One of the strangest unintended consequences of designing a Spirit of Tradition yacht — or any custom yacht for that matter — is figuring what they’re worth to their second owner. Own a production Morris 52 or J-44, and it’s easy enough to find its price. There’s a good-sized fleet. And good chance that somebody has paid for a similar model boat, with similar features. Go find that price.
But to price the custom boats we create, valuing them is not easy. There are few similar reference points. Each boat is unique. We build them to last for 100 years. And nobody is particularly rational about the value of their boats.
Is the $1.7 the right price for the 5 year old Isobel? We shall see.
We will be digging deeper in the valuation question of Spirit of Tradition boats in the coming months. But for now, let’s get started with the basics of SOT pricing with one of our favorite boats, the performance sloop Isobel.
She is for sale at what we think is a pretty darn reasonable $1.7 million dollars.
Replacement cost.
For starters, the $1.7 million sale price is roughly half of the build-from-scratch replacement cost. There’s about 30,000-plus hours of build-time in this boat, at say $55 per hour (labor rates in Maine). Or upwards to about $70 per labor hour in states like Rhode Island, Massachusets, or Washington. That adds up to between $1.6 and $2.1 million for labor. Roughly double those costs when estimating materials for a lightweight, high-performance boat like Isobel.
In all, we’re between $3.3 and $4.2 million for a new build.
That price is confirmed by a rough rule-of-thumb per-pound estimate of cost to build, similar to home construction that is priced per-square foot. A lightweight, high-performance boat like Isobel starts at $80 per pound and can get into $100 per pound easily.
Isobel’s 42,000 pounds brings us to, yet again, from $3.4 to $4.2 million. So far so good.
The Depreciation Factor.
Now you ask, how much has Isobel depreciated? That is, how much less is she worth because of she was made 5 years ago. Just like any other form of transportation, luxury boats take a devaluation hit as soon as they splash into the water. And from there, the residual value is based on how kindly or roughly they are used.
Pricing data is not efficient in luxury transport. There is no Cars.com of luxury boats that puts vast swaths of pricing data in common terms. The closest market we found to custom boats is the aviation market. The prices are the similar. And while planes are closer to production boats, in that they are made in discrete models, the tricking out and targeted inside aviation was surprisingly close to our custom-boat practice.
The Cessna Caravan. This floating plane devaluates along the same lines as custom yacht like Isobel.
To see the values in action, take a look at a well-known flying workhorse: the Cessna Caravan turbo-prop, which most of us have flown on at one point or another. When you hop on a puddle jumper to make a regatta in an island somewhere, this was probably the plane. Something like 2,500 of these up-to-14 seaters were made. The pricing comparisons are interesting.
A new Caravan starts at about $1.95 million for a base model and run up to $2.53 million for the 2016 so-called Grand Caravan, according to the airplane maker published reports.
The pricing story gets interesting when we look at some used Caravans. A one year-old, 2015 Grand Caravan is available for $2.35 million. That’s a little drop of about 7 cents on every dollar. But a 2011 Grand Caravan can be had for just $1.6 million, or a pretty darn serious loss in value of around 40 cents on every dollar. Assuming our $3.3 to $4.2 million cost to build Isobel, the value of this 2011-made sloop should be between $1.9 and $2.5 million.
Again that’s higher than the current price.
What’s interesting about Isobel, is when you compare that cost to other used yachts. This we found to be trickier than comparing used planes. Used boats are all over the market price-wise and very tough to compare. But a yacht in reasonable condition, kindly maintained, say a 2010 Swan 60, which is about equal in space but slower to Isobel is priced at $2.8 million.
Here is the kicker. We know the maintenance history on this boat. She has been very lightly used for just 10 weeks each season. We estimate it would cost $250,000, or about 15% of the asking price, for a new wardrobe of sails and systems upgrades to get her in as-new condition.
That indicates, with just a little bit of dickering over that $1.7 million offer price, a properly valued, as-new Isobel can be had for about half the cost to build her, at a reasonable discount for similar luxury forms of transport of her vintage.
What we know: This sort of pricing is like feeling your way in the fog. And we understand there are other ways to value a boat. In fact, we look forward to hearing from all you brokers and owners about your perspectives on our design models.
But we will be doing more of this valuation soon. And probably beginning to automate this analysis with a powerful SOT pricing engine that can sniff value in the wider used boat market.
But now, we can’t see a reason why an updated classic like Isobel is not only beautiful, but a bargain.
By the way, Isobel’s aggressively for sale— give a call to learn more, and you could be sailing this spring.