Sky Harbour Group Corporation Noble Capital Markets Virtual Equity Investor Conference

Thanks, Joe, and good morning, everyone. I'm going to run through the presentation for 10-15 minutes, and then we'll open it up to Q&A, and appreciate everyone joining. Sky Harbour, at a high level, we are an aviation infrastructure and real estate developer. We design and construct and then operate and lease the hangars and associated office space that you see in the pictures here. Our main targets are business jets and other general aviation aircraft. That rent business is our primary point, or primary source of revenue, along with some fuel that we sell to our clients. Conceptually simple business. It's securing land at airports around the country. You typically can't own that land because airports are owned by the local county or municipality that they're located in.

We get the land in the form of long-term ground leases, typically out to 50 years. Couple advantages of the ground lease. The first is no real upfront cost in acquisition, like there would be in a fee simple transaction. We actually reduce our total development cost because there is no upfront acquisition fee. But we do pay for it in the form of operating expense, in the form of a lease payment over time. That's one advantage. The other is that it qualifies us for a type of tax-exempt municipal bond called private activity bonds, that we can use to fund our construction with long-term and cheap debt. We'll talk about that in a future slide. But just know that because from a tax perspective, the airport, which is public, is the ultimate, the beneficial owner of the improvements.

From a tax perspective, we're able to issue this type of tax-exempt debt. That's on land acquisition and the benefits of the ground leases. Next, we design and construct the hangars that you've seen in the pictures here. We've internalized some of the design and architecture functions that we previously used to outsource. We've now vertically integrated into doing that. Once they're completed, is the third and probably the most important step of the business, which is leasing and managing them. We provide aviation line services. You see in the upper right picture there. We do aircraft towing. We do aircraft fueling, which, as I mentioned, fuel revenue is a big revenue line item for us. We do other ancillary services to get the aircraft in and out of the hangar and ready to fly.

Our three primary categories of tenant are, the first is the largest. That is high net worth individuals who fly the aircraft, usually for a mix of business and personal use. That is the majority of our clients. The next category is Fortune 500 companies and other corporate fleets that own and operate their aircraft for their own corporate use. Good example there is Chevron Corporation in Sugar Land, Texas, right outside of Houston, which uses our hangars to operate their fleet of aircraft. The last category is a mix of other general aviation users. It is a mix of charter companies. We have a couple government clients, such as the Tennessee Bureau of Investigation in Nashville, for example. Pretty much anyone else who interacts with the general aviation infrastructure system in the U.S. That is the business. It is get the land, design and construct, and then lease and operate.

On our finances, we look at the property level. We target low to mid-teen NOI yields, or yields on cost. I mentioned the advantage of the ground lease, being able to issue tax-exempt debt to finance these. Because of that low cost of financing, we can actually drive our ROEs much, much higher than that low teen NOI yield, and those numbers we can talk through in a later slide. That is the main business. Couple of macro slides here. The chart in the middle kind of explains the macro tailwinds of our business in one chart. You can see that the total square footage of the business aviation fleet has grown every year. Couple of things driving that.

One is the number of aircraft is increasing, so that is driven by slowing retirements, so aircraft are being used for longer. The average number of aircraft coming off the line from the plane manufacturers is also increasing every year. So the number of aircraft is increasing, and then perhaps more importantly, the average size of those aircraft are increasing. The red bars at the bottom, you can kind of see our proxy for the largest business jet aircraft, which are greater than 24-foot tail height. That Global 7500 here that you see in the upper right-hand picture. Those big aircraft have increased at a faster rate than the square footage of the fleet as a whole.

It is, again, number of aircraft increasing, and the average size of aircraft are increasing, and that square footage of the total aviation fleet is essentially outgrowing the available hangar space that has previously been constructed in the U.S. That hangar space was historically built by an industry called FBOs, or fixed-base operators. We will compare and contrast how we differ from an FBO in the next slide. A couple of factors driving this lack of hangar space across the country. There are no new airports being built, so the last airport servicing a major metropolitan area was the Denver International Airport in the early 1990s, so over 30 years ago. So essentially where airports are now, they are landlocked because they typically cannot expand much to grow their overall footprint because of other development around them.

The available land at airports is shrinking over time as more development gets built. Not just companies like ours that do aircraft hangars, but logistics centers, commercial terminals, and other entities that compete for this scarce airport land. The last factor is who actually builds the hangar space. Airports themselves don't build it. They don't want to spend taxpayer money on aircraft hangars. So, like I mentioned, they've historically outsourced to the FBOs to build hangar space. But if you think of the FBO business, their primary revenue driver is fuel sales. So they typically build hangars because they have to, not necessarily because they want to. Again, they'd rather focus on fuel sales rather than spending CapEx to build hangars. While 20, 30, 40 years ago when business aviation was just really beginning, FBO hangars were enough to house the fleet.

But as we saw in the previous slide, that growing square footage, FBOs have not built enough hangar space to capture that increase in that square footage. That was the opportunity that our CEO and founder, Tal Keinan, saw when he started the business about eight years ago. Was that there needed to be another company out there that partnered with airports to bring this needed hangar space to the airports that service major cities around the country. So that's on the supply side of hangar space, and those two dynamics are what we're trying to take advantage of for the business. Biggest difference between us and the FBOs, again, FBOs are the legacy players on airports. We don't service transient aircraft.

We only service our own base residents, so we classify ourselves as a home base operator rather than a fixed-base operator, which focuses on fuel sales, particularly those visiting the airport, because they can generally charge more in fuel margin to those on the road. So, that's one of the big differences. The fact that we don't service transient aircraft means we have a lot fewer operations. Just a general quieter campus environment than the FBOs do, and we're able to offer a higher service level than FBOs do because of that lower operational footprint. When you live with Sky Harbour, your aircraft has its own dedicated parking space and all the ancillary benefits that come with that.

So it's not just the fact that your aircraft will always be in the hangar when it's at home, it's that it's your own hangar, and so you have the privacy, the security that comes alongside that. Whereas if you're based with an FBO, you generally have to go through their public terminal to access your aircraft. There's just other issues with accessing your aircraft through an FBO that you don't have with Sky Harbour because, again, it's your own space that you, as an aircraft owner, control. Brief overview of where we're operating. The green circles on the map are the eight campuses that we currently have operating. That's everywhere from Miami Opa-locka in South Florida out to San Jose International in the Bay Area and a number of airports in between. So that's our eight in operation.

We have a total of 23 ground leases announced total. The last of which, number 23 there you see, was Van Nuys Airport, which is probably one of the top 3 or 4 business aviation airports in the country, kind of rivaling Teterboro and White Plains in the Northeast. Of course, Van Nuys is in Southern California servicing the L.A. area. Just a very, very busy and attractive general aviation airport in the L.A. area. That was our recently announced. You can see the 8 in operation. We have 4 under construction. That is everywhere from Orlando to Bradley International outside of Hartford to Salt Lake City in Utah. Then we have an additional 11 under various stages of pre-development. So we are at 23 ground leases now. No plans to stop. This is still one of the core competencies of the business, is our ability to convince airports to let us come in and build these hangar spaces based on our experience and our successful partnerships with all these airports around the country.

We spend a lot of time looking at airports and talking with them to increase the number of airports that we are located at. I will blow through these. I mentioned we have vertically integrated into a few design and construction areas. We do our own internal design and architecture work now. We manufacture our own hangar space through a captive metal building manufacturer called Stratus Building Solutions in Texas, and we have also started doing our own general contractor work through a captive general contractor called Ascend Aviation Services.