1) Q – Please explain the cruise ship condo purchase process.
A – It’s identical to the pre-construction real estate purchase.
(1) Reservation Agreement –Condo Cruise Lines develops preliminary plans for the project that are subject to change, and buyers make "intent to buy" reservations with a deposit of $10,000.00. This deposit goes into an interest-bearing bank trust account, and the buyers can get a refund plus interest at anytime, less a $200 escrow fee. There is no risk.
(2) 15-Day Right-of-Rescission Period –When all available condos are reserved, the buyer receives the finalized cruise ship condominium documents (prospectus) and hard contract to review for fifteen days. These documents provide complete details of the project. The buyer decides whether to go ahead with the purchase or request a refund of their reservation deposit.
(3) Contract for Sale –At this point, the hard contract (purchase agreement) is signed and becomes binding for both parties. The buyer pays the balance of the required earnest money which is typically 20%. This can normally be paid with 10% cash and 10% 2nd loan-financed. When enough of the Reservation Agreements convert into hard contracts, Condo Cruise Lines will then purchase the ship and begin renovations. (Estimated month for hard contract in September.)
(4) Closing -- The condo units are completed and the buyer goes to closing. This is when the remaining balance and closing costs are paid.
2) Q – Are there going to be more ships, and will there be condos for less money?
A – Yes, and no. There will be more ships, but as demand consumes inventory, condos on each subsequent ship will be progressively more expensive to purchase, not less.
3) Q – Do you discourage pre-construction condo investing?
A – No. We think a well-rounded investment portfolio will include both real estate and cruise ship condos. A long-term investment strategy requires property that appreciates in value… a beachfront condo does just that, while a cruise ship actually depreciates. However, the new real estate market will be more and more resistant to short-term “flipping”, as lenders and developers create safeguards to protect their investments. Therefore, by purchasing a cruise ship condo, the investor realizes an almost immediate ROI as his/her suite is rented out by thousands of travel agents desperate for inventory. The real estate condo will continue to appreciate for the long-term investor until it reaches a point he/she is ready to sell and take a profit. That could be years, but in the meantime, the investor’s cruise ship condo continues to provide cash flow far exceeding the mortgage, thus helping him/her ride out the ups and downs (and hurricanes) of the beachfront unit.
4) Q – If the reservation deposit is refundable, why is it necessary at all?
A – Our lenders require pre-sales (reservations) to ensure there are enough buyers interested for the project to proceed. By providing a $10,000 deposit, even though it is refundable, we feel certain the prospect is serious, so we can then provide further detailed information.
5) – Is my reservation deposit at risk?
A – Absolutely not. Your $10,000 reservation deposit is held in escrow by an established escrow attorney/agent. The fee is refundable upon termination of the reservation by either party. There is a $200 escrow fee.
6) Q – What are the sizes of the suites?
A – They range from around 224 sq. ft for the double/V.I.P. suites, Tri-suite 400 sq. ft, Penthouse 500sq ft, Master suite 600sq ft, Executive suite 740 sq. ft, Grand suite 820 sq. ft.
7) Q – How much will the suites rent for?
A – According to CLIA (Cruise Lines International Association), luxury cruise ship suites typically rent for between $5,000 and $14,000 per week. Suggested rental for our suites will be $3,000 to $8,000 per week.
8) Q – How many weeks can I count on my suite being rented?
A – There is an unsatisfied demand for even the smallest cruise ship stateroom. There’s a HUGE demand for LUXURY cruise ship suites. Our luxury travel agency partners advise us they can book every suite on every ship we put into service, for every date we make condos available. If you want to use your suite for a couple of months and rent it out the rest of the year, we have been assured that the thousands of travel agents nationwide can keep it booked as much as you wish.
9) Q – What additional fees must the condo owners pay?
A – Each suite owner will pay an annual Condo Association fee of between $7,000 and $20,000.
10) Q – What does the Condo Association fee cover?
A – The fee contributes to the entire seagoing operation of the ship… fuel, crew, hospitality staff, insurance, port fees, maintenance and upkeep, all meals, daily housekeeping, and most emergency repairs. What it does not cover… incidental expenses such as alcoholic beverages, tipping, onboard shopping, and excursions ashore.
11) Q – Can the Condo Association fee go up? What guarantees do we have it won’t?
A – Obviously there can’t be any guarantees. However, while the fees will probably remain basically the same from year to year, there could be periodic inflationary or cost-of-living adjustments.
12) Q – How much is the rental management fee?
A – The Condo Rental Management Association charges a standard 30% management fee.
13) Q – Where will the ship be home ported?
A – San Francisco, California, USA. The ship will only be in port once every two years as it will be on a continuous world cruise.
14) Q – How soon will the first ship be ready?
A – That depends on how fast the reservations go. The way things are proceeding at present, the first ship would arrive in California, ready for its maiden voyage in February 2007.
15) Q – What will the ship’s itinerary be?
A – The ship will cruise the globe continuously. A suite owner or renter will join the ship at a major port and stay onboard until disembarking at another port, where he/she will then fly home. The condo owners will be provided a choice of several itineraries suggested by our luxury travel agency partners, and they will select one by majority vote. The reason the ship will not be used for 3,5 or 7-day trips from its home port is this: many of our purchasers want to cruise several months on end. Can you imagine going back and forth to Cancun or the Caribbean over and over, week after week? It would be very boring for the “liveaboards”.
16) Q – How old is the ship?
A – The ships will usually be ten to fifteen years old, with many decades of useful life left.
17) Q – How long will the ship last before retiring?
A – Our ships will most likely have 10 to 30 years of cruising ahead of them. The ship will then be retired and moored somewhere as a floating hotel. Your suite will still be earning you an income in the range of $200-$400 a night, depending on location.
18) Q – What kind of shape is the ship in… is it safe?
A – The ship is inspected thoroughly before purchase. All our ships will meet or exceed US regulations (the toughest in the world). All are SOLAS, US Coast Guard, and US Public Health Service compliant.
19) Q – What renovations are done, and how long will it take?
A – The ship’s existing staterooms will be modified to provide one, two and three room suites by creating doorways between rooms. Some suites will have wet bars with refrigerators and microwaves. We will spend many millions of dollars upgrading the ship into luxury class. All this should take between 30-60 days after Condo Cruise Lines purchases the ship.
20) Q – Are there any suites with balconies?
A – There are some suites with balconies on this ship. Most of the ships we will be purchasing will have been phased out of the cruise lines in favor of larger ships which are incorporating balconies or verandahs. During the renovation process we will be working with a world class designer to add verandahs where available.
21) Q – Who actually runs the ship?
A – Our two ship management partners… Sophlex Ship Management (www.sophlex.com) and Marine Growth Ventures (www.marinegrowthventures.com).
22) Q – Is the ship US flagged?
A – No. Most all ships home ported in the US are foreign flagged. It’s a matter of economics. But while the ship is in US waters, it is in US jurisdiction and must adhere to US maritime laws and regulations.
23) Q – Is there financing available?
A – It is anticipated that one-third of our buyers will pay cash, another third will arrange their own financing by leveraging equity in assets they already have, while the last third will request financing. We are currently working with a number of lenders that have expressed an interest in this concept and we anticipate providing loans with 20% down. Terms will be announced in the coming weeks when the program has been finalized.
24) Q – Are there any tax advantages?
A – As each purchaser has different financial situations, we advise you to seek guidance from your CPA or tax advisor.
25) Q – If I am buying a suite as an investment, won’t the value of my suite go down as the ship depreciates?
A – No. Remember, when a condominium development (either beachfront or cruise ship) sells out, the price tag goes up. When there are no more suites available market demand should drive the prices upward, despite the depreciation of the ship itself.
26) Q – Will I need to insure my condo?
A – No. The ship has its own insurance that covers structural, hull, and life and health of passengers.
27) Q – Is the purchase transaction a security?
A – No. We are selling ocean-going condos. What you do with your condo is strictly up to you, within certain parameters. You can do whatever you like with it… live in it, put your office in it, rent it out, or any combination of the three. If you desire to rent it, we can only tell you what other suites on other similar cruise ships rent for, then you can do the math yourself. We are merely selling you a condo that floats… not an investment.
28) Q – Do I get to conduct a “walk-through” before I purchase?
A – You will close your sale based on the description and specifications outlined in your cruise ship condo document. If, when the ship arrives and you are able to conduct a walk-through, there are any discrepancies in the actual condition of the suite, we would be in default and have to (by law) make corrections.
29) Q – Who is decorating the suites? Will they all be the same or different?
A – The suites will be part of the overall renovation which is conducted overseas by skilled marine architects and designers.,Tillberg Design. (www.tillbergdesign.com )
30) Q – Who will operate the food and beverage, casinos and shops?
A – The food and beverage concessions will be leased to highly respected upscale restaurateurs. The casinos and shops will also be leased by top name contractors in each industry.
31) Q – Are there laundry facilities in the condo, or is there a laundromat on the ship?
A – There will be not be laundry facilities in a common area of the ship. There will be daily housekeeping service. If laundry service is needed the ship is in port 2-3 days and at sea only 1 day.
32) Q – If I went in with one or two other partners, how would title or ownership be reflected?
A – We are prohibited from giving legal advice, but perhaps you could form an LLC and let it own the condo, with you and your partners as members whose shares are proportional to their contribution to the purchase. Please seek the counsel of an attorney before making that decision.
33) Q – What are the liability issues within each owned unit versus the common areas?
A – The ship’s insurance policy covers all areas, public and private.
34) Q – Docking and fuel costs are absorbed by whom?
A – The management association (see 32 above).
35) Q – What are the estimated closing costs?
A – Typically between $1000-$2000
36) Q – What passports and/or visas do we need if we travel around the world on the ship?
A – You will be advised what is needed to travel by our booking agencies prior to your departure. It depends on where you embark (get on) and disembark (get off) worldwide.
37) Q – Who gets the money from the casinos, shops and restaurants?
A – The management association. These funds, along with the standard stateroom rentals and annual association fees contribute to the entire operation of the ship.
