Lenders Turn to Asset Appraisal Group
Amid Uncertainty in Retail, Manufacturing

When the U.S. economy took a nosedive last year, secured lenders went into defensive mode. Their first impulse was to stop lending. Their second was to do everything possible to figure out where their assets stood amid the financial crisis and economic slump. For help with the latter, many asset-based lenders turned to Buxbaum Asset Appraisal, which has earned a reputation for using sophis-

demand for appraisals related to new lending. In particular, he points to an East-Coast headquartered client that specializes in working with middle-market firms. "This asset-based lender is aggressively looking for, and finding, new opportunities," he relates.

ticated methodologies to help lenders get a handle on the actual market value of their borrowers' collateral.

"We began to see a flurry of new business toward the end of 2008," explains Buxbaum Group Executive Vice President Jim Siebersma, who heads the Asset Appraisal unit. "At that point, lenders had regrouped. They began asking us to take a look at their loans and the condition of their borrowers."

The aforementioned growth has continued in 2009 as more secured lenders have turned to Siebersma's team for informed reassessments of wholesale and retail inventories. Perhaps surprising, though, is the ongoing

CEO brings expertise continued

"We're also focusing hard on the supply chain and on the replenishment business with both core and new retailers. For example, we're opening back up in Macy's in a big way and are growing fast with chains like Kohl's and JC Penney."

The recession, of course, creates challenges for any brand, including Haggar. Contraction in the retail sector—which has seen bankruptcies and liquidations among household names like Gottschalks, Goody's and Mervyns, to name a few—is among those challenges, Buxbaum notes. "With these former distribution channels gone, Haggar must now find new operators to sell to and expand with," he says. "This is one of our top priorities, and we're pleased with our progress so far."

Fortunately, savvy retailers are as focused on providing value as their customers are on finding it. By developing relationships with value-based chains, while simultaneously shoring up inventory management, maximizing core collections and adding new categories through licensing, Haggar stands an excellent chance of bouncing back.

"With Haggar, you're talking about a great-quality pair of pants from $29 to $39. A similar product sold by other brands can be $60 to $100," Buxbaum says. "These are precisely the kinds of distinctions that matter to today's shoppers. If they have the chance to buy a garment at a value price that is the same quality as a more expensive product, they'll take the value option every time."

In total, Siebersma's team appraised or reappraised inventories worth more than $1 billion in 2008. About 40% of those were at retail entities, another 40% at wholesale and the remaining 10% at companies with wholesale and retail inventories. The goods came from a wide spectrum of product categories, including apparel, linens, costume jewelry, candles, nuts, vacuum cleaners, school supplies and sporting goods.

Of course, valuations for both retail and wholesale inventories have been affected by the recession. But wholesalers, in particular, face a thorny situation, Siebersma explains. Many are sitting on a glut of aging inventory amid a contracting retailing sector in which once-vibrant chains have vanished. Other nationals have sharply curtailed their expansion plans and are shuttering underperforming stores.

"A retailer will have a history of catering to a specific segment of the consuming public. And we also know that putting up ‘going out of business' and ‘inventory liquidation' signs will spur additional sales and attract new customers at retail stores," Siebersma says. "A wholesale appraisal is completely different. Wholesalers do not have an open door, a way to regularly sell directly to the consuming public. As more retailers close, wholesalers find themselves with fewer options as far as how to turn their inventories."

The complications faced by wholesalers are many. For example, retailers must be able to stock and replenish their stores in consistent, reliable ways, and so they have less incentive to buy from wholesalers that might go under tomorrow, no matter the price. And yet, notes Siebersma, many appraisers conduct wholesale appraisals using the same methodologies common to retail valuations. "That simply does not work," he asserts.

Buxbaum Asset Appraisal, by contrast, has tailored its methodologies to the wholesale business. Rather than relying on outmoded assumptions based on past market performance, Siebersma's team focuses on in-depth research rooted in today's realities. This is all the more important in a drastically changed economic environment (one that includes important new accounting rules), he adds.

"The outlook for the appraisal business is positive," he says. "Once lenders go through their internal reorganizations, we'll see more new lending. In the meantime, there will continue to be this push to find out where everybody stands. We saw that push for reappraisals start in 2008, and it will continue throughout 2009."