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Old 12-05-2011, 17:52   #1
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Buying a Cat with Large Charter Company

While I was planning on full-time cruising on a moderate used cat, some opportunities came up that would perhaps make plan B feasible:
Stay landlocked somewhere nice and buy a new cat and having her in Charter for 5 years, enjoying 12 weeks of sailing every year in different locations. I know the glossy brochures look nice but everything feels a little bit sugarcoated.

A couple details come to mind? Where is the chartermarket going? Will the company stay solvent over the course of the contract? Will I have a halfway decent boat at the end and will the total payment (deposit + balance at the end of term) equals a good value?

I can arrange my early retirement activities in a way that one month of sailing every 3 month would be okay, so my question goes more towards the good, the bad and the ugly others have experienced and might willing to share either here in the open or with a PM.

I am fully aware, every risk is my own and there is no advice to be expected from the web. But hearing about experience others have or had, might allow me to investigate and to empower we to ask the right questions and to negotiate the right terms.

Any response is appreciated.
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Old 13-05-2011, 03:00   #2
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Re: Buying a cat with one of the large charter companies this year?

Basically, there are about 3 levels of quality in the charter boat market. The first level is in outfits like The Moorings or Sunsail and others. They really only handle brand new boats and after anywhere from 2 to 3 years want to get rid of them and bring in new boats for their customers. On the plus side they do get the cream of the folks who want to charter boats and are willing to pay big money for the use of a new boat.
- - There are second level charter outfits that will accept older boats like ones from the first level and likewise put them out for charter as lower rates than the first tier charges. Naturally their customers are more interested in watching their pennies than flaunting their financial status.
- - The third level are the - what I call - the "co-op" clubs where you place your boat and members of the club can charter it. You will probably be able to almost cover your costs at this level, but in any case you might at least recover your slip rental and insurance costs.
- - The first level is known to do a very good job maintaining your brand new vessel and making repairs as necessary. The other levels are not so diligent.
- - In any case you need to research each charter company's proposals with a wary eye towards loopholes and early cancellation clauses as the boat ages. These can be tricky to understand, but if you do due diligence you can offset a lot of the cost of buying a new boat with their management and rental of the boat.
- - The first level is also a good place to buy a used charter boat that has been well maintained at a reasonable price. I have quite a few friends who have purchased their catamarans from such charter outfits and are quite happy with the deal they were able to obtain.
- - All the above is really only my experience with charter company's who operate in the southeastern USA and the eastern Caribbean. There are European and Pacific basin charter outfits that also operate pretty much the same.
So look in the sailing magazines for charter companies and work your way through them to see if any of their "deals" is attractive to you and your objectives.
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Old 13-05-2011, 03:56   #3
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Re: Buying a cat with one of the large charter companies this year?

You also have to be aware that the cheaper cats after 5 years in charter are in need of significant chunks of money and some are just plain worn out.
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Old 13-05-2011, 05:10   #4
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Re: Buying a cat with one of the large charter companies this year?

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You also have to be aware that the cheaper cats after 5 years in charter are in need of significant chunks of money and some are just plain worn out.
Not just the "cheaper cats". No doubt ANY boat in charter will be more worn than a properly maintained private boat, but unless it was damaged in such a way that it flooded the hull or was not properly repaired, here's what you would do to fully refurbish it (assuming you want it as close to "like new" as possible)....


Let's assume a ~40-foot cat:
  1. New sails: $10-15k depending on grade
  2. Add spinnaker and/or screacher: $5-10k
  3. New running rigging and ground tackle: $5k
  4. New or re-cover cushions: $5-10k
  5. Fiberglass reconditioning (repair all dings and scratches with gelcoat, repair or replace lettering and stripes, compound and wax): $5-10k (maybe double that if you needed to re-do shoddy repairs)
  6. Misc. repairs and equipment upgrade: $5-10k
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Old 13-05-2011, 05:56   #5
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Re: Buying a Cat with Large Charter Company

Assuming the 5 -10 K for miscellaneous is to deal with items not otherwise mentioned such as canvas, docklines, fenders, servicing and repairs to the diesels/saildrives (which will likely have a fairly large number of hours) and battery banks (without upgrades), then there are still a number of items that most cruisers will want:

1. below deck autopilot
2. radar
3. SSB radio, tuner, antenna
4. solar panels/wind generators/regulators
5. upgrades to the battery banks
6. upgraded/updated chartplotter
7. RIB and outboard
8. water maker
9. galley upgrades ( some have no oven, others minimal storage/refrigeration etc.).
10 rebedding of stanchions/hand rails/deck hardward.
11.RIB and outboard.
12.Series drogue and/or para-anchor plus rode.
13. epoxy bottom barrier coatings
14. upgraded alternators/charging system

If the boat is an older one that is coming off service from a tier two charter company, the following are also possible:

15. replacement/rebuild of diesels and saildrives.
16. replacement of all portlights and hatches.
17. replacement of lifelines.
18. replacement of standing rigging.
19. replacement of refrigeration units.
20. replacement of stove/propane tanks

The above is of course assuming that there is no problem with osmotic blistering and/or delamination.

Brad
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Old 13-05-2011, 20:55   #6
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Re: Buying a Cat with Large Charter Company

Back to the original question, I think the charter market is like most industries which are going through challenging times.
If you buy a boat and put it into charter you will be at the mercy of the charter company regardless of contracts.
If they are good and look after your boat it will need some refurbishment after 5 years but you should end up with a good cheap boat.
If they are bad and your boat gets trashed and doesn't get maintained you will probably regret it.
Having just bought a boat from a French charter company which has been well maintained and refurbished after 6 years of light charter work I'm very happy.
But I did see other boats of the same vintage that hadn't faired so well so I would be careful.
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Old 14-05-2011, 00:29   #7
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Re: Buying a Cat with Large Charter Company

The question that always hits me is:

"If it was a good deal, wouldn't the charter company buy the boat themselves and on sell it at the end of the 5 years?"

Perhaps that is my cynical view but in my business, if I can make a buck doing it myself without killing the rest of the business I would certainly give it strong consideration.
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Old 14-05-2011, 00:40   #8
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Re: Buying a Cat with Large Charter Company

great question
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Old 14-05-2011, 00:53   #9
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Re: Buying a Cat with Large Charter Company

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Originally Posted by Johnathon123 View Post
The question that always hits me is:

"If it was a good deal, wouldn't the charter company buy the boat themselves and on sell it at the end of the 5 years?"

Perhaps that is my cynical view but in my business, if I can make a buck doing it myself without killing the rest of the business I would certainly give it strong consideration.
Yup, that's the one I always come back to.
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Old 14-05-2011, 01:01   #10
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Re: Buying a Cat with Large Charter Company

Quote:
Originally Posted by Johnathon123 View Post
The question that always hits me is:
"If it was a good deal, wouldn't the charter company buy the boat themselves and on sell it at the end of the 5 years?" . . .
That is a somewhat easy one - - Unless you happen to have close to a million bucks laying around loose in the bank somewhere, when you do buy a boat you finance it through banks where you borrow the money. Yes?
- - Well, the charter companies use prospective owners as their "bank" and they use the credit worthiness of these "owners" to be able to acquire the needed millions of dollars needed to build a fleet of charter boats.
- - The charter companies then maintain, rent and oversee/manage your boat for you and return to you some of the income produced by your boat.
- - It is somewhat analogous to the your owning rental property/apartments/condos and hiring a real estate management company to do the daily work of renting and overseeing the properties while you are out there cruising or sailing during your agreed upon self-use periods.
- - At the end of the management period you can decide to keep the boat and continue the payments or you can, because of changed circumstances in your life, decide to sell the boat. The Charter company can then act as your sales agent since they know the boat and have a reputation.
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Old 14-05-2011, 02:13   #11
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Re: Buying a Cat with Large Charter Company

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Originally Posted by osirissail View Post
That is a somewhat easy one - - Unless you happen to have close to a million bucks laying around loose in the bank somewhere, when you do buy a boat you finance it through banks where you borrow the money. Yes?
- - Well, the charter companies use prospective owners as their "bank" and they use the credit worthiness of these "owners" to be able to acquire the needed millions of dollars needed to build a fleet of charter boats.
If the return on capital employed was good enough, the banks would have no problem with lending millions to the charter companies, just as banks lend to companies to buy apartment blocks and rent them out.

I don't believe the business case is there, which is why there are no charter companies buying their own boats.
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Old 14-05-2011, 04:50   #12
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Re: Buying a Cat with Large Charter Company

Very True - Unlike real estate which - except in today's market - generally appreciates over time, boats do not appreciate in value. So there is no return on investment. In fact, I have never heard of anybody buying a recreational boat as an investment.
- - So to obtain fleets of charter boats, the charter companies have devised a rather ingenious program of using other people's credit to build their fleets.
- - This is one of the "hidden" - maybe not so hidden if you really look into it thoroughly - liabilities of buying a boat through a Charter Company program. Your boat will not only age and depreciate, it will also incur wear and tear that is not directly related to your own use but to the use by others. Which is why it is quite important to choose a very reputable charter company with a proven track record of taking care of the boat properly and also doing an "end of charter contract refit" of the boat for you. Some outfits do this and many others do not.
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Old 14-05-2011, 05:05   #13
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Re: Buying a Cat with Large Charter Company

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Originally Posted by pteron View Post
If the return on capital employed was good enough, the banks would have no problem with lending millions to the charter companies, just as banks lend to companies to buy apartment blocks and rent them out.

I don't believe the business case is there, which is why there are no charter companies buying their own boats.
The bank may be happy to lend, but as a Charter Company why would I want to borrow from someone who could take my business away - if I had an alternative source of finance? Using an Owner to provide the finance makes perfect sense to me, lessens my risk. With a Bank the Charter Company has to solely bring cash to the table, with an Owner they can include non-cash benefits to sweeten the deal........

......Seems that the deal works when what the Charter Company brings to the table (overseas management of the vessel and scheduled use) is valued sufficiently by an Owner to make the deal work for them overall. As a straight boat buying / savings scheme it can't make financial sense (pay for a new boat and receive a s/h boat) - need to factor in the cost of the holidays and boat management. Doesn't fit everyone of course, but does not need to.
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Old 15-05-2011, 06:52   #14
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Re: Buying a Cat with Large Charter Company

Quote:
Originally Posted by Southern Star View Post
Assuming the 5 -10 K for miscellaneous is to deal with items not otherwise mentioned such as canvas, docklines, fenders, servicing and repairs to the diesels/saildrives (which will likely have a fairly large number of hours) and battery banks (without upgrades), then there are still a number of items that most cruisers will want:

1. below deck autopilot
2. radar
3. SSB radio, tuner, antenna
4. solar panels/wind generators/regulators
5. upgrades to the battery banks
6. upgraded/updated chartplotter
7. RIB and outboard
8. water maker
9. galley upgrades (some have no oven, minimal storage/refrigeration etc.).
10 rebedding of stanchions/hand rails/deck hardward.
11.RIB and outboard.
12.Series drogue and/or para-anchor plus rode.
13. epoxy bottom barrier coatings
14. upgraded alternators/charging system
Pretty good list, Brad. We bought Ocelot from Sunsail in 2001 & spent ~$40K turning her from a charter boat into a cruising boat. A lot of folks don't appreciate that charterers don't mind running engines for creature comforts (hot water, electricity, fridge) but cruisers only like running engines for propulsion. So we needed to change some systems, like the fridge/freezers. She also came with 2 too many heads, but that's hard to avoid.

But she was well maintained & we've been cruising her for 10 years now. I'd do it again, but plan on 4-6 months of conversion from charter boat to cruising boat (which is why buying a boat that's been cruised is usually an excellent deal).
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Old 16-05-2011, 01:15   #15
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Re: Buying a Cat with Large Charter Company

Quote:
Originally Posted by pteron View Post
If the return on capital employed was good enough, the banks would have no problem with lending millions to the charter companies, just as banks lend to companies to buy apartment blocks and rent them out.

I don't believe the business case is there, which is why there are no charter companies buying their own boats.
I think its the risk factor when it comes time to sell the used boat that the banks are not comfortable with. Otherwise, why would it be any different from a car rental company. I don't know for sure but I strongly suspect Hertz and Avis borrow from banks to buy their car which they turn around and unload in a couple years. But with cars the secondary market is more stable and predictable, and of course the population for unloading used cars is a lot larger than that for unloading used cats.
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