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PHONE: ['/03)3B1-313i
- mx; U03)361-3631
March 17, 2006
Mr. Carlos lvlartel
Fines, Penalties & Fodeitures Orhcer
U.S. Customs and Border Protection
6601 NW 25"‘ Street
Miami, Florida 33159 E
$$33 i
·¤ e e ·¤ RE; Seizure Number: CS2002-5210-000082-01-001
Marketing and Sale Plan for Learjet 31A in Miami, Florida
.. .. Dear Mr. Martel: . ‘ l
@5.; gg Over the last 16 years, EG&G has sold many aircraft and other luxury items nationwide on behalf of
E a ati U.S. Customs and Border Protection (CBP) and U.S. immigration and Customs Enforcement (ICE).
. 3 EE 3 These high-end items require unique marketing strategies to target niche markets and attract buyers to
si E3: the auction who are willing and able to spend top dollar. EG&G consistently maximizes competition and
g 5 git revenue on the sale of aircraft of all types. ln the last four years alone, we have sold 20 aircraft and
S S Q achieved an average of 131 percent return on third party appraisal.
2 .a >' m
S Q E Our expertise extends to all manner of property such as luxury and exotic vehicles, high-end vessels,
jj .. § .. and jewelry. We have sold a seized DC~9 jet for $3.55 million, 822 diamonds for $8.9 million, 8 92ft.
QE g ¤~§ Sportfisherman named "One More Time" for $1.8 million, and six classic Rolls Royce vehicles for
g pg •— $625,000. An interesting note about the "One More Time"... this was originally to be listed with a yacht
E, 5 broker. Had that been done, $250,000 dollars would have been left on the offering table.
is " _
EE There are three options from which to choose to sell ofthe subject aircraft: conduct specialty sale,
§§ include aircraft in scheduled cyclic sale, or broker sale. We have detailed each option below and
gg included our recommendation.
`ii it Option 1 - Specialty sale
We have found single asset sales extremely effective with high—end, luxury property such as the Learjet
and this is our recommended method of sale for this aircraft. ·
Pre arin the l.ear`et for sale — EG&G recommends that once all repairsirefurbishments are complete
an updated appraisal be done and professional photographs taken. Also, if a minimum bid is to be set,
F we recommend it be set at the time the sales disposition order is issued.
lv1arl
The goal of our marketing and advertising campaign is to create a sense of urgency among qualified
buyers that will attract them to this auction. By doing this, we generate fair and open competition and
maximize revenue. An alrcralt such as this requires a global marketing campaign targeted to owner-
flown business pilots, private owners/buyers, afduent entrepreneurs that own and sell corporate jets
- and business travelers that owniinvest in private aircraft. To reach these buyer segments advertising
would be placed in trade publications such as Business Ain Executive Controlien Executive Traveler,
Flying, and AOPA Pilot. These publications are mailed wondwide with an average circulation of over
90,000 which includes over 9,000 internationally. Along with these trade publications, local
advertisements would be placed in the Miami Herald and the Ft. Lauderdale Sun-Sentinel not only
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March 17, 2006 -
to meet our legal advertising requirements but also to generate more interest in the local market. in
addition, we may include other local business—oriented papers as well as other major market dailies
such as Caribbean Business, Wall Street Journal, New York Times, international Herald Tribune, and
Los Angeles Times. Online advertising would also be done which is often included when ads are placed
inthe print versions. Advertising may also be placed in "luxury-theme" publications such as Ocean
Drive, Robb Report. and Millionaire magazine to reach those with an affluent lifestyle that might be in
the market for a personal aircraft or ready to upgrade. One very important note is that trade
publications typically have a two-month lead-time and mail approximately two weeks prior to the cover
date. For example, a June issue of Executive Traveler has an advertising materials deadline of April 14
and is mailed to subscribers on May 22. Basing the calendar on a projected completion date of March
31, we are looking at a late June sale.
Supporting this advertising would be a color brochure detailing the specidcs of the Learjet, providing
prospective bidders the information they need to comply with the terms of sale. Brochures would be
mailed to Fortune 200 Chief Operating Officers and Chief Financial Officers and aircraft brokers who
deal in rnulti-million dollar aircraft, as well as subscribers to the Treasury auction flyer service. A
companion webpage will also be created and posted to the Treasury auction website, which averages
· over 115,000 page views permonth, and an email alert will be sent to over 150,000 email subscribers. ‘
Posters advertising the sale of the jet would also be produced and sent to our cyclic sale centers for
display at their public previews and auctions.
Method of Sale — We recommend conducting a public auction in a hotel ballroom to sell this aircraft.
We also recommend offering an Internet simulcast to allow bidders from all over the world to participate
in this auction. Online bidders would be subject to the same registration and deposit requirements as
on-site bidders. They would then be able to relay their bids in concert with those on-site. The simulcast .
software relays bids in seconds allowing the auction to maintain its competitive rhythm. Costs are
detailed below under “Sales Costs." This worked very successfully in the sale ofthe 822 diamonds we
_ sold on behalf of IRS-Cl. Of those who participated online, 87 percent were successful bidders and
accounted for 45 percent of total sale revenue. We also found that buyers who purchased large
quantities or dollar amounts of diamonds preferred the anonymity of bidding online.
An oral, outcry auction evokes an emotional response from and creates a sense of urgency in the
prospective buyer. The best way to make an individual willingly pay more for a Learjet is to let him
know he has competition. l-le will not want to be outbid.
Sales Cost — Estimated cost to conduct this sale are as follows:
Sales Cost Estimated Cost
Advertising $ 42,000
Auotioneerin $ 168,000
Estimated Total $ 210,000
Our advertising budget is dictated by Fil/lV (estimated $4.200,000) and is typically set at 2 percent of
FlvlV. However, for this asset we have capped our advertising expenditures at $42,000 (1 percent of
F MV). This cost covers placing all advertisements, producing the color materials, and professionally
photographing the plane.
The estimated auctioneering costs include sales management, room rental and setup, simulcast
software, and selling fee.
lf a minimum bid is set and that price is not achieved at auction, the aircraft will not be sold unless all
parties agree tothe amount achieved. In that case, the Government will be billed the advertising costs,
but not the auctioneering fee.
As you can see, costs are not estimated to exceed 5 percent of sales revenue.
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March 17, 2006
Public Previews — Prospective buyers will be allowed to inspect the aircraft and all associated
documentation (log books, maintenance contracts, etc) two to three days prior to the auction date.
EG&G also recommends that a time be set to start the engines so buyers can see that the aircraft is
operational. -
_ Earnest Money Deposit- EG&G will require a $250,000 cashiers check deposit to bid in person and
online. Buyers will have to show proof of deposit at the time of registration in order to be allowed to bid
or to be allowed access to the online auction site.
Public Relations — Public relations will be a key component in selling this aircraft. Should ICE desire,
our Public Relations Supervisor will work closely with her agency counterpart to craft a media campaign
to support the sale of the Leariet. Members of the trade press and local media would be invited to a
pre—sale press conference that would detail the case behind the seizure, the importance and impact of
lCE’s law enforcement mission, and detail the specifics ofthe sale. Pre-sale publicity enhances and
reinforces our advertising message and creates a sense of excitement and anticipation surrounding the
auction.
We have a proven track record of successful public relations campaigns, generating over $500,000
annually for the Government in free publicity.
Option 2 —· Cyclic sale
The next two cyclic sales in Miami are scheduled for May 25 and August 3. While it is possible to sell
the aircraft in conjunction with a cyclic sale, EG&G does not recommend it. Prospective buyers for a
Learjet are vastly different from those wanting to buy a car, boat, iewelry, or abandoned merchandise.
There would be no difference in sales costs between a cyclic sale and a specialty sale and our
marketing, advertising, and public relations efforts would remain the same as in Option 1. in addition,
for the May 25 sale, we would be unable to appropriately advertise the Learjet in the necessary trade l
publications, which would negatively impact participation, competition and revenue. This is especially
important if a minimum bid is set;
Option 3 —— Broker sale
ln our experience, the basic difference between a broker sale and an auction sale is the broker starts
from an established price and negotiates down, whereas the auctioneer starts at a base price and
negotiates up. The broker method establishes an artificial ceiling, which may not guarantee maximum
net revenue, essentially leaving money on the table, and does not foster open competition.
Advertising approach also differs between broker and auction sales methods, which impacts exposure
and public participation in the sal. Brokers primarily target other brokers and only occasionally will
they place an advertisement in local papers. Auction advertisements target not only the broker, but
also the end users using newspapers, trade publications, and the internet. Auction marketing may be
local, national or international; based on the type of property and the location of potential buyers.
Because of the passive nature of a broker sale it is much more difficult to get the press interested in
publishing a story. The activityland excitement of the auction provides visuals that attract the press and
T provide the opportunity to obtain positive media exposure for the law enforcement agencies involved.
Press releases sent before the auction inform the public of the sale and enhance the public's
awareness of the law enforcement mission ofthe agencies.
With a broker sale, there is no set "saie date" as there is with an auction and there is the possibility that
the sale could fall through if the buyer fails to close the deal. Should that occur, the aircraft goes unsold
that much longer until another buyer can be found and there may not be any earnest money deposit
retained. Our sale is a cash sale and the Government does not offer any financing. Terms and
conditions of sale are made available to all prospective bidders prior io the sale so they are aware of
the performance requirements of this sale. It is upto the buyer to have investigated any method of
necessary financing prior to bidding at the sale. Prospective bidders will be required to provide proof of
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March 17, 2006
a $250,000 cashiers check deposit in order to be allowed to bid, and the high bidder and second high
bidder are required to surrender those deposits at the close of the auction. Failure to meet these and
other terms and conditions of sale will place the buyer in default and he/she will forfeit all monies paid
as liquidated damages.
Our research shows that aircraft brokers charge an average commission of 10 percent for their
services. Using the estimated value of $4.2 miliion that would equate to $420,000 in sales costs.
The myth is that Government auctions are tire sales. This myth works to our advantage in attracting
bidders to the auction. The reality is that the auction method brings in higher returns than the traditional
broker method.
Finally, an auction is an arms length transaction and gives the public the full opportunity to participate,
eliminating any perception of preferential treatment to one individual. The Government cannot be
accused of negotiating a "back doo? deal. ‘
While EG&G recommends pursuing Option 1 — Specialty sale, we will sell the Learjet in whichever
manner the Government prefers. Please indicate your preference and concurrence below.
lf you have any questions, l can be reached at (703) 361-3131 x265.
Sincerely,
` - Teresa M. Huattner
Manager, Marketing & Sales
Cc: Dennis McKenzie ‘
Please select one option:
_ Option 1 - Specialty Sale
- Option 2 -— Cyclic Sale
_ Option 3 - Broker Sale
Approvai: Concurz
Carlos Martel Dennis McKenzie
FP&F Officer Contracting Officers Technical Representative
Date: Date:
T|\/iH:trnh
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