Almada Private Equity Fund Sees Value in Used Boeing 737s

(Bloomberg) -- Canada’s newest player in the aircraft leasing business is ready to flex its muscles.

Almada Inc., a Toronto-based private equity firm, is looking to buy as many as 10 additional aircraft for its new leasing fund after acquiring its first five planes.

Having raised $80 million ($61 million) from wealthy individuals earlier this month, it has commitments for another C$60 million of equity and could deploy five times that amount in the coming months with the help of leverage, said Alon Ossip, Almada’s chief executive officer. The fund could eventually be worth as much as C$400 million, with a fleet of up to 15 planes, Ossip said Thursday in a phone interview.

Ossip, who also serves as CEO of the Stronach Group, teamed up with former Canadian real-estate and market-research executive Martin Goldfarb to create Almada last year. In the 1970s and 1980s, Goldfarb worked as a pollster for former Prime Minister Pierre Elliott Trudeau, the father of current Prime Minister Justin Trudeau.

Goldfarb, Almada’s chairman, says he and Ossip were attracted to aircraft leasing after selling a chemicals company to Toronto-based Acasta Enterprises Inc., which paid them partly in shares. One of Acasta’s holdings at the time was Stellwagen Group, a Dublin-based aircraft lessor. Together, the two now own 7 percent of Stellwagen, which helps them find and lease planes.

Almada targets annual returns of about 12 percent from aircraft leasing, Ossip said.

Move Assets

Aviation finance “is a very interesting platform, more secure and more flexible than real estate,” Goldfarb said. “If you have a recession in one part of the world, you can move your assets to other parts of the world. You can’t do that in real estate.”

Called Almada Aircraft Opportunity LP, the fund invests in used aircraft because they offer predictable returns, Ossip said. It focuses on turboprops, narrowbody jets such as Boeing Co.’s 737 and Airbus SE’s A321, as well as “special purpose” aircraft that fly for clients such as the United Nations.

“We like narrowbodies because you can move them from airline to airline very easily,” Ossip said. “Unlike widebody jets, they are cheap to reconfigure.”

Almada’s returns hinge on an ability to find planes that are below market value and lease them out at higher rates. Ossip pointed to a recent transaction in which Almada found a plane in Russia whose owner, an airline, wanted to modernize its fleet.

“We got a plane at a very good price, we leased it to someone else at the market price, and that’s our return,” Ossip said. “We are able to do this because we don’t have a huge bureaucracy and we have ones or twos, not huge portfolios of planes.”

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