Greetings. Welcome to the Pure Cycle Corporation third quarter 2021 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mark Harding, President and CEO of Pure Cycle. Thank you. You may begin.
Thank you, Hilary. I'd like to welcome you all to our third quarter earnings call. For those of you that have access, you can jump onto our website, and on the landing page, you can join the conference through a live slide deck that I have that will accompany this presentation. If you go to purecyclewater.com and on the landing page, just click that join conference in progress, that'll allow you to kind of flow along with the presentation. As usual, first slide will be our safe harbor statement, which states that statements that are not historical facts contained or incorporated by reference in this presentation are forward-looking statements. I'm sure you're all familiar with forward-looking statements. What I'll do is I'll kind of provide a brief overview. I'll try and be cursory about that.
I know many of you are familiar with the company, but also for those of you who are new to the company, to give you a kind of a overview of what it is that we're doing and where we generate our revenues from. We have three unique business segments that are all kind of underpinned on our utilities. At a DNA level, we're a water and wastewater resource development company. We own a portfolio of water rights here in the Denver metropolitan area of Colorado, where owning water is a unique asset. You can own water as a severable property right asset. If you take a look at our portfolio, we can serve about 60,000 connections, and we reference our connections based on a single family equivalency connection.
In addition to our water and wastewater activities, we also have land development, where we are a master plan developer, and we have about 1,000 acres on the I-70 corridor in one of the most attractive development corridors in the Denver metropolitan area and are developing a full master plan of residential product as well as commercial and retail and light industrial spaces. I'll talk a little bit more about that. More recently, into the single-family rental segment, where we're actually contracting with others to build homes that we will actually maintain in inventory and be able to leverage some of the equity value that we've developed, not only in the water arena, but also in the land side. We'll talk a little bit more about that as well. I want to kind of highlight our new website. It has a tremendous amount of information.
If you're new to the website, certainly come back and visit us and drill down on all the different layers of it, because it contains a tremendous amount of information and very multimedia formatted, where we're able to kind of give you the benefit of some of our current activity. We update some video links of some of our development activity, have some podcasts on there. It's a wealth of information, not only for those that are new to the company, but also those that are familiar with the company to get updates on a more real-time basis. We're thrilled to be able to present that to you all. Let's talk a little bit about our water utility segment. As I mentioned, we have a portfolio of water, and we really go cradle to grave with that.
We own the water rights, we develop the wells and the surface water diversion facilities. We treat that water. It goes into our distribution system to deliver that to our customers who use that. They return that water to us as wastewater. We collect that wastewater. We run that through our water reclamation facility, and we have complete reuse of that water supply. We're using and reusing that water supply through its extinction. We're reusing that water supply for outdoor irrigation demands as well as our industrial customers. We have the opportunity to kind of reuse that very precious resource. We collect two fee instruments for this. A 1-time connection fee, which is something we refer to as our tap fees. Those have grown over the years. We're currently at about $32,000 per connection.
This will give you a little bit of the math on it. If you take a look at the 60,000 connections, that's about $2 billion worth of top-line revenue, and really it's about a 50% margin business. We use half of that money to build all the brick and mortar that delivers all of the infrastructure to our customers. Then you have your customer that delivers water and wastewater on a monthly basis. That generates about $1,500 per connection per year. At build-out of the 60,000 connections, that's about a $90 million year-over-year business for us, and that's about another 50% margin business. We do operate and maintain that and make sure that we're continuing to deliver high-quality water to our customers. A little bit of information about some of the metrics that we have on our utility assets.
Wells and the water rights themselves and pipe and water reclamation facilities. If I take a look at kind of the customer growth in our customers, we're serving close to about 1,000 connections. We continue to grow our customers each month organically from what we have at Sky Ranch as well as our other service area down at Wild Pointe. This really just kind of shows the growth of what we have in the Sky Ranch community itself of our 5,000 connections. As I mentioned earlier, we have capacity of up to 60,000 connections. Taking a look at some of the bulk assets that we have, we continue to grow our assets.
We're up at about $55.1 million in net water assets, our revenue growth each through the years and organically growing those from our Sky Ranch and Wild Pointe projects. Moving on to our land development segment. We have about 930 acres that can accommodate 3,400 residential lots, that'll be a mix of lots. It'll be a full range of single-family detached as well as paired product. We have duplexes, some higher density multi-family product, as well as some townhome product for us. We have a cadre of price points for customers out at Sky Ranch, we're very proud of Sky Ranch. It's become one of the fastest-growing, one of the most affordable master-planned communities in the Denver market.
We're happy to continue that theme and really working with our home builder customers to deliver a high-quality, affordable housing product. We also have an ideal location along the interstate, so that accommodates some commercial development for that. We have about 2 million sq ft of retail, commercial, industrial space up there. If you convert that out on a typical basis, that's about another 1,600 connections. Just where we're located, just directly south of the airport. Just some bullet points on progress of our first phase. This kind of gives you an aerial. We've got a little more than 330 residents out there. We metric that out on, we've delivered 446 connection fees. Typically, those are delivered at the building permit phase. It's almost nearly sold out.
We probably got about another 40 homes left or 40 lots that are yet to be sold out there. It's really exceeded expectations, both from the company standpoint as well as each of our individual home builders out there. They're about two years ahead of schedule on delivering all those finished lots. In addition to the revenue that we received, we received about $36.7 million from our lot fee revenues, and we still have a bit more to collect on that. In addition to the lot revenues, we get the revenues from the public improvements that we create out there. Those are reimbursed to us by the local municipality that's out there. We had about $30 million-$31 million of reimbursables.
We've gotten about $10.5 million of that back, but have been able to record the other $20 million due to the acceleration of the development of phase I, a little bit higher assessed value to the community, and then also additional mills that we have from future filings. All of that, we're executing very well and really enjoy working with our home builder partners. Taking a look at our phase II. We broke ground on that in February of this year, and we'll deliver that additional 900 lots in four subsequent phases. If you look at these, they quadrant themselves out very nicely in terms of the main thoroughfare streets there, but we're delivering sort of this first quadrant of about 229 lots. Finished up the grading of that. All of our dirt work's done.
We have the utility crews in there working on the water, sewer, and storm water systems associated with that. Hope to be delivering some lots to each of our home builders later this year so that they can continue that construction through the winter and get their model homes up for the selling season of next year. If you take a look at all 900 lots in here, that was estimated to generate about $72.6 million of that. Of that $72.6 million, we'll get about another $48 million of that in reimbursables. Again, the utility fees of about $21.5 million in the water tap fees. This will drill down a little bit more specifically on the gross numbers for Sky Ranch, and we really carved it up in terms of here are net experiences on filing one. That shows you where we're at.
We invested about $35.8 million in between the lot sales and the reimbursables that we are getting. We're currently showing about just the $10.5 million of those reimbursables and that $47.4 million, which also includes the tap fee revenue. We still have about $21 million net to receive on that. You take a look at the filing two metrics on that. Again, we show that net of the reimbursables in there. The timing of those reimbursables will be dependent on a financing metric of the local municipality. It also casts it out on the build out and the remaining 3,600 lots and how we forecast the remaining balance of the project. Tremendous opportunity for us.
We have very good success with delivery of this infrastructure and ultimately the finished lots for our home builder customers. Talk a little bit about this new segment that we have, the single-family rental segment, where we're actually going to hold in inventory certain lots, and kind of an understanding of why we think that's a good business. If you take a look at the housing market in general, there's a tremendous appreciation of houses. These are some metrics that come out of Colorado, but we've had nearly a 26% increase in average single-family home prices over the period of time which we've got started on the Sky Ranch project, moving from what was really around $350,000 per home to probably close to $480,000, $500,000 per home. Significant growth rates. We're seeing about 6% annual growth rate there. Just kind of the competitiveness of the market.
It's very competitive to get these homes. The supply does not come close to meeting the demand. You can kind of see weeks on inventory from even just year-over-year, May from 2020 to May 2021, we're moving from nine weeks of inventory to two weeks of inventory. The housing market's still very robust, particularly in our market segment, in the starter home market segment. One of the things that we like about that is that we find Denver to be a very good place to be able to deliver a single-family rental market where families can come in, and if they're not situated to buy just yet, they can certainly find a very nice community where they can rent a home until they are interested to buy.
These are some of the metrics about kind of where we position ourselves with other master plan communities in the metro area. We think that with our ideal location, access to transportation, the ability to deliver the amenities. We have a new charter school that was approved this year, so that will be under construction later this year for delivery in school year next year. We'll have neighborhood schools, parks, open space, and a whole network of trails that run throughout the community. Taking a look at some of the numbers of this single-family rental. We are forecasting rental income on average of about $2,800 a month per unit. If you take a look at how this would accrue to us, we're able to get access to very inexpensive money, mortgage type money. It's not a mortgage.
Companies can't have a mortgage, but it's mortgage type money at about 3.75 from our lending institution. Not only do we have the renters covering our cost of debt service on that, but we also generate a margin on that. It becomes accretive to both the balance sheet as well as the income statement. It really does accelerate kind of our recurable income. Instead of us just generating that $1,500 per connection per home per year, this really does add maybe another $15,000 in free cash flow and $33,000 in total cash flow. It's a great opportunity for us to really carry forward some of that equity value from collecting that land at the height of the Great Recession and being able to capitalize on the appreciation of the community that we're creating. A little bit more metrics on that.
What we're looking at is we'll finance the vertical cost of that. This is kind of a typical assumption of how that's going to look for us, where we'll have a finance cost of about $317,000 of a $450,000 market cap or market value of the home. Each year, we are estimating maybe 4% to even 6% appreciation on that $450,000 asset. We're financing that $317,000 of that at 3.75%. We've got a natural arbitrage on the market appreciation of the value of the asset, together with the added incremental cost of going vertical on it. Just to kind of give you a view of our three units that we've got under construction for phase I. We did have three available lots.
We're well on our way to completing these units and hope to have those completed by September, and they'll have renters in there in September, October timeframe. We've got a few lots reserved in our second phase that we will hold out for more BTR units that'll be interspersed within the community and our home builder partner products where we're looking to engage with them as they're on that block. They can build those typical homes that they're building next door to us, and they can build those homes for our inventory account. Then we have a block of about 60 homes that are contiguous that we'll look to continue this model and add to the portfolio. A little bit of touch on the oil and gas. Certainly $70 oil helps a lot more than $40 oil.
We do have operators that are drilling in the field. We've got one rig that's drilling continuously, and then a 2nd operator will bring in a rig for some wells that'll be a little bit south of our service area, which will be kind of a new portion of the field that they'll be exploring. This is an area where we deliver an awful lot of water to these operators in a very short timeframe. We are seeing kind of an annual creep in terms of the amount of water that they're using just because of technology and enhancements to the fracking technology. Currently, we generate about $250,000 per well for water, and we're seeing kind of a progression of the field. As opposed to it being one or two wells per pad site, this year we're seeing four and six wells per pad site.
Next year, that may increase to anywhere from 10 to 12 wells per pad site. That continues to be an opportunity for us. It's very incremental in terms of our ability to maintain service for this. We enjoy that when they're there, but don't have a lot of fixed costs when that weakens. Continue to watch that and see how that progresses over the years as the oil market continues to strengthen. For our nine months ended, I will just be very summary in our financial presentation here. We had hoped to have a more traditional presentation on each of our individual metrics, but we did find an error in one of our spreadsheets just at the 11th hour on how our reimbursables were going, so we had to redo those numbers.
You'll see those numbers coming out later this week, sometime towards the end of the week. What I'll do is I'll update this slide presentation so you can see those traditional metrics that we have. In general, we've got about $12 million in revenue for the nine months ended. Our gross margins are about $7 million, and net income up to about $18 million. One of the key areas of that was that we were able to recognize the reimbursement opportunity from the phase I. We had that add in our Q2. We have about, if you take a look at some of these metrics in here, about $36.7 million in lot revenues from phase I. We're almost through the tap fees, so we've got a few more tap fees left.
That'll get us up to about $14.5 million, and we're currently at $13.3 million. Of the reimbursables, of the $29 million in reimbursables, we've got about $10.5 million of those already delivered to us. We get a project management fee on top of the reimbursables for the public improvement. That give you a summary overview of that, but then look for the actual filing of the Q later this week. Just want to talk a little bit about our leadership. Very strong board of directors that have very relevant disciplines that they bring to the board and to the company. We've got strong expertise in land development, financial management, commercial development, water law and just investor shareholder relations in general. We continue to rely on their stewardship.
A little bit more about the continued stock metrics, because we're continuing to get the word out. I think people are continuing to see our results that we post quarter-over-quarter, year-over-year. That's helping significantly, not only in terms of price, but also in volume. We like to continue to provide liquidity to the marketplace. With that, those are my prepared remarks. Let me turn it over to our moderator and see if we have some questions that I can drill down and provide a little color.
Thank you, Mark. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Okay, our first question is from Bill Miller, shareholder. Please state your question.
Mark, hi.
Hi, Bill.
Delighted to hear only good news, but I'm wondering about the three-year view and wondering where you're going to get your next land for your apartment rentals or your house rentals, because that seems to be by far the most profitable business you have. I wonder how big a % you're planning to make it and where you're going to get the land for your next act.
That's a great question. As I've mentioned previously, we do have our nets out for additional land acquisitions and we have a tremendous amount of land that surrounds us that is available. It's ideally positioned because I think it's kind of consolidated. You're not dealing with 10 acre assemblages here. We have a lot of land that's around us that would be a half section, a section, or large assemblages even of that. Really, that's kind of where we're looking for our opportunities. We are cognizant that it's a red hot market and expectations are pretty darn high, and we want to make sure that it works for us as well as them. Not to be overly analytic in our acquisitions.
What we want to try to do is, I think we have the ability to pay a little bit more than, say, anybody else because we're bringing the water to the table. In truth, a lot of these property owners also know that we're bringing water to the table, and they want a little bit more of the benefit of the water than they actually have. We're a little patient on some of that, but we do have some very specific targets in mind, and that's where we're focusing in on that kind of segment. To your other question about the BTRs and kind of the opportunities that that does provide us and the leverage that we create on some equity value there. I will say that the true value of that for the company is really in doing both the land and the utilities, right?
There's a lot of companies that are going after this single-family rental market segment. Very big companies. If you're talking about the American Homes for Rent or BlackRock or any of the managed portfolios that are really going after this. They're actually just buying it in the market and really don't have any of that metric margins in there other than being able to capitalize on inexpensive mortgage money. In addition to us being able to do that, we have the equity value that we have on the land and the water. It gives us a tremendous value. I don't know that we would actually be out there doing it if we weren't doing the land and the water, but boy, that certainly gives us a compelling opportunity.
Will that be the biggest part of your business in five years, that recurring revenue?
We'll wait to see. It certainly will have some of that because it's such a large component of the residual recurring revenue, that certainly will be a component of it. I still think that the water utility and the land segment give us some big compelling projects that have decades worth of growth potential. I think you're going to like how the BTR model generates a lot of cash flows for us to flex into things like dividends, flex into if the market doesn't quite understand what the value of the stock is, that we can redeploy some of that revenue that way as well.
Great. I look forward to it.
Thank you. Thanks for your continued support.
Bye.
Once again, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we call for additional questions. Mark, it appears we have no more questions at this time. I will now turn the call back over to you for closing remarks.
You bet. To the extent that you were not able, from a technology standpoint, to queue in to ask a question, I do apologize for the brevity of the financial presentation. We do have the metrics out there that kind of give you a quarter-over-quarter results. Then, with the details on each of the segments, you'll see some of that information later. I'll refresh the presentation, and certainly, if you have questions as it relates to some of that detail, don't hesitate to give me a call. I do want to make sure that we have that quarterly analytics that I know a lot of you have got your model set up for, so we can keep that information rolling for you so that you can continue to trend us on that.
We do have an investor day coming up. We have a very nice RSVP for the investor day. I welcome all of those of you that are going to be joining us next week to come out and kick the tires and not only see phase I, but it gives you real-time opportunity to see how some of this horizontal infrastructure sinks in and coordinates in. It really does give you a feel for the synergies. The synergies of the utilities together with the horizontals. Then, it gives me ability to highlight where some of these reimbursables come from and how that kind of factors into our overall unit pricing in terms of our lots. Then an opportunity to tour our water reclamation facility that we're very proud of because we're recycling and reusing 100% of our water supply.
In addition to us having a very valuable portfolio, we use and reuse that portfolio. We'll welcome those of you, and if you find yourself traveling through the area and it's not an investor day, certainly reach out and give me a holler. I'd love to give you a tour. With that, I will close that out and look forward to speaking with you all again soon.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.