Asset Management: Out with the old and in with the new
Having worked with the pre-owned division of Bombardier Aerospace for 15 years before joining Mente Group in May 2015, Vice-President Jeff Dorrough has seen the need for an accurate asset management tool coming for a long time.
“There are two price guides in the industry used by virtually everybody – VREF and BlueBook – and historically, they’re often inaccurate,” Jeff explains. “They compile their information quarterly, so whenever a new version is published, it’s already 3-6 months old, and by the time the quarterly publication is expiring it could be 6-9 months old. This is primarily due to the fact that the current market changes too fast in that time period.”
Mente saw this problem as an opportunity and, during the summer of 2016, we started to think about a way to take the fundamental information everybody uses to create a current price point reference and automate that process.
Our company started building its new asset management tool last September, and in March 2017 began beta-testing. The product is still in the testing phase but it’s already been rolled out to one customer and there are others in the pipeline.
“Currently we’re partnering with the banks,” Jeff expands. “We review their portfolio and then, with roughly about 12 data points per aircraft, we update their portfolio by giving them a current fair market value estimate, including future values. The plan is to expand our utilization of the tool to include partnerships with fleet operators and high net worth individuals.”
One of the reasons Mente has such a good relationship with the banks is that Jeff has been a senior appraiser with the American Society of Appraisers (ASA) since 2010. Another reason is that CEO Brian Proctor has earned a well-respected reputation in the industry. With over 17 years’ experience in business aviation – not to mention over $7 billion in aircraft transactions and over $5 billion in aviation business planning behind him – Brian has led the Mente team to become one of the most successful aviation consulting firms across the globe.
But where does all the data required to make an estimate come from? “One of the biggest challenges is that a lot of our information is compiled through phone calls. That makes it hard to stay on top of,” Jeff admits.
However, having grown to a team of 15 people in just 12 months, he thinks it’s an issue we’re dealing with very well. He continues, “With all of those people out in the marketplace constantly talking to buyers, sellers and others brokers in the community – as well as my efforts with the financial institutions – we’re getting such a well-rounded insight into the marketplace that being current and being accurate is our strength.”
The tool isn’t just impacted by industry talk, either. Dorrough estimates that with all the resources the company considers – from the traditional price guides, subscription-based online resources for marketers of aircraft, constant communications with OEMs and other players in the marketplace covering the average cost of components from engines to paint and interiors – there are approximately 50 external inputs being used to create accurate data.
And what about the current estimates the tool is coming up with? Jeff comments, “I’ve seen the good times and the bad. This latest downturn started back in 2008, which means we’re almost in the tenth year of going through this. We have seen values plummet and fall at rates never before imaginable.
“But, we’ve reached a point where current pricing is beginning to attract a lot of new interest in some sectors because buyers are seeing the value of the aircraft in the marketplace right now. We’ve seen some pockets of resilience building in the last 3-6 months. It’s our hope the market is going to begin to at first turn flat, and hopefully alleviate the pressure caused by the excess inventory out there at the moment.”
To find out more about Mente Group’s asset management tool, you can contact Jeff directly here.