Vintage yachts get a new life

Fractional ownership is helping keep some of America's classic boats
maintained and in use.

By Kathryn Tully, Financial Times

March 26, 2007 -- Earl McMillen III is not a big fan of modern yachts. When
he sees them out on the water around his boatyards in Newport, R.I., or
Beaufort, S.C., it troubles him.

"The grace and form is just not there," he says. "The engines they can put
in a modern power boat will push pretty much anything, so you'll see these
big ugly monstrosities going through the water, pushing up these tremendous
wakes.

"Classic yachts were designed to go through the water easily and they're
just much more beautiful to look at. There's a lot more to going out to sea
on one of these wooden yachts than [in] a plastic boat, in my opinion."

McMillen's opinion is not surprising: He has spent the last 21 years
rescuing old yachts, restoring them and then sailing them. Over the years,
he has found others who share his passion.

While plenty of wealthy people can afford to have new multimillion-dollar
yachts built to order, one-of-a-kind vintage yachts - those designed or
launched before January 1950 - are rare and in high demand. Aside from
having a scarcity value and offering a beautiful sight cutting through the
water, these vessels are often cheaper and retain value better than their
modern counterparts.

But finding one can be a challenge. The number of classic yachts in the U.S.
is dwindling, as many in need of restoring are being abandoned in boatyards
or scrapped.

"I do a lot of traveling and digging around in old boatyards," McMillen
said. "Over the last 20 years, as waterfront real estate has become more
sought after, a lot of old boatyards have been sold to developers and any
old boats they have go with them. I've seen some wonderful boats, that
weren't necessarily in horrible shape, bulldozed to make way for the next
condominium development."

When McMillen realized 12 years ago that he lacked the cash to save more
than a few old yachts on his own, he set up a fractional ownership business,
McMillen Yachts, to rescue and restore more vessels. "A lot of people I met
were happy to write a check to get involved in what I was doing, even if
they didn't have much time to devote to this themselves," he says. "The
partnership scheme gives them access to these magnificent yachts that you
see very rarely these days, in a format that takes all of the hassle out of
it."

McMillen is mainly interested in American-built motor yachts constructed
between the two world wars, a period he thinks was a pinnacle in U.S.
design. Investing partners each pay $50,000 to $350,000 for a minimum 5%
stake in a renovation project or a boat already on the water, each organized
as a limited-liability company. As well as maintaining their ownership
stake, investors can take the boat out for at least eight days a year for a
preferred rate, or use another McMillen yacht if theirs is unavailable.

Aside from organizing crews and schedules for the boats once they are
launched, McMillen maintains the yachts and transports them. The boats spend
the summer in Newport and spring and fall in Beaufort. They are relocated to
Florida and the Bahamas in the winter. When a partner is not using one of
the three boats in service, they are available for charter.

Although other companies have followed McMillen into the fractional yacht
ownership business, he thinks that his small family business, which employs
only 30 people, including crew, is still the only one that offers this for
classic yachts.

Despite the large commitments in time and money to restore these boats,
McMillen says most of his investment partners have seen their interest
appreciate, either when that interest has been sold to another investor, or
when a boat is sold.