I have watched so many
people lose millions of dollars
because they had the wrong
transaction team around them.
And that's not even financing.
If you're paying cash, real
estate guys are really bad
at this, anybody who does
like deal junkie type guys
are really bad at this.
They're like, oh yeah, I'm
gonna run my own transaction.
Be sure to assemble a
good transaction team
that you can trust and it
will take you a long way.
Welcome to Own the
Jet by Aspen Aero Group,
where we share perspectives
from some of the leading voices
in private jet
ownership and business aviation.
I'm your host, Derek Savage,
along with my co-host Jason Spoor,
president of Aspen Aero Group.
Our guest today is Preston Holland
from Prestige Aircraft Finance
and the author of the
Private Jet Insider Newsletter.
Preston is passionate about making sure
his high net worth clients are getting
the right finance
solution for their situation.
Join us as we dive deep
into the mechanics, mindset,
and moments that define jet ownership.
And together, we'll learn
what it takes to own the jet.
Hey Preston Holland,
thank you for joining us
on Own the Jet.
Yeah, thanks for having me.
This is fun.
The cool thing about
having you on the program here
is that you have a unique ability
of taking all of these
crazy, amalgamous things
that people don't
understand and distilling it down
into something that's easy
for someone like me to get,
right, that doesn't know
anything about private aviation,
the finance world
surrounding private aviation.
It's like you have a gift for that.
Yeah, for sure.
Happy to have you on the show,
happy to be talking to you about this.
Super glad you're here.
Yeah, I think the cool thing is,
one of the things that
you guys are doing here
that I think is gonna be really helpful
for you over the long
term is it's a muscle.
Explaining things in a really simple way
is only achieved by repetition.
And so I was actually
having a conversation
with a friend of mine and he was like,
"How do I find my voice in my industry?"
And he was like, "I don't
feel like when I say things,
"I don't exactly say them right."
And I told him, I said,
"Look, if you look back
"on the history of any
sort of content that I create,
"the early stuff is terrible."
It's not good, it doesn't read well,
it doesn't get any
engagement, all that kind of stuff,
but you literally have
to put the content out.
And as you do that,
you'll find your voice
and you'll see what
resonates and you'll understand.
And so what I think is
cool about what you guys
are doing here is this is
a regularly cadenced show
and it's not just one
part of the industry.
And as it continues, it gets better
and it's really hard in the beginning.
It's really, really hard to get started,
but you have to push through that point
and then it becomes understandable.
It becomes a big muscle.
Yeah, exactly.
Exactly, it's like
working out or it's like,
you have to train that
and it's inside your brain.
And so I write a newsletter,
it's called The Private Jet Insider.
You can find it at pressinholland.com.
It's distilling down complex concepts
and making them
digestible for the everyday human.
That's what I like to do.
So anyways, it's a
little background on me.
Excited to be here, thanks for having me.
Let's talk about prestige.
So because prestige
is your day job, right?
I mean, that's like what you do.
Exactly.
This is what people may know you for.
I create content for fun.
Like it's literally a block and I'm a
practitioner by trade.
Right, but your company is prestige.
Yeah, so I own an
aviation finance brokerage,
debt advisory service.
Essentially what we tell people is
when you call your bank, they will do
your RV, your house,
your line of credit,
they'll probably do anything
business banking that
you could possibly need.
And then you're gonna call them and say,
I'm buying an airplane.
And the president of
the bank is gonna go,
well, we have one on the
books, we have no idea.
How to help you.
Exactly.
And so we help people
navigate the fairly complex world
of aviation finance and
structuring and understand
we create market efficiency, right?
So we work with a platform
of about 35 to 40 lenders
that we do consistent transactions with,
and then a network of
another probably 20 on the backend.
And that ranges from household names
to banks you've never heard of,
to private debt funds,
to leasing companies,
kind of across the spectrum.
We sit down with a client, we say,
what's the right answer for your need?
And we typically
collaborate with the broker,
the tax person,
somebody like KJ, an attorney,
put together the transaction team,
and us, the transaction
team, shapes and forms
the transaction to be the
right structure for the client.
And so we'll work with the
broker on pre-buy inspection,
and we'll work with them on
maintenance tracking and specs,
and all of the technical
aspects of the aircraft.
We will deal with the
capital market side.
So we have relationships with lenders,
we're oftentimes able to
drive market competition,
which creates the best
structure for our clients,
and then hopefully
have a successful outcome
so that when they go
to do their next one,
we're gonna run it back
and do the same thing.
And I probably talk
myself out of 30% of deals,
20 to 30% of deals, I'll sit down with
either the principal
or the CFO or the
head of the family office
or the controller, whoever kind of,
whoever does the cost
of capital calculation,
and I'll say, what's
your cost of capital on XYZ?
And they tell me, and I say, look,
you're not gonna beat
that on an airplane loan,
so you're probably better off doing that
until rates readjust and
maybe we could do a cash out refi,
or your cash isn't really
earning the type of returns
that make sense to put
leverage on the airplane,
or hey, you have this
beautiful stock account,
it's currently uninhibited,
and you can take credit lines off that.
I had no idea.
I don't wanna sell this
stock to avoid capital gains,
and I wanna buy an airplane.
Well, have you thought about taking a
stock portfolio-based
loan instead of putting
leverage on the airplane?
Maybe, maybe not, right?
And so, yeah, we try to
be consultative in that.
And then even if they don't end up
needing your services,
you help them out. Exactly, exactly.
And typically it means that now,
the next time they go to buy something
and they can't do that,
they're calling us and saying,
okay, you were honest with me.
So, yeah, that's the whole goal.
So if I'm getting into that conversation,
what's the first
thing I need to ask myself
about my situation, and
then what's the first thing
you're gonna ask me?
You need to ask yourself,
what does my next five years look like
from a capital investment in my business?
So am I trying to buy another company,
expand more regionally,
am I trying to do a merger
with another franchise and
take over a new territory?
And what type of capital requirements
am I going to have for that?
If the answer is no, and
you're sitting on a fat pile
of cash and you are risk averse,
the answer may be pay cash.
But if you're on the growth trajectory
or you have your cash
returning 12, 15, 18%,
which is not uncommon
for many of my clients,
it makes no sense to not
take a six and a half percent
today loan on your airplane.
Because that cash works
better for you elsewhere.
So that's the number
one thing that you need
to ask yourself as you
go to buy an airplane.
Okay, and then maybe the next question,
because this has been a huge topic,
is the new bonus depreciation situation
and how that plays into
that part of the conversation.
Because now the rules
have changed a little bit
as opposed to what they were last year.
So can we talk about that a little bit?
We look at this
through a holistic picture
when we are looking at giving advice.
Because we have a
responsibility to our clients
to give educated informed advice
and then also synthesize
what the rest of our clients are doing.
And accurate.
Exactly, accuracy,
like how does this play?
In a bonus depreciation environment,
if you're in the 27th tax bracket,
27% tax bracket, which most
of our clients are, right?
When you finance your
airplane and you're putting 20% down,
typically the back of
the napkin math says
that the savings from a tax perspective
is about 20% of the purchase price.
So really you're not having
to come up with a lot of cash.
So you may put the cash
down and then in three months
have the savings from a tax standpoint.
But it kind of rough back in the napkin
math equates to that.
So you're really only
paying your interest expense
over the life of your
ownership of the aircraft.
Now, this is not tax advice to be clear.
I am not a tax professional.
But what a lot of my clients
are doing is they're saying,
I'm gonna use that depreciation expense
or that depreciation
savings as my 20% down.
And then I'm basically just
paying my cost of capital,
which is today
somewhere between six and 7%.
And that's really my
cost of my carrying cost,
plus the real depreciation that happens.
The financing
conversation becomes easier to digest
in a bonus depreciation environment,
as opposed to in a 40%,
you're still having all this cash expense
and moving stuff here and there.
And really at the end of the day,
it might just make
more sense to pay cash.
And then you can also deduct your
interest expense over time
at the same proportion
that you have business use.
So let's say, Jason's gonna
come pick me up on Friday,
we're gonna go play golf as well,
we're in the industry,
might be a business expense,
who knows?
(laughing)
But he may take--
Big talk, business, carrying cost.
Maybe he takes his wife to
a fancy dinner in New York.
That probably doesn't count.
So he does that 10% of the time,
90% of the time is for business,
he can deduct 90% of
his interest expense.
So there's other
calculations that go into that.
And a lot of times our
clients have better uses
for their cash than just
sitting in an airplane,
especially in a rate
environment, surprisingly,
it's easier to make the
justification for financing
in a slightly elevated rate environment
than a 0% rate environment.
Because it's all about risk-free yield
and that would get very, very technical.
But talk to your financial advisor,
figure out what your cash is making,
then call me and I'll say,
yeah, probably makes sense,
or no, it just
definitely doesn't make sense.
Yeah, so in terms of the
way everything's calculated,
you were explaining to me earlier
that there are three kind of like letters
that you can pull in the way
that they interact with each other.
Can you tell me a little bit about that
so I can understand
it a little bit better?
We talk about structuring the loan.
Yeah.
You have three main components
and then there's some
fringe kind of back-end stuff,
but your three main
components are down payment,
amortization and interest rate.
Those are the three things
that we're really gonna focus on.
They're interrelated, so
they're levers that you can pull.
If I wanna drive my interest rate down,
I can put more cash
down, keep the amortization.
For those that don't
know the word amortization,
because it's a financy term.
If you think about your home loan,
you have a 30-year home loan.
Well, home loans are
calculated as 30-year term,
30-year amortization.
So my monthly payment is
as if I have a 30-year,
but I can hold it for 30 years.
Airpoint transactions
are typically structured
in a five-year term and
an amortization period
that is longer than that.
So there's a balloon payment
at the end of the five years.
It's a commercial lending regulation.
There's a whole reason
why that is the case,
but that is typically
how they're structured.
So when I talk about amortization,
I'm gonna pay as if
it was a 15-year loan,
but at the end of the
60th month, the fifth year,
I will have the
outstanding balance will come due.
That's the end of the term.
So when I talk about amortization,
that's just so that everybody's kind of
on the same playing field.
So down payment,
amortization and then interest rate.
Those are the three levers.
So if you wanna lower interest rate,
shorten up your amortization,
or raise your down payment.
Interest rate is
calculated based off of risk
of not repaying.
At the end of the day,
the bank needs to yield on their money.
So if you're more risky, your interest
rate will be higher.
They will require a larger down payment.
And the down payment
amortization has to do with,
if the bank has to go pick it up,
the bank does not
want that airplane back.
Right. Right.
Period. Right, right.
I don't know if you've
ever had a client go to fault,
but it's really rare.
Like the bank is gonna
try and work with you.
But amortization, it
depends on what equity position
you're in the aircraft.
And it is what determines a
lot of your monthly payment.
And so if you want a longer amortization,
you may have to come with
another five or 10% down.
Or you may have to pay
another 25 or 50 basis points
a quarter to a half point of interest
in order to get that longer amortization.
So we can play with those three levers
depending on what your priorities are.
So if you're saying my cost of capital,
which is a fancy way
of saying interest rate,
is the most important thing,
well maybe we'll come
in with another 5% down,
shorten the amortization by three years,
and we can maybe drive
that down by 50 basis points,
a half a percentage.
Maybe that's important to you.
Maybe you're a cashflow guy.
You say I want the lowest
possible monthly payment.
So maybe we'll pay a
little bit more in interest,
but we're gonna kick the amortization out
as long as we can and
have as little money down.
So it's those three things really
interplay with each other
when you're talking
about structuring a lot.
That makes total sense.
Yeah. Yeah.
So if somebody's trying to work these
three levers, right,
have you been into situations where,
let's say you're talking to a broker
that's representing somebody and they're
trying to buy a jet,
have you been in
situations where it's like,
look, this may not be
the right fit for you
because I'm pulling
all the levers that I can
and it's just not matching up?
It happens, I would
say it probably happens
15 to 20% of the time.
Okay. Yeah.
Now there is always, you
can get to a yes, almost.
It's almost, you can get to yes.
I mean, I've gotten to yes
as a pretty crazy background, you know,
there's like the whole like,
oh, you have something crazy that
happened in your background
or when I Google you, like
the first thing that pops up
and you're like, ooh.
(laughing)
But you got like a mug shot,
the article about what they did.
It's like a lawsuit. Oh, yeah.
If you wanna know if you
can get approved for a loan,
Google your first last name lawsuit,
and if something pops up in the top,
it's gonna be challenging.
I mean, it just, if there's
anything like that's serious,
like it's not something
petty, like it's gonna be tough.
The answer is always yes.
We can go to the private markets.
We can go-- Yeah, get it there.
Yeah, we can go get an asset-based loan,
but you're gonna come out with 40% down.
It's gonna be like,
High interest. So far plus 8%
as the floor, and it's
gonna go up from there,
and it's gonna be straight
amortizing a five-year term,
five-year amortization,
your monthly payment's
gonna be out the lawsuit.
We can get to yes.
Yeah. That's just--
That's not what you wanna pay for.
Exactly. What about chartering?
Because you've got a
whole thing about chartering
and debt service and cash
flow positive and all that stuff.
There's two types of,
I'm gonna charter my jet.
And you've probably seen
this with some of your clients.
You have like, I'm a rich
guy, I'm gonna buy the airplane,
and some guys are really risk averse,
and they put it on a charter certificate,
and I tell people you
should at least think about this,
is if you're gonna let your
buddies borrow your plane,
chartering it to your friends
gives you an extra layer of insulation
that dry leases don't
give you as much insulation,
not legal advice, not tax
advice, just to be clear.
A lot of people will
throw it on a certificate
so they can kind of
charter it out lightly.
That is one type of customer, which is,
I have the money, I don't
need the charter revenue.
I'm just, it's nice to have,
I may charter it here and there.
I'm gonna put it on the certificate,
it's gonna stay compliant
for 135, all of those things.
But from time to time, I will charter it.
That's one type of client.
No problem, lenders are
gonna have no issue with that
because you're not
massively depreciating the airplane
by putting more hours on it.
It's just nice to have.
That's totally fine.
It really doesn't
limit your scope of lenders
that will do that transaction.
Then you have, I'm gonna fly 50 hours,
and then I'm gonna
charter that 400 hours.
Basically, you're the next net jet in
your own mind, right?
You're just doing the
whole business model.
Correct.
And you can do it.
There are scenarios in which,
essentially what you're
doing is you're doing it
off of your signature.
So you're borrowing from
the bank on your signature,
on your balance sheet,
and then you're basically
borrowing for 6% and
you're ready to return
to your charter operator,
it might be 8.5%, right?
So you're making a spread there.
You're making some sort of spread there.
The problem is you're
depreciating the airplane.
Right.
If I was gonna ask you how
much is this airplane worth,
what's one of the first
questions you're gonna ask me?
This is a spec.
If it's a 135 or a 91.
Yeah, exactly.
How many hours, right?
Yep.
Right, well, right.
Whether it's been operated in 135
or whether it's been operated in 91.
Right, exactly.
I'm gonna say, hey, this airplane--
Has it been chartered or it's been--
Right, so yeah, to be clear to me,
the layperson here, 135 means charter?
The chartered airplane.
Okay, and 91, was it?
Is a privately operated--
Yeah.
All that stuff.
Exactly.
No revenue.
I drew this illustration.
I stole this from the FAA, to be clear.
This is like the one
piece of clever writing
I've ever read in FAA documents.
The FAA defines 91, like if
you're gonna do a dry lease
as a rental car.
Okay.
And a 135 as an Uber or a taxi.
And it makes that, it
draws that analogy here.
It literally draws out that analogy.
It's like, you can go
rent a car from enterprise,
that's a 91 dry lease.
Okay.
135 is you're paying for an Uber.
One transaction, I pay
you, you take me, that's it.
That's just like a easy way to like--
It makes sense.
Figure out the difference.
Yeah, right.
But it's, I'm gonna
ask, you're gonna ask that.
And then the next question is, how many
hours does it have on it?
Yep.
And when it's on a 135 certificate,
and I'm flying 50 and
I'm flying at 400 hours,
I'm now 100 hours over the fleet average,
which may be 350 hours, right?
Like--
Yeah, most likely.
Yeah.
Like I know that like
in the large cabin space,
that the fleet average kind of goes up
because you go longer.
Yep, exactly.
But you're looking at the fleet average,
and this guy has
chartered the absolute bejesus
out of this airplane.
Right.
So it's gonna depreciate faster.
Well, the bank doesn't
want to be in a backwards,
they, the bank will not let
you be upset on the airplane.
So your amperstition is shorter.
Like that's, but those
are the two types of clients
that are saying, there is,
I'm going to charter this,
opportunistically, and then there's,
I want to make this make money.
And then there's even guys who go,
they're kind of
fringy, approvable, right?
Like they could be approved, maybe not.
And then they're like, well, I'm gonna
have all this cash flow
from the charter.
And the bank's like,
we're just not gonna count it.
Do they try to get into
situations where it's like,
well, maybe I don't want to
buy it myself and charter it,
but I want to get into a
fractional ownership situation
with other people.
Like what is that?
Yeah, that's different.
They like, well,
there's, so there's like,
NetJets, FlexChat, that's like, I'm
signing up for a program.
And then there's me and
Jason are gonna go buy
an airplane together.
The bank will look at global cash flow.
So like maybe I could
afford to have a half airplane
or like, we're gonna buy a
$10 million plane together.
I could afford a $5
million plane on my own.
He can afford a $5
million plane on his own.
Together we can afford a nine million.
Like it's not one-to-one,
but yeah, you can get together
and do kind of shared ownership.
And you can finance it.
You have to really like
your partner, first of all.
Yeah, a lot of friendships
and with joint ownership of airplanes.
Now you've had to kind
of like come in clutch
for people before, right?
Like whenever like
things were down to the wire
and you told me a
story about Mexico earlier.
Yeah.
Can you share that with us?
Yeah.
Yeah, what happened
where you had to kind of like
really go a little bit above the on?
Yeah, so I had a client this year
and we were running up
against his purchase agreement
that expired on the 31st
and his deposit had already gone hard.
So in this scenario, he
had a $2 million hard deposit
that technically, according to the APA,
the seller could walk
away with on the first.
They could just walk away.
They could wipe their
hands in the deal the month.
So basically it's like,
you've got to give us $2 million
in order to get
started on this transaction.
But if for whatever reason it
doesn't get done by this date,
we have the option of keeping that.
Yeah, I don't know how you
structure your transactions.
This is a little plug for
like using the right broker
because I've had deals where the broker
structured the deal terribly.
Okay.
But your broker is
going to help advise you
on when you want that to be
able to be non-refundable.
Right.
Because refundable at first
and then it becomes
non-refundable at a point.
And the reason you do that
is you don't want to like
leave people hanging, is that what it is?
Or you don't want the
thing to be off the market.
Yeah, this is, well right.
You know, after a
certain amount of time goes by,
you want to guarantee the seller that,
hey, this is going to work.
Yeah.
You know, we've
already taken your airplane
pretty much off the
market for however many weeks.
Yeah.
So there has to be some reciprocating.
And that's usually it
with the money going.
Okay, so you're not
just stringing them along.
Exactly.
Because there's like a soft
deposit and a hard deposit.
That's right.
It starts soft, right,
up to a certain point.
And then once we hit a certain threshold,
then it becomes a hard number.
Yeah, which means it's non-refundable.
So this contract explodes on the 31st.
It's the 27th.
I'm calling this guy
four times a day, every day.
Hey man, I know that this is
going to sound preposterous,
but the bank requires a wet signature
on your loan documents.
It's like 70% of banks probably require
wet physical blue ink signatures.
He's at his hotel in Mexico.
Okay.
The attorney is in Oklahoma.
The bank is in Florida.
And so--
And you're where?
And I'm in Chattanooga, Tennessee.
So I'm at home, at my office.
Lots of--
It's like there's a
lot of people everywhere.
The broker is calling me as
often as I'm calling the client.
We're both trying to get
in contact with this guy.
You have to sign these documents.
And he calls me and he's like,
"Hey man, what's going on?"
I was like, "What's going on?
I've been calling you for two weeks."
I said, "I'm going to
email you these documents.
I need you to print them."
Single-sided.
Print, sign, scan, send.
I had my finger on the
button at Delta to get on a plane,
to find him.
Literally, I was going to go--
I was going to go for him.
I was going to go sit in the lobby.
The broker is texting
me, meantime, nonstop.
Have you gotten it done?
He's freaking out.
His money's on the line.
So I'm like, "Okay."
So I've got everything.
And I said, "All right, I need you to
take this up there."
I get the scan, I send it in,
and we closed, I think,
48 hours before the deposit
went and walked away.
And I don't think the VA understood,
the lady at the hotel understood,
not even sure the client understood
how expensive it was going to be
if he didn't sign those correctly.
This is exactly why you
wouldn't have the right people
in this situation, because, you know,
Preston's going to do what it takes.
Make sure it happens.
Some other dude might not.
Right.
It's not my problem, buddy, it's yours.
And having a broker
that had the foresight
to kick the hard deposit out further,
because he knew no one could get in
contact with his client.
So it may not have anything
to do with anybody's fault,
other than the fact this
guy doesn't understand.
Yeah.
But he knew that,
because this has been
working with the guy for two years.
That's awesome to get to this point.
Exactly.
Did it happen recently enough
that he's able to get the bonus
depreciation for the--
It actually happened late enough.
He was supposed to
close before the deadline.
Okay.
Because he was unresponsive,
he saved himself a lot of money in tax.
There you go.
Oh, yeah.
Isn't that crazy?
He was supposed to
close on like January 4th,
and then he didn't close like--
Maybe he had it all planned out, man.
He was planning on each
test with the whole thing.
He's playing chess when
we're playing checkers, so.
Yeah.
Before we go, Preston,
is there anything else
that you can think of that
other people might need to know?
I do want to plug the VIP
seat with you and Jesse Nayer.
And I also want to plug,
you know, your newsletter,
the Private Jet Insider, which is not
only on your website,
but is also published on LinkedIn, right?
Yep.
Anything else before we
take off that we need to be,
that a private jet,
potential private jet owner,
needs to be thinking about
that you want to leave us with?
Yeah, I think, look, you
cannot cash flow positive a jet.
I don't care how many
times you see it on TikTok.
I don't care how many people,
how many times you listen to
whoever is going to tell you
that you can cash flow positive a jet.
It's almost a platform that I have,
is like, it's just not going to happen.
When you're thinking about
buying and owning an aircraft,
they're assembling the
right transaction team.
We talked about this
earlier, but I want to just,
I want to double-quick.
I have watched so many
people lose millions of dollars
because they had the wrong
transaction team around them.
And that's not even financing.
If you're paying cash, real estate guys
are really bad at this.
Anybody who does like
deal junkie type guys
are really bad at this.
They're like, oh yeah, I'm
going to run my own transaction.
Or I'm going to go
get something off market
because this guy told me I
have something off market.
Oh, and I'll have to pay a fee.
Like those are all of the ways
that you are really getting screwed over.
So assemble the transaction
team and assemble it early
and check your references and know who
you're working with.
Because if not, you can get taken.
And the thing is about this business,
when you're talking about
transaction sizes this large,
it tends to bring out
some very curious characters.
Yes, yeah, yeah, yeah.
Avoid those as much as you can.
The only way to do that is
to have a transaction team
that is all working for you
and not all the same people.
Because everybody's
holding each other accountable
and keeping each other in check.
Be sure to assemble a
good transaction team
that you can trust and it
will take you a long way
in all of your transactions.
That's like my big plug.
And I'm a huge fan of high
quality transaction brokers
that know what they're talking about
who have years and years
and years of experience.
There is a movement towards,
you can sell jets with
no experience necessary.
There is, yeah, yeah.
There is a lot of experience
necessary to sell airplanes.
So that's my--
Especially when a lot
of commas are involved.
Yeah, exactly, exactly.
When the commissions are
big and someone can sell
one airplane and go sit in their basement
for the rest of the year,
it just go with known
entities, go with known commodities.
That's my rant, I guess.
I'll get off my soapbox now.
That's good, that's great.
Awesome.
It's a pleasure.
Dude, thank you so much for being here.
This is fun.
Thanks for having me.
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