Tne fourth of our quarterly reviews for 2008 updating you on the completions,new orders, sales and name changes in the superyacht market over the last three months.
Compiled by Malcolm MacLean
While everybody in the yachting industry was extremely confident back in August 2006, I mentioned various concerns in my introduction to Market Intelligence that month, including that I had seen an increasing number of new shipyards attempting to build larger yachts that they had no experience either of building or pricing. I said I was worried that some would find themselves in major financial trouble, as they had not taken into consideration the significant increases in the cost of raw materials that were exploding in 2006.
I also noted, and was astonished, at the expenditure of certain yacht brokerage companies – all chasing the same clients. Nothing was spared; no extravagance was too much. The music was on full, and as Charles Prince, the ex CEO of Citigroup, infamously declared before he was fired: “While the music is playing we will keep on dancing”.
Well, my concerns were well founded. The music has stopped and there are not enough chairs for the dancers.
Today the cost of building quality custom yachts has rocketed due to the increase in costs of raw materials and labour. Several shipyards have experienced serious financial pain with some of the yachts delivered in the past two years, and will experience even more over the next two. One major yard recently delivered a yacht for which the estimated loss was more than €80 million.
The days of the speculator, who orders three yachts at a time only to flip them like Miami Beach condominiums, are over. Banks are no longer interested in providing financing for yacht speculators, home speculators, gold speculators or diamond speculators. The current worldwide sub prime lending fiasco is far from over. With an estimated $1.2 trillion of bad loans, of which only $400 billion have been recognised to date (by US banks, the European Banks have not yet owned up to their problems), I believe it will take a significant time for the worldwide yachting market to stabilize.
So is there any good news? Well the current state of the order books for the majority of quality shipyards remains strong, with the top end of the market place remaining extremely buoyant. I believe that the US dollar has finally seen the worse and will begin a long recovery back to a level of $1 to €1.15, which is the rate that the Euro was originally introduced in 2000. Another positive is that the long-dormant US yacht buyers are coming out of their hibernation. Of the four large yacht projects that Moran Yacht & Ship has sold in 2008, three are for USA-based clients. With 20 yachts REALLY under construction, not make believe, Moran Yacht & Ship is very well placed both financially and with the staff to meet any future challenges.
At the end of the day, it is the truth that overcomes all. Smoke and mirrors and false claims are always found out.
“As for reality, below is a photograph of the magnificent 79 meter Lurssen-built TV. This yacht is a masterpiece, and is another Moran Yacht & Ship new-build reality, of which there will be many in the foreseeable future.
Robert Moran, CEO Moran Yacht & Ship.