VESSEL VALUATIONS, MARINE APPRAISALS & SURVEYS
"Price is what you pay; value is what you get."
Warren Buffett, Chairman of Berkshire Hathaway
Valuing of shipping and maritime assets has been a topic of considerable debate in the last few years. Freight market volatility and, on occasion volatility and distortion in the financial and capital markets, commodity pricing, and an ever-changing regulatory environment, can affect vessel values, which, in turn, can have a cascading impact for accounting, auditing, financial, and loan documentation assignments. The Market Comparable Approach (or 'last done' as usually had been referred to in industry parlance) is the widely accepted method for Fair Market Value (FMV) for loan documentation and loan-to-value covenants. However, the Income Approach Valuation Methodology and the Replacement Cost Valuation Methodology can also add unique perspective, under proper disclaimers, in illiquid markets or for unique or highly customized maritime assets. There have been 'variations on the theme' for more elaborate or purpose-driven valuations, such as the Discounted Cash Flow (DCF) Approach, the Net Present Value (NPV) Approach, the Long Term Asset Value (LTAV) Approach (also known as 'Hamburg Rules') sponsored by the Hamburg Shipbrokers Association (VHSS).
Our firm and its founder, Basil M Karatzas, have published and provided expert opinion extensively on the subject of vessels valuations, and acted as a protagonist in a Harvard Business School case study on vessel valuation methodology (Vereinigung Hamburger Schiffsmakler und Schiffsagenten e.V. (VHSS): Valuing Ships.)
The professionals in our firm have provided more than 5,000 valuations that have been utilized by banks, lenders and creditors for loan documentation, Loan-to-Value (LTV) covenant tests and portfolio reviews, by private equity funds and institutional investors for fairness opinion, third party independent valuations and market expertise, by lessees and lessors for establishing independent market pricing of shipping assets for triggering purchase options on assets, by insurance companies and P&I Clubs for the establishing of third party independent pricing of assets involved in accidents, by shipowners for preparation of financial statements including annual reports of both private held and publicly traded companies, by investment banks for the preparations of documents for public filing including prospectuses for Initial Public Offerings (IPOs) and raising of equity and debt in the public markets. Although the majority of our valuations have been for 'mainstream' shipping assets, we have provided valuations for crude, products and chemical tankers, including substantial exposure to stainless steel and LPG tankers, dry bulk vessels, containerships, car carriers, OBOs (Ore, Bulk or Oil Carriers), Jones Act vessels - primarily for Jones Act product tankers, cruiseships and offshore assets.
Memorable assignments include the valuation of a luxury 1,000 berth cruiseship, the valuation of a multi-purpose vessel (dry bulk cargo holds reinforced for ammunition, containership, quarter-deck ramp for Ro-Ro, heavylift capacity, cargo tanks for diesel and gasoline and accommodation for 120 people - the vessel was employed under the Military Sealift Command Prepositioning Program), and the valuation of a brand-new 12,000 TEU including the physical inspection of the vessel and cargo operations during the vessels maiden port call.
Basil M Karatzas holds the prestigious Accredited Senior Appraiser (ASA) for Machinery & Technical Specialties accreditation by the American Society of Appraisers. Mr Karatzas is one of the few individuals worldwide accredited for vessel valuations and appraisals in the international marine industry for tankers, dry bulk, containerships, drilliships and offshore platforms, offshore supply vessels, tugboat and barges, American-flagged and Jones Act shipping assets. Mr Karatzas has performed more than 5,000 ship valuations and vessel appraisals, including marine surveys, totaling several billion of United States Dollars in value; said ship valuations and appraisals have been utilized for lending (ship mortgages), bond issuings, Initial Public Offerings (IPOs) in the maritime industry, regulatory filings, expert opinion, fairness opinion, litigation and arbitration.