Is refit quite literally value added?
Does a €5 million refit on a €20 million boat make it a €25 million boat?
Superyacht owners are incredibly intelligent people; pair them with a strong advisory team and you would expect that they are more than capable of getting the most out of their financial investment in yachting.
So, why is it that when some owners purchase a boat and proceed to do refit work, which might be considered basic maintenance, they believe the boat can then return to the market at a price that is essentially the purchase price, plus the value of the refit, plus a little more for good measure?
Many refit yards can considerably improve the condition of a boat at a great price, but under current market dynamics, a €5 million refit on a €20 million boat does not equate to a €25 million boat.
A refit may well improve the prospects of a sale and the speed at which it’s completed – indeed this must be the rationale behind improvement-works on a ‘for sale’ yacht anyway. However, refit-work at the lower end of the pricing spectrum will generally not transform what is a rapidly depreciating asset into a state where it can justify a higher asking price, that is vindicated by the value of the refit and the owner’s expectations.
One boat on the market springs to mind as I write this. Upon being purchased, the vessel had a multi-million-euro refit, only to return to the market at an asking price that was 40-plus per cent higher than the owner had bought it for several years earlier. This exponential increase in price made its asking price, per gross ton, higher than a new build replacement at the yard, after a number of years on the water.
The boat is now priced at 60-70 per cent of its original asking price because there was a huge gap between its speculative post-refit valuation and a fair market value. It all comes down to managing owner expectations. While they may not recoup their refit investment in the form of a higher selling price, if the yacht sells a damn sight quicker, the refit has certainly served its purpose as a cost mitigation measure.
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