Entrepreneurs Martin Goldfarb and Alon Ossip learned about aircraft leasing the hard way, by watching their first investment in the business lose more than half its value this spring.
Undaunted, the two founders of Toronto-based private-equity firm Almada Inc. are jumping back into the aviation industry on Thursday, with an $80-million investment in five planes they expect to grow into a larger fleet. Almada will announce the acquisition of three used passenger planes − two Bombardier Q400s and a Basler BT67, which is based on the design of the storied Douglas DC-3 − and has two other aircraft under contract, a Boeing 737-800 and an Airbus A321-200.
“Aviation finance is unique in that the assets are secure, movable and global,” said Mr. Ossip, co-founder and chief executive of Almada, and a long-time adviser to the Stronach family as chief executive of their private company and a former executive at auto-parts company Magna International Inc. He said: “It is a very attractive business, growing rapidly in size, with strong lease yields and strong air travel demand."
Almada’s founders have successfully owned software, consumer-products and real estate businesses in the past. They backed into the aviation industry after investing approximately $12-million in private-label soap and detergent maker JemPak Corp. in 2011, then selling it in 2016 for $135-million to another private-equity company, Acasta Enterprises Inc. Mr. Goldfarb, best known for his marketing-research firm, Goldfarb Intelligence Marketing, and Mr. Ossip received half the JemPak sale price in cash, and the other half in Acasta shares.
Acasta, with Mr. Goldfarb and Mr. Ossip as significant shareholders, had also acquired an aviation-finance company called Stellwagen Finance Co. Ltd. for US$270-million in 2016. When Acasta subsequently ran into financial difficulties in 2017, Mr. Goldfarb and Mr. Ossip offered to buy Stellwagen. The Acasta board decided instead to sell Stellwagen to its management team for approximately US$100-million in May.
As part of that transaction, Mr. Goldfarb and Mr. Ossip swapped their Acasta shares for a 7-per-cent stake in Dublin-based Stellwagen. Acasta co-founder Belinda Stronach also became a Stellwagen shareholder.
Mr. Ossip and Ms. Stronach are currently in court with Magna founder Frank Stronach, who alleges the two executives have mismanaged his family company, The Stronach Group, which owns horse racing, real estate and farming businesses. The 86-year-old Mr. Stronach is asking the Ontario Court of Justice to put him back in control − his 52-year daughter is currently chair and president of the Stronach Group − and seeking $520-million in damages. In an interview on Wednesday, Mr. Ossip declined to comment on the lawsuit, as the matter is currently before the courts. Mr. Ossip’s spokesman Paul Deegan said: “These allegations are baseless and are not grounded in fact or reality."
Acasta went public at $10 a share in 2015 and was backed by a number of high-profile business figures, led by former Onex Corp. executive Anthony Melman and Ms. Stronach. The company quickly ran into financial difficulties, breaching covenants with its lenders after making a series of large acquisitions, and businesses were sold to pay down debt. Acasta stock now trades around $1.
Stellwagen will service Almada’s aircraft, which are typically eight to 10 years old, and work with the private-equity firm on acquiring, leasing and selling additional planes. Mr. Goldfarb said Almada will focus on owning narrow-body passenger planes that can be converted for service for different airlines quickly and at a relatively low cost. Almada’s short-term goal is to acquire up to a dozen aircraft, which would translate into a $150-million to $200-million investment. In addition to airlines, Almada plans to lease planes to governments, cargo companies and non-government agencies such as humanitarian groups.
Almada is backed by wealthy individuals, family offices and institutional investors, in addition to the founders' capital. The fund has invested more than $200-million and has 10 professional employees. Mr. Ossip and Mr. Goldfarb also backed tech company Workbrain Corp., which was run by Mr. Ossip’s brother David and sold for $227-million in 2007. The name Almada is a blend of the first two letters from the names Alon Ossip, Martin Goldfarb and David Ossip.