Client Affairs

Private Banks and Yacht Financing: A Growing Business

Contributing Editor 8 June 2005

Private Banks and Yacht Financing: A Growing Business

The sight of Russian billionaire Roman Abramovich’s three super yachts moored on a dock in Portugal during last year’s Euro Football Champi...

The sight of Russian billionaire Roman Abramovich’s three super yachts moored on a dock in Portugal during last year’s Euro Football Championship is testament that big yachts are very much in fashion with the rich—and the bigger the better. The financing of these mega yachts—the biggest one, Octopus (126 meters long), owned by Microsoft tycoon Paul Allen—is an area private banks are increasingly moving into. “We have had at least two private banks come to us in the last year to conduct feasibility studies on starting specialist yacht financing departments,” Alex Zaracoudis, a director at the specialist ship and yacht financing/consultancy group Eurofin based in Athens, told WealthBriefing. “Both of them decided to do so after they saw what a growing market this is.” Mr Zaracoudis said there are around 10 private banks in Europe which offer specialist yacht financing for boats worth at least $5 million upwards. He was not prepared to name any private banks in this area, because of exclusive relationships with many of them. But said: “They are major private banks and we have definitely seen an increase in this area of financing from financial firms.” He added that many clients buying mega-yachts typically take out a loan worth half of the price. “Most private banks provide a mortgage-like product for this type of financing, or some give straight loans—depending on the liquid assets available and the size of the yacht being bought.” Clients are borrowing money to finance yacht purchases because they can get such good terms on their loans. “Few clients are financing these yacht deals with cash, most are borrowing at least a third of the price, because they can use the money better elsewhere,” said Mr Zaracoudis. Most clients looking to buy a mega-yacht have at least $30 million in liquid assets, according to Eurofin. But $5 million—generally considered the entry level into the mega-yacht category—does not get you much of this top of the range consumer durable. To be considered important in the mega-yacht stakes you need at least $15 million, which will buy you a 40 meter yacht. “Eighty meter boats—the top of the range—will cost you around $55-60 million, but this is the basis price. Buyers can often spend millions on interiors,” said Mr Zaracoudis. Research from Eurofin found there are around 2,500 mega-yachts (over 30 meters) in existence. Around 34 per cent of these are found in the US, another 31 per cent in Europe, around 16 per cent in Asia, and a further 6 per cent in Latin America. “Demand has grown greatly from Eastern Europe, particularly Russia. In the last few years’ Russian ship yards are beginning to build luxury yachts for the first time ever,” said Mr Zaracoudis. Eurofin anticipated strong demand to come from China, as well. “A couple of orders for mega-yachts from China have recently been taken,” said Mr Zaracoudis.

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