OCEANS APART AD#2 QUESTIONNAIRE

Who designs and engineers your yachts?

Jeff Leishman, the Chief of Design and a principal in the company, has designed every single Nordhavn from Day 1. Jeff has created a logical consistency in the evolution of Nordhavns. Although they have undergone changes and modifications to keep them current, all are instantly recognizable as being a Nordhavn.

Jeff heads up a design dream team that includes Phil Arnold and Mike Telleria. These three highly-talented and top-regarded engineers have nearly four decades of experience combined and have been collaborating on the design and engineering of Nordhavns for about 10 years.

A graduate of California State University Long Beach, Phil came to PAE after having been the esteemed head of sail and powerboat design and engineering at other top builders and design offices. He has also designed custom spar, rigging and hardware for various boat models – both recreational and commercial.

Mike is a U.S. Merchant Marine Engineering Officer and graduate of the U.S. Merchant Marine Academy with a degree in Marine Systems Engineering. He is also an American Boat and Yacht Council (ABYC) Master Technician. A former managing editor with several marine publications and a current boating industry journalist, PAE is fortunate to have Mike’s expertise and experience in his role with the engineering department as well as his oversight of each Nordhavn hull-specific Owner’s Manual.

How have the designs developed over time from the earliest to the latest models?

This ties into design integrity. Everything ever done on a Nordhavn is based on empirical design knowledge based on previous models. We have kept the design basically the same but evolved it further by taking all the best features of past models and incorporating them into future boats while designing out what doesn’t work well.

Not only are we able to achieve this through our own design experience but also via the feedback we get from our owners who have cruised a total of nearly 6 million miles on their Nordhavns. Illustrating this point perfectly is a Nordhavn 68 owner who purchased his boat in 2010 and is now building a new Nordhavn 68, incorporating some tweaks and modifications based on what he has learned from over 40,000 nm cruising.

How long has the company been in business?

Pacific Asian Enterprises, Inc. (PAE) has been in business in Dana Point, California, for 40 years and has been run by the same ownership team of Dan Streech, president, and Jim Leishman, vice president the entire time, with Jeff Leishman taking stake in the company in 2000. They have had consistent ownership without interruption, having maintained control of the company without insolvency.

In addition to Dan and Jim, who founded the company 40 years ago (with Jeff joining them just a couple years later), the first sales rep, Larry Gieselman, has worked for PAE for 37 years; seven employees are closing in on – and well in excess of – 20 years of service at PAE; while 23 others have been with the company longer than 10 years. That’s three-quarters of PAE that has worked together for over a decade, which not only displays company loyalty but also highlights the cumulative experience that exists at PAE.

Aside from this, PAE has maintained a partnership with its two factories in Asia that build all Nordhavns: PAE has been in partnership with the Ta Shing Yacht Yard for 40 years and with South Coast for more than 30 years.

Who are the owners and who manages the company?

Dan Streech, president; Jim Leishman, vice president; and Jeff Leishman, Chief of Design are shareholders and full-time employees of PAE. Additionally, South Coast Marine, our factory in Xiamen China is a shareholder. General Manager Sky Scott oversees the day-to-day operations of the company including project management, production and finances. Sky reports to Jim and Dan. Jeff oversees the engineering team and supports the production team. The Marketing Director and Sales managers report to Jim and Dan.

How many of your brand’s boats have been built?

Today there are more than 550 Nordhavns that have been built and are out cruising the world over.

It’s important to note that the roots of Nordhavns lie in the Mason cruising sailboat brand, which laid the groundwork for the concept of Nordhavns. PAE began as the manufacturer of Mason sailboats, building 212 Masons. It was the design and sales experience gleaned from the years producing Masons that influenced the Nordhavn concept. For a time, PAE manufactured both Masons and Nordhavns, but in 1997, production on Masons was halted.

What is the financial history of the company?

Pacific Asian Enterprises, Inc. is a California registered "C Corp" corporation that has been in business continuously since it was formed in 1978. The original capitalization was $25,000 that was used to set up a "state-of-the-art" office with furniture, an IBM Selectric typewriter, a telex machine, and two calculators.

In the ensuing 40 years, PAE has built and delivered over 800  new boats with revenue exceeding $1 billion and has created a global presence with a branded product: Nordhavn. Additionally, PAE has – over the same 40-year period – conducted a vibrant yacht brokerage business consisting primarily of pre-owned Mason sailboats and Nordhavns. The history of the brokerage business is recorded in commissions earned rather than number of boats sold or gross sales figures. However, it is estimated that over 1,000 brokerage boats with a total gross selling price exceeding $1 billion has passed through PAE’s books.

The 40 years of PAE’s existence has covered a period of time that arguably may involve the greatest changes in human history, and the greatest challenge to survival in business. PAE has spanned the time between slide rules and computers, hand-drawn designs and sophisticated CAD-designed modern yachts, simple boats described on a few hand-written pages to mind-numbingly complex superyachts that require a terabyte of data. The list of calamities and disasters during that time is long (wars, famines, an oil crisis, the dot.com boom/bust, nuclear accidents, impeachments, recessions, 22% prime rate [January 1988], Black Monday [October 19, 1987], currency crises, and more, much more). The list of amazing advancements in our standard of living is also long (the Internet, medical advancements, automobile safety, space travel, the Hubble Space Telescope, human rights, and more). And, of course, there was the end of the Cold War and the opening of China. In 1978, China's cultural revolution had just ended and it was unthinkable that only 22 years later we would be building boats there. Additionally, PAE has lived through nearly the entire productive life cycle of the Baby Boomer generation.

Why the history lesson when the question to be answered is about the financial history of the company? With the crazy backdrop described above, PAE survived it all, created a brand of boat that is beloved around the world, and thrived with not a drop of customers’ money spilled, all vendors paid, all boats delivered, and all obligations met. We didn’t go broke or bankrupt or become insolvent. That last sentence answers the question.

Do you have an actual tally on your brand’s ocean crossings, circumnavigations and other serious passages and cruises of specific boats?

There is a continually-updated database of Nordhavns that have crossed oceans, completed circumnavigations, and attained other momentous cruising achievements. Currently Nordhavns have completed more than 150 ocean crossings, eight global circumnavigations, and multiple roundings of Cape Horn. Nordhavn claims many records held by production powerboats including highest latitude visited, fastest (yes, fastest!) global circumnavigation by a production powerboat, and the only one ever to reach the sub-Antarctic island of South Georgia.

Why are Nordhavns so heavy compared to other manufactuers’ yachts?

Nordhavns are built with heavy construction scantlings for added strength and durability. All full-displacement models are ballasted for the stability one would expect from an offshore vessel. Nordhavns are made with heavy-duty deck hardware, heavy-duty high-duty cycle engine(s), large efficient propellers and heavier shafting, and greater tankage for the long passages they are designed for. The added weight found in the Nordhavn full displacement models contributes to the longevity of the boat, and the boat’s ability to stand up to heavy sea conditions provides a more comfortable ride.

Do you manufacture any yachts that are built to class and certified?

All Nordhavn models 76-feet and smaller are CE Type Certified. The only differences between a Nordhavn built for the U.S. and a CE-Certified Nordhavn build for Europe are a few minor modifications to the fuel and electrical systems to comply with specific European laws. Category A stability is a feature of every Nordhavn, regardless of the market it is being built for.

Nordhavn 80, 86, 96 and 120 can be classed at the buyers request and built to the standards of the American Bureau of Shipping (ABS). To date PAE has built seven ABS classed boats, all of which underwent material and machinery certification, engineering design check, approval of all structures and systems, and independent build surveys throughout the construction by ABS. Over the years the PAE design and construction team has become well versed in meeting the special construction and documentation requirements of building to such a high-quality international standard, much of which ends up being integrated into all Nordhavns from the smallest to the largest.

What material are your tanks made from and why?

All major tanks for storing fuel, water, and waste are constructed from fiberglass, which affords many benefits to the owner and the builder. The main benefit is there is never a chance for corrosion due to moisture with a fiberglass tank, which is important for a boat that is deigned to last many decades – if the boat lasts 60-70 years, the tanks need to last just as long without creating problems. Given enough time, a metal tank will surely suffer from corrosion at some point. Another benefit is a fiberglass tank can easily be shaped to fit the curve of the hull to ensure every available cubic-inch of space is being taken advantage of, which becomes very important for boats designed to cruise for months at a time and need to store as much fuel and water as possible. Structurally fiberglass tanks are much easier than metal to secure to the fiberglass hull, stringers, and bulkheads. The tanks are fitted to mate with the surrounding surfaces and are glued and glassed in place to form a secure bond that will last the lifetime of the boat.

For more detail, the following describes the fuel system on the venerable Nordhavn 47 and, aside from capacities, is utilized in all Nordhavns up the 76-foot model.

Firstly, the storage tanks are molded over male molds using a conventional laminating process with all vinylester resin and a fire-retardant resin on the outer laminates. The interior of the tanks have a fine molded surface, and baffles are provided on longitudinal and transverse centers of 24 inches. Each tank is approximately 700 gallons with access to the tank provided through a top-mounted manhole approximately 18-inches by 18-inches – large enough for a 180-pound man to enter the tank. Additionally each baffle has a removable section that can be unbolted allowing that same person access to the entire tank interior for cleaning or repair. The tank is molded and pressure tested to 4 psi outside the boat. Each tank is fitted with a sight-glass and a calibrated veneer. The FRP tanks will last the lifetime of the boat and are not susceptible to corrosion or electrolysis. We’re confident that these are the finest and most expensive fuel tanks you will find on any production boat.

Another important component of this system is the gravity-feed supply reservoir. The fuel drains from both storage tanks through 3/4-inch Aeroquip hose and swaged JIC fittings into an aluminum supply reservoir of about 70 gallons. At the bottom of the reservoir is a sump that has a drain off valve and a water sensor that sounds an alarm within the wheelhouse if water is present. Above the sump are the feed lines for the engine, generator and any other diesel consumer that might be aboard.

The supply reservoir design offers other important benefits. Virtually all the fuel carried aboard the boat is usable. Even with 10 gallons of fuel in each tank the vessel can be safely operated in the roughest of conditions as virtually every last drop of diesel will find its way downhill and consolidate within the supply reservoir - with no concern of air ingestion.

Additionally, the supply reservoir is very effective at catching any water that might find its way into the system. With both fuel supply feeds opened to the reservoir - if a cup of water is poured into either tank – within a few minutes it will flow downhill and find its way into the supply reservoir sump where it can easily be drained off via a petcock. We had firsthand experience in Alaska a few years ago when a customer’s grandson - while taking on water from a dockside hose – inadvertently added about 200 gallons of fresh water to the starboard fuel tank. What looked like a major problem was resolved by simply opening the sump on the supply reservoir and draining off the water into the bilge. The water had displaced all the fuel in the reservoir and when we got our first hint of fuel at the sump’s drain valve we knew that only residual water remained, which was completely eliminated after a few hours of running and one more purge of the supply reservoir sump. For normal operation the crew can open the sump valve and check for water as a preventative measure. An added benefit of the reservoir is that it acts as a very effective settlement tank where debris can be purged from the sump before ever reaching the primary filters.

The benefits pertaining to usable fuel along with the water and debris sump and the ability to sample the contents of the sump are directly derived from a typical high wing light aircraft fuel system – a design that has survived 70 years of successful operation with no viable alternative developed – despite advancing technology.

Another unique feature of this system is that precision consumption checks can be performed easily and quickly – not only for the main engine but for the generator or even an optional diesel heater. The supply reservoir has two parts – the lower section in which about 95-percent of the fuel is contained, and the upper section that holds approximately 2 gallons and is fitted with a sight-glass and a precision veneer - calibrated into 1/10th of a gallon increments. Underway or at dockside - during a test - the gravity-feed lines from each storage tank can be closed and, as the fuel in the upper section of the tank is consumed, the operator can note how many 1/10th gallon increments disappear over a 6-minute period, then simply multiply the fraction of a gallon by 10 and the total hourly consumption is calculated – far more accurately than with virtually any other method.

The simplicity of this system dramatically adds to the vessels reliability and reduces demand on the crew. If a customer is at sea and is having a fuel problem that is not related to clogged filters and where confusion or uncertainty over the operation might exist  – the instructions are to simply open all the valves. Older Nordhavn models were like virtually every other production boat – separate supplies and returns with multiple tanks. There was a Nordhavn 46 that was lost years ago on a beach in Mexico because the inexperienced and seasick crew drew fuel from one of four tanks and inadvertently returned to another full tank. In rough weather with lots of wind and effected with the lethargy of motion sickness - the crew did not realize that they had sucked a tank dry and over filled another tank (pumping their fuel overboard out the vent lines) until the engine quit. At that point their condition prevented them from bleeding the engine and getting things back up and running. Soon they were on the beach – fortunately unhurt but they lost the boat. In that system with four tank supply valves and four return valves, all of which have to be in the perfect position to operate, it’s easy to make a mistake. With the supply reservoir system, the Nordhavn 47 can be run from full fuel down to the last drop without ever touching a fuel valve. Normal operation is from one tank at a time with return always back to the supply reservoir, so switching only involves turning two valves - however two-tank operation works fine unless there is a weather condition that would effect athwartship trim - but even then - aside from a self limiting and only slight list (due to an uneven fuel load) there would be no adverse effect.

Finally we come to the subject of fuel filtering. As mentioned the supply reservoir has excellent water separation and debris settlement qualities. The primary filters are Racor 75-900 Duplex along with the manufacturers engine-mounted secondary filter. For transfer and polishing – separate 1/2-inch supply lines are provided from the bottom of each tank and via a separate transfer manifold fuel can be drawn from either tank (independent of engine operation) through a Racor 900 filter by a 24-volt pressure regulated pump with a flow rate of 43 gallons per hour. The fuel can then be returned to either tank or the supply reservoir.

If the operator wished to isolate one tank that contained dirty fuel and polish it- he would want to close that gravity-feed line to the supply reservoir and then open the transfer suction line to the isolated dirty tank - activate the pump timer and draw dirty fuel through the transfer filter. He could then open all three return paths – the supply reservoir and the port and starboard fuel tank. The supply reservoir would be gravity filled by the fuel from the clean tank and the dirty tank would be cleaned by the transfer filter. The returning fuel can go anywhere as it is clean – it would travel a path of least resistance and if any of the three tanks became too full - resistance would be created and the fuel would go to the tank that has reserve capacity. At the completion of polishing the normal transfer capability of the system could quickly resolve any fuel related trim issues.

When faced with extremely dirty fuel the best tactic is to turn the supply reservoir into a day tank, which can be done by turning a few valves. With the reservoir converted to a 70-gallon day tank, the transfer system and its Racor 900 filter allows the operator to pump fuel from either tank directly into the day tank – fuel that is filtered and stripped of water and immediately ready to be consumed by the engine and generator.

What about stability? Does your brand test each model for stability and if so can I see the calculations and stability curve for each model?

The United States does not have stability requirements for recreational boats; however PAE tests each Nordhavn model for compliance with International Standards Organization (ISO) standard 12217-1 or other applicable standards. This ISO standard sets criteria for stability of recreational power yachts over 6 meters in length (19’-8”). All Nordhavn models exceed the criteria specified in ISO 12217-1 for Category A, the most rigorous of the four design categories.

Larger, classed yachts are tested to the criteria of the ABS Guide to Building and Classing Yachts or to the requirements of the flag state.

Although yacht stability can be a daunting topic, and a full stability report as submitted for approval can run dozens of pages, PAE can provide a summary and explanation of the stability criteria and stability curves for each model to a client upon request.

Manufacturers claim to produce “Category A” yachts for unlimited offshore use. What does this mean and how do I confirm this is true?

“Category A” refers to a Design Category as described in the European Union (EU) Recreational Craft Directive (RCD). The RCD provides requirements for the design and construction of recreational craft to be built for use in the EU. It is the most comprehensive small craft standard for recreational boats in the world, covering everything from exhaust and noise emissions, construction scantlings, stability and load capacity, electrical, plumbing and other system requirements, to fire protection and numerous other requirements. The RCD defines four Design Categories, from “A” to “D”, Category A being the most stringent. From the RCD: “A recreational craft given design Category A is considered to be designed for winds that may exceed wind force 8 (Beaufort) and significant wave heights of 4m and above . . .” To achieve a CE Category A, the boat must meet the requirements of numerous International Standards Organization (ISO) standards relating to the size and type of boat being built. A CE Certificate with a Category A notation ensures the boat has been built to the highest standards for a recreational boat.

A manufacturer will be able to show you the CE Certificate for any boat built for CE Certification. If a CE Certificate is requested for a new boat, upon completion, the documentation supplied with the boat will include the CE Certificate with the Category A notation and a signed Declaration of Compliance. Nordhavn yachts are CE certified by HPi Verification services in the UK and are listed on their website.

Tell me about your company’s insurance policies. How is the yacht protected during manufacture, transport and during commissioning? Does your brand have product liability insurance? An umbrella policy? What are the limits?

PAE has a comprehensive insurance policy package that was developed by our agent Doug Holm who is based in the San Francisco office of Lockton Insurance. Doug and his Lockton team have extensive experience in the marine insurance industry and have expertise in everything from super yachts, Jones act, marinas, shipyards, America's Cup race boats, charter yachts, yacht brokers, boat builders and more. The insurance needs of PAE's business model requires a customized insurance package.

PAE is a designer and builder of yachts, so we have product liability risk for errors and omissions and design defects as well as general liability risks. The limit on this portion of the policy is $25,000,000. The policy covers all Nordhavns built and delivered in the last 12 years as well as all present and future Nordhavns.

There are three areas of risk for physical loss of a Nordhavn before it is delivered to the Buyer:

  • Damage or loss while under construction at the Asian factory and/or while being moved to the transport ship.
  • Damage or loss while in transit aboard the transport ship in route to the commissioning location.
  • Damage or loss while being commissioned.

PAE has three policies with Lockton for the above three categories of risk so that there is seamless and continuous coverage for each new Nordhavn from the first layer of laminate in the hull mold to the moment that the Buyer is handed the keys and the title to the finished boat. To make sure that there is no finger pointing, all three policies are covered by the same underwriter, and the policies are written to eliminate any gaps in coverage. On an annual basis, Lockton and our risk team (Sky Scott and Josh Lloyd) look at the production schedule to determine the peak value figures at each factory, in transit or in stock and undelivered at various locations. The limits for the coming year are set accordingly and a base premium is paid. Then on a monthly basis all actual values are reported to Lockton and the account is reconciled at the end of the year.

The Buyers of new Nordhavns can be named as additionally insured on any or all of the three policies covering physical damage, thus protecting the buyer’s interests at all times.

Additionally, there are several other elements to PAE’s policy package:

  • Liability coverage for the actions of PAE yacht brokers while operating an owner’s boat.
  • Liability coverage for pollution caused by PAE, such as a catastrophic fuel or oil spill.
  • Liability coverage for sexual harassment or discrimination by a PAE employee.
  • Liability coverage for the use of an employee’s car for PAE business
  • Coverage for our owned (and leased) office buildings, contents and equipment in Dana Point and other marketing offices. Dana Point is tricky because we are located in a tsunami zone and an earthquake liquefaction zone.

And then there are the odd and one-off risk events that must be insured such as:

  • Liability (including crew) and Hull and Machinery value of the N120 for the delivery on its own bottom from Xiamen, China to Vancouver via Hong Kong.
  • The pollution certificate bond required for the N120 to enter Dutch Harbor, Alaska.
  • Complete coverage for the voyage of N8610 Koonoona from Hong Kong to Singapore.
  • Various bonds and guarantees for PAE owned Nordhavns shipped to unusual locations.

As you can imagine, there is a price to pay for this broad level of quality insurance. That cost, of course, is borne by PAE and is part of our overhead. Arguing and complaining to Doug Holm about the renewal premiums (as the sticker shock hits us) is a predictable annual event. Happily, while the premiums go up each year, it is only because the revenue figures are going up. The actual rates per unit of coverage have gone down.

With more than 550 Nordhavns in service now and 40 years of PAE’s activities and business practices to measure, insurance underwriters around the world know that Nordhavns have a good risk history and actively pursue the business. They do their best to offer attractive pricing and packages to meet the special needs of a class of boat that can roam the world at will.

Back to Doug Holm and PAE’s insurance package. Doug’s defense to my annual attempt to chisel him on pricing is “As it applies to your customers, you have bought the best and the best costs money ...  some day you are going to call me and I am going to be your BEST FRIEND.” On June 27, 2009, a Nordhavn was dropped during offloading in San Diego. As president of the company, I got the call from our launch crew and was told that it was "bad". I called Doug’s cell phone and got him on the second ring (on a Saturday). “Ah Doug, Dan here ...  remember that thing about you being my best friend?” We had a check for the full value of the boat in 29 days...

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