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building boom of 2000 to 2008, there were cost to build a similar vessel new today - and OSV market, the industry is awash in near a global and highly regulated set of markets. no sales, as no one wanted to sell moneymak- depreciate it over the expected normal use- new boats with state-of-the-art out? tting that An OSV in the North Sea is likely to be oper- ing vessels. From 2012 to the present, there ful life of the vessel. This is its designed life, may never ? nd a buyer through no fault of ated – and appraised – quite differently than a are no sales as there are more boats than work which can vary by vessel type and service the asset itself. In this case, economic cir- similar vessel in the Gulf of Mexico. and no one wants to buy another idle asset. from approximately twenty to thirty-? ve cumstances in the market place can signi? - Certi? ed marine asset appraisers following

In the former period, when business was years. cantly affect the ? nal appraised value. USPAP requirements play a challenging but strong, appraisers could make the case for us- These forms of depreciation - physical, exciting role in the maritime industry.

ing the income approach, or discounted cash technological, and economic - can be “cur- Harry Ward is the President of Dufour, Las-

Depreciation ? ow model. In this approach, the future cash At the end of the vessel’s normal economic able” or “incurable.” That is, does it make kay & Strouse, Inc. Harry is a US Navy vet- ? ows of the vessel are evaluated against the life, there is usually some residual value. Be ? nancial sense to do life extension work to eran and has spent much of the past decade risk of obtaining those cash ? ows, and a “net it a secondary use, salvage value, or scrap remove physical depreciation? If so, it’s cur- in the maritime industry in sales, ? nance and present value” is calculated. However, banks value, most vessels do not depreciate 100%. able. Does it make ? nancial sense to repower general management. His goal is to build on in this period were often wary, so risk models To avoid confusion with leasing terminology, or add a DP system to remove technological the strong history and reputation of DLS and were challenging to construct. Lenders know we often refer to this residual value as a “ter- obsolescence? If not, it is incurable deprecia- provide outstanding service to marine indus- how cyclical marine markets can be and it minal value.” Having calculated an annual tion. Economic depreciation, often measured try clients just as the company has done for might be dif? cult to convince a banker that depreciation rate, the appraiser then looks at by the fall in day rates, may not be curable the past 50 years.

your 240’ PSV with twenty-? ve years of re- a vessel’s remaining useful life, which gives solely by a vessel owner as industry factors, Norman F. Laskay is currently Of Counsel maining life is going to continue to make that a gross value, having only measured age, i.e., like raw material demand, changing trade with Dufour, Laskay & Strouse, Inc., a full a deliriously high 2007 day-rate for the rest physical condition. The appraiser must then routes, or IMO or U.S. Coast Guard regula- service marine survey company with its head of its economic life. While it is hard enough also look at “technical obsolescence.” For tions, are beyond an individual owner’s con- of? ce in New Orleans, Louisiana. He is a to estimate a vessel’s expenses into the fu- example, does the vessel have Tier 2 engines trol. graduate of Maine Maritime Academy, has ture, estimating even a gross income stream and no dynamic positioning when the com- Maritime asset appraisal is a challenging sailed as a deck of? cer on U.S. and foreign takes the appraiser and banker into a mine- peting boats in the market are Tier 3 and have process that involves a delicate balance of art ? ag freighters and worked ashore in ship ? eld of assumptions. some level of DP certi? cation? If so, the as- and science. Unlike in residential home valu- agency operations. He has been an indepen-

Under these conditions, where the market set’s value may be signi? cantly degraded in ation, a professional marine appraiser starts dent marine surveyor of hull and machinery and income approaches are not highly reli- the marketplace. with no database of comparable sales, and he for over 40 years. He was a member of the able, the appraiser following USPAP looks to Finally, there is “economic depreciation” or she must have a deep understanding of the Machinery & Technical Specialties Com- the cost, or “depreciated replacement cost,” or “economic obsolescence.” This is a loss unique combination of terminology and mar- mittee of the American Society of Apprais- approach. The experienced appraiser will of value or usefulness of a property caused ket forces that comprise the marine market. ers (ASA) for 12 years, where he is now an determine a vessel’s replacement cost – the by factors external to the property. In today’s On top of all this, the maritime industry is Emeritus member.

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