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Item 1. Business

2023-03-24 compared with 2022-03-28 · 253 added, 588 removed, 134 unchanged (86% of the section changed)

Business Combination

On the Closing Date, we completed the previously announced business combination pursuant to the Equity Purchase Agreement between us and Sky.

On January 25, 2022 (the “Closing Date”), we completed the Business Combination pursuant to the Equity Purchase Agreement between us and Sky.

Each of the Existing Sky Equityholders separately entered into an Equityholders Voting and Support Agreement irrevocably agreeing to vote in favor of the Business Combination set forth in the Equity Purchase Agreement.

As contemplated by the Equity Purchase Agreement, on the Closing Date the following occurred:

As contemplated by the Equity Purchase Agreement, the following occurred on the Closing Date:

(a) YAC changed its name to “Sky Harbour Group Corporation”;

(b) all outstanding shares of Sponsor Stock held by the Sponsor were converted into shares of Class A Common Stock of the Company;

(c) Sky restructured its capitalization, issued to the Company 14,937,581 Sky Common Units, which was equal to the number of outstanding shares of Class A Common Stock immediately after giving effect to the Business combination (taking into account the redemption of Class A Common Stock and the Class A Common Stock issued under the BOC PIPE (as defined below)), reclassified the existing Sky Common Units (other than the Sky Incentive Units), existing Sky Series A preferred units and the existing Sky Series B preferred units into Sky Common Units;

(d) effected certain adjustments to the number of Sky Incentive Units to reflect the new capital structure;

(e) appointed the Company as the managing member of Sky;

(f) the Sky Common Units issued to BOC YAC in respect of its Series B preferred units were converted into 5,500,000 shares of Class A Common Stock;

(h) holders of Sky Common Units received one share of Class B Common Stock for each Sky Common Unit, and as consideration for the issuance of 14,937,581 Sky Common Units by Sky to the Company, YAC contributed to Sky $46,262,048 consisting of the amount held in the YAC trust account after (i) deducting $123,068,515 required to fund the redemption of the Class A Common Stock held by eligible stockholders who properly elected to have their shares redeemed as of the Closing Date, (ii) taking into account the BOC PIPE and (iii) deducting $21,164,160 consisting of deferred underwriting commissions, transaction expenses, and the BOC Yellowstone LLC promissory note repayment;

and (i) without any action on the part of any holder of YAC Warrants, each YAC Warrant that is issued and outstanding immediately prior to the closing became a SHG Corporation Warrant (the transactions referred to in clauses (a) through (i), collectively, the “Business Combination”).

(b) all outstanding shares of Sponsor Stock held by the Sponsor were converted into shares of Class A Common Stock of the Company;

(c) Sky restructured its capitalization, issued to the Company 14,937,581 Sky Common Units, which was equal to the number of outstanding shares of Class A Common Stock immediately after giving effect to the Business Combination (taking into account the redemption of Class A Common Stock and the Class A Common Stock issued under the BOC PIPE investment (the “BOC PIPE”)), reclassified the existing Sky Common Units (other than the Sky Incentive Units), existing Sky Series A Preferred Units and the existing Sky Series B Preferred Units into Sky Common Units;

(d) certain adjustments to the number of Sky Incentive Units were effected to reflect the new capital structure;

(e) the Company was appointed as the managing member of Sky;

(f) the Sky Common Units issued to BOC YAC in respect of its Series B Preferred Units were converted into 5,500,000 shares of Class A Common Stock;

(g) holders of Sky Common Units received one share of Class B Common Stock for each Sky Common Unit, and as consideration for the issuance of 14,937,581 Sky Common Units by Sky to the Company, YAC contributed to Sky the net amount held in the YAC trust account after redemptions and taking into account the BOC PIPE and the amount of various transaction costs;

and (h) each YAC Warrant that was issued and outstanding immediately prior to the closing became a Warrant (the transactions referred to in clauses (a) through (h), collectively, the “Business Combination”).

As a result of the Business Combination, the Company is organized as an “Up-C”

structure in which substantially all of the operating assets of Sky’s business are held by Sky, and the Company’s only assets are its equity interests in Sky.

As of the open of trading on January 26, 2022, the Class A Common Stock and Warrants of the Company, formerly those of YAC, began trading on the NYSE American as “SKYH”

structure in which substantially all of the operating assets of Sky’s business are held by Sky.

The Company’s only assets are its equity interests in Sky.

As of January 26, 2022, the Class A Common Stock and Warrants of the Company began trading on the New York Stock Exchange American LLC (the “NYSE American”) as “SKYH”

and “SKYH WS,”

respectively.

The disclosure in Items 1 and 1A of this report gives effect to the Business Combination and includes the operations of Sky prior to the Business Combination.

We are an aviation infrastructure development company building the first nationwide network of Home-Basing Solutions (“HBS”) for business aircraft.

The disclosure in this section gives effect to the Business Combination and includes the operations of Sky prior to the Business Combination.

We are an aviation infrastructure development company building the first nationwide network of Home-Basing Solutions (“HBS”) hangar campuses for business aircraft.

We develop, lease and manage general aviation hangars across the United States, targeting airfields in markets with significant aircraft populations and high hangar demand.

Our HBS campuses feature exclusive private hangars and a full suite of dedicated services specifically designed for home-based aircraft.

Our HBS hangar campuses feature exclusive private hangars and a full suite of dedicated services specifically optimized for home-based, versus transient, aircraft.

The physical footprint of the U.S.

business aviation fleet grew by almost 28 million square feet in the ten years preceding the beginning of the COVID-19 pandemic, with hangar supply lagging dramatically, especially in key growth markets.

As the fleet of private jets in the United States continues to grow, with recent new aircraft deliveries exceeding retirements, demand for hangar space is at a premium in part because new jets require more square footage of hangar space and the pace of new hangar construction has lagged behind the demand.

The cumulative square footage of the business aircraft fleet in the United States increased 50% between 2010 and 2021.

Moreover, over that same period, there was a 70% increase in the square footage of larger private jets –

Moreover, over that same period, there was an 81% increase in the square footage of larger private jets –

those with greater than a 24-foot tail height.

The larger footprint aircraft do not fit in much of the existing hangar infrastructure and impose stacking challenges and constraints in the traditional shared or community hangars operated by fixed-base operators (“FBO”).

A recent study conducted by a business aircraft manufacturer forecasted that business aircraft will only continue to grow in the next ten years, with up to 8,500 new business jet deliveries worth almost $275 billion expected to be delivered between 2023 and 2032, further supported by data from the major business aviation manufacturers that suggest the current order backlog for new business aviation aircraft is almost $47 billion.

These larger footprint aircraft do not fit in much of the existing hangar infrastructure and impose stacking challenges and constraints in the traditional shared or community hangars operated by fixed-base operators (“FBO”).

The addition of winglets (the vertical extensions on aircraft wingtips) on most modern business jets inhibits wing-over-wing storage.

Aircraft hangars are in high demand and short supply, with some airports compiling waiting lists that can exceed several years.

Our scalable business strategy addresses the increased imbalance between the supply and demand for private jet storage, including the lack of hangar facilities able to accommodate larger aircraft, by growing our portfolio of HBS campuses at key airports across the United States.

We target airports with excess demand for private hangar space, typically near metropolitan areas, which include both established and growing markets.

We intend to capitalize on the existing hangar supply constraints at major US airports by targeting high-end tenants in markets where there is a shortage of private and FBO hangar space, or where such hangars are or are becoming obsolete.

In contrast with community hangars and other facilities provided by FBOs, the HBS campuses we offer provide the following features and services:

We believe our scalable, real estate-centric business model is uniquely optimized to capture this market opportunity and address the increased imbalance between the supply and demand for private jet storage.

We intend to capitalize on the existing hangar supply constraints at major U.S.

airports by targeting high-end tenants in markets where there is a shortage of private and FBO hangar space, or where such hangars are or are becoming obsolete.

We realize economies of scale in construction through a proprietary prototype hangar design replicated at HBS hangar campuses across the United States.

This allows for centralized procurement, straightforward permitting processes, efficient development processes, and the best hangar in business aviation.

Unlike a service company, our revenues are mostly derived from long-term rental agreements, offering stability and forward visibility of revenues and cash flows.

This allows the Company to fund its development through the public bond market, providing capital efficiency and mitigating refinance risk.

In contrast with community hangars and other facilities provided by FBOs, the HBS hangar campuses we develop provide the following features and services:

private hangar space for exclusive use of the tenant;

adjoining attractive/custom lounge and office suites;

dedicated line crews and services;

adjoining configurable lounge and office suites;

line crews and services dedicated exclusively to tenants;

climate control to mitigate condensation and associated corrosion;

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customized software to provide security, control access and monitor hangar space.

We use a standard set of proprietary prototype hangar designs, which are intended to lower construction costs, minimize development risk, expedite permit issuance, and facilitate the implementation of refinements across its portfolio.

We use a standard set of proprietary prototype hangar designs, which are intended to deliver high-quality business aviation facilities, lower construction costs, minimize development risk, expedite permit issuance, and facilitate the implementation of refinements across its portfolio.

Hangar features include:

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compliance with National Fire Protection Association (“NFPA”) 409 Group III fire code, eliminating foam fire protection systems, resulting in lower construction costs and operating expenses, as well as eliminating accidental foam discharges and the resultant negative effects on aircraft maintenance and resale value;

high-voltage, industrial drainage and impervious floors that support in-hangar maintenance and inspections;

high-voltage capability, industrial drainage and impervious floors that support in-hangar maintenance and inspections;

control through smartphone application.

Our product strategy aims to attract tenants with exclusive access to their aircraft, minimize the risk of damage to aircraft, provide increased access, security and control, facilitate maintenance, and improve pre-flight and post-flight convenience.

We believe these products and services complement those of the FBO facilities.

We believe that with no transient traffic, our HBS hangar campuses offer a shorter time to wheels-up, even during periods of peak traffic.

We believe demand for HBS services will be driven broadly by the growing size of the business aviation fleet in the United States and the delivery of larger aircraft with taller tail heights.

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While private aircraft use generally was not affected to the extent of commercial aviation, and some private aircraft clients may continue to use that mode of aviation following the pandemic, preferences for air travel and specifically general aviation are unknown and may change following COVID-19.

Risk Factors –

The aviation industry generally, and the business of Sky specifically, have been and may continue to be materially adversely affected by the global COVID-19 pandemic.

Risk Factors 

— 

An epidemic, pandemic or contagious disease, including the ongoing COVID-19 pandemic, could have a material adverse effect on our business and results of operations."

Tax Exempt Senior Bond Issuance

On September 14, 2021, our wholly-owned subsidiary following the business combination, Sky Harbour Capital LLC (“SHC”), closed a $166.34 million financing through the sale of Series 2021 private activity tax-exempt senior bonds through a municipal conduit issuer, Public Finance Authority (Wisconsin) (the “PABs”).

The bond issuance consisted of unrated senior fixed tax-exempt bonds with three term maturities (2036, 2041 and 2054) with an average life principal amortization of 24 years.

The term bonds were priced to yield 3.80% (2036), 4.00% (2041) and 4.25% (2054).

The use of proceeds from this issuance, together with proceeds from the sale of the $55 million of our Series B Preferred Units to BOC YAC, were used, in part, to fund a construction escrow account for Sky’s development program at five airports consisting of 8 existing hangars and 73 new hangars in various phases of development and construction located at Miami-Opa Locka Executive Airport, Sugar Land Regional Airport, Nashville International Airport, Centennial Airport and Phoenix Deer Valley Airport and to repay all existing indebtedness of Sky.

The PABs are obligations of all the operating subsidiaries of Sky Harbour Capital LLC, the borrower subsidiary of Sky.

The PABs are senior secured obligations with a collateral package that includes the leasehold improvements, ground leases and tenant leases of Sky financed with such bonds.

There are financial covenants that restrict the ability to make cash distributions to Sky and, thus, may limit the ability to distribute dividends in the future.

Failure to meet financial and other covenants under the PABs master and bond indenture, if not cured, may lead to an acceleration of the debt and foreclosure on Sky’s main operating assets.

Investment Criteria

We seek to develop our HBS hangar campuses on long-term ground leases (or sub-leases thereof) at airports with suitable infrastructure serving metropolitan centers across the United States.

On September 14, 2021, Sky’s subsidiary, Sky Harbour Capital LLC (“SHC”), closed a $166.3 million financing through the sale of Series 2021 private activity tax-exempt senior bonds through a municipal conduit issuer, Public Finance Authority (Wisconsin) (the “Series 2021 PABs”).

Management ’

s Discussion & Analysis of Financial Condition and Results of Operations —

Liquidity and Capital Resources 

— 

Private Activity Bonds ”

for more information regarding the Series 2021 PABS.

The use of proceeds from this issuance, together with proceeds from the sale of the $55.0 million of Sky Series B Preferred Units to BOC YAC, were used, in part, to fund a construction escrow account for Sky’s development program at five airports consisting of existing and new hangars in various phases of development and construction and to repay all existing indebtedness of Sky.

Our Properties

We currently maintain our executive office at 136 Tower Road, Suite 205, Westchester County Airport, White Plains, NY 10604 under a lease agreement.

We consider our current office space adequate for our current operations.

The table below presents certain information with respect to our portfolio as of December 31, 2021.

We lease each of our properties under long-term ground leases.

Sugar Land Regional Airport, Sugar Land, TX (Houston area);

Miami-Opa Locka Executive Airport, Opa-Locka, FL (Miami area);

Nashville International Airport, Nashville, TN;

Centennial Airport, Englewood, CO (Denver area);

Phoenix Deer Valley Airport, Phoenix, AZ.

Initial Portfolio

Completion Date

Estimated Total

Construction Cost

We seek to develop our HBS hangar campuses on long-term ground leases (or sub-leases thereof) at airports with suitable infrastructure serving metropolitan centers across the United States. We lease each of our properties under long-term ground leases.

The tables below present certain information with respect to our portfolio in development and in operation as of December 31, 2022.

Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area);

Miami-Opa Locka Executive Airport (“OPF”), Opa-Locka, FL (Miami area);

Nashville International Airport (“BNA”), Nashville, TN;

Centennial Airport (“APA”), Englewood, CO (Denver area);

Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ;

Addison Airport (“ADS”), Addison, TX (Dallas Area).

PROPERTIES IN DEVELOPMENT

Scheduled Construction Start

Scheduled Completion Date

Estimated Total Construction Cost (1) ($mm)

Square Footage

Predevelopment

December 2024

In Construction

February 2023

Predevelopment

September 2023

November 2024

In Construction

November 2022

February 2024

Predevelopment

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In Construction

December 2022

Predevelopment

November 2023

February 2025

Predevelopment

Our current facilities include seven constructed hangars at the Sugar Land site and an existing hangar facility at the Nashville site, which amount to approximately 66,000 square feet and 27,000 square feet, respectively, of rentable space.

In addition, we have improvements in construction at the Nashville and Miami Opa-Locka sites, and facilities that are not yet constructed, including proposed improvements at the Sugar Land, Centennial and Deer Valley sites.

Each facility is expected to consist of clusters of between nine and 22 hangars.

September 2024

220.5 - 253.2

PROPERTIES IN OPERATION

Completion Date

Rentable Square

December 2020

BNA Phase I & II

November 2022

Total/Weighted Average

215,149

Each constructed facility is expected to consist of clusters of between 9 and 19 hangars.

On average, each hangar provides 12,000 square feet of hangar space and 1,300 to 2,000 square feet of office space.

Once completed, the facilities are expected to total 78 hangars on 81 acres of ground leases, with an infrastructure of over 980,000 square feet expected to be completed in the next five years.

We intend to lease each respective facility to one or more tenants, who will use all or a portion of such facility for general aviation aircraft storage and related uses permitted under the respective ground leases and will pay rent and other charges derived from HBS activity on the respective sites to us pursuant to a sublease.

Once completed, these facilities are expected to total 80 hangars on 87 acres of ground leases, with an infrastructure of over 1,095,000 square feet expected to be completed in the next five years.

We intend to lease each respective hangar to one or more tenants, who will use all or a portion of such facility for general aviation aircraft storage and related uses permitted under the respective ground leases and will pay rent and other charges derived from HBS services on the respective sites to us pursuant to a sublease.

Sugar Land Site

The Airport .

Sugar Land Regional Airport (“SGR”) is located approximately 20 miles southwest of the Houston central business district.

The airport is owned by the City of Sugar Land and is situated on 622 acres.

SGR is located approximately 20 miles southwest of the Houston central business district.

The airport is situated on 622 acres owned by the City of Sugar Land.

SGR is a publicly-owned, public-use general aviation facility, and it is included in the Federal Aviation Administration’s (“FAA”) National Plan of Integrated Airport Systems (“NPAIS”).

SGR is designated as a “reliever airport”

for George Bush Intercontinental Airport (“IAH”) and William P.

Hobby International Airport (“HOU”) in Houston.

Twenty-four companies on the 2021 Fortune 500 list are headquartered in the Houston metro area.

According to the 2018 Texas Aviation Economic Impact Study, a significant portion of SGR activity is attributable to itinerant operations by business jet aircraft.

for George Bush Intercontinental Airport and William P. Hobby International Airport in Houston, Texas.

24 companies on the 2022 Fortune 500 list are headquartered in the Houston metro area.

General airport facilities at SGR include an 8,000-foot primary runway, as well as fuel services, aircraft storage in hangars, and tie-down parking.

SGR includes United States Customs facilities.

SGR is home to seven on-airport businesses that offer services such as FBO amenities, aircraft maintenance, and avionics.

The most frequent general aviation operations at SGR involve business and charter flights, flight instruction, recreational flying and law enforcement.

Between 2018 and 2019, SGR experienced a 12.0% increase in overall operations based on data from FAA OPSNET.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020:

total operations at SGR decreased 12.3%.

The 11.6% increase in operations from 2020 to 2021 is largely attributable to a return to pre-pandemic levels of operations.

According to forecast data from FAA TAF, the general aviation recovery is projected to continue through 2023 and 2024, with growth projections of 6.5% and 6.9%, respectively.

The sole FBO onsite at SGR is the primary competition for our HBS hangar campus at SGR.

Another company located at SGR has maintenance hangars onsite, and can accommodate short-term hangar rentals without FBO services.

Based Aircraft.

The following table shows based aircraft data at SGR:

Aircraft Based at SGR

Sugar Land Regional (SGR)

JETNET and AirNav. 

Jet data current as of December 2022 from JETNET.

AirNav data current as of December 2022.

Sugar Land Site Facilities.

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The first phase is divided into seven private hangars, which were completed in December 2020.

The second phase plans to include six private hangars.

All hangars feature 28’-high doors and include 480-, 240- and 120-volt electrical outlets to allow for routine maintenance.

The Sugar Land ground lease provides that, if construction of the second phase is not commenced by October 15, 2022, the ground lease with parcels comprising the second phase project site will automatically terminate.

Sugar Land Facilities Construction Project .

The total cost of the Sugar Land facilities is estimated to be approximately $23.8 million, of which $15.1 million is the recently completed facilities and $8.7 million is the expected cost of the facilities in the second phase.

Sugar Land Tenant Leases/LOIs .

Currently, the Sugar Land development has one executed lease, comprising approximately 43% of the first phase leasable area.

The lease commenced December 3, 2020 for a five-year term.

The remaining hangar units currently are being marketed for lease.

General Airport Facilities .

General airport facilities at SGR include an 8,000-foot primary runway, as well as fuel services, aircraft storage in hangars, and tie-down parking.

SGR includes United States Customs facilities.

Based Aircraft .

The following table shows based aircraft data at SGR:

The second phase plans to include four private hangars.

All hangars feature 28 foot-high doors and include 480-, 240- and 120-volt electrical outlets to allow for routine maintenance.

The Sugar Land ground lease provides that, if construction of the second phase is not commenced by October 2023, the ground lease related to the parcels comprising the second phase project site will automatically terminate.

Opa-Locka Site

OPF is located approximately 10 miles north of the Miami central business district, 16 miles from Miami Beach and seven miles from Miami International Airport (“MIA”).

OPF, a public-use general aviation facility owned by Miami-Dade County and operated by the Miami-Dade Aviation Department.

The Miami Airport System consists of five active airports, with OPF being the largest general aviation airport in the system and designated as a reliever to MIA.

Notably, OPF ranks eighth in the FAA’s Top Ten Airports for Domestic Business Jet Operations, with 55,223 domestic business jet operations during the period February 2022 through January 2023.

Facilities at OPF include three runways which are all served by full-length paved parallel taxiways.

Other facilities at OPF include hangars and tie-downs for aircraft parking and fuel services.

Data from FAA OPSNET indicates that between 2018 and 2019, OPF experienced a 10.3% increase in overall operations.

The effects of the COVID-19 pandemic were apparent in the change from 2019 to 2020 as total operations at OPF decreased 20.8%.

The 21.2% increase in operations from 2020 to 2021 is largely attributable to a partial return to pre-pandemic levels of operations.

Forecast data from FAA TAF projects increases of 4.8%, 3.8%, and 4.1% for 2022, 2023, and 2024, respectively.

The existing stock of hangar space at OPF comprises approximately 266,000 square feet of space, with an additional 350,000 square feet of new construction hangar space planned.

There are six large, nested T-Hangar rows on the airport, capable of storing 99 aircraft.

Aside from our Miami-Opa Locka development in construction, no private hangar space for larger aircraft is available at OPF.

Based Aircraft .

Aircraft Type

Multi-Engine Aircraft

Single Engine Aircraft

Jet data from JETNET as of 2021.

All other data as of 2017 from Sugar Land Master Plan.

Aircraft Operations .

Between 2018 and 2019, SGR experienced a 10.07% increase in overall operations.

Total general aviation operations increased 3.36%, and local civil operations increased 25.24%.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020:

total operations at SGR decreased 10.75%, general aviation declined 14.10%, and civil operations declined 4.51%.

The significant increase in projected operations from 2020 to 2021 is largely attributable to the fact that the FAA Terminal Area Forecast (“TAF”) forward-looking data was produced prior to the pandemic, and does not consider its ongoing effects.

As illustrated in the table on the following page, growth is projected in overall operations through 2037.

HISTORICAL AND PROJECTED AIRCRAFT OPERATIONS

Itinerant Operations

Local Operations

Historic data derived from FAA Operations Network (“OPSNET”).

* Forecast data via FAA TAF.

Regional Airport Competition .

Within a 30-mile radius from SGR, there are five alternate locations accommodating business jet service and offering a minimum runway length of 5,000 feet, as described in the following paragraphs.

Houston Hobby Airport (“HOU”) is a commercial and general aviation airport located approximately seven miles southeast of downtown Houston.

Currently, 12 commercial airlines serve HOU, and it is Houston’s second busiest airport, after IAH, ranked 34th in the nation for passenger traffic.

Operated by the City of Houston Department of Aviation, HOU is located within the city limits of Houston, Texas, and the boundary of Harris County, Texas.

General aviation is a very active sector at HOU, with general aviation services provided by six FBOs:

Signature Flight Support, Jet Aviation, Million Air Houston, Atlantic Aviation, Wilson Air Center, and Galaxy FBO.

Ellington Field (“EFD”) is a public-use, general aviation reliever facility located in Harris County, Texas, 18 miles east of Houston.

EFD offers one museum and nine on-airport businesses, which offer services such as FBO amenities through Signature Flight Support, military training, and flight instruction.

The most frequent general aviation operations at EFD include flight instruction, recreational flying, medical transport, search and rescue, law enforcement, powerline and pipeline patrols, military exercises, and business flights.

With close proximity to Johnson Space Center, EFD supports activities affiliated with the National Aeronautics and Space Administration, and it is home to the Ellington Field Joint Reserve Base.

In addition, the airport is home to the Houston Spaceport, the nation’s 10th licensed commercial spaceport.

Houston Executive Airport (“TME”) is the region’s newest airport, located in Waller County, Texas, approximately 15 miles northwest of downtown Houston.

TME is a public-use, general aviation facility that is privately-owned and operated.

The airport has 10 large community hangars, 60 individual plane hangars and a control tower.

The airport currently does not have a customs facility and is served by a single FBO, Henricksen Jet Center.

Houston Southwest Airport (“AXH”) is a privately-owned, public-use, general aviation facility located 15 miles southwest of Houston’s central business district.

The airport offers ten on-airport businesses, which offer services such as the airport-owned FBO and business amenities, flight instruction, aircraft maintenance, and medical transport.

The most frequent general aviation operations at AXH include recreational flying, business flying, charter flights, flight instruction, aerial photography, law enforcement, utility patrols, and medical transport.

There are 24 hangars on the field, ranging in size from 3,500 square feet to 17,000 square feet.

In addition, there are 39 T-hangars available for single engine aircraft through small twin-engine aircraft.

David Wayne Hooks Memorial Airport (“DWH”) is privately-owned, medium-sized, primarily general aviation airport near the city of Tomball in unincorporated Harris County, Texas.

It is located approximately 23 miles northwest of Houston’s central business district and approximately ten miles northwest of IAH.

DWH is a public-use, general aviation facility and FBO services are provided by Gill Aviation.

Based Aircraft —

Regional Airports .

The following chart identifies the latest available information on the number of based aircraft at SGR and each of the alternate airports described above.

Aircraft Based on the Field

at SGR and Alternatives

Single Engine

Houston Hobby (HOU)**

Ellington Field (EFD)**

Houston Executive (TME)**

Houston Southwest (AXH)**

David Wayne Hooks (DWH)**

Sugar Land Regional (SGR)

SGR as a % of Total

The following chart identifies the latest available information on the number of aircraft based at OPF.

Aircraft Based at OPF

Miami-Opa Locka Executive (OPF)

JETNET and AirNav.

* Jet data current as of 2021 from JETNET.

** AirNav data current as of 2021.

On-Airport Hangar Services Competition .

As the sole FBO onsite at SGR, GlobalSelect is the primary competition for SHG Corporation Sugar Land.

Western Airways, also located on-airport, has maintenance hangars onsite, and can accommodate short-term hangar rentals without FBO services until space becomes available with GlobalSelect.

Opa-Locka Site

The Airport .

Miami-Opa Locka Executive Airport (“OPF”) in Opa-Locka, Florida, is located approximately ten miles north of the Miami central business district, 16 miles from Miami Beach and seven miles from Miami International Airport (“MIA”).

OPF, a publicly-owned, public-use general aviation facility, is owned by Miami-Dade County, operated by the Miami-Dade Aviation Department and situated on 1,810 acres.

According to Miami-Dade County, the Miami Airport System consists of five active airports, with OPF being the largest general aviation airport in the system and designated as a reliever to MIA.

Notably, OPF ranks seventh in the FAA’s Top Ten Airports for Domestic Business Jet Operations, with 58,486 domestic business jet operations during the period February 2021 through January 2022.

Jet data current as of December 2022 from JETNET.

AirNav data current as of December 2022.

Miami-Opa Locka Site Facilities.

The Miami-Opa Locka facilities are planned to be constructed in two phases and in total are expected to consist of 19 individually-leased NFPA Group III hangars comprising 259,888 total square feet.

The OPF facilities are planned to be constructed in two phases and are expected to consist of 19 individually-leased NFPA Group III hangars comprising 262,169 total square feet.

Each hangar is approximately 13,798 square feet, which can accommodate the various ultra-long-range jets and include 480-, 240- and 120-volt electrical outlets to allow for routine maintenance.

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Each unit is assigned adjacent outdoor parking, as well.

The hangars are rented on long-term (3-5 year) leases, with the Company including its own line crew and ground service equipment.

Miami-Opa Locka Facilities Construction Project .

The total cost of the Miami-Opa Locka facilities is estimated to be approximately $54 million.

Construction on the first phase of the Miami-Opa Locka facilities began in August 2021, and the second phase is in predevelopment.

Sky Opa Locka Tenant Leases/LOIs .

Currently, five letters of intent (“LOI”) and three leases have been executed with respect to the first phase and a fourth lease is in currently in agreed form pending execution.

The remaining hangar units currently are being marketed for lease.

General Airport Facilities .

Facilities at OPF include three runways.

All three runways are served by full-length paved parallel taxiways.

Other facilities at OPF include hangars and tie-downs for aircraft parking and fuel services.

Based Aircraft .

The following table shows based aircraft data at OPF:

Based Aircraft

Aircraft Type

Multi-Engine Aircraft

Single Engine Aircraft

Jet data from JETNET as of 2021.

All other data as of 2018 from AirNav.

Aircraft Operations .

Between 2018 and 2019, OPF experienced a 10.31% increase in overall operations.

Total general aviation operations increased 3.94%, and local civil operations increased 25.72%.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020:

total operations at OPF decreased 20.81%, general aviation declined 19.97%, and civil operations declined 32.41%.

The significant increase in projected operations from 2020 to 2021 is largely attributable to the fact that TAF forward-looking data was produced prior to the pandemic, and does not consider its ongoing effects.

As illustrated in the table below, nominal growth is projected in overall operations through 2037.

HISTORICAL AND PROJECTED AIRCRAFT OPERATIONS

Itinerant Operations

Local Operations

Historic data derived from FAA OPSNET.

* Forecast data via FAA TAF.

Regional Airport Competition .

The following four airports, each accommodating business jet service and providing a minimum runway length of 5,000 feet, have been identified as alternate locations within the OPF service area.

MIA is operated by the Miami-Dade Aviation Department and is the property of Miami-Dade County.

MIA now offers more flights to Latin America and the Caribbean than any other United States airport, is the United States’

third-busiest airport for international passengers, with over 80 airlines serving 150 destinations, and is the nation’s top airport for international freight.

MIA is also the leading economic engine for Miami-Dade County and the State of Florida.

MIA’s vision is to grow from a recognized hemispheric hub to a global airport of choice that offers customers a world-class experience and an expanded route network with direct passenger and cargo access to all world regions.

Signature Flight Support is the only FBO onsite at MIA, offering a 20,000-square foot community hangar.

No private hangar space is available.

Miami-Executive Airport (“TMB”) is a public airport in unincorporated Miami-Dade County, Florida, 13 miles southwest of downtown Miami.

TMB is operated by the Miami-Dade Aviation Department and is a designated reliever airport for MIA.

TMB’s property is composed of 1,360 acres and includes three active runways.

Facilities at TMB include FBOs, T-hangar bays, business hangars, an aviation museum and office space.

TMB also has a Customs and Border Patrol facility to service international traffic.

Among TMB’s major tenants are several aircraft maintenance businesses, FBOs, air taxi/charter operators and flight schools.

With its on-site aviation-related schools and the airport’s proximity to businesses in the South Florida region, TMB has a significant amount of flight training, business and charter operations.

The airport includes three FBOs:

Reliance Aviation, Signature Flight Support and Air Sal Aviation.

No private hangar space is available among the FBOs at TMB, and certain community hangars cannot accommodate larger aircraft.

Fort Lauderdale-Hollywood International Airport (“FLL”) is in unincorporated Broward County, Florida, located in Fort Lauderdale, 21 miles north of Miami.

FLL is one of the fastest-recovering U.S.

airports, with passenger traffic approaching 2019 pre-pandemic levels.

Despite the impact of COVID-19 on the aviation industry in 2020, FLL ranked 6th in total passenger traffic recovery and 4th in international traffic recovery amongst U.S.

In 2020, the airport served 16.5 million passengers.

In 2019, FLL ranked 18th in total traffic and 10th in total international traffic among U.S.

The airport lacks any vacant developable land, providing significant barriers to entry.

There are four FBOs at FLL:

Jetscape, Sheltair, National Jets and Signature Flight Support.

Among these, Sheltair offers a private 15,000-square foot hangar, which is fully occupied.

Palm Beach International Airport (“PBI”) is located 2.5 miles west of downtown West Palm Beach and 3.5 miles west of Palm Beach.

PBI serves both air commercial airlines and general aviation aircraft.

The airport has a 24-hour control tower and a U.S.

Customs & Immigration port of entry facility.

PBI’s general aviation interest is served by three full service FBOs:

Atlantic Aviation, JetAviation and Signature Flight Support.

Available hangar space is limited to community hangars.

Based Aircraft —

Regional Airports .

The following chart identifies the latest available information on the number of aircraft based at OPF and alternative general aviation airports in OPF’s service area.

Aircraft Based on the Field

OPF and Alternatives

Miami International (MIA)**

Miami Executive (TMB)**

Fort Lauderdale-Hollywood International (FLL)***

Palm Beach International (PBI)***

Miami-Opa Locka Executive (OPF)*

OPF as a % of Total

JETNET and AirNav.

* Jet data current as of 2021 from JETNET.

** AirNav data current as of 2018.

*** AirNav data current as of 2021.

On-Airport Hangar Services Competition .

The existing stock of hangar space at OPF comprises approximately 266,000 square feet of space, with an additional 350,000 square feet of new construction hangar space planned.

There are six large, nested T-Hangar rows on the airport, capable of storing 99 aircraft.

Aside from the proposed SHG Corporation Miami-Opa Locka development, no private hangar space for larger aircraft is available at OPF.

The hangars are rented on long-term (3-5 year) leases, with the Company including its own line crew and ground service equipment.

Nashville Site

The Airport .

Nashville International Airport in Nashville, Tennessee (“BNA”) is the primary commercial air service facility serving the Nashville metropolitan area and is the largest airport in the State of Tennessee.

BNA is the primary commercial air service facility serving the Nashville metropolitan area and is the largest airport in the State of Tennessee.

As the only medium hub in the region, BNA serves as the primary commercial service airport for the air service area.

BNA is one of the nation’s fastest-growing airports.

The combination of Nashville’s robust economy and business and tourism appeal led to seven successive years of often double-digit growth, which ended with 18.3 million passengers that passed through the airport in 2019.

The combination of Nashville’s robust economy and business and tourism appeal led to seven successive years of often double-digit growth, which ended with 18.5 million passengers that passed through the airport in 2022.

BNA has four runways, the longest of which is 11,030 feet.

Berry Field Air National Guard Base is located on the premises of BNA and it has hosted the 118 th Airlift Wing since 1937.

According to FAA OPSNET, between 2018 and 2019 BNA experienced a 7.5% increase in overall operations.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020 as total operations at BNA decreased 30.5%.

From 2020 to 2021, a significant increase of 34.3% was recorded, and was largely attributable to a rebound to operation levels experienced prior to the pandemic.

FAA TAF forecast data projects a slight decline of 3.6% in 2022 due to lower projected commercial operations, followed by projected increases of 14.0%, 5.1%, and 4.6% in 2023, 2024, and 2025, respectively.

There are two FBOs at BNA offering the following amenities:

pilot’s lounge, waiting area/lounge, weather station, restroom, showers, kitchenette, and conference rooms, flight instruction, rental car, aircraft maintenance and parts supply, hangar rental, aircraft tie-down parking, and aircraft fueling.

In addition, there are several private hangars at BNA which generally provide storage for business aircraft, office space, maintenance space, and passenger/pilot lounges.

Some of the private hangars are owned and built by individuals, while others are leased from one of the FBOs.

Aside from our BNA HBS hangar campus, no private hangar space for larger aircraft is currently available at BNA.

Based Aircraft .

The following chart identifies the latest available information on the number of aircraft based at BNA.

Aircraft Based at BNA

Nashville (BNA)

JETNET and AirNav.

Jet data current as of December 2022 from JETNET.

AirNav data current as of December 2022.

Nashville Site Facilities.

We obtained lease rights to 15.15 acres of land at BNA.

The facilities at BNA plan to consist of nine newly constructed individually-leased NFPA Group III hangars comprising 122,400 total square feet.

The constructed facilities at BNA consist of nine newly constructed individually-leased NFPA Group III hangars comprising 121,867 total square feet.

Our Nashville campus also includes an existing facility, Hangar 14, with an area of 27,202 square feet.

Groundbreaking on the new facilities at BNA occurred in July 2021.

Groundbreaking on the new facilities at BNA occurred in July 2021 and construction was completed in October 2022.

Each of the hangars includes a ramp area for aircraft startup and shutdown in front of the hangar doors.

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The hangars are rented on long-term leases, with the Company including its own line crew and ground service equipment.

The Company will offer fuel at a negotiated discounted price for our tenants.

Nashville Facilities Construction Project .

The total cost of the Nashville facilities is estimated to be approximately $27 million.

A construction contract has been awarded for the Nashville facilities.

SHG Corporation Nashville Tenant Leases/LOIs .

Currently, we have an executed lease for 100% of the existing facility at BNA.

The subtenant, one of the largest charter operators in the United States with locations at 20 airports, is currently operating out of the hangar facility.

The lease commenced January 1, 2021 for a three-year term, with one 3-year renewal option.

The in-place lease reflects approximately 18% of the overall leasable area of the facilities at BNA.

The remaining hangar units currently are being offered for lease.

General Airport Facilities .

BNA has four runways, the longest of which is 11,030 feet.

Berry Field Air National Guard Base is located on the premises of BNA, and since 1937, it has hosted the 118th Airlift Wing.

Based Aircraft .

According to 2019 Tennessee Aviation System Plan data, BNA accommodated 116 based aircraft, as summarized in the following table:

Based Aircraft

Aircraft Type

Multi-Engine Aircraft

Single Engine Aircraft

Jet data from JETNET as of 2021.

All other data from 2019 Tennessee Aviation System Plan data.

Aircraft Operations .

Between 2018 and 2019, BNA experienced a 7.51% increase in overall operations.

Total general aviation operations increased 0.25%.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020:

total operations at BNA decreased 30.47% and general aviation declined 27.89%.

Civil operations saw 26 total operations, where previously there had been none.

As illustrated in the table below, growth in overall operations through 2037 is projected to range from 2.21% to 2.82%, averaging 2.48%.

Actual 2019 FAA data for general aviation operations at BNA indicate that 15.7% of the airport’s operations were dedicated to iterant and based general aviation.

This is typical for a commercial hub, as 71% of total operations for 2019 were attributable to air carrier operations.

HISTORICAL AND PROJECTED AIRCRAFT OPERATIONS

Itinerant Operations

Local Operations

Historic data derived from FAA OPSNET.

* Forecast data via FAA TAF.

Regional Airport Competition .

Primary alternate airports to BNA, which accommodate business jet service and provide a minimum runway length of 5,000 feet, include Smyrna Rutherford County Airport (“MQY”), John C.

Tune Airport (“JWN”), Lebanon Municipal Airport ( “M54”), Music City Executive Airport (“XNX”) and Murfreesboro Municipal Airport (“MBT”).

MQY is located 12 miles south of Nashville and serves private and general aviation.

With more than 1,700 acres, MQY is the 3rd largest airport in Tennessee.

MQY is located in the geographic center of Tennessee and the center of the eastern United States.

The airport is served by two FBOs:

Azure Flight Support and Hollingshead Aviation.

The Azure Flight Support FBO operation is situated on 19 acres under lease with 50,000 square feet of heated hangar space for storage of aircraft, 20 T-Hangar units, and additional land available for development for business hangars.

Azure Flight Support offers only community hangar space, whereas Hollingshead Aviation offers both community and private hangar space.

JWN is located eight miles from downtown Nashville and is the busiest general aviation airport in Tennessee.

It serves the needs of regional and private aircraft, and is owned and managed by the Metropolitan Nashville Airport Authority.

JWN serves the region’s growing private aircraft market and acts as a reliever for BNA.

M54 is a public-use, general aviation facility located 20 minutes from Nashville.

M54 is Tennessee’s fourth largest general aviation airport, it covers 9,600 square feet and includes a state-of-the-art terminal facility located at the west ramp.

Direct Flight Solutions is the sole FBO at M54 and the only hangar options on the field are community hangars.

XNX is a city-owned public-use general aviation airport located two miles east of the central business district of Gallatin, in Sumner County, Tennessee.

Nashville Jet is the sole FBO at XNX and the only hangar options on the field are community hangars.

A new 22,500-square foot community hangar is under construction at the airport.

MBT is a general aviation airport serving Middle Tennessee.

MBT is one of the only general aviation airports in the state of Tennessee that is self-supporting.

The revenue generated from leases and fuel sales funds the operations and capital improvement programs.

Middle Tennessee State University trains professional pilots, aircraft mechanics, air traffic controllers, and airport administrators utilizing the airport.

The university maintains a fleet of over 25 aircraft and has continued to maintain a ranking of one of the top five aviation programs in the nation.

The FBO offers community and T-hangar space.

Based Aircraft —

Regional Airports .

The following chart identifies the latest available information on the number of aircraft based at each of BNA and the alternative general aviation airports identified above.

Aircraft Based on the Field

BNA and Alternatives

Single Engine

Smyrna Airport (MQY)

John C Tune Airport (JWN)

Lebanon Municipal Airport (M54)

Music City Executive Airport (XNX)

Murfreesboro Municipal Airport (MBT)

Nashville (BNA)

BNA as a % of Total

* Jet data from JETNET as of 2021.

All other data from 2019 Tennessee Aviation System Plan data.

On-Airport Hangar Services Competition .

FBOs currently based at BNA include Atlantic Aviation and Signature Flight Support.

Both FBOs offer the following amenities:

In addition, BNA has several private hangars that generally provide storage for business aircraft, office space, maintenance space, and passenger/pilot lounges.

Some of the private hangars are owned and built by individuals, while others are leased from one of the FBOs.

Aside from the proposed SHG Corporation Nashville development, no private hangar space for larger aircraft is currently available at BNA.

The Company offers fuel at a negotiated discounted price for our tenants.

Centennial Site

The Airport .

Centennial Airport (“APA”) in Englewood, Colorado is owned and operated by the Arapahoe County Public Airport Authority.

The airport serves Denver and surrounding areas, is classified as a National airport according to the FAA National Asset Report.

APA is the largest general aviation airport in the system, and it is designated as a reliever to Denver International Airport (“DEN”).

During the period September 2020 through August 2021, the airport recorded 44,888 domestic business jet operations, ranking it tenth busiest among all business airports in the United States.

Centennial Site Facilities .

We obtained lease rights to approximately 20 acres of land in the Centennial lnterPort master-planned business hangar development on the south side of APA.

Our Centennial development at APA is located in a secluded, low-traffic area on the airfield.

The campus will be constructed in two phases, and in total will consist of 18 individually leased NFPA Group III hangars comprising 233,210 total square feet.

Our Centennial campus will include two hangar layouts, each including a ramp area for aircraft startup and shutdown in front of the hangar doors.

Car parking is included in an attached two car garage and the hangar space.

The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with a shower.

Each unit is also assigned adjacent outdoor parking.

Centennial Facilities Construction Project .

The total cost of the Centennial facilities is estimated to be approximately $48 million.

To date, the new facilities at the Centennial site are in the design and predevelopment phase, and a construction contract has not been awarded.

SHG Corporation Centennial Tenant Leases/LOIs .

Currently, there are no LOIs executed at the Centennial site.

The hangar units currently are being marketed for lease, pending permitting.

General Airport Facilities .

APA covers approximately 1,315 acres and has three runways.

 APA is owned and operated by the Arapahoe County Public Airport Authority.

The airport serves Denver and surrounding areas and is classified as a National airport according to the FAA National Asset Report.

APA is the largest general aviation airport in the system, and it is designated as a reliever to Denver International Airport. APA covers approximately 1,315 acres and has three runways.

Other facilities at the airport include hangars and tie-downs for aircraft parking and fuel services.

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The airport includes a U.S.

Customs facility on the airfield.

FBO services at APA are provided by Denver jetCenter, TAC Air, Modern Aviation, Signature Flight Support, and The Heliplex.

Based Aircraft

Aircraft Type

Multi-Engine Aircraft

Single Engine Aircraft

Jet data from JETNET as of 2021.

All other data from AirNav as of 2019.

Aircraft Operations .

Between 2018 and 2019, APA experienced a 3.54% increase in overall operations.

Total general aviation operations increased 5.65%, and local civil operations increased 2.30%.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020:

total operations at APA decreased 5.41%, general aviation declined 13.48%, and civil operations declined 0.66%.

As illustrated in the table on the following page, nominal growth is projected in overall operations through 2037.

HISTORICAL AND PROJECTED AIRCRAFT OPERATIONS

Itinerant Operations

Local Operations

Historic data derived from FAA OPSNET.

* Forecast data via FAA TAF.

Regional Airport Competition .

Alternate general aviation airports offering business jet service and a minimum runway length of 5,000 feet in APA’s service area include Denver International Airport (“DEN”), Greeley-Weld County Airport (“GXY”), Rocky Mountain Metropolitan (“BJC”) and Colorado Air & Space Port (“CFO”).

Although there are other general aviation airports across the State of Colorado, these facilities are the most likely to compete with Sky Centennial for tenants and users of hangars space.

DEN is a commercial service airport located 16 miles northeast of downtown Denver.

The airport is owned and operated by the City of Denver and was opened as a new airport in February 1995.

DEN is the primary commercial service airport for the Denver metropolitan area and acts as an international hub for Colorado and the surrounding states.

The airport has six runways including one at 16,000 feet long, which is the longest commercial service runway in North America.

In addition to air carrier passenger operations, DEN supports large scale air cargo and charter activities.

DEN is the 20th-busiest airport in the world and the 5th-busiest airport in the United States.

As a major international airport, DEN does not feature a large general aviation operation.

There is one FBO serving the airport - Signature Flight Support.

According to the Colorado Aviation System, as of 2020, DEN provides hangars for 80% of based aircraft fleet and 50% of weekly average overnight transient storage.

The airport includes three hangar spaces for based aircraft, with two based aircraft representing 80% of the fleet.

Hangar space at DEN is limited to community space.

GXY is a general aviation airport in northern Colorado, located approximately three miles east of Greeley’s central business district.

The airport is owned and operated by the Greeley-Weld County Airport Authority and has two runways, which are 10,501 feet long and 5,502 feet long, respectively.

The airport is primarily used by recreational aircraft, flight schools, and business aircraft visiting businesses in Greeley, the University of Northern Colorado or oil extraction operations in the surrounding region.

Other activities at GXY include aerial crop application, aerial inspections and flight testing.

According to the Colorado Aviation System, as of 2020, GXY provides hangars for 50% of based aircraft fleet and 50% of weekly average overnight transient storage.

The airport includes 218 hangar spaces for based aircraft, with 121 based aircraft representing 60% of the fleet.

Hangar space is limited to community space, with no facilities able to accommodate larger aircraft.

BJC is a general aviation airport located nine miles northwest of downtown Denver along the U.S.

Highway 36 corridor.

The airport is owned and operated by Jefferson County.

BJC has three runways, including one of which is 9,000 feet long.

The airport is used heavily for flight training, recreational flying, business activities and aerial wildland/firefighting.

Additionally, the airport frequently receives large corporate and college charter aircraft visiting the University of Colorado.

BJC is also home to a U.S.

Forest Service heavy tanker base and the National Center for Atmospheric Research Aviation Facility.

BJC is the second busiest general aviation airport in Colorado and is home to several large aviation and aerospace businesses.

According to the Colorado Aviation System, as of 2020, BJC provides hangars for 60% of based aircraft fleet and 50% of weekly average overnight transient storage.

The airport includes 199 hangar spaces for based aircraft, with 255 based aircraft representing 60% of the fleet.

Sheltair Aviation and Signature Flight Support provide FBO services at BJC.

CFO is a general aviation airport in the Denver area.

The airport is owned and operated by Adams County.

CFO has two runways that measure 8,000 feet in length.

The airport is used for flight training, recreational flying, aerospace manufacturing, and business/corporate activity.

CFO is home to a rocket engine testing facility, an Army National Guard armory and the Colorado Department of Transportation Division of Aeronautics’

CFO earned its spaceport license in 2018, making the facility the first and only licensed public-use spaceport in Colorado and the FAA Northwest Mountain region.

CFO is located on 3,200 acres of land, less than eight miles southeast of DEN, enabling users to quickly access aerospace companies on the Front Range and around the world.

CFO is already home to several aerospace companies, including Reaction Engines, which is conducting research on hypersonic propulsion solutions.

According to the Colorado Aviation System, as of 2020, CFO provides hangars for 60% of based aircraft fleet and 50% of weekly average overnight transient storage.

The airport includes 291 hangar spaces for based aircraft, with 261 based aircraft representing 60% of the fleet.

These are community hangars, able to accommodate only small aircraft and mid-sized jets.

Based Aircraft —

Regional Airports.

The following chart identifies the latest available information on the number of aircraft based at APA and the alternative general aviation airports described above.

As illustrated, APA is ranked first in total number of based aircraft, according to the most recent data available.

APA garners 47% of the overall based aircraft market share.

Moreover, APA also is first in total number of based jets.

The facility garners 44% of the based multi-engine market and 65% of the based jet aircraft market.

Aircraft Based on the Field

APA and Alternatives

Denver International (DEN)**

Greeley Weld County (GXY)**

Rocky Mountain Metropolitan (BJC)***

Colorado Air & Space Port (CFO)***

Centennial (APA)**

APA as a % of Total

JETNET and AirNav.

* Jet data current as of 2021 from JETNET.

** Data current as of 2018.

*** Data current as of 2019.

On-Airport Hangar Services Competition .

Nine providers of hangar services have been identified at APA, as illustrated in the table below.

Summary of APA Hangar Rentals

Property Name

Denver jetCenter

Signature Flight Support

Modern Aviation

Willowbrook Park

SunBorne XVI, Ltd.

Aero Colorado

Floors & Doors

TOTAL/AVERAGE

July 30, 2020 Market Conditions Report completed by Stijgend Real Estate, LLC

On-Airport Hangar Services Competition.

FBO services at APA are provided by Denver Jet Center, TAC Air, Modern Aviation, Signature Flight Support, and The Heliplex.

Customs facility.

Four companies currently provide FBO services at APA.

Between 2018 and 2019, APA experienced a 3.5% increase in overall operations according to FAA OPSNET.

The impact of the COVID-19 pandemic is seen in the change from 2019 to 2020, leading to a decline in total operations at APA of 5.4%.

The effects of the pandemic continued to be evident in the change from 2020 to 2021, as APA did not experience the positive effects exhibited by other airports, and total operations at APA decreased a further 6.1%.

FAA TAF forward looking data forecasts a rebound in total operations beginning in 2022 and increasing each year thereafter, including annual growth projections of 4.9%, 3.7%, and 4.9%, for 2022, 2023, and 2024, respectively.

FBO services at APA are provided by four companies.

The FBOs offer standard amenities such as pilot’s lounge, waiting area/lounge, weather station, restroom, showers, kitchenette, and conference rooms, flight instruction, rental car, aircraft maintenance and parts supply, hangar rental, aircraft tie-down parking, and aircraft fueling.

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Some of the private hangars are owned and built by individuals or corporations based locally.

Based Aircraft .

The following chart identifies the latest available information on the number of aircraft based at APA.

Aircraft Based at APA

Centennial (APA)**

JETNET and AirNav.

Jet data current as of December 2022 from JETNET.

AirNav data current as of December 2022.

Centennial Site Facilities.

We obtained lease rights to approximately 20 acres of land in the Centennial lnterPort master-planned business hangar development on the south side of APA.

Our Centennial development at APA is located in a secluded, low-traffic area on the airfield.

The campus will be constructed in two phases, and in total will consist of 18 individually leased NFPA Group III hangars comprising 236,930 total square feet.

Our Centennial HBS hangar campus will include two hangar layouts, each including a ramp area for aircraft startup and shutdown in front of the hangar doors.

Car parking is included in the hangar space and in an attached two car garage.

The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with a shower.

Each unit is also assigned adjacent outdoor parking.

Deer Valley Site

The Airport .

The Phoenix Deer Valley Airport in Phoenix, Arizona (“DVT”) is a medium sized, predominantly business and general aviation airport that is owned and operated by the City of Phoenix.

 DVT is a medium sized, predominantly business and general aviation airport that is owned and operated by the City of Phoenix.

DVT is located on 914 acres within Phoenix’s northern limits, approximately 20 miles north of downtown and approximately 17 miles north of Phoenix Sky Harbor International Airport (“PHX”).

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however, air taxi service is available.

DVT has two parallel runways.

The airport offers a complete range of services including fueling, avionics repair, maintenance, parts, flight training, new and used aircraft sales, aircraft rentals, a pilot shop, and a restaurant.

The landside facilities at DVT include the terminal building, an FBO, flight schools, fueling facilities, major utilities, and support facilities.

Based on data from FAA OPSNET, between 2018 and 2019, DVT experienced a 10.0% increase in overall operations.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020 as total operations at DVT decreased 12.0%, and the effects of the pandemic continued to be evident in the change from 2020 to 2021, as total operations at DVT decreased a further 32.4%.

FAA TAF forward looking data forecasts a rebound in total operations beginning in 2022 and increasing each year thereafter, including increases of 18.9%, 18.1% for 2022 and 2023, respectively.

Currently, the only aircraft hangar rental providers at DVT are the DVT Airport Authority and an FBO.

According to the DVT Airport Authority, they do not have any corporate/executive hangars, but they have available land to build hangars.

The FBO is currently based in two locations at DVT and its future plans at DVT include the construction of new hangars as well as a modern FBO facility.

Based Aircraft .

The following chart identifies the latest available information on the number of aircraft based at DVT.

Aircraft Based at DVT

Deer Valley (DVT)

JETNET and AirNav.

Jet data current as of December 2022 from JETNET.

AirNav data current as of December 2022.

Deer Valley Site Facilities.

We obtained lease rights to approximately 15 acres of land at DVT on the southeast side of the airport.

Our Deer Valley development at DVT is located in a secluded, low-traffic area on the airfield.

The campus will consist of 18 individually leased NFPA Group III modular hangars comprising 218,600 total square feet.

Ground-breaking for the first phase is projected to commence by the second quarter of 2022.

Our development at DVT is located in a secluded, low-traffic area on the airfield.

The campus will consist of 16 individually leased NFPA Group III modular hangars comprising 220,764 total square feet.

Ground-breaking for the first phase occurred in December 2022.

Every hangar includes a ramp area for aircraft startup and shutdown in front of the hangar doors.

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The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with a shower.

Each unit is also assigned adjacent outdoor parking.

The hangars are rented on long-term leases, with the Company including its own line crew and ground service equipment.

Deer Valley Facilities Construction Project .

The total cost of the Deer Valley facilities is estimated to be approximately $40 million.

To date, the new facilities at the Deer Valley Site are in the design and predevelopment phase, and a construction contract has not been awarded.

SHG Corporation Deer Valley Tenant Leases/LOIs .

Currently, we have five executed LOIs.

The remaining hangar units currently are being offered for lease.

Currently, the property is exempt from real estate tax.

General Airport Facilities .

DVT has two parallel runways.

The airport offers a complete range of services including fueling, avionics repair, maintenance, parts, flight training, new and used aircraft sales, aircraft rentals, a pilot shop, and a restaurant.

The landside facilities at DVT include the terminal building, the Cutter Aviation FBO, Westwind School of Aeronautics and TransPac Aviation Academy flight schools, fueling facilities, major utilities, and support facilities.

Based Aircraft .

The airport has 884 based aircraft, as summarized in the following table:

Each hangar is also assigned adjacent outdoor parking.

Addison Airport Site

ADS is owned and operated by the Town of Addison.

The airport serves the Dallas/Fort Worth Metroplex market and is in close proximity to the residential and business districts where aircraft owners and operators live and work, located only nine miles north of the central business district of Dallas.

ADS does not cater to commercial flights, making it preferable for basing business aircraft as it provides for the quickest “time-to-wheels-up”

in the Dallas area.

According to its website, ADS is home to more than 650 based aircraft.

Facilities at ADS include a 7,203 foot runway equipped with high-intensity lighting and a full length parallel taxiway.

Operations are supported by Instrument Landing System (ILS) and RNAV (GPS) instrument approaches.

The airport offers an FAA control tower, 24-hour U.S.

Customs services for international arrivals, no landing fees, and over 70 businesses including maintenance providers, flight schools, and various other aviation-related service providers.

According to the Texas Department of Transportation, as of 2018 the airport contributes over 1,000 on-airport jobs to the Town of Addison. 

Between 2018 and 2019, ADS experienced a 6.1% increase in overall operations.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020 as total operations at ADS decreased 15.9%.

Operations at ADS rebounded from 2020 to 2021, as the airport experienced a 22.8% increase in total operations.

FAA TAF forward looking data forecasts a continued rebound in total operations beginning in 2022 and increasing each year thereafter, including increases of 1.1%.

4.8%, and 3.7% for 2022, 2023, and 2024, respectively.

Aircraft hangar rental providers currently on the airport consist of three FBOs.

Additionally, multiple smaller private hangars exist on the airport, primarily owned by operators or for flight schools and other airport businesses.

The existing hangar facilities at ADS are overcapacity and predominantly older with low door heights, which creates little opportunity for attracting newer larger private jet aircraft to the market.

Though a new FBO brought additional community hangar square footage to the airport, the combination of older current facilities, lack of private hangar space on the airport, increased wealth migration to the north side of Dallas, and substantial popularity of the airport make for an attractive target for our private and exclusive Home-Basing solution.

Based Aircraft .

Aircraft Type

Multi-Engine Aircraft

Single Engine Aircraft

Jet data from JETNET as of 2021.

All other data from AirNav as of 2020.

Aircraft Operations .

Between 2018 and 2019, DVT experienced a 10.03% increase in overall operations.

Total general aviation operations decreased 30.59%, and local civil operations increased 14.07%.

The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020:

total operations at DVT decreased 11.9%, general aviation declined 16.44%, and civil operations declined 12.87%.

As illustrated in the table on the following page, nominal growth is projected in overall operations through 2037.

HISTORICAL AND PROJECTED AIRCRAFT OPERATIONS

Itinerant Operations

Local Operations

Historic data derived from FAA OPSNET.

* Forecast data via FAA TAF.

Regional Airport Competition .

Primary alternate airports to DVT that accommodate corporate jet service and offer a minimum runway length of 5,000 feet include PHX, Scottsdale International Airport (“SDL”), Glendale Municipal Airport (“GEU”) and Goodyear Airport (“GYR”).

PHX has been owned and operated by the City of Phoenix since 1935.

PHX occupies approximately 3,400 acres of land located about four miles east of the downtown Phoenix area.

It is the only Arizona airport designated as a large hub by the FAA and is the principal commercial service airport serving metropolitan Phoenix and most of Arizona’s population.

There are no other U.S.

large-hub commercial service airports within a five-hour drive of Phoenix, with the closest being Las Vegas’

McCarran International Airport (approximately 290 miles to the northwest).

PHX served over 17.3 million enplaned passengers in fiscal year 2020 and over 22.8 million enplaned passengers in fiscal year 2019.

PHX has two FBOs, only one of which offers hangar space for lease.

Cutter Aviation provides community hangar space in a 24,000 square foot of hangar that can accommodate aircraft sizes up to a Gulfstream G-550 or Bombardier Global Express.

No private hangar space is available.

SDL is located in the northeastern portion of the Phoenix Metropolitan Area, within the City of Scottsdale.

The airport consists of approximately 282 acres and is situated between the McDowell Mountains to the north and the Camelback Mountain to the south.

The airport is surrounded by commercial and industrial developments within the Scottsdale Industrial Airpark and Scottsdale Business Center.

SDL is a public-use, general aviation reliever facility.

Facilities at the airport include a runway, which is 8,249 feet and includes fuel services, aircraft storage in hangars and tie-downs.

SDL includes three FBOs offering hangar space for lease:

Jet Aviation, Ross Aviation, and Signature Flight Support.

Neither offer private hangar space.

Jet Aviation’s 30,000-square foot hangar is a community hangar.

Ross Aviation has approximately 156,000 square foot of community hangar.

Signature Flight Support has approximately 150,000-square foot of community hangar.

GEU is a general aviation airport that is owned by the City of Glendale and is operated on a daily basis by a fulltime Airport Administrator who reports to the Deputy Public Works Director –

Transportation.

GEU is a public-use, general aviation reliever facility.

Facilities at the airport include one runway, which is 7,150 feet.

Glendale Hangars provides private hangar rentals at GEU, which consist of “bare bones”

facilities, with no office space or onsite amenities.

The sole FBO on the airport is Glendale Aero Services.

GYR is a general aviation airport located in Goodyear, Arizona, approximately twenty miles west of downtown Phoenix.

The airport is designated as a general aviation reliever airport to PHX.

GYR has no commercial airline activity and is a center for flight training, aircraft maintenance, repair and overhaul, and aircraft storage.

GYR is owned and operated by the City of Phoenix.

Facilities at the airport include one runway at 8,500 feet, as well as fuel services, and aircraft storage in box and T-hangars.

Several long-standing tenants of GYR include an aircraft maintenance, repair and overhaul company, flight schools, and Lux Air Jet Center, an FBO that offers rentals within community hangars.

Such hangars are “bare bones”

facilities, with no office space or onsite amenities.

Based Aircraf t —

Regional Airports .

The following chart identifies the latest available information on the number of aircraft based at each of DVT and the four primary alternate general aviation airports in DVT’s service area.

Aircraft Based on the Field

DVT and Alternatives

Phoenix Sky Harbor (PHX)**

Scottsdale Airport (SDL)***

Glendale Municipal Airport (GEU)***

Phoenix Goodyear Airport (GYR)***

Deer Valley (DVT)*

DVT as a % of Total

The following chart identifies the latest available information on the number of aircraft based at ADS.

Aircraft Based at ADS

Addison Airport (ADS)

JETNET and AirNav.

* Jet data current as of 2021 from JETNET.

** Data current as of 2019.

***Data current as of 2020.

On-Airport Hangar Services Competition .

Currently, the only aircraft hangar rental providers at DVT are the DVT Airport Authority and Cutter Aviation.

According to the DVT Airport Authority, they do not have any corporate/executive hangars, but they have available land to build hangars.

Cutter Aviation is currently based in two locations at DVT and its future plans at the Airport include the construction of new hangars as well as a modern FBO facility.

Addison Airport Site

On October 15, 2021, we entered into a binding letter of intent with the Town of Addison for a ground lease of approximately 6 acres on the Northeast side of the primary runway at Addison Airport (KADS) in Addison, Texas.

The anticipated lease term is 40 years with no additional options, which is the maximum allowable term permitted by the Town of Addison.

Jet data current as of December 2022 from JETNET.

AirNav data current as of December 2022.

Addison Site Facilities.

We obtained lease rights to approximately six acres on the northeast side of the primary runway.

As part of our development plan, the existing facilities on the site, including a terminal, ramp and automobile parking, will be demolished.

We then anticipate developing six hangars with adjoining office and support space constituting approximately 100,000 square feet.

Anticipated occupancy for the Addison Airport site is in the third calendar quarter of 2023.

Sky pursued land for development at the Addison Airport via a competitive request for proposal process and was ultimately selected by the Town of Addison to enter into a binding letter of intent and exclusive lease negotiations, as well as due diligence, which is currently underway.

Addison Airport is attractive to us because there is virtually no developable land available with airside access.

We value a presence on the Addison Airport as we believe it is one of the most prominent business and general aviation airports in the Dallas market and is in close proximity to the residential and business districts where aircraft owners live and work, located only nine miles north of the central business district of Dallas.

Additionally, KADS does not cater to commercial flights, making it preferable for basing business aircraft as it provides for the quickest “time-to-wheels-up”

in the Dallas area.

The existing hangar facilities at KADS are overcapacity and predominantly older with low door heights, which creates little opportunity for attracting newer larger private jet aircraft to the market.

We believe these conditions make for an attractive target for our private and exclusive home-base solution.

We anticipate subsequently developing six hangars with adjoining office and support space constituting approximately 105,000 square feet.

Anticipated occupancy for the ADS site is in the third calendar quarter of 2024. In January 2023, we amended our existing ground lease agreement with the Town of Addison, TX to include additional parcels of land that will effectively double the land available for development at our ADS HBS hangar campus project.

Customers, Sales and Marketing

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We focus our operations on various types of tenants, including, individuals (directly or through personally or family-owned LLCs), charter operations, flight schools, corporate fleets, government entities and aviation service providers.

In general, we will execute a letter of intent with the tenant during the construction phase of the project and will execute a final tenant lease before the construction project is completed.

Terms of the tenant leases typically range from three to ten years, with most leases having a five-year term.

We intend to develop a diversified portfolio of tenants in terms of geography, type of tenant and length of lease term.

While the business currently is dependent on its two largest tenants, longer term, the business does not expect to depend on a single customer, the loss of which would have a material adverse effect on the business.

The business expects to diversify its risk by having multiple types of tenants across multiple locations across the country.

Risk Factors –

Our rental income will initially be concentrated within a small number of tenants and the loss of or default by one or more significant tenants could have a material adverse effect on our business and results of operations ”

of this proxy statement.

Overview of Our Leases with Tenants

Tenant lease terms are generally 3-10 years, with maturity dates staggered for purposes of risk management.

While much of our historical revenue has been concentrated with our two largest tenants, longer term, we do not expect to depend on a single tenant or group of tenants, the loss of which would have a material adverse effect on our business.

We expect to diversify our risk by having multiple types of tenants across multiple locations across the country.

Risk Factors 

— 

Our rental income is initially concentrated within a small number of tenants and the loss of or default by one or more significant tenants could have a material adverse effect on our business and results of operations.

Tenant lease terms are generally 1-10 years, with maturity dates staggered for purposes of risk management.

Base lease rents vary by location, but all leases feature annual rent escalation.

Leases are triple-net, with tenants covering insurance, taxes and utilities.

Leases include all line services and exclude the cost of fuel.

Leases are structured as either gross or triple-net, with tenants covering insurance, taxes and utilities.

The tenant leases do not have early termination options, and renewals are generally reset to fair market value.

Under the terms of our existing leases, the average rent per square foot is $27.17. 

The hangar space rental segment of the aviation services industry in which we operate is very competitive.

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We must compete with other operators based on the location of the facility relative to runways and street access, quality of customer service, safety, reliability, value-added features, and price.

See “— 

Investment Criteria ”

of this section for additional information regarding SHG Corporation’s competitors with respect to each particular facility.

for additional information regarding our competitors with respect to each particular facility.

We do not experience substantial seasonal fluctuations in our revenues and the results of operations.

Government Regulation

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In addition, the Department of Homeland Security, Department of Transportation, Environmental Protection Agency, state and local environmental agencies, and local airport authorities contribute to the regulation of our HBS hangar campuses.

The business must comply with federal, state, and local environmental statutes, and regulations, including those associated in part with the operation of fuel storage tank systems and fuel trucks.

We must comply with federal, state, and local environmental statutes, and regulations, including those associated in part with the operation of fuel storage tank systems and fuel trucks.

These requirements include, among others, tank and pipe testing for tightness, soil sampling for evidence of leaking, and remediation of detected leaks and spills.

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Our HBS hangar campuses are subject to regular inspection by local environmental agencies, as well as local fire marshals and other agencies.

The business does not expect that compliance and related remediation work, if any, will have a material negative impact on our business.

The business has not received notice requiring it to cease operations at any location or of any abatement proceeding by any government agency for failure to comply with applicable environmental laws and regulations.

We do not expect that compliance and related remediation work, if any, will have a material negative impact on our business.

We have not received notice requiring us to cease operations at any location or of any abatement proceeding by any government agency for failure to comply with applicable environmental laws and regulations.

Americans with Disabilities Act

Under Title III of the Americans with Disabilities Act (“ADA”), and rules promulgated thereunder, in order to protect individuals with disabilities, public accommodations must remove architectural and communication barriers that are structural in nature from existing places of public accommodation to the extent "readily achievable." In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable by disabled individuals.

The "readily achievable" standard takes into account, among other factors, the financial resources of the affected site and the owner, lessor or other applicable person.

In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable by disabled individuals.

The “readily achievable”

standard takes into account, among other factors, the financial resources of the affected site and the owner, lessor or other applicable person.

Compliance with the ADA, as well as other federal, state and local laws, may require modifications to properties we currently own or may purchase, or may restrict renovations of those properties.

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Our business is subject to numerous statutes, rules and regulations relating to environmental protection and is exposed to various environmental risks, hazards, and environmental protection requirements, including those related to the storage and handling of jet fuel and compliance with firefighting regulations.

Risk Factors –

Our businesses are subject to environmental risks that may impact its future profitability ”

of this Form 10-K.

We endeavor to be a leader of the industry’s initiatives to address environmental issues, and it is increasingly focused on how it can reduce its carbon footprint in a sustainable way.

Risk Factors  

— 

Our businesses are subject to environmental risks that may impact our future profitability ”

of this Report.

We endeavor to be a leader of the industry’s initiatives to address environmental issues, and we are increasingly focused on how we can reduce our carbon footprint in a sustainable way.

As part of this, our HBS hangar campuses are designed to reduce the need to reposition private jets, which reduces the use of fuel as well as air emissions and noise pollution.

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Moreover, our hangars are designed to be both solar and wind energy capable for future installation.

We maintain the following insurance:

During construction:

Builder’s Risk

Owner’s Interest

General Liability

Excess Liability

Contractor’s Pollution Liability

Once operational, each campus maintains:

Commercial Property Insurance

Flood Insurance

Earthquake Insurance

Boiler & Machinery Insurance

Business Income/Loss of Rent Insurance

Automobile Liability Insurance

General Liability/Products/Hangar Keepers Insurance

Environmental Insurance

Worker’s Compensation and Employer’s Liability

Tenants at our campuses are required to maintain the following types of insurance:

Aircraft Physical Damage and Aircraft Legal Liability

General Liability Insurance

Worker’s Compensation and Employer’s Liability

Automobile Liability Insurance

Pollution Liability Insurance

We maintain insurance of the types and in amounts that we believe to be adequate and consistent with industry standards.

During construction, our principal coverage includes builder's risk, general liability, excess liability, and contractor's pollution liability insurance.

Once operational, each campus maintains commercial property, flood, earthquake, boiler and machinery, business income/loss of rent, automobile liability, general liability, environmental liability, and worker's compensation insurance.

We also maintain insurance coverage related to our directors and officers, employment-related liabilities, and cyber-related incidents.

We require the tenants at our campuses to maintain aircraft physical damage, general liability, worker's compensation, automobile liability, and pollution liability insurance coverage.

Human Capital

As of December 31, 2021, we had 11 employees and 9 contractors, none of which were subject to collective bargaining agreements.

As of December 31, 2022, we had 23 employees and 11 independent contractors, none of which were subject to collective bargaining agreements.

We also engage consultants to supplement our permanent workforce.

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Our success depends in large part on our ability to attract, retain and develop high-quality management, operations, and other personnel who are in high demand, are often subject to competing employment offers, and are attractive recruiting targets for our competitors in fields such as aviation and real estate.

We believe we offer competitive compensation (including base salary, incentive bonus, and in the future, long-term equity awards) and benefits packages designed to attract and reward talented individuals who possess the skills necessary to support our business objectives and assist in the achievement of our strategic goals and development plans.

We believe we offer competitive compensation (including base salary, incentive bonus, and long-term equity awards) and benefits packages designed to attract and reward talented individuals who possess the skills necessary to support our business objectives and assist in the achievement of our strategic goals and development plans.

All employees are eligible for health insurance, a retirement plan, and life/disability coverage.

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Our executive management team regularly review and update our talent strategy, monitoring a variety of data, including turnover, diversity, and tenure, to design and implement effective recognition, training, development, succession, and benefit programs to meet the needs of our business and our employees.

Legal Proceedings

We may be involved from time to time in ordinary litigation, negotiation, and settlement matters that will not have a material effect on our operations or finances.

We are not currently party to any material legal proceedings, and we are not aware of any pending or threatened litigation against us that we believe could have a material adverse effect on our business, operating results, or financial condition.

Periodic Reporting and Financial Information

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In addition, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Pursuant to a Continuing Disclosure Agreement in connection with the PABs, SHC is required to publish (i) Monthly Construction Reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC, all of which are available through the website of the Municipal Securities Rulemaking Board via its Electronic Municipal Market Access (“EMMA”) system at www.msrb.org and on the investor relations section of our website.

Pursuant to a Continuing Disclosure Agreement, dated as of September 14, 2021, by and between the Public Finance Authority (Wisconsin) and the Company (the “Continuing Disclosure Agreement”) in connection with the Series 2021 PABs, SHC is required to publish (i) Monthly Construction Reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC, all of which are available through the website of the Municipal Securities Rulemaking Board via its Electronic Municipal Market Access (“EMMA”) system at www.msrb.org and on the investor relations section of our website.

The information on our website is not, and shall not be deemed to be, part of this Report or incorporated into any other filings we make with the SEC, except as shall be expressly set forth by specific reference in any such filings.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business