www.hilcoappraisal.com • 847.509.1100 Business Asset Valuation Services Newsleer Vol. 1: Issue 4 2012 Like us on l Follow us on l Link us at l Subscribe to us l Watch us on Given the current economic environment, it is counter-intuive to think that there is a liquidity surplus of both debt and equity capital. Not only are there plenty of funds available, interest is strong from all lender/ investor constuencies. Companies with solid operaonal profiles and sound financial reporng are being well received by all funding sources. The Senior Debt Market has eased post-recession, with aggressive compeon from banks and non-bank lenders. Tradional LP Funds, Credit Opportunity Funds, Capve Bank Funds, Hedge Funds, Commercial Finance Companies, and Insurance Companies have all created pricing pressure on tradional lenders. This significant cross secon of investors are compeng for a limited number of quality transacons whose credit standards remain basically unchanged for firms of all sizes. Risk aversion has relaxed considerably in the last 6 months, opening the market to non-sponsor private equity companies, challenged credits and tradionally avoided industries. There is also excess capital in the private equity market as the window will soon be closing for various general partners to invest a significant poron of their “dry powder” that accounts for the approximate $425 billion capital overhang in 2011. As these groups work through this buildup of capital, investment acvity is expected to increase. Valuaons are expected to climb as a result of improving general economic condions, increased availability of aracvely priced debt, and increased compeon for quality deal flow. “Liquidity Surplus…?” Hilco Real Estate Appraisal, LLC adds teams in New York and Boston Chris L. Harland, MAI has joined Hilco Real Estate Appraisal, LLC as of June 2012 as Northeast Region Manager, and will be located in the Capital District (Albany area) of upstate New York. Chris is joined by a team including Mark Grant, Andrea Nazarian, Jay Buhr and Robin Hynes. Chris has been engaged in the appraisal, underwring and analysis of real estate throughout the northeast for 22 years. Before joining Hilco, Chris was the President of Capstone Appraisal Group, a commercial appraisal company based in New York’s Capital District, for 13 years. Charles L. Clark, Ph.D., MAI joined Hilco in our Boston, MA office in May 2012 as New England Region Manager for Hilco Real Estate Appraisal, LLC. Charles is joined by Ma Dostoomian and will work alongside Hilco’s Debt Management Services group headed by Ron Lubin. Mr. Clark has over 20 years of experience in the valuaon of real property and market studies on a variety of property types. He has experience in the valuaon of commercial, industrial and special use real estate throughout the Boston metropolitan area and New England. Since its incepon in 1999, Hilco’s real estate appraisal group has delivered thousands of valuaons for private and instuon clients.
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www.hilcoappraisal.com • 847.509.1100
100/56/0/23
Business Asset Valuation Services
NewsletterVol. 1: Issue 4 2012
Like us on l Follow us on l Link us at l Subscribe to us l Watch us on
Given the current economic environment, it is counter-intuitive to think that there is a liquidity surplus of both debt and equity capital. Not only are there plenty of funds available, interest is strong from all lender/investor constituencies. Companies with solid operational profiles and sound financial reporting are being well received by all funding sources.The Senior Debt Market has eased post-recession, with aggressive competition from banks and non-bank lenders. Traditional LP Funds, Credit Opportunity Funds, Captive Bank Funds, Hedge Funds, Commercial Finance Companies, and Insurance Companies have all created pricing pressure on traditional lenders. This significant cross section of investors are competing for a limited number of quality transactions whose credit standards remain basically unchanged for firms of all sizes. Risk aversion has relaxed considerably in the last 6 months, opening the market to non-sponsor private
equity companies, challenged credits and traditionally avoided industries.
There is also excess capital in the private equity market as the window will soon be closing for various general partners to invest a significant portion of their “dry powder” that accounts for the approximate $425 billion capital
overhang in 2011. As these groups work through this buildup of capital, investment activity is expected to increase. Valuations are expected to climb as a result of improving general economic conditions, increased availability of attractively priced debt, and increased competition for quality deal flow.
“Liquidity Surplus…?”Hilco Real Estate
Appraisal, LLC adds teams in
New York and Boston
Chris L. Harland, MAI has joined Hilco Real Estate Appraisal, LLC as of June 2012 as Northeast Region Manager, and will be located in the Capital District (Albany area) of upstate New York. Chris is joined by a team including Mark Grant, Andrea Nazarian, Jay Buhr and Robin Hynes.
Chris has been engaged in the appraisal, underwriting and analysis of real estate throughout the northeast for 22 years. Before joining Hilco, Chris was the President of Capstone Appraisal Group, a commercial appraisal company based in New York’s Capital District, for 13 years.
Charles L. Clark, Ph.D., MAI joined Hilco in our Boston, MA office in May 2012 as New England Region Manager for Hilco Real Estate Appraisal, LLC. Charles is joined by Matt Dostoomian and will work alongside Hilco’s Debt Management Services group headed by Ron Lubin.
Mr. Clark has over 20 years of experience in the valuation of real property and market studies on a variety of property types. He has experience in the valuation of commercial, industrial and special use real estate throughout the Boston metropolitan area and New England.
Since its inception in 1999, Hilco’s real estate appraisal group has delivered thousands of valuations for private and institution clients.
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Business Asset Valuation Services
NewsletterVol. 1: Issue 4 2012
For the last few years metal market prices have been relatively stable; producers had closed mills in conjunction with reduced demand and service centers have kept inventory levels at historically low levels given fears of a repeat in the significant market price drops experienced in 2008. Going into June this year we have begun to see some significant volatility of prices in some key metals segments. First, scrap which has had strong market values the last few years due to decreased industrial outputs and a strong foreign export market is now experiencing a $50 (or greater) drop per ton in market prices going into June 2012. The drop in scrap market prices is primarily due to weak demand from Asia, the abundance of
industrial scrap from recent increased production levels and macroeconomic concerns driven by the financial distress in Europe. Scrap industry experts are predicting the softness in scrap market prices could extend into July and possibly August as well.
Another sector within the metals space that is experiencing recent
price volatility is copper. Copper prices are currently at 6-month lows based on new fears that growth in China is slowing. China is the largest consumer and importer of copper and it is believed China’s current copper inventory levels are very high.
Unless manufacturing levels in China rebound it is expected further softness in copper pricing could be experienced over the next few months.
Andy Dahlman Senior Vice President, M&E Group Leader
Andy Dahlman joined Hilco in 2000 and has been in the auction, liquidation and appraisal industry since 1994. Andy is a certified M&E appraiser and holds membership in numerous professional
organizations, including AMEA (Association of Machinery and Equipment Appraisers) and the Equipment Appraisers of North America. Andy has served as a consultant to financial institutions on asset-based lending and recovery, and has been called upon as an expert witness in bankruptcy proceedings.
Ed Zimmerlin, Jr. Senior Vice President, Inventory Group Leader
Ed Zimmerlin has worked with Hilco Appraisal Services since 2001 and during the course of that time re-located from Hilco’s Boston office to our corporate headquarters in Chicago to help form Hilco’s industrial inventory appraisal group. Over his time with Hilco, Ed has worked directly on or supervised over 5,000 inventory appraisals. Ed also works closely with Hilco’s various liquidation groups especially when they involve a company for which Hilco has performed the valuation work. Before joining Hilco Ed worked with Staples Corporation, Fidelity Capital and GE Lighting. Ed holds a bachelors degree in finance & accounting from Babson College in Wellesley, MA and is an active member of the CFA and TMA.
Often, Hilco’s clients ask us to appraise properties where complex issues are interwoven, providing opportunities to engage with our clients and employ our unique skills on their behalf. Recently an estate planning law firm hired Hilco to appraise one of Seattle’s most notable residences. Built in 1913, the Georgian-Revival styled mansion contains nearly 8,000 square feet of living space. On completion it was recognized as one of Seattle’s most
beautiful homes, and was recently the featured home in Pacific NW Magazines home section. One lot off Lake Washington’s shoreline, it has
expansive views of Mt. Rainier, Cascades, and Lake Washington, with grounds designed by the Olmstead brothers. Its original beauty however, is one of days gone by.
Consequently, renovations will involve substantial costs. In addition to providing an expert market value appraisal for use in filing gift and estate tax returns, Hilco advised the firm to assist the owner in placing the residence on the National Register of Historic Places. The register is administered by the National Park Service, and properties on the register are eligible for consideration for federally assisted preservation grants, investment tax credits, and other benefits. Hilco’s objectives for the client was to provide a means to facilitate adequate renovation of this magnificent structure. Along with citizens in the community, we will monitor the progress of this wonderful piece of historic architecture in the hopes that it is fully restored to its original grandeur.
Postcards From Europe and Beyond...
In the last 18 months, Hilco Appraisal Europe (HAE) has assisted Lender and Insolvency clients on a huge variety of appraisal projects in Countries including;
Every completed appraisal adds to the Worldwide experience that HAS draws upon to assist our clients with respect to local laws and issues that they may encounter, and this experience is an invaluable resource in exit planning. Please do not hesitate to contact your local Hilco contact if you feel that we may be of assistance to you.
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Business Asset Valuation Services
NewsletterVol. 1: Issue 4 2012
Is a lumber super cycle possible?
The words lumber and supercycle are not two words that anyone in the U.S. would expect to see paired together. With the U.S. housing market mired in the worst slump in its history, how could a lumber supercycle possibly occur anytime in the near future? It seems unlikely, but a confluence of factors may join together to create one as early as 2014.
The U.S. housing market currently remains sluggish with new home starts expected to reach approximately 700,000 units in 2012. However, this is a far cry from the approximately 1.2 million homes needed annually to satisfy demand required by new household formation. The reason for the current shortfall is the overbuilding that occurred between 2002 and 2007 and the excess inventory that currently remains. However, if recent year over year gains of 25 percent can be extrapolated for 2013 and 2014 (a big if), new home starts will be more than 1 million units in 2014, representing a significant boost in demand for lumber.
This demand increase will not be enough by itself to drive lumber prices significantly higher, as sawmills currently operating could expand capacity to meet demand. Demand from China and Japan, however, will continue to increase. Although it appears that China's economy and housing
market is slowing, there is no denying the demographic trends that will continue to drive Chinese demand for lumber. In fact, British Columbia (B.C.) sawmills sent 24 percent of their production to China in 2011. With regards to Japan, the rebuilding efforts that will follow the tsunami of 2011 are only now beginning in earnest and will provide another significant source of demand.
On the supply side, the market simply can't count on its previous sources. Sawmills in B.C. and Alberta are dealing with the devastating effects of the pine beetle, which has ravaged the timber. The worst of the supply problems are expected to occur in the next two to
four years. In the province of Quebec, the sawmills' annual allowable cut from government lands is being reduced amid decades of over cutting. Furthermore, for all Canadian mills that were shuttered during the Great Recession, it will be difficult to reopen because much of the labor has moved onto higher paying jobs in the oil sands
or precious metal and diamond minds that are running full tilt. None of these problems are easily ameliorated; Canadian production simply won't be what it once was.
The combination of stronger demand from the U.S and Asia as well as a lack of supply from Canadian mills may result in sharp price increases for lumber starting as early as 2014. Of course there are many risks to this scenario, including a weaker housing recovery in the U.S. and/or the continuing trend of new home starts moving towards multifamily units. However, the case for a lumber supercycle is not so farfetched that it can simply be dismissed without careful consideration of the factors that may drive one.
Hilco Dedicates New Conference Facility
On June 14th, Hilco was pleased to honor the memory of Norman Adler, one of the founding members of the Hilco’s appraisal business, by dedicating a conference room and presentation center in his name. The Norman Adler Presentation Center sits on the 3rd floor of Hilco’s home office in Northbrook, Illinois and includes state of the art technology that enables Hilco to conducts meetings and communicate with people across the world seamlessly. Norm’s wife, Elaine, and daughters, Laura and Barbie, joined Hilco
employees in dedicating the room by sharing warm stories about Norm over coffee and bagels…one of Norm’s favorite pastimes. Norm was a pillar of the valuation world having worked in the industry for over 30 years and knowing all the key players. Very few days go by without one of our customers recounting a pleasant memory they had with Norm. Hilco looks forward to continuing to honor Norm’s legacy to the company through it’s wonderful, new presentation center.
