have spent much time on yachts or have the time to work on a concept. For many others, however, the build and design phase is the most enjoyable part.
For those who do build, a clear idea is needed at the outset of how and where you are going to use the yacht. Lambert says some people “rush in and then, for example, say at the end of a build that they want to explore the ice fields”, which will be impossible if the yacht does not comply with Ice Class. Equally, if you want to charter to earn income, the yacht must comply with commercial regulations based on where the yacht is registered and operates.
The planning, design and build process is time consuming: the lead time for new build yachts is currently around four years, although this can be shorter for semi-custom boats where the hull is built and then fitted out to a desired specification. There is increasing pressure on available build slots where people have, as a result of the pandemic, brought forward their plans.
Spencer Hurrell notes an increasing desire to build yachts that are environmentally friendly. “We’re looking at a lot of expedition yachts – great escape, go everywhere vehicles. Another big one for us is looking at sustainable and green yachts. The technology is there to make even motor yachts carbon neutral.” Some owners are building expedition yachts, not only for personal use, but to be used for scientific charter and environmental research.
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