By Request: How Much Did MON TIKI Cost vs How Much is MON TIKI Worth?
In my previous post I mentioned that we were having the boat surveyed for insurance purposes prior to launch.
My chief concern in having the boat insured is not loss, but liability. If you think minor a fender-bender in your car is appallingly expensive to fix, that’s nothing compared to minor gelcoat scuff, and in even merely launching MON TIKI there lies the unlikely, but present possibility of mayhem, which is to say that between the slipway and open water there are about 30 boats I have to not hit.
But contrary to what some of you have experience with automobile insurance, the lions share of the cost in a marine policy is not be loss and damage (what is referred to as “comprehensive coverage” for an auto.) No, the majority of your premium will pay for your liability coverage, with loss and damage as an add-on that (for reasons I don’t completely understand) costs less when bought as a package.
Now originally our insurer had offered to extend our “builder’s risk” policy (covering labor and material on to the water along with liabity, something called harbor coverage, so we could finish our fitting out and sea-trialing, on the Coast Guard’s assertion that the vessel had been built in accordance with the plans approved by the USCG Marine Safety Center and that she was seaworthy.
But in the Coast Guard’s statement letter they went out of their way to point out that the Coast Guard was in no way appraising the value of the boat, and that a survey should be conducted to appraise the insurance value of the vessel.
Suddenly insurance underwriter got cold feet and wanted a survey.
Now this is sort of interesting. When the boat was on land and under construction the insurance company was happy to insure the build against lost for the value of rent, materials, labor, design licensing fees, engineering consulting; in short, the total cost of the build, my time and risk not included.
But the eve of the launch the underwriter suddenly decided that the value of the vessel had to be assigned by a survey; that he couldn’t even recognize the value of materials, labor, etc, and never mind the value added of turning all that stuff into an actual boat.
And so last weekend’s launch was scrubbed, and this week I’ve been in the position of being that asshole who calls you on the phone and says, “I need it yesterday.”
And so yesterday the surveyor came by and saw the same thing our USCG safety inspector’s been seeing for the last eight months: a boat that’s been built in accordance with the rigor standards set forth in section 46 of the US Code of Federal Regulations, a plywood and epoxy catamaran built from the best materials and and to the ABS Offshore Racing Yacht Cold-Molded rules.
All of the previous paragraph can be demonstrated, enumerated and accounted for empirically. We have our 20 pages engineering submission to the USCG Marine Safety Center, we have ATM-certified lab results for our materials, we have the boat herself, with all her joinery readily visible.
But as a finished boat what is that all worth?
The surveyor works for me. He got paid with a Montauk Catamaran Co. LLC check. He’s there to give me the answer I need.
But he also has to have a rational basis for that answer. The cost of labor and materials might be a starting point, but in this case, perhaps not as good a starting point as one might think.
So then, what is MON TIKI worth?
The miracle of capitalism is that merely counting labor and materials costs does not fully represent the value of the object created.
Lots and lots of theories have emerged for how to account for this difference, but the method most fully accepted today is the Free Market System, wherein the value a good or service is determined by what someone is willing to pay for it; and when a value is to be assigned absent a transaction, an appraiser looks at sale of comparable items.
Now here’s the rub.
It’s axiomatic that one-off builds of unusual designs will not resell even for the cost of materials, let alone material and labor, let alone materials labor and a profit. The reasons for this are two-fold:
An unusual design is unusual because there is not a demand for it in the market. The two reasons it can still make sense to build an unusual design is because: a) it may perform as well or better than a more readily available design at a lower cost, and; b) it may have capabilities or characteristics that are uniquely appealing to the builder that are not broadly appealing to the market.
The second is that there is less surety of the build. As a one-off from a builder with no track record, the buyer assumes more risk that something hasn’t been done right, and that he’ll have make corrections sometime down the line.
On the other hand, it’s a readily observable fact that USCG Inspected Vessels sell at a premium over uninspected vessels. Again the reasons are two-fold:
As an Inspected Vessel, the boat in question has been regularly inspected, and warranted as fit for the service intended.
As an Inspected Vessel the boat has a COI that designates here legal carrying capacity and legal routes. This gives a perspective buyer a way to make a good guess the vessel’s earning potential.
The reason we elected to build MON TIKI is that we believed under a worst case scenario that we could build her for about half of what it would cost us to buy a a well-found second-hand Inspected Vessel of similar carrying capacity and we believed there were aspects to the design that were of unique benefit to our business plan and our private enjoyment of the boat in the off season. (And also I really wanted to do it.)
Which is why I say it’s an interesting question to fix a value. MON TIKI will have a COI for 49 passengers while also offering accommodations for 4-6 for extended sea-going journeys. To buy a vessel of similar capacity new would cost about $650,000.
But we didn’t spend anywhere near that much constructing MON TIKI. The very reason we chose the TIKI 38 design is because she offers those capacities for a fraction of the cost. By virtue of her Polynesian-inspired design, MON TIKI has the same sea-going and passenger carrying capacity of a Gold Coast CG 54, but at about half the weight. (Feel free to draw an inference there if you are so inclined.)
At any rate, as I’ve been typing the surveyors report has arrived via email and been forwarded to our broker who in turn forwarded it to the underwriter who now wanted to see a certificate of insurance for the shipyard that’s doing the launch. The same Travel-Lift that will launch MON TIKI carried $5M power cruiser across the yard yesterday, and I’ve never been asked to show a yard’s insurance to my insurance company before. But once underwriters start thinking anything “non-standard” is going on, they get flighty. The last exchange was that the yard is faxing their certificate of insurance to the broker, who will then fax it to the underwriter. Oy!)
After getting the the certificate of insurance from our boatyard, the underwriter decide he wanted motor vehicle records to cover the launch. As outlined in a previous post, the maritime insurance industry has found that a person’s driving record is, as I put it to my insurance agent when she told me about the underwriter’s request, a good proxy for general assholery (or for the more gentile reader, risk.)
But at this point she put her foot down.
“Enough!’ she told the underwriter. “Who do you even want motor vehicle records for? The shipyard owner? My client? The guy running the travel lift? This doesn’t make any sense! Stop it!”
And he did.