Early in August, reports surfaced that luxury developer Miki Naftali was being sued for $725,000 in Florida for allegedly stiffing yacht broker Scott Goldsworthy out of a commission on a deal to buy a megayacht from Italian shipbuilder Baglietto. It was the latest installment in a saga that started with Naftali requesting a declaratory judgement in New York Supreme Court, stating that Goldsworthy wasn’t entitled to a commission in the first place.
Understanding the boat drama begins with the basics of yacht sales — including what being a yacht broker, or a yacht sales professional (YSP) in the lingo of the trade, actually means.
But first, some history: While the roots of yachting date back to the reign of Charles II of England in the late 1600s, recreational cruising grew increasingly popularity over the 20th century. The Yacht Brokers Association of America (YBAA) was founded in 1920; Robert Bertram, the man sometimes cited as the father of the modern yacht brokerage, earned his reputation as a pioneer during the early 1960s. Ebbs, flows, and the formalization of the trade followed. Vin Petrella, the current executive director of YBAA, joined Hellier Yacht Sales in New London, Connecticut in 1981 and stayed in the industry for the next 40 years; in the early 2000s, he helped introduce a certification program with an aim of professionalizing yacht sales. “We were trying to disassociate from the ‘used car dealer’ reputation,” Petrella told The Real Deal. And for the most part, he thinks it was successful.
“There will always be shysters,” said Steve Messenger, a broker with Denison Yachting. “When you have any business that deals with large sums of money and is unregulated, you’re going to have a lot of people who are trying to take advantage,” he said, pointing to an incident in the early 2000s in which a Snug Harbor broker was caught stealing deposits.
In the years since its creation, the CYPB licensing credential–which must be renewed every three years and requires ongoing education to remain current–has created more legitimacy, transparency, and trust, brokers said.
Though luxury yachts might be viewed as floating mansions for the peripatetic elite, the yacht brokerage industry bears only passing similarities to the real estate business. “The due diligence process is pretty much the same,” said Petrella.
That said, the industry is not as regulated: California and Florida–where the vast majority of transactions take place–are the only states that require brokers to hold licenses.
North American cities with the most CPYB brokers:
1. Seattle, WA (42)
2. Annapolis, MD (17)
3. Ft. Lauderdale, FL (15)
4. Vancouver, BC (13)
5 (tied). St. Petersburg, FL (12)
5 (tied). Newport, RI (12)
Nor are yacht sales as complicated as property sales; Messenger likens it to the process of buying a car. A yacht on the market for $250,000 can be sold, start to finish, within three weeks, depending on surveyor inspection findings and the sea trial. Yachts under five net tons displacement must be state registered and titled in states where titling is available. Vessels over that limit require federal documentation; in times of war, those yachts can be commandeered by the Navy or Coast Guard, Petrella explained, though it’s highly unlikely today.
Then there’s the inventory, which can cost anywhere from tens of thousands to millions, depending on the specifics of the yacht. While new vessels enter the water every year, the used boat market has become very strong, according to Messenger, but also very limited. He estimated that there are about 130,000 yachts worldwide on the market at the height of the recession; today, that number has fallen to about 70,000. “Used boats are hard to come by, and good listings are valuable,” he said.
Largest Brokerages by CPYB Broker Count:
1. Galati Yacht Sales, 21 brokers in Florida, Texas, Alabama
2. United Yacht Sales, 10 brokers in Florida and North Carolina
3 (tied). East Coast Yacht Sales, 7 brokers in Massachusetts, Maine, Rhode Island
3 (tied). Brewer Yacht Sales, 7 brokers in Connecticut, Rhode Island, Massachusetts, New York
As in the real estate business, commission rates are benchmarked but open to negotiation. But recently, yacht brokerages have shifted commission structures. Before listings moved online, when buyers had to seek out YSPs to find yachts for sale, the commission split was traditionally was split 70/30, between the selling broker and the listing broker, respectively, explains Patrella. As commission splits evolved with the rise in Internet listings, selling brokers began sending buyers to listing brokers, who began to do more of the work in the transaction, and the split shifted to 60/40. With fewer used vessels on the market, commission structures have adjusted to 50/50–though Petrella adds that most YSPs split based on value added to the transaction.
Nowadays, buyers arrive at the table with new environmental concerns: underpaint on boats, LED lighting, eco-friendly materials and energy efficiency are several aspects Petrella mentioned. Property tech has changed the way that people monitor their yachts, while mechanical innovation has made captaining easier. At the same time, the industry continues to contract, a fact reflected by the diminished number of new brokers and potential buyers.
“There’s a lot of attrition in our industry, and we’re not attracting as many new people,” says Petrella. He estimated that there were up to 600 CYPB yacht brokers in the late 1990s; now there are likely around 525 to 550. Furthermore, a new generation just isn’t as into the lifestyle. “It used to be that people were committed to yacht clubs: That’s what they did. They put on their blue blazer, went down to the Stamford Yacht Club or the New York Yacht Club–sailing and boating was their passion.”
Today, the passion appears to have cooled. People don’t want to buy a boat; they want to try a boat and then move onto something else. “Millennials like to experience a lot of things. They have less inclination to own things,” says Messenger. For that reason, he predicts growth in yacht chartering services in the future, adding says that if indeed the market enters a recession, the industry will feel the impact. “In a downturn, the boat is the first thing to go.”