Q3 2024 Sky Harbour Group Corp Earnings Call

[music].

Good afternoon, My name is Sarah and I'll be your conference operator today at this time I would like to welcome everyone to Sky Harbor, 'twenty 'twenty, four third quarter earnings call and webinar.

Sarah: My name is Sarah and I'll be your conference operator today.

Operator: At this time I would like to welcome everyone to Sky Harbour 2024 third quarter earnings call and webinar. All lines have been placed on mute to prevent any background noise.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks there will be a question and answer session. If you would like to ask a question during this time, simply submit your question online using the webcast URL posted on our website. Thank you.

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply submit your question online using the webcast U R. L posted on our website. Thank you.

Francisco Gonzalez: Mr. Francisco Gonzalez, you may begin your conference. Thank you, Sarah. I'm Francisco Gonzalez, CFO of Sky Harbour. Hello and welcome to the 2024 Third Quarter Investor Conference Call and webcast for the Sky Harbour Group Corporation. We have also invited our bondholder investors in our Barrington subsidiary, Sky Harbour Capital, to join and participate in this call as well.

Speaker Change: Mr. Francisco Dallas, you May begin your conference.

Francisco Dallas: Thank you Sarah.

Speaker Change: So our CFO, Scott Harbor, Hello, and welcome to the 2024 third quarter Investor Conference call and webcast. Please try Hartwell Corporation.

Speaker Change: We have also invited our borehole to investors in our foreign subsidiaries scheduled capital to join and participate on this call as well.

Francisco Gonzalez: Before we begin, I have been asked by council to note that on today's call, the company will address certain factors that may impact this and next year's earnings. So all the information that will be discussed today contains forward-looking statements. These statements are based on management assumptions which may or may not become true and you should refer to the language on slides 1 and 2 of this presentation as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward looking All forward-looking statements are made as of today and we assume no obligation to update.

Before we begin I've been asked by counsel to note that on today's call. The company will address certain factors that may impact this and next year.

Speaker Change: So all the information that will be discussed today contains forward looking statements.

Speaker Change: Statements are based on management's assumptions, which may or may not become become true.

Two language on slide two of this presentation as well as our SEC filings for the strip some of the factors that may cause actual results to differ from our forward looking statements.

Speaker Change: All forward looking statements are made as of today and we assume no obligation to update any such statements.

Speaker Change: So now let's get started.

Francisco Gonzalez: So now let's get started. The team with us this afternoon, you may know from prior webcasts, our CEO and Chairman of the Board, Tal Keinan, our COO, Will Whitesell, our Chief Accounting Officer, Mike Schmitt, our treasurer, Tim Herr, and our recent addition to our team, Marty Kretschmann, our Head of Air. We have a few slides that we want to review with you before we open it to questions. These were filed with the ACC an hour ago in the format of 8K, along with our 10Q. And they will also be available in our website in a few hours.

Speaker Change: With us. This afternoon, you may know from prior webcast, our CEO and chairman of the board, Ken our CLO with White our.

Speaker Change: Our Chief Accounting Officer, Mike Smith, our Treasurer, Jim her on a recent addition to our team Marty Kretchman our Heidelberg.

Speaker Change: We have a few slides that we'll want to review with you before we open up to questions. These were filed with the SEC on an hour ago and the form 8-K, along with our 10-Q.

Speaker Change: And they will also be available in our website.

Speaker Change: We also filed our capital good financials with MSRP ammo.

Francisco Gonzalez: We also filed our Sky Harbour Capital Obligated Group Financials with MSRP EMA. As the operator stated, you may submit written questions during the webcast using the Q4 platform. And we'll address them shortly after our prepared remarks.

Speaker Change: As the openness data you may submit written questions through the website webcast using the Q4 platform.

Speaker Change: Yes, I am shortly after our prepared remarks.

Francisco Gonzalez: Let's get started. Next slide. In the third quarter, on a consolidated basis, assets under construction and completed construction continue to accelerate as we continue to advance towards completion of the three campuses in Dallas, Denver, and Phoenix. And we'll update on those and other projects shortly. The revenues experienced an increased step function, given the San Jose campus that began on Q2, but also the optimization of our three other campuses. Even if we don't open any new campuses, we expect revenues to continue to grow as we exceed 100% occupancy, achieve higher rental rates on renewals, and enter into other types of arrangements that allow us to take advantage and monetize the various assets, including our...

Speaker Change: It started next level.

Speaker Change: In the third quarter on a consolidated basis.

Speaker Change: <unk> is under construction and completed construction continued to accelerate as we continue to advance towards completion of these three campuses in Dallas, Denver and Phoenix.

Speaker Change: We'll update on the up on dose and other projects shortly.

Speaker Change: The revenues.

Speaker Change: Experienced an increase.

Speaker Change: Step function given the San Jose campus have begun for Q2, but also.

Initiation of our three other campuses.

Speaker Change: Even if we don't open any new campuses, we expect revenues to continue to grow as we exceed 100% occupancy achieve higher rental rates on renewals and enter into other types of arrangements that allow us to.

Speaker Change: Take advantage or monetize the various assets, including our April.

Speaker Change: The operating expenses in Q3 increased mainly from two factors.

Francisco Gonzalez: The operating expenses in Q3 increased mainly from two factors. First, as we discussed in the last quarter, the ground lease payments in San Jose are significantly higher than our typical greenfield projects. It's because, in essence, that ground lease includes the payment for the fact that we control and took over a large hangar, aprons, and related parking. And because of these existing facilities, it's being amortized through the ground lease. as part of our operating expenses. Second, and very importantly, and Mike will be covering a bit of this, as we sign more ground leases, we end up starting to recognize operating expenses ahead of any actual cash payments on those ground leases.

Speaker Change: First as we discussed last quarter, the ground lease payments and San Jose are significantly higher than our typical greenfield projects is because in essence that ground lease includes the payment for the fact that we control.

Speaker Change: <unk>.

Speaker Change: Took over in HR under a large hanger April and related parking and because of these existing facilities is being amortized through the ground lease.

Speaker Change: As part of our brain expenses second and very importantly.

Speaker Change: And.

Mike Smith: Mike will be covering.

Mike Smith: A bit on this as we sign more ground leases.

Mike Smith: We ended up starting to recognize corporate expenses ahead of any actual cash payments on those ground leases and Mike will go into more detail on that obviously ethylene side more ground leases the impact of that becomes bigger and bigger in our results.

Francisco Gonzalez: And Mike will go into more detail on that. And obviously, as we sign more ground leases, the impact of that becomes bigger and bigger in our results. Lastly, on SG&A, we continue to work to maintain our SG&A as far as possible, and as we scale, that will drive the operating cash flow and profitability on a consolidated basis. And as you can see here, we continue to move to parity in terms of our cash flow from operations, and we reiterated our guidance that we expect to be at break-even at this time next year on the back of the opening of our three campuses and the leasing of those in the spring and summer of next year.

Mike Smith: Lastly on SG&A, we continue to work to maintain.

Mike Smith: Our SG&A as far as possible and as we scale that will drive the operating cash flow and profitability on a consolidate basis.

Mike Smith: As you can see here, we continue to move to parity in terms of our cash flow from operations and we reiterate our guidance that we expect to be at breakeven at this time next year on the back of the opening of our three campuses and the leasing of those in the spring and summer of next year. Thanks a lot.

Speaker Change: Sky Harbor capital.

Francisco Gonzalez: Sky Harbour Capital, which is, again, the obligated group where we have all our campuses right now except San Jose. San Jose is not here because it was not financed with bond proceeds. Obviously, we have the same movement in construction, constructed assets, given that everything that we're constructing and will be completing in the next year or so are obligated group projects. Quarterly revenues don't have this step function from San Jose, but continue to show, as I mentioned earlier, incremental revenues as we optimize. You know, when a lease comes for renewal and the renewal rate is 20, 30, or 40 percent higher, you're going to continue seeing increasing revenues, even though we are at or higher than 100 percent occupancy.

Speaker Change: Which is again the obligated group, where we have our all of our campuses right now except San Jose San Jose is not here because we also financed with bond proceeds obviously, we have been seeing.

Speaker Change: Movement in construction infrastructure assets.

Speaker Change: Given that everything that we're constructing and would be completed in the next year or so are probably gave a group.

<unk> a quarterly revenues don't have these step function for us I will say, but continues to show.

Speaker Change: As I mentioned earlier incremental revenues as we optimize this.

Speaker Change: This comes for renewal and there is already 2030 or 40% higher you're going to continue to see interest in revenues, even though we are at or higher than 100%.

Speaker Change: <unk>.

Francisco Gonzalez: and then it's good to show that the operating results are positive and operating cash flow continues to move north at Sky Harbour Capital. On the back of next year, this will be sufficient to obviously pay debt service on our bonds and as we scale, produce positive cash flows that will support again looking to get a break-even at Consolidate.

Speaker Change: And then.

Speaker Change: And it's good to show that <unk> operating results are positive operating cash flow continues to move north.

Speaker Change: Scott capital.

Speaker Change: On the back of next year.

Speaker Change: This will be sufficient to obviously pay debt.

Speaker Change: Service for our bonds and.

Speaker Change: As we scale and produce.

Speaker Change: Positive cash flows.

Speaker Change: That will support.

Again looking to get.

Speaker Change: Breakeven at cycle sort of cases.

Francisco Gonzalez: On the next slide, I pass it on to Mike to go deeper into this non-cash impact that we are experiencing to do a deeper dive on our ground leases and also non-cash expenses.

Speaker Change: On the next slide personal to Mike to go deeper into these noncash impact that we're experiencing there.

Speaker Change: To do a deeper dive.

Mike Smith: On our ground leases I'd also noncash expenses, Mike Thank you Francesco.

Michael Schmitt: Mike. Thank you, Francisco.

Michael Schmitt: I'd like to take this opportunity to provide additional context. as Francisco said regarding the differences between our actual cash payments on operating leases and the reported expense. This slide includes a visualization of the cash payments and reported expense of a ground lease within our portfolio. Beginning with our ground lease at Addison, all of our ground leases for greenfield developments generally defer cash rent payments until the completion of construction. Our ground leases at each of our airport development sites are accounted for as operating leases under U.S. GAAP, which requires us to begin recognizing reporting expense on a straight-line basis upon execution.

Speaker Change: Take this opportunity to provide additional context.

As Francisco said regarding the differences between our actual cash payments on operating leases and the reported expense. This slide includes a visualization of the cash payment seven reported a expense of a ground lease within our portfolio.

Speaker Change: Beginning with our ground lease at Edison all of our ground leases for Greenfield developments generally deferred cash rent payments until the completion of construction.

Speaker Change: Ground leases at each of our airport development sites are accounted for as operating leases under U S. GAAP, which requires us to begin recognizing reporting expense on a straight line basis upon execution.

Michael Schmitt: even though we may not be making cash payments for years under the term. of the ground lease as easily demonstrated by the graph on this slide. As Francisco indicated, the non-cash portion of our ground lease expense is quite significant in terms of our overall operating expenses. It amounts to approximately $1.3 million and $3.3 million for the three-and-nine-month period presented here. This represents 36% of our reported operating expense for both of the periods presented.

Speaker Change: Even though we may not be making cash payments for years under the terms of.

The ground lease.

Speaker Change: Easily demonstrated by the graph on this slide.

Speaker Change: As Francisco indicated the noncash portion of our ground lease expense is quite significant in terms of our overall operating expenses and amounts to approximately $1 3 million and $3 3 million for the three and nine month periods presented here.

Speaker Change: This represents 36% of our reported operating expense for both periods presented.

Next slide please.

Speaker Change: Moving on we also believe it is important to illustrate other significant non cash components of our reported net loss for the three and nine months ended September 32024.

Michael Schmitt: Moving on, we also believe it is important to illustrate other significant non-cash components of our reported net loss for the three and nine months ended September 30. For both of the periods presented, the most significant component of our reported net loss was the non-cash expense recognized associated with the changes in fair value of our outstanding warranty. For the three months ended September 30, 2024, this non-cash expense accounted for approximately $16 million, or 77% of our total reported net loss. As a reminder, these warrants are liability classified and are required to be marked to market each reporting month.

Speaker Change: For both of the periods presented the most significant component of our reported net loss was the noncash expense recognized associated with the changes in fair value of our outstanding warrants.

Speaker Change: For the three months ended September 32024. This is a noncash expense accounted for approximately $16 million or 77% of our total reported net loss.

Speaker Change: As a reminder, these warrants are liability classified and are required to be mark to market each reporting period.

Speaker Change: This slide also illustrates our depreciation expense.

Michael Schmitt: This slide also illustrates our depreciation expense, which is non-cash and amounted to $0.6 and $1.9 million for the quarter in year respect.

Speaker Change: Which is noncash and amounted to 0.6 and $1 9 million for the quarter and year respectively.

Speaker Change: A key part of our ongoing employee compensation strategies inclusion of stock based compensation.

Michael Schmitt: Key part of our ongoing employee compensation strategy is the inclusion of stock-based compensation. This non-cash expense associated with our equity compensation programs is reported as a component of selling, gelling, general, and administrative expenses, and totaled $0.9 million and $3.0 million for the three and nine months ended September 30.

Speaker Change: Noncash expense associated with our equity compensation programs is reported as a component of selling gelling general and administrative expenses and totaled <unk> 9 million and 3.0 million for the three and nine months ended September 30.

Michael Schmitt: Lastly, we have the non-cash lease expense, which we discussed on our previous slide. And when adjusted for these non-cash items, our reported net loss for the three and nine months ended September 30, 2024. approximately $1.9 and $5.6 million.

Speaker Change: Lastly, we have the noncash lease expense, which we discussed on our previous slide and when adjusted for these noncash items our reported net loss for the three and nine months ended September 32024 was approximately $1 nine and $5 6 million respectively.

Tal Keinan: With that, I'll pass it on to Tal. Thank you, Mike. So viewers are accustomed to seeing this slide from previous. So we continue to ramp up, as you can see, what we're, just to remind people, what this slide is, represents is. land under lease, under binding lease with Sky Harbour, multiplied by square footage of hangar that is going to fit on that land, multiplied by the Sky Harbour equivalent rent, which is what aircraft owners are currently paying on a per square foot basis for hangar at that specific airport. And it's, in our view, a conservative estimate of what the revenue capture is from the current portfolio that's under lease.

Tom: I'll pass it on to Tom.

Tom: Thank you Mike.

Tom: Yes.

Tom: So.

Tom: Yours are accustomed to seeing this slide from previous.

Tom: Yes.

Tom: Earnings call.

Tom: So we continue to ramp up as you can see what we're doing.

Tom: Just to remind people what the slide is represents us.

Tom: Land under lease under binding lease with Sky Harbor.

Tom: Multiplied by square footage of hangar that is going to fit on that land multiplied by the Sky Harbor equivalent rent, which is what aircraft owners are currently paying on a per square foot basis for hanger at that specific airport.

Tom: In our view a conservative estimate of what the revenue capture is from the current portfolio Thats under lease.

Tal Keinan: And as I've explained in previous earnings calls, we have significantly exceeded the Sky Harbour equivalent rent on every single campus that we have so far, which is why we believe it's a conservative estimate. And if you're looking at the company from a valuation perspective, I believe this is the place to start. to figure out how much revenue is available and then discount that for various risk factors that you want to apply, like construction risk, lease-up risk, operating risk, you know, that sort of thing. That's how we look at it.

Speaker Change: And as Ed.

Speaker Change: Explained in previous earnings calls, we have significantly exceeded the Sky Harbor equivalent rent on every single campus that we have so far which is why we believe it is a conservative estimate and if youre looking at the company from a valuation perspective I believe this is the place to start.

Speaker Change: Figure out how much revenue is available.

Speaker Change: And then discount that for various risk factors that you wanted to apply.

Speaker Change: Like construction risk lace up risk operating risk.

Speaker Change: That sort of thing.

Speaker Change: How we look at it.

Speaker Change: The last airfield, we announced was Salt Lake City in August.

Tal Keinan: The last airfield we announced was Salt Lake City in August. We revised our guidance up last quarter to an additional nine airports by the end of 2025, sorry, additional eight airports by the end of 2025, which would take us to a total of 22 airports in the portfolio by the end of 2025, and today we are going to revise that estimate up again to nine airports by the end of 2025, which would take us to a total of 23 airports by the end of 2025.

Speaker Change: We revised our guidance up last quarter.

Two an additional nine airports.

Speaker Change: By the end of 2025, sorry, additional eight airports by the end of 2025, which would take us to a total of 22 airports in the portfolio by the end of 2025 and today, we are going to revise that estimate up again, two nine airports by the end of 2025, which would take us to a total of two.

Speaker Change: <unk> three airports by the end of 2025.

With that let me hand over to will to talk about development.

Will Whitesell: With that, let me hand it over to Will to talk about development. Thanks, Tal. On this slide, top portion, we have DVT Phase 1, APA, and ADS. As we issued guidance in the first quarter, these three projects remain on schedule. Both ADS and APA remain on track, with actually DVT trending a little bit ahead of schedule prior to, in relationship to our guidance in the first quarter. In regards to the $27 million budget for remediation, that also remains on track as we sit here today.

Will: Thanks, Tom.

On this slide top portion we have.

Will: TVT phase, one EPA and ADF as we issued guidance in the first quarter.

Will: These three projects remain on schedule.

Will: Both aes and <unk> remain on track with actually DVT trending a little bit ahead of schedule prior to <unk>.

Will: In relationship to our guidance in the first quarter.

Will: In regards to the $27 million budget for remediation that also remains on track.

Will: As we sit here today.

Will Whitesell: The snapshot below of the bar graph really represents a picture of our accelerated growth for 2025 and 2026. Last quarter, we previously had starts of eight new fields. This quarter, we're announcing nine starts. In lieu of finishing three last quarter, we have five, finishing five in 2025. We've added two fields, both OPF Phase 2 and Addison Phase 2, as a targeted completion in fourth quarter 2005. In summary, we have 14 fields in some state of either completion or starting construction in 2025, and a total of 20 fields either starting or finishing in construction in 2026.

Will: On a snapshot below the bar graph really represents a picture of our accelerated growth for 2025 and 2026.

Will: Last quarter, we previously had starts of eight new fields this quarter we.

Will: We're announcing nine starts.

Will: In Lula, finishing three last quarter, we have five finishing five and 2025, we've added two fields, both AP <unk> phase II and Addison phase III as a targeted completion in the fourth quarter 2005.

Will: So kind of in summary, we have <unk>.

Will: <unk> thousand 14 fields in some state of either completion or starting construction in 2025, and a total of 20 fields, either starting or finishing in construction in 2026.

Tim Herr: With that, I'll turn it over to Tim, our treasurer. Thanks Will. Just a quick review of our current cash and investments. The bar chart on the left is our September 30th cash and treasuries. amounts. You'll notice that the $110 million is the combined Sky Harbour Capital amount of about $85 million, and the remainder, $25 million, is up at the holding company level. So that $85 million is dedicated to our fields at the obligated group, so that'll be the fields that Will just touched on that are being completed in the next few months, as well as the remaining phases at Opelika and at Centennial Airport in Denver.

Will: With that I'll turn it over to Tim our treasurer.

Tim: Thanks, Paul just a quick review of our current current cash and investments.

Tim: The Bar chart on the left is our September 30th.

Cash and treasuries.

Tim: Amounts.

Tim: Notice our youll notice that the $110 million is the combined Sky Harbor capital.

Tim: The amount of about $85 million and about 20, the remainder 25 million is up at the holding company level.

Tim: So that $85 million is dedicated to our fields at the obligated group so that'll be the.

Tim: <unk>.

Tim: The field that will just touched on that are being completed and in.

Tim: In the next few months as well as the remaining phases at Opa-locka and.

Tim: Sure.

Tim: Centennial Airport in Denver.

Tim: We also on the right hand side have.

Tim Herr: We also, on the right-hand side, have a pro forma balance sheet of cash and investments following the completion of the pipe that we announced in October. We closed the first $37.6 million of that at the end of October, and we plan to execute the second closing of that pipe, which will be an additional $37.6 million for a total of just over $75 million in additional pipe proceeds that will be used to be the equity portion to fund the additional fields beyond the obligated group that Will also just mentioned in 25 and 26.

Tim: Our pro forma.

Tim: Alan sheet of cash and investments following the completion of the pipe that we announced in October we closed the first $37 $6 million of that.

At the end of October.

Tim: And we plan to execute the second closing of that pipe, which will be an additional $37 6 million for a total of just over $75 million and additional pipe proceeds.

Tim: That will be used to.

Tim: The equity portion to fund.

Speaker Change: The additional sales beyond the obligated group that will also just mentioned in 'twenty five 'twenty six.

Speaker Change: Just one more note on our bond debt service on the right hand side.

Tim Herr: Just one more note on our bond debt service. On the right-hand side, we are approaching the end of our debt capitalization period in 2025, but with the completion of Addison, Centennial, and Deer Valley in Phoenix in the next few months, we'll be leasing those up and have more than enough coverage to start our interest payments in 2025.

Speaker Change: We are approaching the end of our debt capitalization period in 2025.

Speaker Change: With the completion of.

Speaker Change: Addison Centennial and Deer Valley and Phoenix.

In the next few months.

Speaker Change: We will be.

Speaker Change: So we'll be leasing those up and have more than enough coverage to start our interest payments in 2025.

Francisco Dallas: Passing I'd like to Francisco.

Francisco Gonzalez: Passing along to Fran Thank you, Tim.

Thank you Tim just a quick comment on our existing outstanding 2002 paths.

Francisco Gonzalez: Just a quick comment on our existing outstanding 2022 PABs. First and foremost, we made it clear at the time of the issuance that we will be at the appropriate time seeking investment grade ratings. We plan to begin the process soon and will be approaching the ratings during the course of 2025. For us, it's not a question of if but when we'll achieve investment grade ratings. Obviously, on the back of the completion of our construction projects, as we did risk that aspect of the ratings, we have been achieving, as you have seen, rents significantly higher than what we projected at the time that we did the bond deal, which means that our debt service coverage by definition is going to be higher than what we projected at the time of the bond issuance.

Francisco Dallas: First and foremost we made it clear at the time of the issuance that we will be at the appropriate time seeking.

Francisco Dallas: The investment grade ratings.

Francisco Dallas: We plan to begin the process soon and we will be approaching <unk>.

Francisco Dallas: During the course of 2025 and for US it's not a question of when will achieve investment grade ratings.

Francisco Dallas: Obviously on the back of the completion of our construction projects as we de risk that aspect of the ratings.

Francisco Dallas: We have been achieving as you have seen rents significantly higher significantly higher than what we projected at the time that will be the bond deal, which means that our debt service coverage.

Francisco Dallas: <unk> is going to be higher than what we projected at the time would be.

Francisco Dallas: Bond issuance.

Francisco Gonzalez: The market on the right hand side seems to recognize this. This is the trading of our shortest bond and our longest bond in the past year and a half. And you can see the significant appreciation of the bonds or declining yields on both of those maturities. Obviously, part of this has been declining rates in the past few months, overall market rates, but there's been a significant spread compression on our credit, and we believe there's still room to go as we approach investment grade for these to come further down.

Francisco Dallas: If the market on the right hand side seems to recognize this is this is a trading.

Francisco Dallas: Sure. This is Paul and our luggage bond.

Is passed.

Francisco Dallas: <unk>.

Francisco Dallas: A year and a half as you can see the significant appreciation of the bonds are declining yields on both of those maturities. Obviously as part of this has been a declining rates in the past few months overall market rates, but theres been a significant a spread compression on our credit and we believe there is still room to go as we.

Francisco Dallas: It wasn't great for these to come further down.

Francisco Gonzalez: Next slide. which takes us to the comments on our capital formation and growth. As we have discussed in prior calls, we continue being opportunistic and being very prudent in our raising of equity and debt. We want to do these things always in advance, avoiding defaults, and take up the opportunities that the market provides us. So first, you may have seen that in our closing announcement a few weeks ago of our first closing of our pipe, that we were able to upsize that by about $6 million. These are, again, long-term investors that we have known, we have participated before.

Francisco Dallas: Next slide.

Francisco Dallas: Sure.

Francisco Dallas: Which takes us to the.

Comments on our capital.

Francisco Dallas: Formation and growth as we have discussed in prior calls.

Francisco Dallas: <unk> been opportunistic have been very prudent in our racing of equity and debt. We will do these things always in advance avoiding the funds.

Francisco Dallas: And I think the opportunity is that.

Francisco Dallas: Market.

Francisco Dallas: <unk>. So first you may have seen that in our closing announcement a few weeks ago of our first.

Francisco Dallas: The first closing of our pipe that we were able to upsize that by about $6 million.

Francisco Dallas: These are again long term investors.

Francisco Dallas: We have known leukemia participated before some of our new long term investors and so on they are signing a.

Francisco Gonzalez: Some were new long-term investors and so on. They're signing a lockup agreement, and by their nature, they're people who are looking to be with us for a long time. We are cautiously optimistic that in early December, there will be the expected exercise of those options that we granted those investors for an additional $38 million, and that will be expected to close on December 20. and so that basically will complete this exercise on five common shares.

Francisco Dallas: Lockup agreements and by their nature that people who who.

Francisco Dallas: Are looking to be with us for a long time.

Francisco Dallas: We are cautiously optimistic that in early December.

Francisco Dallas: There'll be the exercise of those.

Francisco Dallas: I expect that exercise of those options that we granted those investors for additional $38 million and that will be expected to close on December 20th.

Francisco Dallas: So that basically will complete this exercise on pipe common shares.

Francisco Gonzalez: In terms of internally generated cash flow, as we said earlier, we expect that to be available at this time next year and that will help us either provide capital for our growth, equity capital, or at some point lead us to make a decision on our dividend policy, but we have too many opportunities for us to be thinking about dividends at this point. On the ATM program, we have not sold any shares since our last disclosure on this subject and we already spoke about the PIPE offering. We continue to think about a sidecar platform that will be used only for existing hangar opportunities for M&A opportunities, the greenfield projects we obviously want to maintain and keep for our shareholders.

Francisco Dallas: In terms of internally generate cash flow as we said earlier, we expect that to be available at this time next year that will.

Help us either a provide.

Francisco Dallas: Capital for our growth equity capital or at some point it will.

Lead us to make a decision on our dividend policy, but we have too many growth opportunities as provost do we think about dividends.

Francisco Dallas: The point on the ATM program, we have not.

Francisco Dallas: Sold any shares since our last disclosure on this subject.

Francisco Dallas: And we already spoke about our offering and we'll continue to think about sidecar.

Francisco Dallas: Platform for it for that will be used only.

Francisco Dallas: For existing.

Francisco Dallas: Kanger opportunities or M&A opportunities.

Francisco Dallas: The Greenfield projects, we obviously won't maintain and keep it for our shareholders.

Francisco Gonzalez: Lastly, on the topic of the debt, as we mentioned prior disclosures, we're aiming to raise about $150 million of additional taxes on debt. We're dual tracking bank and bond solutions. We're still several months from implementing this, but we want to monitor markets and monitor both opportunities to seek what's most optimal for the company. And a critical balance here is one of a balance in the cost of capital and our growth, and be prudent and deliberate about how we raise the capital to fund our growth.

Francisco Dallas: Lastly on this topic.

Francisco Dallas: That as we mentioned prior disclosures, we're aiming to raise about $150 million.

Francisco Dallas: Additional taxes that we are dual trucking bank and bond solutions, we're still several months from.

Francisco Dallas: Implementing this.

Francisco Dallas: We will monitor market and monitor both opportunities to seek what's more most optimal for the company.

And.

Francisco Dallas: The critical balance here is one of a policy that cost of capital and our growth and be prudent and deliberate about how we raise the capital.

Francisco Dallas: To fund.

Speaker Change: Our growth with that let me pass it on to tell for the Q Q3 highlights.

Francisco Gonzalez: With that, let me pass it on to Tal for the Q3 highlights. Thanks, Francisco.

Francisco Dallas: Thanks Francisco.

Tal Keinan: So as people know, we like to think of the business in four discrete, but obviously linked buckets. The first is site acquisition. I'm going to start with, we only report binding site acquisition wins, and the nature of this process is such that progress is difficult to gauge until we've actually made an announcement. And we haven't been able to find a better way to keep the public appraised of our progress on site acquisition, which has been a bit of a frustration because it is the key value driver of the entire business. For the time being, we're sticking to our policy.

Speaker Change: So as people know, we like to think of the business and four discrete but obviously linked buckets.

Speaker Change: First as site acquisition.

Speaker Change: I'm going to start with it we only report binding site acquisition wins.

Speaker Change: And the nature of this process is such that progress is difficult to gauge until until we've actually made an announcement.

Speaker Change: We haven't been able to find a better way to keep the public appraised of our progress on site acquisition.

Speaker Change: Which has been a bit of frustration because it is the key value driver.

Speaker Change: <unk>.

Speaker Change: Entire business.

Speaker Change: For the time being we are sticking to our policy.

Tal Keinan: We only announce that acquisition wins when they're done binding irreversible. So stay tuned for that. There's been quite a bit of progress in the last quarter, but again, that's not something that we really are able to measure in a way that can be shared publicly. What we can say is that we've had significant success in expansion on existing airports. And those who watch us closely, you know, perhaps saw the example of the acquisition of the Ramada Hotel adjacent to Chicago Executive Airport, which we have been able to merge into the airport property and effectively not only expand the square footage but significantly increase the efficiency of our site plan in Chicago.

Speaker Change: We only an outside acquisition wins when they are done binding irreversible.

Speaker Change: So stay tuned for.

Speaker Change: There's been quite a bit of progress in last quarter, but again. This is not something that we really are able to measure it in a way that can be shared.

Speaker Change: Publicly.

Speaker Change: What we can say is that we've had significant success and expansion on existing airports and those who watch it closely.

Speaker Change: Perhaps saw the example of the acquisition of the Ramada hotels.

Speaker Change: Adjacent to Chicago Executive Airport.

Speaker Change: Which we have we have been able to merge into the airport property and effectively not only expand the square footage, but significantly increase the efficiency of our site plan in Chicago. So those from our perspective are as good if not better than new airport wins is the ability to.

Tal Keinan: So those from our perspective are as good if not better than new airport wins is the ability to expand accretive investment on an existing airport and make a site plan more efficient. So there's been quite a bit of that going on on the site acquisition side.

Speaker Change: Expand.

Speaker Change: Accretive.

Speaker Change: Investment on an existing airport and make mega sized plant more efficient so there's been quite a bit of.

Speaker Change: Of that going on on the acquisition side.

Tal Keinan: In development, as Will said, we've got three projects set for delivery between now and the end of the first quarter of 2025. Leasing has already commenced on those projects, and we hope to see the cash flows from those projects begin sometime in the first or second quarter of next year. We have Another two projects slated for delivery in 2025. That's Miami Phase 2 and Dallas Phase 2. and as Will described, 11 new project phases now in development. The Sky Harbour 37 prototype design is complete. This is the hangar that you'll be seeing on all future airports.

Speaker Change: In development.

Speaker Change: As will said, we've got three projects set for delivery.

Speaker Change: Between now and the end of the first quarter of 2025.

Speaker Change: Leasing has already commenced on those.

Speaker Change: On those projects and we hope to see.

Speaker Change: Cash flows from those projects begin sometime.

Speaker Change: Sometime in the first or second quarter of.

Speaker Change: Next year.

Speaker Change: We have.

Speaker Change: Another two projects slated for delivery in 2025, Thats, Miami Phase II and Dallas Phase III.

Speaker Change: And as we'll.

Speaker Change: <unk> described 11, new project phases now in development.

Speaker Change: <unk> 37 prototype design is complete this is the hangar that youll be seeing on all future airports of course, we're always going to be working to refine it but it's the same hanger everywhere, which ties into the last bullet under development is that rapid built has now been fully.

Tal Keinan: Of course, we're always going to be working to refine it, but it's the same hangar everywhere, which ties into the last bullet under development is that Rapid Built has now been fully and finally configured as a pure play Sky Harbour production facility. That means the the shop has been entirely retooled with equipment. The welding team has been retrained to to stamp out exactly the same product day after day. And we we plan to capture very significant cost efficiencies and quality gains by through that vertical integration.

Speaker Change: And finally configured as a pure play Sky Harbor production facility.

Speaker Change: That means the shop has been entirely retooled.

Speaker Change: With equipment.

Welding team has been retrained.

Speaker Change: <unk> stamp out exactly the same product.

Speaker Change: After day, and we plan to capture very significant cost efficiencies and quality gains through.

Through that vertical integration.

Tal Keinan: On the leasing side, again, perhaps a bit of a frustration, but we were under NDA with our residents. What we can say is, number one, these are the most visible individuals and corporations in the country. We have definitely caught the attention of the most discerning aircraft owners that there are. This is the model of choice, and I think we can say that. I think we've been kind of conservative up until now about making any claims about this, but we're at a position today where if there is a Sky Harbour location in your metro center, that's where you want to be.

Speaker Change: On the leasing side.

Again.

Speaker Change: Perhaps a bit of a frustration, but we.

Speaker Change: We're under NDA with with our residents.

Speaker Change: What we can say is number one.

Speaker Change: These are the most visible.

Speaker Change: Individuals and corporations in the country.

Speaker Change: We have definitely caught the attention of the most discerning.

Speaker Change: Aircraft owners that there are this is the model of choice and I think we can say that I think we've been kind of conservative up until now about making any claims about this but we're in a position today, where if there is a sky harbor location and your Metro Center, that's where you want to be even though it's much more extensive than any other basin solution that's where.

Tal Keinan: Even though it's much more expensive than any other basing solution, that's where you want to be as a jet owner, and I think that imprimatur from those specific residents has been very powerful. We don't share names. However, I think the industry is quite small, and that brand recognition has caught on, and I think increasingly is. In addition, as Francisco said, we used to think in terms of percentage occupancy. I don't think in those terms at all anymore because 100% is meaningless to us. We've blown through 100% everywhere and found ways to drive revenues significantly beyond any kind of a ceiling, as you can see in the release.

Speaker Change: You want to be as a jet owner.

Speaker Change: And I think that imprimatur from from those specific residents has been very powerful.

Speaker Change: We don't share names however.

Speaker Change: However, I think the industry is quite small and that that brand recognition has caught on and I think increasingly.

Speaker Change: Is.

Speaker Change: In addition.

Speaker Change: As Francisco said, we used to think in terms of percentage occupancy I don't think in those terms at all anymore, because 100% is meaningless to us we've blown through 100% everywhere.

Speaker Change: And found ways to drive revenues significantly beyond any any kind of a ceiling as you can see.

Speaker Change: In the release actual airport revenues are exceeding forecast revenues by a very substantial margin not not not.

Tal Keinan: Actual airport revenues are exceeding forecast revenues by a very substantial margin, not 10%.

Speaker Change: It's not 10%.

Speaker Change: On the operations side.

Tal Keinan: On the operations side, as Francisco alluded to earlier, we have our new airport fully up and running, cash flowing, functioning in a very satisfactory way. We're measuring our time to wheels up. We are the fastest time to wheels up at San Jose as we are in all of our other airports, and that means a lot to us. It's also been a very good testing facility for some of the additional services that we've begun to roll out to residents. We have three additional fields in advanced staffing and equipping in anticipation of opening.

Speaker Change: As Francisco alluded to earlier, we have our new airport fully up and running cash flowing functioning.

Speaker Change: Very very satisfactory way, we're measuring our time to wheels up where the fastest time to wheels up at San Jose is we are in all of our other airports and that means a lot to us. It has also been a very good testing facility for some of the additional.

Speaker Change: Services that we began to rollout to.

Speaker Change: To residents.

Speaker Change: We have three additional fields.

Speaker Change: Advanced staffing and equipping.

Speaker Change: In anticipation of opening that's Denver Centennial, Phoenix Deer Valley, and Dallas Addison.

Tal Keinan: That's Denver Centennial, Phoenix-Deer Valley, and Dallas-Addison.

Speaker Change: Okay.

Speaker Change: Now, let's look at the next 12 months on the next slide again looking at the four pillars of the business.

Tal Keinan: Now, let's look at the next 12 months on the next slide, again, looking at the four pillars of the business on the site acquisition side. Again, we are, as of this earnings report, revising our estimate of new sites from eight to nine, which would put us at a total of 23 airports at the end of 2025. Please stay tuned for announcements as they come. Our focus today, again, as I described on previous earnings calls, is the best airports in the country. Right? Revenue per square foot is the highest standard deviation metric in our business. If we're targeting yield on cost The denominator of that formula is relatively static, varies within a relatively finite range.

On the acquisition side.

Speaker Change: <unk>.

Speaker Change: Yes.

Speaker Change: Again, we are as of this earnings report revising our.

Speaker Change: Estimate of new sites from eight to nine which would put us at a total of 23 airports at the end of <unk>.

Speaker Change: <unk> 2025, please stay tuned for announcements as they come.

Speaker Change: Our focus today again as I've described on previous earnings calls is the best airports in the country right.

Speaker Change: Revenue per square foot is the highest standard deviation metric.

Speaker Change: Our business, if we're targeting yield on cost.

Speaker Change: The denominator of that.

Speaker Change: That formula is relatively static varies within <unk>.

Speaker Change: A relatively finite range the numerator is where the action is.

Tal Keinan: The numerator is where the action is, and the numerator being revenue per square foot. And that is primarily a function of location. We are in the real estate business after all. So our focus is on the best airports in the country.

Speaker Change: <unk>.

Speaker Change: The numerator being revenue per square foot and that is primarily a function of location. We are in the real estate business. After all.

Speaker Change: So our focus is on the best airports in the in the country.

Speaker Change: Yeah.

Speaker Change: Moving on to development.

Tal Keinan: Moving on to development, the theme for the next 12 months is handling this very dramatic scale-up, which again is accelerated at a faster pace than we anticipated, which of course we welcome, and we aim to continue accelerating. It is a scaling challenge, and we're doing that while we continue working to reduce our per square foot cost, hopefully by a dramatic margin. We're doing that through prototyping. Again, as I noted, the Sky Harbour 37 prototype is done, fully processed and issued. Mass-scale process management and insourcing, right, that's not just the vertical integration of rapid build, but bringing a lot of the engineering and architecture functions that we can in-house and spreading, essentially, again, it is the same prototype, same hangar at every airport, and printing those out across the country, and looking to realize economies of scale in other areas, right?

Speaker Change: The theme for the next 12 months is <unk>.

Speaker Change: Link this very dramatic scale up which again has accelerated at a faster pace than we anticipated which of course, we welcome and we aim to continue accelerating.

Speaker Change: It is a scaling challenge and we're doing that while we continue working to reduce our per square foot cost hopefully by our dramatic margin, we're doing that through prototyping alright again.

Speaker Change: Notice the Sky Harbor 37 prototype is done fully.

Speaker Change: Fully fully processed and issued.

Mass scale process management and in sourcing right. That's not not just the vertical integration of rapid built but bringing a lot of the engineering and architecture functions that we can in house and spreading.

Speaker Change: Essentially again it is the same prototypes same hanger.

Speaker Change: At every airport and printing those out across across the country and looking to realize economies of scale in other areas right. We've made provisions for for example, holding significant steel inventory.

Tal Keinan: We've made provisions for, for example, holding significant steel inventory. It's not like we're exactly going out and hedging in the open market, but really looking for every advantage that we can have. Right now, as far as I know, we're the largest hangar developer in the country, perhaps in the world, and there are real economies to be gained from that scale.

Speaker Change: It's not like we're exactly going out and hedging in the open market, but really looking for every advantage that we can have right now as far as I know, we're the largest hanger developer in the country, perhaps in the world and they are real economies to be gained from that from that scale.

Speaker Change: On the leasing side.

Tal Keinan: On the leasing side, again, it's really, we do feel that there is an established brand today. Again, this time last year, I would have said, you know, people in Nashville who know about Sky Harbour probably think about it as a local Nashville play, you know, same for Miami, same for Houston. I think today in the business aviation community, Sky Harbour and Home Basing are absolutely known quantities. They're very sought after. We hope to enhance that, increase it, increase the recognition of it. But we feel that there is definitely a brand today that's reinforced by the fact that, again, the top, the most sought after aircraft owners in the country are Sky Harbour residents.

Speaker Change: Okay.

Speaker Change: We do feel that there is an established brand today again this time last year I would've said people in Nashville, who.

Speaker Change: Who know about Sky Harbor, probably think about it as a local Nashville play same for Miami San for Houston.

Speaker Change: I think today in the business Aviation community Sky Harbor, and home basing our absolutely known quantities, they're very sought after we hope to enhance that increase it increase the recognition of it but we feel that there is definitely a brand today, that's reinforced by the fact that again the top of the most sought.

After aircraft owners in the country are Sky Harbor residents.

Tal Keinan: We're increasingly looking to include flight departments, pilots, mechanics, schedulers and dispatchers, security teams into our leasing process. There are a lot of boxes that we tick for those particular players. It's not just for the aircraft owners. It allows, if you provide the facilities and service to allow pilots, maintenance professionals, schedulers, dispatchers, security teams to work the way they want to work. The net result is a completely different and completely enhanced service for the aircraft owner that frankly can't really be matched as far as we can see by any other model. We're, for the time being, the only players here.

Speaker Change: We are increasingly looking to include.

Speaker Change: Light departments pilots mechanics, schedulers, and dispatchers security teams into our leasing process. There are a lot of boxes that we take for those particular players it's not just for the aircraft owners.

Speaker Change: It allows if you if you provide the facilities in service to allow pilots maintenance professionals schedulers dispatchers security teams to work the way they want to work.

Speaker Change: The net result is a.

Speaker Change: It's a completely different and completely enhanced service for the aircraft owner that frankly can't really be matched as far as we can see by any other model.

At the time being the only the only players here.

Tal Keinan: So what's really shifting in the next 12 months is an increased focus on facilities and services catering specifically to pilots, maintenance professionals, schedulers and dispatchers, and security teams. And then lastly, operations. We are absolutely fanatically focused on the resident experience, allowing aircraft owners to maximize the utility of what's, you know, for anybody, a very, very significant investment.

Speaker Change: What's really shifting in the next 12 months is an increased focus on facilities and services catering specifically to pilots maintenance professionals, schedulers and dispatchers and security teams.

Speaker Change: And then lastly operations.

Speaker Change: We are absolutely fanatically focus on the resident experience, allowing aircraft owners to maximize the utility of whats for anybody a very very significant investment.

Tal Keinan: And with that, we, you know, we had a really wonderful opportunity to be able to attract Marty Kretschmann to join our team as the Senior Vice President of Airports. It's very difficult to think of anybody, anybody on the planet who's better suited to that role, and to increasingly surprising our tenants, delighting our tenants in a way that, you know, we could not have anticipated six months ago, and I don't think our tenants could have. And that is, you know, an absolute fanatical focus of the company today. That expresses itself in a spotless safety record, a security offering that we don't think can be matched anywhere in aviation, efficiency that we're beginning to measure and share with our residents in time two wheels up, and an increasing array of value enhancing services and partnerships that, again, our focus is on deliver value that nobody else can deliver in aviation.

Speaker Change: And with that we had.

Speaker Change: A really wonderful opportunity to be able to attract Marty kretchman too.

Speaker Change: To join our team as the senior Vice President of airports, it's very difficult to think of anybody anybody on the planet, who is better suited to that role and to increasingly.

Speaker Change: Surprising our tenants delighting our tenants.

Speaker Change: In a way that we could not have anticipated six months ago, and I don't think our tenants and that is an absolute fanatical focus of the of the company that expresses itself in.

Speaker Change: And.

Speaker Change: Spotless.

Speaker Change: Ft record a security offering that we don't think it would be matched anywhere in aviation.

Speaker Change: Efficiency that we are beginning to measure and share with our residents in time two wheels up.

Speaker Change: And an increasing array of value enhancing services and partnerships that again, our focus is on deliver value that nobody else can deliver in an.

Speaker Change: In aviation.

Speaker Change: With that I think yes.

Francisco Gonzalez: With that, I think, yeah, we conclude our prepared remarks, and we now look forward to your questions. Please submit your questions on the Q4 platform, and we'll answer them accordingly.

Speaker Change: We conclude our prepared remarks, and we now look forward to your questions. Please submit your questions Louise Q4 platform.

And we will answer them.

Speaker Change: Accordingly.

Operator: operator. Thank you.

Operator.

Speaker Change: Thanks Lauren.

Speaker Change: Thank you. Your first question comes from Cameron dial.

Francisco Gonzalez: Your first question comes from Cameron Giles. Do you plan on contributing to Sky Harbour Capital again to help close the funding gap for the remaining construction? And when do you plan to raise the $300 million to $420 million equity portion of the $1.2 billion needed for the first 20 sites?

Speaker Change: You plan on contributing to Sky Harbor capital again to help close the funding gap for the remaining construction.

Speaker Change: When do you plan to raise $300 million to $420 million equity question.

Speaker Change: One 2 billion needed for the first 2000 sites.

Speaker Change: Thank you come around.

Francisco Gonzalez: Thank you, Cameron, for the two questions. Let me address them in order. Yes, so as you know, just as a refresher, we do product finance for construction projects, which means that we put equity and we raise debt and we put out a trustee dedicated to the projects that we look to putting in place. And twice over the past three and a half years, we have to go and inject additional equity into the construction fund, you know, to address what have been, my God, almost like generational construction inflation given COVID that everybody in the industry experienced.

Speaker Change: Two questions.

Speaker Change: Let me address the first order.

Speaker Change: Yes, so as you know just a refresher we do project finance.

Speaker Change: Our construction projects, which means that we put equity and we raised debt and we've put a prestige it dedicated to approach that we look to two fully in place.

Speaker Change: Twice over the past three years, we have to go.

Speaker Change: Inject additional equity into the construction fund.

Speaker Change: To address would have been up my God almost like generational.

Speaker Change: The inflation construction inflation, if you can call it that everybody.

Speaker Change: The industry experience and then suddenly sign corrections.

Francisco Gonzalez: And then some design corrections on our prototypes that we experienced, but we did not hesitate and immediately moved to plug those funding gaps whenever we realized that they existed. The good news is that we feel confident right now that the $87.3 million of cash that is currently at the trustee for these projects is more than sufficient to complete the projects that remain, which means the three that are opening in the Q1, the second phase at Opaloca in Miami that will start next year, and then the second phase in Denver that will be coming up later.

Speaker Change: On our prototypes that we experienced but we did not hesitate.

Speaker Change: And immediately moved to.

<unk>.

Speaker Change: Those funding gaps whenever we realized that they exist that the good news is that we feel confident right now that the 87 3 million.

Speaker Change: Cash.

Speaker Change: As currently the trustee for these projects esport institutions to complete.

Speaker Change: The projects that remain.

Speaker Change: Which means the three that are opening in the Q1 the second phase.

Speaker Change: In Miami that will start next year and then the second phase in Denver.

Speaker Change: Yeah.

Speaker Change: In Denver that that will be coming up.

Speaker Change: <unk>.

Francisco Gonzalez: And obviously this includes, yeah, that's the answer for that one. And second question, you know, we are more or less halfway, more than halfway in terms of our equity races that we then pair with debt to complete the 21st airport. And it's important that now we talk about phases. You know, we, given the amount of real estate, of higher real estate, these campuses, we tend to do things in two phases, in two phases, which means that... and every dollar of equity that we raise, we pair that with about $2.3 of tax-exempt debt in terms of our capital formation.

Speaker Change: And obviously these include.

Speaker Change: That's the answer for that one and the second question.

Speaker Change: We are more or less halfway.

Speaker Change: Halfway in terms of our equity raises that we then pair with debt to complete the 20.

Speaker Change: 24 airports and it's important that that we've talked about phases.

Speaker Change: Given the amount of real estate of Hanger real estate. These campuses, we tend to do things in two phases in two phases.

Speaker Change: Which means that.

Speaker Change: And every dollar of equity.

Speaker Change: Race with paradigm with about $2 $3 of tax exempt debt.

Speaker Change: In terms of our capital formation. So again answering your question we are more than halfway through in terms of our funding for <unk>.

Francisco Gonzalez: So, again, answering your question, we're more than halfway through in terms of funding for our 20 airports, including both phases.

Speaker Change: R 20 airports, including both cases.

Francisco Gonzalez: Let me just take the opportunity to mention the following. So we have some deadlines in our ground leases to start construction. We do have some flexibility on meeting those milestones. So in theory, we could tap dance a little bit here and wait until we have internally generated cash to be the equity contribution to some of these fields. The issue, though, is that we prefer, and it's accretive to our shareholders, to continue raising equity and pairing it with debt and accelerating those projects than waiting several years into the future to get the equity cash flows to fund those projects.

Speaker Change: Just sticking with dual fuel dimensionally following aim.

Speaker Change: Although we have some.

Speaker Change: Deadlines.

Speaker Change: In our ground leases to start construction.

Speaker Change: We do have some flexibility.

Speaker Change: On when those milestones.

Speaker Change: Theory in theory, we could.

Speaker Change: It helped us a little bit here and wait till we have internally generated cash to be the equity contribution to some of these fields. The issue, though is that we fear.

Speaker Change: It is to our shareholders to continue racing equity parent Ed with debt and accelerating those projects.

Speaker Change: Waiting.

Speaker Change: Several years into the future too.

Speaker Change: Equity cash flows to fund those projects.

Francisco Gonzalez: And, you know, we have run the math on that many times, and, again, the opportunities on these projects and to do them sooner await the drawback of the dilution of additional equitations. Obviously, these are fact-specific and will continue to be delivered as we manage funding and capital-based investments into the future.

Speaker Change: We have a broad new muscles that many times and again the opportunities on these projects and sooner of weight.

Speaker Change: The drawback of the dilution of additional equity issuances, obviously is our fact.

Speaker Change: Specific and we will continue to be deliberate as we are measures at funding.

Capitalization decision.

Speaker Change: In the future.

Speaker Change: Next question.

Operator: Next question. Thank you.

Speaker Change: Thank you. Your next question is from Shiela Hendrickson, how do you foresee the Trump administration's policies will affect your business.

Tal Keinan: Your next question is from Shyla Hendrickson.

Tal Keinan: How do you foresee the Trump administration's policies will affect your business? Thanks, Shaila. As you know, we view ourselves as relatively insensitive to the economic cycle, right? Once an airplane exists, once it's born, it's got to live somewhere. The fleet is only growing, it's not shrinking. The backlog at the OEMs is, you know, is robust. And that's... That's going to remain the case, you know, no matter who's running the country. At the margins, there are potentially some benefits here. I mean, again, it's very early to say, but there's a lot of speculation in the industry about reinstating bonus depreciation, you know, 100% bonus depreciation on aircraft, which is obviously a boon to the aircraft manufacturers and, you know, encourages people to cycle aircraft.

Speaker Change: Thanks, Sheila as you know, we view ourselves as relatively insensitive to the economic cycle right once an airplane.

Speaker Change: <unk> once it's born it's got to live somewhere.

Speaker Change: Our fleet is only growing its not shrinking the backlog at the Oems.

Speaker Change: <unk> is robust.

Speaker Change: And Thats.

That's going to remain the case.

Speaker Change: No matter, who is running the country.

Speaker Change: Yes at the margins there are potentially some benefits here.

Speaker Change: <unk>.

Speaker Change: It's very early to say, but.

Speaker Change: There is a lot of speculation in the industry about reinstating bonus depreciation we have 100% bonus depreciation on aircraft.

Speaker Change: Which is obviously a boon to the aircraft manufacturers and <unk>.

Speaker Change: Encourages people to cycle aircrafts that will.

Tal Keinan: That will precipitate growth in the fleet. We don't need growth in the fleet for the Sky Harbour model to, you know, to succeed, but you know, it's a welcome tailwind. But in general, I'd say the answer to the question is we're, you know, as a business, more or less agnostic to the political environment. Thank you.

Speaker Change: Precipitate growth in the fleet, we don't need growth in the fleet for the Sky Harbor.

Speaker Change: Model two two to succeed but.

Speaker Change: It's a welcome tailwind.

Speaker Change: But in general I'd say to answer the question is where.

Speaker Change: As a business more or less agnostic to.

Speaker Change: The political environment.

Speaker Change: Yes.

Speaker Change: Thank you. Your next question comes from Peyton scale can you talk about the shift to the semi private hangar first original thesis of fully private has the company run into any scenarios, where there is not enough demand for folly praful.

Tal Keinan: Your next question comes from Peyton Skill. Can you talk about the shift to the semi-private hangers versus original thesis of fully private? Has the company run into any scenarios where there is not enough demand for fully private?

Speaker Change: Yes, thanks for that patent.

Tal Keinan: Yeah, thanks for that, Peyton. The way we got into semi-private originally was exactly that. It was in Nashville, and I wouldn't say exactly not enough demand, but Nashville has become in the last two or three years a large jet market. And we've captured a very significant, if not most, of the heavy business jets in Nashville as residents. But when we started leasing in Nashville, it was mainly a mid, and to some extent, super mid market. So that's Challengers, Falcons, aircraft like that. for whom it doesn't necessarily make sense to pay for 12,000 square feet of hangar space if you've only got 5,000 or 6,000 square feet of airplane.

Speaker Change: The way, we got into semi private originally was.

Speaker Change: It was exactly that it was in Nashville and.

Speaker Change: I wouldn't say exactly not enough demand, but at Nashville.

Speaker Change: Has become in the last two years or three years, a large jet market and we've captured a very significant if not most of the <unk>.

Speaker Change: Heavy business Jets in Nashville is wrong.

Speaker Change: Residents, but when we started leasing in Nashville, It was mainly amid some extent super mid market. So thats challengers Falcons aircraft like that.

Speaker Change: For whom it doesn't necessarily make sense to pay for 12000 square feet of anchor space.

Speaker Change: If you've only got five or 6000 square feet of airplanes, we understood that and at some point realize we're turning away.

Tal Keinan: We understood that, and at some point realized we're turning away a major part of the market, and perhaps we can accommodate these aircraft owners, and sat down and realized there's plenty of demand for people to come in with one or two other aircraft in the hangar with them, as long as they have privacy in their office and in their car parking. And that's how semi-private was born. Very quickly, we realized we could exceed 100% occupancy in those hangars. There's a lot more fuel that gets consumed, so you're making more money on the fuel as well in those hangars.

Speaker Change: A major part of the market.

Speaker Change: And.

Speaker Change: Yeah.

Speaker Change: And perhaps we can accommodate these these aircraft owners and sat down and realize there is plenty of demand for people to come in with one or two other aircraft in the hanger with them as long as they have privacy in their office and their car parking.

Speaker Change: And that's how semi private was born very quickly we realized we could we could exceed 100% occupancy in those hangars. There's a lot more fuel that gets consumed so youre, making more.

Speaker Change: Money on the fuel as well and those hangers and frankly, it's a better better model.

Tal Keinan: And frankly, it's a better model on average than fully private hangars. The reason we landed on the specific size and shape of the Sky Harbour 37 prototype is that. That is the size and shape of hangar that can accommodate the most square footage of aircraft, meaning the highest ratio of aircraft square footage to hangar square footage. So I can say that a Sky Harbour 37 can accommodate 70,000 feet of airplane comfortably, like we're never going to pack them in. This is never going to be a tight, tight, tight fit. That's not our business. You can comfortably house 70,000 feet of airplane in 37,000 feet of hangar.

Speaker Change: On average than than the.

Speaker Change: And then fully private hangers.

Speaker Change: The reason, we landed on the specific size and shape of the Sky Harbor 37 prototype.

Speaker Change: Is that.

Speaker Change: That is the size and shape of hangar that can accommodate the most square footage of aircraft. We had the highest ratio of aircraft square footage to anchor square footage.

Speaker Change: So I can say that Sky Harbor 37 can accommodate 70000 feet of airplanes comfortably like we're never going to pack them. In this is never going to be a tight tight tight fit that's not our business.

Speaker Change: You can comfortably house 70000 feet of airplane in 37000 feet of anchor to us.

Tal Keinan: So to us, that's a real design breakthrough. The revenue density is obviously much higher on that. But it sounds from your question that you're, yeah, you're implying something that is true, is that some people do want total privacy, and some people have fleets of aircraft, you know, corporations or individuals have fleets of aircraft that require a full 37,000 square feet, and they'll take down the whole piece. but one of the features of the Sky Harbour 37 prototype design. is that it's demisable. It's demisable with a regular acoustic wall that runs down the middle, right? The new NFPA 409 Group 3 fire code allows us to go up to 40,000 square feet of firewall space, contiguous firewall space.

Speaker Change: A real design breakthrough the revenue density is obviously much higher on that.

Speaker Change: But it sounds from your question that your ear, implying something that is true that some people do want total privacy.

Speaker Change: Some people have fleets of aircraft corporations or individuals have fleets of aircraft that require a full 37000 square feet and they will take down the whole the whole piece.

But what we one of the features of the Scarborough 37 prototype design.

Speaker Change: It's <unk>, it's <unk> with a regular acoustic wall that runs down the middle right. The new NFPA for our nine group three fire code allows us to go up to 40000 square feet.

Speaker Change: Firewall space contiguous firewall space, we're using 37 of those but very easy to divided and by the way very easily afterwards to undivided if you want to go back to a more efficient semi private.

Tal Keinan: We're using 37 of those, but very easy to divide it. And by the way, very easy afterwards to undivide it if you want to go back to a more efficient semi-private model.

Tal Keinan: I will say that the semi-private is really a breakthrough for Sky Harbour, right? The revenues go up so significantly when you can put more. It will give you kind of an example if you check out the revenue run rate at San Jose, which is a purely semi-private situation, right? We didn't build that facility. We inherited it. One of the reasons that we're exceeding our projections by such a large margin is because it's all semi-private.

Speaker Change: Model I will say that.

Speaker Change: Semi private is is really a breakthrough for Sky Harbor right.

Speaker Change: The revenues go up so significantly when you can put more it.

Speaker Change: We will give you kind of an example, if you check out the revenue run rate at San Jose, which is a purely semi private situation right. We didn't build that facility we inherited it.

Speaker Change: One of the reasons that we're exceeding our projections by such a large margin is is because its all semi private.

Speaker Change: Your next question is from Greg.

Tal Keinan: Your next question is from Greg Gibbous. How is visibility on pricing looking for the three new fields expected to commence operations in Q1 of 2025, and how do you expect them to compare to the existing weighted average? So I would say on those fields. Denver, Phoenix, and Dallas all compare nicely to Nashville and Miami, perhaps slightly more favorable than Nashville and Miami.

Speaker Change: Kevin.

Speaker Change: How is visibility on pricing looking further three new field is expected to commence operations in Q1 of 2025, and how do you expect them to compare to the existing weighted average.

Speaker Change: So I would say on those fields.

Speaker Change: Denver, Phoenix and Dallas.

Speaker Change: All compare nicely to Nashville, and Miami, perhaps slightly more more favorable than than national and Miami. We also may be to combine this with the last question is.

Tal Keinan: We also, maybe to combine this with the last question, is, you know, we've made provisions for significant semi-private occupancy, so that, although the per square foot rate for each aircraft might not change, the total revenue from the campus goes up quite significantly. So, you know, as you know, we don't actually begin leasing in earnest until a campus is up and running, we find that our pricing leverage is the highest when there's actual standing product that people can walk through and see. Also, for those on the call who've been inside Sky Harbour hangars, it is a dramatic experience.

Speaker Change: We've made provisions for significant semi private occupancy so that.

Speaker Change: Although the per square foot rate for each aircraft.

Speaker Change: Might not change the total revenue from the campus goes up quite quite significantly.

Speaker Change: So.

Speaker Change: As you know, we don't actually began leasing in earnest until the campus is up and running we find that our pricing leverage is the highest when theres actual standing product that people can walk through and see.

Speaker Change: Also for those on the call who've been insights Garber anchors. It has a dramatic experience. It's not what you might expect if youre accustomed to housing your aircraft at an spo, let's say so we find that that is really the time to strike I know some of the bondholders on the call and they've been very.

Tal Keinan: It's not what you might expect if you're accustomed to, you know, housing your aircraft at an FBO, let's say. So, we find that that's really the time to strike.

Tal Keinan: I know some of the bondholders on the call, they've been very patient with us in Miami and in Nashville and in Houston, allowing us to bear out that model, not pre-lease all of this space, you know, six or 12 months in advance, but really wait until we've got a product that's, you know, that's visitable. I think that's what we're going to see in Denver, Phoenix, and Dallas as well.

Speaker Change: Patient with us in Miami, and in Nashville, and in Houston, allowing us to bear out that model not pre leased all of this space six to 12 months in advance, but really wait wait until we've got a product.

Speaker Change: That's visible.

Speaker Change: I think that's what we're going to see in Denver, Phoenix, and Dallas as well.

Your next question comes from Frank Lynn Ross, what is the average weighted average lease term on your hangar tenant leases.

Tim Herr: Your next question comes from Franklin Ross. What is the average weighted average lease term on your hanger tenant leases? Anybody have the average? Yeah, thanks. So this is a...

Speaker Change: Okay.

Speaker Change: If anybody has the average.

Speaker Change: Thanks, Sarah this is Eric.

Tim Herr: This is Tim Herr. Our weighted average lease term is 3.2 years, but that's a mix of tenant lease terms. Remember, our goal is a geographically diverse, tenant diverse, and lease term diverse portfolio of contracted revenues with CPI increases with generally a floor of 3 or 4 percent. And so we focus our lease terms to be staggered so that we can take advantage of those increases when the tenant leases come up. So on the shorter end, we do have some shorter leases, like a year essentially to get tenants in, get them hooked on our service and offering.

Speaker Change: This is Tim hurt our weighted average lease term is three two years.

Speaker Change: That's a mix of a mix of tenant tenant lease terms remember our goal is geographically diverse tenant diverse and lease term diverse portfolio.

Speaker Change: Of contracted revenues with CPI.

Speaker Change: Increases with generally with a floor of three or 4% and so.

Speaker Change: We focus our lease terms to be staggered so that we can take advantage of.

Speaker Change: Those increases when the when the tenant leases come up so on the shorter end. So we do have some shorter leases.

Speaker Change: A year essentially you got to get tenants and get them get them hooked on on our service.

<unk>.

Speaker Change: Yeah.

Offering.

Speaker Change: So those we do have a few of those we do have a couple of longer term leases.

Tim Herr: So we do have a few of those. We do have a couple of longer term leases, you know, we have up to 10 years for kind of the strategic tenants who we want to keep on our campus long term. But again, kind of our sweet spot is the 3 to 5 years and that's where we end up in the average of a little bit over 3 years. I would add to that, you know, kind of two... two important things to look at. One is staggering, right? We don't want too many leases to come to maturity in the same period.

Speaker Change: Up to 10 years for kind of the strategic tenants, who who we want to keep on our campus or long term, but again kind of kind of our sweet spot is the three to five years and Thats why we are where we ended up.

Speaker Change: And the average of all of it a little bit over three years.

Tom: I would add this is Tom I'll add to that.

Tom: Two.

Tom: Two important things to look at one is staggering right. We don't want too many leases to come to maturity in the same period.

Tim Herr: That's just a risk management policy on our standpoint. So we do try to stagger the leases across the campuses. And the second is, you know, if you're the equity, you'd like the shorter term leases, right? And I understand that the debt likes the longer term leases. The equity should like the shorter term leases. We're averaging a 20% markup between the first lease in a hangar and the second lease in a hangar, a 20% markup. Remember, this is on top of escalators, which are CPI with a floor of 3%. Annual escalators, CPI with a floor of 3%.

Tom: The risk management.

Tom: Policy on our standpoint, so we do try to stagger the leases across the campuses and the second is.

Speaker Change: Sure the equity you'd like to shorter term leases right and I understand that the debt like the longer term leases the equity she'd like to shorter term leases, we're averaging a 20% markup.

Speaker Change: When the first lease in a hangar and secondly, CAGR of 20% markup remember this is on top of escalators, which are CPI with a floor of 3%.

Speaker Change: Annual escalators CPI with a floor of 3%, we're seeing 20% average markups between first term and second term.

Tim Herr: We're seeing 20% average markups between first term and second term. But there are several cases more recently, which is significantly higher than 20%. But like Tim said, I think it's a good policy to get people in the door on shorter term leases, even if we compromise on revenue in the short term. Because again, people don't know what home basing is. Many people don't know what that is. And once you've experienced it, we're finding in almost all cases, you never want to go back. This is the way you want to keep an aircraft going forward, even understanding that your introductory pricing is not necessarily going to carry forward.

Speaker Change: There are several cases, more recently, which is significantly higher than 20%, but like Tim said.

Speaker Change: Think it's a good policy to get people in the door on shorter term leases, even if we compromise on revenue in the short term because again people don't know what Homebase ing as many people don't know what that is and what once you've experienced it we're finding in almost all cases, you never want to go back.

Speaker Change: You want to keep and aircrafts.

Speaker Change: Going forward, even understanding that.

Your introductory pricing is not and not necessarily going to go into carry forward and I think we've had a lot of luck with that strategy.

Tim Herr: And I think we've had a lot of luck with that.

Operator: Stratis.

Speaker Change: Your next question is from Jim Jones, Hi, Great quarter, I was wondering what francisco's thought about the equity value at Sky Harbor, given his current ownership and if you would participate.

Jim Jones: Your next question is from Jim Jones. Hi. Great quarter.

Francisco Gonzalez: I was wondering what Francisco thought about the equity value at Sky Harbour, given his current ownership, and if he would participate in the December offering. Thank you Jim for the question. I always welcome more ownership bonuses at the end of the year, so I'm glad that you're asking the question and hearing from our CEO and founder. But no, to answer your question, you know, the proxy statements understate my ownership in the company because I precede the equity offering and so on and so forth, and there are three employees, myself the treasurer and our former CEO that have a participation that's really not reflected in the RSUs that began being granted post this PAC.

Speaker Change: Paint in the December offering.

Speaker Change: Okay.

Speaker Change: Thank you Jim for the question.

Speaker Change: I always welcome more ownership.

Speaker Change: Closes at the end of the year. So I'm glad you're asking the question are you hearing from <unk>, CEO and founder, but no to answer your question.

Speaker Change: The proxy statements.

Speaker Change: Understate my ownership in the company because I precede the equity offering.

Speaker Change: And so on and so forth and there are three employees myself the treasurer on our former sure that that happens to have a participation.

Speaker Change: That's really not reflected in the indeed.

Speaker Change: The issues that begun as being granted post destock.

Francisco Gonzalez: And, you know, I have not sold any shares and I've said publicly many occasions I don't plan to sell any shares in the foreseeable future and so on and so forth. But I will refrain from giving thoughts about our valuation and so on and leave that to the research analysts and to the market in general to and so on. And, you know, we always at conferences, you know, guide people in terms of what to focus on, in terms of our valuation and so on, but again on a personal basis, I'm actually longer this talk than people will see from the RSU.

Speaker Change: And I have not sold any shares.

Speaker Change: I have said publicly many locations I don't plan to sell any shares.

Speaker Change: In the foreseeable future and so forth, Steven but I will refrain from giving thoughts about or by the <unk> and so on I'll leave that to.

Speaker Change: We research analyst and to the market in general. So we always are conferences guide people in terms of what to focus on in terms of our the ratio and so on.

Speaker Change: But again on a personal basis.

Speaker Change: I am actually longer the stock.

Speaker Change: You can see from the <unk> <unk>.

Operator: Next question. Thank you.

Speaker Change: Questions.

Speaker Change: Thank you.

Francisco Gonzalez: Your next question is from Cameron Giles. Have you made any progress on renegotiating the below market DBT leases and what is the current and targeted price per square foot? Thanks, Cameron, for the question.

Speaker Change: Your next question is from Kamran Guiles have you made any progress on renegotiating the below market DBT leases and what is the current and targeted price per square foot.

Speaker Change: Thanks camera for the question. So we don't we don't put out.

Francisco Gonzalez: So we don't put out price per square foot. We're in active talks with prospective tenants. We don't have any leases to renegotiate. We gave indicative pricing early on in the project, but I think the market understands that a lot has changed in Phoenix. You know, it sounds like you follow that market. Scottsdale is completely full and busting at the seams and experiencing very significant delays and congestion due to the crowding there. There's significant migration, particularly in the semiconductor industry in northwest to the Deer Valley area. So, you know, what was true of that market, you know, 24 months ago is no longer true today.

Speaker Change: Price per square foot.

Speaker Change: We're in active talks with with prospective tenants, we don't have any leases to renegotiate. There is there is no we gave indicative pricing.

Speaker Change: Early on in the.

Speaker Change: And the project, but I think the market understands that a lot has changed in Phoenix.

Speaker Change: Yes.

Speaker Change: It sounds like if you followed that that market Scottsdale is completely full and busting at the seams and experiencing very significant.

Speaker Change: Delays and congestion due to the crowding there.

Speaker Change: There is significant migration, particularly in the semiconductor industry.

Speaker Change: Northwest to the Deer Valley area.

Speaker Change: So what was what was true of that market.

Speaker Change: Four months ago is no longer true today, and that's I think the market understands that.

Francisco Gonzalez: And I think the market understands that.

Speaker Change: Your next question is from Peter Shaun does the expansion plan for Westhampton Airport with signature aviation represents a sign of new competition for hanger space or Fbl's, and then New York.

Peter Sean: Your next question is from Peter Sean. Does the expansion plan for West Hampton Airport with Signature Aviation represent a sign of new competition for hangar space or FBOs in the New York area? Can you repeat that question?

Speaker Change: Sorry can you repeat that question I don't think we got it yes.

Tal Keinan: I don't think we got it. Does the expansion plan for West Hampton Airport with Signature Aviation represent a sign of new competition for hangar space or FBOs in the New York area or NY area? Okay, very good.

Does the expansion plan for Westhampton Airport with signature aviation represents a sign of new competition for hangar space.

Speaker Change: Fbl's, and then New York area or NY area.

Speaker Change: Okay very good thank you.

Tal Keinan: Thank you I don't know if it's directly linked. I'd say a couple things. Number one, a signature like us sees that the New York area is, you know, this is the richest market for business aviation in the country. So both FBOs and Sky Harbour should be investing significantly in, you know, in the New York area.

Speaker Change: I don't know if its directly linked I would say a couple of things number one cigna.

Speaker Change: Signature like US Caesars, New York area as is.

This is the richest market for business aviation in the country. So both <unk> and Sky Harbor should be investing significantly in the New York area.

Tal Keinan: Second, you know, to point out, and it sounds from the question that you're quite plugged into the business, we are in very, very separate, different businesses from Signature, which is what allows us to cooperate in so many areas so effectively. They are an FBO. They're in the fuel business. They make their money outdoors. Sky Harbour makes its money indoors from rent. So we are attacking different markets. There's certainly overlap between what we do. But again, I think that it's narrow enough that the two companies have been able to cooperate extensively in ways that add value to each of us and to our respective customers.

Speaker Change: Second to point out.

Speaker Change: It sounds from the question that Youre youre quite plugged into the business.

Speaker Change: We are in very very separate different businesses from signature, which is what allows us to cooperate on so many.

Speaker Change: In some areas so effectively they are and they are in the fuel business. They make their money outdoors Sky Harbor. It makes us money indoors from from rent. So we are attacking the remarks theres certainly overlap between what we do.

Speaker Change: But again I think it's it's narrow enough that the two companies have been able to cooperate extensively.

Speaker Change: In ways that add value to.

Each of us and to our respective customers.

Tal Keinan: So I really see that West Hampton expansion, you know, primarily as an endorsement of the New York market, which, you know, again, was not something we needed.

Speaker Change: So.

I really see that west Hampton expansion, primarily as an endorsement of the New York market, which again was not something we needed we know the New York markets attractive.

Jim Jones: We know the New York market's Your next question is from Jim Jones.

Your next question is from Jim Jones can you. Please walk us through the DFS CR calculation and where you are as of third quarter on a run rate basis.

Francisco Gonzalez: Can you please walk us through the DSCR calculation and where you are as of third quarter on a run rate basis? Yes, thanks Jim for the question. Let me answer the following way, because you got to look back to the original projections that we made at the time of the bond offering, and those were all subsequently updated at the time of the, I would call it the pivot, when we added Addison in lieu of another, of the second phase at Phoenix, and we also at that point also updated the projections.

Speaker Change: Yes, Thanks, Jim for the question.

Speaker Change: Let me answer the following way.

Speaker Change: You got to look back to the original projections that we made at the time of the.

Speaker Change: Bond offering and those were all subsequently updated.

Speaker Change: Time of the <unk>.

Speaker Change: Hard to pivot when we added Amazon in.

Speaker Change: In lieu of another of the second phase.

Speaker Change: Phoenix and <unk>.

Speaker Change: We also at that point also updated the predictions.

Francisco Gonzalez: You know, we, as a matter of course, we don't put out projections. Our research analysts put out, you know, in their updates consolidated projections, which obviously are different than obligated group. Obligated group does not include San Jose, for example, and so on. So I think the guidance we've been given publicly has been that once stabilized, you know, once we complete the projects, which are, I will say, about a year to two years delayed, remember we had COVID, we had, you know, construction delays and so on, that once we get stabilized, and that will be about two to three years from now, in terms of being fully constructed on the obligated group and fully cash flowing, we will be at higher cash flow available for debt service than we projected three years ago.

Speaker Change: As a matter of course, we don't put out projections.

Speaker Change: Our research analysts.

Speaker Change: <unk>.

Speaker Change: Put out.

Speaker Change: In their updates consolidate projections, which obviously are different than hopefully gategroup obligate group does not include San Jose for example.

Speaker Change: So I think the guidance we've been given.

Speaker Change: Publicly has been that once stabilized once we complete the projects which are.

Speaker Change: We'll see but a year to two years delayed remember we had call it, albeit we have.

Speaker Change: <unk> delays and so on that once we get stabilized and that will be.

Speaker Change: About two to three years from now in terms of being fully constructed on the obligatory group and fully cash flowing and we will be at a higher higher cash flow available for debt service than we projected three years ago and those projections. If you go back to the <unk> report is one issue.

Francisco Gonzalez: And those projections, if you go back to the CRE report on the talent bond issue, which was we're in the $25 million area. So you can compare that to the $6.9 million interest expense that we have on our debt between now and 2032. And basically, what we're saying is that we expect to be more than three times the service coverage in terms of our cash flow available for debt service and our debt service was stabilized. So that's basically the way I will think about this.

Speaker Change: Which was we are in the $25 million on our area. So you can compare that to.

Speaker Change: The $6 9 million interest expense that we have on our debt.

Speaker Change: Between now and 2032.

Speaker Change: Basically what we're saying is that we expect to be more than three times.

Speaker Change: Yes, there was coverage.

Speaker Change: In terms of our cash flow for debt service and our debt service.

Speaker Change: Once stabilized.

Speaker Change: So that's basically the way I will think about this and look at the current run rate.

Francisco Gonzalez: If you look at the current run rate in Q3, when we're about to open three campuses in Q1 of next year, it's too early to be looking at it that way. And remember, we have capitalized interest through July of next year. So that means we have the money set aside and paying interest income to our bondholders from cash that we have invested in treasuries at the trustee.

Speaker Change: Q3, when we are about to open three campuses.

Speaker Change: In Q1 of next year is just not historically, so we're looking at that way and remember we have capitalized interest through July of next year. So let me be money set aside I'm paying interest net interest income from cash that we have invested in treasuries are interesting next.

Operator: Next question.

Next question.

Peyton skill: Thank you. Next question is from Peyton Skill. What kind of project level ROE is the company targeting on a project like OPF Phase 2, which should get similar REND RSF as OPF Phase 1, but significantly higher construction costs given the post-COVID inflation?

Speaker Change: Thank you next question is from Peyton scale, what kind of project level <unk> is the company targeting on a project like <unk> phase, two which should get similar rent Rss as Lps phase one that's significantly higher construction costs, given the post COVID-19 inflation inflation.

Francisco Gonzalez: Thanks. Thanks for that, Peyton. So, yes, there's been significant inflation in construction costs, and Will's mission is to battle that and reverse it for us, but we'll see. The jury's out. That battle has not been fought and won yet. Hanger rent inflation has outpaced construction inflation by a massive margin. So I don't know if I agree with the assumption that phase two rents in Miami will be similar to phase one rents in Miami. I'd say right now, the current waiting list for aircraft in phase one is about double the number of the entire occupancy of aircraft that's currently in phase one.

Thanks, Thanks for that.

Speaker Change: So yes, there has been significant inflation in construction costs.

Speaker Change: And we'll mission is to battle that and reverse it for us, but we'll see the jury is out.

Speaker Change: <unk> has not been fought and won yet.

Speaker Change: Hanger rent inflation has outpaced construction inflation by a massive margin.

Speaker Change: So I don't I don't know if I agree with the assumption that.

Speaker Change: Phase II rent and Miami will be similar to phase one rents in Miami I'd say right now the current waiting list for aircraft and phase one is about double the number of the entire aircraft.

Speaker Change: The occupancy of aircraft. That's currently in phase one so theres massive demand for the product in Miami frankly from my perspective, the leases Ken Ed soon enough because we think the replacement tenants are coming at a much higher level. So we think there is there is and we think thats still ongoing right theres significant hanger price inflation.

Francisco Gonzalez: So there's massive demand for the product in Miami. Frankly, from my perspective, the leases can't end soon enough because we think the replacement tenants are coming in at a much higher level. And we think that's still ongoing, there's significant hangar price inflation, not just in Miami, but Miami is one of the areas where it's higher, I think, than the average in the country. The second point is that the revenue density in Opa-locka phase two, I think it's a nuanced point, but I think it's worth understanding. When I talked about the semi-private capacity in the Sky Harbour 37, you can get a lot more airplane into a 37, a lot more square foot of airplane into a square foot of hangar in a 37 than you can in a Sky Harbour 16, which is what Opa-Locka Phase 1 is.

Speaker Change: Not just in Miami, but Miami is one of the areas, where it's higher I think than the average in the country. The second point is.

Speaker Change: Is that the revenue density and Opa-locka phase II, it's a nuance point, but I think it's worth understanding what.

Speaker Change: When I talked about the semi private capacity in the Sky Harbor 37.

Speaker Change: You can get a lot more airplanes into a 37.

Speaker Change: Yeah.

Speaker Change: A lot more square foot of airplane into a square foot of hanger and a 37 than you can in a Sky Harbor 16, which is what Opa-locka phase one is our <unk> phase two is now 37%. It's an interim hangar it's not the prototype yet it's called Skiba 34, it's not quite as efficient as the 37 in terms of revenue density, but it's not far.

Francisco Gonzalez: Now, Opa-Locka Phase 2 is not the 37. It's an interim hangar. It's not the prototype yet. It's called the Sky Harbour 34. It's not quite as efficient as the 37 in terms of revenue density, but it's not far either. You'll have a much higher revenue density in Opa-Locka Phase 2 than we did in Phase 1. that combined with hopefully continued hangar price inflation, we think the yields are at least what we're seeing right now in Opa-locka phase one. If I may add, again, without going into much detail, given the confidentiality of our tenants, it's fair to say that we have two existing tenants at Opa-locka phase one that already have raised their hand for one of the larger Sky Harbour 34s, Opa-locka, because they have significant fleets, and right now they have some of their excess planes literally sitting in our apron, and so forth, outside of Opa-locka at the current phase.

Speaker Change: Sure Peter So you'll have a much higher revenue density and Opa-locka phase III than we did in phase one.

Speaker Change: That combined with hopefully hanger continued hanger price inflation.

Speaker Change: We think the yields are at least what we're seeing right now in Osaka phase one is.

Speaker Change: If I may add if I may add.

Speaker Change: Without going towards detailed clinical financial and give our tenants, but it's fair to say that we have two existing tenants and a bulk of phase one <unk> raise your hand.

Speaker Change: While these larger Skyboard 30 force of OCA.

Speaker Change: Until because they have significant fleet and right now they have some of the excess.

Speaker Change: If plains literally ceding our April one so the fourth cycle.

Speaker Change: The current base.

Francisco Gonzalez: So, you know, that's good to know, before we even start construction, have two of them basically spoken for. We'll see how Reds shake out between now and then.

Speaker Change: So.

Speaker Change: Yes.

Speaker Change: Before we even start construction have two of them basically spoken for.

Speaker Change: We'll see how rents shake out to now have the next question.

Greg Gippas: Next question. Your next question comes from Greg Gippas. Given pricing seems to continue exceeding your initial expectations with lease renewals and replacements stepping up nicely, do you see upside to your current potential revenue opportunity at stabilization presented in this figure? What level of pricing growth is assumed in those sure projections? All right. Well, thank you, Greg.

Speaker Change: Your next question comes from Greg to tip us given pricing seems to continue exceeding your initial expectations with lease renewals and replacements stepping up nicely do you see upside to your current potential revenue opportunity at stabilization presented and this figure what level of pricing growth is assumed in those.

Sure projections.

Speaker Change: Alright, well. Thank you Greg the last question is the easiest wanted to answer zero.

Tal Keinan: The last question is the easiest one to answer. Zero. We're projecting zero growth. To be clear, shares or Sky Harbour equivalent rent is a pretty simple formula, the two major components of which are what are aircraft at a specific airport currently paying at the FBO in rent and what are they paying in fuel margin. So Sky Harbour equivalent rent is a proxy for the total basing cost of an aircraft currently at an airport. Now we use that as a floor because we want, the assumption behind using that as a floor is that if you were paying the same amount to Sky Harbour as you would be paying an FBO, you would almost certainly move to Sky Harbour because everything about it is superior as a home base.

Speaker Change: We're projecting zero growth to be clear sheriffs or Sky Harbor equivalent rent.

Speaker Change: Is.

Speaker Change: A pretty simple formula the two major components of which are water aircraft at a specific airport currently paying at the spo in rent.

Speaker Change: And what are they paying in fuel margin, so scarborough equivalent rent as a proxy for the total basin cost of an aircraft currently at an airport.

Speaker Change: Now we use that as a floor because we want.

Speaker Change: The assumption behind using that as a floor is that if you were paying the same amount.

Speaker Change: <unk> Sky Harbor as you would be paying an spo you would almost certainly move to Scott Harper because everything about it is as superior as a homebase remember we can't do transient we don't compete with the FDA and the transit business, we don't have a transient business, where pure homebase, but as a homebase zero downsides and only upside so the.

Tal Keinan: Remember, we can't do transient, we don't compete with the FBOs in the transient business, we don't have a transient business, we're pure home base. But as a home base, there's zero downsides and only upside, so the assumption is if you were paying the same price, you would come to Sky Harbour. Of course, we aim to target 80, 90, 100%. premium over what these people are paying. And that's what we've been hitting at these airports, in some cases, even exceeding that, because we are putting out an offering that has very, very unique value to aircraft owners.

Speaker Change: Assumption is if you were paying the same price.

Speaker Change: You would come to Sky Harbor of course, we aim to target 80, 9100%.

Speaker Change: Premium over what these people are paying and that's what we've been hitting at.

Speaker Change: At these airports in some cases, even exceeding that.

Speaker Change: Because we are putting out an offering that has very very unique value to.

Speaker Change: Two two aircraft owners so.

Tal Keinan: That's what Sky Harbour Equivalent Rent is.

Speaker Change: That's what's got her broker Evelyn rent is want to be very clear. It has nothing to do with our projections right. We use it as a risk management tool because we don't carry at least these hangers.

Tal Keinan: I want to be very clear, it has nothing to do with our projections. We use it as a risk management tool because we don't pre-lease these hangers. We only lease when they're up. We want something that gives us safety, particularly gives the bondholder safety, that these hangers will be leased at at least a certain rate. That's what Sky Harbour Equivalent Rent is. In terms of exceeding expectations, none of that has worked its way into our projections. I think some of the analysts might be looking at that and maybe revising their own models on the basis of the results.

Speaker Change: At least one of their App, we want something that gives us safety, particularly gives the bondholders safety that.

Speaker Change: These <unk> will be at least at at least a certain rate.

Speaker Change: That's what's garver equivalent renters.

Speaker Change: In terms of.

Speaker Change: Exceeding expectations, none of that has worked its way into our projections.

Speaker Change: Some of the analysts might be looking at that and maybe revising their own models on the basis of the of the results. We haven't we haven't done that I think just for our own purposes.

Tal Keinan: We haven't done that.

Tal Keinan: I think just for our own purposes, we'd like to see that at many more airports over a much longer time period before we start making any kind of claims. But I might check in with the analyst community because they might be revising their models. Thank you, Tal.

Speaker Change: We'd like to see that many more airports over a much longer time period before we start making any kind of claims.

Speaker Change: But.

Speaker Change: My checking with the analyst community because.

Speaker Change: They might be horizon in their models.

Speaker Change: Thank you Todd operator, there seems not to be any additional questions.

Operator: Operator, there seems not to be any additional questions.

Operator: Thank you all for joining us this afternoon and for your interest in Sky Harbour. Additional information may be found on our website, www.skyharbour.group. And you can always reach out directly with any additional questions through the email investors at skyharbour.group.

Speaker Change: Thank you all for joining us this afternoon and for your interest in Sky Harbor additional information may be found on our website Ww star with the group and you can always reach out with any additional questions. We'll be email investors ask Alberto group. Thank you again for your participation and with these we have concluded our webcast operator. Thank you.

Operator: Thank you again for your participation.

Operator: And with this, we have concluded our webcast. Thank you.

Speaker Change: Thank you. This concludes today's conference call and webcast you may now disconnect.

Operator: This concludes today's conference call and webcast. You may now disconnect.

Speaker Change: [music].

Speaker Change: Yes.

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Speaker Change: Okay.

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Speaker Change: Yes.

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Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Sure.