Anyone who buys an apartment on board Somnio, the newest residential cruise ship, should note one innate constraint: don’t expect that owning a home on this ocean-going gated community will confer instant non-dom status. “You can’t declare residency on Somnio — believe me, we tried many times, but there is no way for that,” says Erik Bredhe, the ship’s co-founder.
Sailing full-time in a luxury apartment might not cut tax bills, but Bredhe promises there are other upsides to such an investment. Mostly, it is the lure of being part of an exclusive club — there are just 39 apartments on board. “It’s all about the community of like-minded people. Everything comes so easily,” he says. “The crew is there all the time running the vessel for you.”
For such a rarefied venture, some aspects of Somnio seem oddly egalitarian, though: the annual itinerary is decided in consultation with residents.
For a long time, the idea of residential cruising was synonymous with one vessel: The World, the only such ship at sail since it launched in March 2002. But if Bredhe’s start-up, and a spate of other competitors, manage to leave dry dock, the world’s wealthiest will no longer be limited to The World.
Blue World Voyages, co-founded by serial cruise entrepreneur Fredy Dellis, will have state rooms for one-off events, as well as owner-occupied apartments. Njord has an arsenal of aquatic toys, including submarines, that aims at the more adventurous buyer. Another new entrant, Storylines, intends to corner the affordable market: its website lists high-seas homes starting at about $700,000, cheaper than the millions charged by the others.
It isn’t just price that sets Storylines apart, but its leadership team. The other companies are steered by alumni of The World: Somnio’s Bredhe was its captain, Dellis was chief executive and Alain Gruber, who runs Njord, was in charge of operations. All are trying to draw valuable lessons from the secretive luxury liner’s bumpy ride.
The World’s launch was beset by difficulty but a group of the ship’s residents rallied together to rescue it from the banks, relaunching the project under their own leadership.
Bredhe says The World was too large, and many owners were absent for much of the year as a result. “Because there was hardly anyone on board during Pacific or transatlantic crossings, it was called the ghost ship, or the dead ship.” Somnio has about a quarter of the number of apartments on The World.
Another problem was the mix of tenure. Initially, The World offered both owners’ cabins and state rooms that could be rented for one-off trips, akin to a commercial cruise liner. The needs and behaviours of both groups clashed: long-term residents were keen to sail slowly, idling overnight in ports, while occasional travellers were keen to roam fast and wide. The radically different size of the accommodation was a source of friction, too, as the largest cabin is 10 times the size of the tiniest.
“What happens with small apartments like that? You get almost like a first and a second class on board,” Bredhe says. When it relaunched as owner-operated, The World became residents only.
Bredhe is confident he can also sidestep the financial issues that dogged The World, with a group of investors providing the approximately €500m that Somnio will cost to build. Bredhe declines to share specifics on sales, but says the ship has already sold apartments and is financially secure enough to meet its planned Q3, 2024 launch date. Prices start at €9.5m (about $11m).
Somnio won’t work with an estate agency on sales, either. “We tried working like that on The World, but it wasn’t that fruitful,” he says, noting that it is better to rely on word of mouth.
Njord’s Gruber is equally bullish in the wake of The World. “I have enormous respect for that ship, but sometimes it’s better to be second to market,” he says. Like Somnio, the project is financed to completion, says Gruber, through a combination of progress payments from buyers and institutional financing in Germany, where construction will begin early next year.
“Buying on Njord is buying into the ultimate exclusive community,” Gruber says. The ongoing maintenance fees each owner pays, he says, are like privileged country club dues. Njord’s array of toys is likely to help attract younger, full-time cruisers. “It can go to the iconic cities and yachting spots of the world, but we can also take it to parts of Antarctica that no one’s seen, or the Northwest Passage.”
But the history of this sector suggests that ocean-roaming developers face significant hurdles. Rivals to The World have been announced before. Utopia, a 190-unit vessel first mooted in 2009, with sales starting four years later, still has no firm launch date. Commercial operator Crystal Cruises is a subsidiary of Genting Hong Kong, a cruise and resort conglomerate that lost more than $1.7bn in the past fiscal year. Crystal had announced it would sell state rooms as residences on several of its upcoming ships in May 2016 but in February 2018 it cancelled the apartment programme.
Allan Jordan is a maritime historian with expertise in cruise ships. “Finance for the buyer is the whole problem, because you’re not selling a true asset like a piece of property. At some point, The World will have to be retired because the ship wears out. If you buy a condo, it might need maintenance, but it’s there forever,” he says. Many residential ships, then, offer their properties as effective leaseholds and prioritise cash buyers, since securing mortgages can be difficult.
It’s worth noting that apartments on The World haven’t appreciated in value, as conventional real estate might: at launch, prices started at £1.5m — or about $2.17m at 2002 exchange rates. Today, they start at $2m.
Jordan says the surge in residential cruise ships right now is in part a side effect of the impact of the pandemic on commercial cruising. Most cruise operators struggled financially. The Centers for Disease Control and Prevention (CDC) enacted a No Sail Order for much of 2020, effectively mothballing the industry. Cruise lines headquartering overseas were excluded from much of the financial support offered by the US government.
Compounding this was an image problem created after two early Covid-19 hotspots emerged on cruise ships, the Grand Princess and Diamond Princess, forming an unfortunate association between the pandemic and this industry. Shipyards felt the effect as orders for new ships were cancelled, or simply didn’t arrive.
Jordan says that it isn’t surprising that a big cruise ship builder such as Germany’s Meyer Werft — where Njord is set to be built — would be more amenable to working with one of these start-ups on such a vessel now compared with earlier this decade, when its order books were oversubscribed.
No one better understands how difficult it is to launch such a vessel than David Nelson. The Minnesota-based developer has been championing his own residential cruise vessel for almost 15 years. It was just before the 2008 financial crisis that he secured funding for his River Cities project, a residential ship that would criss-cross America’s rivers and was intended as a floating retirement community.
“We’ll always be within sight of land, an interesting town or somewhere you can go ashore nearly every night,” he says. “Being out on the ocean water can get a little boring.” This could appeal to a wider market than the super-rich buyers of The World.
In the aftermath of the financial crisis, Nelson managed to sell a few units, and even built a model vessel featuring a 3D two-bedroom condo. He and his team sailed that miniature version of the cruise ship around for a few years on marketing trips, scoring a few commitments as they went. Eventually, though, the financial hurdles proved insurmountable: even at lower prices, cash-only transactions are hard to secure.
“Mine was a real estate investor idea and it was difficult to find anyone interested then when there were so many opportunities to buy [traditional homes] low and sell high. All the investors went to that.” Nelson admitted defeat and sold the sample vessel.
He didn’t lose hope though. Next week, he’s expecting to sign a deal with a new corporate backer who will fund marketing for the programme: if sales restart and cash flow improves, he has the design ready for construction in Morgan City, on the banks of the Atchafalaya river in Louisiana.
“As the years went by, people looked at the idea, and wondered why it had gone stale. But it’s not the idea,” he says, ever optimistic, “It just seemed like we were jinxed a little in the beginning.”
Properties for sale: condo yachts
Size 644ft, 12 decks; 165 units
Launch May 2002
Price $2m-$15m, plus annual charges
Ownership structure Now owned by its residents, more like a co-op than a condo building, a self-policing community at sea
Size 222m, 6 decks; 39 units
Launch Q3, 2024
Price From €9.5m, plus monthly fees
Ownership structure No lease, but ownership for the lifetime of the yacht. Maintenance fees per square footage
Size 289m, with 13 decks; 117 units
Price From €8m
Ownership structure A 50-year leasehold basis with 5 per cent of purchase price levied as a monthly maintenance fee
Size 600ft, 5 decks, 4 hulls; 180 units
Launch To be confirmed
Price From $161,000 for six months a year on board, plus a monthly maintenance fee
Ownership structure Apartments are sold on a 100-year renewable lease