Friday, December 5, 2014

As a Lender, Where Are You Entering the Value Curve When Lending on Machinery & Equipment?

Recently, when discussing value trends with a group of lenders, the following question was raised:

"From a collateral perspective, is it more secure to lend X percentage against used equipment than on new equipment because of there being less dissipation of value over time?"

At Loeb, we agree with the statement. Another lender in the room indicated he didn't follow, he stated:

"New equipment is new, therefore more valuable."

His statement is true on day one, but that can quickly change.

For example, a machine costs $100 brand new and its FLV at one year is $65. The lender advanced 100% of the new cost on a 5 year note. The outstanding loan value at the one year mark is approximately $85. The loan to value is 1.31.

A machine costs $75 used and its FLV at one year is $65. The lender advanced 100% of the used cost on a 5 year note. The outstanding loan value at the one year mark is approximately $63. The loan to value is 0.97.

This is the reason that lenders who issue leases/loans on new equipment for 3 or 5 years recognize they are underwater from a value perspective for the first period of their loan. That is the cash flow/ability to pay component of the underwriting credit decision.

Both new equipment and used equipment can be secure collateral. The understanding needs to be in place that, when looking at the opinion of value curve, at what point is the lender joining the curve? The higher up the curve (meaning the newer or new equipment) will dissipate more value than a similar used unit that starts at a lower value.

Understanding value today is critical. Understanding where that value is going is just as critical.

For more information on Loeb Appraisal or to speak to a representative regarding Equipment Valuation, contact info@loebappraisal.com or complete our Appraisal Services Form and an appraisal specialist will contact you.

Equipment valuations for industrial facilities of all sizes!Contact Loeb for all your Appraisal needs!

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Wednesday, September 24, 2014

Understand Your Asset Values with a Certified Market Appraisal from Loeb Appraisal

Loeb Appraisal specializes in appraising machinery and equipment within the food, pharmaceutical, cosmetics, and chemical industries. Our certified market appraisals give our customers clear insight to the value of their capital assets.

Loeb's expertise in the field comes from our direct experience in buying and selling quality used machinery and, unlike others in the industry, our appraisal values are based on actual historical transactions.

Loeb Appraisal's certified market appraisals help companies and financial partners gain insight in situations involving:

  • Asset-based lending and procurement of financing
  • Acquisition cost allocation
  • Lease end negotiations
  • Partnership formulation or dissolution
  • Mergers and acquisitions
  • Litigation
  • Property tax issues
  • Risk management

For more information on Loeb Appraisal or to speak to a representative regarding Equipment Valuation, contact info@loebappraisal.com or complete our Appraisal Services Form and an appraisal specialist will contact you.

Equipment valuations for industrial facilities of all sizes!  Contact Loeb for all your Appraisal needs!

Thursday, August 7, 2014

Understanding Costs Versus Values

Beware: High rates of customization will not always pay off in terms of valuation

Recently a banking client contacted Loeb Appraisal in need of valuation for a newly installed computerized conveyor system. They required an opinion of value to include both a Fair Market Value In Place definition, as well as, a Forced Liquidation Value definition. This prompted a lengthy conversation and discovery period as the overall costs of the system was $4,000,000, but there was no breakdown from the lender's client the document hard costs (the actual cost of the conveyor system) versus the soft costs (labor, installation, and programming).

This scenario presents a unique situation wherein there will be a large differential of values between the FMV IP definition of value and the FLV definition of value. Opinions of value under Fair Market Value In Place for these types of scenarios are typically very straight forward. The actual total cost for the recently installed system is a known value. However, the Forced Liquidation Value is quite a bit different. The soft costs play a large factor in the final valuation as these unrecoverable costs cannot be incorporated into a Forced Liquidation analysis. In Place, the values are retained, but under the Forced Liquidation Value scenario, they will not.

The result of this engagement was an opinion of FLV being merely 10% of the overall cost. From the FLV perspective, both our banking client and their borrower agreed with our analysis. The time factor that is inherent with the definition of FLV is critical to keep in mind in these scenarios. What are the hard and soft costs, what the value is on the books, what the current value of the assets are – these factors impact the analysis and the final opinion of value.

Our day-to-day involvement in the marketplace is critical when it comes to true asset valuations. With Loeb as an active participant in the market from multiple disciplines, our appraisals are based on actual transactions of buying, selling, financing, and auctioning industrial assets. We apply real world analysis to our approach.

Wednesday, May 28, 2014

Achieving Consistent Results Through Our Proven Process

Loeb is divisionally agnostic. Regardless of why we are looking at an industrial asset, Loeb always looks at the equipment in a consistent manner.

Are you looking to sell equipment, auction your plant or are in need of an appraisal? Our clients get the benefit of knowing that regardless of why we are being asked to look at the facility or equipment. The benefit of our knowledge and expertise is applied consistently.

This is our cross-divisional approach. We have numerous clients who throughout our relationship we have performed multiple services: performed appraisals, sold equipment, bought equipment, conducted auctions, and also financed.



At it's core, Loeb Appraisal's Proven Process can be broken into just a few key steps (click on the graphic above for detailed information):
  • Appraisal Requested
  • Executed Engagement Letter with 2, 3, or 4 week Turnaround (depending on type of appraisal requested)
  • Inspection
  • Research & Opinion
  • Asset Verification & Internal Peer Review
  • Final Review
  • Final Appraisal Report
  • Quarterly Check-in
We meet our clients expectations not only because of our knowledge and expertise, but also because of our Proven Process.

Equipment valuations for industrial facilities of all sizes!
Contact Loeb for all your Appraisal needs!