Publisher Ron Caruso has been reporting on the equipment financing industry for more than 25 years. Pulse features his knowledgeable analysis of news, trends and current economic or regulatory issues having an impact on commercial financing.
Pulse also features people in the news, business opportunities and Ron's personal wine recommendations.
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Send news releases to editor@pulse.com
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Recent Editions
Business News Impacting the Leasing Industry
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GOING BACK TO BASICS |
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Yes, Pulse Online is alive
and well. I have spent the last month or so re-thinking its approach and
content. What I finally realized is the one unique aspect of this column
is its analysis and interpretation of what is happening in the equipment
financing industry. Am I always right? Absolutely not. But I do attempt
to provide some perspective on what is happening in this industry and
where it may be headed on both a micro and macro basis. There are numerous sources on the internet that do a good job of giving the latest news, byte by byte. This is often interesting and important to you the participants in equipment financing. What will be the ongoing approach of Pulse Online is to retrace its steps and focus on interpretation and evaluation of what’s going on. This is our “value-added”, and we will continue to “call them as we see them”. As always, your comments are greatly appreciated. |
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THE NEW YEAR-WHAT TO EXPECT |
| By: Ron Caruso |
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For many lessors, the new
year begins in early February. The first month of the year usually
focuses on cleaning up year-end business and completing plans for the
new year. After this is done, the focus shifts to the current year. What can we expect? In a nutshell, my view is the new year will be a combination of two things: 1) More of the same, and 2) A continuing evolution of certain factors that are currently in play. Let me explain, using a historical perspective. In the past, I have called to your attention to the “graying” of the leasing industry. We are an industry of seasoned veterans, putting it kindly, but new talent is a rare commodity and real, live raw recruits an even rarer commodity. The leasing industry may become an endangered species, if some new blood is not injected. Similarly, leasing technology is graying. I remember a time when leasing was new kid on the block, had not been thoroughly accepted, and was often looked upon as a last refuge before bankruptcy or as a gimmick. It has transitioned through that stage to becoming a “viable financial alternative”, to its current status as a legitimate financial tool that should always be considered, but suffers from a lack of newness. Creativity, once the cornerstone of the leasing industry, seems to be in short supply. Many lessors are offering the same, somewhat dated approaches again and again. In the competitive arena, when this occurs, it becomes a rate game with the winner being the lessee, not both sides. Added to this sameness is an evolution of certain factors that continue to develop, and the impact of which are not fully upon us. Again, let me offer a historical perspective. There was a time when senior managers spent the overwhelming part of their time thinking about and doing business. Ah, the good old days! Today those same managers are challenged by many other issues that demand their attention and resolution and are not directly related to bringing in business. Numerous regulatory issues, including Sarbanes-Oxley and FASB continue to impact both leasing and other financial services as well. The amount of time and expense that are devoted to SOX is truly mind-boggling and frustrating. Is it an over-reaction? Perhaps, but it must be presently addressed, with hope for a more detached perspective in the not too distant future. FASB and IASB continue to develop a more consistent view of business accounting, one which in their opinion more appropriately reflects the underlying transactions. Leasing has been challenged by accounting issues many times in the past and has been able to adapt. However the ultimate result each time seems to be that the lease vs. buy equation shifts a few basis points in favor of outright purchase, often to the detriment of not only our industry, but other lessees for whom leasing is the best choice. How will these regulatory issues play out? We have seen, as an example, the impact of revisions to the tax code and the financial distress of the airline industry on big ticket leasing. It is now a micro-niche sector. Industry participants and ELFA will continue to stay on top of these regulatory issues and will offer the industry’s position on them. Will we be pleased with the outcomes? Stay tuned. EVOLUTION OR REVOLUTION? The financial services sector and major corporations are awash in capital. Stock buybacks, increased dividends, M&A activity all are a reflection of this. Many would-be lessees also awash in capital, need only write a check rather than consider equipment financing. Beyond this impact, is another more significant change. Lessors are re-evaluating their role and their portfolios. They are now viewing these two activities as separate and distinct, often booking transactions with the intention of eventually selling them, and perhaps providing servicing to the acquirer. They are also looking at their existing portfolios to re-evaluate its profitability and its sale-ability. Do we want to continue to hold a significant amount of investment in industry X at this point in the business/economic cycle? Can we achieve a better return by redirecting this capital into other industries, or other financial products? Look for this trend to continue to develop, as leasing companies see themselves not as “book and holders”, but rather as business finders, but not necessarily business holders. With pension funds, hedge funds and numerous other sources eagerly looking for investment opportunities, this could provide a new pool of “passive investors” for the leasing industry and a significant restructuring to the traditional way that lessors do business, with fee income generation becoming a major emphasis. Stay tuned. |
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IN VINO VERITAS |
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NAPLES WINTER WINE FESTIVAL |
| Wine tasting events have long been recognized as a win-win
situation. They can provide the attendees with a wonderful opportunity
to sample a wide variety of wines, enhancing their knowledge of both
vintners and their wines, and also can be a rewarding fund-raising
event. The Naples Winter Wine Festival combines these elements and succeeds to a degree beyond the imagination of most of us. Their most recent extravaganza held under a white tent at the Ritz-Carlton Golf Course set a new world record, raising $16.5 million for children’s charities in the Naples area. How did they do this? Well, to begin with, the ticket of admission was $7,500 per couple. This provided an entrée for 570 guests to participate in the fun and festivities, including dinner in one of Naples mansions, prepared by a celebrity chef, such as the incomparable Emeril Lagasse, Wolfgang Puck, Tom Colicchio or Daniel Boulud, among others, and to bid, bid high and bid often at the concluding event, the auction. The auction included items that would be wonderful stocking-stuffers for even the Forbes 500. Looking for that special new car? How about a 2007 Masserati. Quattroporte? The car, which has a 400 hp V8 engine was specially made for the festival and was raffled with the tickets going for $5,000. Not your cup of tea? How about a brand new (1 of 100) Rolls Royce V-12 convertible? The winning bid was $2MM. Since it is a wine festival, items of note that were auctioned included a 15-liter ’99 Cheval Blanc (winning bid-$50,000), Napa Valley visit for two at Screaming Eagle, Napa Valley Reserve and Meadowood, ($130,000) or if you enjoy vintage port, perhaps eleven cases of the finest port from the last century ($90,000). These are just a few of the 72 lots that raised the $16.2 MM. Obviously this was not an event for bargain hunters. But for those able to indulge it provided according to press reports, a truly enjoyable and remarkable evening. One last note: An interesting additional event that was part of the Festival was a wine tasting with Robert Parker. For a mere $10k you and your significant other could enjoy superb wines selected by Mr. Parker, and compare your evaluations with his. The next issue of Pulse will provide a handy reference for upcoming wine festivals throughout the U.S. |
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