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Searching for A Bargain Superyacht? Try an Auction

The ins and outs of this unique phenomenon

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An auction can be a great way to secure the yacht of your dreams.

Marin Tomas / Getty Images
An auction can be a great way to secure the yacht of your dreams.
Marin Tomas / Getty Images

When it comes to buying superyachts, most buyers go the traditional route—buying from a broker and/or directly from a well-known company with years of experience in the yachting world. But sometimes, and especially in tougher economic times, and during softer yachting markets, auctions become another way to sell boats.

In recent years, there have been some notable multimillion dollar auctions. In 2010, the 72-meter Apoise was sold for €34.75 million (US$38.8) during an auction in Grand Cayman, with the winning bid coming from a telephone call, according to boatinternational.com.

In 2014, the 60-meter Trinity superyacht Bacarella was sold at auction for more than $30 million, with 19 serious bidders in on the game. It had previously been advertised for sale for $64 million.

For now, though, thanks to the current strength of the market, they’re the exception, not the rule.

"Love [President Donald] Trump or hate Trump, we’ve really had a bump in the market," said Bruce Schattenburg, a broker in the Superyacht division of Denison Yacht Sales in Fort Lauderdale, Florida, with more than 30 years of experience in the yachting industry.

In a down market, you would likely have more auctions, with sellers eager to unload their boats even if it means getting a lower price, Mr. Schattenburg said.

"Yachts are sellable right now," he said. "If the price is right, there is a buyer for it."

Prices for superyachts usually start around $7 million or $8 million and can run into hundreds of millions of dollars for the 200-foot-plus yachts, according to Diane M. Byrne, editor of MegayachtNews.com. Yachts of equal length can have widely different prices based on which yards built them, what technology is aboard, and what kinds of luxury finishes and furnishings were used.

Superyachts are a symbol of wealth rather than an investment

Kelly Drum, the Fort Lauderdale, Florida-based co-owner of Drum Realty and onetime principal in the former Yacht Auction Group, agreed that megayacht auctions are few and far between these days.

In 2002, Mr. Drum formed Yacht Auction Group, a company that shut down officially in 2013. "We sold some boats," he said.

"We sold some groups that were fairly inexpensive (at least $100,000 to $150,000), some in the $2 million range and some in the $4 million range," Mr. Drum said. "The highest priced boat that we sold was just under $5 million." "Most of the time we sold one boat at a time."

"In boat auctions, more brokers show up," Mr. Drum said, compared to real estate auctions, where more everyday bidders come to perhaps buy a house. If the reserve price was not met at his yacht auctions, "then you go into private negotiations," he said. "You’ve got a whole bunch of people that are there, who are ready, willing and able to buy. The smart thing is to go one by one and try to put together a sale."

A sale can also happen before the auction, Mr. Drum said. "The way I look at it is that if you do your marketing properly, and you’ve got a proper reserve price, it will sell before, during or after the auction."

Plus, he said: "I would tell my sellers that the reserve price has to be so low that it hurts. ... It’s a gutsy way to sell an asset."

Part of the problem with public auctions, said Russell Crump, sales director of Yachting Partners International in Monaco, is that the owners of these big boats—defined as at least 80 feet, or about 24 meters, in length—tend to be very private about their ownership.

"People don’t like to publicize the price they paid for their yacht," Mr. Crump said.

And superyachts are not like paintings or jewelry or vintage cars, auction-worthy items that gain in value as an investment over the years, Mr. Crump said. "A yacht is not an investment per se; it’s a lifestyle choice. It is a symbol of wealth."

Mr. Schattenburg said it’s not impossible that yacht auctions will gain in popularity in the near future, either because of an economic downturn or because a smart company comes in and figures out a better way to make them more successful.

The last yacht auction that he attended was four years ago at the Miami Beach Marina, in an auction held by Mecum, the car auction powerhouse.

There were about 30 large yachts, he said, and only three or four were sold. " If they had been successful, they would be doing it again."

At boat auctions, buyers tend to be looking for a steal and sellers are looking to hold onto their bottom line, Mr. Schattenburg said. As such, these auctions can end at a sort of standstill.

Most buyers in the market for these kinds of extravagant purchases are pretty savvy about the market and what a particular boat is worth, he said.

"It’s a small world, the superyacht industry," said Adrian Seiffert, owner of Marine Auctions, a Brisbane, Australia-based company specializing in auctions of boats of all sizes. "They know their boats."

Auctions can be a good option for sellers

That said, an auction can be a good option for sellers looking to make a fast sale. "If you look at the averages from listing to sale, you’re usually looking at a year to sell," Mr. Schattenburg said.

When Mr. Drum was running yacht auctions, all of which were live with some bidders on the phone, he would usually hold the auction within 60 to 90 days of signing a contract with the seller. The winning buyer would put down 10% that day or soon after, with full payment usually due within seven days."The advantage for the seller is that it happens quickly," he said.

Several rungs below the rarified world of superyachts, Mr. Seiffert of Marine Auctions, has had a good deal of success in the boat auction business.

In the last 15 years, he said his company has sold nearly 4,000 boats, for as much as A$9 million (US$6.8 million). He also sells marina berths.

Mr. Seiffert auctions about 25 boats a month through his website, and most are in the $200,000 to $250,000 range, he said. About 5% of his sales are superyachts.

He no longer does live auctions, instead running them all as online timed auctions now. "It’s virtually the same as eBay," he said. The auctions usually last one week, and 90% of bidders wait until the last day to make their bids.

Typically, the buyer pays his commission of between 5% and 7%, and the seller pays him $500 to $700 to launch a three- to four-week marketing campaign. His database of about 750,000 email addresses help to keep down his advertising and marketing expenses.

Mr. Seiffert said that "99.9% of our sales are cash contracts," with the buyer expected to deliver a 10% deposit at the end of the auction and all of the money within seven days.

He usually has a 50% success rate on the day the auction closes, meaning that half of the boats are sold, and his rate goes up to 70% if he adds in the boats he manages to sell within two weeks after the auction.

Most sellers set a minimum bid, or reserve. If the reserve is not met, then he may talk to the seller and go back to the highest bidders to negotiate an acceptable price for the owner.

If no reserve is set, it’s called an absolute auction. No matter what, somebody new is going to own that boat at the end of the day in an absolute auction.

"Historically, both on big homes and big boats, I’ve found that an absolute auction is the way to end up with a better price," Mr. Drum said. It tends to draw more interest and bidders think they may get a great deal.

Do the necessary research for an auction

Before auction, most boats are thoroughly inspected and surveyed, and reports are available to interested parties.

"What I like about an auction is that you do all of your due diligence at the front end," Mr. Drum said, unlike traditional sales, in which the inspection process is initiated after a deal is made.

"I would tell owners to make sure people know everything there is to know about the boat" before the auction, Mr. Drum said.

Mr. Seiffert agreed. "When we go to look at a boat, we might take 200 photos and a video," which can be sent to interested parties, along with the surveys, he said.

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