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Donkin on Sailing

March 2009 – The super yacht business

Super YachtsBuyers of luxury sailing yachts are saving millions of euros in deals just now as the market has fallen by about 25 per cent on prices expected in 2008.

The problem for sellers in what has to be one of the world’s most rarefied markets is finding those who can combine a passion for sailing with enough disposable wealth to contemplate deals that can run to Euros 20m or more.

“These yachts are in short supply so there is still a market, but the surplus of borrowed money available to buy them in the last few years has dried up and this means that sellers have had to drop their prices,” says James Troop who runs the brokerage side of Dubois, the Lymington-based yacht design, sales and charter business.

The company is handling the sale just now of Salperton III, a 145 ft long super yacht owned by Barry Houghton, a Lancashire-born entrepreneur who made his fortune in telecommunications from a company he founded with £1,500 in 1971. The company, called Rainford, was floated in 1995 and sold to Reltec, a US electronics company for £80m in 1996. The boat is named after his Cotswold estate.

“Not bad for a grammar school boy from St. Helens,” says Houghton, when I meet him at one of the season’s most impressive gatherings of super yachts, the Maxi Yacht Rolex Cup, at Porto Cervo, Sardinia.

His boat was put on the market at €22m in 2008 but the asking price was lowered to €19.75 as the market began to show signs of sagging. Houghton seems relaxed about the sale’s progress, even though he takes delivery of a slightly bigger Dubois-designed yacht at the end of next month. He plans to sail the Auckland-built 150 ft long Salperton IV in the Pacific for the time being.

Up to this year Houghton’s strategy of ordering successively grander yachts – with three to four-year design and build cycles – had paid off profitably as boats like this cannot be bought off the shelf and there had been no shortage of buyers throughout most of the 2000s.

In September he argued that the top end of the market was recession proof. “How wrong can you be?” he said recently. “I don’t think anything is recession proof and free of risk. There are a lot of bottom fishers around now and the market has gone slow for sure. Everyone is being cautious.”

He remains optimistic of a sale, however, and says that three potential buyers have expressed interest. “I think we’ll see the market picking up again come the summer,” he says. It’s difficult to know whether the optimism is justified as the luxury yacht market is in the doldrums almost everywhere, particularly in the 50ft to 60ft mid-range.

The high end luxury performance yacht, however, is a relatively new addition to the yacht market. “We think the market at the very top end is more resilient as there are still people out there who want to own these boats,” says Troop, “but it’s tough just now all the same.”

Salperton III - Super YachtSo what is it that differentiates these exclusive yachts from those in the rest of market? Ed Dubois, the designer of Salperton III and its 150 ft replacement, Salperton IV, believes it has something to do with the combination of sailing performance and styling.

On a guided tour of Salperton III, as we head out to the Rolex start line off Porto Cervo, he points to the trade-mark wrap-around saloon window that adds a raked-back sleekness to the styling. Sail racing can be one of the most spartan of sports with few home comforts in the stripped-out interior of a state-of-the-art ocean racer. But stepping through the smoked-glass automatic doors of Salperton is like wandering in to a luxury hotel suite.

A terracotta bust is standing on the shelf, and bowls of white orchids are decorating the saloon tables.  Its giant sails are hoisted at the push of a button as we cruise out of the marina, overlooked by the Yacht Club Costa Smeralda, one of the world’s most exclusive yacht havens, established in 1967 by the Aga Khan and a group of like-minded associates.

Within minutes the boat is gliding along at about 11 knots in full sail but the lean is gentle and the orchids never shift.

Back on the quayside maxi yachts are decorating the marina like pampered pedigrees, groomed for their very own beauty pageant. Alongside minimalist Wallys are timeless J-class boats – veterans of the great days of sail.

A number of J-class boats are currently in build, but will they all make it on to the water? One unhappy former owner, jailed fraudster Dennis Kozlowski, the disgraced former chief executive of Tyco Corporation, was forced to sell his J-class boat, Endeavour, at a substantial loss in 2006 – a cautionary tale for would be owners.

As Salperton slides in to its birth, we find ourselves moored alongside Hamilton II, the slightly shorter super yacht owned by Charles Dunstone, the co-founder and chief executive of Carphone Warehouse. While Dunstone takes the helm in racing, Houghton is happy to leave all the sailing to others, in this case handing the helm to Andy Green, a former British America’s Cup team helmsman.

One of Salperton’s temporary crew, a sale maker, told me that a new suite of sales for this kind of yacht could cost around €500,000 and might need replacing after three years, depending on the level of competition undertaken by the owner. What happens to the old sails, I ask? “They have no resale value. Sometimes owners have to pay to have them carted away. In Majorca the farmers use them to cover their haystacks,” he says.

In a later race on Hamilton II we have a grandstand view of Valsheda and Ranger, two of the best maintained J-class boats, sailing neck and neck, sometimes within a rope’s length of the honey-coloured rocks and islands that make Porto Cervo such a top class racing venue.

As a contrast to the modern lines of Salperton and Hamilton II, I spend one race sailing aboard, Hetairos, a classic-looking Bruce King-designed ketch that was built just 14 years ago. Its project manager, Jens Cornelsen, points to its special features such as prism windows set in the deck to shed light below where, among the more unusual fittings, is a piano and a stove.

“The people who knew how to build this boat have since retired so you’re looking at the last of its kind,” says Cornelsen.

Afterwards the owners gather at the Hotel Cala di Volpe for the traditional end-of-regatta party – all white slacks, blazers and sequinned frocks. The financial storm clouds are gathering as I take my leave. But all the owners I meet say they’ll be back.

©2006 Richard Donkin - all rights reserved