When it comes to building giant superyachts, the ocean's the limit.
The world's mega-rich are ordering ever larger boats and Middle East buyers are helping to drive a recovery in this market for the ultimate status symbol in the wake of the financial crisis.
The biggest yacht to date, the 180-metre Azzam, was completed by the German shipyard Lürssen this year and exceeds some commercial cruiseliners in size. According to media reports, Azzam was built for an estimated €500 million (Dh2.45 billion).
It has knocked the 163-metre Eclipse, owned by the Russian billionaire Roman Abramovich and reportedly equipped with a missile defence system and a submarine, into second place. Eclipse is believed to have two swimming pools, one of which can be converted into a dance floor.
But even the mighty Azzam, due to be delivered later this year and capable of top speeds exceeding 30 knots, is likely to lose its title soon.
Industry insiders say someone plans to order a private yacht soon that will exceed 200 metres.
Renowned designers such as Donald Starkey have produced such a 200 metre yacht concept. Berkeley March, another yacht architect, told CNN in 2010 that his concept 200m boat could cost up to Dh3.67bn to build, "depending on the needs of the clients".
According to Mr March, the yacht, known only as "Project 1000", could be in the water by 2015.
The plans, drawn up for Emocean Yacht Design based in Belgium, call for a drive-in garage, two 30-metre day boats, a helipad with a hangar, 10 VIP suites and 22 guest suites.
Superyachts are generally defined as being at least 30 metres long. The market is expanding along with the size of the boats and Abu Dhabi investors have been positioning themselves by purchasing whole shipyards in Europe in recent years to secure expertise and tap into a growth market.
Abu Dhabi Mar owns the French firm Constructions Mécaniques de Normandie (CMN) and Germany's Nobiskrug and also has a stake in the civilian shipbuilding operations of Germany's Howaldtswerke-Deutsche Werft, giving it a broad portfolio that comprises not only yachts but commercial and naval ships as well.
"The boat-buying populace is being led now by the Middle Eastern people, by the Russians and the Americans," says Russell Crump, the yacht sales director at Yachting Partners International, a yacht brokerage house.
"We're seeing green shoots in the economy and that has spurred people on to say maybe this is the time to buy because as these green shoots get bigger the prices will start getting higher and higher."
"2013 is not the best year ever but I would describe it as buoyant and I think momentum in the market-place will carry on," he adds.
"I think any savvy brokerage house is going to be looking forward to the next three years with a lot of optimism."
The current global fleet of superyachts amounts to 4,181 boats, according to Boat International, a superyacht magazine. Last year, there were 488 such yachts under construction worldwide, and so far this year there are 469 yachts being built.
As the average size of the vessels is increasing, the gross tonnage of yachts is also growing year by year. When Boat International began compiling its list of the world's top 100 largest yachts in 1990, the smallest was 45 metres long. Now the smallest is at 77 metres. At present, there are 27 superyachts more than 100 metres in length and 19 more in construction. In 1983, there were just five.
A yacht of 100 metres or more will set you back at least €200m. And the running costs can amount to some €2m per year.
The mega-wealthy could have afforded to buy new yachts throughout the crisis but with the world pulling out of the downturn, they now feel freer to engage in conspicuous consumption on such a scale again.
"I don't think any of the money at the top end went away but I think a lot of people either had priorities elsewhere and were focused on their businesses or they did not want to be seen to be spending the money when they were having to lay off workers at their companies, perhaps," says Mr Thomas.
"It's not the best image to project. But gradually we're coming out of that and predictions are that the brokerage market has been pretty strong this year, as strong as any year since 2008."
Most yachts more than 80 metres long these days have helicopter landing pads as a standard feature. Two or three-seater submarines are becoming increasingly popular.
"If you want to build the best superyacht ever you can do what you like because you've got all the space in the world," says Mr Crump.
"Provided you've got the money, any designer and any shipbuilder will have the time and the ideas. You can do absolutely anything. I heard the other week that someone's putting a seaplane on their yacht." Marine architects are also developing new designs for tenders - the smaller boats used for ferrying people to and from the yachts.
"I think on the larger yachts we'll see clever ideas for tender launching and getting in and out of the tender, it can become quite difficult in the big sea. We might see some funky tenders come out or lot of tenders, one fast one, one passenger one," says Mr Crump.
The bigger the yachts become, the more important the tenders, because many of the most exclusive jetset resorts are too small to offer berths for the new giants. If the owners and passengers want to avoid commercial ports, which are not the most romantic or attractive locations, they will need to anchor out at sea and use tenders to reach trendy harbours such as St Tropez in France or Porto Cervo in Sardinia.
But many new yachts offer their own on-board seafront experience. New designs permit the stern to be folded down to form a platform on the water.
"You can have a big beach club and a swimming pool down there, with a sauna and massage and steam rooms," says Mr Thomas.
"The idea of a big beach club cum spa area is becoming very popular.
"Traditionally on older boats you'd have technical space or a tender garage at the rear but now they're being moved elsewhere," he says.
"You end up with an amazing guest area, they can sit there and sunbathe by the water rather than being cooped up at the top of the yacht."
At some point, the quest for ever bigger yachts is likely to come to its natural conclusion, say analysts.
"The amount of volume you have with anything over 100 metres is so big that it becomes very impersonal, you just end up with a lot of boat that never gets used," says Mr Thomas.
German yards such as the family-owned Lürssen, HDW, Blohm und Voss and Abeking & Rasmussen are the market leaders for superyachts but Dutch rivals are scaling up their production capacities. Italian companies such as Fincantieri are also in the market but at the smaller end.
China has also started building superyachts but its yards still lack the reputation to attract many buyers.
"The respect isn't there for Chinese yachts," says Mr Crump.
"If you're a discerning billionaire, you go and buy a Lürssen or a Blohm und Voss or a Fincantieri because you can afford to do it. To be frank, if you're buying a 100-metre boat for €200m, it doesn't matter whether it costs €200m or €250m, you might as well have the brand behind it."
It is a market Abu Dhabi, home to the yacht builder ADMShipyards, is keen to expand in.
Mr Crump says he believes Abu Dhabi investors are currently in negotiations with some of the biggest shipyards in Europe.
"A lot of expertise goes into building a shipyard, to get it right you need the expertise and that has been growing in Germany and Holland and Europe, so you've got to bring those guys in and they're expensive.
"Rather than building in the Middle East and bringing all the technology there, it makes sense to keep the technology where it is, keep the brains where they are, and own it."
business@thenational.ae
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Company info
Company name: Entrupy
Co-founders: Vidyuth Srinivasan, co-founder/chief executive, Ashlesh Sharma, co-founder/chief technology officer, Lakshmi Subramanian, co-founder/chief scientist
Based: New York, New York
Sector/About: Entrupy is a hardware-enabled SaaS company whose mission is to protect businesses, borders and consumers from transactions involving counterfeit goods.
Initial investment/Investors: Entrupy secured a $2.6m Series A funding round in 2017. The round was led by Tokyo-based Digital Garage and Daiwa Securities Group's jointly established venture arm, DG Lab Fund I Investment Limited Partnership, along with Zach Coelius.
Total customers: Entrupy’s customers include hundreds of secondary resellers, marketplaces and other retail organisations around the world. They are also testing with shipping companies as well as customs agencies to stop fake items from reaching the market in the first place.
Naga
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Day 4, Abu Dhabi Test: At a glance
Moment of the day Not much was expected – on Sunday or ever – of Hasan Ali as a batsman. And yet he lit up the late overs of the Pakistan innings with a happy cameo of 29 from 25 balls. The highlight was when he launched a six right on top of the netting above the Pakistan players’ viewing area. He was out next ball.
Stat of the day – 1,358 There were 1,358 days between Haris Sohail’s previous first-class match and his Test debut for Pakistan. The lack of practice in the multi-day format did not show, though, as the left-hander made an assured half-century to guide his side through a potentially damaging collapse.
The verdict As is the fashion of Test matches in this country, the draw feels like a dead-cert, before a clatter of wickets on the fourth afternoon puts either side on red alert. With Yasir Shah finding prodigious turn now, Pakistan will be confident of bowling Sri Lanka out. Whether they have enough time to do so and chase the runs required remains to be seen.
If%20you%20go
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Email sent to Uber team from chief executive Dara Khosrowshahi
From: Dara
To: Team@
Date: March 25, 2019 at 11:45pm PT
Subj: Accelerating in the Middle East
Five years ago, Uber launched in the Middle East. It was the start of an incredible journey, with millions of riders and drivers finding new ways to move and work in a dynamic region that’s become so important to Uber. Now Pakistan is one of our fastest-growing markets in the world, women are driving with Uber across Saudi Arabia, and we chose Cairo to launch our first Uber Bus product late last year.
Today we are taking the next step in this journey—well, it’s more like a leap, and a big one: in a few minutes, we’ll announce that we’ve agreed to acquire Careem. Importantly, we intend to operate Careem independently, under the leadership of co-founder and current CEO Mudassir Sheikha. I’ve gotten to know both co-founders, Mudassir and Magnus Olsson, and what they have built is truly extraordinary. They are first-class entrepreneurs who share our platform vision and, like us, have launched a wide range of products—from digital payments to food delivery—to serve consumers.
I expect many of you will ask how we arrived at this structure, meaning allowing Careem to maintain an independent brand and operate separately. After careful consideration, we decided that this framework has the advantage of letting us build new products and try new ideas across not one, but two, strong brands, with strong operators within each. Over time, by integrating parts of our networks, we can operate more efficiently, achieve even lower wait times, expand new products like high-capacity vehicles and payments, and quicken the already remarkable pace of innovation in the region.
This acquisition is subject to regulatory approval in various countries, which we don’t expect before Q1 2020. Until then, nothing changes. And since both companies will continue to largely operate separately after the acquisition, very little will change in either teams’ day-to-day operations post-close. Today’s news is a testament to the incredible business our team has worked so hard to build.
It’s a great day for the Middle East, for the region’s thriving tech sector, for Careem, and for Uber.
Uber on,
Dara
