The growing impact of remarketing
Firms that collect and dispose of boats in deals gone bad or that have been physically damaged are no longer the “dirty secret” cottage industry of a few short years ago. Once perceived as companies providing last-ditch attempts to recover the remnants of value in a failed marine lending transaction, dealer or yard service snafu, or an insurance coverage shortage resulting from natural disaster, the evolving moniker has progressed from “liquidator” to “repo agent” to the current sweet-sounding “remarketer.”
The change in perception has accompanied reports that the pre-owned boat sales market is outpacing the new and should be served. Certainly the growing acceptance relates to the service remarketers provided during the devastating 2005 hurricane season and the current uptick in boat take-backs by lenders and dealers. Yet strides have also come from the growing professionalism and capability of firms in this niche to provide solutions to troubled and complex transactions and to expand the demand for repo’d product both domestically and offshore.
Bob Toney, president of National Liquidators, got into the remarketing business in 1988 and notes that his firm’s dollar volume growth has been a mostly consistent 10 percent per year. He attributes that to several factors, including efforts to market both his company and the overall marine remarketing industry. The company’s 2007 gains were significantly higher, reflecting growing problem loans made by banks, more dealers sending bad trades and “birthday boats,” and a spurt in smuggling vessels seized by the federal government. National, an approved contractor for dispositions in those cases, has seen smuggler’s boat activity grow to 10 percent of overall sales.
When Toney entered the business, a main effort was convincing his clients that repo was not a four-letter word.
“Banks worried that consumers would attach a negative stigma to these products when it was actually seen as a plus – that the buyer was getting a deal not available at retail,” he says. “Today, the influence of boat-exclusive auctions with leverage from the Internet, can drive prices higher than sellers seek.”
The impact of selling remarketed boats in offshore markets is a significant plus for the marine industry. Toney explains that 60 percent of National’s resold boats of 30-feet and less are going out of the country, many headed for Europe.
“The weak U.S. dollar means that European buyers are currently getting the equivalent of a 30 percent discount on boats bought here,” he explains. “And those being shipped offshore means they are no longer competing for sale with domestic new or used boats.”
Of the overall pre-owned U.S. market of 1 million annual boat sales, Toney estimates that he and other remarketers have less than a 1 percent share, though they likely control more activity in larger, longer and more expensive transactions.
Marine remarketing has become a complex routine and gained substantial sophistication since the early days when success was often simply tied to a high-traffic highway location and a snappy “For Sale” sign. Now the remarketing process starts with gaining control of the vessel (often offshore or under water), coordinating the seizure with authorities and maritime counsel, transportation, refurbishing, storage and security, documentation, promotion (including Internet exposure), auctioning and/or finally selling. A rule of thumb is it will cost 15 to 20 percent of the asset value in expenses throughout the process. In days past, the charge for repossessors was to just get as much money as possible out of the resale. Today the goal is to recover as much of the loan deficiency or insurance payment shortfall and prove that the price was fair and reasonable (since many deals will be scrutinized by the courts).
For those who use auto auctions to re-sell small trailerable boats, expect marine remarketing to cost more. In the overall process, especially with larger craft, Toney feels costs will actually be saved. He cautions that with complex recoveries, it often takes more time and resources to unravel a botched repossession than hiring professionals at the start. And he tells new clients the more information that can be provided to the recovery team regarding the vessel in question; owner, location, crew, etc., better and faster (and less costly) results will be realized.
As with other preparations for unpleasant scenarios faced by marine businesses, having a remarketing plan or team in place before it’s needed is prudent insurance against losses. Then when that check fails to arrive or bounces, the collateral can be used to bring the lender or dealer closer to being made whole.