Despite Coronavirus Outbreaks, Cruise Ship Condos Are Gaining Steam
There are people who live on their own boats and people who share fractional ownership of a yacht and use it a few weeks per year like a timeshare. But selling off individual cabins like condo units has so far been a rare concept, pioneered by The World luxury cruise ship, which launched in 2002 and whose 165 units start around $3M apiece.
Now, though, several companies are competing in this sector. A company based in Port Canaveral, Florida, called Oceanic Resort Condos of America is launching home sales this week on the 290-foot-long Larga Vida, with an entry price point, at $298K, that even a middle-class couple might be able to afford. The ship will be based in Miami, sailing about once a month around the Caribbean, Latin America and wherever owners decide to go. Amenities include a $3M mini-submarine that each condo owner will partly own.
ORCA is an affiliate of Sophlex Marine Management Inc. The yacht will be owned by its residents, not the developer.
"What we’ve done is make the business model more affordable and regional," an ORCA spokesperson said. "We don’t cruise around the world, but just in the Americas and remain in Miami most of the time, so living aboard would be perfect. The ship cruises 54 days a year and is in port 311 days."
ORCA President Tim Levensaler will serve as the captain of Larga Vida, which translates from Spanish to "long life."
"Imagine your upscale condo building has just 50 units, five free owner's guest staterooms, a dance lounge, three meals a day, a guest gourmet chef every Friday, top-deck hot tub, gym, beauty salon, cigar bar, medical center, and, oh yes … a brand-new professionally piloted $3M sightseeing submarine that every resident gets to use," Levensaler said in a statement." And best of all, the yacht sails four days a month around the Caribbean and takes a 14-day extended cruise each year."
ORCA began taking reservations for units on the Larga Vida this week. Its 50 condo suites will be priced between $298K and $468K. At 235 to 360 SF, cabins are larger than on a typical cruise ship, the company said.
The launch is moving forward despite the coronavirus pandemic, which is actually working in favor of the company, the spokesperson said, despite ports being closed and horror stories about sickness spreading like crazy on ships. The Centers for Disease Control and Prevention has suspended U.S. cruise operations until September at the earliest, citing widespread outbreaks on vacation liners.
People want to get out of crowded cities, ORCA believes, and the Larga Vida will be protected like a fortress, with a temperature scanning system that will discreetly monitor everyone coming aboard, a HEPA-grade air filter device and an onboard saliva testing capability. A doctor will live and travel with the ship while coronavirus is a problem, the spokesperson said, and later, they will have a traveling nurse instead.
The spokesperson said confidentiality agreements prohibit ORCA from disclosing details about the ship's provenance, but that "she’s a quite new ship by vessel standards and cruises as a five-star luxury yacht. We are looking at a total of three similar size boutique ships to convert into private ownership for other Florida cities," including Tampa and Jacksonville, he said.
ORCA has determined three berths in Miami where the Larga Vida may be based but hasn't yet committed to one. People who want to reserve units can make 10% down payments now, which will be put in escrow, and then when the ship is 70% sold, complete their payments. The launch depends on when units sell out, but the company is optimistic that could be as soon as October.
"We think it's a selling point rather than a problem," the spokesperson, who declined to give his name, said of the virus. He said civil unrest and protests could also spur business.
"We're planning another ship, an escape ship, that goes to South America, hangs out in Costa Rica for a year," he said.
While ports are closed, the Larga Vida can anchor near private islands, he said. He imagined residents having barbecues on secluded beaches and taking the submarine out to play around reefs.
The catch for buyers is that a monthly homeowners' association fee will likely be far more expensive than a condo on land. It will cover meals, activities and expenses, but not alcohol. That will likely be $3K to $4K per month on Larga Vida, but cover all amenities such as beauty salon, butler service, private chauffeur and housekeeping. On The World, for comparison, such fees are reportedly about 10% to 15% of the condo purchase price.
"There are no real estate property taxes, and because it is a depreciating asset, they can amortize the depreciation as a write-off," the spokesperson said. "In 10 years, if the group decides to either scrap the ship or move to a newer and bigger one, they can either sell her to another individual or as scrap and pocket the return."
ORCA believes the idea will appeal to millennials as well as retirees. The residents will collectively determine itineraries, but marketing materials say the ship will visit islands three or four days a month and South and Central America for two weeks each year. The ship could travel to Mardi Gras in New Orleans, New Year's Eve in Key West and the Beating Retreat Ceremony in Bermuda, Levensaler said.
Several other residential cruise ships are also in the works.
Fredy Dellis, former CEO of The World, has co-founded a new, similar concept called Blue World Residences, with 40 units for sale, starting at $2.3M, according to its website. In addition to those permanent residences, there will be 200 double suites and 25 single suites available for temporary cruise passengers. Dellis said that on The World, one challenge was that owners were only on board for a few months of the year, so at times, occupancy was low.
Dellis told Bisnow that, because of the coronavirus, cruise lines have no business and are currently trying to get rid of ships. Whereas a new-build ship could cost $500M, used ones are selling for more than 50% discounts right now, and he is in negotiations to buy one. It can be retrofitted in Europe in just a few months, with one-bedrooms at 800 SF and two-bedrooms, 1,200 SF.
Dellis denied an industry report that Blue World had bought two ships from Holland America, but the company does plan to ultimately increase its fleet to three ships.
"Our timing is good to launch in the fall of 2021," said Dellis, who remarked that in 2001, 9/11 scuttled sales on The World, and the company had to adjust. Assuming a vaccine is ready next year, it could be a requirement that passengers have it before boarding.
Blue World Residences is targeting 35- to 55-year-olds who lead active lifestyles. Its ship would travel around the world, mostly in Europe and Latin America. Annual fees for residences are estimated to be between 8% and 10% of the purchase price — about $300K, Dellis said — payable monthly, and owners can rent out their units. Renting it out for about 23 weeks per year will cover the annual maintenance cost, he said.
Units cannot close until the company actually owns the ship, Dellis said, but he said the company already has 430 interested buyers.
"Some have put deposits," he said. "We have a partnership with Compass, and they say that ratio, 10:1, is good: 430 buyers for 40 units."
Dellis said that real estate contracts will be executed and governed by the laws where the ship is registered. In the case of Blue World, that will most likely be the Bahamas.
A company called Storylines is taking deposits for a new-build ship scheduled to launch in 2023. It offers a 12-year lease from $297K or ownership starting at $789K. Prices go up to $8M and some units are as big as 2,121 SF. It will have 627 residences and travel the world. Storylines is positioning itself as a green and philanthropic venture. Amenities include a farm and a microbrewery.
Storyline's website says it was founded in 2016, when founders Alister Punton and Shannon Lee, who were in the land-based real estate and construction sector, did two years of market research and found that there was enough demand to create a more affordable product and still be profitable. The owners considered retrofitting older ships before deciding on a new build, which will last 60 years, as opposed to about 24 years for a used ship, they wrote on the company's blog. Storyline didn't make anyone available to comment by press time.
Delays experienced by one floating condo concept highlights the challenges with the business model. A residential cruise ship concept founded more than a decade ago, Utopia, is set to be helmed by a former captain from The World. It has advertised 190 residences and 206 hotel rooms, and reportedly plans to travel the world, stopping at top events like Wimbledon and the Olympics.
According to industry trade publication Maritime Executive, Utopia's founders ordered a $1.1B ship to be built by Samsung Heavy Industries in 2009, but as of 2018, it was still years from delivery.
A spokesperson for Utopia said via email that the company is still operational, that most of the largest units — three- and four-bedroom residences — have been sold or reserved, and that it will launch in about three-and-a-half years.
"The business is in the middle of converting the final architectural and marine engineering drawings into construction drawings and has completed the plans for its itinerary for the first year of operation," the spokesperson said. "The pandemic caused us to pause some of the design and building efforts by major subcontractors who were required to cease operations. As of today, most of the suppliers and subcontractors are back to normal operations."
"Our clients have realized it is far superior to take their home with them as they travel rather than checking in and out of a different hotel room that needs to be sanitized in every destination that they visit," she added.
The ORCA spokesperson said that, prior to the Great Recession, other companies such as Four Seasons and Magellan had hoped to develop ships to compete with the World, but all those plans stalled when the economy tanked.
"Our business model is the only one that works," the spokesperson said.
Massive cruise ships make money on economies of scale, but aren't nimble enough to deal with crises, he said. However, it's a buyer's market for smaller ships in great condition.
"With millions of wealthy people, selling 50 cabins should not be a problem," he said. "It's very reasonable compared to buying a condo in downtown Miami, and it's like they get $50K in cruises each year free."