|
|
 |
|
| Best Practices: Banker's Agenda |
Seafaring Financiers
Michael Verdon
11/01/2004
|
In 1999, Tim Smith had a flash of genius that ultimately led to a year of
intense financial frustration. This commercial real estate developer and
longtime yachtsman from Raleigh, N.C., came up with a design idea that even the
most seasoned shipyards had missed—a yacht that is wheelchair accessible. “We
saw it as an extension of our building business,” he explains. “All of our
buildings have to meet ADA regulations, so we decided to build a yacht as close
to those as we could.” Smith commissioned a yacht designer to draw up plans,
mandating necessary items such as ramps and elevators for a 154-foot vessel that
would eventually be called Genesis.
| The Genesis project is an example of a new type of service that some
private banks are offering: broad- ranging, expert advice. |
Attracted by the euro-to-dollar exchange
rate at that time along with the abundance of yacht-building talent, Smith and
his project partners decided to construct the Genesis in the Veraggio region of
Italy. Rather than work with established Italian shipyards such as Benetti and
CRN, they set up a corporation called North American Yacht and Shipbuilding to
independently manage the undertaking. When he attempted to arrange financing for
the $21 million project, however, Smith found only frustration. Admittedly, his
proposal was a tough sell: Not only did he and his partners have minimal
experience in the idiosyncratic world of yacht building (the two-year build
would require a labor force of 140 craftsmen), but they wanted to market an
untried concept in yacht design. There was no guarantee he would find a buyer,
and, to make matters worse, he planned to build offshore.
After 12 months of
rejection, help eventually came from Lisa Verbit, senior vice president at Bank
of America’s Private Bank in Fort Lauderdale, Fla., who set up a meeting between
Smith and the bank’s underwriters. “Initially they were not too thrilled with
the idea,” Verbit recalls. “But I knew if they met Tim and his partners, they
would see clients who had really done their homework.” A loan for $12.5 million
was duly approved.
 Ultimately, Verbit would spend thousands of hours on
Genesis over the two-year build cycle, working with lawyers, bank officials and
Smith and his partners to keep the project on track. “She was instrumental,”
Smith recalls. “We talked just about every other day. If it wasn’t for her, it
probably wouldn’t have gotten done at all.”
Verbit’s enthusiasm for and
dedication to the Genesis project is an example of a new type of service that
some private banks are offering: broad-ranging, expert advice. Whether their
customers require guidance on the acquisition of a Vermeer painting, or some
practical tips on hiring a crew for a personal jet, each private bank hopes to
be a comprehensive, first-call advisory resource. Specific to the purchase,
construction and financing of yachts, the range of service and expertise varies
among private banks, with many focusing more on creative ways to finance yacht
construction or purchases than on the minutia of yacht ownership. However, as
with their other advisory services, the banks do acknowledge the niche needs
that surround yacht construction and ownership, and are making efforts to meet
them.
“What we bring to the table is an understanding of the yacht market
and the various issues that come into play,” Verbit explains. “Over the last 10
years, we’ve seen mistakes that people have made. Some even had to finish
building a yacht in a bankrupt yard. We can help clients understand what is
important, and how to avoid pitfalls.”
Floating Loans
Avoiding the
pitfalls requires a level of expertise that the average private banker does not
possess. Custom yacht builds are quite complex, especially when, like the
Genesis project, they occur thousands of miles away in foreign yards. Closing
cycles can take anywhere from six weeks to six months, and involve a small army
of attorneys, naval architects and yard officials.
|
|
|
|
|
|
|
