Owning a superyacht is often complicated and always expensive, but some firms in the Channel Islands have spotted an opportunity to make life easier for wealthy boat owners – and a healthy profit in the process
As any visitor or resident will know, Jersey and Guernsey are no strangers to yachts. There is room for well over 2,000 ketches, motorboats and cruisers in the various marinas across the two islands, and often a long waiting list to get in.
If you’re looking for a 15m to 20m berth in Elizabeth Marina, for example, you may have to hang on for up to two years – and it can take ‘substantially longer’ for a space to open up in St Helier Marina, according to Jersey Marinas.
The yachts that are based on the islands tend to be fairly small vessels, relatively speaking. The Jersey ship register is only able to deal with vessels of up to 400 gross tonnage (GT), while in Guernsey the maximum is even smaller, at 150 GT.
That might seem a reasonable size for most keen amateur sailors, but it is far too modest for the world’s super-rich, who prefer something rather more substantial. The world’s biggest yachts today weigh in at well over 10,000 GT, and in terms of length, the current record-holder is the 180m-long Azzam, built in 2013 by German shipbuilder Lürssen.
On occasion, one of the world’s mega-yachts might call in to St Helier or St Peter Port while making its way from a shipyard in Germany or the Netherlands to its long-term home in the Mediterranean ports of Italy, Spain or France.
And while most of these will simply be too big to be handled by the local ship registers, a growing number of them now have a direct connection to the islands through their ownership structure.
“There are two elements to consider: where is the yacht registered and where is the company that owns the yacht based?” says Robert Ayliffe, the Jersey-based Executive Director of yacht services business Fiduchi.
“It is very rare for an individual to own a yacht in their own name. They almost always use a company. And that’s what this island is good at: being a corporate services provider, with relevant expertise and transferable skills.”
The reasons superyacht owners usually prefer to use a management company as the owner of their vessel are straightforward enough. By doing so, they can help preserve some anonymity. It can also be more convenient when it comes to estate and tax planning.
Perhaps more importantly, it is also useful to limit the owner’s personal liability should anything go wrong.
All this presents a clear opportunity for the Channel Islands, given their reputation as offshore financial centres with plenty of experience related to managing assets and offering related professional services to the world’s wealthy.
There are numerous issues that a services provider can help yacht owners with, from setting up and administering the corporate structure used to own the vessel, to liaising with tax and legal advisers, and ensuring the yacht’s crew is paid on time.
Indeed, Ayliffe contends that managing a yacht is not very different from dealing with other high-value assets – a loan taken out against a yacht is like one that’s attached to a house.
“Fundamentally the same principles apply to yachts as to real estate,” he says. “You need professional managers to look after it. Jersey is well placed. It already has the skills and it’s a diversification away from financial services.”
Others agree on the potential for Guernsey and Jersey.
“Both Jersey and Guernsey are established financial centres. And they’re very well regulated offshore financial centres, with good track records covering banking, admin, legal expertise, company formation and ownership of vessels of all kind,” says Paul Welch, Guernsey-based Founder and Chief Executive of Millionplus.com, which sells high-end yachts, houses and private jets, among other things.
“Their history and track record of good corporate governance, being a well-regulated and stable environment, are key.”
Finding a flag state
Another issue which a services provider can help with is choosing the most appropriate flag state for a yacht, even if that’s a ‘rival’ jurisdiction to Jersey or Guernsey.
Some yachts are suitable to be flagged locally. The starting point for something to be considered a superyacht is generally thought to be around 24m (the term ‘mega-yacht’ is less clearly defined, but often implies a vessel of at least 60m in length). A 400 GT yacht allowed on the Jersey Ship’s Registry could be around 40m in length, which brings it easily within that definition.
Jersey and Guernsey are both part of the Red Ensign Group, which means any ships registered there are considered to be British vessels and therefore entitled to diplomatic protection and, in extreme circumstances, help from the Royal Navy.
Jersey is also the largest Category Two register, holding more than 2,000 ships on its books. The higher level of register, known as Category One, includes Bermuda, the British Virgin Islands (BVI), the Cayman Islands, Gibraltar, the Isle of Man and the UK – all of which can register ships of unlimited tonnage.
It is these Category One flag states that currently dominate the market for superyachts. According to a guide to yacht finance from Jonathan Hadley-Piggin, a Partner at UK-based Keystone Law, the Cayman Islands register has attracted more superyachts than all of the other British registers combined.
The islands also claim to have more superyachts than any other shipping registry, with estimates of more than 20% of the world’s fleet.
The yachting world has not followed the habits of the international merchant shipping fleet in seeking out the open registers of ‘flags of convenience’ – states such as Panama, Liberia or the Bahamas.
However, some of these jurisdictions are starting to get in on the action. According to Keystone Law, Panama and St Vincent and the Grenadines are occasionally used to register large yachts, while the Bahamas, Cyprus and Malta also now register an increasing number.
Convincing owners to set their yacht’s ownership structure in a different jurisdiction to where the vessel is flagged is at the centre of the Channel Islands’ business case in the sector.
The Channel Islands have some advantages over the BVI and the Caymans. While the Caribbean jurisdictions also have wide-ranging professional services industries that can accommodate the needs of yacht owners, Jersey and Guernsey have the advantage of being in almost the same time zone as France, Spain and Italy.
This is an important consideration, given that most superyachts spend the majority of their time in the Mediterranean (although some do head to the Caribbean for the winter months).
“The Cayman Islands, BVI and the Isle of Man are the market leaders,” acknowledges Ayliffe. “But there is a lot of untapped potential in the sector.
“We’re leveraging the reputation of Jersey as a jurisdiction with strong governance. The majority of yachts are based in the Mediterranean. Most of the service providers and crew are based in Europe. So Jersey is better placed than, say, the Cayman Islands.”
Running a yacht is a business in itself. Even for the richest individuals the cost of a vessel can be eye-watering, both in terms of buying the ship in the first place and then keeping it afloat.
A minimum price for building a superyacht is estimated to be around $1m per metre, but the final bill can easily be two or three times that for the most luxurious boats.
Cost of staying afloat
Maintaining the vessel is not for the faint-hearted either – and can easily add up to an additional annual cost of 10%-15% of the initial price of the ship, once you allow for insurance, maintenance, management fees, depreciation, fuel, the cost of crew and, perhaps, financing payments too.
As a result, superyacht owners often like to offset some of their costs of ownership by hiring out their vessels. Chartering a large yacht will often cost tens or even hundreds of thousands of pounds a week.
Despite those hiring fees, few make a profit on their ownership. “They are very expensive machines to run,” Ayliffe says. “Normally, the charter income will merely offset the running costs.”
Dealing with superyachts is still a fairly new area of activity for the Channel Islands and the number of local firms involved is still relatively limited, as is their share of the market.
Ayliffe says his firm currently helps to supervise more than 100 superyachts and mega-yachts. The global market potential is far bigger than that, however. Estimates of the number of superyachts on the seas range from 5,000 to 7,500. Last year, a further 243 superyachts were built, according to Superyacht Times.
The cost of ownership means these boats will always be out of reach for the vast majority of people, but the lure of the superyacht remains.
Welch believes that fewer people want to buy a superyacht nowadays, but the other side of the market remains healthy.
“There are a lot of mega-yachts being built,” he says. “But millennials and younger people are not so interested in ownership – they’re much more interested in chartering.”
That alone means the case for professional assistance for owners will remain a lucrative potential market.