Tal Keinan: There are a couple of questions in there, this is Tal, again. So David, first, we don’t pay for the ground leases. One of the benefits of doing this greenfield is there is no upfront payment. So it’s very efficient from our perspective. The lease term is 50 years at Chicago. The number of hangars, I’m just following on Francisco’s point, the mix is changing, we’re using those larger, what we call, the Sky Harbour 34 hanger now. Happy to get into it at this time as to why we’ve made that shift, but more square footage under each hangar roof. We’re talking about something on the order of 250,000 square feet of hangar in total for Chicago. In terms of the clientele, I think the one interesting thing I can say, as I think most of the people on the call know, we do tend to attract sort of the highest end clientele.
This is the newest, largest business jets in a metro center Chicago Executive has a 5,000 foot runway, it’s got an EMAS, which is an emergency arrestor system on the runway. We used to have the filter of 6,000 feet, we didn’t look at airports that had runways shorter than 6,000 feet. And one of the things that we learned among other places in Chicago is that there are certain conditions under which a 5,000 foot runway works very well. So the largest business jet, Bombardier Global 7500s, Gulfstream G650s our base at Chicago Executive and can operate out of that runway. So there’s a lot of nuance that goes into our target election criteria. We learned a lot from Chicago but this is one of the airports where again, I think, for example, as Houston large jet owner might not locate an airport with a runway that length.
Each market has its own particularities, but that’s one of Chicago’s.
Operator: The next question is from [DJ Meghan]. Are you experiencing any construction cost overruns or labor issues as we are seeing with many airport projects? Please discuss the competitive environment at MIA or others offering hangar space?
Tal Keinan: Look, I think we experienced what everybody else is experiencing things in the industry. As I think you’ve heard from both Francisco and me so far, we have taken a lot of initiatives to bring as much of the variability in construction under our own control. That’s I think one of the key drivers of vertical integration for us in the business. We have seen a little bit of loosening. I don’t know if that will continue or not. I would say 2022 — and late 2022 was probably for us the peak of the labor and materials shortage. Again, it feels a little bit looser now, but we’ll see going forward. With regard to Hanger in Miami, Opelika is absolutely jam packed. We are the most expensive basing solution at that airport, at every airport.
So for us it’s really about achieving the premium that the market is willing to give us at that field. And like I said in one of the earlier questions, we just don’t see a comparable offering, right? The alternative is to go to an FBO community hangar, which is a good fit for many aircraft owners, not for the type of owner that tends to come to Sky Harbour.
Operator: The next question is from [Philip Ristow]. Will there be an option to refinance next year if rates decline if you raise for PABs before year end?
Francisco Gonzalez: I’ll take that. And thank you, Philip, for the question. And I will say also that, you’re one of those investors that follow us very closely, and we appreciate your questions that come in between conference calls. Glad that you’re reading all our materials. So yes, we are — one of the benefits of private activity bonds is that the tax and bonds come with a 10 year per call. And that allows us over time to have a portfolio when we have various bonds outstanding. And remember, it’s a program not a separate bond deal. So the next bond issue will basically join the obligated group, join on several. So one benefits on the fact that there’s already a cash flowing portfolio of collateral to support the next bond deal and so on and so forth, which is why we are optimistic that in 2025 when we go to the rating agencies, it will secure — expect to secure investment grade ratings.
And that’s ideally when we like to go to the bond market, when we can achieve 150 to 200 basis points in savings versus issuing non-rated. And that type of credit spread — a reduction will offset a significant portion of the increase in interest rate that we have experienced in market in recent months. So between now and then, you will be funding projects with our equity capital. And we might do interim debt solution, more to come on that later, that will bridge us between maybe time within now and the time that we will be in a position to achieve investment grade ratings. And at that point, it’s the ideal time to look in permanent capital in terms of the bonds in the bond market.
Operator: The next question is from [Christine Thomas]. How do you source your customers, what are your customer acquisition costs? Are there customer groups you’ve not yet targeted, which would be easy to target? Can your new investors help?
Tal Keinan: And I think your question might stem from some of our original guidance on using brokers to get to customers, which we haven’t really done. That was in the original plan. I think if you look at our financial models, we did have a pretty significant brokerage expense in there. So I don’t know maybe Francisco and Tim might be able to specifically the customer acquisition costs. I would say with very few exceptions have secured all of our members without brokers. We’ve gone direct. We don’t have marketing yet. We do get some inbounds but it tends to be local, in terms of new groups and how it works with our new investors. So among our new investors are aircraft owners that actually own fleets of multiple aircraft and frequent more than one market.
You might be based in Miami that might be your hub, but there are people who are based in three or four or five different jurisdictions and are specifically — and have specific operating characteristics or might operate types of aircrafts that are a little bit difficult to accommodate in kind of generic FBO situations who are looking to create their own sort of network of Sky Harbour hangars across the country. We haven’t done that yet but it’s something that we’re looking at.
