Below is a proposal to sell equity in a fully owned yacht for the purposes of getting cash out without taking an "equity" type mortgage (if they are even available for older yachts). Please comment. The numbers are just examples.
Terms & Conditons
1. This proposal is for the establishment of a partnership in sailboat sloop
, Mfg 36s hull
#123456 to be named Sailing Vessel Share Partnership (SVSP)
2. The yacht My Boat and its accessories, owned free and clear by John Doe are valued at $100,000 based on average selling price
of 5 most recent sales of the identical hull
of the same vintage.
3. The SVSP partnership will consist of 100 shares, 75 common - no dividend and 25 preferred - pays dividend, with a par value of $1,000 each share value equity of $100,000. SVSP Shares represent ownership
of equity only.
4. John Doe agrees to sell 25 SVSP preferred shares at par value.
5. SVSP Shareholders do not contribute to the repair, maintenance
of the vessel and its accessories.
6. The partnership shall lease
100% of the assets to John Doe at $1 per year and he shall pay all dividends on preferred shares.
7. All repair and maintenance including mooring, storage and insurance are the responsibility of the leasee of the SVSP assets.
8. Holders of preferred shares receive full par value for their preferred shares from the insurance settlement in the case of total loss. Insured value is $85,000
9. The leasee agrees to maintain the SVSP assets in the same or better condition as they are at the time of establishment of the SVSP subject to normal aging of components.
10. The sale
of 25 preferred shares of SVSP to partner A as follows:
Equity Interest at closing (25 shares) 25% $25,000
11. Computation of partner A SVSP Equity Dividend Earnings
Annual Equity Dividend ($25,000) ~12% $3,000
Monthly Dividend on total equity (25 shares) $250
How it works
John Doe establishes a the SVSP partnership and offers no risk dividend paying preferred shares to partner A giving a 25% interest in sv My Boat
Partner A receives a monthly dividend of $10 per preferred share ($250 total) per month on her 25% equity in the SVSP partnership as long as he holds preferred shares in the SVSP partnership.
If the majority SVSP shareholder (John Doe) chooses to sell the sv My Boat, at the closing of the sale
, he will purchase
all preferred shares owned by Partner A at full par value ($1,000 each) plus pay any equity dividends due at the time of closing. Preferred shares remain at par value regardless of the change in value of the assets. (All risk is held by the common shareholders)
The share distribution of the SVSP Partnership is as follows:
John Doe 51 common
Jane Doe 24 common
partner A 25 preferred
Total shares 100
John Doe may at any time purchase
partner As shares at par value ($1,000 e/o) and reduce the dividend payment by $10 per share purchased.
Why it Works Mutual Shareholder Benefits
Partner A Preferred Shares
- earns interests 12% ROI (~2x) from SVSP partnership equity shares as opposed to <~6% ROI from typical unsecured investment portfolio
- SVSP share Investment is secured by an asset $100,000 yacht.
- receives guaranteed fixed $250 per month dividend earning on SVSP shares
- Is not responsible for any costs associated with the repair or maintenance, including mooring, storage and insurance of the assets
John Doe Common Shares
- Turns part of his equity in his boat into cash continues with full control of sv My Boat
- Small Dividend is paid (no principal) until such time as SVSP shares are purchased back