Fractional yacht ownership: The up and down side

Imagine embarking on your own private yacht—complete with on board hot tub, captain and chef—to spend a week in the Caribbean with friends. Together, you spend your days drinking in the gorgeous coastlines of the Bahamas, Cuba and Turks and Caicos, making frequent stops to fish for barracuda and snorkel in coral reefs full of cobalt blue chromis, bright yellow goatfish, even sea turtles. After two sun-drenched weeks, you debark in Miami and head back to your regular landlubber life—until six months later, when you meet the same boat again in the Mediterranean for another adventure. Your personal belongings are waiting for you on board and the same smiling crew waves hello. Fractional yacht ownership provides access to some of the world’s most luxurious vessels at a fraction of the purchase price, and without the hassle of ongoing maintenance. With fractional ownership, you can sail your boat a few weeks a year then forget about it while your co-owners enjoy it or while the management company is busy doing the upkeep. It’s a great alternative to a vacation property for ocean-lovers who want to dedicate a chunk of time each year to exploring the waters of the Caribbean, the U.S., the Mediterranean or Southeast Asia. Saskatchewan native and real estate developer Willard Olauson owned 25% of a 73-ft four-bedroom Sunseeker yacht between 2006 and 2011. The 76-year-old, now based in Newport, Calif., would recommend it to anyone with the budget. “It allowed me to own 25% of a $3 million boat, which was a luxury I couldn’t afford otherwise,” he says. “It’s really quite a beautiful experience to have that kind of a facility and have it managed for you as well.” Olauson routinely took the Sunseeker to California’s Catalina Island—his kids surfing the wake behind the boat—and every so often, he took it down to Cabo, Mexico, where he and his pals went fishing. Unlike a timeshare, fractional ownership means you own a deeded share in the yacht—not just access to it—and you can sell your stake at any time to a willing buyer. Or you and your co-owners can decide as a unit to sell the boat outright and split the proceeds. Olauson and his three co-owners successfully sold their boat to a buyer in Hong Kong for just shy of US$2 million. This opportunity to recover at least part of your initial investment is what fractional sales people hang their hat on. “With fractionals, every dollar you spend, at least a certain percentage of it, is recoverable,” says Kent Chamberlain, founder of yacht brokerage Chamberlain Yachts and its sister fractional management company PartnerShips.

Fractional-yacht-ownership — Courtesy of Partnership Yachts

Spending $400,000 up front typically gets you an ownership share and 70 days a year on a $2 million boat. And while you might get some money back down the road, prospective buyers are wise to consider fractional yacht ownership a leisure expense and not an investment per se. Yachts depreciate over time, so you’re likely to get 70% or less of your initial investment back if you sell your share after five years. That is, if you can sell it, of course. Finding a willing buyer is easier said than done when the global economy stumbles. During the 2008-09 financial crisis, the appetite for fractionals all but dried up. “The fractional market is strong when values are solid and buyers are plenty,” says Chamberlain. “I think we’re approaching that but I don’t think we’re there yet.” Also keep in mind that while you don’t have to personally take care of the maintenance repairs, docking fees, insurance and staffing costs, you will have to pay for those services: it will likely cost you between $30,000 and $40,000 a year, or between 10% and 15% of the purchase price. And there’s also the cost of food, drink, fuel and airfare from your home city to the ship’s harbour. “There’s always going to be a premium any time you have a third party involved,” says financial adviser Aaron Keogh. “The cost over the long term may very well be more, but the accessibility potential is there up front.” He says fractional ownership can offer good value to busy people with limited time for travel, especially when you factor in investment income potential on the money you save up front. The concept still has appeal for Olauson, who misses his fractional. He’s currently leasing a boat but he’s eyeing a stake in a 93-ft, Italian-made Benetti that charts global waters. “It’s a beautiful big boat and an unbelievable experience,” he says, adding he hopes to cross the Panama Canal off his bucket list.

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