Boats, Trains and Automobiles

Over drinks at a friend’s BBQ we were discussing some trade ideas, one of which I would like to share here as it is quite interesting.

Firstly, some context. My colleague is a boat captain for the 30m+ yachts found in Monaco / St Trop / Antibes / Cannes etc. We both live in this neck of the woods too.

The rise of the “new wealthy” (well documented in FT, Economist etc.) has been driving the rise in demand for “toys” (big boats, private jets etc.).

Some interesting facts:

1. Currently most the major boat-yards around the world that can build the decent “toy” yacht have order books full for the next 5-8 years.

2. 30-40% of the “boat metres” being build will end up on the Med in France, Spain, Italy etc. The “big” ones will be around France/Italy.

3. There is currently zero (yes zero) marina space realistically available to accommodate these new boats. Well, there is a development in Monaco extending the harbour via landfill and in France mooted between Cannes and St Maxine; but this new marina space will only be about 10-20% of the capacity required.

4. I have noticed recently several private equity firms buying into boat-yards (one just closed in Germany a week or so ago). Private equity guys are normally pretty smart so when they going into a trade there is normally a sensible basis for the trade.

5. Some of the luxury “smaller craft” firms (e.g. Crisscraft) have been “turned around” recently driven by the same demand (and big boats needing “posh tenders”)

So it looks as if there exists a “big boat” trade in the market involving boat yards, marinas etc. How can we get in on the trade (this is a non-exhaustive list of questions)?

Boat yards
– not many (near zero) of these are public quoted. Therefore we are looking at private equity. Two key questions; 1. with the current credit market issues, will the leveraged financing be available; 2. are they any boat yards on the market?

Private equity – which funds are looking at going long on boat builders and are these funds open?

Marinas – most marinas are state (or local authority) owned. Two more questions; 1. where are the likely spots for development; 2. will the governments in the Med need “PFI” type money to build?

Wealth – will the wealth “bubble” continue to grow and ensure the boat yard order books remain full? (from the current private equity deals in this sector, I guess they believe “yes”)

Why am I posting this? well, I am looking for ideas. My searching for a decent way into the trade and for more data on this sector have led to “not much”.

Answers on a post-card 🙂

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~ by Nigel on June 29, 2007.

3 Responses to “Boats, Trains and Automobiles”

  1. There’s a similar problem with Airplanes (especially post 9-11). I believe the Nevada dessert was used to “store” planes. For boats surely you just anchor them off-shore? Maybe there’s a market for very large pontoons offshore that provide power / water etc and a shuttle service to get people on-shore.

  2. Just thought – aren’t there a lot of old Oil/Gas rigs that are a *very* expensive environmental problem to get rid of? If they could be customised for the job (made to sit a lot lower to the sea etc) could these be towed into position and then rented out? May be a good oppertunity here??

  3. You are right that the mega yacht world is a great place to make money. In the US, some local governments are figuring this out and focusing new marinas or refits of old ones for the larger mega yachts rather than “regular” yachts. It seems money into the local economy is 7 fold for mega yachts (for every $ the yacht owner/crew spends on refit, maintenance, slips, etc, there seems to be a large multiplier effect).

    Having said that, it is still surprising that here in the US, boatyards (and marinas!) with prime waterfront real estate are not able to renew their leases with local port authorities but instead are having their lands changed into tourist or other “retail” use. A problem for this market…

    I am fascinated by the fact that the market for fix-up/restore classic yachts hasn’t really picked up much at all with this new wealth “trying” to go into yachting and considering there is both a lack of ability to build one’s “new” impressive yacht in quick fashion (the yards are booked!) and simultaneously the classic (i.e. wood) boat builders/restoration firms are going under or taking on piecework for the mega yachts but not actually “growing” at all. If one looks at vintage cars, planes, or even estates, we find “restore” as a whole other dimension to flaunting one’s wealth.

    Yet, this doesn’t seem to be the case in the yachting world.

    I would expect marinas specifically geared towards larger yachts (30 m +) would be a better investment than yacht construction or repair. Presently, these yachts are forced to anchor out when they visit many ports OR they find themselves in commercial port areas without sufficient amenities. Even when new builds slow down or when owners defer maintenance for economic reasons, their yachts must be berthed somewhere!

    Finally, from my experience as the owner of a 67′ (20 m) sailing yacht and experiences of other “regular” yacht owners, I believe tho corporate culture of most of the yachting world (builder, maintenance, etc) is dismal. Providing questionable quality that is often based upon looking at the owner as a very deep pocket, it seems that there are major problems. Best practices borrowed from other industries could allow new ownership at building/repair facilities to make existing businesses much more profitable (simple view seems to be that while looking at a deep pocket, businesses frequently forget to adopt efficient business practice because they are just passing cost along to the customer…its almost like the government contractor mentality…) I digress…

    Else, one can make money just setting up shop nearby and pulling customers away from the old established businesses by providing quality and service… On the west coast of the US, a good example is to look at the establishment and growth of Baja Naval which has pulled much repair and hull extension business away from Southern California in terms of the 15-40 meter size yachts. Now, they have purchased a nearby commercial boatyard allowing them to venture into much larger yachts. With a good marina to boot, they are doing quite well.

    Enough meandering thought… I’ll look forward to reading more of your thoughts on this topic in the future.

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