Sky Harbour Group (SKYH) Conference Transcript

Summary of Sky Harbour Group (SKYH) Conference Call - June 05, 2025 Company Overview - Company: Sky Harbour Group (SKYH) - Industry: Aviation Real Estate - Business Model: Focuses on hangar construction at airports, leasing to general aviation business jet owners [3][4] Key Points Business Operations - Hangar Construction: Acquires land through long-term ground leases (typically 50 years) at U.S. airfields, designs, constructs, and operates hangars [5][6] - Tenant Profile: Primarily high net worth individuals and corporate aviation fleets [6] - Revenue Streams: Includes hangar leasing and aviation services such as fueling [6][24] Market Opportunity - Demand Drivers: Increasing size and longevity of business aviation fleet leading to higher demand for hangar space [9][10] - Supply Constraints: Insufficient hangar supply due to local municipalities' reluctance to invest in hangar construction, typically relying on FBOs [10][12] Financial Metrics - Target Returns: Aims for low to mid-teen NOI yields, with current unit economics showing an average development cost of $300 per square foot and rental income of $45 per square foot [16][17] - Debt Structure: Utilizes tax-exempt municipal bonds for financing, with a current average yield of 4.18% and plans to issue new debt at 5.5% to 5.75% [19][20][21] Growth Strategy - Expansion Plans: Currently operates 18 ground leases, aiming for 23 by year-end, with ongoing efforts to secure additional leases [15][26] - Vertical Integration: Acquired a hangar manufacturing company to reduce costs and improve margins, targeting a 5% savings on hard costs [33][34] Competitive Landscape - FBOs: While FBOs have considered entering the home basing sector, they remain focused on fuel sales and have not significantly shifted their business model [39][40] - Barriers to Entry: Challenges in airport land acquisition and the need for established relationships with airport authorities limit new entrants [41][42] Recent Developments - Lease-Up Strategy: Ongoing leasing efforts at newly constructed campuses, balancing speed of lease-up with achieving target rental rates [36][38] - Capital Position: Currently holds $97.5 million in cash, earmarked for ongoing construction and future debt issuance [25] Shareholder Relations - Boston Omaha Corp: Noted as a significant shareholder, currently trimming their position to raise capital for other investments, which may impact stock performance [44][46] Additional Insights - Operational Efficiency: Plans to bring more construction processes in-house to enhance control over costs and timelines [32][34] - Future Revenue Potential: Ground leases are viewed as critical assets, representing future revenue streams post-construction [23][24] This summary encapsulates the key aspects of Sky Harbour Group's business model, market dynamics, financial metrics, growth strategies, competitive landscape, and recent developments as discussed in the conference call.