SuperyachtNews.com – Owner – The art of the commercial conversion

Delivering large custom yacht projects is a multi-year process. A new-build 50-metre or longer motoryacht is likely to take about four or five years from conception to launch. These lead times are now stretching towards 2027/28 and beyond. The compounding pressures of supply chain issues and uncertain economic outlooks are driving more clients towards alternative yards and avenues to ownership.

The practice of converting commercial vessels into luxury motoryachts is nothing new. Iconic projects such as the 58-metre Seawolf at Pendennis and Astilleros de Mallorca have shown what is possible when enough time, innovation and investment are made into rebuilding and repurposing commercial vessels.

These projects take time and require patient and passionate owners to see through. Once thought of as a niche project that may be sporadically commissioned by adventurous owners and undertaken at specialist yards, the discord is becoming more mainstream. The topic inspired one of the most intriguing keynote sessions at The Superyacht Forum 2022.

Lürssen, synonymous with the largest superyachts in the world, is diversifying. It was therefore fascinating to hear how the team in Germany would approach the growing segment that is commercial conversions and incorporate it into its comprehensive refit division. Alberto Perrone, sales director of Yacht Refit at Lürssen, outlined the vision.

“We did not want to come here and discuss conventional refit, which is still our main area of activities, as we have done that many times. There are some great refit yards here, and we all know what needs to be done. The opportunity that we have decided to pursue is that of commercial ship conversions. There has been an alignment of factors that make this a fantastic avenue. Are we the first? Of course not. I am sure that it is something we as shipyards will all end up doing in some capacity.”

“In the past some have opted, just like old country houses in Chianti, to buy a ruin and go from there. This might be fun and entertaining, and of course still valid, but at Lürssen Yacht Refit and Services we will focus only on conversions from strong and ‘healthy’ donor vessels.”

Potential perfect donor vessel

To strengthen its service and refit activities Lürssen founded its own refit  company, Lürssen Yacht Refit and Services. Perrone goes on to explain that it has been conceived as a space to undertake all post-new-build projects, ranging from warranty periods to major refits. Therefore, Lürssen Yacht Refit and Services is also perfectly placed to apply the Lürssen philosophy to the slowly growing market of commercial conversions.

The post-pandemic boom in yacht purchases has extended across all size ranges. This market pressure is driving a reframing of the traditional pathways to ownership. Crucially, clients are also exploring the options that can deliver a project faster, and the substantial commercial fleet is an enticing option.

“In the past some have opted, just like old country houses in Chianti, to buy a ruin and go from there,” says Perrone. “This might be fun and entertaining, and of course still valid, but at Lürssen Yacht Refit and Services we will focus only on conversions from strong and ‘healthy’ donor vessels.”

Lürssen conversion refit yard

Lürssen’s vision is to start with a highly capable and operational donor, such as an offshore support vessel. Perrone outlines why Lürssen Yacht Refit and Services sees these as the best option: “They are stable, they are quiet and are comprehensively outfitted. A good example is that many of these vessels operate with high-precision machinery, often with cables hanging a thousand metres down. They incorporate active-heave compensation, allowing them to remain stable in large seas, supporting this machinery. Building on this stable platform is ideal for the conversions that Lürssen are looking to undertake.”

The typical donor vessels that Lürssen is looking for in a ‘go anywhere’ conversion are Crew Supply Vessels (CSV), Anchor Handling Tug (AHTS), Offshore Supply Vessels (OSV) and Offshore Construction Vessels (OCV). There is a significant pool to choose from also, with the active fleet of global offshore vessels currently comprising 3,200 vessels, while approximately 1,200 were decommissioned in 2021.

Looking to the oil and gas sector for such vessels has many downstream advantages.  While the price to charter and purchase may have increased as demand rose in the face of the current energy crisis, there is still an active market of potential donor vessels.

Lürssen envisages this renewed market as a potential opportunity. Clients can purchase an operational vessel and charter it out for conventional offshore operations while Lürssen Yacht Refit and Services begins the preliminary and planning stages of the build, and when all these factors are in alignment the vessel can be pulled from service and taken to the facility. Perrone even goes as far as to say that if the owner has a change of heart, the vessel can be sold back to the offshore company with relative ease.

The perfect candidate outlined for the prototypical Lürssen conversion is a 120-metre OCV. The key features that underpin this designation are a hull built according to ice class B, accommodation for 130 PAX (meaning that no major conversion is expected by Class), a safe manning requirement of 13, and a ≥ 90-day operational endurance. Some of the other key characteristics of an ideal conversion candidate include:

• Deadweight – 4,750 tons
• Deck cargo max – 2,400 tons
• Fuel oil – 1,300 cubic metres
• Ballast water – 5,380 cubic metres
• Freshwater – 900 cubic metres
• Helideck D-value ­– 21.0m and 12.8t take-off weight, second helicopter operations possible.

The aesthetics of these support vessels imply capability. This ‘offshore look’ is in no small part a driver of their popularity. It is worth reflecting on just how much can be supported by a 2,400t cargo weight. Coupled with the high fuel capacity and operational endurance, this style conversion really can carry everything, anywhere.

While still using conventional propulsion systems at this stage, there is another way to frame its sustainability credentials. By upcycling an existing platform instead of constructing from new, the total carbon emissions saved have been allocated at around 30,000t. Perrone frames this as “starting with 30,000 credits in the carbon bank”.

Although a long way from being sustainable, the comparatively huge technical spaces and carrying capacity give a conversion such as this the room to innovate and incorporate lower and zero-emissions technology, Lürssen envisions that these conversions, with the right client attached, will look to use the same fuel-cell technology and methanol-based main propulsion that it has pioneered for its new-build sector.

Although developed to serve the oil and gas sector, the dynamic positioning system that so effectively holds its position while surveying or supplying an offshore platform theoretically allows vessels such as this to greatly reduce the amount of harmful anchoring practices that it undertakes.

As the oil and gas market dropped in recent years, more and more of these vessels entered the market and prices were driven down. For the highly capable and operational vessels such as those highlighted by Lürssen, that market has risen again as the global energy crisis has driven more conventional oil and gas exploration. Still, a conservative estimate for the style 120-metre that Lürssen highlighted is around 75 million euros.

The realistic timeframe for delivery is the standout feature of this project. Lürssen foresees that a project such as this will be available within 24 months after vessel purchase. The cost is still relatively high – not at the level of a new build of comparable size, but at 190 million euros for an estimated project cost, still a significant investment. Additionally, in a relatively nascent sector of the market, and with each project carrying with it its idiosyncrasies and challenges, it will take more intrepid owners to realise more of these projects.

There is still a key set of drawbacks that need to be addressed and discussed openly. These vessels were not designed with comfort in mind. Their form follows function, and while they have the carrying capacity and operational flexibility to fit the role of an expedition superyacht, the comparisons are not like for like.

As Terry Allen, technical director at McFarlane Ship Design, highlights, “There are a lot better choices in the commercial world than using something with a block coefficient* of about 0.85, unlike what we are used to in yachting. As well as the examples that Lürssen has highlighted, there are offshore research vessels, and tuna fishing vessels; the diversity is out there.”

“The price tag of 190 million [euros] is significant also,” continues Allen. “Any vessel that gets purchased for this kind of project will need to be very carefully selected for passenger comfort by looking at the hull form and stability calculations.”

Brendan O’Shannassy echoed the sentiments, highlighting the need to address the comfort levels associated with conversions such as this. “They’re a bit brutal [commercial conversions] and that block coefficient factor matters. There are acceleration forces at play that can affect onboard comfort and those need to be addressed. But when I look at the price, there is a research vessel sitting in the north of England right now with a price tag of four million [euros], 3,000gt and desperate to be repurposed,” concludes O’Shannassy.

“It is great to start these conversations and look at these boats. Every time I am in the Pacific I see the tuna boats that Terry mentioned, and think, wow, they look great. And I am sure their time will come and they will be repurposed in due course.”

By casting a wider net across the commercial market, significantly cheaper options exist. The entrance of a yard as storied as Lürssen into the conversion sphere is a significant show of force. There are many thousands of potential conversions, as highlighted at The Superyacht Forum.

Lürssen has taken the high road in looking to convert the top end of the offshore market. The headline figures look enticing, but the economics of a build often do on paper. As Lürssen and the other new-build giants look to the specialist fields such as conversions to increase their capacity and cater to evolving markets, what can be called the ‘typical yacht’ may become harder to define.

This feature first appeared in the Superyacht Refit Report. For full access to all of our reports click here.

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Click here to become part of The Superyacht Group community, and join us in our mission to make this industry accessible to all, and prosperous for the long-term. We are offering access to the superyacht industry’s most comprehensive and longstanding archive of business-critical information, as well as a comprehensive, real-time superyacht fleet database, for just £10 per month, because we are One Industry with One Mission. Sign up here.