Plans to Purchase and Dry Dock/Refurbish the Ship
Welcome back to part two of our series on finances and solvency here at Fabled Voyages!
In this article, we are going to take a closer look at how we envision purchasing, dry docking, and refurbishing a cruise ship, as well as how our proposed financial model differs from more traditional approaches.
One of the things we have been working toward is creating a pricing structure that provides future residents with different options based on their needs, financial abilities, and desired length of stay. Our intention is to offer opportunities to purchase a residence aboard our ship for exclusive use, with the option of renting out that residence when it isn’t being used by its owner.
For those who don’t intend to remain aboard continuously, we also envision bridging our rental program with their extended time away from the ship, should they wish to participate. This provides flexibility for residents, helps maintain our baseline residence occupancy rate, while allowing us to assist residents in potentially paying their monthly maintenance fees via a interested renter while away.
Why Isn’t Fabled Voyages Pursuing Traditional Financing or Outside Investment?
Let’s start with outside investors.
Traditional investors generally have expectations that go beyond simply receiving their original investment back. Depending on the arrangement, they may expect scheduled returns, ownership shares, decision-making authority, and ultimately, the opportunity to maximize their financial returns. There is nothing inherently wrong with that approach. It is how much of the traditional business and investment world operates.
However, we have a different vision for Fabled Voyages. We would rather have the people who are investing in their future lifestyle, their home, and the experiences we hope to provide be the same people who have a voice in the community and a meaningful interest in its future. In other words, we would prefer to build around our Residents rather than outside investors who may have little or no connection to the people actually living aboard.
Next, let’s look at traditional financing.
As we discussed in our previous article, purchasing and operating a vessel capable of continuously traveling around the world is an expensive undertaking. Traditional financing can add a substantial amount to those already significant costs.
Let’s look at some simple numbers to help put this into perspective.
Residential cruising is a relatively specialized and higher-risk industry from a traditional lending perspective. With a proposed residential purchase structure based on a 15-year period, a lending institution might be reluctant to offer financing beyond 10 years. An interest rate of 10% is also a reasonable illustrative assumption for examining the potential cost of financing in this type of undertaking.
Using a hypothetical $100 million loan, financed at 10% interest over 10 years, and assuming 85% of 1,000 available residences have been purchased, the additional financing cost would be approximately $1,554 per month per purchased residence. That is an additional expense on top of an already expensive lifestyle and service, and is one of the reasons we have spent considerable time looking at alternatives to traditional financing. Rather than building a business model around substantial outside debt and the financial obligations that come with it, we want to explore a model where the residents themselves help make the journey possible.
How Does Our Financial Model Work?
Simply put, you, the Resident, who purchases one or more residences, become part of the financial foundation that makes Fabled Voyages possible. Your purchase helps fund the acquisition, preparation, and refurbishment of the ship, ultimately helping bring the entire adventure to life.
This is also why we believe Residents should have a voice in the company and its future. If the people who call the ship home are the ones helping make it possible, we believe they should have a meaningful opportunity to participate in decisions affecting their community. We will discuss our vision for the Residents’ Voice, including how we see that working, in a later article in this series.
What Are We Doing Differently?
There are several parts to our proposed financial model, and they are all inter-connected.
Our current benchmark is to have approximately 85% of the available residences sold by our planned sail date. Monthly maintenance fees would begin at the time of sailing for all residences, regardless of whether the owner is aboard continuously. These maintenance fees are intended to reflect the actual costs of operating the ship, maintaining its facilities, providing services, and building the financial reserves necessary for long-term solvency.
Why 85%? Based on our current planning assumptions, we estimate that the ship could reach an operating break-even point somewhere around 75–80% of sold residences. However, simply reaching break-even isn’t necessarily enough. We want to maintain a healthy level of income to account for unexpected expenses, ongoing maintenance, improvements, enhancements, and the realities of operating a single vessel of this size and complexity.
Our goal is to establish a financial cushion above the estimated break-even point rather than operate right at the edge. We have also established an initial threshold of approximately 70% of residences sold as our trigger to begin moving forward with the ship purchase process. Purchasing a vessel, arranging dry docking, scheduling inspections, and completing the necessary repairs and refurbishment can take several months. We want to allow time for those processes to take place while continuing to work toward our 85% benchmark before sailing.
It is important to understand that our 85% benchmark refers to actual residences sold, including situations where a resident purchases multiple base residences to combine into a larger living space. It does not include rental occupancy. We have also allowed for a considerable range in our projected total resident capacity. This gives us flexibility as we finalize the vessel, determine the number and configuration of available residences, and account for changes in the resident population over time.
Not every residence will necessarily be occupied by its owner at all times, and not everyone will be aboard continuously. Our rental program is intended to make use of available, unsold residences and provide an additional source of income that can contribute toward maintenance, renovations, future dry docking, and emergency reserves.
What Does the Purchase of a Residence Actually Fund?
This is an important distinction in understanding how our proposed model works.
When someone purchases a residence aboard Fabled Voyages, that purchase isn’t simply paying for the right to occupy a cabin. These purchases are intended to collectively fund the acquisition and preparation of the vessel itself. Depending on the final ship selected and the associated purchase and refurbishment costs, our financial planning includes provisions for several major expenses.
These include:
- Ship Acquisition: Funding toward the purchase of the vessel.
- Dry Docking and Refurbishment: An initial budget of at least $50 million for dry docking, necessary repairs, refurbishment, and improvements.
- Contingency Reserves: An additional reserve of at least 10% above the initial refurbishment budget to account for unexpected expenses and changing requirements.
- Initial Operating Reserves: A minimum of two months of projected operating income to help provide a financial buffer as operations begin.
- Inspections and Certifications: Funding for the inspections, regulatory requirements, and certifications necessary to prepare the vessel for residential operations.
- Employees, Crew, and Specialists: Costs associated with the people, professionals, and specialized services needed to prepare and operate the ship.
- Administrative and Backend Operations: The additional infrastructure and operational expenses required to support the company and the vessel.
We are also considering a structure in which shares of the company that own the vessel, will be tied to each of the residences aboard. This is something that will require additional legal, financial, and corporate review before any final decisions are made. We want to make sure that whatever structure is ultimately chosen is appropriate, transparent, and provides the protections and considerations necessary for both the company and its residents.
What About Monthly Maintenance Fees?
While residence purchases are intended to fund the acquisition and initial preparation of the vessel, monthly maintenance fees serve a different purpose. These fees are intended to cover the ongoing costs of operating the ship and maintaining the residential experience. They will also contribute toward building and maintaining reserves for future dry docking, repairs, improvements, unexpected expenses, and other financial contingencies.
We believe this distinction is extremely important. Purchasing a ship and getting it ready to sail is one challenge. Maintaining it, operating it, and keeping it in good condition over the years is an entirely different responsibility. Our financial planning needs to account for both.
Over the remainder of this week’s series, we will take a closer look at monthly operating expenses, maintenance fees, and the reserves and contingencies we believe are necessary to support the long-term financial health of Fabled Voyages. After all, our goal isn’t simply to purchase a ship and set sail. It is to create a residential community that can continue exploring the world together for years to come.
Thank you for joining us for part two of our financial series and for continuing to follow our journey.
Fabled Voyages – Your Next Chapter Begins at Sea!