As Economy Slips, Yacht Sales Skyrocket

Feb. 21, 2008 — -- Forget all the talk about mortgage foreclosures and a looming recession. Instead, close your eyes and imaging yourself on a boat sailing the Caribbean. Not just any boat, but a megayacht that is two to three times the size of your house.

On board is every luxury you could ever imagine. You can lounge in a Jacuzzi on the top deck while you or your crew barbecue. Prefer something less casual? No problem, a deck or two down is your formal dinning room with a table that seats 12.

Your master suite is large enough to accommodate a king-size bed, walk-in closet and of course your own private bathroom with another Jacuzzi. Fine marble and woodworking adorn every corner of the yacht.

Ready to buy? It will cost you $30 million and up. And don't expect to get your yacht any time soon; there is such demand today for these over-the-top boats that it could take four years before you ever set sail.

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That's right, while the U.S. economy slows — if not enters a recession — the demand for these toys for the ultrarich has never been stronger. Several luxury shipyards have seen sales double in the last five years. The rich are not just buying more yachts, but larger and larger ones.

"It's not that significant to them whether we're in recession or not, because they're so wealthy," said Tork Buckley, editor of The Yacht Report, a trade magazine based in London. "The business appears to be recession proof."

Fueling this boom is the emergence of a new class of superwealthy in Eastern Europe, Russia, the Middle East and elsewhere. And like those before them, these new-money billionaires want all the trappings to prove their wealth.

A 151-foot yacht built by American shipbuilder Northern Marine.

"It's a must-have accessory, not much different from a watch or a villa or a Ferrari," Buckley said. "You have to have a yacht."

So you think you want a yacht?

Well, get in line. If you order a superyacht today from one of the top builders, you won't actually get delivery until 2012, Buckley said. It takes about two years to build one and there is a two-year backlog at the shipyards because demand is so high.

This delay is helping some builders outside the traditional shipyards of Holland, Germany and Italy.

American boat builders are seeing new business and countries such as China, which have little experience in yacht building, are starting to enter the market.

A weak dollar is also benefiting American shipbuilders.

U.S. Shipbuilders Benefit

Joe Foggia, president of Christensen Yachts in Vancouver, Wash., said that 10 years ago, his company was highly dependent on American buyers.

"If a recession hit, we would be hurt," Foggia said. "Nowadays, it doesn't seem to be that way."

Christensen builds six to seven 160-foot yachts at a time in its Vancouver facility. It takes the company about 28 months to build each yacht but because of a surge in orders, the quickest somebody who buys one today can get delivery is in three years. Christensen also has another shipyard in Knoxville, Tenn., designed to build even larger yachts — up to 225 feet in length.

To put that in perspective, the Statue of Liberty is 151 feet tall from her toes to torch.

Basically, these are big boats.

The kitchen in one of Christensen's yachts.

Christensen is selling its 160-foot yachts currently for $36 million. For that price, you get an astonishing 6,500 square feet of interior living space and 3,500 square of feet exterior space. The yacht has six staterooms. All can fit either a king bed or two twin beds and each has a private bathroom.

There is a full kitchen, living room, dinning room and plenty of deck space. The yacht can sleep 12 comfortably plus the crew of 10, which has its own quarters and lounge area.

The yacht has a total of 15 bathrooms and to get from one level to another it comes with an elevator.

A Good Investment

The long waits for a new yacht mean that these boats resell years later for more than the original price.

"We have yachts out there right now that left the yard 10 years ago for $10 million and they'll get somewhere around $19 million for them now," Foggia said.

And if you decide not to spend every week on the yacht, you can always charter it out to pay the bills. Foggia said that one of his company's yachts can rent for $370,000 a week in the Mediterranean during the summer or $250,000 a week in the Caribbean during winter. That fee doesn't include fuel, food, dock fees or a tip for your crew.

Christensen just signed its 13th repeat buyer.

John Rosatti is one of them. He already owns a 157-foot yacht that he bought from Christensen in 2005. He recently ordered a 160-foot yacht that will be ready in 2010 at which point he will sell his existing yacht, the Nice N Easy.

"It's like a hotel on the water. You have your own chef, your own crew and you just go anywhere you want," said Rosatti, who once owned 22 car dealerships in Florida and the Northeast and is now semiretired.

In the summer Rosatti took his family to Europe, stopping by a Formula One race in Monte Carlo, the Cannes Film Festival, Croatia and the Greek islands. In the winter, when his kids are on break, he takes them from the family's home in Florida to the Caribbean on the yacht.

"For me it's a hobby and it's my passion," Rosatti said. "I love boating and being out on water."

Another shipbuilder seeing a surge in business is Northern Marine in Anacortes, Wash.

"Traditionally for us, it has been people in North America, but now we're seeing a lot of demand come over from Europeans, people from the Middle East," said David Mahalko, vice president of sales and marketing. "Probably more so now because of the currency."

The company even offers two versions of its Web site: one in English and one in Russian.

The company's 151-foot yachts — which cost $30 million — come fully loaded.

A buyer gets sofas, tables, tender boats, pillows, sheets, knives and forks. The yacht will even come with a certain amount of artwork.

The Bigger, the Better

"Five years ago, a 130-foot boat would be in the Top 100 largest yachts in the world," Mahalko said.

"Nowadays I don't think you are even in the Top 100 unless you are over 200 feet," he said.

Consider this: In 2003, there were just 10 yachts that were 250 feet long or bigger, according to ShowBoats International, a trade publication.

Last year, 18 such boats were built and 23 are expected this year.

"The Superyacht century truly has arrived," ShowBoats said.

The bedroom in one of Northern Marine's yachts.

One of the boldest and biggest of this new class of yachts is the Maltese Falcon, a 288-foot clipper ship that Buckley, of The Yacht Report, calls "the most exciting yacht of the century."

What sets the Maltese Falcon apart from others is its sails. While most yachts have triangular sails, the Maltese Falcon has rectangular sails in the fashion of the old clipper ships like the Cutty Sark.

But there is nothing old about this ship. It has every modern convenience. The yacht's interior was even designed with the art collection of its owner, Tom Perkins, in mind, said Buckley.

"It's a man's yacht," he said. "It's a very much a man's yacht."

When the Maltese Falcon comes into a port, "everybody stands and looks," Buckley said. "Everywhere it went, there was just a continuous spectator fleet. Anyone who is afloat is just bobbing along looking at this spectacular thing."

Buckley was so taken back by the yacht that his magazine has published a 240-page book filled with photos of the boat. So those aspiring to own a yacht but can't afford it can spend roughly $100 to look at the Maltese Falcon. (The book is available at http://www.superyachtart.com/mfb/ )

But everything is not perfect for the owner of today's megayacht. For one, Buckley said, while shipyards have been ramping up operations to meet the explosive growth, there has not been a similar growth in good crews. Many owners are having trouble finding the people to man their ship.

Then there is the issue of where to put the yachts when in port. Buckley said that the popular ports in Monaco, Saint Tropez and Corsica simply don't have room for these ever-larger yachts. They could be anchored offshore and the owners could get to town on smaller tender boats. But Buckley points out that if you own one of these yachts, "you want to be seen."