Recession Hits Superyacht Yards

The recreational marine recession which started in 2005 in 15’ aluminum boats in the American Midwest has now – 4
years later – not only rolled around the world, it has also climbed right up the
boat size ladder to superyachts and hit the super rich. Last week Royal Denship,
one of the largest megayacht-building yards in northern Europe, declared bankruptcy.
This is the first major megayacht yard that has been brought to its knees by the
world-wide recession. As recently as last summer, most superyacht yards had full
order books going out at least three years.

The Danish superyacht builder Royal Denship went bankrupt last week meaning the recession has finally reached the rich.

Megayacht builders tell us that there have been precious few new custom orders booked
since July 2008.
A spokesman for Nigel Burgess, one of the world’s leading large
yacht brokers, said last winter that prices for used large custom motoryachts had
fallen significantly and charter business had drastically fallen. Indeed, charter
bookings of megayachts for this year’s Cannes Film Festival which recently concluded,
were far behind normal years.

Princess Mariana was built by Royal Denship and the owners were proud of her high freeboard and her massive underwater lighting.

Royal Denship



The Danish daily newspaper Borsen carried a story last week in which it says that
Royal Denship, the yard in Aarhus that built, among others, the superyachts Turmoil,
Big Roi and Princess Mariana, has declared itself bankrupt.



The company's website states that court-appointed lawyers were appointed when the
declaration was made official on April 3, 2009.



The newspaper quotes Lars Skytte Jorgensen, CEO of Royal Denship, as saying: "A
combination of cancelled orders and clients failing to pay on time led to the decision."



"We have had major problems in financing, cancellations of projects and we have
had clients, who retained payments for a long time", says Lars Skytte Jorgensen,
CEO of Royal Denship to the daily Borsen.

The concept of the fold-down beach was first demonstrated on Princess Mariana which was a valiant effort to enable owner and guests to get closer to the water.

The Shipyard



The shipyard has over the years produced a series of superyachts of the kind one
could only dream of, including the 258' super motoryacht Oeina, which is constructed
of steel and glass fibre and has six decks.



The shipyard is owned by Peter Johansen, who was behind Martin Gruppen in Aarhus.
No longer ago than October last year, Lars Skytte and Peter Johansen stated to daily
Borsen, that they expected profits from the shipyard and had a filled order book,
mostly from newly rich Russians.



Last fall the Russian stock market fell 75% and word in the industry was that Russian
orders for both custom megayachts and production boats were virtually all cancelled.
Used boats owned by Russians have also evidently flooded the Russian market.



Evidently the Russian clients disappeared just as fast as world stocks declined,
and today the business is closed. The yard’s website appears to be turned off.



"It looked really positive in October, but when payments of large, two figured million
amounts were withdrawn, there was nothing we could do, " says Lars Skytte Jorgensen.

Opera diva Maria Callas and Aristotle Onassis were followed by the paparazzi right onto the yacht Christina which sparked interest in large pleasure yachts in Europe in the late 1960s..

Megayacht Mania



The building of megayachts in any numbers had started in the 1970s, thanks in large
measure to Aristotle Onassis’ converted commercial ship Christina and the attendant publicity
with his wife Jackie Kennedy Onassis aboard. Numerous European multi-millionaires
quietly commissioned such boats from mostly European yards, but the “mass” building
of these vessels did not take off until the early-1980s. Again, mostly for European
clients which did not mind such ostentatious displays of wealth, in fact they gloried
in it.

At great cost Christina was completely re-built about 10 years ago and is now available for charter to both individuals and groups. Today she is called Christina O.

Custom yacht building was dealt a serious blow in the U.S. with the passing of the
10% Luxury Tax in 1991 and did not begin to recover until the mid-1990s after the
1993 repeal. From then until last summer demand for these boats grew, much of it
due to the dot com boom in the late 1990s and subsequent booms in different industries
and in different geographical regions, the rape of Russian industry after the fall
of the Soviet Union by the oligarchs being one such example.



At its height there were over three dozen yards in the world producing boats over
100’ in length. Most were building one to three of these large vessels at any one
time, and typically they take 18 months to three years to complete. There have been
about 650 vessels over 80’ at some stage of construction in
all yards around the world each year for the last five years or so.

The intimate bar aboard Christina was famous because its bar stools were covered with whale foreskin, which was always a good conversation starter.

Nevertheless, it is a tough business for yards to
consistently and universally make
money due to the intensity of competitive bidding. Large yacht construction is notorious for taking boat yards down, the most famous of which was the failure of the Benetti
yard in Viareggio, Italy thanks to the yacht Nabila owned by Saudi Arabian middle
man and arms dealer Adnan Khashoggi. The yard was later bought by Azimut.



This latest pause in large custom yacht orders is the first major one we have seen
since the business really got rolling world-wide in the mid-1980s. Its 20-year run
has been far longer than that of mere yachts and boats, which usually have sales
fluctuations on a five or six year cycle.