Good afternoon. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. All lines have been placed on mute to prevent any background noise. After this speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply submit a question online using the webcast URL posted on our website. Thank you. CFO Francisco Gonzalez, you may begin your conference.

Thank you, Tina. I'm Francisco Gonzales CFO of Sky Harbor hello and welcome to the 2025 first quarter investor conference call and webcast for the for the Sky Harbor Group Corporation we have also invited our bondholder investors in our borrowing subsidiary Sky Harbor Capital to join and participate on this call before we begin I've 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. Some of the information that we'll discuss today contains forward-looking statements. These statements are based on management assumptions, which may or may not come true, and you should refer to the language on Slides 1 and 2 of this presentation, as well as our ACC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statements wanted to note uh the picture here on on uh on the deck is one of our new hangars at our new campus that just opened the city of addison just north of downtown dallas this hangar is beautiful if you notice in the picture has a messaging level and floor to roof wall windows in the office space overlooking the hangar the jet shown is a bombardier global 7500 one of the largest jets in business aviation and fits nicely into our hangar space. We're now moving to even larger size hangars in our future campuses to accommodate even larger single jets or customers with fleets. So now let's get started. The team we do this afternoon, you know from prior webcasts, our CEO and chair of the board, Tal Kanan, our treasurer, Tim Herr, our chief accounting officer, Mike Smith, and our accounting manager, Tori Petro. We also have Marty Kressman with us. Some of you remember he joined us as head of airports about a year ago after a successful career at Signature Aviation. We have a few slides we'll want to review with you before we open it to questions. These were filed with the SEC about an hour ago in Form 8K along with our 10Q and will also be available on our website later this evening. We also filed our first quarter Sky Harbor Capital Obligated Group Financials with MSRP EMA also about an hour ago. As the operator stated, you may submit written questions during the webcast during the Q4 platform and will address them shortly after our prepared remarks. So let's get started. Next slide, please. In the first quarter, on a consolidated basis, assets under construction and completed construction continue to accelerate, reaching over $275 million as of quarter end on the back of construction activity in Phoenix, Dallas, and Denver. Revenues experienced an increase of 133% over a year ago and 20% sequentially, as we incorporate the operations from the acquisition of the Camarillo campus last December. Operating expenses in Q1 increased moderately due to several factors which Mike, our Chief Accounting Officer, will break down shortly in more detail. We strive to keep SG&A in check as we grow, keeping frugality front and center in our expense and cost management initiatives. Cash flow using operating activities moved higher, which usually happens in each of our first quarters, but this quarter in particular for the increase in operating costs that Mike will explain now. We wanted to also reaffirm our prior guidance that we expect Sky Harbor to reach cash flow break-even on a consolidated basis at the end of this year as we ramp up the leasing and cash flowing of the new three campuses over the summer and fall. Next slide.

Mike. Thank you, Francisco. like to discuss a few of the factors impacting the comparability between some of our reported operating expenses this quarter as compared to the prior of the one and a half million increase approximately a third of the increase relates to an increase in our reported fuel expenses which is simply a function of us reporting fuel gross at our camarero hangar campus as opposed to net as we do with many of our others two other impactful impactful factors including increases in headcount at our ADS, APA, and DBT locations. This was further impacted by a full quarter of our operations at our Camarillo Hangar Campus. Similarly, our cash use and operating activities was impacted by many of the things I just went over, but was also impacted by largely just...

Thank you, Mike. Next slide is a summary of the financial results of our wholly owned subsidiary, Sky Harbor Capital, and it's operating subsidiaries that form the obligated group. This basically incorporates the results of our Houston, Miami, and Nashville campuses, along with the capex and operating costs, and soon revenues of our three projects that have just opened up in Phoenix, Addison, and Denver that's expected to open up in a few weeks. Revenues were basically flat for the last few quarters. We expect a step-function increase in revenues in Q2, Q3, and Q4 at these three campuses as their list stop and random field revenues commence to flow over the coming months. Operating expenses increase, as we just discussed, given the onboarding of only-line personnel and hardware masters in Q1 in anticipation of this campus becoming operational a few weeks ago. Next few quarters are expected to succeed increase into higher positive cash flow from operations as the three new campuses are leased with that let me pass on to tal for an update on our grand lease pipeline thanks francisco so this is a slide that draws the most uh questions and comments so i'll dwell on it for a few minutes before we go on with the rest of the presentation and just highlight few things that we've added.

So what you see on the right is our growing map of Sky Harbor ground leases, self-explanatory. The two new ground leases that you see are in the Pacific Northwest, that's Seattle and Portland. The chart on the left is I think maybe the key chart to understand in terms of how we perceive or conceive of value creation at Sky Harbor, which is the chart that that tracks the revenue that is available to Sky Harbor. And we added a few points just to make sure that people understand, because we've gotten questions about this on the last two or three earnings calls. The first is, what does that bar chart actually represent? It's rentable square footage under ground lease times Sky Harbor equivalent rent, okay? Airport, sorry, rentable square footage uh under ground lease times sky harbor equivalent rent that is the total revenue that's available to sky harbor from ground leases that we currently control the box on the upper left is a direct answer to a lot of people's uh questions from previous calls how do we calculate that and why do we think it's a conservative starting point for for estimating uh you know kind of call it terminal NOI in the entire Sky Harbor portfolio. Sky Harbor equivalent rent is what people are paying today at those airports. Now the closest function that we have to compare it to is the original CBRE estimate from 2022 on available rent on the airfield that we had. So what we're looking at here is $29.08. That was the original estimate. That is what we went out to the bond market with originally that was for 2022 and we're looking at three airports there that's sugarland in houston opelaka in miami and nashville international in nashville where we are currently is at 35.75 cents a square foot so that is the actual that's about 23 percent higher than the sky harbor equivalent rent which is half of the reason that we feel that this chart is conservative what we see on the lowest line is the highest expected revenue which is forty dollars and six cents that is a blended average of the most recent leases signed in uh miami nashville and Houston, which represents a 38% premium over the original CBRE estimate. So there's two things that we feel are going on here. The first is the premium that top jet owners in the country are willing to pay for the home basing offering. Sky Harbor is a completely unique offering in aviation. It doesn't exist today, and we think that that's part of the reason that we're commanding such a premium over Sky Harbor equivalent rents. And the second is inflation on airports, which is a central piece of our thesis, which is we're not building new airports in this country. The available land on existing airports or let's say the readily developable land on existing airports is already quite scarce. we tend to take up all of the readily developable land on an airport that we come to. And that really makes the case, it's really a supply-demand question, for airport inflation outstripping CPI by a very significant margin. And I think that's part of what we're seeing. So the last line on that chart captures, we believe, a lot of that inflation, meaning the most recent rents that we're seeing are much higher than our average rent. A lease that we signed on the first round right after opening a campus comes in at a lower total revenue than a lease signed more recently. So that's that is on site acquisition. The next slide is just a quick overview of our most recent site acquisition deal. This is Hillsborough, Oregon, which is the primary business aviation airport for Portland. And everybody has the slides, so I'm not going to spend much more time on it. Next slide is where we've spent most of our time and effort over the last two quarters, which is in a total revamping of our construction. Sky Harbor is becoming a construction company in many ways. And we have, you know, today we have the scale that, you know, both, I'd say, demands that we do this, but also presents a big opportunity for doing it. So if you look on the left side of the chart, you see the story of vertical integration at Sky Harbor, which largely was not a factor in the early days. We did do our own prototypes very early on, and I think that was a big piece of our value proposition, but almost everything else was outsourced in the construction stack. And what you can see over the course of 2024, where we purchased our pre-engineered metal building manufacturer subsidiary and brought all of our steel and materials procurement in-house, uh what we've done over the last uh call it two or three quarters was integrate a uh the ability to conduct our own pre-construction uh construction services design architecture engineering uh and increasingly now general contracting uh in-house so what does what does all that do and that trend i believe will continue as we continue to scale what does all that do the center column is the intended effect of those moves the first for everybody who's looking closely at our unit economics is to manage costs and that's not just a question of cutting out margin to the various suppliers that used to be on the outside but it's also getting a lot more efficient in our processes because again we're not relying on people who do a lot of different things We're now talking about people who do only one thing, which is build a prototype Sky Harbor 37 hangar. That'll also manifest in speed, which improves, which lowers our costs as well and also starts revenues flowing earlier. Now, if you figure about a half a million dollars a month in NOI per campus, the effect of shaving two, two and a half months off of our construction campus is uh it certainly moves the needle uh even in the grand scheme build quality which uh you know there's a lot of people in the call uh who follow us closely have known we've had you know a very mixed experience uh with build quality and design quality in our space and we've worked with with the blue chip suppliers uh it just happens that in in this space there are quality issues and that's something that we want to address by taking it in-house fundamentally the ability to manage scale you know really inoculate ourselves from the effects of supply chain disruptions or anything like that and and have nothing get in get in the way of scaling our business and then lastly versatility if we need to make modifications to the prototype you know retrofits whatever it might be having all of that ability in-house and the ability to prioritize because you know we're not competing with other customers for those services I think is a big deal and the ultimate benefit that we're trying to get from this is on the right column obviously our unit economics is yield on cost is what we measure the denominator is our construction cost the lower we get those the better our unit economics one level more subtle but I think very important for people are trying to value this company is our addressable market if you just do the math if you're looking at it you know if you look trying to target a minimum of a 12 yield on cost in all of our new construction if you're building at 250 a foot versus 300 a foot the universe of airports that will bear that yield grows dramatically right the addressable market grows if we're successful in all of our efforts to reduce our construction costs the total addressable market grows very significantly for sky harbor and then third you know arguably most important is is product differentiation right and we have a bundled uh real estate and service offering that has to go together you have to build it this way in order to put forward the service offering that that we have uh we aim to be the six star offering always um in our space and we're differentiating ourselves on on build quality it's not just it's not just about the quality of construction and the durability of our structures but it's the design itself and the fact that we have a rapid feedback loop where you solicit direct feedback from our residents and then introduce that into the portfolio I think we continue to gain an advantage and that will increasingly be part of the moat around this entire business. With that, I'm going to hand it over to Tim.

Thanks, Al. We continue to enjoy strong liquidity with approximately 97.5 million of cash in U.S. treasuries. Our cash management strategy focuses on investing our cash in short-term U.S. treasury bills and money market funds dedicated to future construction use, while the various reserve funds required by our bonds are invested in longer term treasuries. The chart on the right-hand side shows the latest trading of our long bond which continues to rally over the past year. We stand by our expectation that the future debt service coverage ratios for these bonds will exceed those that we forecast forecasted at the time of the bond issuance.

We appreciate the continued interest in our bonds by our bondholders as we gear up for our next offering this year to fund our airports currently under development back over to francisco thank you tim uh very quickly in terms of capital formation um we continue to work ahead in preparation of our next uh debt issuance which we as we discussed in prior calls we have been dual tracking upon offering uh or a bank term facility and let me also note you know we keep our eye on developments in dc about the future of tax exemption for municipal debt and you know all that we've seen at least in public news is that what's coming out of dc seems to be leaving tax exemption untouch which obviously is great news for uh you know our one of the pillars of our business model which is raising tax exempt debt to fund our growth um separately we continue to receive inquiries from investors looking to invest in the company, and also from certain real estate and infrastructure funds looking to partner with us in potentially looking at existing hanger assets already in operations. We'll report soon on these potential structures and finances that we are working on as soon as they're materialized or get formalized. Let me turn it back to Tal to discuss and look ahead and highlights of our Q1 in terms in terms of development and leasing.

Thanks, Francisco. So Q1 highlights, I'm gonna focus on development in this slide, and when we look ahead, I'm gonna focus on leasing because as we've described the business before, it's an exercise in shifting bottlenecks, right? We had a very big side acquisition bottleneck. We're coming into a place where our success on the side acquisition side has built a development bottleneck, which is welcome. That's what we want. But starting at the beginning on site acquisition, two new leases in the last quarter, both in the Pacific Northwest. As always, more to come. The pipeline is full. We will not take our foot off the gas on site acquisition. It is the binary entry ticket into this entire business. And we remain focused on pulling down the best airports in the United States for Sky Harbor. Development is where the biggest action has been in the last quarter. We are on the eve of some big announcements and some big introductions for new leadership in our construction team and a significant expansion of the roster of players, not just in number, but in fit for our mission. These are what I consider the top veterans of the pre-engineered metal building industry in this country. uh coming in house uh things that i referred to earlier that we we really are excited about i think that that's a huge piece it's both a necessary gear up uh for for the scale of development that we're entering right now but also a an opportunity to really just maximize the advantage of and economies of scale of of a construction effort on this of this magnitude uh more near term and tactical uh phoenix dallas and denver are all nearing completion all three of those have part of their hangers under certificate of occupancy already we've commenced operations uh in two of those airports and leasing at all three of those airports we have two more uh uh campuses scheduled for delivery by the beginning of 2026 that's dallas phase two and miami phase two and then 16 additional campuses in development so you know certainly you know an exponential ramp up in development activities i would say coming into the second and even third quarters that will remain a major focus for management is is is making sure we're properly prepared for that but also maximizing the the benefits that we can draw from scale on the leasing side all three of the new campuses are in round one lease up remember we're also completing leasing at Camarillo which we acquired and we're beginning lease up in Boeing field in Seattle which we just acquired we are experimenting now you know I think a lot of people who follow us closely you know have noted and challenged this strategy of waiting until we actually are ready for operations certificate of occupancy full ground support equipment and staff trained and ready to go before we actually start leasing a campus the idea behind that is that we have maximum pricing leverage at that point in that aircraft owners pretend not to pre-plan and pre-lease. One of the things we're seeing, though, is inbound demand is real. When we announce a new airport, we increasingly get calls from a lot of the business aviation community in that jurisdiction looking to pre-lease. And increasingly, we feel like people are aware of the differentiated value you of the Sky Harbor home basing offering, and frankly are aware of the premium that you pay in order to get it. So we've taken one airport, which we'll perhaps name at the next opportunity, and we're going to lease up part of that campus well in advance before we've even broken ground and see, and this is an experiment, but to see what that does for us. I would say for certainly for the you know bondholders on the call and I say you know people who are looking at downside scenarios on the equity side you know that that should be welcome news and we're going to see if we are really forced to part with significant upside by doing that. Obviously the intention is to try to have our cake and eat it too but we'll see how that goes uh releasing has become a central piece of our activity and that's just a function of scale at this point is that we have you know uh you know seven eight nine airports uh with leases coming to term uh now sort of significant i don't want to call it a distraction but but a significant uh uh portion of the leasing team's focus uh has been diverted to releasing and that that's also key because of the premiums that we're getting on on on previous uh releases the second round is i don't know if we have updated statistics but let's say between 20 and 30 percent higher than the first round of leasing uh so we want to continue to maximize that that's on leasing on operations i don't think people on this call have uh have met marty Kretschmann, our senior VP of airports. So this is a good opportunity to meet him. So Marty, let me ask you to cover operations.

Sure. Thanks, Tal. So quarter one, strong quarter of execution for the operations team. As Tal mentioned, when it comes to value differentiation, that really is where the rubber meets the road for our customers. We ramped up our three new campuses, Phoenix, Addison, and Denver with personnel and equipment, getting ready for the first residents and bringing the Sky Harbor model to more aircraft owners and operators across the country uh tal mentioned we also established our initial operating presence at boeing field we began support of our first incumbent residents there while we're negotiating towards a longer term agreement with the airport and then at camarillo we continued refining the service offering from our december acquisition to align with our distinct and elevated standards with nine campuses now actively serving our residents were we're dead thanks marty okay so moving on to the uh the next one or two quarters

uh again the theme that you will see is a gradual shift of management attention away from the the bottleneck that you know we're we're now contending with which is development to the next bottleneck which will be leasing okay we have a skeletal leasing team today and that's going to have to change as all this volume comes online um again on site acquisition started at the beginning on site acquisition our focus is on the best airports in in the country right we're just referring us back to that bar chart it's it's primarily about revenue capture and maximizing that we are i'll reiterate on course to meet our 2025 acquisition target which will have us at 23 campuses by the end of this year and we continue to grow our team to support that acceleration development again we've discussed quite a bit already and i'm guessing there's going to be some questions on this but vertical integration is has been the theme more and more is coming under our roof and that is both a necessity and also a big opportunity for us to increase our build quality speed up scale up and lower our development costs leasing uh like i said will increasingly be the center of management's focus in in the coming quarters uh we're going to have to build up a national leasing team um definitely a challenge again i think one of the areas is going to take a lot of focus it was and it has been on the development side it will be on the leasing side, it's not obvious who the right players are to actually manage a process like this. There's no obvious pool to be fishing in for talent. A lot of it, I think, is cultivated in-house, and that might be the strategy going forward. As we do that, and again, I'm going to ask Marty to speak about operations in a minute, but a lot of that takes care of itself if we continue firing in all cylinders on operations and really bringing that differentiated value. So increasingly, we're seeing the Sky Harbor brand growing in the business aviation community. There are fewer and fewer people, whether that's aircraft managers, pilots, aircraft maintainers, and in many cases, aircraft owners who are aware of Sky Harbor and want it. Again, And we're seeing that in the, when we announce new ground leases, the calls that we get from flight departments looking to pre-lease these properties. We're seeing it in expansions. People who have, let's say, one hangar who are now going to two hangars, or in one case, two hangars going to six, I guess now seven hangars. Residents in one location who are looking for a dedicated hangar in a second location. so increasingly i think the the word is out and that's really about just delivering you know every day so we've been worried a little bit less about messaging uh and more letting that take care of itself when we just deliver which is a good segue to uh let me hand it back to marty again to talk about operations in the coming quarters sure so as we look ahead we continue refining our standard operating platform with input from our residents and their support teams What we offer is a comprehensive aircraft home-based solution.

Our model means we don't serve any transient traffic, so we have up to 10 times fewer aircraft movements than a traditional FBO at the same airports. And there's an inherent operational simplicity here that enables tighter security, improved safety performance, and ultimately a more seamless transition into the air for our residents. FBOs, maintenance…

Thank you, Marty. Operator, this concludes our prepared remarks. We now look forward to investor and participant questions. Operator, please go ahead with the queue.

At this time, I would like to remind everyone, in order to ask a question, please submit it online using the webcast URL. We'll pause for just a moment to compile the Q&A roster. And our first question comes from Randy Beiner with B-Raleigh Securities. Can you provide more color on your plans to raise debt this year? You have mentioned $150 million in the past calls. Thank you.

Thank you, Randis Francisco. Thanks for the question. Yes, we are gearing up to, as we've said in prior calls, to do a financing for new projects that are coming up and we are diligently preparing for that. we continue to do a track if you know we keep an eye on interest rates we keep an eye on what's happening in the markets in the musical market and inflows and outflows into the funds in that market a so it's not just about just being ready ourselves also a making sure the market is a good market to go into and as you guys know they have been a little volatility the past few weeks and then And as I mentioned earlier in the past, we do all track a debt bond issuance also with some very attractive term financing that we have received from some of our relationship banks that are able to actually lend money on a tax exempt basis. So yes, we're tracking 150, it could actually end up being a little bit more from 150 to 175 million in terms of our next debt issuance. Next question.

Our next question is from the line of Pat McCann with Noble Capital Markets. Could you speak to the prospect for increased competition over time from operators that would seek to replicate your model versus FBOs?

And does this concern you, and what would Sky Harbor's competitive advantage in the face of new competition? yeah this is tell pat thanks for the question the answer is yes it does concern us uh you know it's probably my biggest concern today in the business uh is new competition uh that said as the quarters go by i i feel that the lead that we have is increasingly sustainable in that you know if you take if you look at the different silos of our activities independently site acquisition which is really the the binary entry ticket you're you're just not in the game if you can't acquire the land is probably our most special skill in the company you know we we couldn't import it from anywhere else we had to we had to develop that skill set internally i think we have the bedside acquisition team with anybody on airports today and even even then you're talking about a mini year process to actually get landed at an airport we have plenty I look at our you know pipeline you know which which is you know well over a hundred airports today that we're working on their airports that have been in there for five or six years and we're optimistic about them we're in good shape but this is a very long process so I think it takes takes quite a bit of time to uh break into it um rather than go through every other silo i'll just add that the integration of all four silos right site acquisition construction leasing and operations it's it's not that easy a trick it's definitely a lot less easy than i thought it would be when we started this business to actually get them working together uh and it's key right i mean it doesn't it doesn't make sense if they're not working together correctly you know we used to think we're a real estate company you know we just put up hangers and you know and people would come in and and leave them i think today if you pulled sky harbor residents and that's it doesn't matter if it's the aircraft owner pilot uh you know maintainer aircraft manager it almost doesn't matter they're going to talk about the people that they interact with every day at sky harbor and the the level of service that they get now you can't put forward that type of service without a very specifically designed hangar and a very specifically designed campus so it is all integrated and if you can't build it you know at the quality level that we need at a price that actually works uh you know for for the for the uh business plan uh it's almost you know don't don't bother coming so increasingly you know again it's we're not putting uh people on mars here we we understand that. It is a straightforward and fairly simple business model, and I do imagine we will have eventually. And every quarter we get this question, every quarter I say it's coming, we will have competition. For the time being, we haven't seen it, and I think as more quarters go by, it gets harder and harder to compete with us. Again, I think it's inevitable that we will have competition, but I also think we have a much better chance of maintaining our lead as time goes by.

Our next question is from Philip Risto. If Sky Harbor was segmented only for New York and Connecticut locations, what would the unlevered and levered returns be?

Okay, thank you, Philip. It's Tal again. I understand what you're getting at, and I think a lot of people have said, you know, forget the rest of the country, just be a New York company, and that would be a great company. i i agree with that uh you know we are fundamentally we are in the real estate business right there's a big operational component to it but it is about location at the end of the day new york is the richest market there's well over a dozen airports that that that would work really well uh for our model in in the new york area um so in terms of yield on cost if you're only looking at unit economics yeah you'd be you'd be looking at new york you know uh you know again i think it'd be very conservative to say 15 yield on cost is achievable in new york i think you do a lot better than that uh in this area that said first of all there are other jurisdictions where you can do that um the the scale of the opportunity again i mean i think we're very happy to see you know 13s as well uh which which we are seeing in in other jurisdictions so if you get a 15 16 17 in New York, I think it still makes sense as long as the capital is there to do the rest of the country as well. I think that's what you're getting at in the question. In terms of leverage, I do think it's an interesting cost of capital question. Again, I think all day long at our current cost of capital, yeah, do 13% yield on cost. I'll ask Francisco to weigh in on this as well. You could increase our cost of capital significantly and would still be worth pursuing those. But I think that's what I have to say on that. Francisco, you want to add anything?

No, I think that's a good answer. The projects in the New York area, Connecticut area, may also have a slightly higher cost than some other regions in the U.S. So at the only day of that, But that does not offset the much higher leased revenues and potential for revenues in this So, indeed, that's why we're so focused on this area and also I will say some areas in Florida, some areas in California, some areas in Texas, not just in the New York area, but But yes, all these projects pencil out nicely for our business model. Next question.

Our next question comes from Alex Bozart. You've stated that you typically achieve income per square foot double that of the FBO's charge. What are the FBO's charging at your four New York metropolitan airports, And do you believe any of the airports you have ground leases at could generate income per square foot exceeding $100?

Yeah, thanks. Thanks for the question, Alex. It's it's pal. I want to be cautious about that sort of forecast. I think maybe what we could say is we don't we don't have any New York area airports open today, But we already have leases that are generating 70, 80, and almost $90 a square foot outside of New York. So if you kind of fuse that with the previous question, I think from Philip Ristow, you can perhaps form your own view on the likelihood of that. Great. Next question. question?

Yes, our next question comes from Ezra Kodick. Your initial projection saw the entire obligated group being completed in 2024 versus more than half slipping into 2025 and 2026 now.

Considering these delays, the door issues, and the new delays in all the locations expected in Q1, why is the correct strategy to accelerate the pace of the lease acquisition instead of focusing on those already signed out yet to start construction yeah it's tal again ezra thank you for the question it's a great question um and look we we have debated and continue to debate questions like this all the time um i i'd say this cautiously we we've invested so much in perfecting our prototype and minimizing the development risk going forward you know we we've certainly look a lot of things you're inevitably going to learn the hard way i'll say this one of the one of the good things we did in the early days of the business was we intentionally stayed away from new york We said, look, we don't know which geographies we want to be in for sure. We're going to try to take the path of least resistance. It ended up that Houston was the first market that we've made headway in. One rule that we did say is we're in the state of New York, we're in the state of Southern California, we're going to stay out of the Pacific Northwest, some of the best markets that we knew already were the best markets in the country, where we knew we would make Unfortunately, we didn't know which mistakes we'd be making at the beginning, but we knew they were going to happen. uh not all those have been in design and construction but a lot of the big ones have as you as you point out so we have spent really a lot of time uh perfecting a prototype that works uh that is functional in a way that no other hangar is in in aviation and is constructible uh at scale and and efficient cost and we feel confident going in that we're we're in a good place on this so our you know we we believe that you know this is kind of a walk and chew gum situation we've got great people on the construction side and on the design side we don't see any reason to slow down on the on the site acquisition side i'll say two more things and i'll link this to one of the earlier questions about competition yes the model is increasingly difficult to replicate but the deepest moat around this entire business is site acquisition if you can get land i think denver international was the last airport that was developed in this country that was you know a generation ago we do not make new airports in this country it is almost impossible you cannot come to national international airport today and compete with sky harbor we took all the available land at that airport it is a key piece of our strategy and then the last thing i'll say on that is if we do hit log jams on the development side it's important to understand that there are either no performance obligations in most of our ground leases or very loose, lenient performance commitments in those ground leases. Meaning, if you do have to delay by a year or even two years, the start of construction, you can do it. We don't want to do it. We are all about speed and growing and growing fast. We feel we have our ducks in a row and we're ready to do that. Again, And a lot of the last two quarters have been exactly about that. That has been the focus of managing now is getting our construction ducks in a row so that we can handle this scale and take advantage of it maximally. But I think it's a great question. It's something that we talk about here all the time.

Yeah, in fact, it's Francisco, because this is a really, really good question. And as Tal mentioned, we get to continue doing both lease acquisition and then development of those leases. But we're definitely in a rat race. You know, we're in a rat race because this land is sacred in the sense of that, as Tal mentioned, there's just no new airports that are going to be developed in the U.S. They all are there. And we're probably also competing with the development of expansions of commercial aviation terminals, cargo facilities, and so on. And we want to get our hands at not every airport, at the airports that we care about. and lock that ground lease for 50 years. And once we do that, the rest is about execution. So the economic value to our investors, to our equity holders, in our business model, it happens the moment we lock in that ground lease. Next question, please.

Our next question comes from Randy Biner. Have construction timelines been affected by macro uncertainty this year? If so, how are you managing around the delays? any delays, thank you.

Randy, it's Tal, thank you for the question. Short answer is no. We – you know, I think, again, one of the benefits of insourcing a lot of those functions is that we're really not as exposed to, you know, to supply chain issues or, you know, any kind of supply demand issue along that vertical supply chain so the timelines have not been affected we did pre-purchase a lot of steel in february out of an abundance of caution that's paid off for us again that i think that was more kind of tactical luck than anything else to be clear i think two things that we see going on is is business aviation does not seem to be affected by any of this stuff uh we're seeing zero uh you know change in in uh in the demand for our offering and if we did go into you know call it a construction recession maybe that's too strong a word if we went into a construction slowdown in the united states that wouldn't be such a bad thing for sky harbor we we'd kind of welcome that our next question comes from quentin harrah are you seeing any impacts to lease term negotiations given the uncertainty in the markets i think the short answer is no our next question is from payton skill could you please provide some color on nashville occupancy nashville oxy is 92 percent it's important to understand though that i'm going to say something nuance right right now of the 92 percent that is occupied it is more than 100 occupied okay when we say 92 occupancy just so everybody understands our parlance here it means that eight percent of the campus is not leased we have higher than 100 occupancy in the part that is leased right you often particularly in a place like nashville where we have a lot of what we call semi-private hangers where you have multiple residents in the hangar you might have 12 000 feet of hangar space but 13 500 feet of airplane in that hangar space again we we it's not a video call so we can't show you what the geometry looks like when you put uh aircraft in a hangar um but uh i i think there's actually some some cutouts on our website where you where you can see that so you know it's important and when we you know we we debate this sometimes how do we how should we be reporting occupancy um in in light of that uh i don't think we've come up with it with a good answer to that but basically our occupancy is is what is vacant is 100 minus what is vacant but that again that can be a little bit of a misleading number right so like in miami for For example, you know, in Miami or in Houston, we're publishing 100 percent occupancy. We are at above 100 percent occupancy, right? We've got more. If you've got 160,000 square feet of hangar, you've got more than 160,000 square feet of airplane in Miami.

I wanted to add, Francisco, to this good question. Two things. As you probably know, when we have semi-private hangers, that means a hangar that has roommates, we rent those in the box that is the square footage between the wing-to-wing width and the nose-to-tail box. And when those boxes overlap in the Tetris game that you do in terms of uh you know hangering these these planes that's what results in more than 100 occupancy then you add to that a certain campuses where we have been a because of demand able to lease space in the apron outside and then if there's availability in the semi-private hangar then the plane sleeps inside then that further allows the same uh square footage to be rented now a third time. And that is what drives this occupancy. And one last comment. As we grow in our prototype from the Skyward 16 to the Skyward 37, the bigger the hangar, the more potential you have for occupancy to be further higher than 100% because the optimization becomes bigger and bigger, the bigger the hangar.

Our next question comes from Oros Mehta. What is the expected interest rate and timing on the expected term financing and or bond insurance in 2025?

Yeah, thank you, Gaurav, for the question. You know, obviously, it's going to be market dependent, but if we do a bond deal, we're going to go long, you know, call it 30-year final, and then trying to push the term on the bond deal. Obviously, we're constructing and financing hundred year assets so we're looking to get as as long a term as possible um and then if we do a bank facility a likely might be kind of like a five-year term to allow us to kind of like construct and the portfolio and be able to bond it out before the maturity of that term uh facility and then in terms of interest rates you know we we you can you know we talked earlier about our long bond being a where it is in the in the five area and you add a new issue discount so you know if you were to ask me right now it probably a 550 a average a yield if you're looking at bond deal and in terms of the bank facilities we've been looking at proposals uh i think with this yeah we disclosed this last time a couple of uh quarters ago we received proposals in the SOFR plus 200 area that gives you a sense of of of of the uh interest rate cost our next question comes from Ezra Kodik using the low end of your total projected cost for the obligated group you seem to have 61 million of remaining spend compared to the 47 million of cash will you have to make another contribution to sky harbor capital Yes, Ezra, thank you for your question. Good question. Yes, of course we will monitor the obligated group constantly and it's important as you look at your analysis that you're missing the fact that the cash earns interest income in between now and the end of construction. Remember We have Opa Loca 2 that just started phase 2 that just broke ground a few weeks ago. And then the second phase at Denver, which is really the last two remaining projects. And so if you add interest income and then you add the net income, basically the cash flow available for debt service, that will be generated now and the end of the finishing those two phases, then the delta between the cash in hand and the remaining spend is diminished. Lastly, we have been in conversations with a particular party that may look to get and do something in our Denver phase two. You know, nothing concrete yet to announce, but if that were to happen, the CapEx need there will be decreasing by potentially about $10 million. So that also is in play. But to answer your last part of your question, you know, we will always come to support SkyHarp Capital and our bondholders, as we've said in the past, you know, it's sacrosanct our commitment to our bondholders and to that program, which is part of the livelihood of our growth. Thank you for the question.

Our next question comes from Philip Ristow. How conservative is the share slide of close to $20 million by the year end? What kind of premium could we see for the upside of the multiples of CPI for Sky Harbor's business model continues?

Yeah, thanks for that, Phil so how conservative is the is the 200 million you know can we go back to people still see slides all right if we can go back to the bar chart so Phil I'll tell you what we're trying to do is without it's not a forecast it's more a statement of intent the you know I spoke when we talked about this slide a little bit about what the current premium is and where it's trending. And I think you're right to mention that kind of CPI benchmark, and hopefully we achieve multiples of that. But what we're trying to do really relates to what Marty was talking about. And that's, look, I don't know the numbers here. I'm betting there are people on the call who do know the numbers, but I think the premium that you pay for courtside seats, for an MBA team, if you compare courtside to second row, my guess is that's a much, much bigger premium than second row to third row. That's my guess. And we are courtside. We are the premium offering. The best flight departments in the country, the best funded flight departments, the best managed flight departments in the country are at Sky Harbor. And they insist on being at Sky Harbor. if we can continue operating and enhancing, right? We're not done. I mean, we're adding functionality to our offering all the time. If we can continue being that courtside seat in business aviation, then I think the premium that we end up commanding goes up. I don't know to what extent that's going to succeed. I don't even know if that analogy from basketball actually holds. There's probably people who know the numbers better than I do. but that that would be the intent.

Our next question comes from Alec Bosert. How meaningful to your revenue could the add-on services be over time, and how much do you anticipate this may add to your income per square foot?

Yeah, thanks, Alec. So one of the things people may have noticed is as we continue to introduce services, and I've given examples in the past, I'll give one or two right now what we've been doing is not charging for them in order to essentially you know try to capture that on just our basic rent and say look the value of the offering is this much higher because of the following services so for example if you take if you take our secure boarding service right where and we have a lot of public you know personalities as as residents who don't want exposure to, you know, to, you know, and this happened after the two attempted assassination attempts of Donald Trump, people who don't want exposure to shooters outdoors and want to do all of their boarding indoors. You know, they come in, you know, in their car into a closed hangar, they're boarding an airplane in a closed hangar, we pull them out, and they start their engines outside. And by the way, we've perfected that to a three minute, it's a three minute delay to your departure to have that kind of boarding. We don't charge for that. That's a service that if you want it, we'll provide it. We're about to roll out a light maintenance service where you can have a crew come and pre-flight your airplane 12 hours or 24 hours before a flight, address any kind of squawks, whether they're avionics, small things like tire pressure, strut pressure, things like that, we're not charging for that. But we're looking at these things as things that will enhance the value of the offering, and you capture that in the rent. By the way, there's a third-party provider who charges for that. We just don't take any cut of that business. Over time, these are things that I think we'll be able to circle back and look at. But frankly, I think right now we're running so fast on site acquisition, development, leasing, and operations. Just going in and conducting the exercise of trying to price and market services like that is, frankly, I think at this point a distraction. If we can provide them and they don't cost us too much to provide, do it. Try to capture the upside of that in your rents and then circle back because once you have a loyal following that really says, okay, home basing is the only way we're going to operate going forward, then look for opportunities to potentially break those out. And again, I don't know if that actually results in a net increase in revenues or not. We'll see. But right now, we find it's just cleaner, easier, smarter to roll these things out without charging extra for them.

And I will say these are the services that we will provide. As we are discussing prior calls, We're in discussions with people who provide catering services, security services, rental car services, the detailing. There's two financing institutions that would like to offer the financing to our tenants when they look to upgrade their planes and so on. So, and obviously our goal is to, you know, have referral agreements and things like that that allow us to participate in these third-party providers provide services to our tenants.

Our next question is from Ezra Koenig. For all the leases signed outside of the obligated group, what do you estimate the total construction cost being? When do you expect to start and finish the construction on these leases?

Yes. Thank you, Ezra, for the question. We, as Tal mentioned, spent a lot of time in the past few months to gear up and enhance our construction development efforts to accelerate the start and the finish of this construction of these new leases. And there's a schedule that we have provided in page 24 of our 10-Q that you can see the latest startup construction dates for all our leases that we have signed. So we are looking to explain these things, as Tal mentioned, every month results in higher revenues for the company, so there's a lot of value in us accelerating, and you're going to see that in the coming quarters.

There are no further questions at this time. Mr. Gonzalez, I would now turn the call back over to you.

Thank you. Thank you, Operator, and thank you all for joining us this afternoon and for your interest in Sky Harbor. Additional information may be found on our website at www.skyharbor.group, and you can always reach out directly with any additional questions through the email investors at skyharbor.group. Thank you again for your participation, and with this, we have concluded our webcast. Thank you, Operator.

This concludes today's conference call. You may now disconnect.