ISTAT Jetrader - Summer 2021 - 22

Understanding LeaseEncumbered
Values
by George Dimitroff, ISTAT Certified Appraiser
Head of Valuations, Ascend by Cirium
T
he sales of aircraft in the secondary
market with leases in place have declined
significantly since the start of the
pandemic. This reduction in trades could
be attributed to many factors, but one of
them is the expectation from potential
investors that they can purchase leaseencumbered
aircraft at a discount - similar to the reductions
that Market Values have experienced since the pandemic
started. Yet aircraft that still have performing leases signed
before the pandemic typically retain significant value with
owners unwilling to part with them for less than their worth.
While ISTAT Certified Appraisers are well versed in how
to determine Lease-Encumbered Values (LEV), the remainder
of the ISTAT community may not always have the clearest
2 2 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
understanding as to how important this analysis can be, while
potentially confusing lease-encumbered situations with Market
or Base Values. The relative cooldown in trading activity since
the early days of the pandemic makes this an opportune time
to clarify the concept and explain the inner workings of an LEV,
how it is derived and how it can be meaningfully applied.
What Is an LEV?
The ISTAT Appraisers Program Handbook defines a LeaseEncumbered
Value as " ... the Appraiser's opinion of the value
of an aircraft, under lease, given a specified lease payment
stream (rents and term), and estimated future residual value at
lease termination, and an appropriate discount rate. " Sounds
simple enough, but every part of the definition introduces a

ISTAT Jetrader - Summer 2021

Table of Contents for the Digital Edition of ISTAT Jetrader - Summer 2021

ISTAT Jetrader - Summer 2021
From the President
ISTAT News & Events
Perspectives: Q&A With Dean Gerber
Reunited in the Magic City
Understanding Lease-Encumbered Values
ISTAT Foundation: Supporting UN Humanitarian Air Service Efforts
Appraisal: 737 MAX 8 and DHC-8-400
At a Glance: Dezhi Zhu
From the Vault: ISTAT Latin America Forum 2017-2019
Advertiser Index
ISTAT Jetrader - Summer 2021 - Intro
ISTAT Jetrader - Summer 2021 - ISTAT Jetrader - Summer 2021
ISTAT Jetrader - Summer 2021 - Cover2
ISTAT Jetrader - Summer 2021 - 1
ISTAT Jetrader - Summer 2021 - From the President
ISTAT Jetrader - Summer 2021 - 3
ISTAT Jetrader - Summer 2021 - 4
ISTAT Jetrader - Summer 2021 - 5
ISTAT Jetrader - Summer 2021 - 6
ISTAT Jetrader - Summer 2021 - 7
ISTAT Jetrader - Summer 2021 - ISTAT News & Events
ISTAT Jetrader - Summer 2021 - 9
ISTAT Jetrader - Summer 2021 - Perspectives: Q&A With Dean Gerber
ISTAT Jetrader - Summer 2021 - 11
ISTAT Jetrader - Summer 2021 - 12
ISTAT Jetrader - Summer 2021 - 13
ISTAT Jetrader - Summer 2021 - Reunited in the Magic City
ISTAT Jetrader - Summer 2021 - 15
ISTAT Jetrader - Summer 2021 - 16
ISTAT Jetrader - Summer 2021 - 17
ISTAT Jetrader - Summer 2021 - 18
ISTAT Jetrader - Summer 2021 - 19
ISTAT Jetrader - Summer 2021 - 20
ISTAT Jetrader - Summer 2021 - 21
ISTAT Jetrader - Summer 2021 - Understanding Lease-Encumbered Values
ISTAT Jetrader - Summer 2021 - 23
ISTAT Jetrader - Summer 2021 - 24
ISTAT Jetrader - Summer 2021 - 25
ISTAT Jetrader - Summer 2021 - ISTAT Foundation: Supporting UN Humanitarian Air Service Efforts
ISTAT Jetrader - Summer 2021 - 27
ISTAT Jetrader - Summer 2021 - Appraisal: 737 MAX 8 and DHC-8-400
ISTAT Jetrader - Summer 2021 - 29
ISTAT Jetrader - Summer 2021 - 30
ISTAT Jetrader - Summer 2021 - 31
ISTAT Jetrader - Summer 2021 - At a Glance: Dezhi Zhu
ISTAT Jetrader - Summer 2021 - 33
ISTAT Jetrader - Summer 2021 - From the Vault: ISTAT Latin America Forum 2017-2019
ISTAT Jetrader - Summer 2021 - 35
ISTAT Jetrader - Summer 2021 - Advertiser Index
ISTAT Jetrader - Summer 2021 - Cover3
ISTAT Jetrader - Summer 2021 - Cover4
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