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.
The ongoing growth in business aviation combined with the City of Houston’s commitment to continue to invest at Hobby, says Diachenko, made the investment in a new FBO justifiable. And, when runway redevelopment enters the picture in the years ahead, the existing Enterprise leasehold and those of some other operators on the field are scheduled for demolition. The new Enterprise property, under the current plan, will be located at a prime location at the end of intersecting runways.
Diachenko expects that within two or three years one or more new equity partners will be brought in to own the FBO, along with “sweat equity” provided to current top management, ending his role in the turnaround.
Plenty of Based Business
Turner, 70, says there are some 60-70 based corporates that will make the move to the new FBO facility — not quite 100 percent capacity. He explains that he wants to keep some options on space before the move in so he can better determine just what the mix of aircraft should be.
According to Turner, Enterprise Jet Center focuses exclusively on corporate flight departments as subtenants; and, based corporates must agree to the FBO providing maintenance and aircraft cleaning services. “All I want is corporate tenants,” says Turner. “I do not want retail tenants; it wouldn’t work for us.”
The current project is Phase 1 of a planned three-part development project, explains Turner. Phases 2 and 3 call for more corporate hangars, one of which may in time become Enterprise’s dedicated maintenance/overflow facility. The current plan calls for maintenance to take a portion of the new hangar.
Turner says that much of the company’s growth has been mostly from the changing mix of based corporates and transients. “It’s pretty much the same mix of people,” he explains. “We just have bigger airplanes; our hangars have been bulging. I’ve seem them go from having a JetStar and a Sabreliner to Citation Xs; we’ve got a brand new Gulfstream 440 in the hangar, another customer ordering a Gulfstream 550.”
Enterprise offers maintenance, charter and management, and aircraft sales. According to Turner, the FBO pumped some 2.2 million gallons of jet-A in 2005 and projections call for that to reach three million once the new facility is in place.
Next on Turner’s radar screen, he says, is opportunity south of the U.S. border in Mexico and Latin America. He attributes some 150,000 gallons of jet-A sold this year to corporates out of Mexico — up from some 20,000 gallons the year before.
The company is working with the Monterey Jet Center on a sales and charter satellite connection in Mexico. Turner says the company has signed as the exclusive provider for Flight Card, an aviation credit card targeted at the Mexican market. And, Enterprise now prints its company brochures in Spanish. “It’s a market that’s really untapped,” says Turner. “It’s a specialty market, and we want to cater to them.”