Fractional yachts, boat timeshare, yacht share

Reprint from Yachting Matters Magazine.

All about fractional and shared yacht ownership methods

Fractional ownership is one of the most rapidly expanding areas in the luxury goods market. Dividing an expensive asset into percentage shares held by individual owners is increasingly attractive to today’s cash-rich, time-poor individuals. Many people are discovering they can have all the enjoyment of a traditional luxury lifestyle, without the chores and expense that full-time ownership entails. Fractional ownership makes this a real possibility for those who seek the lifestyle, but may not have either the time, or sufficient resources, to take full advantage of it, especially as belts are tightened in today’s harsher economic climate. The fractional owner of a property, aircraft or super-yacht owns a percentage share of that item, enjoying the privileges associated with it, whilst a management company takes care of maintenance and the other mundane, time-consuming, but unavoidable obligations which come with outright ownership. Fractional ownership provides far more freedom and usage benefits than timeshare, the fundamental difference being that with fractional ownership the purchaser owns part of the title, rather than merely having the right to reserve a segment of time. This provides the obvious advantage that if the asset appreciates in value, so do the shares or fractions within it. Fractional owners can sell whenever they deem it necessary or prudent, releasing the capital from their initial investment, but until that time comes they enjoy the benefits of owning a share of a fabulous asset without the drain on their time and nervous systems.

The practice of sharing ownership of vacation property has been around for many years, Outside the USA, non-commercial form of fractional ownership began several decades ago, when otherwise unconnected individuals formed private syndicates to purchase holiday property or boats. Those syndicates operate as small private members groups on a non-profit basis, sharing expenses and usage. Commercial fractional schemes started in the Rocky Mountain ski area of the USA in the early 1990s. Usage rights and reservation plans vary from scheme to scheme, with some deals offering fixed occupancy periods of the shared property, some offering floating periods where the occupancy times rotate throughout the year, and some offering a mixture of the two. Never before has such a broad range of goods and services been so readily available to such a large proportion of the population, but as wealth increases, the time to enjoy it may not necessarily follow, thus leading to an ever-expanding number of persons willing to share their leisure assets.

Many schemes have followed the ownership model of NetJets, started in 1986 by Richard Santulli of Goldman Sachs Leasing Corp, when he realized he could not afford to buy and run his own plane. Twenty years later shared aircraft criss-cross the skies all around the world, and NetJets, now part of Warren Buffet’s investment vehicle Berkshire Hathaway, is still in pole position in the market. Businessmen and private users alike find that they can enjoy the convenience and time-saving qualities of a private aircraft at a fraction the cost of owning one, they and the market continues to flourish. So too does the villa sharing market. In many dream vacation destinations luxury homes are shared on a weekly basis, enabling those with little time, but high ideals, to enjoy the glamour of their own place in the sun or the snow.

Latest onto this lucrative market is the fractional ownership of super-yachts. The concept was pioneered in the USA around a decade ago by Monocle yachts, who operate a ¨Yacht-o-Minium¨ concept much like a luxury condominium building, and receive a fee for their management services. Annual operating expenses are split between owners, and are kept to a minimum as a result of Monocle’s Fleet Purchasing power. Different classes of vessel are available to shareholders who can exchange their purchased weeks for time on other Monocle yachts. Monocle only operates in the USA for now however, and looks unlikely to expand into Europe any time soon, so European customers must look elsewhere for their fractional ownership opportunity.

In Europe, the fractional ownership super-yacht market has been dominated to date by the London-based company YachtPlus, whose fleet of ultra-modern yachts appeal to those seeking a different kind of yachting experience. Designed by Lord Norman Foster, best known for his eye-catching designs of the Reichstag and the new Beijing airport, YachtPlus vessels are sleek, contemporary and stylish, resembling aluminium seals streaking across the water, sunlight glinting from their floor-to-ceiling windows and glass spiral staircases. Han Verstraete, founder and CEO of YachtPlus, explains that he developed the idea from listening to his former clients at Goldman Sachs discussing how expensive their yachts were to buy and maintain, and how much hassle they generally added to their busy lives. Verstraete developed the business plan for YachtPlus based on the concept of fractional ownership, and launched the company in 2005. His business model is different from NetJets, in that with the yachts there is no common fleet. ¨This is genuine fractional ownership¨ he explains, ¨the customers are in from the start, and they finance the construction of the yachts¨. An eighth share in one of these 21st Century super-yachts will buy you five weeks on board, to be divided between the Mediterranean in summer and the Caribbean in winter. YachtPlus aims eventually to build ten yachts, and at the time of writing, three are said to be under construction, with the first due to be delivered by the end of 2008. Each 40 metre vessel in the Norman Foster ¨Signature Series¨ will be permanently staffed and serviced by a full crew, including its own captain, chef de cuisine, engineer, two waitresses and a deckhand. Ownership of one share starts at €1.850.000, and any unused weeks may be chartered out, with the owner receiving the net open market charter revenue. A week’s cruising with ten guests on board costs less than half the weekly charter rate of a yacht of the same size, and gives the owner the pleasure of feeling he is ¨at home¨ whilst on board. Verstraete claims that ¨wealthy people today do not invest only in assets but in experiences¨, and adds ¨my typical customer will have three real estate assets and perhaps also do some sharing of jets. The yacht experience is the experience people are seeking next¨. This may well be the case, and as in all business ventures, competitors are never far behind. YachtPlus may well be sitting up and taking notice of the latest concept in fractional ownership to arrive on the super-yacht market from YachtMarketing Ltd., a company under the directorship of Luuk V. van Zanten.

YachtMarketing Ltd. has gone one step further down the road of luxury super-yacht ownership, with its 2013 launch of the fabulous new Curvelle Catamaran Motor Yacht. At almost half the price for one fractional share, but with comparable guest space and lower running costs, Curvelle is a serious alternative to the YachtPlus package. Built to the highest standards of comfort and performance, Curvelle yachts are modern and sleek, whilst retaining a more traditional look, which will appeal to those who think a yacht should look like a yacht, and not like a piece of floating modern architecture. The Curvelle Fractional ownership model quaranta is 33x9 metres, with four decks, offering significant advantages over any existing competition to date. Due to the highly efficient hull design, Curvelle vessels use far less engine power and fuel than other yachts of comparable performance, and being catamarans, offer about 50% more living space to enjoy than a comparable monohull. Naval Architects Incat Crowther began in 2005 to create a design of super-catamarans that would change cruising forever. It has long been established that catamarans offer far more stability and comfort than monohulls, and Curvelle yachts are designed to maximize this advantage, appealing particularly to potential customers who might have regarded traditional yachts of similar cost as simply cramped and uncomfortable for a stay of any length. The cabins are located on the main deck level, allowing for the provision of large windows, rather than portholes, to access maximum light and views, and to position the cabins as far from the engines as possible, reducing vibration and noise, whilst increasing comfort and minimizing movement at sea.

The cabins offer an enormous advantage over those of the competition, in that all cabins on Curvelle catamarans have a flexible layout. They can be transformed quickly and easily from 6 twin rooms, to 6 double rooms, or even into three large suites, retracting the dividing walls and opening up the available living space. The two forward cabins can also be combined to create a magnificent full beam ¨stateroom¨ (almost nine metres wide), or divided to form a suite. With their light-weight fibreglass composite hulls, these yachts are lighter and faster than the competition, thereby allowing a cruising speed of about 25 knots in Curvelle, as opposed to 10 -14 knots in displacement monohulls, and reducing fuel consumption, an important financial and environmental concern in today’s fuel sensitive market. A Curvelle yacht will run about 30% more fuel efficient than a monohull of similar volume and performance. As a result range is also increased and the fuel tanks required are smaller. YachtPlus vessels cannot go transatlantic, and must be shipped across twice annually to cover the Caribbean and Mediterranean seasons, while Curvelle can motor across under her own power, cutting costs, and saving substantially on the price of transporting the monohull. These savings naturally reflect back to the fractional owners, whose annual running costs are much reduced. The interior volume of the quaranta catamaran of approximately 205 square metres in the guest areas is comparable to that of a performance monohull of about 40-42 metres. The four-deck layout ensures privacy of both owners and crew. The crew accommodation is comprised of three twin cabins on the lower deck, allowing the owners the whole upper area of the ship to themselves.

Curvelle interiors are Italian in style, and are available in a choice of high-gloss American cherry with accents of bird’s-eye maple, or other preferred woods. Owners can choose between contemporary or traditional interior designs according to their own personal taste. With multi-level dining options, a wet bar, Jacuzzi pool and spacious sundeck areas, this is a really comfortable and elegant new style of boat, combining all the elements of traditional cruising with the most modern and up-to-date style and living options.

Interestingly, Curvelle fractional ownership is remarkably cost-effective, given all the benefits described above. With all the most advanced technology and design in these yachts, it may come as a surprise to learn that the total cost of a Curvelle quaranta costs about half of a 40-42 metres performance monohull, which start at about €15m. A one seventh ownership share, providing the same five week vacation period as YachtPlus will set the owner back €1.430.000. The five weeks annual use that each one seventh share allows are split between three weeks in the Mediterranean and two weeks in the Caribbean.

Management of Curvelle yachts will be carried out by a separate company. This management company will program the maintenance, manage the crew, and schedule the transatlantic repositioning. YachtMarketing Ltd. aim to situate several of their Curvelle super-catamarans around the globe in the best yachting locations and have owners of Fractional shares exchange and enjoy new locations. Resale of fractional ownership shares is much more liquid than outright ownership, with the owner able to sell on his share whenever he so desires, as well as pass on any unused weeks to family members or friends.

Curvelle’s plan is different in being designed from the outset to get as close as possible to the flexibility and control that an individual yacht owner has, while providing financial economy by sharing all costs. The Curvelle booking system for the yachts will operate on priorities that will change twice per annum, with each cruising season being in the Mediterranean or the Caribbean; so that the owner with priority number one can choose first which weeks he or she wants, but only for that first season. Whoever has first priority in the first season will get last priority in the second season, thereby ensuring a swift rotation and fair distribution among the fractional owners. In practice this system comes very close to individual ownership, explained Luuk V. van Zanten. “In many cases individual ownership is not a 100% guarantee that the owner will get exactly the cruising weeks and locations that he or she desires. In a sole ownership situation, high maintenance costs, availability of crew, potential charter revenue necessary to offset running costs, but which eats into high season use, and so on, limit the typical sole owner to a 75%-90% probability that he or she can cruise whenever they want. The proprietary Curvelle booking system has been refined by decades of experience in other fractional ownership businesses, and provides a more than 80% probability of providing the fractional owner with the exact cruising weeks he or she hopes for.”

Clients typically include people with the budget to purchase a (VAT paid) 17 metre powerboat which can cost around €1.500.000, , this budget being more than the cost of a one seventh share of a Curvelle quaranta catamaran. So someone with a small yacht budget can now ¨own¨ a super-yacht, says Van Zanten. Clients also include those who regularly charter a +40m (LOA) motor yacht. If this person wants to charter a yacht for more than 12 days per annum, he or she will find the Curvelle fractional ownership product makes economic sense. The break-even point is actually 11 days, even taking into account cost of capital and other economic aspects.

During the next few years it looks as if the fractional ownership market is set for high growth throughout all sectors of the business. The traditional areas of fast cars, racehorses, jets and yachts will prosper, and globally recognized market leaders will emerge. Even those not looking to invest millions or even hundreds of thousands may well find themselves able to participate in the purchase of fractions of lower priced goods. Part-ownership of a Swiss cow for cheese-making purposes has even been offered, so people are beginning to grasp the benefits of fractional ownership in many different ways. Certainly the concept of fractional ownership makes economic and hassle-free sense in many walks of life. Maybe owning a share of a fabulous super-yacht is the latest way to obtain all the pleasure of ownership at much lower expense, and without the hassle.

Author: Sally Beal

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