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The Ups and Downs of Syndicating a Superyacht

Latona yacht

If you’ve thought of entering a syndicate versus owning a yacht outright, here’s what you need to know. First, it’s not just the money involved. Statistically, owners on average use most super yachts just five weeks a year. The rest of the time they’re undergoing maintenance or just floating dockside patiently waiting for their owners to show up.

So why not syndicate ownership and spread the cost around? After all, as some syndicators say, a super yacht is just a hole in the water that you pour money into. I’d add, the bigger the yacht, the bigger the hole.

Usage

Yachts owned by a group get used far more than those of single owners. Say a syndicate of eight members owns a super yacht. At the yearly average of five weeks use per member, the syndicated boat will be underway 40 weeks per year. That’s a lot of cruising. The rest of the time it’s out on charter, or in the yard for maintenance, refit, and the like. One syndication benefit is, no more guilt for underusing such an enormous asset.

Types of syndicates

A syndicate is an association of people or firms formed to transact specific business or promote a common interest. The big benefit of syndicating the build (or acquisition of an existing vessel) and management of a super yacht is that the syndicate owns the boat. Syndicate ownership comes closest to the flexibility and control available to individual owners at a fraction of the cost.

Super yacht syndicates vary depending on the level of involvement the syndicate members wish to have. Here are the three most common:

  1. White glove syndicate: The syndicate pays a management company to run the entire operation. The members really don’t have to lift a finger except to write checks to fund the syndicate’s bank account to pay for the management company’s services. This is the most expensive approach.
  2. Hybrid syndicate: The members select their areas of responsibility and offload everything else to a management company. It can take advantage of the syndicate members’ expertise and resources, if any. Cost-wise, this is the middle-of-the-road approach.
  3. DIY—do-it-yourself syndicates. This is where the members are equal owners and completely responsible for everything from boat maintenance, chartering, crew management, licenses, insurance, you name it. This is the least expensive approach if the members know what they’re doing and are adequately capitalized. If not, it can often be the most expensive by a multiple over what hiring a professional management company would have cost.

Which syndicate type is best?

That depends on several factors: The size of vessel; cost of a management team; member’s availability and experience; and how much control the syndicate is willing to relinquish to a third party (the management company).

From what I’ve seen and heard from owners who have tried the different syndicate arrangements, hiring a professional management company is preferred. Especially if the yacht in question is 250 feet and larger. The bigger the boat, the more complex its management and the more expensive are mistakes. A professional management company does the heavy lifting and saves the fun part of yacht ownership for the syndicate members.

Timeshare vs. fractional ownership

An ownership syndicate is not a timeshare or a fractional ownership arrangement. Timeshares are really just a payment in exchange for the future right to use a yacht. The timeshare company actually owns many yachts. Timeshare owners have no say in anything.

Fractional arrangements give owners a share of the company that owns the boat. It is just one of many vessels that comprise its brand. Shareholders have the right to use a type of yacht, but probably not a specific one, for a specified number of days a year. The fractional company owns various subsidiaries that provide all the services needed by the boats. That’s how they make their money. Usually these services are not negotiable as to cost or vendor (always their companies). Fractional arrangements are a favorite of yacht manufacturers seeking to increase existing boat sales and corporate revenue.

The problem with timeshares and fractional ownership is the existing yachts they own weren’t designed with high use and multiple owners in mind. They show their increased wear rapidly.

Syndicate objectives

Members of successful super yacht syndicates have a number of objectives when forming their group:

  • Enjoyment of yacht cruising
  • Financial security and cost sharing
  • Charter income used to offset some of the operating costs
  • Members are chosen by the syndicate’s members
  • Members are more likely to be treated fairly regarding time and cost allocations.

Will the syndicate turn a profit?

No. After researching this piece I can say that without hesitation. Some readers will swear their syndicate is profitable. Perhaps. But that seems the rare exception and likely isn’t often repeated year in and year out for the life of the boat.

However, syndicating a super yacht does spread the cost among the members. Say you and your family really like that $20 million yacht with an annual upkeep of $2 million. If you spread that around eight members the cost per member would drop to just $2.5 million to buy in and $250,000 annually to run the boat. For many people, the choice is between spending your average of five weeks per year aboard a $20 million yacht like the 170’ Benneti, Latitude ($19.4 million) below.

Latitude yacht
Latitude, courtesy of Fraser Yachts.

Or incurring the same cost as a single owner for a yacht like the 96’ Atalante ($2.3 million) shown below that (statistically) will be used also for no more than the same five weeks annually.

Adelante yacht
Atalante, courtesy of Fraser Yachts.

Operating costs of the syndicate depend to some extent on how successful a charter the boat is. If it’s in high demand and the owners wish to charter it more and use it less themselves, charter income will offset more of the costs. I’ve heard that the breakeven number of days cruising on a syndicate-owned yacht vs. just chartering a yacht is 13 days/year. By that gauge, if you sail for less than 13 days, then a charter comes out ahead; more than 13 days afloat you might consider owning a share of a syndicate. Also, consider the cost per day falls the more you use the boat. For many eight-member syndicates annual allotted time usually maxes out at five weeks per member.

Syndication benefits

  1. The administrative tasks of ownership are for other people
  2. Gone is the financial burden of owning a super yacht for a limited usage.
  3. More bang for your yachting buck
  4. No more guilt for letting such a huge asset just sit at the dock
  5. Charter revenue partially offsets upkeep cost

How to get started

You might want to start with a family meeting. Here are the decisions you need to make:

  1. Figure out how much time annually you want to vacation aboard a boat.
  2. Use the 13-day breakeven rule to decide between chartering and possibly entering an ownership syndicate.
  3. Set a budget for the project—remember the definition of a super yacht at the beginning of this piece. The budget will help determine the size of the boat and syndicate you might consider.
  4. Do you want a new yacht or will one more seasoned do? There are syndicates whose objective is to build from the keel up just as there are those that want to buy an existing yacht and run it.

Here are just four of the many syndication services you might take a look at:

  1. Australian Super Yachts: https://www.australiansuperyachts.com.au/australian-superyachts-syndicates
  2. Curvelle syndicate and shared ownership: http://curvelle.com/shared-ownership
  3. Dream Yachts: https://www.dreamyachtsales.com/consider-yacht-ownership-syndicate
  4. YachtShare: https://www.yachtshare.com.au

As with all yachting decisions, the bottom line is to enter the arrangement that allows you and your family to derive maximum enjoyment from the boat.

About the author

Chris Malburg is a popular writer whose work in the luxury travel and timepiece space appears in a variety of publications. His four thriller novels deal with cyber warfare, political espionage, and financial terrorism. Connect with Chris at https://www.enforcementdivision.com

Motor Yacht Latona photo courtesy of CRN yacht builders

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