After the survey and sea trial on our prospective 2006 Lagoon 410 sailing catamaran, we made a spreadsheet to help determine our best course of action. We listed all the needed repairs from the survey report, the cost for parts, labor estimates ($100/hr.), determined DIY jobs, and then added desired upgrades to the list (like a washing machine, solar, and water maker) to get the big financial picture. We also used our surveyor’s personal advice along with his detailed report to weigh our decision.
Another big consideration were the results from the oil samples analysis that our surveyor collected. As mentioned in our previous post, oil sample analyses looks for elements like sodium (salt water) and wear metals (iron, aluminum etc.) present to help determine what’s going on inside the engines.
Despite the engines performing great under load during the sea trial, the results on our four oil samples weren’t very good.
One sail drive had so much salt water present that the oil sample couldn’t be read. The other had the presence of wear metals consistent with bearings and gears. One engine had silicon likely from dirty oil and the other had aluminum suspected to be from piston wear. At a bare minimum they all need some serious servicing and TLC to hopefully prolong their lives. And of course then there was the $9,000 generator that they couldn’t get running to collect a sample.
We had to weigh all the information we collected and also make considerations based on the current listings on the market, time/money invested, and our time frame for launching the business. After thoughtful consideration and discussion we decided to make an offer.
As I mentioned before, previously chartered vessels depreciate much faster due to the expected wear and tear and the associated decrease in appeal. The owner version of catamarans typically adds on an additional $30,000 to the cost due to their high demand. We offered $64,000 less than the original asking price and $25,000 less than the agreed price during initial negotiations prior to survey. The sellers counter offered with some major repairs and a concession. We countered again, then they countered, and finally we came to an agreement on terms.
Some of the large repairs that the sellers are having serviced are getting the generator running, servicing both sail drives, fixing radar and also the electric winch. Per the contract, the repairs should be done by January 6th 2017 by licensed technicians.
This Vessel NEW: $619,000
Original Asking Price: $259,000
Final Purchase Price: $206,500
The Financing Obstacles
There is a saying “it is not about the destination… it is about the journey.”
I have been trying to remember that as we have progressed along this journey to make our sailing dream a reality. It has been a robust undertaking and learning experience. The journey has required a ton of research, obtaining a Master USCG Captain’s license, the writing of a business plan, doing the financial projections for the business plan, designing websites, editing videos, starting a YouTube channel and vlog, and finally applying for financing. Not all of the journey thus far has been a walk in the park, but I am finding the last portion of the journey highly stressful and unpleasant. There is this persistent and valid fear, that an obstacle arising during the financing portion of our dream could entirely unravel it.
After overcoming a series of obstacles along the financing path, a major source of stress during the final portion of the process has been the attempt to synchronize and expedite the closing on our business loan with our lender. The Economic Development Bank of Puerto Rico approved us for financing. And the Small Business Association (SBA) guaranteed a large portion of our loan. The way the loan works is by first closing with the bank to have access to the necessary funds for the subsequent purchase of the vessel. We can then close on a vessel. We make a predetermined deposit amount and then the bank will pay the remainder up to the amount we were approved for.
There have been several stages of the loan process that all progressed relatively swiftly, and painlessly, until the closing portion. We have been in the closing portion of the loan process for 4- almost 5 months. The original date set for closing was before November 1, 2016. We are now closely approaching January 2017 and still don’t have a date set.
We have had to get a ton of things in place prior to closing, a combination of things for both the bank and the SBA. One of the last things was a lease agreement for a marina slip. There are no marinas in Vieques. And the SBA requires a Lessor’s Agreement (aka Subordination Agreement), a legal form to protect the collateral. The landlord of a rental space for the business must sign the Lessor Agreement. This requirement is not really designed for the type of business that we are starting but nonetheless is a check box that needs to be checked.
Amongst many obstacles over the last few weeks, the most recent was the Lessor’s Agreement. We negotiated with every marina on the east coast of the main island and all accommodated us with a prorated annual agreement for our business. They gave us a prorated amount because we will not be located there as it would be impossible to operate a business in Vieques from the main island of Puerto Rico due to commute time. However, once the marinas were given the Lessor Agreement, that we needed signed to proceed forward with the bank, all of them had to check with their lawyers.
I learned during the process that the Lessor Agreement could be a huge source of problems for SBA guaranteed borrowers. Many landlords are resistant to sign them because they want first access to the collateral if you default on the rent. Apparently the Lessor Agreement can stall these loans into infinity.
We offered to pay the annual agreement upfront to resolve any issues but still no marinas would sign until consulting their lawyers. We felt very stressed because we have a lot of money invested in the business already and a huge deposit on the vessel that would be at risk if we can’t close in a reasonable amount of time.
After a week of constant phone calls and emails we found a marina on the south side of PR in a town called Ponce. The owners are from Texas, super helpful, and are a husband and wife that built and own the marina there. I was able to speak directly with the owner and explain the situation. He quickly helped us and relieved us of a tremendous amount of stress. In 20 minutes we had our lease and Lessor Agreement signed, scanned, and emailed back to us!
With a big sigh of relief as we resolve that last obstacle, we now are back to the bank with our Lease Agreement and Lessor Agreement signed. We have now been told by the closing supervisor that we should wrap this all up on the 12th or 13th of January 2017. We are finally feeling a sense of relief that this is really happening!
Onward… towards the destination, through the journey!
And here is the link to the Folding Bike – Aluminum Schwinn 20-Inch Loop Folding Bike, Black
And travel carrying bag StillCool 14-inch to 20-inch Thick Folding Bike Bicycle Carrier Bag Carry Bag Pouch