Tal Keinan: So I think you might be referring to — there are two new community hangars at one of the FBOs and then there is a new FBO that opened up last year at Opelika, I believe you’re probably referring to that. We don’t really see either of those as competition for our product. Yes, scarcity of hanger in general certainly helps our business but our offering is fundamentally different from an FBO community hangers offering. So we do have people who are — even if there were other hangar space available on the field and even if it were significantly less expensive would base with Sky Harbour, it’s just a fundamentally different offering.
Operator: Our next question is from [Robert Slasak]. In your comments about re-leasing, you referenced additional tenants coming on board. Are some, most — are hangers multi tenant rather than single tenant?
Tal Keinan: So we’ve experimented with that a little bit. We’d still see — remember the original concept was all private hangars, one hangar, one tenant. And that’s still the bulk that of tenancy right now is completely private hangars. We began experimenting last year with a concept that we call semi private hangar where your aircraft might have one or two roommates in the hangar, all base aircraft, all positioned in the same spot. You have private parking, private office space, but your aircraft is in the hangar with other aircraft. We’re finding that for the smaller — if you’re flying a Challenger or the Falcon 900 or something like that, it opens up a lot of possibilities for us. So the way we address that at the beginning in Houston was by building smaller hangars for those aircrafts, that was a mistake.
Most of those aircraft owners are happy to be in a hangar, might not be justified to take down an entire hangar privately for a Falcon 900. You could sit three of those aircraft in one of our standard hangars. Most of those owners are very comfortable being with one or two others. Again, it’s not a transient hangar with constant traffic, the door is always closed, the privacy is maintained, you know your neighbors. We’re finding that works quite well. And one of the perhaps side benefits of that is that we can achieve greater than a 100% occupancy in those hangars, because we do use the FBO convention of lifetime’s wingspan as the square footage of an aircraft, you can play around with the geometry and see that you can get far more than 12,000 square feet of airplane into 12,000 square feet of hanger.
Operator: The next question is from [Alan Jackson]. Last quarter you mentioned the potential of paying dividends with excess cash flow. Why not retain these cash flows within the business to compound as opposed to paying dividends? What is management’s thoughts on how excess cash is deployed?
Francisco Gonzalez: Indeed, it’s something that we discuss internally a lot. Right now, we have been retaining our cash — generate cash in the business as we’re ramping up. Eventually, as we stated indeed in the last conference call, we would like to start paying dividends when the time is right and maybe ultimately converting to a REIT, because that will be very efficient for our investors. But that assumes that we can continue to access the capital markets for additional equity at the right price and that’s the critical contingency. So if we can do that, we’ll start paying dividends and move towards a REIT structure. If the opportunities don’t arise, we’ll then — as you suggested, use our cash flow to continue to invest in campuses given the attractive unit economics for our shareholders. So that’s basically our strategy but very good question and something we think about all the time.
Operator: Our next question is from [Robert Slesak]. For the 10-Qs, properties and development fell from 56 hangars in June 2023 to 42 hangars as of September 2023. Were some projects abandoned or perhaps a change in configuration?
Francisco Gonzalez: And we probably should add a couple of more footnotes in our disclosure regarding hangars. As Tal mentioned, we’re experimenting with some larger formats, a [Sky Harbour 30], which is basically double the size of a typical hangar that we are developing now. And thus, when we report hangar — number of hangars, we don’t differentiate between [Sky Harbour 16], which is roughly 14,000 square feet or a [Sky Harbour 30], which are now in development in future campuses that will simply double the size. So it is indeed mostly a change in configuration that is dropping the number of hangars. But if you notice in terms of rentable square footage, we’re actually moving higher in total square footage in development.
The one thing that did happen is that as you probably saw in our disclosure, we let the lease for the second phase at Sugar Land expire. As you all may recall, that was our first campus. It was our experiment campus where a lot of things that we have now fixing happened. And an allocation that we’re happy with it, it’s cash flowing nicely, but it’s not as attractive as the opportunities that we have in front of us. So we decided to not do Phase 2 at Sugar Land and that is about six — a drop six hangers with that removal.
Operator: The next question is from [David Pinoni]. Can you please provide additional color surrounding the planned Chicago site? What was the price paid for the ground lease and how long is the term? How many hangars do you anticipate to build on that site? How do you anticipate the clientele to differ from Sugar Land, Opelika and Nashville?
