"I don’t know of a yacht with a good pedigree launched in the last 15 years that hasn’t proven to be a substantial positive investment for its owner," agrees James Gilbert, editor-in-chief of ShowBoats International magazine.

"It’s a question of supply and demand," says Lisa Verbit, senior vice president of the Private Bank, a division of the Bank of America. "Manufacturers of production yachts tend to spit them out so fast, they’ve become a commodity. Their resale values are subject to greater volatility. Pedigreed yachts are in a smaller universe, and tend to hold their value."

Profitable Pedigree
The dozen-odd pedigree yards are located in North America and Europe, and include resale-friendly brands such as Feadship, Delta, Benetti, Lürssen, Royal Denship, Perini Navi, Burger, Christensen, Trinity, Lazzara, Amels and Abeking & Rasmussen, among others. It is virtually impossible to compare yard to yard, but generally the U.S. yards (with a few notable exceptions) build yachts less than 150 feet, while a number of European yards specialize in superyachts more than 150 feet. The bottom line, however, is the yard’s reputation.

"Having a major brand name on a yacht supports its value because the yard has an established track record of building quality products," notes Phil Friedman, president of Port Royal Group, a consulting firm in Ft. Lauderdale, Fla., that works with yacht owners. "The buyer is putting millions in the hands of the yard, and the only real assurance you have is its history and what it has built before. That’s why its pedigree is so crucial."

But Gilbert notes that a yacht’s pedigree goes beyond its yard of origin. "The longevity and reputation of the company is certainly a huge contributing factor," he says. "But it also extends to the naval architect and designer. It’s not like a luxury automobile or jet, which can’t be structurally altered or customized. In the course of building a yacht, you can make 10,000 decisions that either add to or subtract from its pedigree."

Details such as the interior’s stonework and woodwork, and even the name of the designer, have an impact on the resale value. The same applies to its systems. "Yes, the reputation goes up if the owner has a Picasso on board," Gilbert says. "But it’s also reinforced by one captain bragging to another about the high-tech acoustic insulation in his yacht’s engine room."
 
Such extreme customization explains why yachts are typically referred to by name. "You won’t find a car or plane with a name like Ocean Princess," says Gilbert. "Yachts develop distinct reputations, even personalities, within the marketplace."

But Gilbert adds that the smarter yards build up their own pedigrees in order to maximize the value of existing yachts. "Most build only three or four new boats each year, so they’re not really marketing to sell new product," he says. "What they’re really doing is supporting their used boats by establishing the pedigrees. That keeps them as sound investments for resale, and existing customers will come back to them for new builds."

Gilbert also notes that many yacht buyers don’t want to wait two or three years for a new build, so the used pedigree yacht market remains strong. "The secret to the resiliency of mega-yacht pricing is time," says Gilbert. "The higher a yacht’s pedigree, the more time it probably took to build, and by extension, the more time it would take to recreate the project."
Friedman notes that prices for older pedigree yachts are often directly connected to the pricing structure of future builds. "You’re likely to pay more for a 2001 Feadship, for instance, because its value has been dragged along by the pricing for a new 2004 build," he says. "That’s not just Feadship. It’s a common practice."

Both Friedman and Gilbert emphasize that pedigree status is not easy to come by. "You don’t invent it overnight by sleight of hand," says Gilbert. "You earn your stripes by building dozens of boats for happy customers over a long period."

A Lineage Restored
Burger’s long-standing reputation as a boat builder, dating back to the 1860s, was one reason why David Ross chose to invest in the ailing yard in 1992. "Burger has the longest, deepest pedigree of any shipyard in North America," he says. "It also had fourth- and fifth-generation craftsmen working there. We found both of those factors very attractive. "

Those craftsmen had all been laid off when the previous owner closed down the yard in 1990, notifying workers by fax that Burger was out of business. But the craftsmen were so dedicated to the yard that, 16 months later, 147 of the 167 original workers told Ross they would leave their new jobs and come back. "You can’t buy that kind of dedication," says Ross.

Despite the pedigree and workforce, Ross had his challenges. "I want to elevate the brand’s reputation, while modernizing the fleet," he says. "You can’t build your father’s Burger forever."

A decade after taking over, most industry analysts agree that Ross is well on his way to accomplishing his mission. The yard has launched 20 new yachts and its workforce has grown to 230. Ross also recently announced a $5-million expansion. "We’re adding 42,000 square feet of production space, which will allow us to move into yachts up to 165 feet," says Ross. "We will not abandon the 100-foot range that we’re synonymous with, but we feel it’s a natural move into a segment where the Europeans have dominated."

Last summer, Burger launched its largest yacht ever, the 126-foot Sis W, built for drugstore magnate Charles R. Walgreen, 97 and wheelchair-bound. Walgreen has said that he will spend his remaining years on the yacht. "This was his fourth Burger," says Ross. "He was involved in every stage of the design."

Ross said it took 15 craftsmen just over a year to finish the exterior of the aluminum hull, and more than 30,000 man-hours to complete Sis W. "Our project manager went around in a wheelchair to make sure every corner was accessible," says Ross. It’s that kind of attention to detail, he says, that builds a yacht’s pedigree.

The Long View
William Smith of Trinity Yachts saw the potential at the upper end of the yacht market, more than 150 feet, in the late 1980s. Trinity had been building commercial and military vessels, many longer than 300 feet, from its Higgins shipyard in New Orleans for decades. "We felt that we could make a horizontal transfer of technology from our military ships to the yachts," says Smith. But even Smith admits that it took the company 10 years to become an "overnight" success.

"We didn’t have the time-honored tradition of many of the European builders, so we had to do what Lexus did—build a name very fast," he says. By all accounts, the branding exercise has been successful, and Trinity is one of the hottest custom builders in North America.

Part of that has come from the yard’s reputation for quality. Smith says that Trinity saw an opportunity in the early ’90s to build more safety features into its vessels than do most other shipyards. "We built to international standards like ABS and SOLAS like our commercial ships," says Smith. "That includes safety features like watertight bulkheads, as well as advanced fire-fighting and other safety systems. Structurally, we build one of the safest yachts on the water." One example was Trinity’s Whale Song, a 94-foot, steel-hulled cruiser built to Ice Class ABS standards, which allows the owner to chase whales through Antarctic waters.

In 2000, Trinity began to ramp up the production of yachts more than 150 feet long, a segment ignored by most North American yards. Since then, its order book has consistently sold out, and its workforce has expanded from 150 to about 450.
 
Smith has also seen the line’s pedigree boom in the last three years. "We’re now getting the critical mass," he says. "We have seven new builds under way, including a 180-footer, and four are repeat clients. You must be doing something right when that many come back to you."

He also notes that early builds like Noble House, launched in 1997, sold for the fourth time at last year’s Ft. Lauderdale boat show for more than the owner paid for her. "When you start getting to the third guy getting more than he paid for it, it says something about the reputation of the brand," he says.

The Dutch brand, Feadship, can also make that claim, having launched more than 200 yachts since the 1970s. The brand is synonymous with luxury custom yachts, the same way "Xerox" is often used to refer to any photocopier. Feadship started in 1949 as a post-war alliance of Dutch shipyards that targeted the U.S. market. The name stands for "First Export Association of Dutch Shipbuilders."

Though its first decade in the U.S. market was rocky (its first exports were a 35-foot cruiser and 22-foot sailboat), by the 1960s it had established itself as the premier brand of luxury yachts. Its register reads like a Who’s Who of famous yachts. Henry Ford cruised the world in his Feadship, and Malcolm Forbes’ The Highlander entertained presidents and royalty, and was said to be the spawning ground of many corporate mergers.

Feadship has retained its position as the pinnacle of pedigrees (most of the Dutch and German yards are very highly regarded as larger superyacht builders), though the average size of its build has moved from 30 feet to 170 feet. Feadships, which can measure up to 280 feet, have become increasingly complex, both in design and construction. "Since the ’70s, we’ve launched about four boats per year," says Hein Velema, chairman of the board. "But the number of man-hours and overall sales have increased by 10 percent each year."

Though the Feadship name has been around for a half-century, its associated shipyards, De Vries and Royal Van Lent, have been building yachts for even longer. "They have the same number of workers and build about the same size yachts," says Velema. "But there is an intense competition between the two yards that benefits everyone. Each one wants to be seen as the best builder."

Intellectual Capital
The glue holding the two companies together is De Voogt Naval Architects, the driving force behind Feadship in its early days, and now the conduit of information between the yards. "We have a staff of 65 naval architects, designers and mechanical engineers to cover every aspect of engineering and design," says Velema. "There is a lot of knowledge flow from one shipyard to another."

Velema believes that is why Feadship has not lost its edge in 50 years. "Many demanding clients come to Feadship, wanting things that have never been built before," he says. "We are used to forming new ideas." That has happened time and again in use of materials, says Velema, in hull shape, and noise and vibration reduction. The company has a long list of practical breakthroughs.

German shipyard Lürssen is also respected for the technology and innovation in its yachts. But the brand is known for size, rather than quantity of builds, and its reputation has developed over the last 15 years with a succession of famous yachts, including 2003’s largest new launch, Octopus, at 413 feet. According to ShowBoats’ annual Order Book, which tracks yacht builds, Lürssen has only seven builds under way, but the average size of each build is a colossal 284 feet—making the builder the undisputed world leader in terms of hull length.

Lürssen started flexing its yacht-building muscles in the 1990s (taking the yacht world by storm in 1999 with Al Salamah, the world’s largest yacht at 459 feet), but the Lürssen family has been building boats since 1875. Chairman Peter Lürssen says the company was heavily involved in military shipbuilding until the late ’80s, when it decided to branch into yachting. Now, yachts account for about 60 percent of its business.

How has it built a pedigree that is now the envy of many older yards? "We have a strong engineering background," says Lürssen, noting that 300 of the 1,000 employees are engineers. "We put the engineering innovations of the larger yachts onto the smaller yachts we build, so everyone is well-served."

The second path has been the yard’s custom approach. Of the 13 yachts launched since 1988, no two look alike. "You can pull into any port and tell most other builders’ yachts," says Lürssen. "But our yachts are all unique." Regarding his brand name’s fast track to pedigree status, Lürssen says simply: "The market has recognized that we can build what the client wants."

"THE BUYER IS PUTTING millions in the hands of the yard, and the only real assurance you have is the history of the yard, and what it has built before. that’s why its pedigree is so crucial."

That’s clearly an understatement. Compare the extremely high-tech, almost militaristic hull of 233-foot Skat, delivered last year to a software exec, with the gigantic 413-foot Octopus, the pride and joy of Microsoft cofounder Paul Allen. Octopus is rumored to contain the most fantasy-inspired features of any yacht afloat, including hull space for a 65-foot submarine and 65-foot tender, as well as landing pads for two helicopters. There’s also said to be a recording studio and cinema—the stuff of dreams.
Which is the bottom line for most yacht owners. "Yachting is largely a market of images," says Port Royal’s Friedman. "People want to project themselves in certain ways, and the different brands bring different images to mind." The true beauty of a pedigree is that you can trade one image for another—often for more than you paid for it.

Additional Information
 Burger Boat: History of an American Pedigree
 Pedigree Also Pays in Financing