Monday, July 19, 2010

Pro's and Con's to Boat Partnerships

Boat co-ownership: sharing the costs, but waves over money, cleaning and guests



Lou Sandoval, right, of Karma Yacht Sales in Chicago, has been in four boat-owning partnerships. "I tell people to have a down-to-earth conversation about how the boat will be used and who will use it more," he says. Jason Veatch is at left. Photo: Stephen J. Serio


From Crain's Chicago Business


By Shia Kapos

July 19, 2010

When Jon Mossberger's boat needed $5,000 in repairs, he was thankful he co-owns it with seven fraternity buddies, reducing his share of the expense to $625.

He was less happy to hear that the steering mechanism in the $70,000 boat had been damaged because of a co-owner's lack of experience using it.

"That was frustrating," he says.

Mr. Mossberger, 31, shares a 2002 Chaparral 280 Signature and goes out on Lake Michigan with his friends nearly every weekend.

"The best part about owning a boat like this is that it allows us to stay in touch. As you get older, it's harder to do that," he says. Still, he acknowledges, "there are some challenges."

New boaters or die-hards pinched by the economy are the most likely to share ownership of a boat. Once they can afford it, though, most leave the communal life behind quickly.

They say goodbye to disagreements about the cost of repairs, whether to add upgrades such as air-conditioning and who they can bring onboard as a guest.

Mr. Mossberger, owner of Stretch bar in Wrigleyville, says his group abides by written rules "to make sure it's not awkward. It's all on paper. There's no gray area."

Owners must text everyone when they want to use the boat. Any of the co-owners can join the person initiating the trip. The boat leaves at about 2 p.m. You can bring any number of girls but only one guy.

When issues arise, they turn to the contract. "We don't get mad," Mr. Mossberger says.

You can't, says Lou Sandoval, owner of Karma Yacht Sales in Chicago, or you may as well end the partnership.

"I tell people to have a down-to-earth conversation about how the boat will be used and who will use it more, and you have to have a sunset on the agreement that allows you to exit gracefully," Mr. Sandoval says. A legal document should allow co-owners to revisit their partnership at a certain time, allowing a chance to continue or buy a partner out. Now on his fourth partnership, he says such agreements made his previous splits amicable when co-owners wanted out after having children.

"You see (partnerships) go wrong when they aren't aligned in the goals of the use of the boat. One guy wants to spend a lot on high-tech equipment to re-outfit the boat and the other owner might say, 'What's with the bells and whistles? Can't we use last year's sails?' " Mr. Sandoval says.

Bob Zeman, 71, founder of Chicago-based Norwood Paper Inc., is in the sixth year of what was supposed to be a two-year partnership with Gene McCarthy, 82. They disagree often, about how frequently to race the boat or when to buy new sails: "If we were all exactly like one another, it would be dull," Mr. McCarthy says. But the two men respect each other's sailing and this week will embark on the Race to Mackinac with their 69-foot sailboat.

They have not made the partnership legal: "I come from an era where a handshake and a word are good enough," Mr. Zeman says.

Dirk Lohan, a co-founder of Lohan Anderson architects in Chicago, equates boating partnerships with marriage.

"Two people come together, and they have different personalities and different priorities," says Mr. Lohan, 70, now the sole owner of a 55-foot custom-designed boat.

A few decades ago, he shared ownership of a smaller boat. "I'm a cleaning freak, and I saw things that should have been done that weren't done. Food was left in the pots and was mildewing," he says. "I pointed it out, and it got solved amicably, but I decided if I can, I'm going to own my boat free and clear by myself — which has its own shortcomings, because you have more work to do."

But partnerships still exert a pull. It makes sense to share the costs and labor, given the time and money involved for a short boating season.

SHRUGGING IT OFF

Len Goodman, a criminal defense attorney, was ready to sell his 19-foot motorboat when friend Martin Herman, a neurosurgeon at Advocate Lutheran General Hospital in Park Ridge, talked him into keeping it, proposing a partnership in which Dr. Herman takes care of the maintenance and storage.

Also next-door neighbors in Lincoln Park, they say they're both easygoing and neither demands frequent use of the boat.

"We don't clash. I really only like to water-ski, and the weather has to be perfect for that, which isn't very often," Mr. Goodman says.

He had just returned from one of those perfect mornings, despite having arrived at the boat to find no life jackets left aboard.

"We had to use those flotation devices; I'm sure we were violating some sort of safety rule," he says. "You can't let things like that bother you."
Len Goodman, left, was about to sell his boat, now in Diversey Harbor, when friend Martin Herman talked him into a partnership deal, offering to store and maintain it. Photo: Lisa Predko

The biggest challenge to their co-ownership came a few years ago when Dr. Herman married and had children, making it more difficult to coordinate use of the boat, Mr. Goodman says. He credits having a small boat (19 feet) with keeping disagreements to a minimum, with lower costs and no large parties onboard.

That's the very reason Michael Wolf, 41, has two boats: a 34-footer of his own, which he sails out of Monroe Harbor, and a 9-foot dinghy that his family shares with another in Evanston, to introduce their combined five kids to the water.

Mr. Wolf, a partner at Jenner & Block LLP, says the low cost — the dinghy was $3,000 — makes the situation less fraught.

"It's our first season together, but we've known the family for a while," Mr. Wolf says. "If any concerns pop up, it will be about maintenance or upkeep. Those are simpler to solve for a small boat. For a big boat, that's where you get into trouble; I couldn't imagine doing that unless you had complete alignment."

There are three kinds of boating partnerships in Chicago's nine harbors.

Sociable co-owners boat together. Like Mr. Mossberger and his pals, they tend to be younger, single and able to head out to the water at a moment's notice. You're just as likely to find them hanging out in Diversey Harbor with a case of beer as on the water.

There are the co-owners at the Chicago Yacht Club at Monroe Harbor who sail together during regatta season.

And there are those who share ownership but seldom see each other, boating for leisure with their own close friends and family. These relationships are most ripe for tension, as co-owners are less bonded to each other.

THE PRICE OF PARTNERSHIP

For Gene Mackin, the challenge of shared ownership was figuring out the value of labor vs. money.

"Some of us had money, and some had time. The people who had the money thought they had a greater stake, but some put in a lot of time. How do you value five hours at the boat yard vs. $250?" says Mr. Mackin, 71.

He owned his first boat with four partners; "Holiday" was a 40-footer with a 12-foot beam and 6-foot draft, bought for $15,000. But that was four or five boats ago, back in the 1960s.

' The people who had the money thought they had a greater stake, but some put in a lot of time. How do you value five hours . . . vs. $250?'

— Boat owner Gene MackinToday, he outsources the labor on his boat to Bob Remsing's SailTime Chicago, part of a worldwide network of fractional boat ownerships. The local office operates in Burnham and Winthrop harbors, overseeing upkeep and storage and offering an online scheduling system.

Mr. Remsing says a good number of his clients came from boating partnerships gone bad.

"There's always someone who wants it cleaner," he says. There are disagreements about handling the boat on the water, getting the boat ready for the season and repairing it. Not to mention scheduling.

"What if you both want to take it out to watch the fireworks for the Fourth of July?" Mr. Remsing says.

Willie Wagner, 47, the owner of Honky Tonk BBQ in Chicago's Pilsen neighborhood, has owned his 44-foot boat with a number of partners over the past 20 years. Right now, there are four. He's seen tempers flare over cleanliness ("It's a bunch of guys, so it's always been a little bit of a frat house," he says); contributing to spring upkeep ("If you have someone who is like, 'All I do is drive the boat,' that's a problem") and money.

"What if one guy can't come up with the money by Feb. 15, when payments are due at the harbors? Then the other three have to make it up by a certain date," he says. "That's been the biggest beef."

He's not sure he could handle it without a lifetime of preparation.

"If you're going to be a partner in a boat, you shouldn't be an only child; you have to know how to share," he says. "I'm one of 11 kids."

©2010 by Crain Communications Inc.


For More Information Ask Karma Yacht Sales by email  or call 1-877-KARMA-Y-S (527-6297)
Bookmark and Share