So a project by project, each project is profitable. It could be that thing right now as a business that we have to grow so that the contribution of those projects surpasses the semi fixed cost of our SG&A as a business. And again, we expect that to happen in the near future. In terms of headcount, we’re keeping it very tight. Every time we open a campus, we have three or four full time equivalents. So you can do the math there in terms of the expenditure as we open campuses. And in terms of capital requirements, I think the rule of thumb here to use is that on average again, these are on average. Every campus with these various spaces will cost, will make mean a deployment of between $50 million to $60 million. So that gives you a sense of capital formation for us as we continue to grow.
And in terms of how — obviously, the business is very competitive and we find. Let me let Tal address that in terms of competitive dynamics, but we are in a competitive business. And at the same time, though, we have a differentiated product that allows us to be very successful. And the recent past has shown us again and again be able to be selected among others.
Tal Keinan : I agree with that. I think what you said is exactly right. You may be on top of that. I’d say, I think the place where we’re probably, we’ve created the most proprietary knowledge in the entire company is on-site acquisition. To be clear, we love our hangars. They’re Taj Mahal for us. But fundamentally, it is a metal box. Leasing is leasing operations is not very different from what you’d see, for example, in FBO operations. In fact, it’s simpler because we don’t have transient business. The real smarts, the kind of the deepest bag of tricks in the company is on-site acquisition. So, even implied in the question is when you use the word bids, in many cases, it’s us initiating, these discussions with an airport. We’re alone in these discussions.
We try to stay two or three steps ahead of where the market’s going. I don’t know that we’ll be alone forever. I don’t want to assume that’s the case. But for now, we are the only people doing what we’re doing anywhere in the country. This is the Sky Harbour is a unique model for now. And again, in the cases where it is competitive, as Francisco just mentioned, we do come with a with a very differentiated offering, where this is not an FBO offering. And I think in pretty much every case where we’ve made a concerted effort and it has been competitive, we’ve won and hopefully, we continue.
Operator: Your next question comes from [Andrew Sordoni]. You had a significantly lower estimate of remediation cost when you first announce the design flow in Denver and Phoenix in December. What has changed since December, and what can we expect in today’s numbers to be final? Also, can you discuss why you needed to spend the $27 million in remediation costs, DVP, APA and ADS, and whether that is one-time?
Will Whitesell: This is Will. I’ll take that one, Andrew’s question. Andrew a couple of things. First, we conducted an extensive and exhaustive review of both Denver and Phoenix that were the furthest along in construction on the designs, right, really culminating in three different engineering firms, primarily with Thornton Tomasetti as I would consider world class, maybe the best that there is. And the objectives were to diagnose the flaw and determine all the related issues with it, with a high-level of precision. And then from there detail a remediation plan that is optimized first and foremost for certainty of result, right, and makes this make this a once and final fix, right? Secondly, this has been a thorough and rigorous process and we feel very confident in our estimates.
And lastly, I would note, we’ve learned a tremendous amount from this process and this engineering study, which has been key for us to carry over into our new prototype Sky Harbour 34 that we’re really landing on moving forward as our mainstay offering.
Operator: Your next question comes from [Connor Kim]. When opening a new campus, what do you expect to your average time to reach full occupancy to be?
Tal Keinan: This is Tal. We have six months budgeted. I think one of the things you can see is on our original campuses, it took us more than that. Part of what we were doing is, I think, again, if you’ve been following, you see that the per square foot rents go up as the supply goes down. Again, not something that we invented. We have come up with a few methods on the leasing side to shorten that. So I think one of the things you see, for example, in San Jose is we actually haven’t opened yet. We’re already in about 60%. So we expect that one to go quite quickly. So going forward, one of the objectives is to have it look more like San Jose than the first projects.
Operator: Your next question comes from [Peyton Skill]. Is the 2 millimeter Q4 operating expenses all attributable to existing airports?
Mike Schmitt: This is Mike. In terms of our Q4 operating expenses, look at the allocation as about 45% related to the operations at our three operating airports, and the remaining 55% is actually attributable to all of our ground leases at all airports, regardless of whether or not regardless of whether or not they are operating. As disclosed in our financial statements, we’ve adopted an accounting policies, where we elect to expense those directly as opposed to capitalizing them during the construction period.
Operator: Your next question comes from [Robert Slasak]. As financing needs increase with growth, how do you think about ranking sources of capital? Bond insurances versus pipes versus potential add on public stock offering.
Francisco Gonzalez: We look into this and we think about this all the time. And, obviously, it’s and we’re capital intensive and we have needs. Important thing for us is always to be ahead of the game. So at no point, we are forced to go and get capital at terms that we don’t find attractive for the company and for our shareholders. So from our perspective, our goal is to have a capital structure that maximizes the use of permanent bond transactions at the lowest rate possible. Well and then that will obviously provide leverage and then augment your return on equity to their shareholders. So how do we accomplish that? So far as you have seen, we have been at the receiving end of proposals from family offices, in terms of pipes as we did last November and that’s something that we will entertain, if the opportunity arises.
In terms of the bond market, we track it, we follow it, and so on. And one important thing that we have discussed in the past is, should we wait, given increasing interest rates overall, for when we achieve investment grade ratings? Because once we achieve investment grade ratings, you’re looking at saving of about 200 to 250 basis points in your fixed rate cost of debt. So, we are balancing always the timing of the our next bond issue, relative to timing of potential investment grade and the timing of further equity offerings. One last point I will make is we’re very conscious that we need to increase our float, so at the right time, again, the right market conditions, it will make sense for us to broaden our flows in the right way. But, again, we do not do this by looking at market opportunities and do it on a timely basis, not to and right now, in terms of our capital needs, we’re covered for the next 18 to 24 months and thus, we have plenty of time to entertain these various alternatives of capital.
Operator: Your next question comes from [Jamie Fortino]. In hindsight, was going public the right strategy?
Tal Keinan: You want to take this?
Francisco Gonzalez: Yes, please. So I’ll take it and some people are laughing in the room here because we are a field not public company. As you know, we’re real estate and — two years ago, we’re probably early stage company and I was probably most reluctant to go this path. And now I’ve turned around in my view of this, and now I’ve become kind of like someone who’s supportive of being a public entity. It really has us out there internal web show with all information available to the marketplace, which allows us and we get incoming all the time of people who are interested in investing with us or trying to do some transaction with us, showing us of opportunities. So, it’s something that also has allowed us to attract talent, in terms of the professionals that have joined us in the past few months in having a currency.
