Q1 2024 Pure Cycle Corp Earnings Call
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Greetings welcome to the pure cycle Corporation Q1, 2024 earnings call. At this time all participants are in a listen only mode. A 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 you may begin.
Mark W. Harding: Thank you Lisa and welcome and good morning, Bonnie morning here in Denver.
Speaker Change: Happy to.
Speaker Change: Give you a overview of our Q1 2024 earnings call. We do have a slide deck for this call. Its on our website. If you go there you can click on it on the front page or go to the presentations page and you can see it there. So if you want to follow along with the deck I will try and note the transitions as I walk through the.
Presentation with me today is our CFO, Mark is alley, and our controllers arena and again.
Speaker Change: So let's get started first.
Mark W. Harding: First slide second slide actually.
Mark W. Harding: He is our forward looking statements.
Mark W. Harding: That most of you are familiar with statements that are not historical facts contained or incorporated by reference in this presentation are forward looking statements and I think you all kind of understand we'll get the lawyers out of the room and get onto a.
Mark W. Harding: The presentation.
Mark W. Harding: So we'll talk a little bit about kind of the business model and our strategies take a look at our scorecard for Q1.
Mark W. Harding: Really drill down into some of the specifics about our assets and the opportunities in the kantar.
Mark W. Harding: Continuing strength that we have within our assets and then a little bit on the updates.
Mark W. Harding: Over to slide four really want it.
We continue to benefit from a very strong and experienced leadership team and our board of directors to maximize.
Mark W. Harding: Our highly appreciated assets through our complementary business segments in each of these business segments really do relate to each other and by that what I mean is as we make an investment in one of the business segments, we benefit each of the other business segments. So we're very proud of having these vertical integration within these business segments.
Mark W. Harding: Opportunities that present for us.
Mark W. Harding: Here's our key management team and we have.
Mark W. Harding: A tremendous amount of experience within the firm not only.
Mark W. Harding: Within the various disciplines, but across the leadership boards. So repeatedly do benefit from a very strong and diversified and tenured management team.
Three been principal business segments as most of you know we have our water and wastewater.
Mark W. Harding: Segment, we have our land development segment and our single family rental segment, we talked a lot about that complementary nature.
Mark W. Harding: Each of them do relate to each other we wouldn't be doing our land development. If we werent in the water utility side, we wouldn't be doing the single family rentals, if we werent at the land development segment of that and so by us improving our water system that improves our land development by us improving our horizontal <unk>.
Mark W. Harding: <unk> of our Master plan communities that provides us opportunities for our single family rentals and continuing to appreciate the curb appeal for each of the homes that.
Mark W. Harding: We or our builder partners.
Mark W. Harding: Our developing in our communities.
Mark W. Harding: So you can look at about our asset portfolios and this is kind of divided up and segregate it into our each of our segments and they continue to grow in value not only in the direct investments, but each of these assets continue to appreciate.
Mark W. Harding: Their fair market value through each of the segments.
Mark W. Harding: Water wastewater segment holds more than $2 billion in top line revenue.
Mark W. Harding: We have the ability to provide 60000 single family connections with our water portfolio.
Mark W. Harding: Have an existing system thats built that can deliver around 2500 connections and I think we have about 3500 total connections in there. So we have a little bit of pedal left in.
Mark W. Harding: Developing a more connections for what we're doing on the water and wastewater side in Orlando's element segment. The Sky Ranch project holds more than $500 million in value will talk a little bit more about that in the presentation, but we have very low basis in each of these segments. We have about a $4 5 million dollar basis in the.
Mark W. Harding: The land development side, mostly because we bought it right but.
Mark W. Harding: We continue to improve the value of that and you see that through the direct investments on the balance sheet.
And then not last but not least is our single family rental segment. Each home that we complete and deliver holds approximately 30% equity value and thats because we roll forward the appreciation of the value of the land a lot itself as well as the water connections water and wastewater connections there. So what you see.
He is we have a recorded book value of about $5 4 million, but we have about $2 million of equity in that segment and it really comes from each unit that we do that we deliver on that and so we get fair market value rents for those and that covers not only the debt service on that but provides us margins on it so that's another.
Mark W. Harding: Summary of the asset values.
Mark W. Harding: We will take a look at our scorecard see how we did in the first quarter. We had an excellent first quarter take a look at slide nine delivered very strong revenues as well as impressive gross margins that are a little over 60% on that about 62%, but Q1 revenues are 5.3, almost $5 4 million.
Mark W. Harding: <unk>.
Mark W. Harding: With a very high margin on those are about $3 3 million. So if you take a look at that that's a strong quarter for us even historically when you look at the last four years of our performance on that.
Mark W. Harding: Taking a look at slide 10, the net income on that too.
Two little over $2 million in about nine <unk>.
Mark W. Harding: Our share on earnings per share. So we carry through to our net income in our combined segments are delivering over 38% profit margin. So very healthy results from our assets and they continue to demonstrate their strong equity and strong appreciation value for our shareholders.
Mark W. Harding: If you take a look and break that out by each individual segments. So if you take a look and drill down on that are really looking at where the revenues come from.
Mark W. Harding: Little bit weighted in the water wastewater side I think that the strength in the oil and gas deliveries will buoy that a little bit but.
Mark W. Harding: It's almost split between our water segment in our land development segment, our single family rental segment still coming on early we have about 14 units on that but if you take a look at our gross margins in each of these segments again.
Mark W. Harding: It really demonstrates the value that we have and really the opportunity to.
Mark W. Harding: And turn those into margins for our shareholders set of growth gross profits. There are also illustrated on the graph there and again you start to see the single family rentals getting in the game here, but they are still pretty early.
Moving over to slide 12, if you take a look at kind of water deliveries and where the water or were those water segment revenues are coming from they come from really three principal areas of tap fees, which are that large capital fee that we get and we add a few chassis and theyre inbev wouldn't say that it was an extraordinary quarter.
<unk> for tap fees, mostly because we're closing out and finishing up the <unk>.
Mark W. Harding: The first phase.
Mark W. Harding: Phase Iia the first phase of our second phase so that sounds terrible we've got to find a better way to to identify each of these phases.
Mark W. Harding: But youll see Theres, a healthy segment in there for oil and gas this quarter and the outlook for that continues to look robust and strong and then we continue to grow our customer growth for our recurring customers and so youre going to see that continue to slide into a meaningful component of the business, but we continue to deliver.
Mark W. Harding: For water and wastewater for our 13 closer to 1400 customer connections each month.
Mark W. Harding: Moving on to slide 13.
Mark W. Harding: That would kind of highlight the oil and gas operations on this and so we've got really what was a record quarter for oil and gas deliveries. If you take a look at that we almost at $2 million and just the quarter for oil and gas deliveries and really that outlook continues to look strong the operators that are drilling in this.
Mark W. Harding: They have a dedicated rig that rig can drill maybe a little bit more than 20 wells per year, because they're really at pad site development. So a lot of these.
Mark W. Harding: A lot of these pads are going to hold up to 16 wells per pad and then.
Mark W. Harding: They will drill those they'll move on and then the Fracs will follow that but.
Mark W. Harding: Were still averaging.
Mark W. Harding: A bit more than $250000 per well not necessarily per pad per well. So these are these pad sites with the large number of wells do do consume quite a bit of water in the footprint for this is very large so they are drilling in Adams and Arapahoe County is really right on top of our server.
Mark W. Harding: This area.
Taking a little bit about our land development segment.
Mark W. Harding: Yes.
Mark W. Harding: So with the.
Mark W. Harding: Phase Iia nearly complete so we illustrate this 5% complete basis and that kind of smoothed out the revenues. The revenues don't always match the timing of the cash flows and as you've heard me speak in the past, we try and get our cash flows from our builders. So that they are able to help us with.
Mark W. Harding: Some of that very expensive horizontal costs and at the same time, we don't incur or we don't burden them with a large inventory of that cost upfront. So it's more of a as close to a real time delivery of the revenues to the improvements as you can get within this business and so what we see here as we're closing out of there.
Mark W. Harding: <unk> two <unk>, which is the first 200 and call. It 230 lots in there we have a little bit of landscaping left and it's a little bit difficult to do that when its below zero, but will catch up on that towards the spring and the summer months and punch out that one.
Mark W. Harding: We've got most of the wet utilities done on phase II, B, and we should be starting to deliver lots in this quarter Q2, and then through the rest of the year. So we will deliver a phase all of the phase <unk> lots.
Mark W. Harding: In this fiscal year, and then phase two C. We've actually started so that we're going to overlap that with phase two be mostly because of.
Mark W. Harding: The continued strength of our particular product in our segment, which is an entry level product here in the Denver market and so youre going to continue to see us overlap some of those.
Mark W. Harding: Development phases in each of these phases continue to get their progress based on a total delivery of the single family lots and then we still have phase II D, which is a component of.
The second phase of the 860 lots down there and we're looking to start that sometime next year as well, where we can continue to make sure that we're delivering all of those lots concurrently with the demand.
Speaker Change: I'm going to move into the single family segment here and I'm going to turn the mic over to Mark. These alley and have him give you a kind of an update and an overview of our strategy with the single family rental so Mark I'll, let you take it.
Speaker Change: Thank you Mark and good morning, everyone.
Mark W. Harding: We continue to see high demand in our single family rental units and we're encouraged by the results that we've seen in the first quarter.
Mark W. Harding: As you can see from the chart, we started as a proof of concept just a few quarters back in in Q1 of 'twenty four we're starting to see the compounding effects on revenue as we scale to a larger number of completed units.
Mark W. Harding: We'd also like to highlight that the single family rental unit segment complements our other segments by utilizing our portfolio of assets.
Each completed unit adds an average of 150000 equity by Caf capitalizing on our well priced lots in our water availability in this competitive housing market.
Mark W. Harding: Yeah.
Mark W. Harding: This table.
Mark W. Harding: Table takes what we've built to date and our phase one proof of concept as well as what we completed in phase Iia and project out where we see this same segment going as we continue to develop in phase <unk>.
Mark W. Harding: The rest of the phase two.
Mark W. Harding: Not not only are we able to control our building costs because of our position in land development and water.
Mark W. Harding: But we're able to do also able to control all of our operating costs as a by maintaining attaining these units in house.
Mark W. Harding: <unk> able to keep our operating costs down and really utilize this portfolio of assets.
Mark W. Harding: The next chart is really a graphical form of the previous table. It charts out where we are projecting the reoccurring revenue from our rental income could be as we continue to build out phase II.
We also are projecting our increase in asset value with the equity that we add in each of the units that we bring online.
Mark W. Harding: And with that I'd like to turn the call back over to Mark Harding to discuss the portfolio of assets for further great. Thanks.
Mark W. Harding: And so as Mark highlighted one of the key things is and it really is indicative of all of our assets as the value of our assets. The difference between what we carry the assets for on the balance sheet together with a fair market value of those assets in and Thats why we like each of these segments whether that segment is.
Mark W. Harding: The water utility segment, whether that's our land development segment or whether that's our single family rental segments.
Mark W. Harding: That does allow us as it allows us to punch a little bit above our weight on income relative to what the book value of the assets are and so that's a story that wed like to kind of continue to emphasize for the market. So that you all get an understanding of why it is that we're doing as well as we're doing with each of these assets it isn't as though the operating rig.
Mark W. Harding: <unk> R R.
Mark W. Harding: <unk> truly extraordinary for a one time basis that really indicative of the appreciation of the asset value. So how I want to highlight that a little bit as talk about that in the stored value that we have not only in the.
Mark W. Harding: The asset themselves, but also the capacity for those assets to continue to generate revenue.
Mark W. Harding: And so when you look at that you look at the water and the wastewater side, there's tremendous value as you all know in the water rights portfolio that we have we have.
Mark W. Harding: About 1300, 1300 60 units of a 60000 connection capacity you do the math on that that's about 2% of the capacity that the portfolio can generate so we have a tremendous stored value in that if you take a look at the land of element Sky Ranch.
Mark W. Harding: Is really starting to hit its stride, but still having delivered up through just that phase Iia, we're really only about 14% of the total capacity of Sky Ranch being developed and then our single family rentals, while we continue to deliver and expand that portfolio, we're still only about 7%.
Mark W. Harding: Towards our goal and our goal being closer to 200.
Mark W. Harding: Planned units in the community.
If I take a look at how we train graphically illustrate that the water segment has two <unk>.
Mark W. Harding: Two revenue sources, we have the recurring revenue, which is really just water deliveries and we're delivering them on a monthly basis to our residential customers as well as on a monthly basis to our oil and gas customers and we did have a great a record quarter for oil and gas customers, but still we used to have.
Mark W. Harding: Plenty of pedal left on that if you take a look at annualized that 15% of our capacity over the year really thats still only about 60% of our transmission capacity. So we continue to look forward to meeting the demands of our residential customers as though grow as that grows month over month by delivery.
Mark W. Harding: New homes at Sky Ranch, and that wild Pointe and commercial customers as well, but also to continuing to serve the oil and gas community and their portfolio needs.
Mark W. Harding: Taking a look at the the.
Mark W. Harding: Capital fees, the water tap fees.
Mark W. Harding: Thats kind of illustrates where are cap. These are today those continue to grow that's really.
Mark W. Harding: An illustration of the scarcity value of water and the increasing cost is we have to reach farther and farther out to deliver new water supply.
Mark W. Harding: But really we're only about 2% of the capacity of our portfolio of $13 36.
Mark W. Harding: The additional capacity that we have with that transmission capacity can serve up to 2500 connections. So we have the ability to get some additional connections without further investment but we.
Mark W. Harding: You need to invest in that that delivery segments. So that we can keep ahead of the demands for our oil and gas customers and make sure that we can meet their needs.
Mark W. Harding: This is a bit of an illustration on the land development side and if you take a look at where our opportunities are for the full build out of Sky Ranch, that's closer to $580 million we.
Mark W. Harding: Monetize a portion of that we have.
Mark W. Harding: Approximately six 700 and.
Mark W. Harding: One key five ish units that are built that's about 14% of that capacity.
Mark W. Harding: The phase two will carry us through the next 650 lots and then we have still another 800 residential connections and then our commercial connections and that's still the most valuable component of the portfolio and while we are still a little bit early on the commercial side, we still continue to prepare and make sure that we have a good structure.
Mark W. Harding: For delivery of value for those commercial lots.
Mark W. Harding: Bids on the single family rentals, if we're targeting our 200 units what that does for us on annual rent.
Mark W. Harding: Annual rental revenues, so that's a little over $6 million and rental revenues at that full figure at about $2800 per connection per unit and so you'll continue to see us add value there and we really add both book value we add.
Mark W. Harding: Asset value and then we also add a little a lot of strength to our P&L. So that youll continue to see that.
Mark W. Harding: That investment.
Mark W. Harding: So what are our key takeaways as you've heard us talk from time to time executing our strategic approach to growing the water utilities together with land development single family rentals maximizes the returns for US three years to come and it also not only generate significant asset value, but significant recurring revenues at very high gross margin. So.
Mark W. Harding: Take a look at really the strength of these assets and where we're continuing to build on those we continued to deliver significant and strong results.
Mark W. Harding: We continue to invest in each segment as they continue to deliver those returns and we continue to pursue acquisitions. Those are continuing we still look for adding to the portfolio whether thats in the water.
Mark W. Harding: Water rights areas and looking for us to add both infrastructure as well as new water rights to the portfolio in strategic areas, where those complement our existing investments.
Mark W. Harding: And then finally on 26, we continue to invest in ourselves we continue to be in the market purchasing shares with a disciplined strategy.
Mark W. Harding: We set those benchmarks to our traders.
Mark W. Harding: They are in the market, where it meets our requirements and it's a mystery to me as to how it trades.
Mark W. Harding: And it also is a mystery to me is how are traders trade those shares but we give those.
Mark W. Harding: There are certain rules and conditions that we can repurchase shares for but we continue to be in that market and really reinvest in ourselves.
Mark W. Harding: So as.
Mark W. Harding: This will kind of close out the presentation with the list of our board of directors, we continued to benefit and rely on their wisdom their experience and their strength in guiding.
Mark W. Harding: Our principal business interests of the shout out to those folks who continue to be overworked and underpaid and we are grateful for their service so with that I'm going to.
Mark W. Harding: Turn it back over to Hollie and see if you all have any questions that we can drill down on and give you a little bit more highlights.
Hollie: Certainly 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.
Hollie: Information tone will indicate your line is in the question queue.
Hollie: Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker Change: Your first question for today is coming from Bill Cunningham. Please announce your affiliation and pose your question.
Bill Cunningham: Hi, This is bill.
Bill Cunningham: Bill Cunningham I'm, a private investor and my first question has to do with your fracking revenue Mark which was very good this quarter I saw a $2 million on that which means that 250000 per frac is you showed us in your presentation means.
Bill Cunningham: Eight wells last quarter.
Bill Cunningham: I remember that there is a 16.
Bill Cunningham: Well fight right near your office that you were planning on starting in the fall and in fact, it started so I'm wondering about the other eight.
Bill Cunningham: Wells, there and whether there are fracking through the winter or whether the weather is impacting that or whether you can give us any kind of general flavor or guidance on what the fracking water sales revenue might be for.
Bill Cunningham: This quarter and possibly a bit into the future.
Speaker Change: Yes, good question.
Speaker Change: I will I will tell you that those those frac crews and the drill crews by and large our Hardie Hardie guys.
Speaker Change: Women.
Speaker Change: They are out there 24, seven through the winter and being out there $24 seven over the last three days, where it hasnt gotten above zero here.
Speaker Change: As hazard pay to <unk>.
Any measure, but no they do frac.
Speaker Change: Water tends to get a little stiff at those temperatures and so they do they do actually pre heat that so they heat it coming out of the reservoir before they put it into the line then that line just is laying on the ground. So it's fully exposed and it gets snowed on and it's a.
Speaker Change: This is a complicated.
Speaker Change: Venture for that but they are flowing at quite a quite a beloved volume they're flowing as much as 4000 gallons a minute and so when it's flowing like that it has a tendency to stay liquid.
Speaker Change: Then they want to make sure that they get that continuous operation and is part of that technology of the fracking once you're in the hole you kind of have to keep through that whole. So.
Speaker Change: We are continuing to frac.
Speaker Change: As far as the.
Speaker Change: Q2 cycle.
Speaker Change: Im pretty optimistic that Q2 is going to look a lot like Q1, and Q3 and Q4 I hope we're going to look like Q1.
Speaker Change: The thing about the oil and gas companies as they pay you to be at their Beck and call, but they don't always call. So.
Speaker Change: I think that the stability of the regulations here in the Colorado market are.
Speaker Change: Our lending themselves to continued investment by oil and gas industries as well as the strength of the oil and gas market, while it isn't as good as it was at $100 a barrel I think these are these operators are very comfortable continuing to make their investments at the current rates and I wish I had an IV.
Speaker Change: What dollar number that would would would turn off or speed up but.
Speaker Change: They don't share that information other than the fact that they've given us a projection that would continue to support similar results to Q1.
Speaker Change: Well I would be thrilled with $1 million or $2 million of.
Speaker Change: Water sales to those companies and I believe civitas is your major customer or one of the major customers and they have some pretty aggressive goals on their website. So I'm also looking at that so this all looks good from my perspective, yes. They are they are and theyre not the only one but they are in.
Speaker Change: The largest one and they do they do have a number of wells drilled they've actually got.
Speaker Change: Once the pad that you referenced was right behind the office, but the other thing that we're excited about is the next pad that they're going to shift who happens to be our sky ranch pad and so theyre going to be fracking, an eight well pad site on Sky Ranch. So not only do we get a bunch of money from our Frac revenues, but youll see our oil and.
Speaker Change: Gas royalty revenue tick up because those will get completed.
Speaker Change: Are they new wells are are they re fracking of old wells.
Speaker Change: There are new wells.
Speaker Change: New World.
Speaker Change: Okay.
Speaker Change: And then I have a question on actually your development at Sky Ranch I know, you've got multiple phases going on right now, particularly to B and C.
Speaker Change: Im guessing that <unk> must be youre going full speed ahead with that.
Speaker Change: I saw that it looks like <unk> is totally sold out.
Speaker Change: Your other builders are in various stages of almost sold out so I assume some of them are chomping at the bit to be able to start selling homes in <unk> and I'm. Just wondering physically you know what the status of <unk> right now.
Speaker Change: Youre right and.
I often lament on the builders, because they're sort of a light switch of turning on and off their sales team when it doesn't quite work that way in delivering lots and so when they asked us to take a 90 day pause there between <unk> and <unk> on the start of that and now they're saying Oh.
Speaker Change: Could you, please hurry up and deliver to see.
It kind of is that hurry up and wait mode, but.
Speaker Change: It is it is.
Speaker Change: Our model and I will describe it this way our model of being able to do this on an incremental basis, where we've got the bulk of the backbone infrastructure constructed right. A lot of that is carried on our balance sheet. As you know through the Reimbursable note receivable and they are they are they are.
Speaker Change: Our deep into chomping on getting to be there and because we have some of that backbone infrastructure already done we're likely to deliver maybe a couple of dozen lots that are going to front streets that are already complete so that they can start does this winter.
Speaker Change: Timing of that is really discretionary for them because the hardest thing for them to do is get those foundations poured.
Speaker Change: Concrete doesn't do so well at these temperatures, but they do they can be optimistic about that and they can get those foundations and it's really just a day to get those things poor. They can blanket them. They can start with those foundation once they get that done they can continue to work and really all temperatures on the framing side. So.
Speaker Change: So what they really want is they want us to deliver them, even if we're not done with all of them. They can take them as we get them and so youll see some phased incremental deliveries on that on to B to C.
The best thing you can do in the winter temperature wise is the grading which is the dirt work and those guys are in those nice big yellow pieces of iron and they're moving around and accompany cozy cabin.
Speaker Change: Dig in and moving dirt and that doesn't bother them. So much so youre going to see a lot of that activity over the winter and we really did want to capitalize on that this winter. So we pulled the trigger on that one just making sure that we could do that seasonality aspect and then start.
Speaker Change: And are positioned to deliver lots and of next calendar end of this calendar year in 2024 on to see as well.
Speaker Change: Okay, that's great I assume on to be that Theres, you are probably going to be there's probably no roads paved interior, yet, but youll probably be doing some of that in the spring once the weather improves.
Speaker Change: Exactly right will be grading it will be getting it fully prepped.
Speaker Change: And then that that goes superfast, it's stunning how quickly the site goes from looking like a dirty masks to a fully.
Speaker Change: Lot driven streets curbs and gutters.
Speaker Change: But it is temperature drift, we do have to that.
Speaker Change: That's going to probably start in April time frame and hopefully finish that went up.
Speaker Change: Within a 60 day timeframe.
Speaker Change: Great. Thank you very much mark thank.
Mark W. Harding: Thank you Bill.
Yes.
Speaker Change: Once again is there are any questions. Please press star one.
Speaker Change: Your next question for today is coming from Jeffrey Scott with Scott asset management.
Geoffrey Scott: Good morning, Mark how are you.
Geoffrey Scott: Hey, Jeff how are you very.
Speaker Change: Very well thank you.
Speaker Change: Yeah.
Jeff: What is the timing on commercial development, we've talked about since we're awful long time and it's always.
Out there in the future.
But we don't know when.
Can you give us some color on on.
Jeff: Current plans and projections. Thanks.
Speaker Change: You bet, you bet and that is of high value component for us and we continue to talk with commercial developers and I would say that there is a little more interest on the industrial side necessarily than the.
Speaker Change: The retail or the big box stores.
<unk>.
Speaker Change: It really is.
Speaker Change: A function of the number of rooftops and while we've delivered 700 rooftops that are captive market for them.
Speaker Change: I think theyre looking at.
Speaker Change: Closer to a couple of thousand rooftops and there's two things that would be <unk>.
Speaker Change: Adding to that connectivity one of them is as we've talked about in the past is the interchange we've got that.
Speaker Change: We're going to be building, a new interchange right at the highway there and we've got some mill Levy set aside so that we can bond that out we're in the middle of the <unk> hundred one which is the permitting process with <unk> to get that done we should have that done towards the end of this year.
Speaker Change: The second component of that is extension of one of the roadways.
Speaker Change: One of our major Arterials as sixth Avenue.
Speaker Change: And have that extend west to connect up to another north south arterial to add that link into some of the development. That's in the city of Aurora directly south of that.
That particular roadway is the responsibility of the developer south of us.
Speaker Change: Theyre looking at starting that that corner of activity sometime this year and so that connectivity again will add some more connections in there.
Speaker Change: And I would say, we're still probably looking at late 'twenty five for some of that commercial activity, Jeff as much as I'd like to accelerate that and have tried have tried by providing some incentives out there and otherwise I think that that's going to roll some time in that 25.
Calendar year timeframe.
Speaker Change: Okay, if I am sorry, if I understand correctly by the end of 'twenty five some of the infrastructure will be completed how many rooftops, where you have by the end of 'twenty five.
Speaker Change: If we can if we maintain our current pace, we're probably taken down about 200 homes a year. So that's another 400 homes in that connection so thats getting pretty close to a couple thousand connections.
Speaker Change: Okay, So you're really working at.
Speaker Change: Pretty much.
Speaker Change: 2027 four.
Speaker Change: Real commercial developments.
Speaker Change: Yes.
Speaker Change: Because most of that infrastructure is already there youre going to see transactions youre going to see lot transactions are going to see tap transactions youre going to see.
Speaker Change: Us making.
Speaker Change: Participating in some of that development, where we can we can we can hold the equity value of the land and partner with someone in to go vertical on that and then exit win.
Speaker Change: A particular facility structure is fully leased so we're looking at pursuing all those avenues in commercial.
Okay. Thanks Mark.
Speaker Change: Beth.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one.
Speaker Change: Okay.
Speaker Change: Your next question is coming from Elliot Knight with Knight Advisors.
Elliot Knight: Good morning, Mark.
Mark W. Harding: Morning, Alex good to hear from you.
Speaker Change: Well you have done a beautiful job today.
Speaker Change: Outlining the values.
Speaker Change: Our.
Speaker Change: In.
Speaker Change: Fewer cycles control.
Speaker Change: It's a question as always.
Speaker Change: How rapidly they can be monetized.
Speaker Change: One thing we've talked about before.
Speaker Change: And thats paying a cash dividend.
Speaker Change: You've always said well the board wants.
Speaker Change: We assure that there are adequate recurring revenues.
Speaker Change: Before they initiate a dividend.
Speaker Change: Aren't you really already Bayer, where you could begin.
Speaker Change: Dividend, even if small even if and.
Speaker Change: On your dividend.
Speaker Change: Could you give us your thoughts on that please.
Speaker Change: You've got a very good point there when you take a look at the one of the things that we sought to do to accelerate that recurring revenue is due to single family rental side and that continues to grow and become meaningful and really when we're adding new customers new connections.
Speaker Change: Each month on both the water side as well as the single family rentals that gets us a whole lot closer to that determination and it is I will tell you. It is a component of.
Speaker Change: The board discussion each each board meeting as the appropriate benchmark.
Speaker Change: And it's it's two fold it is that recurring revenue stream, but then it's also capital needs and how we are starting each individual project to accelerate the development of both the land excuse me land.
Speaker Change: And the water utility side as well as the single family rentals.
Speaker Change: Maybe some of the pause that we're looking at on that is that we've got a pretty aggressive start.
Speaker Change: For some of the single family rentals. So we've moved from where we originally anticipated 40 single family rentals in phase III to 90, so we more than doubled that capacity.
And it's very it's a very not only very attractive for us on the income side, but on how we're able to leverage that and we're able to.
Speaker Change: <unk> put in place.
Speaker Change: Mortgage type debt instruments, theyre, not actual mortgages, because the company can't hold on actual mortgage but our mortgage type instrument in there to give us the capacity to keep that off balance sheet, but it's in the delivery of those that become a little bit challenging for us in quarter over quarter year over year that gets.
Once we complete the units and we'd like to complete those by phase and then roll the the financing instrument by each of those units.
Thank you will probably see that be a little bit different in our second phase as we continue to mature that relationship with our bank, where theyre able to finance this that each individual closing and we get it we get a.
Speaker Change: And instrument alone instrument that delivers each quarter, so instead of us.
Speaker Change: Financing set the construction of 17 homes, and then refinancing that all at once while we're looking to do is say each time, we deliver you as CEO, we will draw down what would be that 17 home financing. So we want to see that work for us and make sure that that doesn't.
Speaker Change: Constrain our capital side and then.
Speaker Change: Deliver those next 17 units and probably take a look at it after that.
Speaker Change: And.
Speaker Change: Uh huh.
Speaker Change: What would the timing of that be.
Speaker Change: Yes, probably I would say we will bring this to a serious consideration at the board at the January Board meeting next year.
Speaker Change: Okay. Thank you that's great and then I know that that'll that'll put you on a little sour note, but give you the expectation that it is part of our agenda, but I think it's also a component of making sure that we build each of these segments up appropriately with our capital.
Commitments on the balance sheet, so we're going to continue to protect that.
Speaker Change: I think that's a very fair answer and.
Speaker Change: Your candor as always is created.
Speaker Change: I'd like to make one other comment.
Speaker Change: I really thought the slide that you put on I don't know what number it is about the stock repurchases I have never seen a company put up.
Speaker Change: Slides such as that.
Speaker Change: Think it's wonderful and thank you for showing it I hope you will continue to show it. Thank you that's all I bet.
Speaker Change: I appreciate that.
Speaker Change: We're really trying to balance competing with you all to buy those shares that those attractive prices, we understand that but by and token.
I think that if the stock doesn't trade appropriately we continue to believe that that is a worthwhile return for our shareholders.
Speaker Change: Well that gives us a wonderful sense of.
Speaker Change: What's your thinking.
<unk> is an undervalued and attractive price, which the buyer of the stock. So that's very helpful and thank you.
You bet.
Speaker Change: We have reached the end of our question and answer session and I will now turn the call over to management for closing remarks.
Speaker Change: Thank you.
Speaker Change: Again, if you are listening to this on a rebroadcast or if you had a technical challenge or if it was just too early and too cold to get on this call alive and.
Speaker Change: And something comes up as you as you work through the deck or you work through the comments don't hesitate to give us a call happy to drill down on any of the specifics and I want to continue to thank you all for your continued support and we will continue to.
Speaker Change: Add value and do the best we can with these assets of yours, so with that I'll bid you all good day.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Speaker Change: Thank you Holly.