Gregmal Posted January 4, 2021 Author Share Posted January 4, 2021 https://seekingalpha.com/pr/18138539-pure-cycle-reports-first-quarter-results One of my favorite things about Pure Cycle is the no nonsense approach to releasing numbers. Quarter over, boom, here's the numbers. Well I agree I like it when companies put the numbers out fast but also Pure Cycle's year ends on November 30th right? Yea they have a different Q end/fiscal year, but as far as reporting quarterly results, I am fairly certain they are one of the first to report for this "earning season". Something they do often. Would like to see a more formal structure/process. They are getting there. This is a company that 2 years ago didnt even really hold conference calls. It is definitely evolving. Link to comment Share on other sites More sharing options...
hasilp89 Posted January 5, 2021 Share Posted January 5, 2021 Starting to read up on them and read through this chain. May have missed it but Haven’t seen anything on this post about the actual water utility and what kind of ongoing investment is required there. While the real estate math makes sense as do the fundamentals on how sky ranch can blow up as well, I feel a little outside my circle when it comes to understanding the water utility side of things and what unknowns lie there. -Im assuming they have existing water treatments plants and majority of infrastructure is set up already (just to the home connections remain) or is there any significant additional on going capital spend required? -Ultimately from what I can tell they are a monopoly on water for any business/home in their geography, it just isn’t built out yet? The thought being sky ranch will be the beginning of this build out. Given they’ve spent almost $50m on water investments would you’d want at least $5-$10m of water profit to have that investment make sense (10-20% returns ignoring cash flows from land sales etc), is that possible? -Also seems like it’s a couple bites of the apple and then relying on mgmt capital allocation. After the lot sales / tap fees you might be sitting on a good roi from cost (initial purchase price + development fee + incurred SGA) but for a new investor the on going profits from the $1500/home/month at 60-70% margin won’t cut it even with 500 homes. Tying in with above, is the expectation that they actually get to 60k sfes at some point in the next 10 years? Link to comment Share on other sites More sharing options...
Gregmal Posted January 5, 2021 Author Share Posted January 5, 2021 First Id say there is next to no chance they fill the 60k SFE in the next decade. Doing that alone would value the water utility end at close to $2B. You should have the Sky Ranch in its entirety completely within the next decade and realistically probably much sooner. My best guesstimate is ~7 years. By then you'll have the 5,000 SFE which just using residential rates(commercial is much higher) yields a $150M valuation or so plus whatever remaining is ascribed to the optionality on the remaining capacity. They have plenty of ability to add capacity and will likely do small bolt ons like Wild Point. This is independent of O&G revenue and not including tap fees which should produce one time revenue(on the taps) over another $125M. The facilities are all rather new and in very good order. Theres rather minimal maintenance once the infrastructure is in place and typically they've structured it in a way that only requires spending once they have contracts in place for the future revenue. They touch on how most of the spend was already completed in phase 1 which is why(in addition to greater demand) you'll see margins increase. They are a monopoly in the sense that once the home is tapped, whoever lives their pays. Marks touched on this before in that its not regulated in a bad way, but you need to be sensitive to this from a cost perspective. Within continued build out of the area, probably future lot/MPC purchases, and perhaps additions of neighboring rights, you have a lot of optionality. The presentation breaks out your revenue/profit that should be expected in terms of whats directly and individually tied to Sky Ranch. The mineral/O&G is a free call. You also have the $20M+ reimbursable. My back of the envelope estimate is that if the company wanted to, there's probably $130M in available liquidity/spending capacity if the right opportunity came up. However Mark has and continues to be very shrewd and disciplined with allocation. This also doesnt even touch on the CRE avenue which will include mixed use office/retail and large box anchored shopping centers. A simple ground lease with HD for instance is a $25M asset pulled from thin air. Link to comment Share on other sites More sharing options...
hasilp89 Posted January 5, 2021 Share Posted January 5, 2021 thanks that makes sense and appreciate the quick response. Will do my own research on Mark and his credentials but anything specific giving you confidence in his ability to execute the CRE side of things essentially he needs to turn Sky Ranch into a desirable master planned suburb. I agree his ability to get the homesites contracted and sold counts. Believe you mentioned he wants to go direct to tenants with development etc. would be nice if he could do all of that with his $3.5M of annual G&A. Given the certainty of the current development/water cash flows it seems like a lot of the upside lies in the execution on of Mark turning Sky Ranch into a full fledged suburbia and having it happen in a timely manner. Link to comment Share on other sites More sharing options...
Williams406 Posted January 5, 2021 Share Posted January 5, 2021 hasilp89, I believe I recall Mark discussing on a fairly recent call that many of the commercial inquiries he was receiving were from would-be middlemen rather than the end user on the commercial side, as you noted. The company invited Jeff Sheets at the start of 2020 on the board to bring commercial development experience Mark didn't feel was there prior. I don't know anything about Jeff Sheets other than his bio from Pure Cycle's leadership page, but it is a positive that Mark and the team weighed different ways to handle the commercial-side planning and opted for patience, better likely economics over the long run, and went out and obtained the expertise they did not have to execute a more direct commercial approach. Jeff Sheets Director since January 2020 Mr. Jeff Sheets has been a real estate development executive for over 35 years specializing in commercial real estate. He has extensive knowledge in office, retail, industrial flex development, land development, master planning and entitlements, for both residential and commercial projects, land acquisitions and property assessment. For the past 29 years, Jeff has been a Vice President at Koelbel & Company, a private Colorado commercial and residential development company, and has been involved in projects throughout the front range of Colorado. Jeff earned an undergraduate degree from Westmont College in Santa Barbara and a master’s degree from the University of Denver. Link to comment Share on other sites More sharing options...
Gregmal Posted January 5, 2021 Author Share Posted January 5, 2021 To that regard on the CRE, one of the things I found respectable is that Mark straight up admitted he doesnt know as much as he'd like about that type of CRE and because of this they expanded the board and brought in Jeffrey Sheets; a guy with 3 decades of CRE experience. Theyre taking their time with it despite already having great interest and offers on the commercial parcels...there is a huge difference in terms of ultimate value creation if you unload today at 20 cents on the dollar just for the sake of monetizing the thing, or hold out 3-5 years and get 100%+. Edit: williams406 beat me to it, but yea. I'm very pleased with how theyre going about everything. Better to take time than rush it. Link to comment Share on other sites More sharing options...
bizaro86 Posted January 5, 2021 Share Posted January 5, 2021 To that regard on the CRE, one of the things I found respectable is that Mark straight up admitted he doesnt know as much as he'd like about that type of CRE and because of this they expanded the board and brought in Jeffrey Sheets; a guy with 3 decades of CRE experience. Theyre taking their time with it despite already having great interest and offers on the commercial parcels...there is a huge difference in terms of ultimate value creation if you unload today at 20 cents on the dollar just for the sake of monetizing the thing, or hold out 3-5 years and get 100%+. Edit: williams406 beat me to it, but yea. I'm very pleased with how theyre going about everything. Better to take time than rush it. Plus it gives me more time accumulate. Link to comment Share on other sites More sharing options...
Gregmal Posted March 11, 2021 Author Share Posted March 11, 2021 What?!?! Mark doing the Sidoti Conference? (term of endearment from Training Day edited out so the offense takers arent offended) We've come a long way! Link to comment Share on other sites More sharing options...
Williams406 Posted March 11, 2021 Share Posted March 11, 2021 Pure Cycle embarking on residential built to rent with retained Sky Ranch lots: https://www.purecyclewater.com/news/pure-cycle-corporation-to-build-single-family-homes-for-long-term-rental/ Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 18, 2021 Share Posted March 18, 2021 What;s going on with PCYO today? Link to comment Share on other sites More sharing options...
Gregmal Posted March 18, 2021 Author Share Posted March 18, 2021 Good volume and follow up to yesterday's big block trade. Perhaps thats the last of Par. Been running around doing errands all day and trying to work as little as possible because then I get to claim a ridiculous by the hour wage! So the real answer is, I dont know.... that said this is exactly what you wanna own in an inflationary environment. Winners gonna win. Link to comment Share on other sites More sharing options...
Gregmal Posted April 6, 2021 Author Share Posted April 6, 2021 MLB All Star Game coming to Denver. DIA will be busy. Definitely an opportunity for some good exposure for the region. Link to comment Share on other sites More sharing options...
Gregmal Posted April 13, 2021 Author Share Posted April 13, 2021 (edited) http://archive.fast-edgar.com/20210413/AC22N22CZC228JK2222A2Z42MOPCIC22N232/ Full steam ahead. Nice news on the reimbursements. Edited April 13, 2021 by Gregmal Link to comment Share on other sites More sharing options...
Castanza Posted May 2, 2021 Share Posted May 2, 2021 https://seekingalpha.com/article/4419180-pure-cycle-top-idea-biggest-position There is some solid info in the comments provided by Bill Cunningham Link to comment Share on other sites More sharing options...
Gregmal Posted May 6, 2021 Author Share Posted May 6, 2021 Heads up to my homies that there may be some ticker confusion inspired bargains today. https://seekingalpha.com/news/3692256-purecycle-falls-after-new-short-report-from-hindenburg-research Link to comment Share on other sites More sharing options...
Castanza Posted May 6, 2021 Share Posted May 6, 2021 5 hours ago, Gregmal said: Heads up to my homies that there may be some ticker confusion inspired bargains today. https://seekingalpha.com/news/3692256-purecycle-falls-after-new-short-report-from-hindenburg-research Looks like the issued a statement on it. Link to comment Share on other sites More sharing options...
Gregmal Posted June 3, 2021 Author Share Posted June 3, 2021 Must be nice having that free call option on oil... Link to comment Share on other sites More sharing options...
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