Come Sail Away

Come Sail Away

ENTREPRENEURS by Jean Gruss | Editor/Lee-Collier

When David Lester visited his personal bankers a few years ago with the idea of selling fine art from a yacht, they politely told him that they didn't finance commercial-shipping ventures.

So Lester visited one that did: CAT Financial Services Corp, a division of Caterpillar, the giant manufacturer of construction equipment. It turns out the company is one of the biggest commercial-shipping lenders in the world.

David Lester and his wife Lee Ann wanted to replicate the successful art-fair businesses they sold for $22 million a few years earlier. But they wanted to do it with a new twist. Instead of organizing art fairs on land in cities such as Palm Beach and Naples, they would bring the art to town on a mega-yacht. The show would be called SeaFair.

The idea didn't immediately float with Caterpillar financiers, either. "They said: 'You're crazy...we don't do venture capital'" David Lester recalls.

Still, the Bonita Springs couple was undeterred. They dreamed up the idea of a company now called Expoships after they retired from the art-fair business in 1998 while traveling on their own yacht, Fortunata. The Lesters' successful land-based art fairs consisted of giant climate-controlled tents the size of a football field where dealers rented space to sell fine art in upscale locations, such as Palm Beach and Beverly Hills. Each art fair cost $1 million to set up. With a yacht, however, the couple realized that most of the costs of setting up a show would be eliminated because the entire gallery would steam from one town to the next.

Naturally, there would be many technical hurdles to overcome. For one thing, the yacht would have to be large enough to hold thousands of square feet of gallery space. It would need top-notch security. There couldn't be many windows because of the damaging effects of sunlight on precious works of art.

Because of the minimal number of windows, the yacht would have to be specially designed, a detail that worried executives at CAT Financial. What if the Lesters' idea failed and they had to repossess the one-of-a-kind yacht?

Working with naval architect DeJong and Lebet of Jacksonville and Miami yacht designer Luiz de Basto, the Lesters refined the ship's design so that it could be converted to a casino or sightseeing boat by removing the outside panels and replacing them with glass.

To show the bankers their vision, they commissioned a $100,000 video animation of the 228-foot Grand Luxe yacht. "Without that movie we would never have sold it," says Lester, who posted it on the company's Web site, www.expoships.com.

It took a year to refine the design of the yacht and make other adjustments to the business plan. When Caterpillar finally agreed to finance the project, Expoships was born. "Having them as our partner was enormously helpful," Lester says.

The Nichols Brothers Boat Builders in Freeland, Wash., is building the $60 million yacht; it will start its maiden voyage in January from St. Petersburg. David Lester says he expects the ship's annual revenues to be $28 million to $30 million, though he declines to reveal additional financial data for the privately held company. The Lesters own 70% of the company; two undisclosed investors own the remaining 30%.

A better retail model

With the shipbuilding phase underway, the Lester's can focus on finding wealthy buyers for the art.

One key strategy is to promote an art-related nonprofit group on opening night at every stop. After all, it makes sense that benefactors of art-related nonprofits such as museums and symphonies would be art collectors, too.

For example, 400 guests will be invited to the opening night of the yacht's show in Naples next January to benefit the Philharmonic Center for the Arts. "This is for people who love the visual arts, so naturally we would be the logical ones to do it," says Myra Janco Daniels, chairman and CEO of the Philharmonic Center. The $400-per-person event is expected to net the nonprofit group over $100,000, she says.

The fundraiser will hopefully create a buzz for the yacht the Lesters will spread to the other cities. In addition, they plan to publicize the boat's arrival to generate newspaper and television coverage. Dealers from New York, Paris and London will display paintings, sculpture, jewelry and rare books in 28 galleries on three decks. In addition, the brightly lit yacht will feature an upscale restaurant on the third deck and an open-air restaurant and bar on the top deck.

For the inaugural launch of SeaFair, the Lesters have booked several hundred rooms at the Renaissance Vinoy Resort and Golf Club where they will host dealers, collectors and journalists. Expoships is spending $5 million in pre-launch marketing expenses, Lester says.

The yacht will typically stay five days in each port and the only way to gain admission will be with an invitation from SeaFair, the sponsored charity, the dealers or sponsors, such as financial institutions seeking to entertain clients. The Lesters are narrowing their search for about 3,000 potential art buyers in each city by sifting through databases of wealthy individuals and mailing them an invitation with a hardbound 250-page catalog of the art the size of a coffee-table book (advertisers can buy a page in the catalog for $5,000 a page). He expects about three-quarters of those who are invited will show up.

Starting in St. Petersburg in early January, the yacht will make its way south to Sarasota, Naples and around the tip of Florida to Miami Beach and Palm Beach. Then, it will head north up the Atlantic seaboard, stopping in such places as Amelia Island, Sea Island, Savannah, Charleston, Myrtle Beach, Annapolis, the Hamptons and Martha's Vineyard. Lester says Expoships has leased 70% of the space for 2007 and the St. Petersburg launch is fully booked. The company has posted a list on its Web site of about 80 dealers from 25 cities who have signed up for SeaFair, including several from Paris and London.

Naples is an especially attractive town, Lester says. It's not a huge metropolitan area and the busy winter season is just four months long, so Naples can't support dozens of art galleries. But it has loads of wealthy buyers. Lester says Naples has 1,000 households with more than $50 million in liquid assets and another 30,000 households with over $3 million in assets. The yacht can accommodate about 2,500 couples per week, or less than 10% of the 31,000 households with $3 million in liquid assets.

Lester estimates that each dealer needs two new clients per week to justify the expense of leasing space on his yacht. With the ship's 28 galleries, dealers need a total 56 buyers each week, or less than 1% of the 5,000 people Lester expects will visit the ship each week.

Supporting the dealers is a land-based operation that includes two climate-controlled trucks and 25 minivans that will follow the yacht up and down the east coast. Because most of the ship's space is devoted to galleries, dealers will stay in hotels and drive to and from the ship in the minivans each day. They'll also use the vans to visit clients and deliver artwork, as well as replenish their stock from the two trucks that follow the ship. Meanwhile, most of the ship's 75 crewmembers will be housed in a former 112-foot dinner boat called the Niagara Clipper that will follow the yacht.

A flotilla of luxury yachts

If the first yacht proves to be a success, the Lesters have plans for more identical yachts. The second yacht, due to be delivered in late 2007, will highlight fashion and jewelry. The third ship will feature Italian designs, from motorcycles to jewelry and clothes.

The model could be applied to other industries, too, the Lesters say. Lester says the fourth yacht will be geared toward the pharmaceutical industry. Dubbed the PharmaSea, the idea is to lease space inside the yacht to medical companies such as drug makers. Doctors near each port of call would be invited to visit with the companies, much like art collectors will be invited to meet with art dealers.

For the fifth ship, Lester envisions it as a real estate fair. Developers and builders would lease space and sell luxury homes located all over the world to wealthy buyers at various ports of call.

Ports won't be limited to the east coast. The Lesters say there are markets up the Mississippi and Ohio rivers as well as down the St. Lawrence Seaway that may be lucrative because of the lack of fine-art galleries.

Meanwhile, Expoships is moving into a new building at Riverview Corporate Center in Bonita Springs that will accommodate its rapidly growing support staff. Currently, the company has 15 employees, but Lester says he expects to have 75 by the fall.

Fine Art SALES

Few people get up in the morning and decide to buy a piece of art, says David Lester, art-fair organizer and principal with Expoships in Bonita Springs.

"All art is an impulse purchase," Lester says.

So what does it take to be a successful art dealer? Lester says these are the big hurdles:

For starters, you have to have a good eye to discern the best art that an artist can produce, a skill that often comes from experience and a passion for art.

Then, dealers must have sufficient capital to build a substantial inventory and be able to market the art successfully.

Finally, art dealers must be able to mingle with their wealthy clientele. "They have to be socially adept because they're dealing with very socially adept people," Lester says.