Asset Valuation Process - Definition of Terminology

At Rabin, our professional machinery and equipment appraisal team has worked together for over 25 years and have extensive experience in nearly every facet of industrial equipment.  Their collective expertise has allowed them to complete hundreds of reports over the years that provide our clients with real-world obtainable value conclusions.  The following is our final blog discussing terminology used in the asset valuation process. 

Our definitions are from the American Society of Appraisers who define the following as a starting point based on standard appraisal theory.  ASA’s states the definitions may be expanded or refined as the purpose and function of an appraisal dictate, as long as the fundamental concepts are not altered. (Other than laws by a country, state, region, or regulatory agency that may take precedent)  

·         Salvage Value - An opinion of the amount, expressed in terms of money that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date.

·         Scrap Value - An opinion of the amount, expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.

·         Insurance Replacement Cost – An opinion of the amount of the replacement cost new as defined in the insurance policy less the replacement cost new of the items specifically excluded in the policy, if any, as of a specific date.

·         Insurance Value Depreciated – An opinion of the insurance replacement cost new less accrued depreciation considered for insurance purposes as defined in the insurance policy or other agreements, as of a specific date.

To discuss your machinery and equipment appraisal needs, please see our website for contact information.  We are more than happy to answer any questions you may have regarding your equipment appraisal situation.

In business for over 60 years, Rabin is an industrial auction and real estate investment company, with a focus on the acquisition and sale of industrial equipment and facilities around the world.  Rabin Worldwide is headquartered in San Francisco with a European subsidiary office in Manchester, United Kingdom.

Source:

Machinery & Technical Specialties Committee of the American Society of Appraisers, July 25, 2010

http://www.appraisers.org/Disciplines/Machinery-Technical-Specialties/mts-appraiser-resources/DefinitionsOfValue

More Terms Used in the Appraisal Process

At the Rabin Company we are a family-held industrial auction and real estate investment company that has a focus on the acquisition and sale of industrial equipment and facilities around the world.  This is our second installation of blogs dealing with terminology used by the industry for determining valuation in an asset-based lending or disposition process.

The American Society of Appraisers defines the following terms based on standard appraisal theory: 

·         Fair Market Value in Continued Use with Assumed Earnings - An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and assuming that the business earnings support the value reported, without verification.

·         Fair Market Value in Continued Use with Earnings Analysis - An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date and supported by the earnings of the business.

·         Fair Market Value (Installed) - An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering market conditions for the asset being valued, independent of earnings generated by the business in which the property is or will be installed, as of a specific date.

·         Fair Market Value (Removed) - An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering removal of the property to another location, as of a specific date.

Our professional asset appraisal services provide an essential starting point for any asset-based lending or disposition process.   At Rabin we base valuations on our actual sales as well as sales values in the marketplace, and we consistently deliver asset values to banks and corporations that they know they can rely on.  

In addition to being specialists in providing companies with expert asset valuation and asset recovery services, we also run an in-house commercial real estate investment and management company. Our seasoned appraisers have completed hundreds of reports, providing our clients with real-world obtainable value conclusions.  Please contact us to learn more about our comprehensive services. 

Source:

Machinery & Technical Specialties Committee of the American Society of Appraisers, July 25, 2010

http://www.appraisers.org/Disciplines/Machinery-Technical-Specialties/mts-appraiser-resources/DefinitionsOfValue

Definition of Terms Used in the Asset Valuation Process

For more than 60 years, Rabin has been a family-held industrial auction and real estate investment company, with a focus on the acquisition and sale of industrial equipment and facilities around the world.  This is the first of a blog series that defines common terminology used by the industry. 

Our information comes from the American Society of Appraisers.  ASA states that the following definitions are the starting point for terms that are based in standard appraisal theory.  Furthermore while they “provide the fundamental value concepts; they are not the only acceptable definitions, since contracts or jurisdictions may dictate somewhat different philosophies.”  The ASA definitions are as followed:

·         Fair Market Value - An opinion expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, as of a specific date.

·         Reproduction Cost New - The cost of reproducing a new replica of a property on the basis of current prices with the same or closely similar materials, as of a specific date.

·         Replacement Cost New - The current cost of a similar new property having the nearest equivalent utility as the property being appraised, as of a specific date.

·         Orderly Liquidation - An opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.

·         Forced Liquidation Value - An opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date.

As leading industrial and commercial liquidators, Rabin has sold equipment assets in every trade sector and on almost every continent.  Our professional asset appraisal services provide an essential starting point for any asset-based lending or disposition process.   

At Rabin, our professional machinery and equipment appraisal team has been working together for more than 25 years—gaining extensive experience in nearly every facet of industrial equipment.  Our seasoned appraisers have completed hundreds of reports, providing our clients with real-world obtainable value conclusions.  Please contact us to learn more about our comprehensive services. 

Source:

Machinery & Technical Specialties Committee of the American Society of Appraisers, July 25, 2010

http://www.appraisers.org/Disciplines/Machinery-Technical-Specialties/mts-appraiser-resources/DefinitionsOfValue

Using Your Equipment and Machinery Assets as Collateral

Collateral is the property or other assets that a borrower offers to a lender to secure a loan, and will be forfeited and typically sold in the event of a default.  Very often businesses use assets such as equipment, machinery, buildings or inventory as collateral to reassure lenders that they have another source of repayment if the need should arise.  

When financing new business assets, they are in most cases automatically considered collateral until such a time that the loan is paid in full.  If the amount of equity you put toward the purchase of the new assets is considered insufficient, other assets may be required as collateral toward the debt. 

According to the U.S. Small Business Association, “Certified appraisals are required for loans greater than $250,000 secured by commercial real estate. The SBA may require professional appraisals of business and personal assets, plus any necessary survey and/or feasibility study.”  They further state that when real estate is being used as collateral, banks and other regulated lenders are required by law to obtain third-party valuation on transactions of $50,000 or more.

For any SBA loan, all owners are required to make a personal guaranty that consists of 20% or more of the business along with any other individuals who hold key management positions. They state that, “Whether a guaranty will be secured by personal assets or not is based on the value of the assets already pledged and the value of the assets personally owned compared to the amount borrowed.”

This is where the services of a company such as Rabin are invaluable by offering accurate third-party valuations to a business.  Our asset appraisal services provide an essential starting point for any asset-based lending or disposition process.  For over 60 years, we have expertly assisted companies with obtaining working capital by valuing assets promised as collateral to asset-based lenders and investors. 

Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and much more. Past auctions include names such as Hostess, Braniff Airlines, Montgomery Ward, and the Railway Express Agency. 

Source:

Small Business Association https://www.sba.gov/content/collateral

Awrey Bakeries - Another Success Story

Awrey Bakeries, once one of the largest privately owned bakeries in the country, was a struggling 100-year old business that was going to be auctioned off in February of 2013.  As one of the few remaining Detroit-area brands still operating, it avoided permanent closure in a down-to-the-wire deal.   

As leading experts with this type of closure, Rabin had been brought in to assist with the sale of the factory and all of the equipment. The bakery was originally scheduled to close in January and lay off all 200 workers as it was prepared to go to auction, but instead the plant continued to operate until late February.

We sent the Rabin set-up team to respectfully work around the employees in the plant to get the enormous facility prepared for the auction.  The team accomplished this in less than three weeks.  While this was going on, we were aggressively marketing the property and equipment to buyers from all over the world including Mexico, Macedonia, Canada, Lebanon, Bulgaria, Central America and a large national interest in the equipment.  The next part of the story takes quite a twist. 

Just one week before the auction, a prospective user approached us and we negotiated a turnkey sale.  The new owner not only reopened the factory the next week but ended up rehiring almost half of the Awrey workers.  It turned out to be a winning situations for all parties as it kept a sorely needed industry in Livonia, Michigan as well as doubled the projected expectations of our client. 

At Rabin we provide turnkey sales and solutions throughout North America.  We actively market and sell companies in their entirety, including equipment, inventory, intellectual property, customers, and often the attached real estate.   Contact us to learn more. 

Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Past auctions include names such as Hostess, Braniff Airlines, Montgomery Ward, and the Railway Express Agency.  Rabin is headquartered in San Francisco with a European subsidiary office in Manchester, United Kingdom. 

Capital Equipment Purchases

Regardless of whether your company is large or small, making capital equipment purchases require careful consideration.  Identifying your needs for replacing, upgrading or adding to your current inventory of capital equipment and machinery needs to be reviewed and analyzed for all available options. 

By recognizing the significance of capital purchases for equipment and machinery, a business needs to determine if the new pieces will add value and perform well over their expected life span and beyond.  This is where a lifecycle analysis can help.  It is used to chart out the full cost of ownership and compare the costs between different models and the price difference if bought new, used, or leased.
 

The process of a lifecycle analysis takes into account the full price of the leasing agreement and the purchase price of buying the equipment new or used.  Factors should include: delivery charges, installation fees, any training costs, maintenance, and depreciation.  Other things to figure in would be the cost of disposing of your existing equipment and any plant layout changes the new equipment or machinery will require.  If financing the equipment or machinery, be sure to include any interest charges as well. 
 

Used equipment may be your best bet for equipment or machinery that is not technologically dependent and is not likely to become obsolete in a short period of time.   Also new or used equipment allows you as the owner to make modifications, whereas with rental equipment, you generally are locked into that piece of equipment for a set period of time and cannot make any alterations to it.  
 

We encourage you to check out our current and upcoming auctions and liquidation sales at Rabin.  As leading industrial and commercial liquidators, Rabin has sold equipment assets in every trade sector and on almost every continent. We purchase complete factories, including real estate, and conduct auctions of any size on behalf of our clients.
 

In business for over 60 years, Rabin Worldwide is an industrial auction and real estate investment company, with a focus on the acquisition and sale of industrial equipment and facilities around the world. In addition to being specialists in providing companies with expert asset valuation and asset recovery services, we also run an in-house commercial real estate investment and management company.  Rabin Worldwide is headquartered in San Francisco with a European subsidiary office in Manchester, United Kingdom.

 

Better to Buy Used Equipment or to Lease?

If you are wondering if it may be a better idea to buy at auction or to lease the equipment you need, there are several things you should consider before you make your decision.  To start with you probably want to evaluate how much and for how long you will use the equipment as well as your company’s financial situation.  In many cases, purchasing good used equipment can be cheaper over the long run, and when you are done with it, you still own something of value to sell.

Leasing makes sense for equipment needs that are short term or if it is the type of equipment that requires frequent replacement as it wears out quickly or becomes obsolete.  Another advantage is you typically put up less money upfront, as most leasing agreements do not require a large down payment.  You can also take rentals as leasing expenses on your taxes, but you need to figure out if it outweighs the convenience and long term benefits of buying your own equipment.  And your own equipment can be depreciated over time on your taxes. 

Buying at auction is a perfect solution for heavy industrial or farm equipment and machinery as it typically has a long life span and does not become technologically outdated in a short period of time.  The best deals come down to condition, and the newer the equipment and the better the condition it is in, the more valuable it will be.  And keep in mind, even if you buy at auction, you generally can still finance it. 

If you are thinking of buying at auction, you may want to take part in some online auctions or attend a couple of live ones to get an idea of prices on the equipment and machinery you are interested in.   Keep in mind if you do plan to buy used that you will want to do your homework and find out everything you can about that equipment.

Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and much more.  Check out our reviews here.