18/09/2019
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Home > Editorials > The Ethical Yachtsman

The Ethical Yachtsman

The ability to travel in style has always been the predominant factor behind a high net worth individual’s (HNWI) decision to purchase a yacht. However, in today’s socially-aware world, it is also important that travel is conducted in a responsible and ethical way. Being presented with a large fuel bill at the end of a sailing trip would jolt the conscience of most people, particularly when the effects of ocean pollution is a hot topic in the media.

However, given the typical price-tag of a yacht, style, speed and status are still attributes that a HNWI will be looking to acquire. So, is there an option that ticks all of these boxes, while limiting damage to the environment? Enter the solar-powered yacht manufactured by Silent Yacht.

Is this a viable replacement for the standard yacht and can it be financed and valued for resale? Is it part of a trend or here to stay? In this interview with Andrew Robinson, CEO of Arc & Co., James Jaffa, lawyer at Jaffa & Co, Harry Bristow-Holmes, Yacht Broker and Founder of Bristow Holmes and Chris Nicolle, Senior Surveyor and Valuer at Ward & McKenzie Yacht Consultants we explore the financial and legal issues surrounding solar-powered yachts.

The first and obvious question that’s on everyone’s mind is: how much does a solar-powered yacht cost? And can it be financed?

Chris/ From a valuer’s perspective, a solar-powered yacht costs around 21.4 million to buy. When it comes to lending against one, a valuer would look at it on a case-by-case basis, as the concept is relatively new. Although solar-powered panels are based on technology that has been around for some time, the application to yachts is relatively recent. Green energy is evolving and as it becomes more reliable and cheaper, in the context of yacht application, it will no doubt become the ‘norm’. It is worth noting that the cost to build a solar-powered yacht is mostly attributed to the fit-out and not the solar panels.

Andrew/ From a financing perspective, there are a number of areas that we would require more detail on before approaching a lender. The biggest factor to explore would be the type of technology being used, including its reliability, as well as the maintenance timeline and cost.

The depreciation of a solar-powered yacht is also a key consideration and this would be hard to map, as they haven’t been around for all that long. Owing to the collective uncertainty, it may be that a lender would fully amortise the yacht and want the loan repaid more quickly. There are exceptions, such as when the client has other assets under management with the lender. But without private banking, the maximum LTV would be 50%. There is funding for these types of yachts, but it is looked at very closely.

The first and obvious question that’s on everyone’s mind is: how much does a solar-powered yacht cost? And can it be financed?

Chris/ From a valuer’s perspective, a solar-powered yacht costs around 21.4 million to buy. When it comes to lending against one, a valuer would look at it on a case-by-case basis, as the concept is relatively new. Although solar-powered panels are based on technology that has been around for some time, the application to yachts is relatively recent. Green energy is evolving and as it becomes more reliable and cheaper, in the context of yacht application, it will no doubt become the ‘norm’. It is worth noting that the cost to build a solar-powered yacht is mostly attributed to the fit-out and not the solar panels.

Andrew/ From a financing perspective, there are a number of areas that we would require more detail on before approaching a lender. The biggest factor to explore would be the type of technology being used, including its reliability, as well as the maintenance timeline and cost.

The depreciation of a solar-powered yacht is also a key consideration and this would be hard to map, as they haven’t been around for all that long. Owing to the collective uncertainty, it may be that a lender would fully amortise the yacht and want the loan repaid more quickly. There are exceptions, such as when the client has other assets under management with the lender. But without private banking, the maximum LTV would be 50%. There is funding for these types of yachts, but it is looked at very closely.

What is taken into consideration when valuing a yacht and how does this compare to a solar-powered model?

Chris/ We look at who is building the yacht, where it is being built, whether it is custom or part-production, the quality and finish of the yacht, usability and marketability. Green technology doesn’t really add a huge amount of value at present.

Entirely solar-powered yachts are difficult to utilise in the same way as standard yachts and this does impact the value. For instance, it couldn’t run at night and would either need to be docked by nightfall or be backed up with a generator. For a yacht owner looking to get from A to B as quickly as possible, a solar-powered yacht wouldn’t be able to tick such a box.

When it comes to the valuation of a solar-powered yacht, there isn’t a sufficient number of comparable yachts, which means it is down to the individual valuer to assess all components pertinent to marketability and usability.

How safe is it to invest in an asset that is a relatively new entrant to
the yacht market?

Andrew/ If you are looking for proven yacht heritage as the first recognised sign of a good investment, then you would go to a trusted yacht builder in a country that is known for quality yacht building. However, as solar-powered yachts are fairly niche, the heritage ‘label’ won’t be a given. Solar-powered yachts are a luxury and ethical asset but wouldn’t be considered ‘safe’ as an investor asset.

James/ For those clients whose primary concern is the environment, financial viability and preservation of value tends to be some way, or indeed a long way, down on their list of priorities. This certainly eases the complex process of yacht construction, because concerns about cost tend to take a back seat in favour of ensuring the technology works seamlessly.

While lenders may not share the same view, an owner who understands they are investing in brand-new technology will inevitably be more relaxed about resale values. Indeed, the clients I have been working with tend to view this class of yacht as an investment in the future of travel.

Chris/ I do not think it is a long-term investment if the yacht is fully solar powered. It is a luxury investment but wouldn’t be able to provide the luxury experience. Any solar-powered yacht is likely to need a back-up generator as, without it, the experience and functionality of the yacht will be negatively impacted.

A hybrid of green technology and traditional power is where I think there is investment value and a resale opportunity. The owner is able to make their experience greener, but without a huge amount of compromise. A great example of a hybrid yacht is the Savannah 83.5ft, which is a low-speed diesel, has high-speed generators and 1MW of battery. It mixes a single engine, rather than two, which cuts down considerably on costs and maintenance.

Do you think there will be a resale market for the solar-powered yachts?

Harry/ Absolutely. As a brokerage that focuses intently on the sales side, we love to see a huge variety of styles of yacht in the brokerage market. The reality is that there will always be a secondary market for superyachts. Yachts for sale with a unique selling point (USP) – from solar panels, expedition specifications or research vessels – have an incredibly tight-knit group of owners.

We encourage our clients to take the time to consider the resale value; shipyards such as Arcadia have been incredibly successful and retain a cult following, so they are relatively safe from a resale point of view. Higher demand will always maintain higher secondary market values. In contrast, Adastra from McConaghy is incredible; she is a world first and will turn heads wherever she cruises! She is likely to appeal to a very specific number of potential buyers. If resale value is a potential concern, don’t stray too far from the status quo.

Andrew/ The resale price-point will be key, and I think the period for the debt payback will be longer, so the asset would’ve depreciated more. In turn, the resale price will be lower and aimed at a smaller pool of buyers.

Chris/ A fully solar-powered yacht has limitations in terms of being able to power the luxury experience that so many yacht owners look to acquire. It has no back-up and may run into various issues relating to AC and heating, charging additional technology and so on. We always look at usability, marketability and the resale opportunities. Is a solar-powered yacht something that all yacht owners would look to own? No.

Who do you think solar-powered yachts appeal to?

Harry/ Global trends are changing in every aspect of life – from the rise in veganism to the surge in luxury electric vehicles (EV). The revolution is in full swing, with yachts, cars and even electric scooters being commonplace in capitals around the world. For EVs to have succeeded, the image of ‘green’ had to fade away. For example, the BMW i8 isn’t marketed as a ‘green’ car.

The majority of HNWIs we work with regularly use private jets and supercars. Global travel is commonplace and their primary concern is rarely the environment. This is not to say the green characteristics of a superyacht won’t appeal, but the technology needs to be subtly integrated, rather than the core USP. Being ‘green’ should not be a defining aspect of the yacht’s character, unless it is a defining aspect of the owner’s character.

James/ We are currently working with a terrific, young family who are building an entirely solar-powered yacht (albeit with a small back-up generator for emergencies). It is their first yacht and the first yacht to have appealed to them.

They have chartered yachts in the past with traditional fuel sources and the feedback was that every time the charter ended, they were dissatisfied with the pollution levels and the cost of fuel. They simply were not interested in building or buying a yacht until they discovered this offering and were more than happy to sacrifice speed in return for green credentials.

What additional developments do you think we will see in the yachting world over the next five years?

Andrew/ As it becomes a more mature industry and there are more yachts in the water, there will be more trading history, which will give lenders added comfort in lending in the asset class. This will result in more people buying pre-owned or new yachts and it will be the ‘norm’ to own a yacht. However, more yachts in the water equal more pollution and governments will then have to place a tax on yacht builders, which then prices some people out of the market. However, there will then be an increased pool of lenders to support the demand.

Harry/ Our clients are starting to venture further afield, with itineraries from Svalbard to South America! Along with the advancement in green technology, we are seeing developments with the exploring credentials of yachts. Clients are requesting higher cruising ranges, lower consumption and the ability to
remain at sea comfortably for longer periods of time.

Established shipyards such as Numarine, previously built fast-planing yachts for Riviera runs. It has recently had incredible success with its Explorer range. This trend is visible across the marketplace, with many manufacturers adjusting their sights to cater to the more adventurous owner.

Is the technology within a solar-powered yacht part of a trend or here to stay?

Chris/ The technology behind green yachting is developing every day. There is limited regulation in the industry at present, but there are emission-related guidelines and there may indeed be a push when it comes to enforcement and fines. This would require an alternative to the standard yacht and it may be that the solar-powered yacht suddenly becomes a requirement rather than an option.

In my opinion, the next step away from standard yachts and for owners who are mindful of their green footprint, is the hybrid of green energy and traditional power, with a small generator and battery banks.

James/ I do not necessarily believe fully solar, or renewable energy, powered yachts will overtake sales of yachts with traditional power sources. Much like cars, they remain in their infancy. However, just as we are seeing on the roads, they will become more commonplace and I believe they will bring a new breed of owner into the world of yachting.

 

Andrew Robinson

+44 (0) 20 3205 2121
andrew@arcandco.com

www.arcandco.com

Arc & Co. is a specialist debt advisory with offices in Mayfair, London and Oxfordshire. Our divisions allow us to provide specialist advice on real estate, marine and aviation assets.

 

 

 

 

Harry Bristow-Holmes

+44 (0) 7881 29 74 75

hary@bristow-holmes.com

bristow-holmes.com

Bristow Holmes is a yacht brokerage firm and has over 15 years ‘experience in the yachting industry. With unique affiliations and unbridled access to some of the world’s most renowned shipyards, Bristow-Holmes is the obvious choice when looking for a new or pre-owned Yacht.

 

 

 

Chris Nicholle

+44 (0) 1728 745344

info@ward-mckenzie.co.uk

ward-mckenzie.co.uk

 

The Ward & McKenzie Yacht Consultancy comprises professional and independent yacht surveyors, new build and refit project managers and legal consultants, providing a comprehensive service to the buyers and owners of large yachts, both commercial and private.

 

 

 

 

James Jaffa

44 (02) 207 846 0341

james.jaffa@jaffa-co.com

jaffa-co.com

Jaffa & Co is an expert team of lawyers focussed on superyachts and private aviation – advising a sophisticated clientele from all corners of the globe. Jaffa & Co have advised on transactions with an aggregate value of several billion Euro.