Okay. For all of those that are online, welcome. We did spend the last couple of hours just going through and touring each aspect of what we're doing out here. I will say, and it's kind of some of the things. For those of you that are on the tour, I'm going to be a little bit repetitive to dial some of that back. One of the interesting things that we have at this particular time is that you can see kind of each phase of how we do what we do under production, right? We've got raw land, which you all know what raw land looks like. Then we've got phase 2D, which is just, I'd say, 40% done. We've done the earthwork, and what you can see now is how we develop the water, the sewer, the storm systems. We're in the wet utility side.
We carve these lot deliveries into three particular subcategories. Excavation work, utility work, and then the roads, curbs, and gutters. You can see the utility work going on for 230, 240 houses' worth of it. It looks like a mess, right? It's a hot mess of a bunch of excavators and a bunch of piles of dirt and a bunch of bees and ants working that side of it. You can see kind of where we're at on finishing a particular phase. We've got 2C that is delivering 230 lots this month. We're on freshly paved streets, and we've got the last two streets that are going to get paved next week, and we'll punch that out. That's a delivery of 2C.
You can kind of get a feel for some of the seasonality of the business because we can't do that type of work in the winter because it's very temperature sensitive. What we can do in the winter is what we are doing, which is the utility work, right? We can dig ground. Our contractors have hardy folks that work. I think there is a temperature threshold, but it's below where we want to be out. We've got that work going on. You can see new homes going up. The phase 2B, which we delivered last August, August of 2024, and our home builders are vertical there. I'd say we probably got about 120 homes up, and most of the homes up, I'd say of the homes that are vertical, 80%- 90% are sold. We've got some that are sold even before they go vertical.
It depends on the style of home and the price points in there. We did some tour of the water facilities. One of the things that we did tour was kind of where Lowry was and the development on Lowry, which is fast and encroaching. It doesn't show as well when we show an image of it, how much the Denver area has grown to it. We've got development. There's a five-mile line of development that's our western edge and what is the eastern edge of Denver. Aurora goes right up to that. When you see it, you see, oh my God, there's the house and there's Lowry, which is our service area, and a new project going on, which is a half section, which was the last privately owned piece of property that abutted Lowry on the southern edge. The big project there is beautiful. People stopped.
They're going to be $2 million, $2.5 million homes on that property. You kind of get a feel for the market dynamic of what we're doing there. I might open it up to the folks that were on the tour. Any questions, any observations? What struck you about what you saw that you didn't know about? Any of your observations? Not to put you on the spot. We got mouthfuls. We're also having lunch here.
I'll tell you what.
I couldn't have timed it worse.
What struck me is how much control and medical integration Mark actually has in his head. I mean, this is not a company that's waiting for bureaucracy and local government and other companies to do something. This is a company that has an incredibly powerful undervalued asset with an enormous amount of power to develop it at the right pace, with other people's money.
To that point, you know, one of the things, and I think this will really, really shine in what you see in variable markets, right? You know, we do our own stuff. I don't rely on, none of us rely on a ton of consultants, whether that's our operator team, our engineering team, our IT team, all of that stuff we have in-house. When we go for the next phase of the project, it's us directly. It's us directly to the planning commission. It's us directly to the county commissioners. They know us. We've made commitments to them. We have come through with all of our promises and validated everything that we're doing with them. From time to time, things get tacky, right? Housing is cyclical, land development is cyclical, water supply is cyclical.
You go through dry periods, you go through wet periods, and you kind of need to make sure that you understand each component of that and evaluate the risks in each of those components. One of the risks that we came across this year that was unanticipated was, and they updated its building regulations, right? That should be a normal process, and it wasn't, right? I mean, it was, it was laboratory for the home builders who were building these homes, the exact same home in Aurora, which is right next to us. Our jurisdiction, being the county, the county adopted an energy efficiency regulation that was passed by the state legislature last year. They were an early adopter. You know, I think they regret it, but all the home builders had to tweak their electrical and their building plans just a little bit to conform with that.
It took them, you know, what should have taken them three weeks, took them six months. The county got feedback. They wanted to know, well, Mark, how's it going out there? I'm glad you asked. Here's the emails I get. Sharing the emails with them, they're like, okay, fine. Let's tweak this process. Let's tweak that process. Let's make this more efficient here. Let's parallel track these things. It was painful, you know, and it was painful for our builders. Our builders were able to lean on us. We were able to lean on our jurisdiction. You know, it kind of delayed a little bit of the building permits for filing five. I don't think it delayed any of the building permits for filing six because we're just finishing those lots. Their delay in five allows them to roll all those permits over in six.
They'll roll them over in filing 2C. They'll roll them over into 2D. Those will be pretty efficient in that. I know I highlighted this in our earnings call, but we have some, this particular phase, and I will say it's only this particular phase, is weighted to the fourth quarter. The reason it's weighted to the fourth quarter, I tried to describe this, but I don't think I was able to get a good picture of that to all the people on the earnings call. Let me do it by virtue. I think you have this. For illustration purposes, if you look at this, this shows you two, two, A, B, C, and D. The coloring is the coloring of the builders.
As you can see in this particular 2C, which is what we're developing right now, we have that construction in progress, and we recognize revenue as we build the infrastructure for three of our four builders. We have lot delivery agreements with three of the four. Our one finished lot delivery builder is D.R. Horton. They're the big dog. They pay us a premium on the lot to buy it at the end. In this particular filing, they have a weighted number of lots. They typically have about 40, 45 lots in each phase. In this particular phase, they have 70 lots. We have more in construction in progress in this fiscal year than we do normally, just because of that one builder in this one phase.
You'll see a lot of that catch-up in four quarters at, you know, when we show our guidance out there at what we had at that $30 million. We show about half of that now. We really are anticipating to get half of that catch-up at that Q4 just because of the weighted delivery of D.R. Horton. Do you have a question online? Shout out.
Yeah, you're on mute.
Am I good now?
Yeah.
Hi, Mark. How are you?
I'm great. We caught you in your car.
Yeah. I'm in Price, Utah. I had another meeting that took priority over your tour. Sorry about that.
I take no offense.
No offense. I have a couple of questions. I'm going to be referring to the presentation, so I hope you remember it. On page 23, phase 2B, there were 211 homes in the phase. 115 have been sold, so 96 have been unsold. What was the selling rate during April, May, June? How many houses per month?
Builders are on average about a home a week. With four builders in there, you're probably looking at about 16 to 18 a month.
Ninety-six unsold would be approximately six months.
Yeah, of inventory.
Okay. It may slow down the progress on 2C a bit, but probably not too much. Is that fair?
Not too much. We've got one new builder in six, and I've got two new builders in seven. Whatever that slowdown is, what you're going to see is homes being built in three phases all at once. We'll see. I mean, it's by builder. It's not necessarily that's the market absorption. That's the market absorption for a builder, and they do their price adjustments and their incentives based on their velocity. When you have four builders versus seven builders, you still might make that up.
Okay. Next question. Page 25. I think for the very first time, you tried to put a dollar value on the commercial development, $423 million. I don't remember ever having seen a number attached to that. My question really is, how did you get to $423 million?
I did two times the residential, pulled it out of my plan.
This is very much back of the envelope, whatever.
I think it's pretty conservative. We did that metric based on the number of single-family equivalents in the commercial compared to the residential and then just said we think we'll get somewhere between two and three and a half times our value of the commercial lot as compared to the residential lot.
Okay. The only thing you and I can guarantee is it's not going to be exactly $423 million. What kind of range would you put on it? What kind of.
I'd say you know.
That kind of ceiling?
Yeah. I'd put it at the low end, Jeff. I think we have petal in that commercial, and maybe we give away some of it to incentivize some of the starting of the commercial. If I can get Kroger or somebody out there early, I'd certainly try to do it. I've tried to incentivize that. They laughed at me when I did that. I'm not so sure that there's any real way of doing that other than executing on your residential. They're not interested in the cost of the land. They're interested in their customers, what kind of sales volume they want based on the number of rooftops.
Right. Any new guess as to when the timing of when that might start?
We talked a little bit about that on the tour. You know, it's a function of two things occurring, and I think they're both kind of going to converge. One is going to be, you know, redevelopment of the interchange because it needs a bigger interchange for that commercial traffic, all the big trucks and that sort of stuff. Then getting past that threshold of about 1,500 single-family lots. We're right about at 1,000, and over the next two years, I think both those things converge. We're looking at having at least what they're telling us today to be the end, the finish line in that 2027 timeframe.
Okay. Is one acre foot really still, point two five, SFEs?
We're getting closer to four with it now.
Are you?
We talked about that a little bit. What the metrics are, and these are a function of a couple of things, but one is our lot sizes are smaller, and therefore our outside irrigation is much, much smaller. We're zero-scaping a lot of that. The rule of thumb 30 years ago was three-quarters of an acre foot per SFE. It worked its way down to a half an acre foot. It worked its way down to 0.4, which was the two and a half. We've actually done our numbers on the, call it, the 700, 800 customers that we have, and it's closer to 0.27 now. That's continuing to do two things. One, conserve water, make sure that we reuse our water supplies, and then give us more connections per acre foot.
Okay. I'm trying to connect it back to what you said on page 18 of the presentation. You said that the water rights had a book value of $31.7 million. What would you estimate the current market value of those water rights to be?
At 60,000 connections, at the 40,000, that's $2.5 billion. It cost me $1 billion to build that system, that buildout. I've got a $1.5 billion margin over some period of time.
Is that going to be done by next week?
We're working on it. We're battling.
Yeah, that's the tap fees.
Tap fees. That's right. When you take a look at, you know, we're generating, you know, we're seeing a bit of growth in that $1,500 per connection. I'd say that's probably closer to $1,600, between $1,600 and $1,700. At 60,000 connections, that's over $100 million a year, year-over-year revenue.
That revenue has a market value of about six times. Would that be right?
At a 50% margin, we're probably a little stronger than that. I'd say it's probably 12.
I mean, American Water sells at like six times revenue, something like that.
Okay. I think York or some of the other ones are a little bit stronger than that, but American Waters is a bit calm.
Okay. The tap fees is a one-time. The revenue is recurring and has a free cash flow yield on it. That's why I was going there. Those are the three questions I had. I'm just going to make a comment. This is, you can take it for what it's worth. I hate your share repurchases because you're competing with me, and I am desperately trying to buy and accumulate and hold, and I don't like the competition.
Yeah, I absolutely cannot argue with you on that. I can also say there always seems to be shares available, and I'm never leading the market. I'm usually below the market, so I'm sweeping up, and I must be just one penny more than you.
Yeah, you are, in fact, about $0.01 more than me, and I wish you'd get out of the way. Right? I've been around for a long time, and you should like having me as a shareholder, and you're doing everything you can to prevent me buying more.
You know what? I can tell you, I'm as long-term shareholder as you are buying those shares.
I know you are, but you're not actively buying for your own account in the market.
True. No, I mean, I respect that. That's a good argument against share buybacks. The other side of it is, you know, if we're not deploying that capital, and that's sitting on my balance sheet at 4.5% on government treasuries, and I'm not putting that to use through buying land and other things, you know, it's not an awful thing to reduce that denominator. We try and balance that out.
Yeah. If you were to dividend it out, you wouldn't be competing with me.
I get it.
If you're out there deploying it by buying shares, you're competing with me. As I said, take it for what it's worth, but I hate the competition.
Got it.
Do lean on me.
Thanks, Mark. Thank you.
Thank you because I've got three board members here that would love that feedback. There are a lot of guys that have a different, the exact opposite position.
I just gave my opinion.
You got it.
Hey, Jeff.
Thank you.
Hey, Jeff.
Dan Kozlowski here. Granted, the share count hasn't decreased in an absolute sense in a huge way, but I don't understand your logic. I hear what you're saying. It's cute and everything. If someone's buying that stock, if somebody buys 10% of the company back, you own 10% more of the company. You're getting the value over time. In theory, you're getting the value of you own more of the company by not buying shares. It doesn't have any effect on your net worth. I mean, it actually improves your ownership of Pure Cycle Corporation. If tomorrow Mark bought 50% of the company back, you're holding your total percentage of Pure Cycle.
Doubles.
Would double. I don't get what you're talking about. I'll be honest. I think you're one of the smartest guys I know, but essentially, I don't see what you're talking about.
Okay. I own 10% of the company, and you buy back 10%. My 10% has just gone to 10/9, so 11.1%, right?
Exactly.
If I had bought that 10%, I'd now be at 20%, not 11.1%.
Right. You're not buying it. You haven't yet. Clearly, there's no massive whale in the market buying a stock every day, or we wouldn't be at $10.
You prevented me from buying that 10%.
It doesn't fit reality. It doesn't fit reality.
I mean, if you want to buy the whole company from buying that 10%.
If you want to buy the whole company at $0.50 because it trades there, yeah, sure. I mean, I'm going to buy it before you do. It's just the market. I don't really understand the logic of a company not looking out for all of its shareholders because one shareholder wants to buy it lower. It doesn't make sense to me. We can agree to disagree. I've never heard this discussion in any of my 25 years of investing at other companies. That's just my little pushback from that being a reason for us not to buy or buy, for competition from a very smart, long-term shareholder who wants to buy more. Yeah, sure, if it gaps down, then you get an opportunity to buy a little more. That's true of everybody in the market too.
The market sets the price, and the market's at $10.25 today, that kind of thing. To Mark's point, I don't think we're pushing the stock at all. He'll opportunistically pick some stuff off and provide some stabilization. We think we all would, almost all of us in this room agree, that the shares are potentially materially undervalued. Whether you buy it or we buy it or some new person buys it, I think they're getting a hell of a deal here at $10.12, and we keep it from going to $10.05. I don't think that should be at Mark's consideration list.
We agree to disagree.
Okay. Fair enough. Love you though. Okay.
This was not going to be my main point, but to address one issue, and I've told this to Mark before, I think a dividend for the company would be a good idea, not because you want to pay a big dividend, but because plenty of institutions can't even buy stock that don't pay a dividend. Simply the fact that you raise the reason to pay a dividend, a reason to pay a $0.01 dividend, not that we're going to do it immediately or anything, but we've talked about it.
We are going to do it.
We've talked about it.
It'll probably be in August, but I just don't know when in August.
We've talked about it.
I mean, if you just got on the board as a dividend payer, it does open up a nestled universe of dividend paying ETFs, dividend paying, you know.
It takes the gloves off. People just can't buy it. They can't lock it because they can't buy a dividend-only stock. My observation through today was, I'm not here at Mark throwing out a number of $500 million corporate. I did a little bit of math in my head when I asked him about the cost of lots earlier versus what they're selling for. I started coming up with hundreds of millions and billions of dollars on a $220 million market cap stock. It's like something is that there's a disconnect somewhere. I'm trying to figure out, do you actually, and I don't know if you can say it or not, but do you actually have what you believe the real book value is?
Book value is the wrong word, but the actual market value of what book versus book value in terms of just the assets of the company alone?
Absolutely. You have 10 different ways to verify that in the market. If you take a look at it from the lot price, I know what that lot price is because I sell it every day. To Jeff's question about how do you value the commercial as compared to the residential, we were very conservative to say we maybe only get twice that value, but I think we get three, three and a half times that value on that. Maybe we only get twice, even if we got the same value that we get out of our residential lots for our commercial, we're still looking at hundreds of millions of dollars in that commercial portfolio. When you look at us selling TAPs, that's the market value of the TAPs. We show that TAP, how our TAPs are priced compared to surrounding jurisdictions.
When you take a look at it, our TAPs are $40,000. You get on the Parker, Castle Rock, they're $60,000. We've got petal in that, and it becomes a time element. The gap there is how does the market present value that future opportunity? What's the absorption on it? One of the things that we tried to do for all of you who've been following us for so long and know this, we tried to just impute that value through the buildout of what is in with our control, build out of Sky Ranch alone. That's $600 million of net cash to the company. That's not a 20-year horizon. That's not a 15-year horizon. That's probably a seven to 10-year horizon. That's a much easier way to present value that. The market's still y'all. Market does what the market does. My analysis is you guys are dying breeds.
Nobody, this is the 30 money managers left in the U.S. Everything else trades on a program trade, some sort of metric trade or something else. There are very, when I used to go do non-deal roadshows, I'd have 100 meetings lined up. Now you do a non-deal roadshow, you get 15. The amount of money that's either managed index-wise, I think one of our largest shareholders doesn't even know they own the shares. They don't need this. They're a Russell index.
To your point, Mark, the industry, the market is changing today. The dynamics of capital being allocated in the public markets is changing. More and more money every day is being passively run. I think we'd all agree in this room that the stock price of Pure Cycle Corporation today does not represent the intrinsic value of the company. I think a large portion of that has to do with the fact that the company does not index well. What is potentially in the control for management to get BlackRock to own 12%, to have Vanguard, to have others come in as indexers to own a majority of the shares to drive it closer to that fair value?
In today, and it's not just unique to Pure Cycle Corporation, any company, especially small, mid-small cap that does not index well, there is going to be a huge gap between the intrinsic value. I've been here several investor conferences through the years and seen the development here. You can see in the financials the value being produced in return, at least on the balance sheet, year in and year out. Yet the stock price doesn't move. It's not getting reflected. At some point, maybe the company is not appropriate to be in the public markets.
I don't disagree. I mean, when you take a look at it, and I argue this all the time, when you take a look at the balance sheet and having what's legacy assets that were acquired 30 years ago at cost at one one-hundredth of their market value, and then having a very liquid, strong, no debt balance sheet where we have a cash position of $20 million and a note receivable of $40 million. If we had a $60 million cash position, it might look different to somebody. Somebody that would screen this would screen this a little bit differently. In fact, that's what we have. We have $60 million of cash on the balance sheet. $40 million of it is invested at a 6.5% interest rate, and it's like a government bond because that's what it is. It's a government receivable.
People don't see that or they don't process that the same way as if you had cash in owned T-bills that might give you 4%. There's a little bit of that timing element on how do we receive some of those monies. The timing of some of this stuff's going to be back-ended in terms of that value as we get some of those commercial lot values. Those are all going to start to monetize. To the point is, us five years ago, where we are today compared to where we were five years ago, we were making $3 million a year five years ago. I'm making $30 million a year. 10x. What's our share price? Exactly the same. Here, I'm a great salesman five years ago, and I suck at it today. More of the market just doesn't get it.
You know, I think, Key, I'm not quoting this, but I think Key allows half a dozen slides about the projections to 2028. If you'd done those slides five years ago and then made it, made the numbers, then everybody will be standing in line to believe you when you come out with the next five years' projections. Having done those projections and this guy will make those numbers and beat them by 2028, there's credibility for the next round of slides. They're going to be humongous numbers with a track record that says we know how to do this.
I think that will help. Smart folks just say, keep your head down, do what you're doing, you're doing it right, you're seeing the playing field is before you, you're executing correctly, don't make any mistakes, and it will solve itself. I'm still waiting for it to show me a little bit of, I'm doing what I'm supposed to be doing. I want you all in the market to do what they're supposed to be doing. It will, but it's not lost on us that it's maddening that that is where we find ourselves.
Yeah, I mean, part of it is just absolute market capitalization, you know, and that's been chicken and egg, chicken and egg, right? We're at where we are, $50 million, $250 million. You know, some of this index inclusion starts at $500 million. Again, that's the, that's the, so you know, you're sort of dead in the water, not dead in the water, but you know, you're sort of all we are until you get to $500 million. The stock would have doubled, you know, and had momentum into 2028 or whatever. You know, suddenly the passive comes in, all this loose supply gets soaked up, all the buyers are in there buying it. You know, it could go hard the other way. You just, you know, some of a lot of these ETFs have minimum market capitalizations of $500 million.
It starts there, and we're still a little bit of a distance from that. Yeah, how do you, how do you get it? How do you double the stock so it doubles three more, you know, three more times for you? Hard question, chicken and egg. I have a follow-up question, one of Jeff's interesting questions about, it was the water per SFE math. Mm-hmm. When you say we've gone from 0.4- 0.27, you and I have talked about this, but I was maybe I'll put it out here. You know, the old math was, okay, we've got X amount of water, we can do 60,000 homes at 0.4.
If you go to 0.27, and I know the margin of safety is important and whatnot, how outlandish is it to say, we just, you know, if we went to 0.2 down the road, does that mean you could do 120,000 future caps? Or is it not that simple?
No, it is that simple.
Okay. The math, and Mark's kept it pretty conservative, I think, in the slide decks over the years, saying 60,000. If that number was accurate, now it's at 0.4, you go to 0.3, that bumps that number into the 75,000, 78,000, 80,000 homes, and then you do a $40,000 per tap, and it could be higher than that as inflation down the road. It just becomes a time value of money thing. In that projection of possibility, the value's gone up a lot just because we can tap more homes.
Has the tap fee come down proportionately as somewhat as?
No, because really the tap fee is a scarcity value. Come on. That is a market-based principle because somebody can either choose to get water service from us or not, right? Once you're connected to our system, that's not market-based, right? That's a little more, you know, that $1,500 per connection per year does not have an infinite opportunity there. We have costs, and we have, you know, sort of, it's not regulated, but there is oversight in there to make sure that our costs and our cost of selling water are in line with others in the metropolitan area. You're not going to see the revenue per customer variance like you see that in the tap fee. You can see tap fees for $20,000, and you can see tap fees for $60,000.
That just depends on somebody's portfolio, how much water they have, how much land they have, and what they want to do with that portfolio. That monthly rate's a little bit more in line. It will continue to grow because that's still the best bargain that you're ever going to have to get thousands of gallons on demand of safe, reliable, clean water. That system is still underpriced, and we'll let that environment continue to grow. It probably grows at inflation, but there are likely things that do change that metric to force conservation. That force conservation, what's that do for you? It makes your portfolio go farther. Maybe we're not serving 60,000 connections. We're serving 100,000 connections.
We've got this perpetual loop because what we're doing is we're taking water out, we're using it, and if I sell, we know that because of wintertime demands, that there's no outdoor irrigation, if you have that year-round, that customer's going to use about 0.2, 0.22 acre feet of water a year. That's our full reuse model. Our water supplies come in, they go then, we treat it, we don't discharge it, we bring it back, we store it back into our system, and then we reuse it. You sort of look at that model as, they've been doing it on the space station for a long time. Anyway, get off my soapbox on that and get down to some color and not complaining.
What about, and it just always gets talked about here and there, data center opportunity on the commercial stuff. I was just back in the Midwest and all through a community, there's a debate whether they should have data centers or not. I was in the upper Midwest, but there's an infinite amount of water. I mean, the offers on the table by whomever was behind this particular project, I don't know if it was Amazon or Microsoft or somebody else. There is this buildout. We do have excess water. Has it, not so much as anyone approached you, but have you been able to study that? Is there an opportunity to do that anywhere around us?
You know, I'd say it's big money.
It's actually shockingly big money, you know, if you can get rolling with it.
Right. That's not my sandbox.
Yeah, no, I know.
Water is, though.
Water, the crazy thing is water is such an easy component of the equation, even more than electricity. Oh, electricity is big.
Right.
I don't know if anyone has any insight here.
Honestly, their water is, I mean, it's just built in.
The truth is the water is the scarcer, is the rarer. That's what we have. I was just telling a little chat with Mark about this in the car on the way here. It's the opposite psychology of the way the company's currently gone. In other words, the way the company's grown, which is really small and really efficient, is you've got in the center and prime area of your enormous monetizable land. You're developing that land contiguous from the inside out. That is the best business model. It's the best way to make money. It's the most efficient way to make money. Data centers by contract would be outside in. In other words, you're not going to put a data center next to Sky Ranch Academy, okay? That wouldn't be very popular.
You've got an enormous amount of land where a data center could be tucked away with access to unlimited water and unlimited power that would also be doing some synergistically good things.
Mark if you say land board area or that means it's Lowry Ranch. Again, we have the water, so we'd have to, we'd be the one that's struggling with Sturdy Ranch.
Yeah, yeah. I mean, one thing that the data center isn't just a very good tenant, as you have noticed. I mean, I was sending Mark stuff this week, you know, $52 million for a year rental for one data center, and you know, in the middle of the freaking nowhere. You know, they're not, they would not only be a good tenant, though, they'd be bringing jobs, right, to the Sky Ranch community and to Denver, which Denver would be very appreciative about. Right. And you've good partners with Denver already, you know, and it's a good synergistic.
Yeah, and I do think that we set up well for that with particularly the Lowry Ranch property because it's a big contiguous parcel of property. The state land board can cut a land deal where they can be part of that action, and they can, you know, we can develop the water and this, you know, they don't have much on the sewer side, but, you know, they have heavy power at the ranch. You know, you've got major transmission lines that flow through there. They've upgraded the power because Arapahoe County wanted them to use electric rigs on Lowry Ranch rather than gas rigs. They've upgraded the power through that to make sure that they have enough power for that. They have plenty of space, and then they have a variable land deal with them on that.
All of those components should lend itself well for something like a data center. I don't know what that, you know, what that key is that unlocks that door for it. You know, does the state need to give them an incentive, a tax incentive on top of the land and top of utilities or otherwise?
Because good jobs and a big attack space.
Yeah. No, I'd love to engage, right? You know, my answer is you had me at data, right?
Maybe worth your time to go to one of these conferences or something on the data center.
Yeah, yeah, yeah.
I think it invests in the time.
Yeah, I've heard it.
Yeah, the other thing that I will highlight that I think is, you know, didn't roll out exactly as planned was our SFRs for this filing five, you know, and that was a function of what we were articulating about the building permit problem. We have 17 that were coming online in five, and we set that up to be sequential, right? Four, five, or two, eight. We got to standardize that. This is driving me nuts. You know, two, A, B, C, and D, which is our four, five, six, and seven, right? We standardized that so that they'd roll out every year, right? That didn't happen. Now we're going to end up having a bit more of a rollout where we're going to have houses that are going to get built in six before houses that are going to get built in five.
You're going to see a bunch of activity on that. It's going to come out a little bit faster, a little bit more lumpy than we would otherwise like it. It keeps Deb up at night. We're going to figure out a way that we're going to do that and make sure that, you know, we continue to roll those out. Maybe we structure those leases as, you know, what you don't want is 60 leases that mature the same month. Maybe some of them are going to be 12-month leases. Some of them are going to be 13, 14, 15, 16 so that we rotate those out, you know, to smooth out that maturity, and we've had an enormous renewal rate. We like that. We want to continue that. You can't plan on that, right?
You got to make sure that you structure this thing correctly so that, you know, I don't have 20 units coming on. I mean, if I had 200 units, 20 units are going to come up every month. Until we get to 200, let's wait till we get a certain %. I want to have 60% of my inventory maturing on the same month.
We have a question from Elliot Knight.
Elliot.
We're on mute, Elliot.
Elliot, you got to take it off of mute.
Yeah, to Greg. We can go to Greg.
Hey, hey guys.
I've got a question for both now.
Okay.
Go ahead, Elliot.
You and I have known each other since 1993.
Almost as long as my wife.
It was before you were married, because I remember when you and Sharon were married.
Yeah.
Anyway, certainly before you had your three children. Since Sky Ranch came into the picture, and we've been increasingly able to visualize the hidden values in the company, we've had discussions such as you had with the group earlier about values and when people are going to recognize that value. I've begun to think that a critical piece of the puzzle is for you to be able to acquire land and let's say be able to demonstrate that there's another Sky Ranch visible in hand.
Yep.
Now, you're not going to make the margins, I don't think, that you are on Sky Ranch. Think of what that does to allow you to monetize these, I'll call them growing water reserves as the consumption per acre lot. You get more units out of it. I think that might cause the market to wake up. We had that discussion at the luncheon meeting in New York on February 13th, which is available on the website. Much of that discussion, thanks to Jeff, was focused on what the company is worth without a second Sky Ranch. It's a big number.
Yeah.
Where do you stand? How close do you think you are to the second Sky Ranch?
Okay. Three comments on that. One, as I agree with you, it may facilitate a catalyst. Secondly, I will tell you that everyone I want to buy land for listens to our calls. I try not to be too descriptive about what it is that we're doing on our calls on a public media. Third is we already have that, for Christ's sakes. I got Lowry. You know, whether I buy the land, I've still got billions of dollars' worth of land value out there that people don't give us the credit for. That's Jeff's point. Don't screw it up. Don't get too far over your skis on that. We don't, right? We're in a position where we do have some of those. I recognize that, yes, if I were, and I'm not looking to kill it like I did with Sky Ranch. I didn't kill it with Sky Ranch.
It took a lot of courage to do Sky Ranch because at the time, the world was on fire. What I'm doing is I'm offering people what I think is even above the market for their land. Then they look at us and say, "Yeah, but, yeah, but." What you can do with that land is much different than what somebody else can. With having the water, with having the transportation, with having the infrastructure. All those things are valuable, and all those things are appropriate for a seller to take under consideration. I'd love to know, I probably have a fair understanding of half a dozen people that are the sellers that we're looking for as to what they tell me and what they believe on their value of the land and the transaction. We're fully engaged. I'm going to leave it there.
Okay, thank you.
Yep. Greg.
Hey, Mark. I recently came across a company that did a water rights transaction in Southeast Colorado. It's a public company in the oil and gas industry. It basically was the Arkansas River Valley under the Fort Lyon Canal. Are you familiar with this transaction?
I'm very familiar with the Fort Lyon Canal, but yeah, what's the name of the company?
It's Select Water. The ticker's WTTR. They spent $62 million to get a 35% stake in a water joint venture. That kind of values what they bought at over $150 million. They plan to resell the water to industrial uses and so forth. It struck me as a huge number. I started thinking, why don't you peel off some of your water rights portfolio and sell some just to get a mark and to show the public what the value of these rights are.
I'm not familiar with that transaction to the extent that you, I will look it up. If you have any information about it, I'd love to see it. I will tell you, we sell 95% of our industrial water for oil and gas to Select, who transfers it. The reason I'm inspired by you on that comment is we own 10,000 acres of mineral interest in the Fort Lyon system. If Select knows something that we don't know about oil and gas in the Arkansas and in the Fort Lyon system, that's inspiring to me. It'll be inspiring to all of us because we own a shit ton of minerals down there. We owned about 60,000 acre feet of water in the Fort Lyon system for about 10 years.
We sold that primarily to start Sky Ranch, but also because it's impossible to take water out of the Arkansas and bring it into the Platte. Select would know that. If they bought a position of water in the Arkansas, in the Fort Lyon, it's not to serve the Denver Niabrera Formation.
Right. Yeah.
That is incredible.
are more details in their investor deck. I look forward to circling back.
Yeah, I'm going to be talking to my guys at Select.
Thanks.
Yeah, that's very interesting. No, I mean, I hadn't heard that. I know a lot of people think there's water plays in the Arkansas and people have speculated on it, and we included. I lost a lot of brown hairs to owning that water down in the Arkansas for the decade that we owned it. It's a big system, different than the Platte. There's probably eight ditch systems in the Platte that control 500,000 acre ft of water, where it would take 300 ditch systems in the Platte to get to that same number. They're very, very big systems. We went after the Fort Lyon because it's the largest ditch system in the state of Colorado. It's an interesting play, Greg. I'm going to look into that.
Yeah, Mark. I was kind of probing with him as to his ability to move that water across state boundaries. Is there the legality? He was somewhat cryptic on that. I was just curious as to, I know that New Mexico is being restrictive on fresh water and that there's a part of that Permian Basin that is in need of some water and everything.
Yeah, I mean, if he told you he was going to buy that water and ship it out to New Mexico or Texas, I would short Select.
Yeah, okay.
That's what is not going to happen.
Not going to. That's what I figured. All right, thanks.
All right. We're coming up on what we had as kind of our reserve time slot here. Thank you all for your continued confidence in your invested capital. We really do believe we have a value proposition. Even more importantly, I think we try to be good stewards of your invested capital. I know it can go faster, it can go more aggressive, and it can go a hundred different ways. We try and balance that all out to make sure that what we do is make good decisions. I've got a strength of a terrific team behind me, not only at the management level, but all the way down to the guys that run the excavators and the loaders and dig ditches and fix our cars. They're a great group to work with.
My talent at the board level, our talent, our collective talent at the board level is unparalleled for a company our size. I'd say it's unparalleled for any company, but they are a tremendous support and resource to me. They are not lip service. Let me tell you, I end up having to beg for my. No, I don't, but I mean, I take it that seriously to make sure that they're well informed so that their guidance and their advice is leaning on their expertise and their experiences through their careers. It's a great relationship for how the company does do what it is that we do. Thank you for our board. Thank you for our management. Thank you for all of your investors. We look forward to catching you up with our year-end results and moving forward with the buildout. I'm going to close with that.
Thank you all.
Thanks, Mark.
Thank you. Thanks all.
Thank you.