Q2 2024 Pure Cycle Corp Earnings Call

Operator: Good morning, everyone, and welcome to the Pure Cycle Corporation Q2 2024. At this time, all participants have been placed. If anyone should require operator assistance during the call, please let us know; please press star zero on your.

Morning, everyone and welcome to the pure cycle Corporation Q2, 2024 earnings call. At this time, all participants have been placed on listen only mode and the floor will be opened for questions. After the presentation. If anyone should require operator assistance during the conference. Please press star zero on your phone.

Keypad. Please note. This conference is being recorded I will now.

Operator: Note, this conference. I turn the conference over to you. Mark Harding, President and CEO. Thank you, Jenny. Good morning, everyone.

Now turn the conference over to your highest Mr. Mark Harding, President and CEO appeal cycle.

Mark W. Harding: Thank you Jenny.

Mark W. Harding: And welcome to our six month ended February 29, 2024 earnings call. We do have a deck for this. If you can go to our website at purecyclewater.com and click on the investor tab, and then there'll be a link there that will direct you to the deck for this. I can walk through this, and I'll try and note the transition of the slides as we move through the presentation.

Mark W. Harding: Good morning, everyone and welcome to our six months ended February 29, 2024 earnings call.

Mark W. Harding: We do have a deck for this if you can go to our website that pure cycle water dot com and click on the Investor Tab, and then there'll be a link there that will direct you to the deck for this I can walk through this and I'll try and note the transition of the slides as we move through the presentation.

Mark Harding: <unk>.

Mark W. Harding: Let me start out with our first slide, which will be our forward-looking statement, which indicates, as I'm sure all of you are familiar with, that statements that are not historical facts are contained or incorporated by reference in this presentation, our forward-looking statement. With that, what I want to do is spend a little bit of time talking a little bit about the various segments of the business, and take a look at our performance through our first six months of this year. I'll talk a little bit about some of the investments that we've made into our assets and some of their trajectory together with their capacities and the opportunities to continue to monetize those assets, and then give you a little bit about important updates coming up with that. You know, none of this is possible within the organization without having a great team to rely on, not only our management team, but all of our line operators that really are the brick and mortar, and they block and tackle every day to make sure that we're putting up strong performances in each of our individual segments.

Mark Harding: Let me start out with our first slide which will be a forward looking statement, which.

Mark Harding: Indicates that I'm sure. All of you are familiar with that statements that are not historical facts contained or incorporated by reference in this.

Mark Harding: Presentation are forward looking statements.

Mark Harding: With that.

Mark Harding: Wanted to do is spend a little bit of time.

Mark Harding: Talking a little bit about the various segments of the business take a look at our performance through the first six months of this year.

Mark Harding: Talk a little bit about some of the investments that we've made into our assets and some of their trajectory together with their capacities and the opportunities to continue to monetize those assets and then give you a little bit on that.

Mark Harding: An important updates coming up.

Mark Harding: With that.

Mark Harding: None of this is possible within the organization without having a great.

Mark Harding: <unk> to rely on not only our management team, but all of our line operators that really are the brick and motor and they block and tackle every day to make sure that we're putting up strong.

Mark Harding: Performances in each of our individual segments, we have got a tremendous board of directors.

Mark W. Harding: We've got a tremendous board of directors, a very strong board that continues to keep us accountable and really offers its years of wisdom and advice in that. So we benefit from a very strong team, both at the company level as well as at the board level. And so we want to continue to recognize and acknowledge all those folks that make what we do happen. So a little bit of information, backgrounds on some of our leadership team, both in terms of the presentation as well as online.

Mark Harding: A very strong board that continues to keep us accountable and really for.

Mark Harding: Years of wisdom, and advice and that so we benefit from a very strong team both at the.

Mark Harding: Company level as well as at the board level and so we want to continue to recognize and acknowledge all of those folks that make what we do happened so little bit of information backgrounds on some of our leadership team.

Mark Harding: Both in terms of the presentation as well as online. So you can get a lot of information about who it is that.

Mark W. Harding: So you can get a lot of information about who it is that's shepherding these assets and steering the direction of the company. And these segments are vertically integrated, with each business segment informing and really improving the value of the other segments. If you take a look at the fundamental premise of the company, we're a wastewater provider. We have a significant portfolio of very valuable assets in an area where water is a hard to come by commodity. And so we have been developing those assets over a very extended period of time; we've got more than 30 years of investments in these water assets, and they have had significant appreciation over that period of time. The portfolio logistics on it allow us to provide water and wastewater service to approximately 60,000 single-family connections, and we're really just getting started with that. We have a little over 1300 connections to date, and we'll talk a little bit more about that.

Mark Harding: Thats shepherding these assets in steering the direction of the company.

Mark Harding: So the company operates in three different business segments, and the segments, our vertically integrated with each business segment to informing and really improving the value of each other segments. If you take a look at the fundamental premise of the company. We're a water wastewater provider we have a significant.

Mark Harding: <unk> portfolio of very valuable assets in a area where water is a.

Mark Harding: Hard to come by commodity and so we have been developing those assets over a very extended period of time, we've got more than 30 years of investments in these water assets.

Mark Harding: We have had significant appreciation over that period of time.

Mark Harding: Portfolio logistics on it to allow us to provide water and wastewater service to approximately 60000 single family connections and we're really just getting started with that we have a little over 1300 connections to date, and we'll talk a little bit more about that but that water segment helps us create.

Mark W. Harding: But that water segment helps us create value in the next business segment, which is our land development segment, where we develop land as a master-planned community. And so we take a look at it as a large-scale development. And as we make these large investments in water and wastewater, we also make those investments in land development, providing single-family lots and multifamily as well as commercial lots to national home builders and area land and businesses. And then that third segment is, as we're developing lots, we retain some of those lots for ourselves. We keep the equity value of the lot together with the water service connections and really work with our home builder partners to build single-family homes on those lots that we keep in our own portfolio, and we rent those out to families and individuals for a single-family rental market business. So each of those segments, as you can see, really complement each other and really provide value in the asset chain. Talk a little bit about the company's assets.

Mark Harding: Create value and the next business segment, which is our land development segment, where we develop land as a master planned community and so we take a look at it as a large scale development and as we make these large investments in water and wastewater. We also make those investments in land development, providing single family loss.

Mark Harding: <unk> multifamily as well as commercial lots to NASA.

Mark Harding: National Homebuilders and area land in businesses.

Mark Harding: And then that third segment is as we're developing what we.

We retain some of those lots for ourselves we keep the equity value of the lot together with the water service connections and really work with our homebuilder partners to build single family homes on those lots that we keep in our own portfolio and we rent those out to families and individuals for Sig.

Mark Harding: <unk> family rental market business. So each of those segments as you can see really complement each other segment and really provide value in.

Mark Harding: The asset chain.

Mark Harding: Talk a little bit about the company's assets, we have about $120 million in assets and one of the things that I think is most unique about this company is really the extremely low basis that we have in these assets and when you take a look at the fair market value compared to what the cost basis is and it's because a lot of these are assets that the company.

Mark W. Harding: We have about $120 million in assets, and one of the things that I think is most unique about this company is the extremely low basis that we have in these assets when you take a look at the fair market value compared to what the cost basis is, and it's because a lot of these are assets that the company's been very disciplined about acquiring. Taking a look at our water and wastewater assets, you know, our capital account for just the water rights portfolio is slightly less than $15 million. When you take a look at the connection fees that can generate over $2.5 billion worth of revenue from that, and then annual year-over-year revenues greater than $100 million, it really does give you an indication of the opportunities that the company has in just that one asset. Taking a look at the land assets, we were very fortuitous in acquiring our Sky Ranch property. We acquired it when not a lot of people wanted land assets back during the Great Recession in 2010. We got a very low basis on that.

Mark Harding: He has been very disciplined about acquiring taking a look at our water and wastewater assets in our capital account and just the water rights portfolio is slightly less than $15 million.

Mark Harding: When you take a look at the connection fees that can generate over $2 $5 billion worth of revenue on that and then annual year over year revenues greater than $100 million. It really does give.

Mark Harding: Give you an indication of the opportunity that the company has in and just that one asset taking a look at the land assets.

Mark Harding: We were very.

Mark Harding: Two of us in acquiring our Sky Ranch property, we acquired it win win not a lot of people wanted land assets back in the great recession in 2010, <unk> got a very low basis in that we got less than a $5 million basis in the land development side and about $10 million in assets, there and as I'll highlight a little bit later in the presentation that.

Mark W. Harding: We got less than a $5 million basis in the land development side and about $10 million in assets there. And as I'll highlight a little bit later in the presentation, that asset can generate significant opportunities for the company in excess of $600 million as we continue to build that out. Our newest segment being single-family rentals, the opportunity there is it's a very tax-advantaged way of us adding recurring cash flows to the company and being able to retain some of that equity value in both the land and the water. What we have is an opportunity to have homebuilders build on those properties, carry forward some of that equity, and each home that we bring online carries with it as much as 30% equity value in the marketplace, and we're able to rent those out at fair market value.

Mark Harding: Asset can generate significant opportunities for the company in excess of $600 million as we continue to build that out and then you know our newest segment being a single family rentals.

Mark Harding: The opportunity there is it is a very tax advantaged way of us, adding recurring cash flows to the company and being able to retain some of that equity value in both the land and the water and so what we have is.

Mark Harding: An opportunity where we can have homebuilders build on those properties carry forward some of that equity and then.

Mark Harding: Each home that we bring online carries with it as much as 30% equity value in the marketplace and we're able to rent those out at fair market value. So there's a great opportunity for us to monetize some of that vertical integration of each of those assets into the single family rental.

Mark W. Harding: There's a great opportunity for us to monetize some of that vertical integration of each of those assets into the single-family rental. One of the other things we like to highlight is the company's stewardship of its capital resources. We've got a very strong balance sheet, a high degree of liquidity in there. If you take a look at our cash position together with our receivables from our governmental entity partner where we're constructing that infrastructure, we've got over 50 million dollars worth of liquidity between cash and cash and notes receivable and very modest debt. You know, we use our debt to really take a look at the vertical cost of single family rentals. And that's very attractive because we can get mortgage-type financing on that company. They can't get a mortgage, but it's a product that we've worked very closely with our banking partners to be able to get that type of credit facility in there and be able to leverage some of those opportunities within the company.

Mark Harding: One of the other things we like to highlight is kind of the company is stewardship of its capital resources. We've got a very strong balance sheet to a high degree of liquidity in there.

Mark Harding: If you take a look at our cash position together with our receivables from our.

Mark Harding: Governmental entity partner, where we're constructing that infrastructure, we've got over $50 million worth of liquidity.

Mark Harding: <unk> cash and cash and notes receivable and very modest debt, we use our debt to really take a look at.

Mark Harding: The vertical costs of single family rentals, and that's very attractive because we can get a mortgage type financing on that company cant get a mortgage but it's a product that we worked very closely with our banking partners to be able to get that type of.

Credit facility in there and be able to leverage some of that opportunities within the company. So that's one of the key things we like to highlight just because of the uniqueness of what it is that those assets bring to the company.

Mark W. Harding: So that's one of the key things we like to highlight just because of the uniqueness of what it is that those assets bring to the company. What I'd like to do is talk a little bit about our financial performance. So we'll advance to slide nine and jump right into the Q2 results.

Mark Harding: Okay.

Mark Harding: But I'd like to do is talk a little bit about our financial performance. So we'll advance to slide nine and jump right into the Q2 results great quarter for us.

Mark W. Harding: Great quarter for us, about $8 and a half million in revenue. As you can see, quarter over quarter in the past three years, we're more in line with what we thought we were looking at in ramping up these operations in 21, 22, 23. We had a little bit of a pause because of the interest rate increases that were so aggressive towards the end of 2022.

Mark Harding: $8 5 million in revenue as you can see quarter over quarter in the past three years were more in line with.

What we thought we were looking at and ramping up these operations in 'twenty, one 'twenty two 'twenty three had a little bit of a pause because of the interest rate increases that were so aggressive towards the end of 2022 and our homebuilder partners. We're looking at how they wanted to inventory in the.

Mark W. Harding: And our home builder partners were looking at, you know, how they wanted to inventory and the velocity of the homes that they were looking for. And so we had about a 90 day gap between starting the second sub-phase of our second phase. Hard to get that one past my lips.

Mark Harding: City of the homes that they were looking for and so we had.

Mark Harding: At our 90 day.

Mark Harding: GAAP in starting our Q, our second the second sub phase of our second phase hard to harder to get down in the past my lips, but.

Mark W. Harding: But our phase 2B had that 90-day pause. And really, what we've seen is a stabilization of that interest rate market. Interest rates are settling in. They're still high above where they were maybe two, three years ago, but on a normalized basis, they're really in line with what normal expectations are for mortgage rates.

Mark Harding: Our phase <unk> had that 90 day pause and really what we've seen is a stabilization of that interest rate market interest rates are kind of settling in there is still high above where they were maybe two or three years ago, but on a normalized basis, they're really in line with what normal expectations are for more.

Speaker Change: Right. So I think the market is coming.

Mark W. Harding: So I think the market is coming around to that. And what we see in the single-family home business, not just here in Colorado and in the Denver market, but all across the country, is really a lack of inventory for sale. And a lot of that is attributable to mortgage locks on a lot of those folks that have a 3% mortgage; it really isn't all that attractive for them to switch that out for a higher mortgage.

Speaker Change: Coming around to that and what we see in the single family home business not just here in Colorado in the Denver market, but it all across the country is really a lack of inventory for sale and a lot of that is attributable to.

Speaker Change: Mortgage locks on a lot of those folks that have a 3% mortgage that it really isn't all that attractive for them to switch that out for a higher mortgage rate.

Mark W. Harding: Our margins have continued to be terrific margins where we're exceeding 50% in all three of our business segments. We'll highlight that a little bit, but you can see our growth profit from that in Q2 is also continuing the results of the company. Net income, a little over $2 million of net income, earnings per share of about nine cents a share.

Speaker Change: Our margins are continue to be terrific margins, where we're exceeding 50% in all three of our business segments will highlight that a little bit but you can see our gross profit from that on Q2 is also continuing the results of the company.

Speaker Change: Net income.

Speaker Change: A little over $2 million of net income and earnings per share of about nine a share and so.

Mark W. Harding: And so, you know, what this does is it carries us through our typically slow period of time; we do have a little bit of seasonality within the company, just because of the climate here in Denver, and a lot of the activity that we're doing on the construction side with delivering lots, you'll see a significant amount of acceleration of that in Q3, and Q4. And that really times out just because of the timing of our year end; we have an 831st year end. And so that puts our Q1-2 in our winter months as opposed to Q3-4. Q3, or our Q2 is the first quarter of the calendar year.

What this does is it carries us through our typically slow period of time, we do have a little bit of seasonality within the company just because of the climate here in Denver and in a lot of the activity that we're doing on the construction side with delivering lots youll see a significant amount of acceleration of that in Q3, and Q4 and that really times out just.

Because of the timing of our year and we have an 831 year end and so that puts our Q1 two in our winter months as opposed to Q.

Speaker Change: Two three.

Speaker Change: Our Q2 is the first Q of the calendar year. So.

Mark W. Harding: So it always trips up a bit on how we look at that, but really rolling into Q3, Q4, those are going to be the summer months. Those are going to be the summer irrigation seasons. Those are going to be the high productivity for our construction activities on delivering lots. Take a look at each of the individual business segments.

Speaker Change: They're always trips up a bit on how do we look at that but.

Speaker Change: Really rolling into Q3 Q4, those are going to be the summer months is it going to be summer irrigation season, those are going to be the high productivity for our construction activities on delivering lots.

Speaker Change: Take a look about each of the individual business segments as I mentioned when you take a look at our revenue and our gross margins by each of those segments again very impressive results.

Mark W. Harding: As I mentioned, when you take a look at our revenue and our gross margins by each of those segments, again, very impressive results, 55% gross margins in our water utilities, very high margins in our land development, and then we are starting to get some traction and some materiality in our single-family rentals. We've got 14 units that are fully leased, and a lot of those are coming through on some of their first-time renewals, some of the units are on our second-year renewals, and our renters continue to be very enthusiastic about the product that we have and the service that we're giving them. So we've got a high renewal rate on a lot of the turnover. Let me drill down a little bit about where the water and wastewater segment revenues come from.

Speaker Change: 55% gross margins in our water utility is very high margins in our land development and then we.

Speaker Change: We are starting to get some traction and some materiality into our single family rentals, We've got <unk>.

Speaker Change: 14 units that are fully leased.

Speaker Change: And a lot of those are coming through on some of the time some of their first first time renewals some of the units on our second year renewals and.

Speaker Change: Our renters continued to be.

Speaker Change: Enthusiastic about the product that we have and the service that we're giving them. So we've got a high renewal rates on a lot of the turnover on those units.

Now, let me drill down a little bit about where water and wastewater segment revenues come from as those of you that are following the company.

Mark W. Harding: As those of you that are following the company, we also provide water, commercial industrial water, to the oil and gas industry. And that's a real high component of what it is that we're doing. And that's very advantageous for us because it allows us to be able to develop our water system with a current user in demand for that. And so they're able to...

Speaker Change: We also provide water.

Speaker Change: Commercial industrial water to the oil and gas industry and Thats, a real a high component of what it is that were doing and thats very advantageous for us because it allows us to be able to develop our water system.

Speaker Change: With a current user in.

Speaker Change: And demand for that and so they're able to.

Mark W. Harding: Provide the company additional capital to expand our system in advance of some of our residential demand. And I think Q2, if you look at just that three months ending, that was pretty close to a record quarter delivery for oil and gas waters, we see that trend continuing. The field that we have is Southern Niobrara Field here in Colorado, and it's about a 200-square-mile area where we're delivering water to our operators that are in the field. We've got a couple of operators, one large operator, Civitas, and then some other smaller operators that are drilling wells. And this is at the stage of field development, so they've de-risked the field. It's a very oil-rich field. It's a very, very heavy oil; a lot of the a lot of production that comes in out of these fields. So I think it's well liked amongst the operators.

Speaker Change: It provides the company additional capital to expand our system in advance of some of our residential demand and I think the.

Speaker Change: Q2, if you look at just that three months ending that was pretty close to a record quarter delivery for oil and gas waters.

Speaker Change: What we see is that trend continuing.

Speaker Change: On the field that we have is the southern Niobrara field here in Colorado, and it's about a 200 square mile area where were.

Speaker Change: Delivering water to our operators that are in this field. We have got a couple of operators one large operator civitas and then some other smaller operators that are drilling wells and this is at the stage of field development. So they've derisked the field Thats, a very oil rich field, it's a very.

Speaker Change: Very heavy oil.

Speaker Change: Lot of production that comes in and out of these fields. So I think it's well liked amongst the operators.

Speaker Change: One of the segments.

Mark W. Harding: One of the segments on this that was a little bit light in Q2 is going to be the tappies, and that's a seasonality issue, as you can kind of see that as we trend through the years. We usually pick up a lot more of those tappies in Q3, Q4, which is where our builders are pulling building permits, and that's where they pay their tappies. They pay their tappies at the time of a building permit, so you're going to see that increase in velocity as the rest of the year rolls through. So, a little bit of projection on our number of customers, and we continue to grow our customer base, and those are our recurring customers. That's a little bit of statistics on the oil and gas side. You know, they're becoming very efficient. And so each rig can drill a well in about five days.

Speaker Change: That was a little bit light in Q2 is going to be the tap fees and that's the seasonality issues you can kind of see that as we trend through.

Speaker Change: The year is we usually pick up a lot more of those tap fees in Q3, Q4, which is where our builders are pulling building permits and thats, where they pay their tap fees. They pay their tap fees at the time of a building permit so youre going to see that increase in velocity as the rest of the year rolls through and so little bit of projection on a number of customers and we.

Speaker Change: Continue to grow in our customer base and those are recurring customers.

Speaker Change: It's a little bit of statistics on the oil and gas side.

We're becoming very efficient and so each rig can drill a well in about five days and so their.

Mark W. Harding: And so they're drilling as many as 12 to 16 wells per pad site. And so I think we've got one and a half rigs that are dedicated to this field. And so you're going to see continuing performance in this segment where we're delivering water to commercial oil and gas. In our land development, one of the things that we want to highlight really is the settling out of interest rates and the activity that's going on within the land development. We have three phases currently under construction. Phase 2A, which is our first 219 lots, that's approximately 96%. I think we've got a couple of homes that are still under construction from some of our builders, but for the most part, most of those lots are finished. And then our activity in there is about 96% finished. We've got some landscaping needs that are very seasonal in their orientation.

They are drilling as many as 12 to 16 wells per pad site and so.

Speaker Change: I think we've got.

One five rigs that are dedicated to this field.

Speaker Change: And so youre going to see continuing performance in this segment, where we're delivering water to the commercial oil and gas operators.

Speaker Change: Our land development.

Speaker Change: One of the things that we want to highlight really is kind of the.

Speaker Change: Settling out of interest rates and the activity that's going on within the land development. We have three phases currently under construction.

Speaker Change: Phase Iia, which is our first 219 lots that's approximately 96% I think we've got a couple of homes that are still under construction in there from some of our builders, but for the most part most of those lots are finished and then our activity and there is about 96% finished we've got.

Speaker Change: Landscaping needs that are very seasonal in their orientation. So as you take a look at the accounting of that that's about 96% complete and we do that on a percent complete basis. So you see how that hits the income statement by virtue of our percent complete accounting methodology phase two b, we're looking at about 52% complete and we are.

Mark W. Harding: So as you take a look at the accounting for that, that's about 96% complete. And we do that on a percent complete basis. So you see how that hits the income statement by virtue of our percent complete accounting methodology. For phase 2B, we're looking at about 52% complete, and we're really in the process now of grading out and, Prepping for that asphalt and curb and gutter on that so that those lots will be delivered. We have finished lots that are available for our homebuilders on some of the infrastructure that overlaps with 2A, and so our builders are out in the county looking for Building Department approval for their master plans, and then we'll be under construction probably later this month or into May and then continuing through the rest of the year. And then overlapping those is our third phase, which is another 200, 20 Lots from Phase 2C. And that's where we released the contract for our grading contractors. They've been on site since February.

Speaker Change: Or really in the process now of grading out in.

Speaker Change: Prepping for that asphalt and curb and gutter on that so that those lots will be delivered we have finished lots that are available for our homebuilders on some of the infrastructure that overlaps with two <unk> and so our builders are out within the county looking for.

Speaker Change: Building Department approval for their master plans in and then we'll be under construction probably in later this month or into May and then continuing through the rest of the year.

Speaker Change: And then overlapping those is our third phase which is another.

200 <unk>.

Speaker Change: Then 20 lots from phase to see and Thats.

Speaker Change: Where we've released the contract for our grading contractors they've been on site since February there'll be finished with their work then we will get the utilities in there and look to be delivering some of those finished lots towards the end of the calendar year and so what you've got is really <unk>.

Mark W. Harding: They'll be finished with their work, then we'll get the utilities in there and look to be delivering some of those finished lots towards the end of the calendar year. And so what you've got is really three phases, I'd say two phases concurrently with about 500 lots under production for delivery to our builder partners, where they and Bill Cunningham And then on top of that, we really do have our fourth sub-phase, that Phase 2D, which will be another 215 lots. And those lots, really, we'll look to plant those by the end of the year and get those under production by the spring of 2025. So really accelerating the development of our land development, mostly because of the demand and the fact that Sky Ranch is one of the very few master-planned communities in the Denver market that can still deliver entry-level product, I dare say affordable, because when you say an entry-level product is anything less than $500,000, it's hard. But affordability is one of those strong issues in our market, as well as many other markets in the country. And it's really a function of just the cost of delivering lots. Let me move to...

Speaker Change: Three phases, I'd say two phases concurrently with <unk>.

Speaker Change: About 500 lots under production for delivery to our builder partners, where they can obtain their building permits and really go vertical and then on top of that we really do have our fourth sub phase that phase two D, which will be another 215 lots and.

Speaker Change: And those lots really will look to plant those by the end of the year and get those under project production by the spring of 2025, so really accelerating the development of our land development, mostly because of the demand and the fact that.

Speaker Change: Sky Ranch is one of the very few masterplan communities in the Denver market that still can deliver.

Speaker Change: Entry level product.

Speaker Change: Dare say affordable because when you say an entry level product is anything less than 500000, it's hard but affordability is one of those strong issues in our market as well as many other markets in the country and it's really a function of just the cost of delivering lots.

Let me move to.

Marc Stephen Spezialy: Single-family Rentals, and I'm going to pass the baton over to Marc Spezialy and have him give you an update on our single-family Rentals. Thank you, Mark, and good morning, everyone. We're excited about the Single-Family Rentals segment, and we're excited to share the continued success that this segment has brought. We continue to see high demand for units. And in the second quarter, we had 100% As shown in the charts, we're beginning to see the compounding impact on both revenue and asset valuation as we bring additional units to the market. We'd like to continue to highlight that our single-family rental segment complements our other segments by utilizing our portfolio of assets. Each completed unit adds an average of $150,000 in equity by capitalizing on our well price loss and our water availability in this competitive housing market.

Speaker Change: Single family rentals, and I'm going to pass the pass the baton over to Mark. These alley and have him give you an update on our single family rental.

Speaker Change: Thank you Mark and good morning, everyone. We're excited about the single family rental segment and we're excited to share. The continued success of this say segment abroad.

Mark W. Harding: We continue to see high demand in the units and in the second quarter, we had 100% occupancy.

Mark W. Harding: As shown in the charts, we're beginning to see the compounding impact to both revenue and asset valuation as we bring additional units to the market with.

We'd like to continue to highlight that our single family rental segment complements our other segments by utilizing our portfolio of assets.

Mark W. Harding: Each completed unit adds an average of 150000 equity by capitalizing on our well priced lots in our water availability in this competitive housing market.

Mark W. Harding: This table represents our projections for this segment as we continue to build out phase III to date we've.

Marc Stephen Spezialy: This table represents our projections for this segment as we continue to build out Phase 2. To date, we've completed the 4 units in Phase 1 and the 10 units in Phase 2a. As you can see from the chart, we are beginning to ramp up the number of units that we will be bringing online. Construction on the 17 units in Phase 2B will begin this summer, and once completed, we will have more than double the units we have available to run. We are also expanding the variety of types of units we are offering the market in our next bill. By being vertically integrated between segments, we can control our building costs because of our equity position in the land and water resources needed to build a home. We are also able to control our operating costs by maintaining and managing these units. This next slide is a visual approach to the projections we just discussed.

Mark W. Harding: We've completed the four units in phase one and the 10 units in phase Iia.

Mark W. Harding: As you can see from the chart, we are beginning to ramp up the number of units that we will be bringing online.

Mark W. Harding: Construction on the 17 units in phase <unk> will begin this summer and once completed we will have more than doubled the units we have available to rent.

We are also expanding the variety of types of units, we are offering in the market and our next build.

Mark W. Harding: By being vertically integrated between segments, we can control our building costs because of our equity position in the land and water resources needed to build a home.

Mark W. Harding: We are also able to control our operating costs by maintaining and managing these units in house.

This next slide is a visual approach to the projections, we just discussed it showcases the projected growth in our recurring rental revenue as we expand into phase II and reached nearly 100 units.

Marc Stephen Spezialy: It showcases the projected growth in our reoccurring rental revenue as we expand into phase two and reach nearly 100 years. We've also included a separate graph of the estimated increase in asset valuation based on the reliable equity we build with each completed unit. And with that, I'd like to turn the call back over to Mark Harding to discuss our portfolio of assets for a minute. Thank you, Mark. So, what I'd like to do is give you an overview of each of the segments and drill down on investments and capacities and really talk a little bit about our utilization because we have tremendous capacities in each of those and what we try to do is stay ahead of the market on that so that we can really react to When you take a look at sort of our water segment, as I mentioned earlier, we have about 60,000 connections worth of capacity in our water portfolio. And currently, the developed amount of the system that we have can serve 3,600 taps. And right now, we have about 1,300.

Mark W. Harding: We've also included a separate wrap of the estimated increase in asset valuation based on the realizable equity rebuild with each completed unit.

And with that I'd like to turn the call back over to Mark Harding to discuss our portfolio of assets further.

Mark W. Harding: Thank you Mark.

Mark W. Harding: So what I'd like to do is give you an overview of each of the segments and drill down on investments and capacities and really talk a little bit about our utilization because we have to.

Mark W. Harding: Tremendous capacities in each of those and what things. We tried to do is stay ahead of the market on that so that we can really react to.

Mark W. Harding: The market in terms of delivering large delivering water service availability and then as we start to continue to build our single family rental segment.

Mark W. Harding: So with that as you know we have these three segments.

Mark W. Harding: Each continue to build and monetize our assets there.

Mark W. Harding: The review of the size of each of these pies and the segment when you take a look at some of our water segment as I mentioned earlier, we have.

Mark W. Harding: About 60000 connections worth of capacity.

Mark W. Harding: In our water portfolio and currently the developed amount.

Mark W. Harding: <unk> system that we have can serve 3600 taps and right now we have about 1300. So it tells you we've got about 50% excess capacity within that water segment. So what we've done is we continue to build ahead of that and its not that thats idle capacity, because we are using that capacity.

Mark W. Harding: So it tells you we've got about 50% excess capacity within that water segment. So what we've done is we continue to build ahead of that. And it's not that that's idle capacity because we are using that capacity to serve oil and gas. In the land development segment, we have a 930 acre master plan community. What we've got developed on the water and the wastewater side can serve up to about 3,200 residential lots, and that's the full build out of Sky Ranch, as well as two million square feet there. The water system is at 3,600 taps.

To serve oil and gas needs in the land development segment, we had a 930 acre master plan community.

Mark W. Harding: What we've got developed on the water and the wastewater side can serve up to about 3200 residential lots and thats. The full build out of Sky ranch as well as 2 million square feet there.

Mark W. Harding: The water system is at that 3600 tasks, the wastewater systems, probably closer to around 2500.

Mark W. Harding: The wastewater system is probably closer to around 2,500. And so we have those fixed capacities that we have plenty of opportunity to continue to deliver taps and water usage revenues. And then in a single family rental, as Mark was highlighting, you know, we very we like this segment very much. And it's an opportunity for us to continue to build asset value, as well as recurring revenue value on our income statement. And, you know, we're looking at somewhere between that 200 and 300 units. So that'll be probably around 10 to 12 percent of the total capacity of the residential lots within. Sky Ranch Community.

Mark W. Harding: So we have those fixed capacities that we have plenty of opportunity to continue to deliver taps and water usage revenues and then on a single family rental as Mark was highlighting we're very we like this segment very much.

Mark W. Harding: And it's an opportunity for us to continue to build asset value as well as recurring revenue value on our income statement.

Mark W. Harding: We're looking at somewhere between that 203 hundred units, so that'll be probably around 10% to 12% of the total capacity of the residential lots within the Sky Ranch community and that seems to be where our balance is so we continue to invest in those segments.

Mark W. Harding: And that seems to be where our balance is. So we continue to invest in those segments. If you drill down on just the water segment alone, water is kind of divided into two segments where we get an upfront capital fee, which is our TAP fees.

Mark W. Harding: If you drill down on just the water segment alone waters kind of divided into two segments, where we get.

Mark W. Harding: Upfront capital fee, which is our tap fees and then we have usage fees and that usage fees really is divided into our residential customers as well as our commercial industrial customers.

Mark W. Harding: And then we have usage fees, and that usage fee is really divided into our residential customers as well as our commercial and industrial customers. And, as you saw in our results of operations, we had a pretty close to a record quarter, and then you're going to see a record year for us in terms of oil and gas deliveries. We delivered a little over 1000 acre feet. We have the capacity of about 3,700 acre feet. So that's the gray bar over there.

Mark W. Harding: And as you saw in our results of operations, we had a pretty close to a record quarter and then youre going to see a record year for us in terms of oil and gas deliveries, we delivered a little over 1000 acre feet. We.

Mark W. Harding: We have the capacity of about 3700 acre feet. So thats the gray bar there and then when you take a look at annualized that what we think we're going to do will probably be right around that 2600.

Mark W. Harding: And then when you take a look at annualizing that, what we think we're going to do will probably be right around that 2,600 acre foot capacity. So still a lot of opportunity for us to continue to deliver that and, you know, a good partnership relationship with our oil and gas partners and continuing to deliver water for that. Taking a look at our TAP fees. As we mentioned, you know, our TAP fees continue to really parrot the market. And so you see our TAP fees closer to $40,000 in combined connection capacity. If you take a look and apply that over to our $60,000 connections, that's a little over $2.3 billion worth of value there. We currently have about 1200 capacities in our single family rental side. I'm sorry, not a single family rental, but our residential capacity, which is really just about 2% of our overall capacity.

Mark W. Harding: Acre foot capacity so.

Mark W. Harding: Still a lot of opportunity for us to continue to deliver that in good partnership relationship with our oil and gas partners and continuing to deliver water for that segment.

Mark W. Harding: Taking a look at our tap fees as we mentioned our tap fees continue to really pair at the market and so you see our cap is closer to $40000 combined connection capacity. If you take a look and apply that over to our 60000 connections that's a little over $2 3 billion.

Mark W. Harding: The value there we currently have about.

Mark W. Harding: 200 capacities at our single family rental side Im sorry, not a single primary end up at our residential capacity, which is really just about 2% of our overall capacity.

Mark W. Harding: Take a look at our land development capacities. Sky Ranch has that capacity of around 5,000 single-family rentals and is breaking that out between the residential and the commercial. Really, all our activity has been on the residential side. The commercial activity is becoming a little bit more attractive. There's a certain number of rooftops that the commercial side likes to see. And this is big commercial, right? This is not just your local retail commercial.

Mark W. Harding: Taking a look at our land development.

Mark W. Harding: Capacity Sky Ranch has that capacity of around 5000 single family rentals and.

Breaking that out between the residential and the commercial.

Mark W. Harding: Really all our activity has been in the residential side. The commercial activity is becoming a little bit more attractive there is a certain number of rooftops that the commercial likes to see and this is big commercial right. This is not just your local retail commercial this is going to be regional commercial and so.

Mark W. Harding: This is going to be a regional commercial center. And so, given the fact that our location is right on the interstate, that we have an interchange right along the interstate, and that we are working to improve and upgrade that interchange. So, we've been working through that with the county and CDOT to be able to get that, and we should have a permit for that new interchange by the end of the year. And then the timing of construction of that we'll see depends on how that commercial demand matures, but we do have some mills that are set aside specifically through our Sky Ranch cap to be able to issue the debt to be able to fund the construction of that interchange. So that gives you kind of a feel for what we're looking at.

Mark W. Harding: Given the fact that our location is right on the Interstate that we have an interchange right along the Interstate that we are working to improve and upgrade that interchange. So we've been working through that with the county, and <unk> to be able to get that and we should have.

Mark W. Harding: Permit on that.

New interchange.

Mark W. Harding: Towards the end of the year and then the timing of construction of that will we will see it depends on how that how that commercial demand.

Mark W. Harding: Matures, but we do have some mills that are set aside specifically through our sky ranch cab to be able to.

Mark W. Harding: Issue the debt to be able to fund the construction of that interchange so that.

Mark W. Harding: Gives you a kind of a feel for what we're looking at and really the metric on the.

Mark W. Harding: And really, the metric on the left-hand side of that scale shows that this brings us close to $700 million worth of realizable revenue on Sky Ranch. If you take a look at our capital account on there, where we have $4 million on that, that's really one of the more interesting undervalued aspects of the company and how these assets continue to generate revenue for the company. We're taking a look at our single family rentals. Again, we're just giving you a little bit of analysis on how many units there are in each phase.

Mark W. Harding: Left hand side of that scale shows that this brings us close to $700 million worth of <unk>.

Mark W. Harding: Realizable revenue on Sky Ranch, and and if you take a look at our capital account on there where we have $4 million on that that's really.

Mark W. Harding: One of the more interesting undervalued aspects of the company.

Mark W. Harding: How these assets continue to generate revenue for the company.

Mark W. Harding: Taking a look at our single family rentals again, we're just giving you a little bit of analysis on how many units that are in each phase and what are the things that we've done with our builder partners is increase that portfolio as many of you. Following the company. We had originally when we contracted with our builders on Sky Ranch on.

Mark W. Harding: And one of the things that we've done with our builder partners is increase that portfolio. As many of you following the company know, originally, when we contracted with our builders on Sky Ranch in Phase 2, we were looking to increase that portfolio to close to 40. And I think we've more than doubled that now, and we are really partnering with our builders where, you know, we are one of their first customers. We're coming in and asking them to build on lots that we own and making sure that they have absorption in the marketplace and opportunities for us to use their product in that portfolio. And so they've been a very good partner.

Mark W. Harding: The phase two we were looking to increase that portfolio to close to 40, and I think we've more than doubled that now and and really partnering with our builders were.

Mark W. Harding: We are one of their first customers were coming in and asking them to be building on lots that we own and making sure that they have absorption in the marketplace and opportunities for us to use their product in that portfolio and so that's been a very good partnership with us.

Mark W. Harding: Some of the key takeaways before I turn it over to questions and answers are going to be our gross margins.

Mark W. Harding: Some of the key takeaways before I turn it over to questions and answers are going to be our gross margins. You know, we continue to generate high margins within the business, significant return on assets, and significant growth within the overall portfolio. Taking a look at each individual business segment and the company as a whole, one of the updates I want to do is that we continue to be in the market. We do believe that the market has a disconnect between the value of the company and where we're trading. And so our board did authorize a share repurchase, and we are in the market buying shares each month.

Mark W. Harding: We continued to generate high margins within the business <unk>.

Mark W. Harding: Significant return on assets and significant growth within the overall portfolio, taking a look at each individual business segments in the company as a whole.

Mark W. Harding: One of the updates I want to do as we continue to be in the market.

Mark W. Harding: We do believe that the market has a disconnect between the value of the company and where we're trading and so.

Mark W. Harding: Our board did authorize the share repurchase and we are in the market buying shares each month and so we'll continue to do that we will continue.

Mark W. Harding: And so we'll continue to do that. Because of our liquidity and because of our stewardship of the portfolio and our investments, we continue to be able to fund our operations through our own liquidity and then can also continue to reduce that denominator to provide returns to our shareholders that way as well. So with that, a little bit about our board, but I'll turn it over to Q&A. So I'm going to kick it back to Jenny, and if you've got some questions, certainly chime in, and we'll try and drill down on some of the color options.

Mark W. Harding: Because of our liquidity and because of our.

Stewardship of the portfolio and our investments we continue to be able to fund our operations through our own.

Mark W. Harding: Through our own liquidity and then can also continue to reduce that denominator to provide returns to our shareholders that way as well.

Mark W. Harding: So with that.

A little bit about our board, but I'll turn it over to Q&A, So I'm going to kick it back to Jenny and if you've got some questions certainly chime.

Jenny: <unk> in and we will try and drill down on some of the color on that.

Jenny: Thank you very much at this time, we will be conducting a question answer session. If you would like to ask a question. Please press star one on your phone keypad now a confirmation tone will indicate that your line is and the key you May press star two if you would like to remove your question from the key to any participants using speaker equipment.

Operator: Thank you very much, Mark. At this time, we will be conducting our question now. If you would like to ask a question, please press star 1 on your phone. Confirmation Tome will indicate that your line is in. You may press star 2 if you would like to remove your question.

Operator: For any participants using speaker equipment, it might be necessary to pick up your handset before you begin. Please hold a moment. Thank you. Your first question is coming from Bill Miller, who's... Thank you, Mark Harding. Good morning, Bill. A wonderful quarter.

Jenny: It might be necessary to pick up your handset before even stickier. Please hold a moment while C pulse questions.

Jenny: Thank you. Your first question is coming from Bill.

Bill: He is a private investor.

Bill: Your line is live.

Bill: Thank you Mark good morning.

Bill: Great Good morning Bill.

Bill: Wonderful quarter, you've got a lot on your plate.

William Christian Miller: You've got a lot on your plate. So my questions are the following. One, you've often mentioned acquisitions. Now, I didn't hear that on this call, but maybe I missed it. Secondly, what do you think is the highest return on investment that you have that you can control? And thirdly, when do you think you will get it?

Speaker Change: My questions are.

Speaker Change: The following one you've often mentioned acquisitions no I didnt hearing in this call, but maybe I missed it.

Secondly.

Speaker Change: What do you think now probably the highest return on investment.

Speaker Change: You have that you can control.

Speaker Change: And thirdly.

Speaker Change: When do you think you will get into the large scale commercial development long I 70.

William Christian Miller: large-scale commercial development, Long I-7. Three good questions. Well, I don't know if they're good, but they're interesting.

Speaker Change: Three good questions.

Go ahead Eric.

Speaker Change: Alright.

Mark W. Harding: Well, yeah, they are. They are. And so, thank you for those, and, You know, I'll give you a little bit of color on them.

Eric: Well, yes. They are they are in so thank you for those in.

Eric: I'll give you a little bit of color on them.

Mark W. Harding: You know, the highest-margin business that we have is really utilizing our portfolio of water for oil and gas, right? And so oil and gas companies don't pay the tap fee on that. And so as a result of that, that's at will capacity. And we're one of the few in this area that has excess capacity, and because of that, you know, and the fact that we can price into those rates and charges, opportunities for us to fund the construction of that infrastructure. It's really a good relationship.

Eric: The.

Eric: Highest margin business that we have is really utilizing our portfolio of water.

Eric: For oil and gas right and so oil and gas.

Eric: They don't pay the tap fee on that and so as a result of that that we'll have capacity and we're one of the few in this area that have excess capacity and because of that.

Eric: And the fact that we can price into those rates and charges opportunities for us to fund construction of that infrastructure.

Eric: It's really a good relationship.

Mark W. Harding: You know, I don't, it's a good margin business for us, but it's also a great business for the oil and gas customers because the limitation that they have is, you know, the only entities that have water at this scale are going to be the large water providers that provide water within a city. And the dilemma for them is that a city doesn't always have excess water supplies, right? They build their systems out so that they can meet the demand needs of their residential customers, and they don't have the capacity to give water that would otherwise be available to their residential customers to oil and gas customers.

Eric: It's a good margin business for us, but it's also a great business for the oil and gas customers because the limitation that they have is the only entities that have water. At this scale are going to be the large water providers that provide water within the city and the dilemma for them are.

Eric: That.

Eric: Our city doesn't always have excess water supplies right there they build their systems out so that they can meet the demand needs of their residential customers and they don't have the capacity to give water that would otherwise be available to their residential customers to oil and gas customers. So that relationship is a great relationship for us.

Mark W. Harding: So that relationship is a great business relationship for us, and so we like that business a lot. We continue to invest in that business, and we continue to make sure that our customers in oil and gas get what they need when they need it and at a fair price. And so we like those margins as well. You know, our land development revenues generate high margins, as you've seen, and that's really because we bought the land correctly, and we continue to work with our home builder partners. There are very few companies left that will actually do the horizontal development, and home builders, our national home builder partners, are loathe to have to do the horizontal work themselves. But because it's a very complicated business to manage that infrastructure, there are very few companies that are actually doing that horizontal development.

Eric: And so we like that business a lot we continue to invest in that business. We continue to make sure that our customers on the oil and gas get what they need when they need it.

And at a fair price and so we like those margins as well our land development revenues generate higher margins as <unk> seen and Thats really because we bought the land correctly.

And we continue to.

Eric: Work with our Homebuilder partners, there's very few companies left that will actually do the horizontal development and homebuilders are national homebuilder partners or lows to have to do the horizontal work themselves, but because it's a it's a very complicated business on how to manage that infrastructure.

Eric: Structure, there's very few companies that are actually doing that horizontal development in and we like it because we are doing that already we're doing that already with our water and our wastewater systems and adding those components in there allows us to manage and have good decisions on how.

Mark W. Harding: And we like it because we're doing that already with our water and our wastewater systems. And adding those components in there allows us to manage and make good decisions on how much capacity we want to build at what times. And so that's a very synergistic relationship. But I can't tell you the number of times our home builder partners have gone to us and said, hey, can you guys do this in the next jurisdiction? Because we like that too.

Eric: How much capacity, we want to build at what times and so that's a very synergistic relationship.

Eric: I can't tell you the number of times, our homebuilder partners have gone to US and said Hey can you guys do this in the next jurisdiction because we like that too and you guys have a terrific model out there and it's not that we wouldn't want to do that but our portfolio has.

Mark W. Harding: And you guys have a terrific model out there. And it's not that we wouldn't want to do that. But our portfolio has, you know, the thing that makes it so good for us is that we can do water at the same time as we're doing land development. The second component of your question was... Acquisitions. Very good. You're right.

Eric: The thing that makes it so good for US is that we can do water at the same time is that we're doing the land development.

Eric: The second component of your question.

Eric: It was.

Eric: Acquisitions very good.

Eric: You're right, we do have our nets out.

Mark W. Harding: We do have our nets out. We have very targeted acquisitions, and our acquisitions are going to be areas where, on the land side, we can provide water utility services from existing infrastructure that we have. The ability for us to be able to use the water transmission systems, our wells, our surface diversion facilities, our wastewater treatment capacity, and there is land within this area of Unacorporated Apo County that meets those requirements, and we continue to meet with those landowners. The timing of those, unfortunately, is not something that we can control, but I will tell you that there is much more activity on that side than there was since our last call. I say that every call, and I can honestly say that each time I meet with these landowners, they do have an understanding of our appetite for that. I also say that there are not any lost opportunities. Us not having that right now has not hurt us, and it has not provided that inventory on our balance sheet. There is a little bit of a synergy there.

Eric: We have.

Very targeted acquisitions, and our acquisitions are going to be areas, where in the land side, where we can provide water utility from existing infrastructure that we have.

Eric: The ability for us to be able to use the water transmission systems, our wells our surface diversion facilities, our wastewater treatment capacity and there are land.

Eric: Within this area of unincorporated Polk County that meet those requirements and we continue to meet with those landowners.

Eric: The timing of those unfortunately is not something that we can control, but I will tell you that there is.

Eric: There is much more activity on that side than there has since our last call I say that every call and I can honestly say that each time.

Eric: I meet with these landowners that they do they do have.

Eric: And understanding of our appetite for that but I also say that theres not any lost opportunities right us not having that right now has not hurt us and it hasnt.

Eric: Provided that.

Eric: That that inventory on our balance sheet. So there is there's a little bit of a synergy there.

Mark W. Harding: The ideal world would be when they were ready for development; we would be able to buy them. I am okay paying the seller a higher price for them as it gets closer to the time period when that property would be marketable. Our price is a function of where we think that timing is, and their price might be a function of where they would like that timing to be. We continue to work with them on that side. The last part of your question was commercial. Commercial activity, I would say, is probably still a year or more out, and it is really a function of the rooftops. We have got about 700 rooftops open. We have got 500, as we have talked about.

The ideal world would be when they were ready for development, we would be able to buy that I'm, okay paying the seller a higher price for that as it gets closer to the time period when that property would be marketable and so as we are priced as a function of where we think that timing is.

Eric: And their price might be a function of where they would like that timing to be and so we continue to work with them on that side and then the last part of your question was commercial.

Eric: Commercial activity I would say is probably still a year plus out and it's really a function of.

Eric: The rooftops right. We've got about 700 rooftops open we've got 500 as we've talked about we've got two overlapping phases. So ive got 500 lots under production right now.

Mark W. Harding: We have got two overlapping phases, so I have got 500 lots under production right now. And I think a lot of those commercial, and this is large scale, right, large scale grocery, large scale box vendors, they really look to have high volume stores. And that's an opportunity for us not only because of the value of the commercial land but also because of the sales tax revenue that that generates to accelerate the repayment of our reimbursables. So those two go hand in hand.

Eric: And I think a lot of those commercial.

Eric: And this was large scale large scale grocery large scale box vendors. They really look to have high volume stores and thats an opportunity for us not only because of the value of the commercial land, but then also the.

Eric: The sales tax revenue that that generates to accelerate the repayment of our reimbursable. So those two go hand in hand, and we really do want to make sure that we're targeting those those larger.

Mark W. Harding: And we really do want to make sure that we're targeting those larger commercial opportunities for high dollar values. So I would say that it's not for lack of our trying; it's mostly for, you know, a bit more of the patience on absorption on Single-Family Home. Okay, Mark, you left out the rental area, single family rentals, you know, tremendous opera.

Eric: Those larger commercial opportunities for the high dollar value. So I would say that it's not for lack of are trying it's mostly for.

Eric: A bit more of the patients on absorption.

Eric: Single family homes.

Speaker Change: Okay, Mark you left out the rental area.

Speaker Change: Single family rentals.

Mark W. Harding: Tremendous boy. This is this is an interesting one because.

Mark W. Harding: Boy, this is an interesting one because, as interest rates rise, we were thinking that most of the renters were just in there because, you know, interest rates were a timing element there. And that's not really what we're seeing. What we're seeing is people choosing to rent. And it's stunning because we get applicants for these single-family rentals that would easily qualify to buy these houses.

Mark W. Harding: As interest rates, we were thinking that most of the renters in there we're just in there because.

Mark W. Harding: Interest rates were a timing element in there and that's not really what we're seeing what we're seeing is people choosing to rent and its stunning because we get applicants for these single family rentals that would easily qualify to buy these houses.

Mark W. Harding: And, you know, just in maintaining relationships, we try to get in and find out some of their motivations, and it's frankly, they're just saying, look, we don't want to buy, we don't want the maintenance costs, although they're brand new homes. And so the maintenance costs are pretty low, or they just, they're not sure if this is, you know, where they are, the Denver market. They may be new to the Denver market, or they may be, you know, considering their careers. And so they're not sure if they're going to stay in this particular market or stay in even this particular sub-market. But, you know, there is tremendous demand. You know, we've got a great renewal rate on that. I think we've had almost 90. We haven't been absolutely perfect, but we're pretty close.

Mark W. Harding: And just on just maintaining relationships, we try to get in and find some of their motivations and it's frankly, they're just saying look we don't want to buy.

Mark W. Harding: We don't want the the maintenance cost, although they are brand new homes and so the maintenance costs are pretty low.

Mark W. Harding: Or are they just they are not sure. If this is where they're the Denver they may be new to the Denver market or they may be considering their careers and so theyre not sure if they're going to stay in this particular market or stay in even this particular submarket, but tremendous demand.

Mark W. Harding: We've got a great renewal rate on that I think we've had almost 90.

Mark W. Harding: Ben absolutely perfect, but it's pretty close I think we're 90 plus percent occupancy while we've been in this segment for the last two years. So we continue to grow that segment and really focus in on delivering those homes at a cost effective basis right, having partnership with our <unk>.

Mark W. Harding: I think we're at 90 plus percent occupancy while we've been in this segment for the last two years. So we continue to grow that segment and really focus on delivering those homes on a cost-effective basis, right? Having partnership with our national home builders, being able to have them continue to line build and build very efficiently, deliver, you know, what is a seasonal product for us, as well as the for sale product that they have. So we'll continue to grow that. Okay, finally, since we're all pretty sensitive to inflation, what kind of price increases are you able to put in place? And have you been consistently doing them, or have you been withholding that knife for a while?

Mark W. Harding: National Homebuilders being able to have them continue to line build and build very efficiently deliver what is the season product.

Mark W. Harding: For us as well as the for sale product that they have so.

Mark W. Harding: We will continue to grow that segment.

Mark W. Harding: Okay, finally, since raw pretty sensitive to inflation.

Mark W. Harding: What kind of price increases are you able to put in place and.

Mark W. Harding: Have you been consistently doing it or we are holding that.

Mark W. Harding: My for Awhile.

Speaker Change: I think we are I.

Mark W. Harding: You know, I think we're, I would say on the rental rates, we're at the 90 percentile, but we're not at the 100 percentile. And our philosophy is, I'd rather, I'd rather retain a tenant. And so when we get renewals, those price increases are very modest; they might be, you know, one or 2%.

Speaker Change: Would say on an <unk>.

Speaker Change: The rental rates were at the 90 percentile, but we're not at the 100 percentile and our philosophy is I'd, rather I'd, rather retain a tenant and so when we get renewals those price increases are very modest they might be one or 2% when we get into.

Mark W. Harding: When we get into a turnover, then we'll mark those up a little bit closer to where those gaps are in the marketplace. So I would say we're super competitive because we want to maintain that high 90-95% occupancy. Okay, what about the oil?

Speaker Change: Our turnover than we mark those up a little bit closer to where those gaps are in the marketplace. So I would say, we're we're super competitive because we want to maintain that that high 90%, 95% occupancy rate.

Speaker Change: Okay, what about <unk>.

Speaker Change: <unk> vessels.

Speaker Change: Hum.

We have kind of a.

Mark W. Harding: We have multi-year contracts with our oil and gas operators that have fixed prices on those, so I think we're very balanced there. We look at a good partnership role with them, and I think they look at us as a great partner with them because they're not competing with residential customers, and so we have multi-year obligations where that's increased every year; the pricing of those does inflation every year. Let me address some questions that you would Ask Me Next, which are going to be, you know, how do we see our price increases in the utility segment on TAP fees as well as water usage fees? Those are increasing, as you can see. When you take a look at when the company first started Sky Ranch, our TAP fees were closer to $28,000 combined. Now they're closer to $40,000 combined.

Speaker Change: Multi year contracts with our oil and gas operators that are fixed pricing on those so I think we are.

Speaker Change: Were very well balanced there.

Speaker Change: We look at a good partnership role with them and I think they look at us as a great partner with them because theyre not competing with residential customers.

Speaker Change: And so we have multiyear obligations, where that's increase every year the pricing of those don't do inflate every year.

Speaker Change: And let me, let me kind of address some questions that you would.

Speaker Change: Ask me next which youre going to be how do we see our price increases in the utility segment.

Speaker Change: Pat fees as well as water usage fees those are increasing as you can see when when you take a look at when the companies first start at Sky Ranch, our tap fees were closer to $28000 combined now theyre closer to $40000 combined and so that's a function of the fact that it's costing more for water providers to reach.

Mark W. Harding: And so that's a function of the fact that it costs more for water providers to reach farther and farther out. And so when you see comparable rates on there, that's accelerating significantly. The water usage rates at the monthly rates, those are more inflationary, right? They don't inflate as much.

Speaker Change: Farther and farther out and so when you see a comparable rates on there that's accelerating significantly.

Speaker Change: The water usage rates at the monthly rates. Those are those are more inflationary right. They don't they don't inflate as much and what we do is we've got a tiered pricing mechanism in there which.

Mark W. Harding: And what we do is we've got a tiered pricing mechanism in there, which is a function of the more you use, the more you pay for that increment of water. And that's kind of a forced conservation measure. We're seeing that our portfolio is actually going to, will be serving more connections than we thought, you know, whereas we thought that might be at 60,000 connections. And we continue to report that 60,000 connections. There's probably some pedals in there somewhere.

Speaker Change: This is a function of the more you use the more you pay for that increment of water and Thats, a kind of a forest conservation measure.

Speaker Change: Seeing that our portfolio is actually going will be serving more connections than we thought, whereas we thought that might be at 60000 connections and we continue to report that 60000 connections theres, probably some peddled in there I think there is some some conservatism in what that portfolio can serve.

Mark W. Harding: I think there's some conservatism in what that portfolio can serve. And then our lot fees, you know, are we are we how are we pricing our lot fees as compared to the market? And we continue to be, you know, an entry-level product, but we also continue to price those lots to maintain our margins, together with the increased costs of delivering those horizontal infrastructure components. So we do take a look at each of those, and I think we're, we're very competitive on all of them. Well, finally. Where are you seeing the most inflationary impact on your business? You know, I would say... We have not seen strong inflationary pressures here.

Speaker Change: And then our last piece.

Speaker Change: We are we how are we pricing our lobbies as compared to the market and we continue to be.

Speaker Change: A entry level product, but we also continue to price those lots to maintain our margins.

Speaker Change: With the increased costs of delivering those horizontal infrastructure components. So we.

Speaker Change: We do take a look at each of those and I think we're very competitive on all of them.

Speaker Change: Finally.

Speaker Change: Where are you seeing the most inflationary impact on your business.

Speaker Change: I would say.

Speaker Change: We have not seen strong inflationary pressures here I would even say we've seen some.

Mark W. Harding: I would even say we've seen some cost improvements on building materials come down. Certainly, the trades have been relieved, and the supply chains are relieved. I, I would, I'd say we're counter to that, Bill, we've really seen a little bit of relief from that high inflationary side, and whether that was because of, you know, any number of factors rolling out of the last three years on the supply chain. COVID shutdowns and, you know, distribution channels and, you know, having the labor force, the workforce be very constrained and competitive. If it's any one of those, it would probably be labor for getting competitive bids for landscaping, getting competitive bids for the utility packages, those sorts of things would be the ones where I'd say if we've seen any cost rising, it would be for the labor.

Speaker Change: Cost improvement on.

Speaker Change: On building materials have come down certainly the trades have been relieving the supply chains are relieving so.

Speaker Change: I would say we're counter on that Bill, we've really seen a little bit of relief from that high inflationary side and whether that was because of any number of factors rolling out of the last three years on supply chain and Covid shutdowns in.

Speaker Change: Distribution channels and.

Speaker Change: Having labor force workforce.

Speaker Change: Be very constrained and competitive.

If it has any one of those it would probably labor for getting.

Speaker Change: Competitive bids for landscaping getting competitive bids for.

Speaker Change: The utility packages those sorts of things would be the one where I would say if we've seen any cost rising it would be on the labor side.

Speaker Change: Thanks, Greg.

Mark W. Harding: Makes great sense. Well, thank you very much. Thanks for your continued support. And as a reminder, if you have any remaining questions, please press star 1 on your phone. Your next question is coming from Greg Malachowski, who's... Greg, you're lying. Hey, Mark, how are you? Good, how are you?

Thank you very much.

Thanks for your continued support.

Speaker Change: Thank you Keith.

Speaker Change: Just a reminder, if you have any remaining questions. Please press star one on your phone keypad now.

Speaker Change: Your next question is coming from Greg Monetary ski is a private investor Greg Your line is live.

Gregory Alexander Roeder: Hey, Mark how are you good how are you.

Gregory Alexander Roeder: Are you.

Gregory Alexander Roeder: Good good so I got two questions. The first one relates to I guess you have what you described as the receivables and I was just wondering if you could give any color on the timeline for the next bond issuance I know historically I think that I really like two or three years is where you guys are kind of there started to be new.

Greg Malachowski: Good, good. So I have two questions. The first one relates to, I guess, what you described as the receivables. And I was just wondering if you could give any color on the timeline for the next bond issuance. I know, historically, it's, I think, every, like, two or three years where you guys have kind of started to make noise about another one happening. And if I remember correctly, maybe 2021 when we got the last one.

Gregory Alexander Roeder: <unk> is about another one happening.

And if I remember maybe 2021, when we got the last one so I was just wondering if you had any visibility into the timing of that.

Mark W. Harding: So I was just wondering if you had any visibility into the timing of that. Yeah. So yeah, the last one was probably 22.

Gregory Alexander Roeder: Yep.

Speaker Change: Yes, the last one was probably 'twenty two and it was as we started that phase II.

Mark W. Harding: And it was as we started phase two. So there's, we tend to bond those out in relationships at the start of each of the phases. And so, as we're accelerating the completion of phase two, we'll be moving into phase three, and phase three is likely to be, you know, we keep increasing the sizes of those. Our first phase was 500 units. Our second phase was a little over 800, and I would say 70 units. Our third phase is likely to be over 1000 units. And so that cycle continues. And really, when you take a look at the absorption of any master planned community, they typically go on a bell curve where you start out with a few numbers of units. And as those units grow, and then you have overlapping phases, you know, we look to deliver, you know, closer to 300-400 lots a year as we continue to build this out.

Speaker Change: So there is we.

Speaker Change: We tend to bond those out.

Speaker Change: In relationship to at the start of each of the phases and so as we're accelerating the completion of phase two will be moving into phase III and phase III is likely to be we keep increasing the sizes of those our first phase was 500 units or second phase was a little over 800, and say 70 units.

Speaker Change: Our third phase is likely to be over 1000 units and so that continues and it really when you take a look at the absorption of any masterplan community. They typically go on a bell curve, where you start out with a few number of units and as those units grow and then you have overlapping phases, we look to deliver.

Speaker Change: Closer to 300 400 lots a year as we continue to build this out and so that next.

Mark W. Harding: And so that next filing, that next phase three will probably start in earnest at the beginning of next year. What we are likely to see is that towards the end of this year, we'll have a refinancing opportunity on our first phase of bonds. And so just to talk with you a little bit about the lifecycle of these bondings, you go out and you bond these things out. We like to bond them a little bit more mature than maybe some of the other developers where we will have already started. Some of the homes will have contracts with home builders.

Speaker Change: Filling that next phase III will probably start in earnest.

Speaker Change: Beginning of next year.

Speaker Change: What we are likely to see is towards the end of this year, we'll have a refinancing opportunity of our first phase of bonds and so just to talk with you a little bit about the lifecycle of these bonding as you go out and you bond these things out.

We like to bond them, a little bit more mature than maybe some of the other developers where we'll have already started some of the homes will have contracts with homebuilders. Some some developers go out very early they pay a lot more money.

Mark W. Harding: Some developers go out very early. They pay a lot more money in terms of their interest costs, and they constrain their overall receivables. Right. So when you take a look at a residential mill, it has a fixed capacity, and you know what that capacity is. Colorado is really what we consider to be a sales tax incentive state.

In terms of their interest costs and a constrain their overall receivables right. So when you take a look at our residential mill. It has a fixed capacity and you know what that capacity is Colorado is really what we consider to be a sales tax incentive state. So.

Mark W. Harding: So as long as you have some commercial there, you really have the ability to get all of your all of your public improvements back. And so we were very confident about our receivables on that side. And as these these typically go out in the early stage. Once that five-year window goes, expires, you really have a very mature tax base, right?

Speaker Change: As long as you have some commercial there you really have the ability to get all of your all of your public improvements back and so we were very confident about our AR receivables on that side and so.

Speaker Change: As these these typically go out on early stage.

Speaker Change: Once that five year window goes.

Speaker Change: Spires, you really have a very mature tax base right. So we know all our 510 lots in our phase one.

Mark W. Harding: So we know all our 510 lots in phase one are all completed, and they've all seen increases in the assessed value of their homes as compared to when we originally bonded that, which means you have excess bonding capacity in there. And so when you refinance those bonds, you're able to refinance them and actually increase the capacity of that. So you'll likely see that late this year, early part of next year, for our next bond issue, and then rolling into late 2526 for our phase three bond issue, and then likely another bond issue for the interchange improvements that we're doing. And we may or may not have some capacity within that to pay some of those reimbursable costs as well.

Speaker Change: Those are all completed they've all seen increases in the assessed value of their homes as compared to when we originally bonded that which means you have excess bonding capacity in there and so when you refinance those bonds you are able to refinance it.

Speaker Change: <unk> increased the capacity of that so you'll likely see that late this year.

Speaker Change: First part of next year for our next bond issue and then rolling into late 'twenty five 'twenty six for our phase III bond issue and then likely another bond issue for the interchange improvements that we're doing and we may or may not have some capacity within that to pay some of those reimbursable as well.

Mark W. Harding: In addition to the bonding of that, and one of the nice things that we have with Sky Ranch is the amount of revenue that comes in from other sources other than our mill levies, and a lot of that is from some severance tax from oil and gas activities. And so that provides excess revenue to the government entity, to our Sky Ranch Community Authority Board, which then they use those funds to pay down that.

Speaker Change: In addition to the bonding of that in one of the nice things that we have with Sky Ranch is.

Speaker Change: The amount of revenue that come in from other sources other than our mill levies and a lot of that is from some severance tax from oil and gas exited activity and so that provides excess revenue to the to the government entity to our Sky Ranch Community Authority Board that then they use those funds to.

Speaker Change: Pay down that so you'll see interim payments, even between our bond offering to that receivables in there and that gives our auditors a lot of confidence it gives the market a lot of confidence of the liquidity of that receivable.

Mark W. Harding: So you'll see interim payments even between our bond offering and that receivable in there. And that gives our auditors a lot of confidence; it gives the market a lot of confidence in the liquidity of that. Okay, thanks.

Speaker Change: Okay. Thanks, and then just my second question.

Greg Malachowski: And then just my second question, and I know it's always kind of the elephant in the room, but I know it's, I guess, is there a point where we look at our market valuation and there's been enough time that's gone by where we can confidently say this is a perpetual issue that whatever it is you guys are doing, isn't translating to value for your stockholders through the main mechanism for that, which is the public And with that in mind, maybe we should look at what we're missing here or what we can do differently to go about fixing that. Because I look at this and it's funny, I was going through your investor relations section a couple of weeks ago and stumbled upon the interview with Mark Harding from, I think it was 2018, with a $10, $10.50, $11 stock price and much of all the great things we've accomplished, not even accomplished yet. And it just wows me almost to fast forward six years.

Speaker Change: Although it's always kind of I guess, the elephant in the room, but I don't know.

Speaker Change: I guess is there a point, where we look at our market valuation.

Speaker Change: There's been a lot of time, that's gone by we're.

Speaker Change: We can confidently say this is a perpetual issue that whatever it is you guys are doing isn't translating to value for stockholders.

Speaker Change: Through the main mechanism for that which is the public markets.

Speaker Change: With that in mind, maybe look at seeing what we're missing here are what we can do differently to go about it.

Speaker Change: So much because I look at the assumed it's funny I was going through your Investor Relations section couple of weeks ago and stumbled upon the interview with Mark Harding from I think it was 2018 with the $10 10, and a half $11 stock price much of all the great things, we've accomplished not even accomplished yet.

Speaker Change: It's just wows me almost to fast forward now six years.

Greg Malachowski: We're at $9. And you guys, on a net basis, have issued more stuff than you bought back. And it's just puzzling to me because there are great assets here. There are great people here. And just something isn't catching on.

Speaker Change: <unk>.

Speaker Change: At $9.

Speaker Change: You guys on a net basis issue more stock than you bought back at all.

Speaker Change: It's just puzzling to me because there are great assets here.

Speaker Change: Great people here and just something isn't catching.

Greg Malachowski: And, I'm just curious if you guys have a point where you say, okay, maybe we should try to do something different. Let's change things up. Let's evaluate this from a different angle than we have. Boy, Greg, you put your finger on the pulse.

Speaker Change: And.

Speaker Change: I'm just curious if you guys have a point, where you say, okay, maybe let's let's.

Speaker Change: Let's try to do something different much change things up let's evaluate this from a different angle than we have before.

Speaker Change: Boy, Greg you've put your finger on the pulse and.

Speaker Change: Your frustration is echoed by management and the board.

Mark W. Harding: Your frustration is echoed by management and the board. And I'm at a loss, you know, at the end of the day. One of the sage pieces of advice that we continue to get is, look, do what you do and, you know, continue to produce those results. Continue to really execute on your business model, and the market will take care of itself. And in fact, it has not, right?

Speaker Change: And I'm I'm at a loss at the end of the day.

Speaker Change: One of the one of the Sage pieces of advice that we continue to get is do what you do and continue to produce those results continue to.

Speaker Change:

Speaker Change: Really execute on your business model and the market will take care of itself and in fact it has not.

Speaker Change: I mean.

Mark W. Harding: I mean, as you correctly highlighted, the only stock that we issue is incentive stock. And so, you know, our buyback program is intended to be anti-dilutive on that basis. And could we be a bit more aggressive on that? We probably could and will continue to look at that metric and really, you know, we set our price points on the repurchase such that we're being opportunistic, but we could be buying a bit more to become anti-dilutive. But you know, the dilutive portion of this is insignificant. And so that's not the problem. The margins are not the problem within the company.

Speaker Change: You correctly highlighted the only the only stock that we issue our incentive stocks.

Speaker Change: And so our buyback program is intended to be anti dilutive on that basis and could we be a bit more aggressive on that we probably could and continue to look at that metric and really we set our price points on the repurchase.

Speaker Change: Such that we're being opportunistic, but we could be buying a bit more to become anti dilutive.

Speaker Change: The dilutive portion of this is insignificant and so that's not a problem.

Speaker Change: The margins are not the problem within the company. The story is not the problem within the company and the team is not the problem within the company because they continue to execute resolved.

Mark W. Harding: The story is not the problem within the company, and the team is not the problem within the company because they continue to deliver results. You know, so is it messaging? No. Is it performance? No.

Speaker Change: So is it messaging no is it is it performance now.

Mark W. Harding: You know, how do companies like our size reach those years? And how many analysts are out there, you know, looking for these opportunities? And is it liquidity? Is it the volume of the stock? Is it the capacity?

Speaker Change: Yes.

Speaker Change: How do companies like our size company reach those years and how many analysts are out there looking for these opportunities and is it liquidity is that the volume of the stock is at the capacity I continue are you being up I mean, when you look at it.

Mark W. Harding: I continue to argue, no. I mean, when you look at it, your average trading shares are anemic. And then when all of a sudden somebody comes in and says, oh, I wanna take a position, you know, we'll get half a million shares trade in a day. And so it seems like there's the ability to buy into it. And so those folks that, you know, when I'm out on the road, when I'm at a conference, or when I'm, you know, doing a non-deal roadshow, they say, hey, I think this is a great opportunity, but your average day volume doesn't allow me to do it. Is that the mechanism?

Speaker Change: Our average trading shares are anemic.

Speaker Change: And then when all of a sudden somebody comes in and says Oh I want to take a position.

Speaker Change: We'll get a half a million shares traded on a day and so it seems like there is the ability to buy into it and so those folks it when I'm when I'm out on the road when I'm at a conference or when I'm.

Speaker Change: Doing a non deal roadshow folks are saying, Hey, I think this is a great opportunity, but your average day volume doesn't allow me to do it is that the mechanism when somebody comes in and analyze this from a portfolio standpoint, and then they go okay. What's the 100 day average trading of the stock and they say Oh I can't buy a position and my answer to that is that you.

Mark W. Harding: You know, when somebody comes in and analyses from a portfolio standpoint, and then they go, okay, what's the 100 day average trading volume of the stock? And they say, oh, I can't buy a position. And my answer to that is, oh, I'll bet you can, without working against yourself.

Speaker Change: Can without working against yourself.

Mark W. Harding: And so all of those things are things that we try to address. We try to address how do we reach more ears, more eyes, more opportunities. And it's not just the management level; it's at the board level, it's at the investor level. And, you know, we're committed to it, while at the same time, you know, we're keeping a steadfast hand on the wheel and making sure that we continue to meet those results. And so the bots that are out there, the programs that are scanning, you know, your gross margins, scanning your returns, scanning your earnings per share, are also able to kick this out and have somebody take another look at it and understand what it is that we're doing. And it's one of those things that's a mystery to us.

Speaker Change: So all of those things are things that we try to address we try to address how do we reached more years more is more opportunities and it's not just the management level as at the board level. It's at the industrial level and were were attenuated to it while at the same time.

Speaker Change: We're keeping a steadfast hand on the wheel and making sure that we continue to put those results up and so the bots that are out there the programs that are scanning.

Speaker Change: Gross margin scanning your returns scanning your earnings per share also are able to kick this out and have somebody take another look at it and understand what it is that we're doing and it's one of those things.

Speaker Change: That's a mystery for us and we are.

Mark W. Harding: And we are, you know, we are looking to try other things. We are looking to expand that approach. We are looking to have sponsorship. And, you know, we're just not an issuer where we're gonna get any love from an investment bank. We're relatively. Unknown Attendee, Gregory Roeder, Marc Spezialy, Pure Cycle Corp., market analysts will pick up some coverage.

Speaker Change: We are looking to try other things we are looking to expand that approach we are looking to have sponsorship.

Speaker Change: And we're just not an issuer, where we're going to get any love from an investment bank were relative.

Speaker Change: Relative we're small in comparison to each of the.

Speaker Change: Segment industry segments that we're operating in but we're punching above our weight class and I think it gets some notice and eventually.

Speaker Change: Out of these.

Speaker Change: Market analysts will pick up some coverage, we continue to try and introduce it to them and incentivize.

Greg Malachowski: We continue to try and introduce it to them and incentivize the opportunity that we have so that they look really smart and are able to, you know, find one of those hidden gems. But, you know, I'd love to take it offline if you've got some ideas that we haven't pursued or to broadcast out to all of our investors. You know, if there's something out there that you think we could be doing better, different, or highlighting the opportunities that the company holds, because you guys have done the work, and you know what that model looks like. I know what that model looks like, and we've got our own modeling in there, and I'd love to be able to share that, but the rules that allow companies to do some of that type of activity are just a little So I share your pain.

Speaker Change: The opportunity that we have so that they look really smart and being able to find one of those hidden gems, but.

Speaker Change: I'd love to take it offline if <unk> got some ideas that we haven't pursued.

Speaker Change: Or for broadcast out to all of our investors if theres something out there that you think we could be doing better different or highlighting the opportunities that the company holds because you guys have done the work and you know what that model looks like.

Speaker Change: No what that model looks like and we've got our own modeling in there and I'd love to be able to share that but the rules that allow companies to do some of that type of activity or just a little bit restrictive so I share your view.

Greg Malachowski: If I could, there are two things that I just think... Perhaps, well, I'm almost certain they would help. It just comes down to whether or not, you know, you guys and the board, kind of feel the same way. And the first one is, I think that the company could absolutely benefit, and shareholders could benefit, and even the people internally working would benefit from hiring an advisor and conducting a strategic review. Because, if nothing else, it's just this is a collection of assets that are unique but also somewhat hard to value. And when I look at a nine or $10 stock price and what that implies in terms of the valuations of your business segment, It's just, it's not, it doesn't make sense to me.

Speaker Change: If I could there's two things that I just think.

Speaker Change: Perhaps where I'm almost certainly would help it just comes down to whether or not you guys.

Speaker Change: And the board.

Speaker Change: How do you feel the same way in the first one is I think that the company could absolutely benefit shareholders could benefit and even the people internally working.

Speaker Change: It would benefit from hiring an advisor and conducting a strategic review.

Speaker Change: The call is if nothing else.

Speaker Change: This is a collection of assets that are unique but also somewhat hard to value and when I look at a nine or a $10 stock price and what that implies in terms of the valuations of your business segments.

Speaker Change: It's just it's not it doesn't make sense to me and there was very clear.

Greg Malachowski: And there are very clear benefits on the capital allocation front from buying back significant amounts of stock. And that doesn't have to be, you know, $50 million worth of stock in one shot. But there's really no reason you guys can't have, you know, a $10 million share repurchase program where you buy half a million dollars worth of shares a month, or at least in the market trying to. And if you guys ran a process and won, who knows? DR Horton bought Miller Water, they bought Four Star, you know. If you guys get a $25 offer on the table, I think a lot of people But even just internally, fully seeing what somebody would pay for our company if they had the opportunity to acquire parts or all of it, it would be useful in terms of then looking at capital allocation decisions and seeing, and that's the first one. And that's the easy suggestion. The other one would just kind of be clarifying.

Speaker Change: Benefits on the capital allocation front.

Speaker Change: From buying back significant amounts of stopping that doesn't have to be.

Speaker Change: $50 million worth of stock in one shot, but there's really no reason you guys can't house.

Speaker Change: A $10 million share repurchase program, where you're buying half a million dollars worth of month or at least in the market trying to.

Speaker Change: And if you guys ran a process and one who knows Dr. Horton Bot builder water they bought four star.

Speaker Change: If you guys get a $25 offer on the table I think a lot of go Hey, Gee, that's something to consider but even just internally fully seeing this is what somebody would pay for our company as we had the opportunity to acquire parts or all of it.

Speaker Change: It would be useful in terms of then looking at capital allocation decisions and seeing and that stopped the first one and that's what usually suggest and the other one was just kind of be.

Speaker Change: Clarifying some of the <unk>.

Greg Malachowski: Some of the You guys are ambitious, right? And you haven't made too many acquisitions to date. But there's a lot of this, we're in the market to buy more water, we're in the market to buy more land. And when you look at it, again, kind of the issue is these are assets that take a while to develop. You've had the water portfolio, in some cases, for decades, right?

Speaker Change: These are ambitious right and you haven't made too many acquisitions to date.

Speaker Change: There's a lot of those were in the market to buy more water, where in the market to buy more or less.

Speaker Change: You look at it again kind of the issue is these are assets that take a while to develop you've had the water portfolio.

In some cases for.

Speaker Change: Alright, and then I'm looking at the numbers in your annual letter and the utilization is 2%.

Greg Malachowski: And then I'm looking at the numbers and your annual letter, and the utilization is 2% or 2% of capacity. Why not just come out and say, we wanna get that number up to 20% capacity or 30% before we're going to entertain the idea of buying more of something we already have plenty of. And even the Sky Ranch, the Sky Ranch you guys bought.

Speaker Change: 2% of capacity why not just come out and say, we want to get that number up to 20% capacity or 30% before we're going to entertain the idea of buying more of something we already have plenty of and even the Sky Ranch Sky rents you guys book I think like 13 years ago, and we've developed 15, 20% of it tops why not.

Greg Malachowski: Transcripts provided by Transcription Outsourcing, LLC. Call it 10 years. Our focus is accelerating that and returning capital to shareholders. And once we've got 20 to 30% of the water portfolio utilized, once we've monetized half of the Sky Ranch, then we'll pursue acquisitions. But I think it gives people a little bit of pause when we're not buying back stock the way we should. I'm not in favor of a dividend, but last call, somebody mentioned it, and you run the math. It costs less than a million bucks a year to pay a penny a quarter.

Speaker Change: Constraints, we are monetizing the assets, we have we have enough for the next.

Speaker Change: 10 years, our focus is accelerating that returning capital to shareholders and once we've got 20% to 30% of the water portfolio utilized once we've monetized half of the Sky Ranch and then we will pursue acquisitions, but I think it gives people a little bit of pause when we're not buying back stock the way we should.

Speaker Change: I'm not in favor of the dividend, but less haul somebody mentioned, good and you run the math it costs less than a million bucks a year to pay a penny a quarter, we're not doing that I. Just think if you guys can find the parameters of your capital allocation and just clearly stated our focus is solely on maximizing what we have and returning capital.

Greg Malachowski: We're not doing that. I just think if you guys can find the parameters of your capital allocation, and it's clearly stated that our focus is solely on maximizing what we have and returning capital to shareholders and demonstrating our competency there, I think that would do wonders for you. So it's something to think about. And I know some of this you can't really do.

Speaker Change: Shareholders and demonstrating our competency there I think that would do wonders for us. So it's something to think about and I know some of this you can't really.

Greg Malachowski: Answer in too much detail or just stuff you guys aren't allowed to speak about, but I just wanted to put it out there because I think it's something that doesn't really have any downside. It's something that maybe people can get behind or just see that if the market's not going to look at things the way we want them to, at some point, it's kind of on us to be proactive about that. So with that, I'll sign off. As always, I thank you guys for the work. It's taken my call, and I look forward to the next couple of quarters.

Speaker Change: Answer in too much detail or just stuff you guys are not speak about but I just wanted to put it out there because I think it's something that doesn't really have any downsides or something that maybe people can get behind you just see that if the market's not going to look at things the way we want them to at some point, it's kind of it's on us to be proactive about that so with that I'll sign off as always I think.

Speaker Change: You guys for the work is taking my call.

I look forward over the next couple of quarters. Thanks.

Greg Malachowski: Thanks. Thanks, Greg. Thank you very much. Well, we appear to have no further questions in the queue. I will now hand back over to Mark for any...

Speaker Change: Thanks, Greg.

Speaker Change: Thank you very much.

Speaker Change: To have no further questions in the keys I will now hand back over to Mark for any closing comments.

Mark W. Harding: Thank you. And again, I want to thank all of you for your continued support and your valued investment dollars here. For those of you that are listening on the replay, if something came up that you didn't quite get your color on, certainly feel free to open up and give me a call and talk about it directly. We will be having an investor day this summer. So as that gets a little closer, we'll start to give you a heads up on the day and allow those of you who were out here a few years ago the opportunity to see the progress that the company has made and really get a feel for what it is that we're doing and the opportunities that the company has before it.

Mark W. Harding: Thank you and again I want to thank all of you for your continued support.

Mark W. Harding: And.

Mark W. Harding: We are valued investment dollars here.

Mark W. Harding: For those of you that are listening on the replay if something came up that you Didnt Kuwait.

Mark W. Harding: Get your color on certainly feel free to open up and give me a call and talk about it directly.

Mark W. Harding: We will be having an investor day. This summer so as that gets a little closer we will start to give you a heads up on hold the day allow those of you who have been out here or been out here a few years ago the opportunity to see the progress that the company has made and really get a feel for what it is that we're doing in the <unk>.

Speaker Change: <unk> the company has before them so with that thank you all and I will sign off and look forward to talking to you in the future.

Operator: So with that, thank you all and I will sign off and look forward to talking to you in the future. Thank you very much. That does conclude my presentation. Phone lines at this time, and have a wonderful day. Thank you. Thank you, Jenny.

Speaker Change: Thank you very much that does conclude today's conference call.

Speaker Change: May disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

Janet: Thank you Janet.

Janet: Thank you Mark.