Used cat market

[EarthBM]

Wiley Sharp of Denison puts out pretty useful quarterly reports on brokered cat sales. The latest is here: Q2’2019

I put the data from Q1’2017 to Q2’2019 into my supercomputer and made some charts... 

Only used cats 49’ LWL and longer (cuts out a lot of 47’-48’ FPs, Leopards, and Lagoons since this is SAILING Anarchy). Also removed 3 sales that were on the market more than 5 years. This left 116 sales over 10 quarters.

Chart 1: Depreciation stops at 20 years and at $200k. The two yellow dots are both Privilege 585s both sold in Jan’19, I suspect there is something dodgy about those sales, both in France. Otherwise pretty clean data.



Chart 2: Average years on the market since listing. In practice probably longer, because of de-listening and re-listing. At over one year this is the true deadweight cost of selling a cat. Brokers do work for their commissions (some more than others). The difference between the offer price and the listing price is not a real cost — listing price is just a guess and a marketing signal, (accepted) offer price is the true market price. But cats spending a year until the clearing price is found, accumulating depreciation, dock fees and maintenance, is the real economic loss. So what Wiley Sharp is doing in disseminating these data is a real service to buyers and sellers, since more information = faster decisions.



Chart 3: Sales have picked up in 2019 from 10 per quarter to 15-20. This could also just be more sales getting input into YW’s sales database.



Chart 4: Average selling price. This picked up in Q1’2019 on the sales of 3 Outremer 5Xs (yum!), and 3 somewhat dodgy sales of Lagoon 620s (Venezuela, Turkey, and Spain — if you need to get your money out of Venezuela pay $1.5m for a Lagoon, but I don’t know). Q2’2019 is the lowest price quarter.



Interestingly 55’ Wormwood Avalon appears to have sold in May this year for almost $300k. Another one that I quite liked was Pinta 52’ tri, sold in March for $225k after almost 3 years on the market. I almost went to see it, but “granite countertops” stopped me.

 

[EarthBM]

My conclusion on Avalon was that it’s unsellable as well. Live and learn. Unless it’s some kind of tax donation/write-off play.

 

[longy]

NFW Avalon sold for that price. We looked really hard at buying her, and even a blind squirrel would have seen all the issues. 9 blind men surveying the boat would have concluded she was a major project boat, if not a white elephant.

 

[KC375]

NFW Avalon sold for that price. We looked really hard at buying her, and even a blind squirrel would have seen all the issues. 9 blind men surveying the boat would have concluded she was a major project boat, if not a white elephant.

I really liked the idea of Avalon.

Looked at that listing many times.

I guess reality did was not kind.

 

[longy]

It's a V ERY n nice design, just just needs to be a new build.

 

[Solarbri]

Another one that I quite liked was Pinta 52’ tri, sold in March for $225k after almost 3 years on the market. I almost went to see it, but “granite countertops” stopped me.

Ha! I’m flying to Italy in a couple weeks to sail with my buddy who bought her back to western Mexico. 

Pretty fucking excited about that, I am!

 

[Doug Halsey]

Chart 1: Depreciation stops at 20 years and at $200k. The two yellow dots are both Privilege 585s both sold in Jan’19, I suspect there is something dodgy about those sales, both in France. Otherwise pretty clean data.

View attachment 322821

How do you determine the depreciation from this chart? 

 

[xonk1]

There are plenty of ways to lose money. Boats just happen to be fun!

 

[EarthBM]

How do you determine the depreciation from this chart? 

A couple of ways.

1. Fit an exponential or log regression line. 

2. Paraphrase Anna Karenina: “Happy catamarans are all alike; every unhappy catamaran is unhappy in its own way.” Meaning that the most expensive boats at any age are comparable over time, so  by drawing the green boundary line you are comparing apples to apples, with the understanding that sometimes things go pear-shaped and you get on the red line trajectory:



3. Draw a downhill skier in Aspen, CO:

 

[Doug Halsey]

A couple of ways.

1. Fit an exponential or log regression line. 

2. Paraphrase Anna Karenina: “Happy catamarans are all alike; every unhappy catamaran is unhappy in its own way.” Meaning that the most expensive boats at any age are comparable over time, so  by drawing the green boundary line you are comparing apples to apples, with the understanding that sometimes things go pear-shaped and you get on the red line trajectory:

View attachment 322906

3. Draw a downhill skier in Aspen, CO:

View attachment 322905

How do you know the depreciation without knowing the original price? Are you assuming they are all the same?

 

[KC375]

...

2. Paraphrase Anna Karenina: “Happy catamarans are all alike; every unhappy catamaran is unhappy in its own way.” Meaning that the most expensive boats at any age are comparable over time, so  by drawing the green boundary line you are comparing apples to apples, with the understanding that sometimes things go pear-shaped and you get on the red line trajector

This is the fundamental assumption that you have to make, that 35 year old cat is comparable to a 5 year old cat. I just don’t think that is true. I do think it may be true to say you can compare a 10 year old to a 20 year old.

In most (many?) established products in a competitive market there is incremental creeping upward in the “utility” of the product that is not captured in traditional “inflation or deflation metrics”. My 2010s vehicles are way more reliable, safer and better equipped than the vehicles I could buy in the 70s but none of that would be captured in simple price info.

Arguably the high end catamaran market has been “improving” much faster than established products like cars.

I would say using the above “depreciation” data for boats over 25 is nearly useless and starts to be relatively useful for boats under 20 years although each younger cohort does seam to have more “utility” so some of the depreciation would still be “less value”. So without looking in more detail at individually comparable boats – it’s hard to make the case that depreciation “flattens out” at 20.  For more validating data:

A search for >49’ and sailing cat 34-36 years old produces 2 hits, Sebago repurposed as day sailor (and insanely priced at $300, and A Spronk priced at $149K. The Spronk is really the only comparable and it is an ultra spartan plywood boat (love it for what it is but luxury it ain’t).

For 29-31 year old produces 6 hits and the first sign of a “production or series built” – the cheapest at $149k is an almost Wharram style 54’ looks like a lot of fun, a bit more comfort than the Spronk but still maybe comparable...then we move to the Lagoon 55 and the CPA 57 – both fiberglass and the interiors would not be out of place in a nice urban apartment. Neither of these two could you compare to the Spronk. The big jump up (80’ and 105’) not really comparables.

For 24 – 26 year old now getting some comparable volume with 10 hits grouped in size 51-57’ and ranging from luxury / condo end Lagoon and Privilege to spartan performance Outremer (Spronk like in sensibilities but production quality and reliability seem higher).

For 19 – 21 year old up now you have a market 25 hits and starting to be comparable with above group – some “outliers” but otherwise a grouping at the condo end (FP, Voyage, Lagoon) and a grouping around more spartan performance (Outremer and Berkstresser)

For 14-16 year old – – 25 hits, much more consistently comparables with a performance grouping and luxury grouping.

 

[EarthBM]

This is the fundamental assumption that you have to make, that 35 year old cat is comparable to a 5 year old cat. I just don’t think that is true. I do think it may be true to say you can compare a 10 year old to a 20 year old.

In most (many?) established products in a competitive market there is incremental creeping upward in the “utility” of the product that is not captured in traditional “inflation or deflation metrics”. My 2010s vehicles are way more reliable, safer and better equipped than the vehicles I could buy in the 70s but none of that would be captured in simple price info.

Arguably the high end catamaran market has been “improving” much faster than established products like cars.

I would say using the above “depreciation” data for boats over 25 is nearly useless and starts to be relatively useful for boats under 20 years although each younger cohort does seam to have more “utility” so some of the depreciation would still be “less value”. So without looking in more detail at individually comparable boats – it’s hard to make the case that depreciation “flattens out” at 20. 

Good points.

Yes, product innovation makes for faster depreciation. The question is whether a 25 year old boat A now is more different from a 5 year old boat B now than that boat B will be different from the future 5 year old boat C in 20 years time. It seems that the pace of innovation is not slowing (foils, materials, rigs), so I'd say today's 5 year old boat will depreciate just as fast or faster as the boat A depreciated over the last 20 years. 

What happens after 20 years is tricky. For large boats maintenance (think replacement sails) doesn't slow down. So I can see situations where some large (especially racing) boats just won't sell at any price. The data, however imperfect, gives me some comfort that a sensible 20y old bot will keep its value (at around $200k) if properly maintained though. 

 

[EarthBM]

But yes, the future is ever uncertain. Maybe depreciation is about to spike. There is a lot more cats about to enter the 20y+ market. Those that were built on the back of interest spike around The Race in 2000. Bought in 2000s with the optimism and the money from home equity loans. By the baby boomers (blue line in 2000s) who now became the red line and have to sell them to Gen X (blue line now):

 

[socalrider]

But yes, the future is ever uncertain. Maybe depreciation is about to spike. There is a lot more cats about to enter the 20y+ market. Those that were built on the back of interest spike around The Race in 2000. Bought in 2000s with the optimism and the money from home equity loans. By the baby boomers (blue line in 2000s) who now became the red line and have to sell them to Gen X (blue line now):

View attachment 322985

And pushing the other direction, these nasty Caribbean storms are depleting inventory of used boats.

 

[EarthBM]

And pushing the other direction, these nasty Caribbean storms are depleting inventory of used boats.

View attachment 323060

The one still floating in the upper right corner looks decent!

Caribbean storms are nothing now, they’ve affected the marked 5 and 10 years ago and will affect in 5 and 10 years just as much.

The depreciation curve is what it is.

YW and soldboats.com are doing everyone a disservice by hiding the data.

 

[KC375]

I kinda have to disagree. Irma was totally unprecedented in its damage. The entire cat market was transformed. It basically killed the Catana brand (in favor of Bali by Catana). The charter cat market has exploded. Order books were sold out in a matter of weeks. No hurricane that I know of changed the market nearly as much. And the effects will still be felt. How many "hurricane damaged" boats will try to sneak past buyers? There is a pile of garbage out there now. 

Soma seems clear Irma has had a real impact on the market in general. Why/how did it kill Catana? I can see how it created demand for the condomaran like offering filled by Bali but how did it affect the more performance segment addressed by Catana?

 

[KC375]

 I made a visit to the Catana HQ when I was boat shopping. They had about 10 brokerage boats there. As part of my visit I did a tour of the factory and the line. I was told that they were making so much money on each Bali, and they could make them so quickly, that they'd begun refunding build slot deposits for the Catanas. Factory space was finite, and whoever could fulfill charter cat orders got the contract. To speed things up they killed Catana. 

It was interesting, we were discussing the arc of Catana vs Outremer. Once upon a time they competed head-to-head in the exact same market. Catana branched into the market segment below their native market (at minimal investment) and they were slaying it. Outremer, on the other hand, went upmarket (at HUGE expense) and found a radioactive, barren wasteland. 

If the goal is to make money, then Catana made the right bet. If the goal is make great boats then GLY won. I wouldn't consider a Bali a good boat, but it is a moneymaker. 

I thought that might be the answer. I believe the most denigrated boat on SA is the MacGregor 26. While the MacGregor 65 gets some grief about structural integrity and “private jet” styling it is more of a sailor’s boat.

As I understand it the smashing commercial success of the Mac26 (and other “powersailers” >30,000 units produced) made it irrational to divert any factory space or attention to the Mac 65 (~100 units produced). {I’m sure there are folks on this forum who know the story better than I}

Sometimes the market wins while the aficionados lose.

If you are not effectively serving the “mass” market you put yourself in a dangerous position. The low cost producer that finds a way to add “quality” or high end features onto a low cost base is fatal to the niche luxury product. (cars, cameras, calculators, computers...).

Shifting the resources to maximize return on capital is the smart move. The really smart entrepreneur then goes on to say “now that I’ve got a larger scale operation how do I turn these economic advantages to serving the premium segment from a low cost base”. (Toyota/Lexus, Honda/Acura, VW/Audi/Porsche,...). Once Bali production approaches its sustainable level maybe Catana can come back with a performance offering on the back of Bali purchasing and production scale. If that happens then Outremer and many other purveyors of high end low volume Cats might find themselves in an awkward place.

In the meantime I’m not looking to buy a Bali.  

 

[EarthBM]

2017 is also the first year when Catana’s earnings turned sustainably positive, tripling its share price.

Still well below the hey days of pre-2008 (speaking of 10-20y old boats coming to the used market).

 

[mpenman]

Well said Soma. Cruising boats that sail well will far outlast the joy of a cheap buy. One nice reach on a full moon night, with the stars out, and damn, money don't matter