Sometimes, being a re-possessor can get depressing. Especially if you’re taking minivans with child seats in the back away from middle-income Americans. Steve’s next guest, Ken Cage, did just that before moving up to luxury repos. Ken decided he’d rather repossess stuff from the rich and famous. We’re talking private jets, yachts, luxury cars, and more.
Ken subsequently hosted Airplane Repo, a long-running show on the Discovery Channel.
Starting IRG Group
Earlier, Ken worked at Daimler-Chrysler, collecting delinquent auto loans. After a while, he realized that he did not enjoy working at a big company. He wanted to be his own boss.
His wife opposed the idea. She thought the repo business would put Ken’s life in danger and their young family’s finances at risk. As luck would have it, she watched an airplane being repossessed on television and suggested Ken do upscale repos instead.
With his wife’s greenlight, Ken teamed up with his friend, Bob Weeks and started IRG Group in 2005.
IRG Group (International Recovery & Remarketing Group) is a full-service international firm. It specializes in the investigation, recovery, and remarketing of specialty assets such as yachts, planes, and more.
Canary In The Coal Mine
In its first two years in business, IRG got about 100 repos per year, with an average value of $40,000 to $50,000. Then, in the third quarter of 2007, repo asset values started to climb to $200,000 and more. Ken was excited because this meant higher commissions for IRG.
But the jump in repo values was like the proverbial canary in a coal mine. It was a sign of something deeper and darker at play. Because shortly thereafter, America was hit by the severe recession of 2008.
People started falling delinquent on all manner of loans. IRG’s repo volume jumped three-fold, to an average of 300 per year between 2008 and the end of 2011. At the recession’s peak, IRG repossessed over $30 million in assets every year.
About 70% of his debtors were in the real estate business, in one way or another. Most of the debtors were in their 40s and 50s. They had taken on loans with very little “margin of safety”. When bad times hit, they had no choice but to default on their loan obligations.
A Return To Normalcy
Now, ten years later and with the recession firmly behind us, Ken’s repos are more diversified. They span multiple sectors and multiple geographies. Additionally, repo volumes have dropped, partly because banks have been very conservative in their lending. Current repo statistics, Ken believes, reflect a return to economic normalcy.
46—The Magic Number
As an aside, Ken notes that banks start auto-calling borrowers when they are 14-days behind on their payments. These calls prompt most customers to send in their checks. However, when loans go 30-days past due, banks get more aggressive in tracking down debtors, with in-person phone calls.
Banks have 120 days before they’re required to write off bad loans. When debtors do not respond after 45 days, loans become past due on day 46. At this point, the likelihood of a repo goes up dramatically.
Within two weeks of the 46-day mark, re-possessors get to work. They get about 60-days to track down assets, repossess them, and sell them. Subsequently, banks get the cash that’s been recovered and do not have to write off the loan.
Repossessing Luxury Items Isn’t Business As Usual
Repossessing a car is one thing. Repossessing a Gulfstream jet or a luxury yacht is something else altogether.
For instance, it cost Ken over $100,000 to transport a Gulfstream jet from just Fort Lauderdale to Orlando. Costs included fuel, pilot’s fees, and related expenses. Additionally, the cost to store these assets often runs into a few thousand each month. Ken’s commissions also get taken out of the sale. So, repossession costs quickly add up for larger assets.
Ken estimates that after expenses, banks recover about 50 to 60 cents on the dollar. They then go after the debtor for the balance of the loan s/he took out to buy the asset.
On The Sets Of Airplane Repo
Switching gears, Ken speaks to what it’s like to film the show, Airplane Repo.
While he’s filming, he wants to protect IRG’s reputation. The production company, on the other hand, likes drama and wants to tell a compelling story. As a result, Ken is sometimes at odds with the production company and needs to balance things out.
He also faces legal restrictions on what can and cannot be shown on television. So actors are often called in to recreate certain scenes.
Off the show, when Ken does his job, he is often in quiet listening or thinking mode. But a reality show requires action all the time. So there’s more pressure to talk about what’s going through his head to keep the show’s tempo going.
On the show, when he tracks down the asset he needs to repossess. He can’t just say, “Alright, let’s go!” The show’s producers want to make the moment dramatic. In Ken’s case, his cheer is “Yahtzee!!”
Word Of Advice
Ken’s parting words of advice to all debtors: If you make a promise to pay, keep your word. In the repo business, broken promises shatter trust very quickly and hurt debtors in various ways.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: We’re back with Ken Cage, the repo man from Discovery Channel’s show Airplane Repo. He’s the guy who will come and get your private jet, your yacht, or your luxury car should you be just a little late [LAUGH] on a loan. Ken, welcome back.
Ken Cage: Thank you.
Steve Pomeranz: Hey, so what is the bank’s point of view here?
Real quick, I mean, when is a loan overdue, when do they feel like they’re at most risk, and when do they bring you in?
Ken Cage: So, generally speaking, they consider it overdue one day past due. They start collecting, generally speaking at 14 days past due and that could be through robocalls. They get nervous at 30 days past due.
Steve Pomeranz: Define nervous.
Ken Cage: Because at that point they’ve tried for two weeks to contact people to get the payments brought in because a lot of times people just forget. They could be on vacation, any number of reasons. One phone call generally spurs on most people to make the payment.
Steve Pomeranz: Yeah.
Ken Cage: So once they get to 30, then they’re thinking, we’ve been trying for 15, 16 days, no response. Now they start to escalate things, as far as they call twice a day, they’re physical calls as opposed to robo calls. So now they’re digging in, and that’s what we used to do.
They’re always told at 46 days past due, that’s a magic number. If it gets to 46, the likelihood of a repo goes up dramatically.
Steve Pomeranz: Yeah, they have the stats that show where that kind of critical point is.
Ken Cage: And they always said 46 was it. So from 30 to 45, the collection teams are really working. They’re trying to find relatives; they’re trying to find associates; they’re trying to find businesses, all that kind of stuff.
Steve Pomeranz: Now, let me interrupt for a second because at six months, is the bank required to charge that loan off and to take it as a complete loss?
Ken Cage: 120 days is the charge-off number.
Steve Pomeranz: Okay, 120 days, okay.
Ken Cage: Yeah.
Steve Pomeranz: And a bank doesn’t want to do that.
Ken Cage: No. So that’s why, in most cases, they call us somewhere around 60, 65 days past due.
Steve Pomeranz: Okay.
Ken Cage: So that gives us plenty of time to go, make contact, repo the asset if need be. Even sell the asset before the charge-off point. So, but that was a huge difference, as well, really in 09, 10, and 11, is they would wait till 80, 85 days past due, which put a lot of pressure on us, so.
Steve Pomeranz: Yeah.
Ken Cage: But normally it’s 60 to 65 days past due, they’ll call us.
Steve Pomeranz: What happens when they charge it off? Why is that something they want to avoid at all costs?
Ken Cage: Because that’s a loss that they have to report, and then if we do sell the asset after that, it’s an accounting thing that drives them nuts. They hate the charge-offs,-
Steve Pomeranz: Okay.
Ken Cage: Because it’s a loss for them, and the repo’s a loss too. But if they can get the asset repossessed, and we as the licensed broker that sells these assets can get the cash back to them, they don’t have to go through the charge-off process, so the actual loss isn’t as great.
Steve Pomeranz: Okay, so paying your expenses, paying your commissions, paying for the cost of obtaining these assets, I want to go into that right now. So it’s one thing if you were to go and pick up the minivan that I spoke about at the top of the show, but if you’re picking up a Gulfstream, or a luxury yacht, I mean it can be pretty expensive to get it back home.
Ken Cage: Absolutely. I mean, the fuel to fly. We picked up a Gulfstream III down in Fort Lauderdale a little bit ago, and the fuel costs alone is a five-figure cost, just to go from Fort Lauderdale to Orlando. By the time you get the pilots in there and the fuel and everything else, because you can’t run it empty, so you have to put in a significant amount of fuel. The pilots cost you money, you need two of them, so moving these things is expensive. The cost to store these assets is thousands a month for the bigger assets. A Cessna 172, that’s obviously a lot less. But yeah, the bigger assets, it’s very, very expensive, and then we’re brokers, so we charge a commission, which gets taken out of the sale. So the costs add up really, really quickly for the banks. And in those cases, they can’t sell it for as much as what the amount it is anyway.
Steve Pomeranz: Well, that’s what I was going to say, and I want to get into that in a second too.
So if we’re talking about 100 cents on the dollar, whatever the amount, the value of the asset was new, and kind of just vaguely coming up with a percentage of what they would expect to receive back after all of the costs of moving the vehicle, of storing the vehicle, of paying the commission of getting the sale and all that, what are we talking, $0.50, or more or less?
Ken Cage: Probably by the time you net everything out, after all the expenses, it’s probably somewhere in the $0.50 to $0.60 range.
Steve Pomeranz: Which I guess they’re happy with, right?
Ken Cage: The banks are happy with it, but at the end, they have to go after the debtor for the deficiency balance.
Steve Pomeranz: Yeah, yeah, so that’s expensive, too.
Ken Cage: It is, and it’s tough. They don’t want to do that.
Steve Pomeranz: Yeah, it was like during the mortgage crisis or during the home crisis where everything was foreclosed, I mean, the banks really are in the business of being residential property owners. They’re kind of bad at it actually.
Ken Cage: They’re terrible and they’ll tell you that. Their business and their commodity is cash. They’re great with cash, that’s what they want to work with, and that’s it.
Steve Pomeranz: Yeah, all right, so I’m a value investor, and this perked my ears up when I was reading about it and reading about you. So you’ve got this asset that was worth, let’s just say it’s a 50-foot yacht, and I don’t know what they go for, let’s say they go for $600,000.
Ken Cage: Okay.
Steve Pomeranz: Now you’re telling me that kind of the value is $300,000, let’s just say. I mean, that boat is sitting in your marina, and you’re a broker, and now you’re willing to sell it. Is this a good place for me to go to find great values?
Ken Cage: It can be, yes. Absolutely, now with the economy being stronger right now, I’ve been posting a lot of sales on my LinkedIn page, and we’re actually getting more than the banks are asking for consistently, and we’re getting it in 30 days.
Steve Pomeranz: Okay.
Ken Cage: So, there’s value there for sure, no doubt about it, but I would say the values aren’t as great as they were three years ago. Because there are more people with cash, so obviously, there’s more out there buying-
Steve Pomeranz: Yeah, well, cash is king, so in bad markets, if you have cash, I mean, you’re dictating terms, and as I said, cash is king.
The other thing that occurred to me when you were talking about the banks robocalling them and then a person calling them, is that you can’t say the check is in the mail anymore because they’ll say well give me your account number, and we will ACH the funds right now. You can’t get away with that anymore.
Ken Cage: You’re absolutely right, and honestly, that’s one thing too that people have to understand—if you’re behind, if you make a promise to pay, you better pay because that’s something that the collectors also consider when they’re making decisions on next steps.
Steve Pomeranz: Yeah.
Ken Cage: If you have a broken promise, it’s the trust level, for obvious reasons, drops a little bit. If you say you’re paying on Tuesday, pay on Tuesday.
Steve Pomeranz: Of course, yeah. Well, also, I would think that those people are professionals. The banks are professionals, they do this.
You’re a professional, you do this every day, all the time, and I’m a guy who decided to buy a plane I can’t afford. So if you’re at the poker table and you’re wondering who the patsy is, you’re the patsy. [LAUGH] That whole saying.
Ken Cage: That is fair to say.
Steve Pomeranz: Okay, my guest is Ken Cage, celebrity repo man from Discovery Channel’s long-running show Airplane Repo. I want to get into a little bit about what it’s like to do that show, Ken. I mean, we as watchers of reality tv think it’s reality, but you’re there on the set, you’re being told to shorten your lines or lengthen your lines.
You know what’s going on day to day, you know what they’re shooting, and then when it’s all wrapped up, you’ll go and watch an episode. And I want to know how far apart the actual reality is from the reality show?
Ken Cage: That’s a great question, I’m glad you asked it. Obviously, sometimes we’re, myself—I’m the owner of the company—and the production company that’s putting the show together are opposing forces because I have to protect my company, and I have to keep things as real as we can get, and they want to tell a story.
Steve Pomeranz: Yeah, [LAUGH] right.
Ken Cage: So there’s a lot of times because of the legalities involved that we have to reproduce things. I can’t show me talking to you, as the debtor, and repo-ing your airplane. That’s against the law.
Steve Pomeranz: A real person, you can’t do that, yeah, of course.
Ken Cage: So we have to reproduce some of that stuff, and we put the disclaimers right on at the beginning.
Steve Pomeranz: These are actors and this is a-
Ken Cage: Some of the stuff is reproduced and redone and recreated and stuff like that, which is, so we try and tell people that up front. I push really hard to keep the stories as true as is humanly possible, and that’s always been my fight.
We had a second production team that did the third season, and they were really great to work with because they were able to tell a great story but also honor the fact that I owned a company, and they didn’t want to hurt that. So I didn’t have to fight as hard on that. But, yeah, there’s a lot of times, and honestly, if you look at some of the news pieces they did before the show, I’m very quiet when I’m actually repossessing.
Steve Pomeranz: Yes.
Ken Cage: Because I’m scanning, and I’m looking, and I’m listening, and I’m figuring. Then I started doing my regular thing with the reality shows, like you can’t sit quietly.
Steve Pomeranz: No.
Ken Cage: What are you thinking? What are you going through? And that was really a challenge at first, and my tagline that I’d become kind of known for when I find the airplane or the item I’m looking for, I always say, Yahtzee.
Steve Pomeranz: Yahtzee, okay. [LAUGH]
Ken Cage: Is that thing? You’ve always said Yahtzee? No, I’m sitting there looking at a plane with cameras on me, I’m like, all right let’s go, and they’re like no, you have to celebrate.
Steve Pomeranz: [LAUGH] Got it.
Ken Cage: How am I going to celebrate? And they made me sit there and come up with Yahtzee.
Steve Pomeranz: Well, you also go around with bodyguard as well. So take us out, we’ve got about a minute left, and tell us one of your most interesting stories.
Ken Cage: Well, when I first met Danny, Danny Thompson is my partner on the show, and he does repos with me off the show as well.
I first met him outside of Phoenix, Arizona on a case. Production crew put us together. I thought I was actually hiring him, but the production crew was like no, he’s for the show. He gets in the car, he’s nervous as can be because we don’t know each other, and we’re trying to drive to this repo by the airport.
All the sudden he blows through a stop sign and there’s a police officer there. So literally, 15 minutes after I meet him, he’s getting pulled over. I look at him, I’m like, do I have anything to worry about here with the police because I didn’t know anything. He looks at me and goes, not that you need to know about, and now the officer’s here, I’m like, what kind of answer is that?
So I’m freaking out. He obviously was clean as a whistle, never an infraction in his life. The officer leaves, he looks over, and he goes, you need to relax a little and then laughs at me. So he’s a great character, but he’s also a great protector because I can’t physically get involved with people, I can’t breach the peace.
But as a bodyguard, he can help me keep the debtors away from me and away from the assets, which makes my life a whole lot easier.
Steve Pomeranz: So is he a pretty big guy?
Ken Cage: Danny is about 5’10”, 5’11”, he’s huge, I think he goes 250, but he’s also the North Carolina state record holder for powerlifting, so he is a huge guy.
Steve Pomeranz: Gotcha, so his presence mitigates a lot of the possible issues that you’ll come across.
Ken Cage: He absolutely does, most people don’t want to challenge him too much, but if they start trying to get tough and loud, he basically is my offensive lineman, and he keeps everybody away, and he just says, go, and I get in the airplane and get with the pilots, and we’re clear, so he keeps everything safe for me.
Even if people want to challenge him, it doesn’t last too long because Danny knows how to handle himself.
Steve Pomeranz: You’ve been listening to the celebrity repo man from Discovery Channel’s show Airplane Repo. I’ve been talking with Ken Cage, and don’t forget if you have a question about what we just discussed, ask us, call us, or write us, or go to our website at stevepomeranz.com and ask us anything you like.
And when you’re there, sign up for our weekly update where we will send you in your inbox the weekly show, with all the segments separated and segregated, and you can read a summary, or read the transcript, or actually hear the segment itself at stevepomeranz.com. Hey, Ken, thank you so much for joining us.
Ken Cage: Steve, thank you so much for having me. I really appreciate it.