Francisco Gonzalez: Yes, I would just add that we have paid very little in terms of brokerage fees. I think, only $42,000 since inception and less than $20,000 this year. As Tal mentioned, by having our leasing group internal and moving — and having a good cadence of having these campuses open in a staggered fashion, it makes it very efficient for doing this internally. And again, it’s probably comes at scale of running a national business of scale in various markets at the same time.
Operator: The next question is from [Kevin Amirsaleh]. How are the markets for hangar space changing with the softening economy? How is absorption of new space in the industry, same as 2022?
Tal Keinan: I would say, it’s what I alluded to earlier is that what really drives this market is the square footage of the US business aviation fleet, which doesn’t fluctuate, it only grows. That would be a very different claim if we were in the fuel business, because if you are in a soft economy, one of the levers that you can pull as an aircraft owner is fly less, consume less fuel. But once an aircraft is delivered, it’s got to live somewhere. I would go to the extreme in a severe recession even if — if the bank now owns the aircraft and it’s not flying, the case for hangering it goes up not down. So we feel that the demand gets locked in once the aircraft gets delivered. So there’s significant insulation we think from the economic cycle.
Operator: The next question is from [Matthew Howlett]. I think you said you expect to execute three ground leases in 2024. Is this about the pace you expect going forward?
Tal Keinan: We actually — we put out an estimate of three ground leases in the first half of 2024. And I think one of the things that you’re seeing is if we do this right, this is not linear, right? We planted dozens, many dozens of seeds starting about 18 months ago, which are now starting to sprout. And if we do it right, should do it at an ever increasing pace. So execution will be our the biggest challenge here. We don’t expect this to be a linear story.
Operator: [Operator Instructions] The next question is from [Connor Keim]. What kind of time line do you see for the conversion to a REIT structure? Is there something you think is a possibility in the next year or two, or is this something that you see happening along the lines of five plus years from now?
Francisco Gonzalez: No, that’s definitely something — conversion to a REIT that will be more of a medium to long term strategy. We’re growing, as you know, at this currently. And thus, we want to — once you convert into a REIT, you’re required to cash flow and dividend out a certain percentage of cash flow, which as we discussed earlier on this call, we’re in growth mode. So we may need that cash flow to continue investing in new projects. So definitely something more in the medium to long term, not within the next two years.
Operator: The next question is from [Philip Ristow]. Why was the phrase North America used in the press release, will there be other airports outside the United States? Can the pipeline be close to 100 locations?
Tal Keinan: The short answer is yes, on airports outside the United States. We think about 60% of the world is right here in the United States, one regulatory jurisdiction to operate in. So it is certainly the low hanging fruit, but there are exceptions that are attractive enough to pursue. In terms of where the pipeline can go, I don’t want to speculate right now on a number, but I understand the direction you’re headed here. I’ll say a couple of things. Number one, I can’t think of many of examples of airports that we thought were attractive to us and turned out not to be attractive. I can think of many of the examples of airports that we overlooked that we now understand are actually good target airports for Sky Harbour. So I gave the example of the 5,000 foot runways, which under certain conditions are completely fine for Sky Harbour and opens up a lot of opportunities that we were not looking at a year ago.
The last thing I’ll say on this is as you can understand the denominator that we’re using in yield on cost is development cost. To the extent that we can get our per square foot development costs down through vertical integration, value engineering, prototyping, all of the measures that we’re taking and working on refining, not only do the unit economics on the existing airports get better but the universe of airports that are viable for Sky Harbour gets larger. So I don’t want to put a number on that right now. But I understand where you’re going with the question and we’re thinking in exactly the same terms.
Operator: We have no further questions at this time. I’ll turn it over to Francisco Gonzalez for any closing remarks.
Francisco Gonzalez: Thank you, operator. And there have been no additional questions. I want to thank everybody for joining us this afternoon and for your interest in Sky Harbour. Additional information may be found in our Web site at www.skyharbour.group. And you can always reach directly with additional questions through e-mail, investors@skyharbour.group. If you wish to visit a campus, please let us know and we will arrange a tour. Thank you for your participation. And with this, we have concluded our webcast. Operator, thank you.
Operator: Thank you. This will conclude today’s conference call and webcast. You may now disconnect.
