Podcast Summary

Real Talk: Real Estate Discussions with Andrew Kirsh

Episode: Flying High – A Deep Dive into the Acquisition of an Airplane Hangar at Hawthorne Airport
Guests: Jackson Brissette & Brian Novak (Founders of Jofa Capital)
Release Date: March 13, 2024

Main Theme

This episode spotlights the unconventional acquisition of an airplane hangar at Hawthorne Airport by JOFA Capital founders, Jackson Brissette and Brian Novak. The conversation dives into the intricacies of the bankruptcy process, the unique appeal of the asset, the capital-raising journey, and their investment ethos of targeting "weird and wild deals" that might be overlooked by institutional players. The episode also explores strategies for finding distress deals, the current climate in real estate capital markets, and the transition from institutional employment to entrepreneurship.

Key Discussion Points & Insights

1. The Hawthorne Hangar Deal: Origin and Unique Appeal

• Background: The asset was acquired out of a Chapter 7 bankruptcy. The previous owner ran a helicopter film company and lost the asset amid litigation and difficult lending situations.
  ⏳ [04:02]
• Fee Simple Interest: Unlike most airport hangars—usually operated via ground leases—this was a rare sale of the underlying land (“fee simple”), making it significantly more attractive and versatile. There are only about 200 such hangars in the U.S.
  ⏳ [05:01]
• Location Advantage: Hawthorne Airport is near LAX, SoFi Stadium, and major tech companies (SpaceX, Tesla, Starlink) but often overlooked due to its shorter runway. It offers strategic upside, especially as nearby Santa Monica Airport is set to close.
  ⏳ [07:08], [19:33]

2. Bankruptcy & Stalking Horse Process

• Stalking Horse Role: By negotiating and entering the initial contract, Brissette and Novak became the stalking horse bidder, setting the bar for subsequent bidders and securing protections like breakup fees.
• Importance of Relationships: Building rapport with brokers, the bankruptcy trustee, and leveraging insider knowledge (via legal counsel Robin Itkin) was critical for success.
  ⏳ [08:38], [16:26], [25:17]
• Breakup Fee & Diligence Edge: As the stalking horse, they gained a breakup fee if outbid, full diligence access, and contract-negotiating rights—advantages against last-minute competitors.
  ⏳ [21:24], [22:38]

“Part of the benefit of being the stalking horse bidder is…you get control over the terms and conditions, but most importantly, you get a breakup fee for all the time and effort you put into negotiating the PSA.” — (Brissette/Novak, [21:28])

3. Capital Raising in a Tough Market

• Challenging Environment: Raising equity was tough due to deal size ($13.3M), new sponsor status, and the hangar’s niche nature. However, the story and attractive fundamentals ultimately resonated with several LPs.
  ⏳ [11:50], [13:16]
• Why Investors Passed: Most overlooked the deal’s versatility and got stuck on product type. The fact it could be industrial, not just aviation, was missed by many.
  ⏳ [14:26], [15:12]

“In the real estate world, people just want to stick to their domain…For lack of better terms, I think people were lazy and they didn’t peel back the onion.” — (Brissette/Novak, [14:26])

4. Post-Acquisition Strategy: Optionality

• Several business plans are viable—a testament to the asset's value:
  • Lease to an R&D or industrial tenant while monetizing the ramp/fuel for aviation
  • Rent to a fleet operator (e.g., JSX, Wheels Up) seeking alternatives to crowded LAX
  • Master lease to an FBO for home-based corporate tenants. ⏳ [17:51]

5. Bankruptcy: Lessons and Future Prospects

• Both founders are eager to pursue more bankruptcy/distressed deals, having gained a competitive edge and practical know-how through this transaction.
  ⏳ [16:45]

“It would be a mistake to ever do something once…That’s the toughest; getting your first one done. This is something we want to rinse, wash, and repeat.” — (Brissette/Novak, [16:36])

• Practical strategies for sourcing: monitor bankruptcy (“chapter 11” and “chapter 7”) and notice of default sites, target company liquidations with attached real estate, and leverage attorney relationships.
  ⏳ [24:29]

6. Market Outlook on Distress and Capital

• Distress in office assets is present, but the much-predicted “tidal wave” of distress across other sectors has not materialized; much activity is in loan mods and one-off special situations.
• "Cash-In" refinancing and disconnect in equity pricing are shaping the market; distressed opportunities may increase if rates stay higher for longer.
  ⏳ [27:54], [32:00]

7. Investment Philosophy: Agnosticism & Intellectual Curiosity

• JOFA Capital purposely avoids specializing in a single asset class, preferring to seek "hairy, quirky, off-market" deals that present asymmetric opportunity.
• Intellectual curiosity drives their dealmaking, with confidence they’ll find LP equity for genuinely strong deals irrespective of asset class. ⏳ [36:20], [37:08], [40:08]

8. Transitioning from Institutional to Entrepreneurial Roles

• Advice: Prospective entrepreneurs must “psychoanalyze” themselves, be prepared for income uncertainty, embrace getting hands dirty, and check their egos at the door. ⏳ [42:15], [44:20]

“You have to love not having an ego…Now I’m fixing leaks at our terminal building, going to Lowe’s on my own and buying buckets.” — (Jackson Brissette, [46:01])

• The journey is not glamorous—successful entrepreneurship requires resilience, humility, direct involvement in property management, and a passion for learning new corners of real estate.
• Both guests stress openness, mentorship, and staying connected with peers and industry newcomers. ⏳ [48:47]

Notable Quotes & Memorable Moments

• On pivoting away from traditional asset class focus:
  “We’re not interested in just buying commodity product...a lot of it is about finding opportunities where we can uncover value thematically. You don’t need to be that expert where you only do core multifamily.” — (Brissette/Novak, [37:08])

• On bankruptcy diligence:
  “Our only risk on the bid? We thought it’d be Stan Kroenke or somebody coming in and outbidding us.” — (Andrew Kirsch, [23:16])

• Entrepreneurial Realism:
  “There’s nothing glamorous about what we do. You’ve got to love it, like Jackson said.” — (Brian Novak, [46:59])

• Personal Touch:
  “I take every call from a UW Madison grad who’s in college and reaches out… these conversations should be fluid and open.” — (Jackson Brissette, [48:47])

Timestamps of Key Segments

• Deal Overview & Bankruptcy Story: [04:02] – [07:08]
• Why Hawthorne? The Airport’s Unique Position: [07:08] – [08:38]
• Stalking Horse/Bankruptcy Process: [08:38] – [11:14]
• Capital Raising Feedback & Challenges: [11:14] – [15:47]
• Would They Do Bankruptcy Again?: [16:26] – [17:44]
• Business Plans for the Hangar: [17:51] – [19:18]
• Santa Monica’s Closure and Market Impact: [19:33] – [20:06]
• Bankruptcy Bidder Advantage, Breakup Fees: [21:24] – [23:16]
• Sourcing Future Bankruptcy Opportunities: [24:29] – [26:22]
• State of Distress/Market Outlook: [27:54] – [33:37]
• Investment Philosophy; Operator vs. Agnostic: [36:20] – [40:08]
• Entrepreneurship Advice: [42:15] – [47:41]
• Openness to Industry & Closing Remarks: [48:47] – [49:57]

Takeaways

This episode provides a rare, candid inside look into executing a distressed asset acquisition via bankruptcy in a niche real estate space, and the mindset required for entrepreneurial success in real estate today. Brissette and Novak champion curiosity, adaptability, and a willingness to execute on unique—but fundamentally sound—opportunities, regardless of sector or perceived institutional orthodoxy.

Their practical, hands-on advice will resonate with aspiring dealmakers, while their navigation of an unusual hangar deal offers a case study in creative, opportunistic real estate investment.