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Superyachts on the auction block

Yacht Auction Group specializes in megayachts that fetch $2 million or more

Yacht Auction Group specializes in megayachts that fetch $2 million or more

So you think it’s a pain trying to sell a 19-foot center console? Imagine unloading a 122-foot megayacht.

Kelly Drum, a Fort Lauderdale, Fla., marina owner and broker of yachts and real estate, offers an alternative to hanging a for-sale sign on that yacht. He and a group of partners who deal in high-end pleasure boats and luxury properties have formed Yacht Auction Group LLC to offer yachts at auction … but not just any yachts.

“We’re trying to stay in that $2 million and above market,” says Drum.

On Oct. 27 the firm auctioned the 122-foot motoryacht Bon Bon for a cool $4.5 million. Add to that a 10-percent surcharge dunned to the buyer to cover marketing and other costs, and the sales price comes to almost $5 million.

Designed by John Overing, the aluminum-hulled Bon Bon was built as a 110-foot trideck in 1993 by Flagship Marine Corp. of Biloxi, Miss., then extended in 1999 to 122 feet.

The auctioneer, J. Craig King — president of J.P. King, a 90-year-old company that specializes in the auction of luxury assets — says the yacht had been listed, unsold, at $6.9 million. To Drum’s knowledge it was the first time a yacht of that size had been sold at auction other than a bankruptcy sale.

And why not, Drum asks. Drum Realty, his real estate company, which brokers some of Fort Lauderdale’s hottest waterfront properties, auctions luxury homes from time to time. Auctions are a widely accepted way of disposing of world-class art. In fact, most luxury assets are commonly sold at auction, he says, so why not yachts?

Bon Bon’s owner, Steve Hudson — owner of high-end yacht brokerage firm International Yacht Collection and a partner in Yacht Auction Group — set a minimum bid of $3.8 million for the yacht. He was pleased to get $4.5 million. “Absolutely,” he says. “The market told us what the boat’s worth, and that’s what it’s worth. … I have over $4.5 million in my pocket. I can go and shop a lot with that.”

That doesn’t mean he wasn’t a little nervous before the start of bidding. He would have preferred a few more bidders. Three registered; two actually bid. Yacht broker Kevin Merrigan —acting as agent for Bon Bon’s new owner, James Glidewell of Newport Beach, Calif. — took his bidding instructions by cell phone from Glidewell and placed the winning bid.

The rules required bidders to plunk down a $100,000 cashier’s check before the auction, to be returned if they didn’t submit the high bid. Drum says 10 percent of the sales price was due from the winning bidder right after the auction. Closing was to be 20 days later.

“It’s all cash, no contingencies,” Drum says. “It’s an as-is, where-is deal. There’s no dickering. Everybody knows up-front the way the program is going to work. It closes very quickly.”

Buyers have the chance to sea-trial and survey the boat, and do all the other due-diligence work before the auction. Yacht Auction advertises the boat globally, and the auctioneer can take bids online from bidders who can’t be there. An owner can expect to sell a boat within 60 to 90 days of contacting the auction company, Drum says.

In his view the auction has a clear advantage over traditional sales, which often draw buyers and sellers who are not strongly motivated to close deals. This can lead to a lot of fruitless negotiating, and boats can stay on the market at unrealistic prices for years. When sellers put their boats up for auction, that says, “I am ready to sell.” When buyers put up earnest money and invest time in due diligence and show up to bid, that says, “I am ready to buy,” Drum says.

Yacht brokers aren’t excluded from the auction process. In fact, they are encouraged to use it to help sell boats for their clients, Drum says.

They still get a commission, which he says is very, very competitive.

Drum’s partners include boat show impresario Kaye Pearson, president of Yachting Promotions and organizer of the Fort Lauderdale International Boat Show; auctioneer King; and yacht broker Hudson’s International Yacht Collection.

Drum says a boat that has been well-advertised and draws bidders that are qualified and serious should sell at market value. “In my mind, this is one of the purest ways to find the market value of an asset,” he says. Still, nothing is guaranteed. A boat owner could hear, “Going once, going twice, sold,” for little more than the advertised minimum. “It’s not for the faint of heart.”

Yacht Auction Group, Fort Lauderdale, Fla. Phone: (800) 479-2856. n