I think you have to change an old steam locomotive away from an investment commodity, it is a historical piece for preservation. Having one run and pull passengers is about enjoyment and delight. If the engine were all about all this toil and trouble it would be scrapped on the spot, and that aint gonna happen for sure.

Is Sandberg's organization professional or non-profit?
Non profit would mean he can accept donations not expection a return off the profits.
(money donated) for the work and restoration of equipment.

NRM seems to treat the engine like an investment commodity. If funding problems go on, then there needs to be a donation drive, but if we carry on at a commodity level it just doenst work out.

IRM seems to do good especially on the recently aquired CA&E cars, what up with 261, eh?

It’s just my speculation, assuming we can do that here. I explained it in great detail in post #3 on page 3, and in four posts on page 2.

No one said it would be a great investment. More of an "interesting"one. LOL

I can't speak to the various insurance policies mentioned but if I take my financial calculator and plug in 225K present value, 75K future value, 180 periods (15 years on a monthly basis), 0.5% per period (6% per annum) I calculate payments of $1641 per month which adds up to $19,689 per year. That's taking it down to scrap value + a bit of jewelry money as described.

Naturally it's worth a lot more than scrap value IF someone is out there who wants to run it. Even as it is right now with the boiler work needed it's still a lot better than the average park / museum engine that will need lots of running gear work, missing parts replaced, and probably major boiler work not just a tube job. It seems to me that 261 is worth a lot more that $225K but then again maybe that's the price without an interested operator.

Hey I'd consider buying it but I have no place to put it and gosh darn it the museum of which I am a mere associate member already has one!

Steve

I believe this is another myth about steam locomotives - that there is some value which is significantly above scrap value. What is their value anyway? If there was a market for operating hangar queens, we would have seen a number of other engines go up for sale and be sold years ago. I am not seeing enough transactions of super power steam locomotives (operating or not), to create a sellers market, where price can be set by their "feeling" on what it is worth.

In My Honest Opinion, the base value of a large restorable steam locomotive is defined by: 1) Scrap value of steel and other recyclable metals on the locomotive, plus the sale of a few collectable hardware items. 2) Costs involved in disassembling locomotive and shipping to scrap metal companies 3) Costs involved in dealing with any environmental issues that come up due to the scrapping 4) Costs involved in a PR campaign to regain face because you just scrapped a locomotive.

If you are an unfeeling corporation you might go with the base value. If you are a non-profit historical organization or a business which may find some responsibility or benefit from the PR in saying "Hey, we just saved a locomotive!" then you could subtract from the base value, a number which might amount to the write-off or contribution which the group or company may have given to "save a locomotive." Or the seller might consider the savings they would have by not owning a huge, hard-to-move object which might be a liability in one way or another.

In my book, what matters is not the amount of money generated, but establishing a positive future for the artifact in question. The biggest factor involved is the recipient of the locomotive, and whether or not they will accomplish their preservation or operation goals. If it just becomes their nightmare, and the artifact basically suffers another 15 or 20 years at the hands of someone new, it is not the most ideal outcome for the locomotive in question (although it probably has not gotten scrapped in the meantime). With this factor in mind, GIVING AWAY a locomotive makes sense if you trust the new owner to be a decent caretaker and has the ability to pay for all the ongoing costs involved in owning a locomotive.

But those with the acumen like to put a value on things, regardless. It seems that the price of a barn-stored restorable complete historic interurban trolley car is about that of a very basic, new operable automobile. Maybe then the price of a recently-operated restorable and complete super power locomotive is about that of a limited edition luxury car, or maybe a small house in the suburbs. This is assuming that moving the beast from its current location doesn't bankrupt the buyer.

Obviously the value of anything is what someone is willing to pay.

If someone seeks a working engine then the value of one in working condition would be the scrap value plus the value of repairs you don't have to make. Or more if you cannot obtain the junk engine at scrap value. In the case of 261 the working engine value is naturally reduced by the anticipated cost of the tube job. (And that itself is variable since it can be done by volunteers over time or by a contractor more quickly.)

If no one is looking for a working engine then the value drops considerably to either scrap value or whatever someone might pay to have a dead engine to display.

The analysis need not be any more complex than that. It's all about how many folks are looking for a large working engine. Considering the case of Frisco 1522 I would have to guess there's not too much of a market (not that she was necessarily for sale but it all comes down to operations whether or not the operator is the owner as well).

Steve

Any asset involved in carrying out a business is worth only what it can contribute to the buisness through its use, with the potential for some salvage value if owned by its operator, no salvage value if leased. Locomotives make money by moving stuff in trains. If you need to move stuff in a train, a locomotive is worth much more than if you don't - but still only if you can get more for using it to do its job than it costs to have at available and use it. Don't waste any time sweating over sunk costs - they are dollars that no longer exist, and have no place in the equasion. So, there's no real rational excuse to lease or purchase a mainline steam locomotive from a strictly business perspective.........which is where we get into non strictly business perspectives, and the highly relative value of intangibles, which are the basis for all these schemes as well as any artistic or entertainment programming.

What we need most is a Spielberg of railroading with a Bill Gates type as a backer.

dave

At the time the lease terms offered by NRM were deemed too steep for the Sandberg group, the museum had set the purchase price for the locomotive at $800,000. Since then, they have lowered the purchase price to $225,000.

Since the lease terms naturally reflect what the owner thinks the locomotive is worth, it only stands to reason that NRM would now be willing to offer less costly lease terms to reflect their lowered selling price.

I still think the $225K price is lower than I would have expected. Yes, I know that the engine needs lots of boiler work, and that even if somebody gave it to me for free, I couldn't begin to afford the cost of the repairs needed.

However, I notice that on the same site, private cars are going for more, in some cases a lot more. Granted, you don't need to put new boiler tubes in your PV and they're a lot easier to tack on to an Amtrak train and go somewhere, but it still seems rather odd.

Also, while $225K is out of reach for me, and probably most of the other folks reading this board, I was up on a cruise on Lake Union in Seattle over the weekend. The boat I was on cost about $800k (No, it wasn't mine, LOL!) We saw plenty of other boats that were easily in the $1 million or more range. What's the "return on investment" on one of those? The lake was full of them, and rumor has it that you can have a hard time finding a place to dock your Yacht in Seattle.

It would only take one of those people with the disposable income that can buy a $750K yacht to decide they wanted a really big train set and 261 could be sold. The extra $500k could probably put a good dent in the restoration costs. Of course then you have to find a place and crew to run her, but the 261 group managed to do that, so maybe somebody else could too, or work with the 261 folks?

All this is well and good, but latching on to 261 is NOT the Sandberg groups first or second priority just now. If the things Steve is currently working on come to fruition, and it looks like they will....well 261 will be kind of irrelevant.

What is Sandberg's first and second priority now?

Another locomotive. And possibly two other locomotives.

I hope you are right. I have often thought that ANY type of operation (mainline or tourist or museum) should have at least two locomotives if they are going to run steam. One to run and one to be working on. Actually, three would be even better; one to run, one as backup and one to be working on, but that would REALLY be extremely cost prohibitive these days.

Les

Any chance one of those two locomotives might even be bigger than 261?

Well now.....this kind of perks up the ole ears.....heh, heh......I mean really.....this is some juicy information. I was just reading on the 261 website in regard to the history of 261. Steve Sandberg's grandfather Frank, was once an engineer/fireman on the 261. So....it seems as there may be a significant family nostalgia factor associated with the locomotive. Perhaps Steve will simply pool some cash with a few of his "steam" buddies to snatch 261 up at such a bargain price. This insures she is kept in good hands and could safely be put in storage for a period of some time to be rebuilt in the distant future after Steve gets his new locomotives in tip top shape....heh...

Seriously, if I was Steve, giving up 261 to be "put away" somewhere and not knowing how well the owner was going to take care of her would be a little dispiriting. Giving her up would be kind of like divorcing the perfect wife.....that's just not something your going to do...

Also, if Mr. Sandberg starts collecting more steam trains.....is he going to have room for them all at the facility in Minneapolis? If 261 stays property of NRM for the next year or two, will 261 be brought back to the museum?

Obviously the value of anything is what someone is willing to pay.

Actually, one measure of value is what a someone (acting rationally, with full information, adequate time and information) is willing to pay; it's often called market price or fair market value. There's also historic cost; book value, etc.

In short value is very subjective. If you want a little more on how price and value can deviate-google up "vickery auction" where the winning bidder pays the second highest price. Prof. Vickery won a Nobel Prize in economics for his work.

While I am a long-time member of the Minnesota Transportation Museum I certainly cannot speak for the MTM leadership. But I would venture a guess that they'd be happy to house a steam engine (or two?) at their Jackson Street Roundhouse in Sant Paul--especially since Frank Sandberg, Steve's dad, is a founder of MTM (when MTM consisted only of our Como-Harriet Streetcar Line demonstration railway in Minneapolis).

Thanks!