the journal of the international machinery & technical specialties ... · issue 1, 1st quarter...

The Journal of the International Machinery & Technical Specialties Committee of the American Society of Appraisers

Volume 32, Issue 1, 1st Qtr 2016

$35.00 ASA Members, MTS Discipline$50.00 ASA Members, Non-MTS Discipline

T H E M & T S J O U R N A L

MTS Editorial Brad Hartsburg, ASA, CPPA, CSA

5

Chairman’s Report John J. Connolly, III, ASA

6

Governor’s Bulletin Richard Berkemeier, ASA and David Crick, ASA, MTS Governors

7

Finding the Right Appraiser is as Easy as ASA Richard Berkemeier, ASA

9

State of the Helicopter Market Sharon Desfor, ASA

11

Ethics in the Global Real Estate Market - A New International Coalition Tony Grant, FRICS

19

Supportable Evidence in Appraisals John Mathe, ASA

25

MTS214 Identification and Appraisal of Mining and Mineral Processing Equipment Course Alan C. Iannacito, FASA and Allan K. Bowles, PE

29

Virtual Chapter News American Society of Appraisers

37

IRONTRAX LLC Mining Industry Insight (Winter 2015) Mining Industry Statistics Joseph Santora, ASA

39

9th International Conference of Plant and Machinery and Equipment Leslie H. Miles, Jr. FASA, FAPI

44

The Past and Future of Compliance and Fraud in Aviation: Don’t Fly Blind Peter J. Turecek

46

Technological Obsolescence Finally Arrives in the Metal Stamping Press Industry Harry J. Richardson, ASA / Edited by: J. Barry Savage ASA, Emeritus

50

The Ideal Pricing Index Walter W. O’Connell M.E., ASA, SCSP

53

Freight Railcar Basics Tom Sexton, ASA

56

ASA Trains ODR Analysts on Machinery and Equipment Valuation Methodology Jack Beckwith, ASA, CEA

64

Archived Articles Available for Your Library Brad Hartsburg, ASA, CPPA, CSA

66

Contents

Volume 32, Issue 1, 1st Qtr 2016 2


American Society of Appraisers 11107 Sunset Hills Rd, Suite 310, Reston, VA 20190 800-272-8258 ext 125

Editorial Office: Fortress Machinery Appraisals and Consulting Inc. 24 Clover Lane, Calgary, Alberta, Canada T3Z 1G9

Business Office: Asset Valuation Source, P.O. Box 39 Rowlett, TX 75030-0039

© 2016 American Society of Appraisers. All rights reserved. For permission to reproduce in whole or in part, and for quotation privilege, contact ASA’s International Headquarters. Neither the Society nor its editors accepts responsibility for statements or opinions advanced in articles appearing herein, and their appearance does not necessarily constitute an endorsement.

Agribusiness AppraisalsJeffrey Berg, ARA, ASA, FRICSAccredited Rural Appraiser

[email protected]

Brian Field, ARAAccredited Rural Appraiser

[email protected]

• Barge & Export Grain Terminals• Grain Elevators• Fertilizer/Agronomy Facilities• Seed Conditioning Plants• Bean Cleaning Facilities

&25 Years of Experience Education at Work for You

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The International Machinery & Technical Specialities Committee

MTS Committee Officers John J. Connolly III, ASA - New Jersey - Chair Samuel Shapiro, ASA - Massachusetts – Vice Chair Karen M. Milan, ASA - Texas – Secretary

Paul Cogley, ASA – Rhode Island - Treasurer Robert W. Clark, ASA - Pennsylvania – Immediate Past Chair Richard Berkemeier, ASA – Rhode Island - MTS Discipline Governor David Crick, ASA – Australia - MTS Discipline Governor

MTS Committee Members Ildefonso Acevedo Reyes, ASA - Mexico Nuno S. Agostinho, ASA - Argentina Jamie Allen, ASA – IL Keith Bransky, ASA - GA Peter J. Campbell, ASA - MI Michael R. Crismyre, ASA - IL

William M. Engel, ASA - NY Brad Hartsburg, ASA - Canada Norberto J. Levin, ASA - Argentina Irina Rykun, ASA - Russian Federation Kevin S. Reilly, ASA - WI Harry J. Richardson, ASA - MI Alexander Ruden, ASA - GA

Charles W. Ruth, ASA - NM Joseph M. Santora, ASA - OH Bradley Schulz, ASA - IL Garrett Schwartz, ASA - CA John C. Wood, ASA – Australia

Emeritus Members Merritt Agabian, FASA - MA Kal Barrow, ASA - NY J.M. Clarkson, ASA - TX John Connelly, III, ASA - NJ

Melvin Fineberg, ASA - NV Alan C. Iannacito, FASA - CO William F. Jacobs, ASA - OR Norman F. Laskay, ASA - LA Leslie H. Miles, FASA - TX

H. Denis Neumann, ASA - CA Robert Podwalny, FASA - CA Barry Savage, ASA - OH Robert Svoboda, ASA - TX Victor Thompson, ASA - KY



MTS Editorial B r a d H a r t s b u r g , A S A , C P P A , C S A

I welcome you to the first edition of the MTS Journal for the 2016 calendar year edition Volume 32, Issue 1, 1st Quarter 2016.

I wish everyone a Happy and Prosperous 2016 and would like to thank all of you that assisted with interesting articles for this issue, there is a lot of great information and we hope it assists you with your daily work and activities.

We continue to look for interesting articles our members and readers want to learn from. If there is a topic you are passionate about, please do not hesitate to contact me. I am more than willing to work with you on your article.

Check your calendars and plan to attend the interesting conferences and courses that are planned for this year. Please see ASA website www.appraisers.org.

Our Chairman, John Connolly III, ASA has written to let us know what is happening with the MTS discipline.

Our Governors, David Crick, ASA and Rick Berkemeier, ASA have updated us on the happenings of our MTS discipline and the society as a whole.

Richard Berkemeier, ASA wrote an article on how to find an appraiser and some information about how to make this easier.

Sharon Desfor, ASA, MRICS has written an article about the state of the helicopter industry in 2015 and going forward.

Tony Grant, FRICS has written an informative article about ethics in the global real estate market.

John Mathe, ASA, has written an article on how to support your evidence in your appraisal report with some do’s and don’ts.

Allan K. Bowles, PE Mining Engineer and Alan C. Iannacito, FASA have provided us with a report of the MTS214 Identification and Appraisal of Mining and Mineral Processing Equipment Course in Butte, Montana, September 9-11, 2015.

Joseph Santora, ASA has provided an interesting economic update about the mining industry.

Leslie H. Miles, Jr. FASA, FAPI has provided a report on the 9th International Conference of Plant and Machinery Equipment held in Tokyo, Japan on October 26-28, 2015.

Peter J. Turecek, Senior Managing Director, Investigations & Dispute at Kroll has written a very informative article dealing with the past and future of compliance and fraud in aviation.

Harry J. Richardson, ASA wrote an article that explains technological obsolescence in the metal stamping press industry.

Walter W. O’Connell M.E., ASA, SCSP has written an informative article about the ideal pricing index.

Thomas A. Sexton, ASA has written about freight railcar basics and explained the workings of them.

And, Jack Beckwith, ASA, CEA has provided a report about an ASA onsite training course for Oregon Department of Revenue Analysts on Machinery and Equipment Valuation Methodology.

I hope that you enjoy this edition of the MTS Journal!

Sincerely,

Brad Hartsburg, ASA, CPPA, CSA - MTS Journal Editor Fortress Machinery Appraisals and Consulting Inc. Calgary, Alberta, Canada - 403-650-1122 E-mail - [email protected] Website - www.fortressmachineryappraisals.com



Chairman’s Report J o h n J . C o n n o l l y , I I I , A S A

Happy New Year to all ASA M&TS Members,

The goals of the committee continue to focus on the advancement in our educational offerings and increasing our membership numbers. Our educational offerings are the leaders in our profession, and they are continually updated to reflect current theories and topics. Our ASA webinars are one of the key factors in helping all in the discipline stay current on issues and trends.

We are teaching our Principles of Valuation (POV) classes around the world including Germany, Japan, Italy, Russia, Africa, Canada, England, Australia, and South America as well as in the United States of America. We also have special courses in Mining, Inventory, Aircraft, Financial Reporting and Marine Appraisals.

The ASA 2015 International Appraisers Conference, Las Vegas, Nevada was held on October 18 – 21, 2015 and had the best attendance yet of any annual conference. Many thanks to those that participated and to the organizers and contributors for the great and interesting programs – fantastic job!

The MTS handbook, “Valuing Machinery and Equipment” (3rd Edition) is currently under rewrite and we are anticipating a March 2017 release. If you are interested in making comments or suggestions please forward them to me and we will consider all input.

Under the direction of Richard Berkemeier, ASA and his team of experts from around the world, the MTS courses are being rewritten and we anticipate having them all completed by Mid-2016 with MTS 204 being the first off the press by March 2016. The Body of Knowledge is also being rewritten which is a major undertaking as well.

Your MTS committee is hard at work and we are always looking for additional help. The pay is poor but the feeling of accomplishment in helping our Profession is GREAT.

Perhaps I may see you at one of our many other course offerings. Please feel free to contact me with any questions, concerns or input you may have.

May you all have a happy and prosperous 2016!

John J Connolly, III, MTS Chairman [email protected] Office 1-201-670-7400 Cell 1-201-264-1109

Get the latest information on inventory valuation, aviation, marine appraisal techniques and report writing and ethics.Hard copy and/or e-Book versions available. Order online at www.appraisers.org or by phone at (800) 272-8258.



Governor’s Bulletin R i c h a r d B e r k e m e i e r , A S A a n d D a v i d C r i c k , A S A , M T S G o v e r n o r s

On the Education front we are planning on holding course offerings in London, Tokyo, Puerto Rico, Cuba, Kiev, Lagos, Melbourne, Moscow and Amsterdam over the next 12 months.

We anticipate holding 12-15 webinars this year and are always looking for new topics.

In 2016-2017 we will be offering the new 2016-17 update to Personal Property USPAP.

We continue to see tremendous growth in our Chapter in Australia, Japan and Europe.

Australian MTS Seminar

The Australian Chapter is holding its fourth annual MTS seminar in Glen Waverley, Victoria, Australia on the 10th & 11th of March 2016. The presentations this year include Classic and Prestige Cars, CNC Machining & Equipment, Renewable Energy and a module on Report Writing. There will also be a tour of the Bombardier Rail Vehicle Manufacturing Plant. The seminar would not be complete without the annual awards dinner. Registrations are strong as is the anticipation of the topics and field trip.

Corporate Jet & Helicopter Conference, London, UK

The sixth annual London event of the aircraft and helicopter industry is being held in Kensington, London from 1 - 4 of February 2016. The sessions are tailored for those involved in aircraft transactions including sessions by appraisers. ASA Appraisers that will be presenting at the event include Mr. David Crick, ASA, Ms. Sharon Desfor, ASA, Mr. Daniel Hall, ASA and Mr. Chris Miller, ASA.

Call or email if you need anything – all the best in 2016!

[email protected] Rhode Island, USA [email protected] Australia

Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical AssetsGet the latest information on inventory valuation, aviation, marine appraisal techniques and report writing and ethics.

Hard copy and/or e-Book versions available

Order online at www.appraisers.org or by phone at (800) 272-8258

Valuing Machinery and Equipment:The Fundamentals of AppraisingMachinery andTechnical Assets

Third Edition

American Society of Appraisers

Valuing Machinery and Equipment: The Fundamentals of Appraising Machinery and Technical Assets

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Tel (800) ASA-VALU • Fax (703) 742-8471www.appraiser.org

O r d e r Y o u r C o p y T o d a y !Topics included:• Processplant appraising

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5TH ANNUAL EQUIPMENT VALUATION CONFERENCE

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Bringing together equipment, finance and valuation professionals

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Finding the Right Appraiser is as Easy as ASA R i c h a r d A . B e r k e m e i e r , A S A

After the savings and loan crisis in the 1980s, and again in 2008, the banking industry responded with new rules and additional safeguards for better risk management.

One of the most significant changes involves aircraft appraisals.

Prior to 2008, a simple market evaluation by a resale broker, often with just a quick look at the current edition of the Aircraft Blue Book, was sufficient to secure as much as a 90% loan-to-value ratio for a preowned aircraft. That is no longer so.

Today, most banks, leasing companies, and insurance underwriters require that all loan collateral, including business jets, be valued by a qualified, certified appraiser before financing is approved. Those appraisers must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), which was created in 1989 by the Appraisal Foundation, and is the generally accepted standard in

Canada and Mexico as well as the United States.

Two organizations provide such appraiser certification: the International Society of Transport Aircraft Trading (ISTAT), which focuses primarily on commercial airliners; and the American Society of Appraisers (ASA), which teaches, tests, and confers credentials to its members, who conduct professional appraisals for business and personal property valuation. The ASA’s Machinery and Technical Specialties division offers the only program to train and certify business aircraft appraisers.

Appraisers earn that aircraft specialty accreditation by completing a rigorous curriculum and peer evaluation. ASA (American Society of Appraisers) accredited appraisers must adhere to the professional standards set forth by ASA’s Code of Ethics and Principles of Appraisal Practice, and well as USPAP in North America, or the International Valuation Standard elsewhere in the world.

The two levels of ASA – American Society of Appraisers certifications that are available is:

1. AM - Accredited Member

2. ASA - Accredited Senior Appraiser - which is based on the number of years of appraisal experience, with continuing education courses required to hold either accreditation.

The recent rebound in business jet transaction activity has increased the demand for certified appraisals. To meet that need, two established aviation organizations, Jet Support Services, Inc. (JSSI) (www.jetsupport.com) and Embry-Riddle Aeronautical University (ERAU) (www.erau.edu) co-sponsored and co-hosted two American Society of Appraisers (ASA) accreditation courses earlier this year, one at ERAU’s campus in Daytona Beach, Florida, and the other at JSSI’s European headquarters in Farnborough, U.K., with more courses planned for this fall.

What does this mean for you, the aircraft owner?

If you are interested in monitoring the value of your aircraft, whether for financing, refinancing, or sale; or to verify hull value for insurance coverage, you will need to have your aircraft appraised by an ASA certified appraiser. This will ensure that you have the most accurate and lender acceptable data available.



On average, expect the appraisal to take about one week, with the physical inspection process usually one full day onsite, and the rest reviewing records and report writing. The appraiser will conduct a systematic inspection of the interior and the exterior of the aircraft, including: engines, airframe, avionics, instrumentation, and other systems; as well as provide a methodical review of your aircraft’s flight and maintenance log books, FAA registration, title, and owner’s documentation.

Most business jet appraisers avoid “desktop only” appraisals because the inspection and review of the records is extremely important.

In 2015, the average cost for a full appraisal and inspection – required by most lenders – is about $5,000, perhaps up to $7,500, plus expenses. Be aware, however, that a standard appraisal is not the same as a pre-buy inspection for purchase, which can run between $10,000 to $50,000 depending on the size and scope of the work.

Rules for lending have changed dramatically in the past six years. If you have not been in the market recently, know that a proper appraisal will ensure that you secure the right equipment at the right price, while meeting your lender’s requirements.

For more information about and to find an accredited Appraiser search the American Society of Appraisers website at www.appraisers.org or call 1-800-272-8258.

About the Author

Richard A. Berkemeier, ASA, is chief appraiser for CB Appraisal Review and Management Group. An active member of ASA’s Board of Governors with 30 years’ banking and leasing experience, he was VP of Citigroups’s Investment Bank.

Volume 32, Issue 1, 1st Qtr 2016 1 0


State of the Helicopter Market S h a r o n D e s f o r , A S A

2015 was a difficult year: stock market volatility, Eurozone volatility, financing volatility, and for those of us in the helicopter industry, oil price volatility.

Why is the Price of Oil so Important to Helicopter Values?

In 1948, oilmen and fur trappers in Louisiana were in a dispute about the oilmen’s marsh buggies (used to reach drilling sites) trampling the muskrat breeding grounds, the birth cycle, and in turn the trappers’ economy. A very young Bell Helicopters brought in a demonstrator to show how the oilmen could bypass the breeding grounds by replacing

marsh buggies with helicopters. Bob Suggs took that idea and ran with it, forming the company Petroleum Helicopters Inc., and helicopters found full-time work in the oil patch.

While PHI remains a strong presence in offshore oil & gas, they have been surpassed in size in the intervening decades by Bristow Group and CHC Helicopters.

Oil and gas companies spend significant amounts of money outsourcing personnel transportation. At the beginning of 2015, Douglas-Westwood was forecasting expenditures of $24 billion on offshore helicopter services in the 5 year period between 2014 and 2018. This predicted a 57% increase in offshore helicopter service expenditures in comparison to the 2009-2013 period. That, of course, was before oil production volume skyrocketed and oil prices fell dramatically during the year. Since then, we’ve seen the major operators downsizing, watching their shrinking profits, and suffering from falling stock prices.

The link between rig counts, oil prices, and offshore operations is easy to see. Look at the ebb and swell of the lines in the following three charts.



Despite timing lags, the matchup is very visible. In truth, it’s nearly impossible to deploy workers to (or rescue them from) a drill rig or production platform by any mode of transportation other than helicopter. Crew members can’t drive, take a train, or land on a helipad with an airplane, and not all platforms have sea-level elevators. They could ride in a frog from a workboat up to the deck, but not all platforms are equipped with the safety hoist that allows personnel transfer. In the North Sea and other inhospitable areas, Sea State 4 and others can make it impossible to safely transfer crews from the water line, which makes helicopters the only answer for more than half the year.

If you haven’t guessed by now, offshore oil support is the single largest source of income in the helicopter industry. As go oil prices, so go helicopter values. Think back to 1980, and again to 2008. There was a bubble in helicopter values and production at each of those points, along with a dearth of used inventory on the market. Now look at this chart.



The top light-green line is the price of crude oil per barrel trended to 2010 dollars. It peaked around 1980, and again in 2009.

During those peak periods, contracts for oil support helicopters skyrocketed, the supply of used helicopters dissolved, manufacturers hit multi-year backlogs, and speculators crowded the market, buying and selling delivery positions for profit. The fewer helicopters available for sale, the higher the values went. And when oil prices crashed, so did helicopter values.

This means that as low as helicopter values are right now, they will continue to fall in reaction to oil prices and rig counts, not to mention a strong US dollar. Yes, it will improve eventually. But it’s going to fall more first, and then it’s going to need a trigger for improvement. Which will probably need oil prices to rise again?

So that’s the impact of oil prices. Why does it impact the values of non-offshore machines? The old saw, “a rising tide raises all boats,” has a lot to do with it. We belong to a tiny industry, and helicopters are pretty easily reconfigurable. So a helicopter that’s been offshore could easily become an EMS machine, or a basic utility craft, or vice versa.

The State of the Industry

Today we have a serious glut of excess inventory on the market. Roughly 10%-11% of the fleet is available for sale, whereas in a “normal” market (if there is such a thing) we’d more likely see 6% to 9% available. And the size of the available inventory is not shrinking at all.

Light single-turbine helicopters continue to flood the world market. There are over 700 light singles on the market. A fifth of them are Bell 206B series machines, and a third is the Airbus AS350B/H125 series. That shouldn’t come as a surprise, since that’s probably the approximate allocation of those models in service as well.

We’ve also seen some slight growth in the used light twin inventory. There are 250 light twins on the market. Two thirds of those are corporate/VIP configured. Three quarters are ten years or older. The Agusta 109 series makes up very nearly half of



all light twin listings. There isn’t a strong secondary market for these machines, with the exception of the BK117, which has found some new life in the utility and oil & gas/mineral exploration markets.

There is noticeable softening in the medium and heavy markets due to replacement of older models like the S76A/B/C and AS332L/L1/L2. Older Super Pumas are being traded in on newer models, and nearly three-quarters of those are unlikely to be rebuilt and will instead be scrapped.

Current Issues in Economic Viability

We’re seeing a 15% loss of value due to VIP configuration and history. Corporate profits overall don’t have a lot of influence over the helicopter market since most helicopters are income-producing assets. That said, profits in the oil & gas companies do impact contracts, and therefore demand and ultimately resale values.

Fleets are moving heavily from owned to leased. The Bristow, CHC and Era fleets already comprise 20-30% of leased aircraft. Most major operators plan to move up to about 35% leased aircraft, making our industry for the first time look more like commercial airlines. Owned ships are being sold off – oldest technology first – or to a lesser extent grounded. Leased ships are suffering from postponed or cancelled deliveries. Lessors are seeking new lessees, even at lower rates, just to get the machines into service.

Lessors are pretty insistent on power-by-the-hour programs (which, of course, the lessees are expected to pay). There are good reasons for this: protection of their assets, improvement in residual value at lease termination, and smoothing out of the predictable but still large surges in maintenance, overhaul and repair expense. Even owned helicopters are moving steadily in this direction. It benefits the helicopter’s owner, regardless of whether they’re a lessor or an operator.

Values at Year-end 2015

The prices ranges below are from The Official Helicopter Blue Book® at year-end 2015, for helicopters with 0% to 60% component usage, given in 2015 US dollars, single outright owner with no title encumbrances. They are shown in alpha numeric order by manufacturer.



Make Model Low to Mid time - EOY 2015* Factory Base 2015

Agusta 109C $525,000 $825,000

Agusta 109E Power $1,060,000 $2,970,000

Agusta 109S $2,220,000 $3,600,000

Agusta 109SP $4,130,000 $5,230,000 $6,210,000

Agusta 119 $1,200,000 $2,200,000 $3,350,000

Agusta 139 $5,650,000 $11,060,000 $11,300,000

Bell 204B $780,000 $1,120,000

Bell 205 A-1 $2,430,000 $3,320,000

Bell 206B $174,000 $330,000

Bell 206BIII $330,000 $1,010,000

Bell 206L-1 $390,000 $600,000

Bell 206L-3 $466,000 $815,000

Bell 206L-4 $790,000 $1,865,000 $2,445,000

Bell 212 $1,530,000 $3,350,000

Bell 214B $1,500,000 $3,000,000

Bell 214ST $1,414,000 $2,500,000

Bell 222U $250,000 $400,000

Bell 230 $300,000 $450,000

Bell 407 $1,480,000 $2,985,000 $3,040,000

Bell 412 $1,725,000 $3,000,000

Bell 412SP $2,010,000 $3,490,000

Bell 412HP $2,280,000 $3,780,000

Bell 412EP $3,470,000 $8,750,000 $10,850,000

Bell 427 $655,000 $1,070,000

Bell 429 $3,750,000 $5,700,000 $6,175,000

Bell 430 $650,000 $1,300,000

Enstrom F-28C-2 $90,000 $140,000

Enstrom F-28F $110,000 $210,000 $485,500

Enstrom 280C $80,000 $130,000

Enstrom 280F/FX $160,000 $340,000 $485,500

Enstrom 480 $290,000 $490,000

Enstrom 480B $470,000 $700,000 $1,215,000

Erickson S64E $19,570,000 $24,770,000

Erickson S64F $22,610,000 $27,610,000

Airbus 117A4 $650,000 $800,000

Airbus 117B-1 $1,040,000 $1,960,000




Airbus 117B-2 $1,170,000 $2,000,000

Airbus 117C-1 $1,140,000 $2,420,000

Airbus EC120B $530,000 $1,050,000 $1,960,000

Airbus EC130 $1,110,000 $1,840,000 $3,200,000

Airbus EC135P1 $1,200,000 $1,745,000

Airbus EC135P2 $2,330,000 $4,305,000 $5,300,000

Airbus EC135T1 $1,200,000 $1,745,000

Airbus EC135T2 $2,330,000 $4,305,000 $5,300,000

Airbus EC145/BK117C-2 $3,860,000 $5,500,000 $8,393,000

Airbus EC155B $2,280,000 $2,840,000

Airbus EC155B1 $3,900,000 $5,640,000 $12,240,000

Airbus EC225 $13,400,000 $27,000,000 $21,460,000

Airbus 330J $1,540,000 $2,500,000

Airbus 332L $4,750,000 $7,250,000

Airbus 332L-1 $6,250,000 $8,750,000

Airbus 332L-2 $8,500,000 $10,500,000

Airbus 350B $235,000 $425,000

Airbus 350BA and 350B1 $300,000 $700,000

Airbus 350B2 $450,000 $1,875,000 $2,240,000

Airbus 350B3 $800,000 $2,160,000 $2,809,000

Airbus 350D $275,000 $500,000

Airbus 355F1 $396,000 $600,000

Airbus 355F2 $416,000 $750,000

Airbus 355N/NP $810,000 $1,930,000 $3,750,000

Airbus 365N1 $740,000 $1,320,000

Airbus 365N2 $1,500,000 $2,480,000

Airbus 365N3 $2,160,000 $4,210,000

Kaman KMAX $5,250,000 $7,000,000

MD 500C $360,000 $550,000

MD 500D $500,000 $800,000

MD 500E $535,000 $1,140,000

MD 520N $570,000 $940,000

MD 530FF $650,000 $1,540,000

MD 600N $550,000 $750,000

MD MD 900/902 $1,130,000 $2,870,000

Robinson R22 Beta $80,000 $140,000




Robinson R22 Beta 2 $110,000 $190,000 $285,000

Robinson R44 $100,000 $205,000

Robinson R44 Clipper/Clipper 2 $110,000 $465,000 $482,000

Robinson R44 Raven 1 $100,000 $365,000 $375,000

Robinson R44 Raven 2 $200,000 $455,000 $456,000

Robinson R66 $490,000 $750,000 $855,000

Sikorsky S-61N $1,540,000 $2,500,000

Sikorsky S-76A $325,000 $450,000

Sikorsky S-76B $670,000 $1,230,000

Sikorsky S-76C+ $2,920,000 $4,800,000

Sikorsky S-76C++ $7,000,000 $9,200,000

Sikorsky S-92 $1,410,000 $31,000,000 $31,000,000 Sharon Desfor, ASA, is president of HeliValue$, Inc., the world’s most trusted helicopter appraisal firm, and publisher of The Official Helicopter Blue Book®, the accepted standard for helicopter resale pricing information.

Sharon was recently elected International Secretary/Treasurer of ASA (American Society of Appraisers). She has participated in leadership roles at ASA for the past decade, at HAI longer than that, and before that, at the Helicopter Foundation for fifteen years.

Sharon enjoys teaching finance people about the helicopter industry, and helicopter people about the finance industry. She lectures frequently for aviation/finance conferences, and writes for magazines in the aviation and appraisal industries.

Sharon is an Accredited Senior Appraiser of the ASA, is past Chair of the Helicopter Foundation International and of the HAI’s Finance & Leasing Committee, and served as Editor of HAI’s finance handbook, Helicopter Funding: Assembling the Pieces of the Puzzle.

For more information, please contact: Sharon Desfor, ASA | www.helivalues.com | [email protected] | +1-847-487-8258



2016 International Appraisers ConferenceBoca Raton Resort & Club | Florida

September 11 - 14, 2016



Ethics in the Global Real Estate Market - A New International Coalition T o n y G r a n t , F R I C S

When I began my career, 52 years ago, few people were predicting the arrival of a truly global market in real property. Now it is here. And it is massive. The World Bank estimates that 70% of global wealth is held in real estate. According to a report last year from Price Waterhouse Coopers, the global stock of investable real estate will rise by more than 55% to around $45.3 trillion by 2020, from a 2012 total of $29.0 trillion. It will have expanded again at a similar rate by 2030.

And as it changes and grows, so must our approach to developing and enforcing international ethics. There is a substantial body of evidence which suggests that transparency and ethical conduct are becoming increasingly important for business everywhere. Responsibility to the wider community is regarded as not only a matter of integrity, but a key to commercial success.

And yet codes of conduct among real estate practitioners are still local, national and regional. And sectoral. That contradiction represents a serious limitation and is hampering progress in our industry.

Investors are willing to place funds in all regions of the world, but in doing so they face different environments and cultures. What may be prohibited in one country could be perfectly acceptable in another.

The need is for the entire industry to speak with one voice by making a declaration of consistent standards. That is why a new International Coalition of organizations representing the property and related professions has been established.

The Evolution of Professional Ethics

Over recent years we have witnessed an evolution in professional codes of conduct. Traditionally, up to the end of the 20th century, they were concerned principally with how to conduct business in a manner that reflected honesty in dealing with clients’ affairs.

Today, those responsibilities are being extended. Many professional bodies require their members to fulfill obligations to all stakeholders affected by their actions and to society as a whole. They must demonstrate professional competence at all times. And they are expected to have regard to modern concepts of social justice. A good place for us to start thinking about international ethics is the Declaration which has been signed by 70 professional bodies (so far) upon joining an earlier and separate Coalition addressing International Property Measurement Standards:

“Ethics guide everything we do and foster public trust. To complement property measurement standards, we support ethical principles that guide and unite our international profession.”

That is the underlying motivation for the new International Ethics Standards Coalition which was founded in October 2014 at an inaugural meeting at the United Nations in New York. It aims to advance the public interest by developing and implementing the first industry-wide ethics standards for property and related professional services. The goal is for property practitioners to work in an ethically consistent way, regardless of where they are located and the nature of their practice.

The Challenge

Let us now take a step back and attempt to analyse in more detail the challenge that exists in the international real estate market with regard to ethical standards.

It cannot be denied that some elements of the real estate industry have a poor reputation. We can identify four main problems:



FIRST: Sad to say, but there are still firms and individuals lacking in integrity and in the skills required for their work. And here we should remember that having the knowledge, training and experience to act competently is an ethical requirement. Clients are at serious risk when practitioners attempt to advise and represent them without possessing the necessary expertise. Such action is a form of express or implied misrepresentation.

SECOND: In many parts of the world, even where standards are in place, they are not adequately enforced by governments or even by professional and business associations.

THIRD: Members of the public simply do not know how to identify practitioners who undertake to adhere to standards of honesty and trustworthiness.

FOURTH: The fourth problem area is a little more subtle. It is that the connection between the adoption of professional standards and the growth of market confidence is not widely appreciated. And here we have come to a key point. It is that ethical conduct leads to market confidence. And, of course, market confidence leads to market stability and improved values.

It is no exaggeration to say that ethics in property are not just about doing the right thing. They attract customers. They motivate staff. And they encourage investors who need to know that their financial affairs will be conducted in a morally acceptable way. In a nutshell, good ethics mean good business.

Historic Areas of Public Concern

At this point, we should identify the principal areas where, over many years, there has been continuing public disquiet about unethical practice within the real estate industry. There are nine of them:

• Misrepresentation of property and project information.

• Financial misconduct, including fraud and misappropriation of third party funds.

• Inadequate skills and expertise to provide the professional services offered, as previously mentioned.

• Conflicts of interest. Also a lack of impartiality when an independent assessment has been promised.

• No proper insurance for errors and omissions (also known as professional negligence).

• Accepting or offering corrupt payments, gifts and hospitality. In a word, bribery.

• Unfair discrimination and a failure to respect human rights.

• Concealing relevant facts and acting without transparency.

• Unauthorized disclosure of clients’ confidential information;

New Challenges

Now let’s consider the requirements of modern social responsibility. At last year’s inaugural meeting of the Coalition at the United Nations, many of the participants felt that one could legitimately ask to what extent are today’s new, 21st century challenges a matter of professional ethics?

Here are some topical questions:

• In this age of computers and mobile devices, is there an ethical duty to take active or even pro-active steps to protect individual privacy and electronic data? Would that go too far beyond the established norm of respecting client confidentiality, or is it simply keeping up to date technologically?

• Is there an ethical obligation to report any suspicion of money laundering or the financing of terrorism?



• How about sustainability ? The majority of informed people around the world believe that reversing climate change is vital for the future of human civilization. Does it follow that there is now an ethical requirement for professionals in real estate to carry out their work based on a ‘green’ agenda ?

On the face of it, the answer is obvious. And a number of professional organizations have already made good environmental behavior a vital part of their code of conduct.

But there is another side to the coin which the International Coalition will at least have to take into account. Some legitimate authorities still question the scientific basis for the theory of global warming. They insist that, in any event, the moral priority is to alleviate extreme poverty in under-developed parts of the world through economic growth and wealth creation even if the current level of pollution is maintained. The point here is that in creating common standards for land and the built environment we will need to reconcile, or at least acknowledge, some very different approaches, to put it mildly.

That theme can be further extended, for example, to today’s development of office buildings. Is it an ethical requirement that new commercial buildings must actually advance healthy living? Should those buildings contribute to the welfare of people working there by providing best air quality, high levels of natural daylight and good recreational facilities? Is this one of several points at which social welfare, productivity and professional ethics ought to march hand in hand?

How far should ethical standards in real estate go in fulfilling the modern idea, reinforced by the United Nations Global Compact, that individual businesses - including professional practices - have a duty to society that extends well beyond delivering a return on investment for their owners? Should today’s standards for real estate – which is only one industry among many - cover aspects like good working conditions; equal employment opportunities for women and for minorities and fairness in the treatment of employees, suppliers and customers?

Or is that notion, which encompasses the entire range of human rights, too political to be a matter of ethics in our professional lives?

A growing number of business leaders are convinced that adopting a genuine corporate integrity, to the benefit of customers, shareholders and employees, is the way forward and is not in conflict with profitability and asset value. It will be interesting to see the extent to which the new International Ethics Standards for real estate are able to answer those questions.

The Solution - International Ethics Standards

The majority of non-profit real estate organizations have long promoted their own codes of conduct which are a vital part of their member value proposition.

It is important to understand that the existence of these numerous ethical codes is not a problem in itself. That is because:

• Most, if not all, have a similar foundation in that they demand decent and trustworthy behavior as well as competence in the services offered;

• Many codes are based on established norms and customs and are published by associations in specific localities, states or regions. Examples are:- The German Property Federation- The European Council of Real Estate Professions - The Real Estate Institute of Victoria, Australia

Other organizations set out to regulate single disciplines, such as brokerage, valuation, architecture and management. They do not attempt to address all sectors of the industry. Examples are:



• The Counselors of Real Estate• The International Union of Architects• The Institute of Real Estate Management• The International Right of Way Association

Some organizations do both, such as:• The Council of European Geodetic Surveyors;• The Royal Institute of British Architects; • The American Society of Appraisers

Once again, we are led to the same conclusion. The real problem is that there does not exist in the highly competitive global marketplace a single statement of principles which is universally recognized. The absence of a central authority on ethics can result in uncertainty at best and confusion combined with widespread mistrust at worst.

The solution is to introduce - at an international level - one shared set of high quality, clear and consistent standards on which everyone can agree and to which all are held accountable. Such standards have the potential to become a recognized benchmark of integrity for services provided by real estate professionals throughout the world.

The idea of international standards underpinning a single profession is not new. There is the Hippocratic Oath in medicine which is very well regarded the world over. The global accountancy profession has its International Ethics Standards Board for Accountants to which most of the leading national boards are affiliated. In Law, there are standards applied by the International Bar Association which includes in its membership more than 190 bar associations and law societies from all continents.

In the wider profession of real estate no such structure has existed up to now.

The intention of the new Ethics Coalition is to achieve global consistency across different markets; to promote comparablility, assurance and trust; to work to a formula that is collaborative and self-governed; to reduce unnecessary risk in transactions and business practices and to construct a sound framework for cross–border working.

No Conflict with Existing Codes

Contrary to the fears of a few national associations that their own codes of conduct will somehow be under threat, the adoption internationally of fundamental but high quality principles will leave a vital and permanent role for individual professional bodies. They will be free to retain their own more specialized and possibly more stringent rules if they wish. And the implementation of global standards will be carried out through the codes owned and enforced by Coalition member organizations.

The Coalition will establish clarity and demonstrate harmony on vital concepts of integrity and professional competence. In doing so, it will reinforce the authority of its members’ existing codes of ethics. In fact, the new standards will underpin those codes.

The result will surely be an enhanced reputation for the entire profession and greater public trust.

In this positive atmosphere, confidence in the ownership of real estate is bound to strengthen globally. This will lead to less volatility and, in the long term, enhanced values. Ultimately, there will be a significantly improved rating for property itself as an investment asset class.



The Process is Key

Now we come to the process of administering the Coalition and creating the new International Ethics Standards.

The process is regarded as key on the assumption that, through active participation, the associations which make up the Coalition, and their individual members, will identify with its output.

Therefore, all organizations which join the Coalition are directly involved in its governance. Each member has appointed a Trustee (and an alternate). The Members and their Trustees are equal in authority and make major decisions by majority vote.

As more countries and organizations become committed, the likelihood will grow that what is finally produced will gain universal acceptance and will actually be implemented. However, the challenge is to ensure that in the drive to gain approval from so many different sources we do not dilute the Standards to the point where they become irrelevant. Many under-developed countries lack the political and economic structure to regulate business. As a result, corruption has a devastating effect on vast populations. Our task, which is not an easy one, is to define the principles of acceptable conduct in both emerging and advanced economies so that the property industry can contribute to a solution.

The Ethics Standards themselves are being written by an independent committee of leading global experts nominated and elected earlier this year by the Trustees. It is called the “Standards Setting Committee” and consists of 20 specialists in the field of codes of ethics, governance and professional conduct. They are researching existing rules, both within real estate and outside, and will be codifying ethical principles so as to create the new International Standards. That process is expected to be concluded during the first half of 2016.

When the Committee’s work is completed, the Coalition members will become joint owners of the Standards. They will legally share the intellectual property and will participate fully in implementation and compliance.

The new International Ethics Standards, or IES, will join at least four other global standards:• International Financial Reporting Standards• International Valuation Standards, and • International Property Measurement Standards.• International Construction Measurement Standards

The first three are already in existence and are of growing importance in world markets.

Continuing Role of the Coalition

The adoption of these new ethical standards across the world will take time and the Coalition is expected to have a long term role. This will be:

1. To create and publish high quality international standards in several languages using terminology that is readily understood.

2. To promote, through close collaboration among its member organizations, the adoption, implementation and enforcement of the Standards by (i) leading professional bodies; (ii) national, regional, state and local governments; (iii) private sector entities, and (iv) public sector entities. In all likelihood, this will lead to the Coalition and its members providing guidance and training for real estate professionals. It is worth commenting that, in the long run, ethics standards that are not enforced are no standards at all. So, ensuring compliance is an absolutely vital part of the Coalition’s purpose.



It is not far fetched to anticipate that that the Coalition could maintain and publish a register of organizations and individuals who have undertaken to adhere to the Standards. This might ultimately lead to internationally regulated practitioners and corporations.

3. The third element of the Coalition’s long term role is to update the Standards, as needed, from time to time while offering advice on their interpretation and application. Also, helping to resolve disputes on their content and meaning. The International Standards will be promoted through associations’ own guidance and codes (as mentioned earlier); the training of professionals around the world and by businesses endorsing the Standards while choosing advisers and brokers who comply with them. We can expect the result to be a wider understanding among the general public of how the Standards work and why they are beneficial.

Conclusion

One cannot over-state the significance of numerous, prominent professional bodies from all parts of the world voluntarily coming together to create and implement International Ethics Standards.

Global adoption of those Standards will establish a new 21st century, moral foundation for all human activity in land and buildings, including construction, finance, occupation and investment. We can reasonably expect the public perception of the entire property profession to be enhanced.

This is a vital opportunity for our profession to demonstrate the benefits of self-regulation while working in constructive partnership with the public sector.

The new Coalition has the potential to advance decency, competence, transparency and integrity as the professional norm everywhere. As we have seen earlier, that is not just the right thing to do but it is likely to result in more stable markets and substantially improved business conditions.

Tony Grant FRICS, FIABCI Past World President, Deputy Chairman, International Ethics Standards Coalition. Tony Grant was born in London, UK in 1942 and has spent a lifetime in the real estate profession. He founded Grant & Partners (Property Advisers, Appraisers, Surveyors and Estate Agents) in London in 1965. The firm initially specialized in industrial and warehouse agency, but later diversified into office property, development and investment consultancy as well as project management and property management. By 1987 Grant & Partners had grown to a total of 12 partners and 140 support staff. In that year, Tony Grant was invited by one of his firm’s major clients, Ladbroke Group PLC (later Hilton PLC), to head up their United States property subsidiary, London & Leeds Development Corporation. He ended his executive involvement in Grant & Partners and moved to New York on a five-year contract. He was appointed President and Chief Executive Officer of London & Leeds with direct responsibility for a 4.7 million square foot office development program in Boston, New York, Washington D.C. and Miami representing approximately $1.5 billion of investment. Tony Grant returned to London at the beginning of 1993. In June of that year he joined the Board of Olives Property PLC as Chairman & Joint Chief Executive, having purchased a substantial interest in the company. Olives was a small UK based public property investment and development company whose shares were quoted on the main London Stock Exchange. During the subsequent five years the gross assets of Olives Property grew from approximately £5.6 million to £58 million. Olives was sold to Hemingway Properties by means of an agreed takeover transaction in May 1998 and Mr. Grant left the Board to take up the World Presidency of FIABCI, the International Real Estate Federation, for a one-year elected term. Between 1999 and 2002 Tony Grant was active in the UK as a real estate investor and developer utilizing his private family funds. This activity was transferred to South Carolina in January 2003 when he moved to the USA as a permanent resident and continues to the present time. He became a U.S. Citizen in 2007. In 2014 Tony Grant was appointed as Deputy Chair of the International Ethics Standards Coalition which now comprises approximately 60 major property, construction and infrastructure organizations from every part of the world.



Supportable Evidence in Appraisals J o h n M a t h e , A S A

Disclaimer: The writer of this article does not profess to be a legal expert and this article should not be construed as legal advice. It is simply my view based upon my experiences as an MTS valuer/appraiser.

Introduction

This discussion focuses on creating supportable evidence utilized in appraisal reports, in particular, when using the sales comparison approach. I want to share with you some methods that I use to support the evidence when writing appraisal reports.

MTS appraisers are often called upon to appraise assets for litigation matters. Many appraisers utilize the sales comparison approach as it is often recognized as sound evidence (after adjustments) for supporting the appraiser’s opinion of value. Notice I said “opinion of value” and not “conclusion of value”. As appraisers we do not conclude value, rather we provide an opinion of value.

The reason I emphasize this point is that in most legal jurisdictions, opinions from expert witnesses should be based upon facts (see rule 702 Testimony by Expert Witnesses (USA)). However, this does not mean that an expert’s opinion will automatically be admissible as evidence. In significant case law; (Australia) Makita Pty Ltd v Sprowles [2001] NSWCA 305, Dasreef Pty Ltd v Hawchar [2011] HCA 21 and (USA) Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), important determinations were made regarding the standard for admitting expert testimony in courts.

In “Dasreef” the Court held that to be admissible, the opinion must satisfy three criteria. Firstly, the opinion must be on a subject matter that is “expert in nature” secondly, the expert witness must have ‘specialized knowledge based on the person’s training, study or experience’ specific to the opinion required; and thirdly, the opinion must be “wholly or substantially based on that knowledge”.

The High Court reiterated, it is ordinarily the case, as Heydon JA said in Makita, that:

“the expert’s evidence must explain how the field of “specialized knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is wholly or substantially based’, applies to the facts assumed or observed so as to produce the opinion propounded.”

By now you must be wondering why I am discussing case law? Many appraisers never get involved in litigation matters. However, as appraisers, we all provide professional opinions which other parties rely upon, and that leaves us potentially open to being sued for damages over an allegedly poor or deficient appraisal report.

After many years of preparing appraisal reports for litigation, I have found there are a number of rudimentary things one can do to support the evidence that forms our opinions in appraisal reports.

• When using the sales comparison approach, if possible, physically inspect and photograph all the comparable sales. Your evidence carries considerable weight if you have physically inspected the asset as opposed to just downloading an image and basic data from the internet. In fact, your evidence may be deemed inadmissible if you cannot convince the court of the suitability of the comparable sales.

• When making adjustments, applying depreciation and obsolescence, use industry acceptable methods. These should be based upon sound science and you should be able to quantify the adjustments. Using adjustments based upon



‘gut feel’ just doesn’t cut it. Even if you use basic calculations to make the adjustments, showing how you got from A to B to C in a logical and quantitative way helps to support your evidence.

• Keep detailed notes of conversations with clients, industry colleagues, machinery & equipment retailers, other appraisers and industry experts. Although file notes may not be classed as self–authenticating, (See Rule 902 Evidence That Is Self-Authenticating USA), the best advantage is that it demonstrates the level of investigation that the appraiser has undertaken and gives weight to the stakeholders that you have carefully considered a broad range of factors and other professional opinions.

• Use excerpts from credible industry publications such as professional appraisal organization publications and guidance notes. These can assist in reinforcing the formulas and methodologies that have been utilized within the report.

• Have a third party review your report. If you know a report will likely be used in litigation, include an amount in your fee to account for a third party to review your report. Using a lawyer or appraisal reviewer can sometimes discover potential areas of weakness that may have gone undetected. Lawyers and professional reviewers are experts at uncovering weak spots in arguments and can be invaluable in mounting a credible defence for your client. Your client wins, you win.

• Include a risk matrix in your report. It doesn’t have to be a complex matrix, but it will demonstrate that you have considered the effect risk has on values of the assets you are appraising.

• Double check your spelling and grammar. It can give the impression to the client that you have not checked the report for errors and the client could easily lose confidence in the quality of the report.

• My final tip is to go to court and sit in on trials involving appraisal reports and observe the areas of the reports that the lawyers and the judges test for credibility. Sitting in on trials can give you an insight into potential weaknesses in appraisal reports and will help you develop methods to support your evidence.

Conclusion

Scrutiny, accountability and due diligence will continue to stay at the forefront of appraisal work and reports will continue to be judged on their merits and the strength and credibility of supportable evidence that we as appraisers produce.

If you prepare your appraisal report with supportable evidence using sound and proven methods, then I believe you will achieve the following;

• You will feel more confident in your reporting.

• You will be less likely to feel anxious about being challenged.

• You will provide a better service to your clients.

• You will create a competitive advantage and a point of difference against other appraisers.

• You will help to improve the reputation of MTS appraisers.

Thank you for your consideration of my article and I hope I have contributed to the appraisal standards debate.

References

https://www.law.cornell.edu/rules/fre/rule_702 https://www.law.cornell.edu/supct/html/92-102.ZS.html http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/nsw/NSWCA/2001/305.html?stem=0&synonyms=0&query=~%20makita http://www.mondaq.com/australia/x/140858/Personal+Injury/Is+the+expert+evidence+admissible+or+not https://www.law.cornell.edu/rules/fre/rule_902



About the Author

John Mathe, Valuer & Senior Appraiser, MSAA, AVAA, ASA, API, is an Accredited Senior Appraiser and API (CPV) Certified Practising Valuer and the owner of Henley Valuers (www.henleyvaluers.com.au) located in Adelaide, South Australia.

John Mathe’s career began in 1984 working in an auction house of machinery, equipment, antiques, vehicles and general goods. He regularly provides appraisal reports for litigation, financial reporting, market evaluations, insurance, mergers and pre-purchase. I welcome any comments which can be forwarded to the editor of this publication or to me directly at [email protected].



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MTS214 Identification and Appraisal of Mining and Mineral Processing Equipment A l a n C . I a n n a c i t o , F A S A a n d A l l a n K . B o w l e s P E

Course in Butte, Montana, September 9-11, 2015

A current MINING ENGINEERING magazine features an autonomous heavy ore hauler. Unless you are a hobby miner, the days of pick, shovel, jackass powered ore cars and brutal mining conditions are a thing of the past.

Too, the days of trade routes across the Sahara, ships trading for gold from Africa, coal, iron ore, silver or salt from various desert and sea sources has brought mining multinational. Therefore, mining is influenced by international politics, economic control, warring factions and improving technology.

History supports evolution towards things that work and the processes that make those things dependable. As a microcosm of industry and progress ASA’s course, MTS214, The Appraisal of Mining and Mineral Processing Equipment, takes a historical but progressive look at what helped that evolution from extraction and refining of useful, nature provided materials.

As machinery and technical appraisers it is important that we study and keep up with diversity such as the extractive metallurgical, coal and rare earth industries. This year’s MTS214 was taught for a second time in Butte, Montana, “The Richest Hill on Earth,” and home to legendary “Copper Kings.”

Nine Students and two instructors were ushered through the MONTANA RESOURCES open pit mine, a huge copper and molybdenum pit adjacent to Anaconda’s former Berkley Pit, and the ore processing “concentrator,” where the rock is broken, ground, put through flotation cells, filtered, dried and loaded into super-sacks for delivery to the smelter.

Denver Equipment Co. ~ 1940’s Public Domain

Instructors Allan K. Bowles, PE Mining Engineer and Alan C. Iannacito, FASA



Typical of large scale open pit mines, Montana Resources operates through exploration, drilling, blasting, loading, hauling, crushing, grinding, flotation, separation, drying packing and shipping. The principal product is copper ore with a secondary recovery of molybdenum and trace amounts of silver. Unique to the process is another facet of recovering copper from the adjacent Berkley Pit. This is mining by precipitation. Montana Resources recovers 60% to 70% copper through cycling water from the pit through concrete cells loaded with shredded scrap steel cans in a process called, “plating.” (Source: Montana Resources Brochure: People are our greatest asset).

The final product is used in a myriad of industrial and consumer products from copper electrical wire to automobiles, cookware, and molybdenum for high strength steel and high tech products.

Also germane to mine and mill equipment valuation is the importance of economics, world political climates, market adjustments caused both by greed, need, technology and the impact on asset values.

Unlike a commercial vehicle or a household appliance, mining and mineral processing equipment can range, in value, from extraordinary high RCN to scrap in the matter of a few bad market hiccups. The class discussed the economics and depreciation of physical assets but also about “intrinsic value,” of seemingly idle machinery on the market but going nowhere during the downtimes.

MTS214 Butte Class of 2015 L-R: Joseph E. Roberts, ASA Kent R. Amareante, ASA, David Milan, Karen Milan, ASA, Christopher Bischof, Alan Iannacito, FASA, Charles Dixon, ASA. John Mathes, JP “Buck” Ward, ASA, Steve Prahl, ASA, Allan Bowles, PE, Mining Engineer.



Mining ore at Montana Resources; Inside Ball and Rod Mill Section of Montana Resources Concentrator

Mining is forever because the world popular needs her resources. There are always the down times, the plateaus of value and the long periods of inactivity of popular but occasional idle equipment spreads.

MTS214 looks for variety with a history of the present and a trip to the past. The first day of the three day class is a mine tour. Montana Resources personnel have been gracious in time and the willingness to take the class through the processes.

As in the past, we then spend the afternoon through a mining museum and underground tour. This year’s tour is adjacent to Montana Tech of the University of Montana in Butte. Here we learn about the evolution, the ups and downs of the industry and what strategic purpose mining is to mankind.

Mining is forever because the world popular needs her resources. There are always the down times, the plateaus of value and the long periods of inactivity of popular but occasional idle equipment spreads.

A head frame at Montana’s World Museum of Mining



Day Two and Three

Here in the classroom we start with the mining portion of the course. The afternoon continues with the ore processing and review continuing on the third day.

Saturday Exam, and done by 12:00 Noon. We have found that the class can be modified to take only a total of three days. Next year’s class will have a different format allowing attendees to get back home before the weekend.

But for those who like to remain a couple of days, there are other reasons to attend this event.

The following are some photos from David Milan at Montana Resources and Butte, Montana September 2015

Instructor: Allan Bowles, PE Mining Engineer and MTS214 Class Class member Charlie Dixon, ASA after the exam with a nice fish



About the Authors

Alan C. Iannacito, FASA has over 45 years in the mining machinery, mineral processing, chemical processing and food processing equipment industries. He is a full time appraiser as well as a former dealer, liquidator, buyer, seller, dismantler, rebuilder, manufacturer of mine, mill and processing equipment. He is the co-presenter of ASA MTS 214 course - The Identification and Appraisal of Mining and Mineral Processing Equipment. Alan was also the first MTS Chairman, MTS text book co-author, MTS Journal contributor and is an expert witness.

Allan K. Bowles, Mining Engineer, PE has a 45 plus year career in the mining, equipment, and environmental area which includes 22 years with the Pittsburgh & Midway Coal Co. as a senior project engineer (2 years in Denver), and working 20 years at active coal strip operations in Kansas, Missouri, and Gallup NM. Other experience includes working as a Product Line Manager for Mine Safety Appliances marketing underground coal equipment and as a mining construction engineer for Boyles Bros Drilling Co. working on mine shaft and tunneling jobs including the construction of a 2400 ft. deep shaft for the AMAX Henderson Molybdenum Mine (Empire CO).



Q4 2015 • NOW AVAILABLE - ONLINE ON-DEMAND POV COURSES – GJ/PP 201 & BV 201: The Principles

of Valuation (POV) courses are being recorded and offered online in OnDemand format. Candidates and interested parties may now learn at home or office, starting & stopping the course as needed over a 90-day period. Pre-recorded lecture modules and downloadable course materials will result in a certificate of completion after 27 hours of instruction and passing a 3-hour exam.

• SOON - ONLINE ON-DEMAND POV COURSES – BV 202 & BV 203

To learn more about BV.201 or PP/GJ.201 OnDemand POV courses, see ASA’s eLearning National ASA Courses online at appraisers.org, call (877) 252-8258, or email Todd at [email protected]

ASA Chapter Round Table Ideas – from ASA’s Las Vegas Conference Chapter Activity Ideas – • Networking Events: golf outings, young professionals night out, meetings at members houses; • Speaker Ideas: CFOs, Bankers, Federal Reserve Bank Economists, County Appraisal District; • Social Media Click Ideas: Messenger, Twitter, Facebook, Linked-In; • Web Conferencing: Google Hangouts, Citrix Go-To-Meeting webinars, Face Time, Skype; • Chapter Websites: Search engine optimization, links to HQ web pages; • Mentoring Candidates through the accreditation process & with required report writing; • Chapter Conference on subject that your city or region has an expertise in; • POV Courses: encourage candidates to take On Demand, Synchronous, or F2F POV courses; • Field Trips such as touring new ships, breweries, wineries, etc.

Chapter Officers Requested – · 30-minute Presentations that chapters can put on themselves; · Chapter Officer Training – HQ is preparing a U-Tube & PDF chapter handbook; · Video Conferencing can be provided by HQ, possibly for a nominal fee for staff time; · Logo Items: pins, pens, golf shirts, wind-breakers, plastic desk trophies, etc.

Save the Dates

Virtual Chapter News

• APRIL 8, 2016: DAYTON-CINCINNATI’S ECONOMIC DEVELOPMENT SEMINAR features 5 speakers on Entrepreneurial Affairs, Regional Economic Development Initiative, Regional Council of Governments, Commercial Real Estate & Dayton Development Coalition. Full day continuing education credits will be given for real estate appraisal and real estate sales/brokerage licenses. Contact David Brewer, ASA MBA_ 513-464-1064_or [email protected] Location at 225 Pictoria Drive, Springdale, Ohio near SR#4 and I-275, in northern Cincinnati.



• MAY 3, 2016: HOUSTON ENERGY VALUATION CONFERENCE. Full day continuing education for oil & gas energy valuation issues. Contact Laurie-Leigh White, ASA _ 832-904-5477, or email [email protected] Federal Reserve Bank of Dallas, 1801 Allen Parkway, Houston Tx, 77019.

ASA Membership

As of December 31, 2014, ASA had 4,852 members with 2208 in BV, 1,207 in MTS, 767 in RP, 530 in PP, 110 in GJ, and 53 in ARM. There were 3,028 ASAs, 201 AMs, 55 FASAs, 1,373 Candidates and 191 other approved applicants and affiliates.

As of June 30, 2015, the International Virtual Chapter has 247 members located in 28 countries, including Argentina, Bahamas, Brazil, Cayman Islands, China, Colombia, Equador, India, Indonesia, Israel, Korea, Mauritius, New Zealand, Pakistan, Russia, Saint Lucia, Saudia Arabia, Singapore, South Africa, Mexico, Japan, Sudan, Taiwan, United Arab Emirates, United Kingdom, Canada, and United States. Disciplines include BV (114), MTS (80), RP (21), PP (15), GJ (10), and ARM (7).

Please email us, or Susan Houchins at HQ, with any questions, concerns, or best of all, your ideas!

Carol , Mike, Blake, Renee & Gary ASA Regional Governors with oversight of the International Virtual Chapter International Virtual Chapter Officers & Directors: Initial Officers & Regional Governors Responsibility Email Mike Pratt ASA, Immediate Past President IVC & EC Liaison [email protected] Carol Akers Klug ASA, President Newsletter [email protected] Gary Snowdon ASA, 1st Vice President At-large [email protected] Blake Runckel ASA, VP & Treasurer Financial Matters [email protected] Renee Marino ASA, Director & Asst. Treasurer Special Projects [email protected] Officers James Ko ASA, VP & Secretary Canada Liaison [email protected] Eli El-Al ASA (Tel Aviv), VP Israel Liaison [email protected] Norberto J. Levin AM (Buenos Aires), VP South America Liaison [email protected] Sujit Joglekar ASA (Mumbai), VP India Liaison [email protected] Vadim Gorbatov ASA (Moscow), VP Russia Liaison [email protected] Directors Faisal Alsayrafi ASA, Director Saudi Arabia Liaison [email protected] James V. Andrews ASA, Director Caribbean Liaison [email protected] Carlos E. Cardoso ASA, Director Brazil Liaison [email protected] Sandip K. Deb ASA, Director India Liaison [email protected] Tony Feszczur ASA, Director South Africa Liaison [email protected] Ricardo Gonzalez ASA, Director Mexico Liaison [email protected] Bruce D. Greenberg ASA, Director Mexico Liaison [email protected] Ron Muller ASA, Director Canada Liaison [email protected] George (Mac) Stephenson ASA, Director South Africa Liaison [email protected]



IRONTRAX LLC Mining Industry Insight (Winter 2015) Mining Industry Statistics J o s e p h S a n t o r a , A S A

Industry Overview

In early December, the angst among energy and mining producers worsened again, as one of the industry’s largest companies cut its work force by nearly two-thirds and Chinese trade data amplified concerns about the country’s appetite for commodities. The current outlook for commodities prices is shaky, with a number of forces battering the markets. China, the world’s biggest buyer of commodities, has pulled back sharply during its economic slowdown. Still, the world is dealing with gluts in oil, gas, copper and even some grains. “The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.” The pressure on prices has been significant. Prices for iron ore, the crucial steelmaking ingredient, have fallen by

about 40 percent this year. The Brent crude oil benchmark is now struggling to stay around $40 a barrel, down from more than a $110 since the summer of 2014.

Worldwide Revenue, Assets and Thermal Coal Production

• Total revenue $ 453 billion

• Total assets $1,231 billion

• Total production of thermal coal (amount in metric tons) 1,223

Major Commodities by Country

• China leads in hard coal production (amount in million metric tons) 3,533

• Chile leads in copper mine prod. (amount in thousand metric tons) 5,800

• Austrailia is second in gold mine production (amount in metric tons) 270

United State Mining Industry

• Gross output $ 667 billion

• Gross operating surplus $ 312 billion

• Value added $ 454 billion A number of commodity-related businesses have either declared bankruptcy or fallen behind in their debt payments. Even more common are the cutbacks. These developments stem from the fact that between 2000 and 2014, companies invested hundreds of billions of dollars to expand their production capacity to satisfy China in a period of rapid economic expansion and much of their growth was fueled by debt. But the situation has proved unsustainable as demand has fallen off. Chinese copper imports are down nearly 3 percent from last year, while imports of steel products are down by more than 12 percent.

The country’s crude oil and iron ore imports are still up, but by rates that are slowing from previous years. The weakening Chinese demand is hurting prices while production is overwhelming markets. In the following months, China will continue to be a key factor in the commodities equation.



Hot Topics

Oil-Price Recovery Not Anticipated Until 2017: The International Energy Agency (IEA) expects oil prices to remain low through 2016, but forecasts a rebound to begin in 2017 as the current oil glut recedes and demand rises. At a December news conference in Paris, Fatih Birol, the executive director of the IEA, stated “Looking to 2016, I see very few reasons why we can see growth in prices.” He added, “I think 2016 will be a year where we will have a lower price environment.” There is an abundance of oil in the current market and we have the potential for a further increase if sanctions against Iran are lifted they come to the market. Oil prices have been struggling to maintain a level of $40 per barrel. The price of the world benchmark, Brent crude, fell below $40 in December for the first time since the global economic crisis in early 2009. At the same time, a barrel of the U.S. benchmark, West Texas Intermediate, was under $37. Mild pre-winter weather that has reduced heating demand and a volatile U.S. stock market ahead of the widely expected interest rate hike that occurred in December has added to the reduction.

The low price of oil has led the energy industry to slash investments in drilling and exploration, which could result in a tighter supply. Birol noted that oil companies have cut such spending by about 20 percent so far this year, and may spend even less in 2016. Although 2016 may well be another year with lower prices and implications for investments in the oil sector, this spending decline, combined with continued growth in demand, according to Birol, could eventually lead to “some surprises” in pricing. Birol stated, “We have never seen, in the last 30 years, two years in a row of oil investments declining, and this will have an impact on production in the next few years.” In the meantime, Birol fears that a protracted period of low prices for oil, gas and coal, could inhibit the move to clean, renewable energy, especially in developing countries, which may prefer to generate electricity by burning cheap, toxic coal rather than turn to more expensive energy alternatives. While Birol didn’t say how low he expects prices to go in 2017, he does expect oil to rebound, albeit probably slowly, to about $80 per barrel in the next several years, specifically because reduced investment by oil companies should constrict supply significantly. He expects the reduced investment by oil companies to cut non-OPEC production by more than 600,000 barrels per day in 2016. But after that, he said, “we would expect to see upward pressure on prices.”

Crisis in the Coal Industry: It’s been a terrible year for the coal industry, particularly in the U.S., where nose-diving prices and tougher proposed regulation have pushed a number of producers to seek bankruptcy protection. The U.S. coal industry faces not just overcapacity but crippling liabilities that will outlive mine closures. In a recent report, McKinsey and Company suggests the U.S. coal industry should get “smaller” and “healthier” to avoid an even worse 2016. The reason for this, as simply put by the analysts in a report published last month, is that while the U.S. has plenty of coal, the world just “doesn’t need it”. “By 2020, the convergence of low-cost shale-gas supply, environmental regulation, and waning international demand is likely to push demand for US coal to at least 20% below what US mines currently produce—which is already almost 20% below 2008 levels.” Aligning supply with lower demand would require closures across all regions of the U.S. coal industry. McKinsey’s projections suggest that roughly half the capacity of the Central Appalachian Basin, in the eastern U.S., could be in excess of demand. Years of pressure from climate activists are taking a toll, as a growing number of banks are now pledging to cut financing to the industry. Such actions, along with crippling debt, could potentially sink the coal industry. The analysts believe that even if miners cut capacity to balance supply and demand in 2020, they still will be unable to service most of the industry’s approximately $70 billion of remaining debt and liabilities incurred over the years.

The U.S. coal industry is still in the early stages of what could be decades of financial difficulty. Beyond the pain to stockholders, debt holders, and employees, the industry’s giant liabilities are crippling its maneuverability and will limit its flexibility to rationalize capacity. The coal industry faces some hard choices. While harsh capacity cuts are normally viewed as the tough but certain way an industry can turnaround, which is not the case for the U.S. coal industry. McKinsey and Company believes it is likely that many US coal companies will continue in business-as- usual mode, hoping for a rebound in the domestic and export market, while others will follow their competitors into bankruptcy or wind up in liquidation.



Iron Ore Industry Hurt by Falling Chinese Steel Demand: The pain for iron ore producers is not expected to let up anytime soon, as China’s demand for steel continues to drop. Early in December, the price of iron ore had declined for nine straight weeks, marking the worst losing streak for the steel-making commodity since 2008. According to a Bloomberg posting on December 10, China’s purchasing managers’ index for the steel industry fell to 37 in November from 42 a month earlier; a number under 50 signals a contraction. Meanwhile more steel is being held at ports. According to Shanghai Steelhome Information Technology Co. holdings have risen more than 2 percent to 89.5 million tonnes. Weak seasonal demand, which is contributing to the mills’ financial difficulties, is likely the reason for the decline in steel production. No doubt that will reduce demand for iron ore.

Where ore prices go from here will also depend on supply from the Big Four. Vale (NYSE:VALE), Rio Tinto (LON, NYSE, ASX:RIO) and BHP Billiton (NYSE, ASX:BHP) have all been following a largely successful strategy of raising output and slashing costs to weather low prices and push out competitors. At the same time, the glut of steel in China due to lagging economic growth is creating conditions for a trade war. According to industry group China Iron and Steel Association, between January and October Chinese steel consumption fell by nearly 6 percent to 590.47 million tonnes. The decline in consumption is affecting producers’ bottom lines, with China’s steel companies shedding $11 billion in the first 10 months of the year. As a result, Chinese steel mills are looking to dump their product on the open market, a strategy which is alarming to China’s steel competitors in Europe and the United States. Analysts at investment bank UBS figure that this year China will produce 441 million tonnes more than it will consume. The country currently produces around half of the world’s annual steel output.

Trends in Used Equipment Values

The trend in values for used mining equipment has changed drastically over the past 2 years. As recent as May 2013, the global mining equipment industry expected to witness steady growth with an anticipated CAGR of 7.5% over the next five years. In fact, global commodity markets have declined. During 2015 alone, supply surpluses have led to 20 to 30 percent decreases in the prices of most major commodities. As a result, many companies within the mining industry continue to restructure their operations or worse, file for bankruptcy. According to a December 2015 article published in the New York Times, London-based Anglo American, the fifth largest mining company in the world, is cutting its workforce from 135,000 to 50,000, and at least seven American coal companies have declared bankruptcy during 2015.

The above developments have, in turn, had an adverse effect on both new and used equipment values and orders, as well as related strategies employed by equipment manufacturers such as Caterpillar. Last September the company announced plans to reduce its workforce by 10,000 by 2018, while closing a number of factories. It is currently difficult to predict when the declining market for used mining equipment will hit bottom. In 2016, commodity prices are not expected to see any material improvement as current over-supplied conditions will continue to strain cash flows for most mining companies. Supply curtailments along with improving demand in some markets could provide some relief. However, with most mining companies’ cash flows under pressure, industry capital expenditures are now expected to decline nearly 20 percent. While reductions in capital expenditures and continued efforts to curtail operating costs may provide some advantage to the market for used mining equipment, sales in general will continue to feel the ill effects of supply surpluses.

For more information, please contact Joseph Santora, ASA at 440-552-1369 or E-mail [email protected]

Joseph Santora, ASA is the Founder & Managing Partner of Irontrax LLC. Irontrax specializes in asset management, consulting, appraisal, and the remarketing of bank-owned construction, transportation, and mining equipment. Irontrax also consults for lease-end negotiations, workouts, and litigations. Santora sits on the American Society of Appraisers (ASA) Machinery & Technical Specialties Committee. He is also Past Vice Chair of the Ohio Contractors Association and current Conference Chairman for the ASA Asset Identification and Valuation Conference held in Cleveland each year, usually in June.



9th International Conference of Plant and Machinery and Equipment L e s l i e H . M i l e s , J r . F A S A , F A P I

Held in Tokyo, Japan October 26th thru 28th 2015 Presentation at the Hitotsubashi Hall, National Center of Sciences

The conference was a big success due to the attendance, approximately 150 from all over the world including 18 from Nigeria and some from other parts of Africa. Twenty-five countries were represented. Most of the attendance was from overseas due in part to the large draw of the setting which is a favorite tourist attraction but also the strength of most currency against the Japanese Yen which made it economically attractive. After discussions with most in attendance, the main attraction was the past reputation of over twenty years of conferences that have gained the favor due to the only offering in the world on the topic machinery and equipment valuation as it is called in the United States and P&M or Plant and Machinery in most of the rest of the world. The venue was terrific and set in auditorium style with pull out desks behind each chair with a stage for presentations with back

projection screen located to the side of the speaker. The Hall would hold approximately 400 persons. The photograph shows entering the hall and taking the seats before the lights came down to better view the screen. Above the screen is the sign well placed announcing the conference and was very large for all to see.

The Host arranged speaker for the event was Professor Kiyoshi Kobayashi from the Graduate School of Management and the Director of the Research Center Business Administration of Kyoto University.

Having the first speaker from Africa (Paul Osaji from Nigeria) was also a big stimulus for the many that attended form that region. Paul did a very good job of getting the word of the conference out to many that would also have come but there was a restriction on Visas to Nigerians due to a mix up on a previous attendance from that country in which many did not go back and may still be in Japan. Two Nigerians that we know applied were turned down and one was a government employee and another well respected applicant was in the teaching profession. Kazuo Wakayama is to be commended for his efforts and we all worked hard on getting most approved.



One of the better presentations was Paul Osaji’s (pictured) talk on valuation in Nigeria and was very insightful to problems they have and his appreciation of the efforts of this committee to have an international forum for our discipline of valuation. Interesting enough is that Nigeria has had an association for P&M valuation for many years even before he became aware of the American Society of Appraisers (ASA). The first two MTS courses are scheduled for the first two weeks of December 2015 and should be the beginning of a start to gaining enough members in that country for a Chapter in the near future. Most ASA prospects already have the education and experience requirements to go straight for the senior ASA designation after the course work and other general submission requirements for getting that accreditation.

All of those that attended seemed to have a strong desire for two areas and the first was the topics and speakers for international understanding; the second was for the networking when international work should come along for assistance if not joint venture participation for a valuation project. There were also other points but I have to assume a third would be the fun that always seems to be a part of this

conference as the association of peers in this profession seem to have an understanding of what we talk about and therefore the interest is automatically there.

ASA was well represented with speakers such as Edward Detwiler, ASA on Medical Valuation and Mona Miller, FASA on machinery and equipment used in the Gems and Jewelry business from mining to completion of products and the measurement (in only a general way) for final values on completed products and some very interesting associated topics. The emphasis was on Jade in this case due to mining in Japan for that as one of its minerals. She actually went into mining equipment below and above ground and had many photos and information for that which assisted the interest for those participants that do much of that type of equipment. The photograph in this paragraph show Mona Miller and Lee Hackett two of the FASA’s in attendance with Lee one of the founders of the conference.

There were three full days of education sessions and this one had many major sponsors (10 total) in addition to the three expected standard underwriters of which RICS and ASA are the associations that are equal sponsors taking on the majority of that requirement. API the Australian Property Institute also is an underwriter for the balance of the underwriting requirement. JaSIA as the host obtained many sponsors of various events. JaSIA did a fantastic job of coordinating all of the timing for sessions and also recorded in the hall, sound video for each of the topics on a digital camera system.

A break was taken each day with sponsors for the lunches and there were speakers for each one of those in which each gave very interesting talks on their companies and how they could contribute in knowledge or use of those that were in the audience. Networking



as usual was very active and those that attend were interested in the topics but also for cooperation of future information gathering and assistance similar to that where the various disciplines in the ASA, RICS and API through networking and experience by their membership. Although not a membership organization, ICVPME is becoming an event with regulars that attend and are always willing to cooperate and assistance the others. I know that this has occurred in many instances also experienced by this report writer. Karen Milan was referred to one of the Japanese students who also attended and stated that her information allowed them to complete the electronic communication job prior to the date of this event. He also worked for one of the sponsors that participated in this conference. As you can see the ASA red coat was worn on the first day and the photo shows Jim Hirt, ASA CEO and two from the larger contention from Nigeria at the lunch break.

After the first day sessions, there was a reception held in the KKR hotel where most of the attendees stayed. There was a presentation and introduction by Kazuo Wakayama and who introduced the chair of the Japan Real Estate Institute who was the host for that reception. The picture to the left shows the speaker for that reception and JaSIA had signs made for the various events where we held lunches and this welcoming. Many of those that attended, who had been to others over the years, indicated that they believed that this one was one of the best we had ever presented. JaSIA with Kazuo and Yuki Kameo along with the entire ICVPME Committee headed up by Peter Singleton deserve the credit for this years’ event but not to forget that the prestige and continuation of better programs comes from the past starting in India with the primary founder Kirit Budhbhatti and those that began this conference. Two of the founders

were in attendance at this one with both now being FASA’s. Kirit also sent his best wishes for all of those at the event to have one that is more successful than those in the past. His wish was realized. The two founders that were present gave the opening toast at the gala dinner.

The Session and Dinner Sponsor was IHRA (International High-Speed Rail Association) and Duff & Phelps. Another Dinner Sponsor was Global Asset Solutions; Welcome Sponsor the Japan Real Estate Institute and the first day lunch sponsor was Gordon Brothers Japan. There were several branding sponsors: Simmon, Japanese Frontier of Moveables Evaluation LLP and another (not translated) having the insignia or logo “H” and also The Tanizawa Sogo Appraisal Co., Ltd.

The Gala Dinner was held on Tuesday Night with Japanese entertainment that was very special as was the dinner which was totally the local cuisine. It would be improper to not at least say that this conference was enhanced by the tenacious effort of Richard Berkemeier who is pictured in the attached photograph. The dinner was followed on Wednesday with another full day of speakers with all topics throughout the three days being very special on an international level for learning about theory, topics of various depreciable factors, specialization, some local specializations and users of appraisal services and their needs and requirements. The topics were well documented in the promotion of this conference but the various topics that were covered were better than expected that could not have been described in the topic coverage as promoted. Almost all

Rod Hyman (Australia) Committee Member at Entrance



of the attendees had comments or praise for this particular topic coverage and the speakers that were there. The provided entertainment was totally Japanese dancers and entertainers as can be seen in the attached picture. All of the Power Point presentations were available for download and will be made available through the MTS committee archive in some manner to be determined. JaSIA also has them on their server in Japan but are all in English.

On the last day at the final and closing event was entertainment provided by those that went on the river cruise. This was described as the Tour of Yakatabune River Cruise. The boat had karaoke and many participated including this writer which was not pleasant for those that heard it. However the laughter probably made up for the bad noise. It was on this cruise we had the usual photographic presentation on slides which was very well received. It was in PowerPoint and had captions that seemed to please all that watched it since most were the attendees. As usual those that were made fun with captions seemed to be pleased with the satirical use of those photos.

Those that might read this report, I assure you that in two years when it comes again, you would combine education and networking with a vacation that would be better than anything you might typically try in whatever region of the world it is held.

About the Author

Leslie H. Miles, Jr. FASA, FAPI is a member of the American Society of Appraisers since 1983 and is one of its founding members. He served as International President from 2006-2007. He has also served as Governor Region 6, Chairman of the MTS committee and was elected to the College of Fellows in 2008. He currently holds the positions of Advisor to the International Educational Committee, and Examiner for the Aviation Discipline. He has published articles in technical journals and appraisal newsletters. He is the author of Dimensions of Value, a textbook dedicated to those who rely upon values for making monetary decisions. He has written courses dealing with Inventory, Real Estate, Cost Depreciation, Machinery and Equipment, and Principals of Valuation. He has lectured and taught in the U.S and internationally.

As an expert witness, Mr. Miles has offered testimony in Federal and State Courts throughout the U.S. He is a licensed Real Estate Broker, state certified in Texas, and holds a Texas auctioneer’s license.

Les continues to stay busy and was also giving the ME201 and ME202 courses in Nigeria the first two weeks of December 2015.



The Past and Future of Compliance and Fraud in Aviation: Don’t Fly Blind P e t e r J . T u r e c e k , S e n i o r M a n a g i n g D i r e c t o r , I n v e s t i g a t i o n s & D i s p u t e , K r o l l

In just the last year, numerous fraud cases have affected the aviation industry—from widespread Foreign Corrupt Practices Act (FCPA) investigations involving major manufacturers and suppliers, to Department of Defense contract fraud and falsified repair or conveyance records. According to a recent global survey by the Centre for Aviation (CAPA), the cost of fraud for the airline industry alone is $1.4 billion a year, much of it coming from online credit card fraud.1 As a result, it is critical that all companies take appropriate steps to mitigate their fraud risks, including appropriate due diligence steps for vetting transactions, partners, agents and vendors.

The first half of 2015 revealed at least eight new FCPA enforcement actions brought by the US Department of Justice and Securities Exchange Commission, including one against FLIR Systems and one against Goodyear Tire.2 Additionally, Embraer’s five-year long FCPA investigation expanded into more countries as Brazilian authorities filed criminal actions against Embraer employees who allegedly bribed a Dominican Republic official.3

The monetary costs of these fraud and FCPA issues are huge and the fines in recent years listed below do not even touch upon the significantly higher dollar cost of internal investigations and the distraction of executive management from their actual day jobs:

• In 2015, BNY Mellon agreed to pay $14.8 million to settle charges that the company had provided internships to the family members of foreign government officials.4

• Alcoa agreed to pay $384m to settle charges related to bribes paid to Bahraini government officials.5

• BHP Billiton paid a $25 million penalty to settle a case regarding sponsoring the attendance of foreign government officials to the Summer Olympics.6

• In 2014, Avon agreed to a $135 million fine to the DOJ and SEC for FCPA violations, on top of the $340 million they had spent in legal and other costs over an 8+ year internal investigation.7

Regulators outside the US are also looking at the aviation industry. The UK’s Serious Fraud Office launched an investigation into alleged illegal business conduct by GPT Special Project Management Ltd., an Airbus unit.8 More recently, German prosecutors have launched an investigation into Airbus for alleged corruption about projects in Saudi Arabia and Romania. These investigations come on the heels of other SFO investigations into Airbus’ activities in Saudi Arabia and Austria.9

Further, it is not just an international issue. This year alone there were numerous smaller frauds involving the US aviation industry that made headline news:

• President of Transistor & Electronics Components, Inc. convicted of fraud for providing counterfeit electronic components on US Air Force contracts and sentenced to three months in prison and nine months of home detention, plus $163k in restitution10

• Owner of NJ-based Tara Technology Corp. indicted on multiple fraud charges for laundering scrapped parts for resale with falsified trace paperwork11

• Former Carson Helicopter VP sentenced to 12 years in prison for falsifying performance charts and other documents for firefighting helicopters that led to nine fatalities in a crash12

• Former WECO repair station quality assurance manager sentenced to 24 month of probation for conspiracy to falsely certify repairs on parts used by tour company and law enforcement helicopters13



• Founder of Diamond Parts pled guilty to fraud on DoD contracts with poor quality foreign made replacement parts for C-130 Hercules aircraft14

New regulatory changes are also coming including understanding the beneficial ownership of transactions. The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has proposed rules regarding clarifying and strengthening customer due diligence requirements for banks, broker/dealers, and others to include a regulatory requirement to identify beneficial owners of legal entity customers.15

Kroll’s survey in its annual Global Fraud Report 2015-2016 showed the percentage of companies affected by listed types of frauds. However, most fraud goes unreported for a variety of reasons. In many cases, the frauds are never discovered, or if they are identified, the company decides not to pursue civil or criminal recourse. In other instances, many cases that are prosecuted are too small to attract publicity. According to the Association of Certified Fraud Examiners (ACFE), ultimately only about 10% of fraud cases are in fact prosecuted. The size of some frauds is sometimes too small for prosecutors to be interested in pursuing, and often there is a lack of coordination or experience by law enforcement or regulatory agencies in handling corporate fraud matters, particularly those across multiple international jurisdictions.

According to statistics from the ACFE, 88% of fraudsters are first time offenders, never having been previously charged nor convicted. Approximately 8% had prior convictions and 4% had been charged but not convicted.

The results of not knowing with whom you are doing business can be disastrous. In December 2012, a corporate jet crashed in Mexico killing singer Jenni Rivera and others. Subsequent lawsuits filed by insurance companies demonstrated that Starwood Management, the jet’s owner, had lied in their applications about the history of their aircraft and the beneficial ownership. The lawsuits against Starwood focus on Christian Edward Esquino Nunez, a businessman with a long criminal record including falsifying airworthiness and maintenance documents, concealment of assets, falsified loan applications and “conspiracy to possess with intent to distribute cocaine.”16

This crash and the activities that led to it are emblematic of many of the various aviation-related frauds. Aviation companies, and those working with and related to the aviation industry, have a number of key issues worth monitoring in order to remain safe:

• Fraudulent transfer of assets• Forged documents (conveyances, maintenance, airworthiness, licensing)• Import/sales tax avoidance schemes including the “temporary” movement of aircraft• Hidden beneficial ownership• Undisclosed relationships among parties (e.g. valuation or maintenance by a party with a vested interest)• Kickbacks/bribes/facilitation payments to government officials

So how does one avoid flying blindly and becoming a victim of fraud, in either a customer or vendor relationship, or a business partnership? It’s all about the DUE DILIGENCE.

Besides the expanding regulatory requirements such as FCPA, UK Bribery Act and other national anti-money laundering/anti-bribery/corruption regulation, it just makes good business sense to ensure that business partners, customers and vendors are who and what they claim to be and are not hiding problems, a history of disputes and unpaid bills in their past, or worse.

Other common red flags to watch for in due diligence include: • Untrustworthy financials• Unsatisfactory explanations• Significant litigation• Gaps/lies in the resume• The absence of information• No social or network presence



Ultimately, there are two ways of doing due diligence:

Pre-transaction or investment: This is the less expensive, less intrusive and less time-consuming form, and therefore the highly preferred method.

Post-investment investigation, audit, litigation consulting, asset searching and public relations assistance: Because such investigations often take place only after an incident or suspicion of fraud, this is VERY expensive route. Post-investment investigations are a very drawn-out process that is also highly distracting to management and an impediment to operations.

However, not all due diligence investigations are created equal. There are numerous levels of depth, scope and cost available depending on the risk, purpose and budget. Broadly speaking there are two very different due diligence approaches: screening or an investigative methodology. Due diligence screening is essentially searching a subject’s name against a select set of online available databases and/or public records. There is generally extremely limited independent verification of fact sets and minimal analysis of findings. However, it is likely the most cost effective solution for high volume projects such as vendor management or customer remediation projects.

An investigative methodology is a much more robust due diligence approach and typically includes a comprehensive review of available public records and databases, following an iterative research process and in-depth analysis of findings by highly trained investigative analysts. This is more of the connect-the-dots type of investigation, where analysts look for not just name matches, but also the omission or absence of information, seeking to explain the gaps in understanding a subject’s background and timeline.

Here is a real world recent example of the difference in screening vs. investigative methodologies, anonymized to protect the client and subjects: A company’s law firm hired our company to conduct a standard investigative background (without source inquiries) at roughly $8,000 as a potential litigation support matter. They had hired an employee in a C-Suite position and asked a screening company to perform an executive background check. The screening company found only one very minor discrepancy—that this employee’s master’s degree was issued on a different date than was stated. Once hired, the new senior executive had, in-turn, hired a consultant, an alleged executive with highly relevant experience, to help with a backlog of work. For whatever reason, after a month, the client grew suspicious and read the employee’s emails to find that the senior executive and this consultant were having an affair and fired the both of them.

Within thirty minutes of starting our investigative work, we immediately noticed discrepancies that the screening did not pick up. First, in our basic Internet searches, we found four different versions of the former employee’s resume, three of which claimed a PhD. Our research showed that degree was never awarded, nor had the employee ever been enrolled in the program. In fact, we found this employee was criminally charged in the late 1980s with a misdemeanor for falsely claiming a PhD in Psychology while employed as a high school Latin teacher (a position that did not appear on any of the four resumes).

Next, we investigated the employee’s assertion that she had been the co-founder and a senior executive from 2000 to the time of the investigation for a $100 million global entity. The screening company had called the phone number provided by the candidate to verify employment and spoke with a Vice President of Operations. In fact, our investigative work found that the company had never even existed—the street address was an independent mail drop vendor in a strip mall; the company’s website domain was registered AFTER the employee had been terminated by our client; the phone number the screening company called was actually the mother’s landline at her condo and the “VP of Operations” was actually a licensed aesthetician.

Our research also found that the employee’s additional prior employment was again fictitious; the employee claimed to have worked as a senior vice president for a multi-billion dollar company for more than a dozen years. A number of other falsehoods were revealed, including previous connections with the “consultant” – who was actually her real estate agent and home decorator and had no work experience related to the position for which she was retained.



Unfortunately, the screening company found none of these facts, any one of which might have been disturbing enough for the hiring firm to withhold an offer of employment. The screening company did not find the additional resume variations; they did not question the actual existence/viability of the previous entities; they did not validate the phone number of the prior employer; they did not find the misdemeanor charge for falsely claiming a degree award, nor her prior employment as a high school Latin teacher; and they did not uncover the discrepancy in dates where the employee claimed to be working for a company that had yet to be formed.

Companies in any industry, but especially in the aviation field given the large dollar amounts at play, should “trust their gut” when considering doing business with a counterparty, whether a customer, vendor, supplier, etc. There is a reason we all have hair on the back of our necks—to warn us of impending trouble. Just like an instrument rating helps you navigate weather to get on the ground safely, thorough due diligence that is appropriate to the level of deal risk can truly save the day in terms of creating or maintaining smooth business operations. Rather than thinking of due diligence as expensive and a sunk cost, consider it a small but crucial investment in the success of your business.

About the Author

Peter Turecek is a Senior Managing Director with twenty years at Kroll, an investigations and risk management firm. Pete divides his time between Boston and Kroll’s New York headquarters, where he is primarily based. He is an authority in due diligence, multinational investigations, and hedge fund related business intelligence services, and also conducts a variety of other investigations related to asset searches, corporate contests, employee integrity, securities fraud, business intelligence, and crisis management.

A graduate of Drew University and Fordham University he has a wealth of industry experience, serving clients in banking, hedge funds, private equity, finance and accounting, commercial real estate, legal, insurance, high-technology, media, and mining and metals. Due to this broad range, Pete is frequently engaged for enhanced due diligence and business intelligence investigations regarding specific industries or companies as part of a client’s investment research. Pete has often been cited in the media regarding fraud and due diligence as well as asset-tracing and pre-employment investigations of senior executives and directors. In addition, he has appeared on CNBC, Fox News and NPR and has served as a guest speaker on a number of topics for various investment and professional groups. He is also an instrument rated private pilot. Pete can be reached at [email protected] or 212-833-3373

1http://centreforaviation.com/analysis/fraud-costs-airlines-usd14-billion-a-year-regional-airlines-the-fraudsters-carriers-of-choice-48150 2http://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml 3http://www.wsj.com/articles/brazil-files-bribery-charges-in-embraer-aircraft-sale-to-dominican-republic-1411502236 4http://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml 5Ibid 6Ibid 7http://www.sec.gov/news/pressrelease/2014-285.html 8http://www.bloomberg.com/news/articles/2014-07-09/airbus-staff-arrested-in-u-k-serious-fraud-office-s-saudi-probe 9http://www.wsj.com/articles/germany-investigates-airbus-defense-deals-in-saudi-arabia-romania-1417607252 10http://www.osi.af.mil/news/story.asp?id=123455778 11http://www.justice.gov/usao-nj/pr/owner-new-jersey-aircraft-parts-brokerage-company-indicted-laundering-scrapped-jet-engine 12http://www.oregonlive.com/portland/index.ssf/2015/06/former_carson_helicopters_vp_g.html 13https://www.oig.dot.gov/library-item/32732 14http://www.justice.gov/usao-nj/pr/former-owner-defense-contracting-company-admits-defrauding-us-department-defense-foreign 15https://www.fincen.gov/statutes_regs/files/CDD-NPRM-Final.pdf 16http://www.cnn.com/2012/12/11/us/mexico-plane-ownership/



Technological Obsolescence Finally Arrives in the Metal Stamping Press Industry H a r r y J . R i c h a r d s o n , A S A / E d i t e d b y : J . B a r r y S a v a g e A S A , E m e r i t u s

The CNC revolution started in the machine tool industry in the in the mid-seventies. The revolution introduced computers and servo drive motors as the controlling and driving forces of a machine tool. No longer needed were: relay electrics, standard electric motors, gearboxes, clutches and drive shafts that previously comprised the essential design of every conventional machine tool built since the start of the Industrial Revolution. This caused a mass extinction of conventional machine tools and machine tool builders who did not make the transition. Thus began the age of the CNC (Computerized Numerically Controlled) Servo Drive Machining Center.

One category of manufacturing machinery escaped the 1970’s extinction. The conventional mechanical & hydraulic stamping press industry escaped this sudden death fate that befell upon every other sector of the machine tool industry. However, it’s time has come and it too must yield to the mighty computer and servo drive technology that dominates today’s manufacturing world.

Introducing the Servo-Drive Mechanical Stamping PressesPredating the Egyptians - the technology for forming metal was based on storing and releasing mechanical energy by elevating a weighted (hammer) form / die which was dropped to shape sheet metal. In the very early days of the Industrial Revolution (1840) that technology was improved by a steam driven motor powering a spinning weighted flywheel (stored mechanical energy) on an arbor, an engaging and disengaging clutch, transferring rotational energy thru a gearbox and crankshaft to a guided ram/die into a piece of metal to create a shape. Also in the mid 1800’s hydraulic presses were invented whereby a hydraulic pump/motor was driven by water or steam power to raise and lower a guided ram/ die with force to shape sheet metal. Both mechanical and hydraulic versions referred to as conventional presses.

Starting in the 1990’s manufacturers were beginning to demand more efficiency and quality from the metal stamping industry. Stampers were limited in this effort by the technology associated with conventional presses. The essential problem being that the products that they envisioned manufacturing required a complex energy cycle control of the press ram, which was not available on conventional presses. It was then that manufacturers started working with stamping press manufacturers to develop new technology that would allow them to have more control over the energy cycle/stroke of a stamping press. The first CNC Servo Drive Presses were available on a limited basis in the early 2000’s.

To understand the terminology: CNC refers to the computer that controls all of the functions of the stamping press with digital computer technology. Servo Drive refers to an A/C or D/C electric motor that directly drives an axis on a machine. Press refers to the physical frame and components of the metal stamping press.

There are many advantages in applying Servo Drive technology in the stamping industry. The most important factor that this technology brings to the stamping press industry is that a Servo Drive motor develops high torque at a very low rpm. Conventional electric motors and gasoline or diesel engines have very low torque at low rpm and require energy augmentation through gearboxes and weighted flywheel mechanisms. Servo Drive technology does away with the need for gearboxes and flywheels.

Good examples of the power of a Servo Drive motor are applications in the railroad diesel electric locomotive and the electric car industries. Today’s locomotives have servo motors attached to each drive wheel. When power is sent to the servo motor it has full torque at very low rpm enabling it to pull the huge load of the train of railcars. Also I’m sure you’ve heard of the extreme 3.2 seconds / 0 to 60 mph speed of the new Tesla electric car. That is all due to the extreme power of the servo motor at low rpm.

The new electric cars have a battery and a Servo Drive motors at either (2) or all (4) wheels. No more need for a drive train including a motor, transmission, clutch, drive shaft or differential - all these components eliminated by the new technology.



Conventional gasoline and electric motors have very low torque at low rpm. That is why, for example, you have a gearbox with a 4 to 7 speed transmission in your car. The gearbox compensates for the low torque when the gasoline engine is operating at low rpm.

Servo Drive presses do not have gearboxes or flywheels - so the massive expense and complexity of a press crown, weighted flywheel and clutch developing and controlling tonnage for the stamping process is eliminated with the new Servo Drive technology.

Over the past few years, the world’s leading press manufacturers have shifted to almost exclusively building ‘Servo Driven’ presses. Servo Drive technology applied to the stamping press industry brings so many advantages that it will virtually revolutionize the metal stamping industry over the next 20 years.

Servo Drive presses brings these unprecedented advantages:

• Servo Drive presses are controlled by computers that give the operator extremely precise control over the energy and speed cycle of the press ram and every other aspect of the stamping process.

• Utilizes less than 50% of the electrical energy of a conventional flywheel press

• Produces up to 100% more production per hour

• Quality and repeatability of stamped parts is vastly improved – in some cases eliminating the need for post-production quality control procedures.

• Allows for control of the tonnage/energy cycle of the press ram throughout the stroke of the ram. This means that a very complex part could be made where full/partial tonnage may be required in any point in the stroke of the ram. On a conventional press full tonnage is developed at a fixed point near the bottom of the stroke and is not adjustable. Many complex parts had to be stamped in several steps now are done in one cycle.

• The length of the stroke is adjustable - not possible on most conventional mechanical presses

• The ram stroke does not have to follow through in a bottom loop as it can be interrupted and reversed instantly, with micro-inch precision, at any point.

• Maximum or selected tonnage may be held at a dwell at any point - this feature is very important in stamping metal that has a spring back tendency. Holding tonnage at a dwell point will help set the metal so that it does not spring back.

• Vibratory cycle at the bottom of the stroke destressing the formed metal – preventing post processing part deformation.

• Significantly reduce die wear as the energy cycle is controlled – in particular at and after the strike point – where most die wear and damage occurs.

• On large installations it is possible and economical to harvest mechanical energy from braking and transform it into electrical energy visa-vis a motor generator set, to feed itself or other off-line electrical requirements for the plant.

• It has been proven that the tooling utilized on conventional stamping presses may be utilized on Servo Driven presses. This is a major point, as this means that the tooling/stamping dies may be transferred directly to the new technology press without modification. Very often the tooling (stamping dies) may cost as much or more than the stamping press itself. If new tooling had to be designed/ purchased each time a company bought a Servo Drive Press – the cost of moving to the new technology might be prohibitive.

We have mainly focused on the point that the Servo Driven presses are replacing mechanical stamping press. The other type of stamping press in the industry is a hydraulic stamping press where the ram is driven by hydraulic pumps through hydraulic cylinders. Conventional hydraulic stamping presses have the ability to adjust stroke length and tonnage and may dwell at the bottom of the stroke. However, they are still considered to be similarly inefficient when compared to Servo Driven presses when it comes to energy consumption and productivity.



Currently Schuler GmbH, the largest stamping press manufacturer in the world, is reporting that they have had no new major orders for state-of-the-art conventional flywheel/clutch style presses for several years. All new major orders are for the new Servo Driven style presses. Schuler is now on its 3rd generation of Servo Drive presses. The new generation includes transfer and progressive die presses. The newest version progressive die press has the capability of introducing an axillary piece mid cycle, welding it to the partially stamped part before finishing the cycle, thus producing a finished assembled part. The new style presses are being purchased by OEM manufacturers such as Daimler, Volkswagen and General Motors. Tier 1 suppliers are now transitioning into this technology. All of Schuler’s competitors are manufacturing Servo Drive presses. Komatsu and Aida, major Japanese stamping press manufacturers, are reporting that over 90% of their orders are for the new style Servo Drive presses. Virtually all stamping press manufacturers are now building Servo Driven presses.

Toyota, the Japanese car manufacturer, has converted all of its major stamping facilities to the new Servo Driven press technology. Very soon Tier 1 automotive suppliers will be required to have this Servo Driven technology if they intend on staying competitive. This is going to be very interesting to watch because most Tier 1 automotive suppliers have what would normally be considered modern stamping presses, some costing upwards of $30 million per stamping line. However, they are not efficient when compared to the Servo Drive technology and furthermore they cannot produce the new level of quality being required by the OEM automotive companies.

What Does this Mean for Appraisers?At some point in the near future the value of the stock of conventional mechanical stamping presses and conventional hydraulic stamping presses In-Use & in the marketplace will be affected by Technological Obsolescence caused by the movement in the market towards Servo Drive technology.

The most likely scenario is that the reduction in value of the older technology presses will clearly evidence itself during and after the next economic downturn with particular attention paid to the automotive industry. It is during these periods where excess capacity and inefficient manufacturing assets are exposed and sold off. Expect to see the older technology stamping press assets being sold at much lower levels during and after the next business cycle. However, we may start to see values of conventional presses weakening prior to the downturn.

Because servo presses are so new to the market – we do not expect to see them appearing on the used market in any significant volume for 5 to 10 years. But again their presence in the market will be known by the affect they have on the value of used conventional presses that are brought to the market for sale.

During this period of transition, especially in the early years, appraisers working on projects that include stamping presses should include in their analysis a statement that this new technology was considered. For Projects that require a projection of value for a lease or finance arrangement, this trend must be discussed in the narrative and factored into the projected conclusions.

About the AuthorHarry J. Richardson, ASA, President and Founder of Tartan American Machinery Corp. and is known throughout the used machine tool industry as a reliable, knowledgeable source for machine tool appraisal & consulting services and as a supplier of used machine tools. Established in 1977, they simultaneously opened offices in Detroit, Michigan and in Paris, France. In 1981 we opened an office in Glasgow, Scotland. Our business has evolved since the early days and today we are buying / selling machine tools and consulting on a worldwide basis. We stock late model machines and have access to machines in the USA, Europe and Asia. We have many machines consigned to us for resale from banks and leasing companies. Our machine tool appraisal & consulting services are being provided to financial institutions and manufacturing concerns on a worldwide basis. In 1990 we began offering appraisal and consulting services to our clients. We specialize in all aspects of metal working and plastic machinery and equipment. Tartan has been a member of the Machine Tool Dealers National Association (MDNA) since 1980.



The Ideal Pricing Index W a l t e r W . O ’ C o n n e l l M . E . , A S A , S C S P

It’s time to index some pricing data you were given, or better yet, data you have compiled on your own data. You have decided on the collection method that you are going to use: survey, interview, focus group or, at a bare minimum, obtained data from a reliable and confirmable source. You have remembered to make sure the data is accurate, consistent, precise and most of all without bias.

You spent days, weeks, and possibly months collecting the perfect data set in pursuit of the ultimate Widget pricing index. It is done… It is perfect… It is the ultimate pricing data set:

Quantity Sold Quantity Sold Unit Pricing

Asset 2006 2015 2006 2015

Widget - Style A 400 500 $ 7.00 $ 8.00

Widget - Style B 300 400 $ 6.50 $ 7.50

Widget - Style C 200 300 $ 5.50 $ 6.50

Widget - Style D 300 400 $ 6.00 $ 7.00

Widget - Style E 200 300 $ 5.00 $ 6.00

Widget - Style F 100 200 $ 4.50 $ 5.50

Now what?

You remember back to ME202 “Machinery and Equipment Valuation Methodology” and what you learned about two Economists, Étienne Laspeyres and Hermann Paasche, both of whom developed weighted aggregate pricing indexes.

Laspeyres Price Index:

Paasche Price Index:

Simply stated:

Laspeyres Price Index: Σ Base-year quantities at current-year prices

Σ Base-year quantities at base-year prices

Paasche Price Index: Σ Current-year quantities at current-year prices

Σ Current-year quantities at current-year prices

So, which one is better? We can see that Laspeyres likes to calculate the relative index of price levels using Base-year quantities, while Paasche prefers calculating the relative index of price levels using Current-year quantities.



Now that we understand the basic workings of each index lets calculate both indexes. Laspeyres Price Index

Asset

Quantity Sold 2006 (Base-year)

Unit Pricing Total Pricing2006 2015 2006 2015

Widget - Style A 400 $ 7.00 $10.00 $ 2,800.00 $ 4,000.00

Widget - Style B 300 $ 6.50 $ 9.50 $ 1,950.00 $ 2,850.00

Widget - Style C 200 $ 5.50 $ 8.50 $ 1,100.00 $ 1,700.00

Widget - Style D 300 $ 6.00 $ 9.00 $ 1,800.00 $ 2,700.00

Widget - Style E 200 $ 5.00 $ 8.00 $ 1,000.00 $ 1,600.00

Widget - Style F 100 $ 4.50 $ 7.50 $ 450.00 $ 750.00

Total $ 9,100.00 $ 13,600.00

10 Year Price Increase

49.45%

Paasche Price Index

Asset

Quantity Sold 20015 (Current-year)

Unit Pricing Total Pricing2006 2015 2006 2015

Widget - Style A 500 $ 7.00 $10.00 $ 3,500.00 $ 5,000.00

Widget - Style B 400 $ 6.50 $ 9.50 $ 2.600.00 $ 3,800.00

Widget - Style C 300 $ 5.50 $ 8.50 $ 1,650.00 $ 2.550.00

Widget - Style D 400 $ 6.00 $ 9.00 $ 2,400.00 $ 3.600.00

Widget - Style E 300 $ 5.00 $ 8.00 $ 1,500.00 $ 2.400.00

Widget - Style F 200 $ 4.50 $ 7.50 $ 900.00 $ 1.500.00

Total $12,550.00 $ 18,850.00

10 Year Price Increase

50.20%

The above tables show that each index result is close to the other (49.45% vs. 50.20%), but there is a slight variance between the two approaches used. Each approach has its own bias. In this example the Laspeyres Index may help a lender, but hurt a borrower by showing a lower price increase than would be derived if we had used the Paasche Index.

If we were to use the Paasche Index, a seller of our Widgets may benefit at the expense of a buyer. In both examples there is inherent bias of each index. No matter what its use, it will incorrectly project the price increase (or decrease) of a good or service over time. Though both methods of indexing are generally accepted and used by both governments and businesses today, it must be understood that bias does occur when either approach is used.

So what is the solution? How do we resolve the issue of bias?

The answer is the Fisher Index or what is commonly referred to as the Ideal Index. This index is considered ideal because it eliminates the bias found in both the Laspeyres and Paasche Indexes. Since the construct of the Laspeyres and Paasche



Indexes in the mid-1800’s, mathematicians and economists have argued over which method was ‘more correct’ and ‘most valid’; but Irving Fisher, an American Economist, recognized that bias was found in both indexes and concluded that the true price increase (or decrease) could be found at a point exactly between both results (the Arithmetic Average). So Fisher concluded that using a combination of Laspeyres and Paasche’s Indexes to calculate the true price increase (or decrease) was the most ideal solution.

Let’s do the Math:

Though recognized by most as the Ideal Index at the time of its development in the early 1900’s, most economist and price survey companies did not use the Fisher Price Index, as the additional cost of labor to calculate both indexes manually was prohibitive. But today, with the advent of the mainframe and personal computers as well as the development of software & MS Excel™ templates, little additional cost or effort is needed to compute the Ideal Index.

As USPAP compliant appraisers’, we must attempt to remove bias from all of our appraisal assignments. The use of the Fisher Price Index, the Ideal Index, is a positive step toward that direction.

About the AuthorWalter O’Connell, M.E., ASA, SCSP, Senior Consultant with Porto Leone Consulting, LLC (“PLC”) and is responsible for managing cost segregation studies and tangible asset valuations. He has provided these services to clients in a variety of industries for over ten years. Prior to joining PLC, Walter worked in the manufacturing and distribution sectors as an Inventory Control Manager for Newell Rubbermaid (NYSE:CHX) and Marcolin S.p.A.. While working as an Inventory Control Manager, Walter specialized in Material Requirements Planning (“MRP”) and Manufacturing Resource Planning (“MRP II”), in matters of national and international purchasing, the procurement of production equipment, plant and production design, cost allocation studies, and inventory accounting.

He has performed and managed cost segregation studies on hundreds of properties, including hotels, senior living facilities, manufacturing facilities, research & development facilities, office buildings, hospitals, and retail properties. Walter has experience in tangible asset valuations for tax, book, insurance placement, due diligence and business planning purposes in the Healthcare, Hospitality, Manufacturing, Chemical, Food Processing, Cable and Telecommunications industries nationally.

Walter holds a Master of Arts degree in Economics from Montclair State University, Bachelor of Science degree in Finance and a Bachelor of Arts degree in Economics from Kean University. He is an Accredited Senior Appraiser (“ASA”) with the American Society of Appraisers and is an Accredited Senior Cost Segregation Professional (“SCSP”) with the American Society of Cost Segregation Professionals (“ASCSP”).



Freight Railcar Basics T h o m a s A . S e x t o n , A S A

The value drivers of railroad freight cars are many but rely on one thing; the overall condition of the nation’s economy. Railroads are busiest when the U.S. economy is healthy and commodities need to be moved from their place of production, or import, to the places where those commodities become finished goods. Some finished goods are also transported by rail, such as automobiles, but by and large commodities are the rule. The value of railcars lies in their ability to carry goods from one place to another.

What other factors are involved in their evaluation? Other factors in the evaluation, or appraisal of this equipment would be to evaluate any potential financial transactions involving the purchase or sale of railcars. There are financial decisions to be made involving portfolio risks and exposure to industries that rely on rail for transportation. In the case of portfolio reviews there are Financial Accounting Standards Board (FASB) annual reviews of the firm’s equipment exposure. Within the leasing

company, there are lease end value analyses that need to be done. There also is the function of an evaluation of equipment to determine its useful life when considering your collateral position.

The rail industry has been around for about 150 years and has enjoyed steady growth along with the development of the country. The rails have always been used to carry goods and people across the country but its primary use was to serve industry. As mentioned above the most efficient use of the rails is to carry commodities but more and more finished goods are being shipped. There are automobiles, heavy equipment, containerized consumer goods and the like.

The rail industry has experienced slow and steady growth over its existence. The activity on the rails tends to follow general economic cycles. The cycles are also related to certain economic cycles. For instance, the energy sector has experienced resurgence in oil production based on shale fracturing in the Bakken and Eagle Ford plays in North Dakota and Texas. The result of this production has seen the delivery of new tank cars to carry the oil and covered hopper cars to carry sand for the development of the newly drilled wells. Meanwhile, the EPA has issued new regulations limiting the amount of carbon utility companies can emit which, in turn, limits the amount of coal the power plants can burn reducing the number of railcars needed to haul coal. This is one example of how demand in one economic sector affects railcar demand. This is throughout the economy.

There are three major rail equipment types. There are freight cars, of which there are approximately 1.4 million in service. There are locomotives that operate in the rail system pulling those freight cars. There are approximately 24,000 of those. Then there are specialty rail equipment known as Maintenance of Way (MOW) equipment that are operated by the railroads themselves, or by private contractors to provide track maintenance and repair to the rails. There also is passenger rail equipment that has its own value and use dynamic and will not be discussed here.

The rail industry is still in the recovery phase of the economic recession that began in 2007. The rail industry did not hit its bottom until 2009. At that time one third of the freight car fleet, more than 500,000 cars, was idle and in long term storage. As of January 2015 there were less than 100,000 idle cars and the majority of those are older open top hopper and gondola cars that were designed to carry coal and center beam flatcars designed to carry raw and finished lumber. The center beam flatcars were victims of the major slowdown in the residential and commercial construction industries. The recovery of the rail industry, also known as the “rail renaissance”, is directly related to the recovery of the US economy which has been slow, segmented and steady.



The ownership of the rail fleet has shifted over time. In 1980 the majority of the freight car fleet, 70%, was owned by the larger railroads. Since then ownership has shifted to private concerns so that approximately 70% of the fleet is privately owned. These private owners are manufacturers, such as Trinity, American Railcar Industries, and Greenbrier, to name a few. There are other private owners such as finance firms and banks, operating lessors, specialty fleet car owners and industrial owners. The rail fleet is varied and reflects varying needs and economic sectors.

A reflection of this activity can be seen in the railcar deliveries in 2014 when 67,000 new railcars were delivered from the various manufacturers. The majority of the railcars delivered were related to the energy sector as fully 70% of the deliveries were small cube covered hopper cars for hauling sand and tank cars for hauling crude oil. As of the beginning of 2015 there was a 100,000 car backlog due to the demand in the oil sector. The amount of the backlog translated to an eighteen month delivery time from the manufacturers. However, with the contraction of oil prices, the orders for new tank cars and covered hoppers is pulling back and becoming more balanced across industries that use rail for moving their goods.

The forecast for the entire year of 2015 is for the delivery of 60,000 cars. These cars are being delivered to replace an aging fleet with an average age of about 20 years. The FRA has ruled that no railcar older than 50 years will be allowed to run on the main lines.

There have been new rules issued as of May 2015 mandating the redesign of the tank car that hauls crude oil thus boosting the production of tank cars and the retiring of a portion of the rail fleet that was dedicated to hauling crude by rail. But oil and sand transport are not the only drivers of railcar demand. There have been bumper harvests the past two years creating demand for grain cars and there are cheap petroleum products, such as plastic pellets that are hauled by covered hopper cars that are in demand. The recovering economy is creating demand for the cars across many economic sectors.

Railcar values are not only driven by demand but also by technological and design development that increase efficiency. Railcars have gone from a gross rail load (GRL) capacity of 263,000 pounds to 283,000 pounds. There has been a redesign of tankcars hauling hazardous materials driven by safety concerns. The delivery of railcars of all types fluctuates with commodity demand. In 1980 there were 90,000 freight cars delivered. In 1983 there were less than 10,000 deliveries. With the current slow but steady economic progress the forecast is for 60,000 cars to be delivered each year for the next four years.

The single most popular and versatile car on the rails is the covered hopper car. The cars are designated with a “C”. The C112 is a small cubic foot capacity car, typically less than 3,500 cubic feet, and is designed to carry sand and cement or other granular mineral cargoes. There are approximately 60,000 of these cars in service. These are the cars in demand in the shale plays for hauling sand for hydraulic fracturing.

The C113 car is designed to haul grain, 4,750 cubic feet, and is no longer in production. There are 128,000 of these cars in service today.

The C114 is a utility car with 5,000 + cubic feet capacity, and can be found in grain, mineral or plastic pellet service. There are approximately 110,000 of these cars in service.

The C214 is generally a plastic pellet car with a cubic foot capacity of greater than 5,250. There are about 112,000 of these units in service.

There are other specialty covered hopper cars in service serving the food industry such as the Pressure Differential covered hopper car designed to carry powdered material, such as flour or powdered sugar, and is unloaded through pressurizing the car and opening the hatches to let the product be blown out.

Other major car types are gondola cars and open top hopper cars, which are essentially rolling boxes that car be unloaded by turning the car over (Gondola) or through the hatches on the bottom of the car (Hopper). These are the cars that carry coal, scrap steel, gravel or aggregate, construction waste or anything that can be loaded into it. These cars can be made of steel or aluminum. The car that carries aggregate is used for road construction or on Maintenance of Way (MOW) projects. This part of the rail fleet is the oldest with an average age of 28+ years.



There are flatcars designed to haul lumber or steel or welded rail. This segment of the fleet is older at 30+ years. The average useful life of these cars is 50 years due to the fact that they do not get many miles per year put on them. A modification of the flatcar is the car designed to carry containers from our ports to the interior for distribution of the goods. They also are the platform for the auto racks that carry automobiles from the factories to distribution points close to dealerships.

The boxcar population is dwindling. This car was originally designed and built to serve the paper industry. With the decline of that industry, the boxcar is also falling out of use. Only 15,000 or so of these cars were built in the last ten years. However new uses for these cars have been found in the refrigerated boxcar or in carrying auto parts. The total population of these cars is less than 100,000.

We have discussed tank cars above in terms of what they carry and what operational and design constraints they are subject to. The reason for the scrutiny is they carry cargo that can be volatile and cargo that can be benign. Their cargoes range from sulfuric acid to crude oil, from vegetable oil to chlorine. A spill from one of these cars can deposit as much as 30,000 gallons of volatile substance into the environment. The volatility of the Bakken crude oil has shown the assumption that crude oil is a relatively benign substance to be wrong, thus, the tighter design and operational rules for these cars. There are other rules as well that all tank cars must follow. Another rule is the HM201, a rule handed down by the Federal Railway Administration mandating that tank cars, no matter what their cargo, be inspected and certified every ten years to verify their structural integrity. The tests are to ensure the wall thickness of the tank is within design specification, the running gear is sound, that all safety appliances, like valves, hatches, gates, ladders and platforms are within the required condition.

The discussion of the varied railcar types has not delved into the valuation of these railcars as originally put forth in the beginning lf this exercise. What follows is a discussion of the valuation issues of the cars above.

Box Car AAR Type A

Railcars built after 1974 have a mandated life of 50 years, although there are some cars that are not practical to run that long due to maintenance issues. That is, those cars subject to abrasive or corrosive uses.



In many cases these railcars can be leased from many operating lessors for terms running from three to 20 years, depending on the users needs. Railcars typically trade in groups of 100 to 125 cars which are called a trainset. The value of these cars can be driven by the specifications required by the operators and can have a limited secondary market due to some design that may not be required by the secondary market. As with all industrial equipment there are some parameters that are desirable and some that are not.

Overall, primary value drivers of railcars are:

• Age vs. economic useful life• Condition• Replacement cost• Technological status – Current design vs. old

• Regulatory environment• Car supply vs. demand• Commodity demand• Alternate uses

Covered Hopper Car

The current approximate replacement costs for various railcar types are as follows:

• Sand/Cement Covered Hopper - $80,000• Aluminum Coal Gondola/Hopper - $90,000 to $105,000• Boxcar – General Service, Plug Door 100 ton - $150,000• General Service Tank Car $110,000 and up• Oil Tank Car – New Reg. Compliant $175,000

• Three Unit Articulated Well Car - $280,000• Fully Enclosed Auto Articulated Auto Carrier - $300,000• Stainless Steel Cryogenic Tank Car - $550,000• Flat Car - $125,000• Schnabel Car - $8,750,000

With all things being equal, taking market demand factors out of the equation we can estimate the value of a railcar given its age/life depreciation with a scrap of salvage value at the end of the car’s economic useful life.



Open Top Hopper Cars

Center Beam Flat Car



Double Stack Well Car

Aluminum Open Top Coal Hopper



Tank Car

Auto Rack on Flat Car



About the AuthorThomas Sexton, ASA Tom Sexton has experience in evaluating industrial equipment of all types, studying relevant segments of the economy relating to equipment values and providing information on various equipment types as well as value forecasts. He also oversees inspections and appraisals of assets used to collateralize financial transactions, and is also active in assisting in all facets of lease end and sale of assets used as collateral. Tom also has 12 years field experience in the appraisal of fixed assets of all types. For the past 28 years he has provided equipment management services specializing in rail equipment, including maintenance of way, motive power as well as freight cars of various types.

In addition to his rail equipment specialty Tom has extensive experience with printing equipment, chemical and food process equipment, machine tools, oil field equipment and providing evaluations and determining appropriate return documentation conditions. He has performed valuation projects in both the public and private sectors.

Tom calls Central Ohio home for the past eighteen years. Tom has a Bachelor’s degree from DePaul University, and has an Accredited Senior Appraiser’s designation from the American Society of Appraisers. Tom’s activities in the appraisal society includes past membership on the Machinery and Technical Specialties Committee and Chairmanship of the Long Range Planning Sub-Committee.

Email- [email protected]



ASA Trains ODR Analysts on Machinery and Equipment Valuation Methodology J a c k B e c k w i t h , A S A , C E A

The American Society of Appraisers (ASA) recently conducted an onsite training course in Salem, OR for County and State Analysts of the Oregon Department of Revenue (ODR). The Society’s Principles of Valuation course (“POV”),

“ME202 - Machinery and Equipment Valuation Methodology” was presented to 38 students on December 7-10, 2015, with instruction provided by Jack Beckwith, ASA, CEA.

The attendees represent personal property analysts from the Oregon Department of Revenue and the Industrial Property Appraisers in the Counties of Multnomah, Deschutes, Marion, Columbia, and Hood River. These students work within four appraisal sections consisting of Appeals; Central Assessment; Appraisal & Review; and Process Industrial Properties Return departments.

The majority of the students attending this course took ME201 in December 2014 at the same Salem facility and wish to continue their advancement through all four POV courses. Discussions with the

students indicated that they must work under the guidelines of the lower value predicated by Measure 50 (Oregon Limits on Property Tax Rates Amendment) or the maximum assessed value (“MAV”) of the taxable property. The student’s job descriptions are to analyze personal property, including machinery and equipment, in the plant or facility in conjunction with the overall taxable real property. These analysts must deal with specific State sanctioned property exclusions and dollar thresholds exceeding a $1,000,000 base and differentiate which assets can be taxed in the State of Oregon. They must monitor what improvements or assets have been added or retired from annual renditions. A discussion with the Department of Revenue’s Appeals Manager indicates that they do on occasions seek ASA expert witnesses for certain major high profile projects.

The three days of instruction covered issues of price vs. value, indirect costs, use of and development of indexes, age-life concepts, recommended rounding of figures, types of values for appraisals, reproduction cost new, replacement cost new, replacement cost depreciated, fair market value in use, orderly liquidation value, forced liquidation value, supporting conclusions for various purposes and concluded with an examination of the last day.

Concerns students shared when performing case studies in the class consisted of how will the Cost Approach be considered a suitable alternative tool to the Sales Comparison method should all the data needed for the Sales Comparison may not be made available to their Department. They were interested in the importance of indexing and depreciation schedules and their accuracy and influence as working tools for their final estimation of the subject.

They were aware when doing mass appraisal the importance of their sources, particularly if they were limited to seeing the subject and verifying the subject assets condition.

“ASA’s Onsite Course Program is the perfect option for organizations like the ODR seeking to train large groups of staff quickly and consistently”, said Richard Berkemeier, ASA, education chair for the Society’s Machinery and Technical Specialties Discipline. “Not only do students benefit from professionally developed courses and instruction, the offerings also provide a path to earning the internationally recognized and respected ASA credential.”

Oregon Department of Revenue office building located in Salem, OR.



The Society’s Onsite Course Program is a popular option for organizations in need of training large groups or entire departments of staff. These special, client-centric courses provide educational experiences that can be customized to meet an

organization’s individual needs. The courses provide a convenient and cost effective means of helping employees with professional development opportunities and to achieve a designation with ASA.

Big four accounting firms, state government departments, large appraisal firms, both domestically and internationally have participated in ASA’s Onsite Course Program.

To arrange an onsite course offering or for more information, contact ASA’s Education Department at [email protected] or (800) 272-8258.

Jack Beckwith, ASA, CEA has been an expert witness in the United States Bankruptcy Court and in various counties for personal property ad valorem tax litigation. Research assignments include Personal Property and Inventory appraisals in such industries as health care, food processing, beverage production, frozen food, light gauge fabrication, auto assembly, millwork, construction, retail, aviation, food service, wafer fabrication, printing, confectionery production, and refueling stations. Though he is based in Texas, Mr. Beckwith has performed and supervised valuations throughout the United States, Canada, Mexico, and Europe. He has been published for various valuation topics in the M&TS Journal and the ASA Professional.

Prior to beginning his professional career, Mr. Beckwith earned his BBA at the University of Texas, served on the University of Incarnate Word Nursing Advisory Board and is currently serving on the Advisory Board for Boerne YMCA and the Kronkosky Place Rainbow Senior Center. Mr. Beckwith has been a staff instructor for the American Society of Appraisers teaching Principle of Valuation courses over the past twelve



Brad Hartsburg, ASA, CPPA, CSA [email protected]

Archived Articles Available for Your Library

Missing recent M&TS Journal articles? Need ideas or direction? Archived articles are available for your library. Below is an index for the last several years of articles. See an article or issue that interests you? Just let me know what you need and I will get back to you with pricing.

THE M&TS JOURNAL# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW

24 20 1 2003 04 Edward D. Biggs Railroads: It’s Not Just Nostalgia P. 4-6 A Resurgent Interest In Passenger Trains To Relieve Highway Congestion Has Revitalized The Segment Of The Industry.

Kenneth Howard, ASA Relationship Between Equipment Financing & Appraising:” Intricacies Of Residual Setting”

P. 7-8 Funding Institution’s Return On Investment Is Highly Dependent Upon The Market Information Provided By An Appraiser.

Leslie H. Miles, Jr., ASA

Depreciated Installation P. 9-11 Discussion Of The Argument Of Depreciating Installation.


A Review Of Functional Obsolescence

P. 12-15 Open Concerns As To How You Convert Functional Depreciation That Can Be Defended And Explained.

Michael J. Remsha, ASA, PE, CMI

Intangibles Assets: What Makes A Business A Going Concern

P. 16-23 When Valuing A Business, Just Adding All The Tangible And Intangible Assets Together Does Not Necessarily Equal The Value Of The Business Enterprise.

John S. Ferguson, ASA, PE

The Use Of Scaling Factors For Measuring Obsolescence In Industrial Property-A Rebuttal

P. 29-33 Discusses Iowa-Type And Weibull Distribution Survivor Curves.

Frank Stern Valuing Generation Assets In Today’s Distressed Markets

P. 34-40 Presents A Warning To Appraisers And The Users Of Appraisals On The Misuse Of Scale Factors And The Six-Tenths Rule

Gerald L. Huether, ASA What’s A Machinery & Technical Specialties Appraiser To Do?

P. 41-52 Attention To USPAP Rules Regarding A Definition Of Value And How To Apply Highest And Best Use.

25 20 2 2003-04 Robert B. Podwalny, ASA

Typical Problems With Appraisal Reports

P. 6-9 Explanation Of Report Writing As Related To Standard 8 Of Uspap.

J. Michael Clarkson, ASA

For What It’s Worth-Dynamic Obsolescence

P. 10-13 Dynamic Obsolescence Is Particular To Certain Industries And Predictable.

Jack J. Landesberg Training The M&Ts Appraiser P. 14-17 Discusses Short Falls Of Not Enough Appraisal Training.



Dr. Charles Gililand The Business Enterprise Valuation Controversy: Intangible Value In Going Concern

P. 18-22 Determining A Firm’s Value By Capitalizing The Entire Income Generated.

H. Denis Neumann, ASA

The Used Car Business (And Values)

P. 23-29 In Pursuit Of A Dealer’s License Discovered The Car Business Is Highly Regulated.

Steven C. Tatro, ASA Tangible Personal Property Tax Appeals: A Special Master’s Perspective

P. 30-33 The Value Adjustment Board Is Enjoined To Protect The Public Trust By Providing Fair And Impartial Hearings.

Raymond Springer Depreciation Of Installation Costs P. 34-36 Argues The Methodology Of Depreciating Installation Costs In The Sales Comparison Approach.

26 20 3 2003-04 Harry Richardson, ASA And J. Barry Savage, ASA

A Short History Of Cat Type Tooling P. 5-8 Development Of HSK Tooling May Mark The Beginning Of The End For CAT Type Tooling.

R. Lee Robinette, ASA Inventory Valuation P. 13-17 Discussion The Impact Of “Level Of Trade” In The Inventory Valuation Process.

J. Michael Clarkson, ASA

For What It’s Worth-Spacecraft Appraisal

P. 18-20 The Appraisal Of The Soviet Spacecraft Proved A Challenging But Interesting Assignment.

William S. Ingles An Analysis Of Flaws In The Direct Capitalization Model Applied To Merchant Coal-Fired Electric Generating Plants

P. 21-29 Discussion Of Issues Surrounding The Application Of The Direct Capitalization Model Or Variations Of The Gordon Growth Model.


Value Of Ad Valorem Tax P. 30-37 Ad Valorem Tax Value Depends Upon The Definition Within The Tax Code Or Prevailing Case Law.

27 20 4 2003-04 Robert F. Reilly, ASA Illustrative Personal Property Appraisal Report Outline

P. 5-22 Complete Overview Of What Should Be Included In An Appraisal Report That Will Be In Compliance With USPAP.

Michael J. Remsha, ASA, PE, CMI

Valuation Of A Nuclear Power Generating Facility

P. 24-37 Overview Of Nuclear Power Plant And Government Policy Dictating Better Understanding By The Appraiser Using The Market Approach.

28 21 1 2004-05 Steven C. Tatro, ASA Florida Department Of Revenue Holds Hearing On Proposed Modifications To Depreciation Table

P. 5 December 2004, Florida Department Of Revenue Conducted A Public Rule Development Workshop Regarding Potential Modifications To Their Depreciation Tables.

Douglas R. Krieser, ASA, Marcus A. EWALD, CFA

Identifying And Measuring Economic Obsolescence With Underperforming Global Assets

P. 6-15 Overseas Expansion By Corporations Are Encountering Issues Associated With Both Financial Reporting And Related Tax Matters.

International M&TS Committee

Asa Mts Candidate-Report Review Checklist

P. 16-21 Checklist For Submitting M&Ts Appraisal Reports For Accreditation.

# VOLUME ISSUE YEAR AUTHOR TITLE PAGES OVERVIEW



Edward D. Biggs III, ASA

Appraising Railcar Movers P. 25-26 Sources For Appraising Railcar Movers.

Leslie H. Miles, Jr., FASA

Highest And Best Use For Personal Property

P. 27-30 Consideration Of USPAP Standard 7 And 8 Related To Highest And Best Use.

Merritt Agabian, FASA True Value P. 31-32 Discussion Of Continued Use Of Items In Place And In Use.

29 21 2 2005 Franklin D. Reid, ASA Appraisal Considerations In Third World Countries

P. 5-8 Issues To Understand When Applying USPAP In Developing Nations.

Robert Neumuller Measuring Economic Obsolescence In Oil Refineries

P. 9-22 Article Describes How Economic Obsolescence Fits Into Value Estimates Using The Cost Approach.

Alan C. Iannacito, ASA Valuations Of Patterns P. 23-28 Patterns Have Value Based On The “Level Of Trade”.

30 21 3 2005 Tom Sexton, ASA Rail Equipment P. 4-16 Rail Industry Is Dealing With Changes In A Recovering Economy.

Douglas R. Krieser, ASA

The Changing World Of Insurance Valuation

P. 17-24 Performing An Insurance Appraisal Is Becoming More Difficult. The Appraiser Needs To Consider A Variety Of Tools To Arrive At Their Conclusion.

V. Neil Thompson, ASA Hurricane Runs The Table P. 25-26 Overview Of Hurricane Katrina To The Gulf Coast Casino Industry.

Leslie H. Miles, Jr. FASA

True Value Rebuttal P. 27-32 Rebuttal To Fair Value Issues In Ad Valorem Cases.

Mike Clark, L&M Publications

Market Conditions P. 33 Overview Of Market Conditions As Of July 2005.

Edward D. Biggs, III, ASA

Trusted Counselor P. 34 Mentoring Is A Win-Win Endeavor For The Society.

31 21/22 4&1 2005-06 Lee Robinette, ASA Letter To Chief Counsel: Missouri Tax Commission

P. 35-37 Official Position Of The M&TS Committee Regarding The Proposed Appraisal Requirements.

J. Barry Savage, ASA and Harry J. Richardson, ASA

Hydroformng P. 10-11 Explanation Of How Sheet Metal Hydroforming Works And The Advantages.

Daniel L. Lagace, ASA How Exponents Work P. 12-20 Article With Intent To Diminish The Perceived Mystery Associated With The Use Of Exponents In The Cost To Capacity Formula.

Art Narverud, ASA A M&TS Appraiser’s War Story P. 21 Surprise Encounter To A Small Fish Cannery In Alaska.

Alan C. Iannacito, ASA Basic Machinery Identification Seminar

P. 22 Update Of Id Seminar Held In Los Angeles In October 2005.

Robert D. Podwalny, FASA

Managing A Portfolio Of Leased Aircraft

P. 24-32 Why The Corporate And Commercial Aircraft Industries Rely On Leasing.

Steven C. Tatro, ASA Divorce-Appraisal Style P. 33-35 Issues To Be Considered Before Accepting An Divorce Settlement Case.

Charles Dixon, ASA 2005 Membership Report P. 36-40 The Latest Membership Numbers By Disciplines As Of 2005.




Leslie H. Miles, ASA USPAP Will Be Changing P. 41-44 Uspap Changes Are A Recognition Of Economic Realities.


FASB Releases Fair Value Measurement Working Draft

P. 45-51 Fair Value Is In The Process Refined And Clarified By The Fasb.

32 22 2&3 2005-06 Jack Washbourn, ASA M&TS Governor’s Report P. 5 Written Awareness Of What Asa Board Of Governor’s Activities In 2006.

China Appraisal Society

Valuation Of Machinery And Equipment In China

P. 7-13 Focus On Imported Second-Hand Equipment.

Robert S. Svoboda, PE, ASA

Value In Use VS. Value In Exchange P. 14-30 Definition Overview Of Fair Market Value In Use Vs. In Exchange From Several Appraisal Societies.

John A. Matthies, ASA A Forgotten Research Tool P. 31 The Yellow Pages Can Be An Excellent Information Source.

Nicole Stango ASA: Strength In Numbers P. 32-34 Article On How Efforts Can Be Made To Increase M&Ts Membership.

Charles Dixon, ASA AMTDA Trade Show P. 35-36 Overview Of American Machine Tool Distributor’s Association Trade Show.

Daniel L. Lagace, ASA Machinery Identification And Cost Approach Seminar

P. 37 Overview Of ID Workshop Conducted In Chicago In March 2006.

Leslie H. Miles, Jr. FASA

Aircraft Maintenance Care And Overhaul

P. 45 Discussion Of The Rapid World Growth Rate Of Maintenance, Repair, And Overhaul (Mro).

33 22/23 4&1 2006-07 Dong W. Cho Average Prices Of New Business Aircraft

P. 5-14 Dr. Cho Explains The Importance Of Index Reflecting Real Price Vs. Nominal Price.

Ken Dufour/Wade Young

The Truth About Fractional Aircraft Shares

P. 15-18 Overview Of Getting Maximum Value For Investment In Aircraft.


FASB Releases Final Version Of Fair Value Measurement

P. 19-28 Mr. Krieser Recommends An Understanding Of Sfas 157 When Performing Sfas 141 And Sfas 142

Alan C. Iannacito, ASA Appraising Clutter P. 30-35 Dealing With An Industrial Category That Can Be Overlooked But Needs To Be Addressed By The Appraiser.

John S. Ferguson, ASA Depreciation Based On Observed Condition

P. 36-41 Discussion Of The Observed Condition Being More Interest As An Historical Reference.

Jack Beckwith, ASA A Case To Determine Lost Value For New Series Equipment

P. 42-49 Importance Of Market Influences May Cause An Adjustment To Both The Functional And Economical Obsolescence In The Cost Approach.

David Fawcett FRICS ASA Annual Conference July 2006 P. 50-53 Outsiders Perspective Of The International Conference.

MTS Board Of Examiners

What Does Your Report Say About You, Your Company, And The Asa?

P. 54 - 62

The MTS Board Of Examiners Give A Checklist And Overview Of What Should Matter In The Appraisal Reports That Are Evaluated.




34 23 2 2007 Dale H. Bracken, ASA How Movies Are Really Made P. 6-9 Article Describes All The Steps, Equipment, And Techniques That Allows The Film To Go From The Camera To What Is Seen On The Screen.

Sharon Desfor The Sun Sets On Fas 13 - Will We Be Left In The Dark?

P. 10-11 Discussion As To How Recent Fasb Definitionn For Value May Be A Concern For Leasing.

Joel B. Levinson, ASA, CSA

Valuing Manufacturers' Secret Weapons Against Costs

P. 12-15 Article Discusses Phraseology That Should Be Used In Describing The Scope Of Work For The Client To Sign.

Catherine J. Rein An Overview Of Photovoltaic Equipment & Issues Affecting Its Value

P. 16-21 Overview Of World Market Demand For Photovoltaic Equipment And Reasons For The Growth.

H. Denis Neumann, ASA

Mobile Homes And Their Value P. 22-25 Mobile Homes May Be Considered Personal Property Or Real Property. Article Is Another Method To Determine Value.

Terry L. Duda, P.E., ASA, CEA

Boiler Valuation P. 26-30 Basic Knowledge Of What To Know About Valuing Boilers.

Jeffrey W. Brend Attorney Tricks-Witness Traps The Abc's Of Testifying

P. 31-43 Insight To The Four Stage Process In Preparing As An Expert Witness.

35 23/24 4 & 1 2007-08 Alan C. Iannacito, ASA Letter From MTS Governor P. 4-5 Details On Various Subjects Including: Proposed Unification Between Asa, Appraisal Institute, And American Society Of Farm Managers And Rural Appraisers.

Norman F. Laskay, ASA Identification and Appraisal Of Marine Dredging Equipment

P. 6-18 Identification Of And Valuation Of “Technical Real Property” For Taxation Purposes.

J.P ("Buck") Ward III, ASA

Some Thoughts On The Valuation Of Office Furniture

P. 19-21 Various Considerations And Market Discussions On Furniture.

Dennis C. Neilson, CMI, P.E. ASA and Michael J. Remsha, CMI, P.E., ASA

Technical Real Property Issues And Property Taxation: Heavy Manufacturing, Utilities, And Process Industries

P. 22-31 Identification Of And Valuation Of “Technical Real Property” For Taxation Purposes.

Sharon Desfor, ASA The Convention On International Interests In Mobile Equipment And The International Registry

P. 32-35 Discussion Of The Capetown Convention And Its Application To Mobile Equipment (Including Rail, Aircraft, And Other “Mobile” Assets).

Alan C. Iannacito, ASA Growing A Machinery And Technical Valuation Appraiser

P. 36-38 The Importance Of Mentoring And Knowledge Transfer When Developing New Valuation Talent.

Osato Osawaye Emerging Markets In Nigeria And The Opportunities For Specialist Valuation Practices

P. 39-41 Economic And Business Development In Nigeria And The Potential Opportunities For Valaution Professionals Within That Area Of The World.




Bob Clark, ASA Industrial Pumps - The Basics P. 42-44 General Overview Of Various Pumps And Their Uses.

Joe Santora Mobile Cranes - Is The Sky The Limit?

P. 45-46 Observations Of The Current Used Market For Large Mobile Cranes.


Buyer’s Premium P. 47-48 Discussion On Buyer’s Premium In Auctions.

Dave Evans, ASA Appraisal Matters P. 49 Discussion Of Various Industries And The Current State Of The Auction Markets For These Industries.

Les Miles, ASA; Ed Raether, ASA And Douglas Krieser ASA MRICS

International Plant And Machinery Conference

P. 51-53 Overview Of The October 2007 International Plant And Machinery Conference Held In London.

36 24 2 & 3 2008 Jack Washbourn, ASA Board Of Governor's Report P. 6 Discussion On ASA Headquarters It Proposal For Service And Various Other Pertinent Subjects.

Jack Beckwith, ASA Mentoring P. 7-11 General Discussion About Mentoring And Why Mentoring Is Important To The ASA.

Ed Biggs, ASA What Will Be Under Your Hood? P. 12-13 Discussion About Converting And Rebulding Locomotives.

Richard Ellsworth, PE, ASA, CCE

Scale Factor Estimates For Infrastructure Assets

P. 14-20 Scaling Factors For Use In Valuing Infrastructure Assets Including Use Of Cost To Capacity.

Micheal J. Remsha, PE, ASA, CMI

The Complete Cost Approach And The Order Of Deductions

P. 21-29 Discussion Regarding The Current Order Of Depreciation Taught By The ASA And An Introduction To An Alternate Approach Based On The Experience Of The Author.

Philip L. Burk, ASA, CMA, PE

Valuation Of Public Utility And Other Property With Limited Earning Ability

P. 30-39 Discussion On How Limited Earnings Effect The Value Of Various Regulated And Unregulated Industries.

Richard Scuster, ASA The Fractional Aircraft Ownership Value Conundrum

P. 40-42 Valuing Fractional Ownership Of Aircraft Under Various Scenarios.

Editor Recent M&TS M&E Identification Seminar And Report Writing Seminar

P. 43-44 Outline Of The Recent M&Ts Machinery And Equipment Identification Seminar And Report Writing Class Given In Detroit.

Editor Los Angeles Chapter Provides Seminar On Tangible Asset Valuations For Financial Reporting Purposes

P. 45-46 Outline Of The Recent Seminar Given In Los Angeles.


Selecting And Publishing Sales Comps From Auction

P. 47-50 Outline Of Some Of The Data And Items Considered By L&M Publications When Listing Sales Comps.




Dave Evans, ASA Appraisal Matters P. 51-53 Discussion Of Various Industries And The Current State Of The Auction Markets For These Industries.

Editor Planning Begins For 2009 International Plant And Machinery Conference

P. 53 Announcement And Update On The Planning For The Joint ASA/RICS/AAI Plant And Machinery Conference In 2009.

37 24/25 4 & 1 2008 Douglas R. Krieser, ASA MRICS

Editor’s Corner P. 4-5 General Overview Of The Current Issue And Recent M&TS Committee Meetings.

V. Neil Thompson, ASA Chairman’s Prospective P. 6 Neil Thompson Outlines Various Accomplishments Of The M&TS Committee And Other Issues Such As The Recent Merger Discussions With AS, ASFMRA And RICS.

Jack Washbourn , ASA Letter From MTS Governor P. 7 Jack Washbourn Discusses The Importance Of Being An Active And Not “Simply A Dues Paying Member” And Some Ideas On The Asa’s Goal Of Becoming “Discipline Centric”.

Alan C. Iannacito, ASA Letter From MTS Governor Alan C. Iannacito, ASA

P. 8 -9 Alan C. Iannacito Discusses The Evolvement Of The Asa M&TS Committee And Recent Issues Important To Members Of The ASA.

Stephen L. Barreca, ASA, CDP, PE

Proper Consideration Of Future Net Salvage In An Appraisal Of Value

P. 10-18 Discusses The Considerations That An Appraiser Should And Should Not Give To The Future Net Salvage Value Of A Tangible Asset When Applying The Various Approaches To Value.

Mark S. Buettner, ASA One Appraiser’s Perspective of IMTS 2008

P. 19-20 Comments On The Bi-Annually International Machinery Technology Show In Chicago In 2008.

Richard K. Ellsworth, PE, ASA, CFA

Survivor Curves And Equipment Life Expectancy

P. 21-27 Insight And Commentary On The Development Of Iowa Curves.

Phillip Kolczynski Ethical Challengers For Expert Witnesses

P. 28-39 2008 International Conference Presenter Provides Commentary On Some Of The Challenges Faced By The Expert Witness. Mr. Kolczynski Is An Attorney Based Out Of Southern California.

Roman Karpov External Obsolescence. Value Change Factor Of Industrial Personal Property Entering Secondary Market

P. 40-44 Roman Karpov Presents A Methodology For Quantifying And Qualifying External (Economic) Obsolescence.

Roman Karpov Russian Version Of The Article Listed Above

P. 45-50 Russian Version Of The Article Listed Above.




Sharon Desfor, ASA, MRICS

The Banking Liquidity Crisis P. 51-53 Sharon Desfor Discusses How The Liquidity Crisis Can Effect Borrowers, Lenders And Appraisers.

John S. Fergusen, PE, ASA, CDP

Valuation Of Public Utility And Other Property With Limited Earning And Ability - A Commentary

P. 54-56 Mr. Fergusson’s Response To “Valuation Of Public Utility And Other Property With Limited Earning Ability” Published In The Last Issue Of The Journal.

Michael J. Remsha, P.E., ASA, CMI

Electrical Generating Plant Valuation P. 57-67 Mike Remsha PE, ASA, CMI Offers Some Interesting Insight Into Valuing A Variety Of Different Power Plants Using All Three Approaches To Value.

Mike Clark Valuation In Time Of Turmoil P. 68-69 Mike Clark Discusses The Effects Of The Current Economy On The Auction Market.

Dave Evans, ASA - Chief Appraisal Officer

Appraisal Matters... With Wells Fargo Business Credit & Wholesale Bank D

P. 70-71 Discussion Of Various Industries And The Current State Of The Auction Markets For These Industries.

38 25 2 & 3 2009 Douglas R. Krieser, ASA MRICS

Editor’s Corner P. 4 General Overview Of The Current Issue.

V. Neil Thompson, ASA Chairman’s Perspective P. 5 Neil Thompson Outlines The Importance Of Education And Some New MTS Courses The ASA Has Developed.

Alan C. Iannacitto, ASA P. 6 Alan C. Iannacito Discusses The Recent ASA/AMEA Seminar, The New ASA Website, And Other Issues.

John S. Ferguson, PE, ASA, CDP

The Value of Writing P. 8 John Ferguson Discusses The Strategic Reasons For Writing Articles For The MTS Journal And Other Publications.

Catherine J. Rein MBA, AM

Don’t Forget the Website in Asset Appraisal

P 10-13 Catherine Rein Discusses The Importance Of Valuing The Web Site Name When Valuing A Company And Some Considerations The Appraiser Should Consider When Valuing These Assets.

Alan C. Iannacitto, ASA Principles of Mining Processing Listing and Valuing Continuous Mills

P. 14-18 Alan C. Iannacito Discusses Various Factors In The Valuation Of Ball And Rod Mills Including Differentiating Between The Two, The Data Required To Value Each, And Various Reference Materials Regarding Mills.

John S. Ferguson, PE, ASA, CDP

On Survivor Curves and Equipment Life Expectancy

P. 19-20 John Ferguson Commentary Of An Article Written By Richard K. Ellsworth Regarding Survivor Curves.





Michael J. Remsha, PE, ASA, CMI

Fair Market Value in Continues Use P. 21 - 26

Mike Remsha Discussed The Intricacies Of Fair Market Value In Continued Use And What The Appraiser Needs To Consider When Using This Value Premise.

Joseph M. Santora, ASA

Mobile Cranes - Is the Sky Falling? Market Observations

P. 27-28 Joseph M. Santora Discusses The Current Market For Mobile Cranes And How It Has Changed Since His Article In Late 2007.

Richard K. Ellsworth, PE, ASA, CFA

Retirement Dispersion and Appraisal Depreciation

P. 29-33 Richard K. Ellsworth Continues His Discussion Of The Use Of Iowa Curves And How They Are Utilized To Estimate Depreciation.

Dennis C. Neilson, Cmi, P.E. Asa And Michael J. Remsha, Cmi, P.E., Asa

Personal Property Tax Appeal/Valuation

P. 34-41 Dennis C. Neilson And Michael J. Remsha Outline Various Issues The Personal Property Appraiser Has To Consider When Performing A Tax Appeal Appraisal Including: The Three Approaches To Value; Classifying Real Vs. Personal Property; Highest And Best Use (Inuse Vs. In Exchange); Mass Appraisal; Assessor Approaches To Value; Excess Depreciation; And Other Relevant Topics.

Mike Clark Random Thoughts on the Market P. 42-43 Mike Clark (L&M Publications) Discusses Various Markets In General Including Metal Working, Plastic Equipment, Food Processing Equipment, Printing Equipment, Etc. Also, He Discusses How The Number Of Auctions Have Varied In The Past Year.

Dave Evans, ASA - Chief Appraisal Officer

Appraisal Matters...With Wells Fargo Business Credit & Wholesale Bank

P. 45-46 Discussion Of Various Industries And The Current State Of The Auction Markets For These Industries.

39 25/26 4 & 1 2010 Sharon Desfor, ASA, MRICS

Editor’s Corner P. 4

Peter Campbell, ASA Chairman’s Prospective P. 5

Alan C Iannacito, FASA Letter From MTS Governor P. 6

Robert S Risbridger and Kenneth M Heyse, ASA

The Perfect Storm P. 8-11

Leslie H Miles, Jr, FASA

Physical Life Explained P. 12-17

Alexander Skorniakov, ASA

Second-Hand Value And Financial Reporting

P. 18-20




Douglas R Krieser, ASA, FRICS

International Conference On The Valuation Of Plant Machinery And Equipment

P. 24-25

William M Engel, ASA Making Valuation Research More Dynamic

P. 26-34

Richard K Ellsworth, PE, ASA, CFA, CCE

Depreciation Methods In Theory And Practice

P. 35-42

Alan C Iannacito, FASA ME214 - The Identification and Appraisal of Mining and Mineral Processing Equipment

P. 43-48

Mike Clark Random Thoughts on the Market P. 49-50

Dave Evans, ASA Appraisal Matters… With Wells Fargo Business Credit & Wholesale Bank

P. 53-54

In Memoriam - Leroy L Ackermann-Ackermann & Tinker Appraisal Specialties, Paul Rice, ASA - The Rice Group

P. 55

40 26 2 & 3 2010 Sharon Desfor, ASA, MRICS

Editor's Corner P. 4-5

Peter Campbell, ASA Chairman’s Prospective P. 6

Alan C Iannacito, FASA Letter from MTS Governor P. 7

Tom Sexton, ASA Machine Tool Market P. 9-12

Joseph M Santora, ASA and David Helle, ASA

2009 Crane Market Conditions…Is The Sky Falling?

P. 13-14

Mike Clark The Market Is Rebounding P. 15

Jack Young, ASA, CPA An Overview Of The California Air Resources Board Diesel Regulations

P. 16-18

Edward D Biggs, III, LLC, ASA

Appraised Fair Market Value And AAR Interchange Rule 107

P. 19

Jack Beckwith, ASA 2010 Changes & Challenges In Healthcare

P. 20-23

Alan C Iannacito, FASA M&E Local P. 24-26

Norman Laskay, ASA The Life Of A Ship P. 27-33

Paul Wride, ASA What An Equipment Lessor Looks For In An Appraiser

P. 34-36

Robert A Davis, MBA, AVA

Applications Of The Inutility Model P. 37-41

Michael J Remsha, PE, ASA, Cmi And Kevin S Reilly, ASA

Economic Obsolescence: Real Life Stories

P. 42-47

41 26/27 4 & 1 2011 Sharon Desfor, ASA, MRICS

Editor's Corner P. 4




Charles C Dixon, ASA Excerpt From Governor Charlie Dixon's January Report To The MTSC

P. 5-6

MTS Committee Definitions Of Value Relating To MTS Assets

P. 7-8

Robert S Risbridger and Kenneth M Hyse, ASA

The Aftermath Of The Perfect Storm P. 9-12

Leslie H Miles Jr, FASA What Is Orderly Liquidation Value? P. 13-15

Douglas R Krieser, ASA, FRICS

Financial Reporting Process P. 16-21

Alexander F Rudin, ASA, CG/GA and Shelby St John

Valuation Modeling P. 22-28

Alan C Iannacito, Fasa ME214 Class Report P. 29-24

Peter Daley, ASA Calculating The Economic Useful Life And Forecasting Residual Value For It Equipment

P. 35-39

Barry Gunderson, CPA, CMA, CIA, CCM, CPIM, CSCP

Reducing Banker Lending Risk: Inventory Valuations - More Science Than Art

P. 40-44

Michael J Remsha, PE, ASA, CMI and Kevin S Reilly, ASA

Functional Obsolescence: Real Life Stories

P. 45-55

42 27 2 2011 Richard A Berkemeier, ASA

Chairman's Perspective P. 4

William M Engel, ASA Editor's Corner P. 5

Danial Lagace, ASA and Sharon Desfor, ASA

Machinery And Technical Specialties Discipline Governors' Commentary

P. 6-8

Jack Beckwith, ASA Medical Imaging Report P. 9-12 Discussion Of The Technologies And Market For Medical Imaging Equipment.

Alan C Iannacito, FASA When Values Hibernate P. 13-15 Explains How The Intrinsic Value Of Equipment Impacts Value Fluctuation.

Mike Clark Premises Of Value: What Is Forced Liquidation?

P. 16-17 Discusses How Some Sales Labled As Auctions Don’t Always Fit The Definition Of “Forced Liqudation Value”.

M&TS Journal Interview with Michael Makin, CEO and President of the Printing Industries of America

P. 18-22 An Overview Of The Printing Industry Including It’s Health And Them Market For Used Equipment.

Alan C Iannacito, FASA ME214 Identification And Appraisal Of Mining And Mineral Processing Equipment

P. 23-26 A Review Of ME214 Identification And Appraisal Of Mining And Mineral Processing Equipment Class.

William M Engel, ASA How Do You Use Technology In Your Appraisal Practice?

P. 27




43 28 1 2012 William M Engel, ASA, Editor's Corner P. 4

Dan Lagace, ASA and Sharon Desfor, ASA

Governor’s Report P. 5

Thomas A. Sexton, ASA Food Processing Equipment P. 6-10 Discusses Values, Considerations And Trends In The Food Processing Equipment Market.

Richard Buckner, President, Fair Market Graphics, Inc.

Sheetfed Printing Presses In The Current Marketplace

P. 11-12 An Overview Of The Current Market For Sheetfed Offset Presses.

Les Miles & Robert Clark

China Plant and Machinery Conference a Resounding Success

P. 14-16 Review Of The ICVPME Held In China.

Norm Laskay, ASA Understanding the Marine Marketplace

P. 17-30 An Overview Of The Different Types Of Vessels And Their Characteristics Along With Considerations When Determining Value.

Gregory W. Kort, P.E., ASA, CMI

Environmental Issues – Impacts on Industrial Property Value

P. 31-36 A Discussion On How Environmental Issues Impact Industrial Property Along With Ideas On Quantification And Accounting For Them.

Michael Rikon Condemnation of Machinery and Equipment: A Case Study

P. 37-46 History Of Condemnation Along With How It Is Treated In Different Countries And States And A Case Study That Demonstrates How A Court Views It.

Kenneth R. Loso, Lessons Learned, Warning Signs, and “Banana Skins”

P. 47-50 Reviews Warning Signs Of Economic Crisis.

44 28 2 2012 Richard Berkemeier, ASA

Chairman’s Perspective P. 4

Danial Lagace, ASA and Sharon Desfor, ASA

Machinery And Technical Specialties

Discipline Governors’ Commentary

P. 5-6

William M Engel, ASA Editor’s Corner P. 7

Rob Schlegel, ASA, MCBA

The Nexus Of Business Valuation And Valuation Of Equipment

P. 8 -10 The Differences Between MTS And Bv And How Bv And MTS May Work Together.

Douglas R Krieser, ASA,FRICS

Gn6 Depreciated Replacement Cost Method Of Valuation For Financial Reporting - A Summary

P. 11-13 A Summary Of RICS Standards Guidance Note 6 Which States, In Part, Market Approach Should Be Used Over Cost Approach For Financial Reporting.

Bruce Leister, ASA Forward To The Past With Semiconductor Market

P. 14 -16

Explains The Market And Sales For Older 200MM Equipment Versus Newer 300MM.

Richard Zhang, MBA, ASA, MRICS, CPV

How Should We Perform Equipment Appraisals

P. 17-22 Explores Why Equipment Appraisals Are Necessary And Considerations The Appraiser Should Keep In Mind.




Kevin S Reilly, ASA A Market Perspective: Identifying, Quantifying, And Applying Economic Obsolescence

P. 23-31 An Overview Of Economic Obsolescence Providing A Case Study Explaining The Application And Theory.

Alan C Iannacito, FASA Eminent Domain And Personal Property

P. 32-34 Discusses How To Work On An Eminent Domain Assignment.


Chairman’s Perspective P. 4

Daniel Lagace, Asa And Sharon Desfor, ASA

Machinery And Technical Specialties Discipline Governors’ Commentary

P. 5-6

William M Engel, ASA Editor’s Corner P. 7

Simon Landy The Value Of Valuations: New International Standards To Benefit Investors

P. 8-9 Current Status And Explanation Of The International Valuation Standards

Tammy Blackburn, ASA Do I Need An Appraisal To Reduce My Ad Valorem Tpp Tax? - A Magistrate’s Perspective

P. 10-11 The First In A Series Of Articles Explaining The Burdens Of Appraising For Tangible Personal Property Tax Appeal Purposes Along With Explanations Of The Appeal Process And Selecting An Appraiser.

William M. Engel, ASA The Art Of The Interview P. 14-16 An Overview Of Questions That An Appraiser May Ask A Subject Company To Assist An Appraisers Knowledge Of The Industry, Equipment, And General Edification.

46 28 4 2012 Daniel Lagace, ASA and Sharon Desfor, ASA


P. 4

William M Engel, ASA Editor's Corner P. 7

Lee P. Hackett, FASA, FRICS, CRE

International Opportunities For Appraisal And Valuation

P. 8 A Glimpse Into The Word Of International Appraising And Advice On How To Get Started

Steven J. Sherman Raising The Bar For The Valuation Profession

P. 10 The Author Shares The Progress Of The IVSC

Robert A. Davis, MBA, ACA, ASA

Inutility Model Scaling Factor - What If The Factor Is Not Six-Tenths?

P. 12 Determining Economic Obsolesence And An Alternative Method Rather Than Using Six- Or Seven-Tenths Scaling Factors

Tammy Blackburn, ASA Preparing For The Vab Hearing - A Magistrate’s Perspective

P. 16 Insights Into What Steps An Appraiser Can Take To Strengthen Their Ad Valorem Appeal Appraisals

J. P. “Buck” Ward, ASA What Color Is Your Blanket P. 19 Gives The M&E Appraiser Points To Consider When Working With Asset-

Based Lenders As Clients.Alan C Iannacito, FASA The Richest Desposit of Mining

KnowledgeP. 22 A Review of MINExpo 2012





Chairman's Perspective P 4

Daniel Lagace, ASA And Sharon Desfor, ASA


P 5

William M Engel, ASA Editor's Corner P 7

James Matthews, ASA Biodiesel Industry Expansion Phase In The United States, An Overview And Its Process Machinery And Equipment

P 8 An Outline Of The Biodiesel Industry And The Equipment Involved

Jack Beckwith, ASA How Will The Ppaca Affect Diagnostic Imaging Equipment Moving Forward?

P 23 How Equipment Use And Value Are Impacted By The Patient Protection And Affordable Care Act

Tammy Blackburn, ASA Considering The Evidence - A Magistrate's Perspective

P 25 Insights Into The Evidence A Magistrate Sees When Considering Ad Valorem Appeal Appraisals

Martin L. King, CR, ASA

Actual Cash Value In Property Losses

P 27 Appraisals From An Insurance Perspective

Jack Young, ASA, CPA Appraising Equipment For Retail Propane Companies

P 29 What To Look For When Appraising The Equipment Of Retail Propane Firms

Kevin S. Reilly, ASA; Clayton T. Baumann, PE

Valuation Of Cogenration Plants; Things To Consider

P 33 What To Consider When Appraising

Cogeneration Facilities

Letters To The Editor P 41

48 29 2 2013 Daniel Lagace, ASA and Sharon Desfor, ASA

Discipline Governors’ Commentary

William M Engel, ASA Editor's Corner P 6

Christina Chojnacki, ASA and Leslie Vitale, ASA

Implications Of Economic Obsolescence In Fixed Assets For Financial Reporting Purposes

P 7 Implications, Indentification, And Quantification Of Economic Obsolescence

John Martin, Chairman Of The IVSC- Advisory Forum

The Role Of The Ivsc Advisory Forum In Developing A Valuation Profession Globally

P 11 Discusses The Progress Made By The Forum And The Challenges That It Faces

Austrailian ASA Chapter

Review Of Equipment ID Seminar P 14 Reviews The Equipment ID Seminar Held In Australia, March 2013

Garrett Schwartz, Asa, Cea

MTS Equipment ID Seminar: Premiere Speakers, Networking And Education

P 17 Reviews The Equipment ID Seminar Held In Cleveland, OH In June 2012

Leslie H Miles Jr, Fasa Nigeria And The ASA P19 Reviews Mr. Miles Trip To Nigeria And Explains The Growing Market For ASA

49 29 3 2013 Roger Durkin, J.D., M.S., FASA

The Top Twelve Mistakes Appraisers Make in Court Preparation

P10




Richard Buckner, President of Fair Market Graphics, Inc.

Sheetfed Printing Presses and Today’s Marketplace

P13

Garrett Schwartz, ASA MTS Appraisers Return to Cleveland for Networking & Equipment Education

P15

Les Miles, FASA ASA’s International Demand – Three Weeks in Japan

P18

Nancy Stacy, GG, ASA In Memoriam P36

50 29 4 2013 Liu Ping Achieve Collaborative Development of the Valuation Profession

P12

刘刘刘刘刘刘刘刘刘 P17

Aleksey Shaskolsky Ethic Dilemmas in Russian Appraisal Practice

P21

Алексей Шаскольский

Дилеммы этики в российской оценочной практике

P22

A. Shaskolsky, V. Romanovsky, S. Edomsky, V. Biryukov, A. Timkov

Federal Appraisal Standard FAS-0 “Paid-for Valuation”

P24

А. Шаскольским, В. Романовского, С. Эдомского, В. Бирюкова , А. Тимкова

Федеральный стандарт оценки ФСО-0 “Заказная оценка”

P27

Thomas Boyle, MAI Banks Run on Standards P31

Alan C. Iannacito, FASA The Class of 2013, ME214 P33

51 30 1 2014 Park Johnson, ASA, MRICS

Editor’s Letter P4

Robert W. Clark, ASA Chairman’s Corner P5

Michael J. Remsha, ASA, P.E., CMI

The Cost Approach and its Relationship to the Sales Comparison and Income Approaches

P6

Jack West, ASA Assessors and Independent Fee Appraisers

P32

P. Barton DeLacy, ASA, MAI, CRE, FRICS

Wind Power and the Tax Base: Reliable as the Resource?

P35

Robert B. Podwalny, FASA

USPAP Reports and Reports in Submitted for Advancement

P46

Clayton T. Baumann, P.E. Cost to Capacity Method: Applications and Considerations

P49



Robert W. Clark, ASA Chairman’s Report P5




Daniel Lagace, ASA and Sharon Desfor, ASA

Governor’s Bulletin P6

Robert F. Reilly, CPA The Unit Valuation of Taxpayer Assets for Protpery Taxx Purposes

P15

Alan C, Iannacito, FASA What Do Value-Added Businesses Pffer and What are Their Affecs on the Market?

P33



Robert W. Clark, ASA Chairman’s Report P5

Robert W. Clark, ASA ICVPME Report P6

Daniel Lagace, ASA and Sharon Desfor, ASA


Norman Laskay, ASA Marine Asset Appraisal and the Three Approaches to Value

P10

Thomas Sexton, ASA Current Trends in Energy Use and Their Effect on Railcars

P13

Barbara A. Spoor, ASA, (MTS – Aircraft, MTS – M&E, ARM)

Appraisal Review and Management P15

David Helle, ASA MTS Appraisers Attend Equipment Identification Seminar

P17

Park Johnson, ASA, MRICS

The Tools We Use: Marshall Valuation Service (MVS)

P20

54 30/31 4/1 2014/15 Park Johnson, ASA, MRICS

Editor’s Corner P4

Robert W. Clark, ASA Chariman’s Report P5

Richard Berkemeier, ASA, MTS Governor


In Memroiam Samuel F. Lucerno, FASA

P7

Mike Clark, ASA Asking Price is Not Selling Price P8

J.P. (Buck) Ward, ASA What Color is Your Blanket? Collateral Documentation and Asset Recovery for Asset Based Loans

P10

Jim Becker, ASA Demystifying New Paint & Interior... Assessing Aircraft Value

P14

Stephen L. Barreca, ASA, PE, CDP Founder & President, BCRI Valuation Services BCRI Inc.

Modeling the Life-Cycle of Multiple Forces of Depreciation

P18

Charlie Burkhardt, ASA, CAE, Senior Consultant, CostQuest Associates and Luis A. Rodriguez, Program Manager, CostQuest Associates

Development of a Replacement Cost New for Wireline Communication Property

P42





Editor’s Corner P4

Robert W. Clark, ASA Chariman’s Report P5

Sharon Desfor, ASA, MRICS, Richard Berkemeier, ASA, MTS Governor


Anthony Kioussis, President, Asset Insight

Used Citation Xs from NetJets are Rebranded by Guardian Jet as Elites

P9

Nathan J. Arnold Appraising Chemical-Processing Machinery and Equipment

P16

By Les Miles, FASA and Park Johnson, ASA ME202 Taught in Japan P17

by Joseph Feldman, President, Joseph Feldman Associates

Acquisition Surprises: Best Practices for Preparation and Risk Management

P18

Joe Santora, ASA Compliance P20

56 31 3 2015 Brad Hartsburg, ASA, CPPA, CSA

MTS Editorial P4

John J. Connolly, III, ASA Governor’s Bulletin P5

Richard Berkemeier, ASA and David Crick, ASA, MTS Governors

Chairman’s Report P6

William Engel, ASA Memorial Tribute to Park Johnson, ASA

P7

J. Fernando Sosa, ASA, MRICS

The Scary Truth about Ghosts Assets P9

Bob Zuskin of Jet Perspectives

Corporate Aircraft: Valuing The Intangibles

P14

oseph Santora, ASA of Irontrax, LLC

Choose Your Equipment Appraiser Wisely

P17

Jean Jackson and David Helle of PNC Financial Services Group

4th Annual Equipment Valuation Conference in Cleveland

P19

Brad Hartsburg, ASA, CPPA, CSA of Fortress Machinery Appraisals and Consulting Inc.

Identifying Heavy Equipment and Serial Number Locations

P23

By Keith M. Bransky, ASA, ARM-MTS

Damaged Aircraft and Diminution in Value Back-to-Basics

P30

Barrie Roesler, ASA Are your Comparables Really Real? P36


The M&TS Journal is a publication of the International Machinery & Technical Specialties Committee of the American Society of Appraisers, the only multi-discipline testing/accrediting appraisal society in America. The M&TS Journal is written both for the appraisers who value equipment on a regular basis, and for those others who may have a professional interest in the subject. These include attorneys, bankers, business brokers, estate planners, used equipment dealers, real property and business valuation appraisers. The M&TS Committee is a nonprofit organization with a goal to standardize and educate all in our profession. Letters from readers are encouraged. Letters will be printed without editing, in the sequence received, subject only to space limitations.

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Send all editorial inquiries to: The M&TS Journal c/o Brad Hartsburg, ASA (Editor) Fortress Machinery Appraisals and Consulting Inc. Calgary, Alberta, Canada [email protected]

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Indices for many years’ M&TS Journal and Machinery & Equipment / Technical Valuation Journal articles are available. Please contact the editor for copies of these indices.

Subscription Form The M&TS Journal

c/o Paul Cogley, ASA Bank of America Merrill Lynch One Financial Plaza, 5th Floor RI1-537-05-06 Providence, Rhode Island 02903 E-mail - [email protected]

Send all Subscription inquiries to: The M&TS Journal c/o Paul Cogley, ASA (Tresurer) Bank of America Merrill Lynch Providence, Rhode Island 02903 [email protected]

Checks should be made payable to the M&TS Committee

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Address

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Sharon Desfor, ASA President

T: 847.487.8258 • F: 847.487.0206 • [email protected] N. Old Rand Road, Unit 101 • Wauconda IL 60084-0575

Ben Moore, ASA Senior Appraiser


Jason Kmiecik, ASA Vice President Operations


Carol Busch, AM Associate Appraiser



the journal of the international machinery & technical specialties ... · issue 1, 1st quarter...

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