‘It is expensive being rich’ – Edmiston
“It is expensive being rich,” he drawled, pausing as the Edmistonism landed.
The irony neatly sums up the puzzle for superyacht owners. Buying the yacht is one thing. Getting to grips with how much it really costs is another.
“It’s expensive owning these boats. You need to go in with eyes wide open,” Jamie Edmiston, CEO of the eponymous brokerage told the audience at the British Superyacht forum. “It’s cheaper to buy some art and hang it on the wall.”
It all starts with a broker who becomes your trusted advisor and scours the world for your dream yacht, mostly on their own dime. Once the deal is done and the money banked, they expect to receive a commission fee.
“It is a substantially expensive business to run. And risky. The client doesn’t pay anything unless we perform. But ultimately, if you do a good job and you provide a good service, then you get paid,” said Edmiston.
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Or not. The Cecil Wright court case with Revolut founder Nik Storonsky over unpaid commission proves the fragility of the arrangement.
Henry Smith, a partner at Cecil Wright used the example of a yacht they once found that matched a client’s brief “in about five seconds”. They went to visit the yacht with the client and had a survey done. But the client began making noises about reducing the commission because it had all seemed “too easy”, says Smith. Based on the survey, Smith’s advice was to reject the yacht anyway. They eventually bought another vessel together about a year and a half later.
“At that point he didn’t quibble,” Smith told the audience. “It’s not those deals that are being paid up, it’s the ones that don’t go through. It’s not like being an estate agent in Chelsea and worrying about shoe leather. You are flying around the planet.”
Edmiston added: “Most sensible owners recognise it is intellectual capability. You can get two drivers to drive a race car on a track. You can get Max Verstappen, who’s very good and will get around the track quickly, or you can get somebody else.”
He turned to Smith and said: “When you found that boat quickly, that’s because you knew the boat, you knew the market, you knew who to call and you did your job very quickly. That is where the value comes. There are people who understand it and recognise it and those who don’t.”
‘Fag packet maths’
Occasionally clients might try to chip brokers on their commission rates but Smith suggests such penny pinching misses the wider point, which is the net sum retained by the seller.
“You can do some pretty basic back-of-a-fag-packet maths: take a yacht that’s worth about €40m and you agree a commission of 4% on it. Then you settle that deal for around €38m; or you pay 6% to a broker who manages to close the deal for you at €40m – you net over a million more as the seller. So lowering commission is not necessarily going to be a bigger net to the seller,” he said.
Brokers reducing their fee just to get a deal risks demeaning their value, he added.
“Either they’re desperate for the business, or they don’t back themselves,” said Smith. “You’ve got to hold firm and do well by your client. And you’ve got to be paid for doing so.”
Slightly fuzzy
A slide shown during the panel from Phronesis data said one in four transactions of yachts over 500GT in the last 12 months were “off market”. The phrase suggests sales conducted under the radar with no marketing. Cecil Wright calls it “not publicly listed” but Smith points out there is still likely to be a central agency agreement in place. And he reckons the statistic could be higher for larger yachts.
“There are a lot of privacy concerns over people having their data put around online,” he said. “The fact that yachts might be for sale might impact their business, for example.”
But as a sales technique, the off-market approach, with a select group of the world’s top brokers exchanging information privately, is increasingly effective, according to Smith.
“Quite often you will achieve a better price and in a quicker time than if your yacht is openly marketed,” he added. “If something is deemed to be more exclusive, psychologically it works very well for a buyer. It’s all about the network that we have as brokers.”
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Edmiston takes a slightly different view.
“I apologise for being contrary, but I actually somewhat disagree,” he said.
“Off market is a slightly fuzzy term. There might be a lower key level of marketing where you circulate it among the key group of the 15 or so people in the world who are well known at selling these big yachts. But I’m inclined to say you do need to list it for sale. What level of publicity it gets, that’s a different matter.”
No secret
The notion of privacy prompted another Edmistonism.
“If you want to keep a low profile in life, don’t buy a yacht,” he said.
“Anyone who says I want no one to know who owns my boat, that’s just complete folly. If you own a big yacht, it’s impossible to keep it secret. I’m fairly confident in saying we know 99.999% of every yacht [owner] in the world. And all of our colleagues in the industry will know the same.”
An essential part of the value-add of a good broker is honesty over running costs, gained through good communication with the crew and management, said Smith. He recounted a tale of another broker showing a prospect around a yacht he was showing. The individual told his client the yacht would cost “about half a million” a year to run. Smith knew its exact running cost was €1.2m.
“You’ve got to be absolutely transparent,” he said. “Making them understand what it is they’re buying, what it is they’re getting into, where the depreciation curve will fall and the realities of what ownership is like. And you’ve got to prepare them for the eventuality of resale as life changes.
“What you want to do is buy and sell every single yacht these people have and do a good job for them.”
Ultimately, said Edmiston, it comes down to this: “Don’t buy a yacht unless you can afford to give it away.”
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