Turnaround at Hobby

HOUSTON — General manager Lloyd Turner came to Enterprise Jet Center at William P. Hobby Airport in 1990 as marketing director, having previously sold Cessna and Mooney aircraft. Annual revenues, he recalls, were some $700,000 at the time; today they’re at more than $6 million and are projected to top $10 million once the fixed base operation is resettled in a new $11 million FBO complex now nearing completion. While the growth has been steady, the financial backing has not. As one company in a portfolio operated under the auspices of a public/private Small Business Investment Company (SBIC), overseen by the U.S. Small Business Administration, it saw its existence threatened because of sister companies’ weak performances. With an influx of capital and new financial oversight by Cupertino, CA-based Sundance Venture Partners, L.P., Enterprise is on track to be a solid turnaround example, say officials.

Explains Turner, “This company was in a portfolio, an SBIC. It was owned by Dave Wallace, who is now the mayor of [suburb] Sugarland. He had a company called Mark Point Ventures II, and he developed an SBIC and got a bunch of companies in that portfolio; we were one of the companies. Somewhere along the line, the portfolio got capital-impaired, to the tune of about $40 million and he couldn’t make the payments on it. In comes Gordon Diachenko, who takes portfolios and sells off the ones that don’t fit or are losses.

“Gordon knows the government channels, and the government had an investment here in preferred stock, like $1.7 million. I was making a profit, but my bank note was a seven-year note with a big bumper on it.”

Adds Diachenko, “In other words, he was highly leveraged.”

[The Small Business Administration defines SBICs as “privately owned and managed investment firms. They are participants in a vital partnership between government and the private sector economy. With their own capital and with funds borrowed at favorable rates through the federal government, SBICs provide venture capital to small independent businesses, both new and already established.”]

The Decision to Invest

Diachenko, who serves as chairman of Enterprise, explains that Sundance Venture Partners got involved after the Small Business Administration put the holding company in a federal receivership. “They fired the management and hired me,” he says. “I can write off investments; work with investments; do add-ons to investments. But they’re all done on proven investment criteria.”

Diachenko, who has some 26 years serving as a corporate turnaround specialist, explains that his primary job is to bring in the right management and financing, to serve as a mentor.

“When we sat down and looked at Enterprise the first thing was, can we get a lease on the adjacent 16 acres and what are the terms? Then we worked the cost of the building — you have to bring in [revenue] so much per square foot. “We put together a sophisticated financial model with a third-party appraiser.”

The initial $11 million FBO complex includes an 85,000-sq. ft. free-standing hangar with some 28,500 square feet of office space for corporate tenants. The leasehold is for 30 years, with two five-year options.

“If it was a ten-year lease, we couldn’t do it,” comments Diachenko. “With 30 or 40 years it’s a no-brainer. And the best part of it is the location.” That location is on the last parcel of vacant property on Hobby, which has five fixed base operators and a heavy air carrier presence, led by Southwest.

The Houston Airport System, which recently completed a major expansion of Bush Intercontinental Airport and which oversees Ellington Field, is in the midst of a $1.5 billion, 20-year capital development plan that rose out of its updated master plan at Hobby.