Pure Cycle Corporation (PCYO) Earnings Call Transcript & Summary

Good morning, everybody. We're just waiting for [ Mark ] to join from the conference room, which should be any second now. We've unmuted everybody to allow for questions and answers, but Mark, if you're in the conference room, you must be muted internally in the conference room, if you want to unmute. All right. We can see you guys in the conference room, but we can't hear you. Mark, if you want, we can call you on your cell and you can just put it on speakerphone, if you want to use that for audio. Great. Welcome, everyone. Terrific opportunity to really the format today is intended to be a kind of an open-ended Q&A with folks. And what we want to do is kind of drill down on, maybe giving you guys a little bit of color as to what we're doing, how we're increasing our absorptions. Okay. And then really just kind of give you guys an opportunity to be a little bit more specific about some of your questions on how we look at the company, some of maybe your questions about what we project for the company, because we have done something a little bit different this year, be giving a little bit of guidance as to what we think is going to happen. And I think it's for good cause, as you've seen, our style through the years, we're relatively conservative about trying to under-promise and over-deliver. And lately, we've had the opportunity to over deliver. We've been a development stage company for a number of years, but for the most part, as we've really been able to enter a couple of different markets, the utility side of what we do is still the fundamental core of what we have, and it brings the core value to the company, right. Without our water portfolio, the opportunities for us, and I think we do a great job of developing land as a master plan community developer, and there are some really unique aspects of doing that. I'd say, if you take a look at our customer base, our customer base are national homebuilders, and these guys are all public homebuilders, and they're really acclimated to do what they do well. They segment the market very well. They're capable of delivering the value to the home buyer at different price points, at different optionalities. What they do, they do very well. One of the things that they don't like to do is what we do. They don't like to do the horizontal infrastructure. All they want is for somebody to deliver them a finished plot that they can get a building permit on, build a home, sell the home, and move on to the next home. I mean, that's really their core business model. When you look at the land development business, it's extremely capital intensive. You've got to put in all this infrastructure, roads, curbs, gutters. And in truth, the real impetus for us entering into this business was we do a lot of that infrastructure in the utility side of our business. We acquire water rise. We develop water systems and wastewater systems, and all of that has that similar upfront capital component, and you want to size that infrastructure where you're optimizing the use of that. You don't want to have too much capacity, but you don't want to have the economies of scale on having to build something and rebuild it or redo it. And so when we look at optimizing some of the infrastructure that we have, that's how we look at it. And I think we carry that very same ideology over into the land development business, right? We want to make sure that we're building that infrastructure where the economies of scale take in, where we're putting to use that capital as efficiently as possible, and then being able to monetize that, either by selling the lots or getting the reimbursables back. And you've heard us talk numerous times in the past about how this reimbursable relationship works. And that's a function of when you're building a master plan community, you start out with no value in the community. As that value grows and the aggregate value of the community is a compilation of the total value of all the homes in the community. And then you have a tax base associated with that, and that tax base is really what pays for that infrastructure. And then we get that back as periodically we issue these bonds from the governmental entity. And so it's been a very good working relationship with us. We've been well, I guess, appreciated by our homebuilder customers, because it is there are few and fewer people that are actually delivering finished lots. And the comparison to this is a lot of the home builders, what they're being required to do is they get a pad site. They might get block of 100 homes in a particular area. And they have to do all of the internal roads, curbs, gutters, all the dirt work, all the -- all of the horizontal infrastructure for their 100 homes, which carry them over into multiple year inventory of land. And that is what they load. There is -- for their balance sheet, what they want to do is they just want to put a home on that balance sheet. When they have to put raw land on the balance sheet, particularly where it carries over in terms of number of years, they have all these accounting issues that complicate how they're looking to do that. And so what we've tried to do is capitalize on that opportunity by being able to put that into our carrying that land for them. And because we have such a low basis in the land, I mean, if you really look at it, we have $4 million investment in just the 1,000 acres that we bought. We bought it, right? We bought it for $7 million. We had water that came with it. We had mineral interest that came with it. And then the land itself. And so when you apportion that out, you know our basis in that land is less than $500 an acre, and tremendous opportunity for us. So leveraging that to our customer, the advantage that we're giving them is that we can deliver that lot on a real-time basis. And they can take that lot in inventory. They can build the house. They can sell that house within that 9 month interval. That's a home run for them. And as opposed to them pushing that off to a third-party, because almost all these groups push that off to a third-party through a land bank, right? They just keep that. They have some entity that they work with, that land banks, the lot cost, they land -- in some cases they land back even the construction of the vertical home, and then they take inventory of it once the home is constructed so that they get that high velocity, right? They're rewarded. Wall Street rewards them on the velocity of those monies. They want very high IRRs, maybe more modest gross margins, and we're the perfect customer for them on that, because we brought to value all that carrying costs at a very low basis. And so that's been working very well for us. The other thing I want to highlight is kind of the acceleration of our single-family rental business, right? So everything that we do on this land, and it didn't matter whether it's making the big infrastructure, the arterial roadways, the big drainage investments of water system, the sewer system, the system in the schools, bringing in a charter school system with a K-12 campus. We opened up our K-8 campus 2 years ago. We're starting construction of the high school that'll open up for students in the fall of 2026. So you've got a full local K-12 campus on this community. Enormous value, right? We get tremendous feedback from our residents about the fact that their kids can walk to school, and it's centrally located and it has just that feel of community value for them, or even the what our sort of next big infrastructure investment is going to be is building this interchange, which is going to be improving the capacity of the interchange, so we can bring on more of that commercial type development with the big development side on it. All of those are increasing the value of the land. And so that value of the land we're participating in by keeping some of those lots in our portfolio, working with our homebuilders who are building homes on that block, and as they're very efficient about that, right? They build -- line build these homes. They're very -- they move from one foundation to another to another, and then they just frame them out. And so building that very efficiently gives us and them that best value, where they're not taking that inventory. We cash flow them on building that house. They build a house for us. And every home that we're completing, we have between $150,000 and $200,000 worth of equity value on that home by virtue of increasing that land value. And that's been a tremendous opportunity for the company to vertically integrate, so that we have these single-family rental homes that that continues to add and accelerate to the recurring revenue stream that the company has. And so all those elements, every dollar that we're spending ends up being a benefit to the next asset portion that's in the portfolio that then we can kind of carry forward. So as you heard me emphasize in our last call, we have opened up almost as many lots as we have built. So we have about 700 homes up and occupied, and then we've got 3 phases of each of about 225 lots. So we've got about another 700 homes under construction. We delivered 230 last summer. We've got 2 phases. Mark, can you go to the website and go into the development side, share screen on that development side, off the website, and get a picture of the -- it will be 2 of the 3 phases. The 1 phase that is under production. We've got homes vertical on that. And so we delivered that. And it's roughly, I'd say we -- of the 230 homes, there's probably 60 homes vertical on that. That's where I want to be. Go down. There you go. Okay. So this shows the other 2 phases. Those will be 2 that are currently under construction. The one on the left is 2C, and we're almost at the -- finishing up the wet utilities. And so as you've heard us talk about how our financial structure works with our homebuilders, they get the lot at the plat, and that's a physical tangible. They own the real property interest, and then they pay us to finish the lot for them. And then we have 2 other payments on that. If we're selling a lot to them, and I'll just keep the math easy, but if we're selling a lot to them for $100,000, they give us $33,000 at the plat, then $33,000 -- $33,000 right when we finish the wet utilities. And that's right about where we're at on this 2C. We should be finishing that up in about the end of -- excuse me. We'll finish that up at about the end of March. And then what will happen is our utility crew will move from that phase over to the one on the right side of it, and we're finishing up the dirt work on that phase. And so this is sequencing us. What we wanted to do is try and time this out, so the crews, once they get on there, they can have continuing work. And it saves us, it saves them. We get more efficient development of that utility work where we're not mobbing and demobbing to the site for various contractors on that. So that's going to portion itself out nicely. You can kind of see on the one on the left there. We're really starting with some of the concrete work on that with the alleyways. We're going to finish in the road work, which is going to be the road that goes between the 2, probably sometime by the end of the month that we'll start to open up another phase of those lots. We've got 1 new homebuilder in Phase 2C. We'll have 2 new homebuilders in Phase 2D. And so that allows us to have multiple phases with not just 3 or 4 builders, but we'll likely have 6, 7 builders by the time this spring season and rolling into the summer work out. So you've got a very high variety of home products for different types of buyers, different types of price segmentation on that. And so that's been great for us. Really happy with how that schedule has rolled out for us on making sure that we're keeping all of these -- we've had some good -- we've had some decent weather. It's pretty cold in Denver now. But it's pretty -- it's been allowing us to get a lot done in those months where we typically are struggling to get some stuff done just because of the temperatures on that. Let me give a quick pause here because I don't want to stand on my soapbox all the time and see if there's anybody that's got a couple of questions that we can bring into the fray. Gets kind of engaged and see folks have a way of thinking about the company. Anybody here? Yes.

A question in terms of the single-family rental. Your plan is to go to the 200 or 300 homes?

Right.

What holds you back to be more aggressive in this since the added value that you can create there is so much bigger? Is it a financing question or?

No, it's really not. That's very astute. The thing about the single-family rental, and there's no magic number here. There are communities that are all totally single-family rent. And we look at this and there's opportunities for us to keep whole phase for ourselves and have that all be a rental segment. And in fact, I wouldn't say that we have a hard and fast rule on what our guidance is on that single-family rental because one of the challenges, and this is -- and I'd be interested in getting your guys' take on some of this stuff. But one of the challenges that housing has right now is affordability. It doesn't matter what market you're in. There's this big disconnect on affordability and a ton of money, I mean, it doesn't matter. BlackRock or Innovations or American Home 4 Rent, we're spending trillions of dollars. And a lot of the commercial money is moving into the residential development money, where you're getting that experience, the living experience where somebody can move into a detached single-family home that they wouldn't do on a multifamily or choose not to do in a multifamily, but can do on a detached residential unit, because of that affordability. And it's interesting because almost every unit that we brought online, we've gotten 6, 7 different highly qualified applicants for these units. And we're out there talking to them saying, why is it? I mean, dual income, you're at 100 -- high 100s in dual income qualifiers. I said, you could buy this house, right? You know that. And they're like, yes, we know. We just don't want to. The younger generations, and I don't know if that's the same experience you guys are seeing in other markets, but the younger generation is choosing not to buy a house when that was the next thing we did. You got out of college, you got married, you bought a house, you had a family. That sequencing just seems to be a little bit disconnected. So as we look at the number of single-family units that we're going to bring online, we were looking at it as to say, we don't want to -- how much do we want to compete with our homebuilder partners, right? How much do we want to have those homes that we're keeping as opposed to for sale. And it was hard for them to make that decision to say, well, if I'm building a home for you, I'm not building a home for sale. And I'd like to build my homes for sale. And we said, listen, the opportunity for you here is when you come in and open up, and this is an analogy on maybe a new builder coming into Phase 2C that wasn't in A and B. I said the opportunity for you is as soon as those lots are finished, you can go out there and put your sign in that lot that says sold right then, the number of homes you're going to build. We've got one builder that's going to build 12 homes for us and another builder that -- we've got 3 builders that are going to be building homes for us in these areas. And they're just going to be knocking up sign and saying sold. I said, that's the advantage for you on this opportunity. And finally, I think that was one of the key things that flipped them into, you're right. This isn't competing. This is just exactly what we do. We're just being more efficient about not having to take the inventory of the land and having that home sold.

Will you sell your [indiscernible]?

That's a great question. And we were talking a little bit about how aggressive does the company want to be in more land acquisitions. And we're out -- we like what this is doing. We like how we're positioning ourselves in this marketplace. We probably have a 5-year inventory of land at Sky Ranch itself. We'll milk that because we'll work on the commercial and a number of joint venture opportunities with the commercial. But we're working on 2 types of basic acquisitions where we can go in and we can buy 300, 600 acres, and that would be anywhere from 1,000 homes to maybe 2,000, 2,500 homes. And those are well within our portfolio of liquidity to buy those interests out. But if we've got bigger opportunities, 2 things that we can do on that is we can use a portion of our liquidity cash to buy into that. But then secondly, it depends on that timing of it. But if I've got a portfolio of 200 homes where I've got a ton of equity value, I may have as many as $20 million, $30 million worth of equity value in that portfolio of homes. I can spin that out for an acquisition. I wouldn't otherwise, right? I like owning the homes. I like that stable recurring cash flow. I like that appreciating asset. And I like the fact that that's tax advantage for us, right? We're getting these homes at 350, they may be worth 500, 550. And so we're only -- we're depreciating out that 350. We've got a ton of equity in there, and I'm not paying all that tax base on -- if I'm an Innovations, if I'm BlackRock, and I'm going buying a lot and building a home on it, my basis in this is going to be 500. It's going to be 550. It's going to be whatever that would have been to the market where we've got a little bit of an advantage on the equity side. So the only reason that you would sell a portion of that portfolio would be to use that to help finance another acquisition, because I can replace it. As I get that other acquisition, I can build those homes to replace that.

Hypothetically could you 1031 the sale of those homes to the land or?

Yes. Wow. That's a great question, and that's one that we looked at. We can't do that on selling lots, right? I did look at that too because we had an opportunity where we were going to position ourselves to say, okay, I'm selling a block of lots. Can I use that as a 1031 into a Land Act? And the answer to that is no. But when you're taking a look at selling the portfolio of, yes, I can 1030 that into a Land Act.

That's reason enough to do it.

Yes. Absolutely, all by itself, right? That's a great question.

And how hard would it be to sell, let's say, all these homes to someone like American Homes 4 Rent or someone like that?

I mean, I've been approached by Home 4 Rent, Innovations, and BlackRock about just buying all the lots in a phase. They said, "Hey, look, we'd be interested in buying 200 lots in the next phase as one builder. And I was a little bit [ resident reason ] enough.

So [ 1031 ] concept, right? You can just like depending on how urgent, when you need the money, right, this would diminish your need to raise equity at a price that you deem to be unattractive to sell equity.

Absolutely right. Yes, I mean, that's an exact strategy of how we can leverage the equity value into a tax-advantaged basis on this.

Is there any chance you could buy options on land? In other words, we'll agree to pay you if we have the right to buy land from you at higher than you think, let's say, instead of $20,000 an acre, maybe 25,000 an acre. Give us the right to buy in Orlando $25,000 an acre in exchange for that right over the next 5 years, we'll give you $1 million, whatever.

Right. Some number.

And that way, you could plan accordingly, you could build your houses up for the ground, 1031, sell all those built rental houses to American Home 4 Rent. You get that cash and then you can exercise your option as opposed to having to rush.

And those are great strategies, and I've tried just about every strategy imaginable for all these landowners out there. And generally speaking, these are sort of legacy ownership interest, right? There are families that are centennial families. They've been in Colorado for 100 years. They've had -- this is a home state for them. They've had it for 50 years and their decisions are either am selling it or I'm not selling.

The options.

The options, to tie it up, they view that as, I'm not interested. And that's not to say that this set of buyers is the only set of buyers. There are buyers that are corporate buyers that are much more acclimated to structure than a binary decision of yes or no.

Would there be an appetite from the public owners of rental housing to buy your existing house? Like have you tested the waters? Is there...

Yes, it gets back to your question. Do you want to do a rent-to-own system where you've got a number of folks that are challenged to buy, but they want to rent. And then as the -- as their situation improves, that their stability improves or that the decision that they want to buy it with there. I kind of -- I'd say, I'm less inclined to do a rent-to-own for the same reason as I'm either selling it or I'm not selling it, right? If I keep that equity value, I'm going to keep that equity value, and I'm going to grow that. And I don't want -- I want that decision to sell it to be one where it's more based on an opportunity, a liquidity opportunity for us where we can reinvest that into another piece of land or another opportunity, whatever that might be. But that's how -- that's why I don't think, it's not that I wouldn't consider it or that our team wouldn't take a look at monetizing something like that, but I think it's more beneficial for us not to have that tie in it, and then us have a whole portfolio that I could move when I needed to or wanted to. Yes.

Do you consider yourself a development company, which entails like all these transactions, buying and selling? But like if you were to consider like holding and keeping these rentals and that becoming a bigger and bigger share of your revenue stream, a much more stable revenue stream, which then would help your equity, your stock over time, like why wouldn't -- isn't that something that as it creates a lot of value to as opposed to like doing all these like buying and selling of stuff that actually helps you in so many other ways?

It does. And you're right, that if you have and we do. If you have 4 or 5 reasons for keeping that home. Why wouldn't you increase the number of homes? And so that's an absorption analysis. I mean, in one particular market segment, how much is enough, how much is too much on the rental homes, right? You'll saturate the market and there'll be, okay, there's only so many people that will want to rent in that particular subset of the market. And if you capture that, then that's fine. And you want to maintain because you're constantly rolling that inventory and you want to make sure that you get some stability there right now. I think we've had in the 3 years that we've been in it, 90% rollover rate in there. So it may be that we do move from 200 to 300 to 400 as we see that saturation. And what will be the data analytics that help us there is going to be the rollovers. When you have a unit available, how many people do you have applying for that unit? How many qualified folks do you have for that? And if we still continue to see this 6, 7 qualified renters, then we don't have enough inventory, and we can increase that inventory. But that's something we can react to. We can either move it up or we can dial it back and say, okay, that's the nice part about the real-time nature of being able to go with that with our homebuilders. And our homebuilders really looking at it from the same perspective, okay, I'm either selling it to John Smith or I'm selling it to Pure Cycle. I don't care. I just want to build the homes. I want the velocity of building the homes. Mark, is there anybody online that, can you open up? Or are you open up with all of the mics for the folks that are attending online?

Yes. All of the mics are unmuted. So if anybody has a question, they might have...

Can you hear me?

Yes, we can hear.

I would like to ask -- can you hear me?

I can hear you, [ Elliot ]. I can hear you, I recognize your voice.

Okay. Thank you. I'd like to shift the conversation, if it's appropriate to do so, to water and the recycling of water. Is that all right?

You bet.

Okay. You've made, frequently spoken of Pure Cycle's cutting-edge technology in the reuse and recycling of water. Would you tell us more about that? Because it sounds as though the same gallon of water is recycled and sold several times. And would you talk about that? How many times can it be recycled? What prices do you get? How much does it cost to recycle? Anything you'd like to tell us? It's a hidden value in the company.

It is. It is. And thanks for that question. And you're right. And I would say there's -- it's probably not so much that we've got any proprietary technology or anything that is IP to the company about treating wastewater and treating it to potable or reuse standards. There's a very strict regulatory framework in Colorado that you have to -- if you're going to reuse this water supply, you have to treat it to a certain standard. And they have very specific requirements about what that water quality has to be. And it's kind of 2 phased. One for, if you're doing non-potable reuse, which means you're just irrigating your park to your open space, industrial water. And you're right. One of the innovations behind it are -- and this has been interesting for us, 100% of the water that goes into what is now our 2 wastewater treatment plants is completely reused, 100%. So we have no discharge, which is very unique. And we've had exposes on the local news channel where a reporter came out and they were filming the whole process. They had heard about what we were doing out there on the recycling side. And there's probably less than a dozen plants around the country that have -- that are reusing 100% of their supply. And so the cost of that is the incremental cost of getting it to that point where you can reuse it versus getting to that point where you can discharge it is narrowing, right? Because the regulatory standards just to discharge water continue to increase, right? So the environmentalists are out there saying, hey, you providers have got to take more phosphorus out. You got to take more of the nitrates out. You got to take all of the things that we know you can get out of a wastewater supply out of a wastewater supply. And so when we elected to do that on the front end, it's starting to catch up with us on saying, that's -- there's really as much as might have been 20% incremental cost of taking that technology there when we made that decision, and that's narrowed down to less than 10% of the incremental cost of treating it just to that standard. There's a lot of talk about how water providers in water-constrained areas can continue to reuse this water supply under a closed-loop system. And if you really look at it, that's how we got started. And I'll give you just a quick, for those of you who I haven't told the story to, when the company got originally started, it was started as a company -- it was manufacturing single-family water recycling systems. And what it did was it had a clean water tank on one end, a dirty water tank on the other end, and a process in between. And so it was predominantly building water systems for folks that lived on a mountain top, a lot of those in Colorado, right, where they didn't have access to a water system. And so this was in the late '70s, right? And this was space stuff, right? I mean the company was on the cover of Time magazine with this innovative technology where you're doing a single-family water recycling system. And it would fill up the dirty water tank all day long, and it would process that water into the clean water tank all night long. You wake up in the morning, you have your water supply for the day. And so it worked brilliantly. It was -- the concept worked brilliantly. What they weren't really good at was they weren't really a manufacturer, right? So they had to manufacture the units and they weren't really geared up to be a good manufacturer of those. And so eons ago, when I first got involved with the company, I sort of said, we're doing it on the wrong scale. You're doing it making these widgets for a house. You need to do it for a whole city. Instead of it being at a single-family level, do it at a whole city. And they're like, you're right, and you should come help us do that. And so really that's been the impetus for us to be able to do that. When you look at it, and this is particularly demonstrated at Sky Ranch, where you take a look at when they were first modeling our water use for single-family residents, it was basically 0.5 acre foot per home is what people were using. And so you take a look at the amount of acre feet that we have and the number of units that we can serve, we thought we could serve this many units. What we see in Sky Ranch is that number has gone down to about 0.27. So it's almost reduced by 50% what that original budget was. And what that means is the density of Sky Ranch. We start out with maybe 45-foot products where you have a decent sized front and back lawn and now you're sort of saying, okay, I'm getting a 35-foot product and our builders on a 35-foot product are building lot line to lot line, right? So I mean, it's getting a detached home and you're having less water for outdoor irrigation. And so 100% of the water that we send in the house is going to come back to us, every drop, right? 100% of that is going to come back to us, and we can treat that and we can reuse that and we can put that back into the system. And I get to sell it again and again and again. And the only thing I lose is what they water the lawn with. And so if that -- as that kind of decreases and you see [indiscernible] with other really areas like Las Vegas and Arizona, where they have absolutely no outdoor irrigation. And you're seeing that become the trend here in Colorado as well now. But I mean, Colorado, the neighboring city said, you cannot have more than 500 square feet of irrigated turf. And in some of our rental units, what we did was we took the approach of saying, okay, we're going to put synthetic turf, AstroTurf, front and backyard for AstroTurf for our rentals. And we want to see how that water demand translates into every single unit. And what we're seeing on those units is that 0.27 is coming down to about 0.2. And so instead of an acre foot of water, that's our unit of measure, using 2 homes, it's looking like it's getting closer to 5 homes. And so that makes it extremely advantageous for us to use what you're referring to, Elliot, is investing in those technologies and recycling this water. And we can do that. There's always -- the Southern California looked at this a number of years ago, and there was just human public outcry of [indiscernible] and how are you going to be regulating this? And a lot of times, I'll go and do a water presentation at our school. And I sort of say, well, there's not -- there's not a drop of water that you haven't had that hasn't been through a million kidneys already. I mean, there's the same amount of water on this planet. And nature just has that ability to reuse it for us. And we're fortunate and really where our system is and how we can discharge to one of the streams that we have and be able to pick that up later so that you're blending that water supply in the environment and using it through storage reservoirs so that you're picking up that peak flow when that's available. And so really, the whole combined aspect of how we're developing our system allows us to be far enough away from that closed loop system and capitalizing on sort of the natural environment and our ability to use our water is -- that same drop of water never goes away. It just keeps getting used and used and used. And so the number of times we get to resell that, to your question, Elliot, is the number of connections that we have. And it could be as many as 5 different times that we sell that water supply within the number of units that we build. Well, let him follow up and then I'll go to you. Yes. Go ahead, Elliot.

What I was going to follow-up with is a question for Dan. Is he there? I don't know. I've never met Dan.

Yes, he ended up getting a little Ebola. So he took -- I think he's on the line, but he had to stay home. Dan, are you on the line?

I don't think he's online right now.

Okay. Maybe not. I'll hold the question for Dan. Thanks Mark.

And Mark, we also have Geoff who has his hand up next after you take the question in the room.

Okay. Go ahead.

What do you do about PFAS?

PFAS, forever chemicals. So the forever chemicals, they're around. It doesn't matter. Once you get a community, you're going to get them. They're on your cooking ware, all that other stuff. And so once you get a measurable area where you have to get rid of them, there's a fairly tried and true way of getting rid of it right now, which is activated carbon. That takes the PFAS out of your water, doesn't get rid of it, but it absorbs it out of the water. That's one of the treatment processes that you go through. And where you get rid of it was when you regenerate your carbon. So you incinerate a lot of the stuff that the carbon absorbs, but right at that threshold where you're not combusting the carbon. And then that will get rid of it and then you can reuse that. But that's a good question, and that's going to be a continuing issue for water treatment forever. Geoff Scott?

Can you hear me?

I can.

Okay. It's funny. I was thinking about what question I might ask you. So I went back in history. And I'm going to apologize in advance, but I want to ask really a 30,000-foot question. So I'm going to use a lot of round numbers just so you know kind of the gist of the question. You have kind of Pure Cycle 1.0, which is when you own some agricultural land down on the Arkansas River and before you owned Sky Ranch. And then starting in 2010, when you bought Sky Ranch for $7 million and you raised some money at $3 a share, $2.70 on the convertible. That was kind of the start of Pure Cycle 2.0. So my question is about is really Pure Cycle 3.0. In your initial commentary, you talked about a 5-year inventory, maybe 6 or 7-year inventory. But if you project that out in round numbers, you have 3,000 more units to sell $200,000 a unit, including tap fees and lot sales and things like that, 3,000 times $200,000 is $600 million, you could end up in 5, 6, 7 years with $500 million, $600 million on the balance sheet. You would be using only something like 20% of your acre feet of water to service those single-family equivalents. So the big question is, when I got involved in this and you had just bought Sky Ranch, it was an extraordinarily, what I thought was an extraordinarily low-risk and certain return business. And $3 in 2010, call it, $12 today, 15 years later, that's 10% per annum. It's been a decent return for very -- what I thought was very, very low-risk money. Dial it out 6 or 7 years, you have this pile of cash and no viable business. You have 4,000 single-family equivalents, you're earning $1,500 a year from each of those. That's a $6 million a year revenue business. You're servicing some oil rigs. You have some oil royalties coming in. But basically, what I'm asking about is the reinvestment risk half a dozen years out. You're going to have this pile of money that you're going to have to do something with. And you've been kind of looking at opportunities over the last half dozen years. It hasn't been a high priority for you. If an opportunity comes along, you've made some investments. But in the greater scheme of things, the amount of investment is not material. But 6 years out, you're going to have a whole boatload of cash, and the Board is going to have to decide what is a good opportunity for that. And as that calendar gets shorter, the risk is going to increase because as you and I have talked about a number of times, in order to do a deal, you need a willing buyer, which you are, but there aren't -- you haven't found a lot of willing sellers. And if you have a very willing buyer and you're forced to buy something, sometimes you make some mistakes.

Yes.

So that's a $30,000 question, and I hope the Board has been kind of noodling on this for some number of years.

They have, they have. And great -- good overview of how when you get into a position where you have a successful business model, how do you have some sort of self-creative rights where we can control our own future. And if you don't have a willing seller and you're a willing buyer, is price ultimately the determination on a willing seller. And I would say most of the ownership interest in our target area are not developers, right? They're not going to be somebody that wants to develop the land. And whether we buy the land or somebody else buys the land, they're still going to want to come to us for water. And so from that side, you still have that growth trajectory. So I would say in answering your question, Geoff, I've got 3 avenues for growth within the company. We'll have the continued development of our water portfolio. We have a service area. So in addition to the areas that we buy and we want to bring water to, we're the exclusive provider of a property and the growth of the metropolitan area has grown out to that property. And so we know as that property comes to market that we'll be the water provider. We also may be the developer. I would love to pitch my services as our services as a developer for that property where we could either buy it or we could joint venture it or we could do any number of things. But one way or another, that property has some portion of development. It's a big piece of property. It's 24,000 acres. And there's enough property there where you can do a number of different things. And so that's one path of it. The other path is that, we are more aggressive today than we may have been 3 years ago on buying properties because the market, our strength in it, our ability to be able to bring the water to it have improved. And so I don't want to make a mistake, right? You sort of say, if you're going out just to kill something, you may not get what you're looking for. And so we're still -- we're upping the bid on that, and we'll see whether or not somebody writes that, the other side of that transaction. The third avenue is the opportunity to increase the portfolio on rentals. And while you accurately said what that math looks like on selling Sky Ranch or the build-out of Sky Ranch, you're right. We're going to have full of money, twice to 3x where our market cap is today in a foreseeable future on monetizing Sky Ranch. And we're going to -- that $7 million, $8 million of recurring revenue, that will be about $0.35 a share on the recurring revenue, which is only going to be about 18% of our water portfolio is baked into just the build-out of Sky Ranch. We talked a little bit about having a couple of hundred single-family rentals that gives us about another $6 million. Can we double that? Can we go from $200 million to $400 million to get up to $18 million. So then you start to get into maybe $1.10 a share on the recurring revenue just in that plus $30 a share in cash. And so you sort of look at all that opportunity, how are we going to keep that extending? And so we like those 3 avenues. And all 3 of those things will happen. I'm very, very optimistic that all 3 of those are going to add to the growth of the portfolio and maybe our portfolio in numerous projects takes our water customers up to 20,000 water customers. It takes our single-family rental up to 2,000, 3,000 single-family rentals. And then we still have more land that we're looking at developing. And then you're starting to look at these multiple billion-dollar valuations. You're saying...

You're saying, by 2032, you should have $600 million of cash after you've...

After we build out of Sky Ranch, that's right.

Can I just probe on that for a minute?

Yes.

I don't want to take you off your line. So if I just take earnings per share from $24 to $32 and I assume $0.50 for '24, $0.52, and I go to $0.28 where you have $1.63, right? And then I go $1.80, $2, $2, $2. I only end up with $12 a share of net earnings altogether in that aggregate period of time, which is equal to $288 million of cash. So where am I off in that math? Because we have a certain amount of cash on the balance sheet now plus the amount of earnings that I'll have between now and 2032. So where am I off? And if I'm supposed to have $600 million of cash by 2032 from monetizing Sky Ranch, where am I off?

So you're likely right. We probably accelerate more on the commercial side in that '29, '30, '31 time frame. So instead of going up from that $1.60 or, yes, $1.60, you might be up into the $3 a share once we get that commercial value, same number of lots, but higher value in the commercial lots.

So I'm going to end up with this roughly double that $12 a share, more than -- yes, roughly double that $12 a share because I'm going to be generating instead of $2 a share, maybe $3 or $4 per share by selling that out to commercial.

Yes.

Got it.

Yes.

And the commercial, you'll sell or...

Yes, we like -- because we like participating in the land side, I think the opportunity, particularly for like the light industrial, where we can say, okay, we'll give you the pad site. We'll give you all the utilities to the pad site, you go vertical. So you typically have 2 types of developers on that. Somebody that buys the land, somebody that joint ventures the vertical. And then once it's fully leased, then they sell it out to a REIT or somebody for the cash flow. I like the exit of the fully improved value on that type of stuff. So we would stay in the deal for that. On -- so in the commercial, we have multifamily housing. And so I'd like to stay in on that deal as well and partner with somebody on the multifamily at the same level to get that fully up, fully leased out and then I'll exit when they exit. On some of the regular land stuff, I'd like to just keep the land and be a land lessor on that. I don't know that I want to own the building and be the tenant that leases out that building, right? That's away from our core competency. Our core competency is to improve the value of the assets. And we are developing that in our single-family rental where we're leasing, and we have a group that within our own organization that's handling that. But the commercial is a little bit different. So I would say we would partner and exit a few times and then keep some of that land and then partner with people that want to be building on the land. Anything from anybody else online? Yes.

What's the current SG&A and how you see that ramping over the next?

So we're right about -- Mark, what are we on our SG&A, around $4.5 million, $5 million?

Yes. So I'd say we're rightsized for what we're going to be doing. I mean, we've got depth in all the key areas. I would say a lot of the conversation at the Board level is me. What are we going to do about me in the grand scheme of things, I'm 62. And thankfully, my wife takes great care of me and she cooks very good for me and doesn't let me have...

And he do pushups.

And I do push-ups every day. We talked about my bad back problems, and I do push-ups every day. And I'd say my runway is I like what I do. And we've got great depth. We've got a great management team. We've got a great team on the operations side. So we're right about 50 employees, and I'd say that's the right size for Sky Ranch. That's not to say that if we pick up multiple Sky Ranches that we don't ramp up, we can. But through what you've identified in terms of the liquidity of monetizing the existing assets, I think we're rightsized. You had a question.

Yes, a couple. You talked about all this excess cash that you have to deal with. I know you had thoughts about the dividend going forward. Like has this evolved? And what's your current planning in terms of the dividend and maybe repurchasing of equities, maybe adjust the minimum price willing to pay?

So good question on the capital allocation and our number of shareholders, your passion for dividend. And some are sort of agnostic about the dividend side. I would say, as a water utility company, people want to own water utilities because they pay dividends. And we're right about where that recurring revenue stream buzzes over our overhead, and that's kind of that key threshold that our Board and I look at is to say then that's where we can start to declare and pay a dividend and when we can start to raise that dividend based on the increments above that as we grow. So that's the dividend type of analysis. On the share repurchase, you probably haven't met a CEO that wouldn't say their shares are undervalued, but shares are undervalued, damn it. And it just -- it's an [indiscernible] to me, right? And I -- and we talk about this at the Board level, and I think that there's fewer and fewer people that are like you guys that do the work. It's not traded on some algo or some quant. I'd say a couple of our largest shareholders don't even know they own the shares. Just because they're a Russell Index and because they manage $1 trillion that they become a 10% holder of these little companies and they don't even know it. And so that bugs the crap out of me. And so one of the things that we'd like to do is start a little bit more, getting out, getting a little bit more awareness of the company. We have a very good portfolio of assets. We have a very good portfolio of customers. We have a very tangible way of seeing the build-out of Sky Ranch. So a lot of that stuff is predictable. It's modellable. And if the market still doesn't get it, we're still going to be buying shares. How aggressive are we going to be? To Geoff's question, the more liquidity I have on the balance sheet and the less recognition we get, we're going to buy it. We're going to be our biggest shareholder. We're going to buy that back. So we leverage that out with also making sure that we have some powder for what we're doing this year, accelerating. We're accelerating, developing 3 phases at once. There's a little bit of liquidity in doing that, but not too much that we still can't be buying shares. We're a little bit of powder so that if a base hit comes up, we can get in there and get a land acquisition and start working on that one. And that's how we're balancing that out.

The question was raised before about willing sellers of land or not willing sellers of land. In your mind, is it a question of if and when or just a question of when about there being willing sellers of land?

When.

Why is it not also a question of if?

Most of these sellers are, like I said, legacy families. They've owned it. They're...

Let me ask it differently. Is it a question of when within the next 5 years? Or could it be 10 or 15 years from now?

No, I'd say it's a shorter time frame.

And why is that predictable that it will be within, let's say, 3 to 5 years? Why is that predictable?

Age of the folks that hold the land.

And let's say, the heirs, why is it likely or very likely that they would be willing sellers? Do you know what I mean, like...

Yes. It's just second and third generations, they're sort of -- they don't -- their children and their grandchildren don't live in Denver.

And what about the Lowry Range in terms of, is that even less predictable than whatever else you're talking about in terms of the specific 5,000 acre opportunity? Is the Lowry Range even less predictable than that? Or is there any time frame within which that becomes predictable?

So -- and the Lowry Range for those that are new to the story, that's kind of our service area. And what you can see on the Lowry Range, who owns that? The state of Colorado through a fiduciary relationship, the education trust owns that land. And development has come out to that property, right? We were on developments literally right abuts it. You've seen it in the past where I've got a drone shot that shows one side of the road, nothing but houses, the other side of the road, nothing. And that's a great opportunity. It's probably their most valuable asset in their portfolio. They own 3 million acres of land throughout the state of Colorado. And I think this property is their single most valuable piece of land.

Three million acres.

Three million acres, yes.

Oh my goodness.

Well, I mean, you look at the entire state, it's a huge state. So when they were -- when the state was granted statehood, they were given every Section 16 and Section 36 and every township in range throughout the state of Colorado. So I think when the state became a state, they owned a little over 4.5 million acres of land. And they like to sell -- when they like to sell land, they like to reinvest that. They take a portion of that property, they put it in the corpus trust and the interest income from that trust is what funnels into K-12 education, and that trust is probably $2 billion or $3 billion. And then they're using land exchanges and then leases and their land...

What -- describe your sense of how they're looking at -- is this the next piece of land to go? Is it ripe? How are they looking at it? Do you have any insight there?

Tough to speak for the agency itself, but they certainly know there's a lot of demand for the land. And they're looking at, okay, how do we best think about 24,000 acres. It's a lot of land to think about. Do they want to look at it as one big project? Do they want to look at it as, okay, I'll sell one section of ground at a time? And how do they want to participate? Do they want to sell it? Do they want to joint venture it? Do they want any number of structures that they're looking at. So they have done all of those structures on other land holdings that they have throughout the state. It's just that none of them are as high profile and as valuable as this one is. And so it's a great opportunity to generate hundreds of millions of dollars for the school trust. And they'd like to do it so that they can generate not just onetime, but perpetual revenues for that. So maybe they stay in on some of the commercial, maybe they stay in on some of the other non-traditional.

What would be your prediction as to the likely outcome of how that goes? Would you -- your best guess be that they sell it in small pieces or they joint venture it or they're both equally as likely or...

They're going to do all of the above. They're going to do all of the above. Yes. They're going to look at it and say, okay, maybe I'll sell some piece of this to get started, learn a little bit, take a bit of those proceeds and reinvest that into a joint venture or the next one and build upon it. At least that's what I would do if were them. And I have successfully been wrong every year about when that was going to happen.

Which brings us back to the predictability of 5 years, right, which ultimately, we don't know.

We don't. But at the end of the day, if you just look at the market, the market is there for them. The market wasn't there for them over the last 5 years when I've been predicting it, but the market is there now.

We talked earlier before about how it was in the market. Yes.

We hadn't grown up to it. It absorbed -- the nice thing about where we're at in our service area is we can only grow one direction, right? We can't grow West. We're up against the mountain. So everything that we're going to grow has got to grow that direction.

To that point in 2032, where you have potentially $600 million of cash, is that, assuming you monetize, sell all your homes for rent and all that? Or is that $600 million of cash plus you'll have a residual of what, in terms of operating -- recurring cash flow?

So we model that based on about 200 homes of the single-family rental that we have not. We still hold that portfolio.

So you'll have roughly $15 million a year of recurring income?

Yes.

In 2032.

Yes.

Okay. And that's kind of it. That's assuming that you sell all of your commercial land rather than hold it.

Correct. That's right.

That's $50 million recurring revenue? And what would that be in profit?

It's probably going to be a 60% margin.

Okay. It's roughly $9 million of -- $7 million of recurring income.

Yes. Yes.

And you -- at that point in time, you would have how many -- your water rights, you would have used up what percentage?

About 20% of the portfolio.

You would have used up 20% of your water right portfolio. You would still have 80% left.

Yes. Do you have a question?

What kind of pricing power do you have on the tap water business?

Pricing power on taps. So what we do, and this is something that we did with the state. So the land board also owns the water, a portion -- majority of the portfolio, but a portion of the water that we have. And so what they wanted to do is make sure that they generated that perpetual royalty because I pay a royalty to them for every dollar that I get from selling that water, while at the same time, knowing that they were going to be a customer of ours, right? They were going to develop the land and they were going to be a customer. So what we do is we price that out based on the comparison of 3 surrounding water providers. And so that's how we try. It basically -- and it's helpful because it basically keeps us right at the market for what that rate is. But I will say, you've seen that happen within the company. The company is -- the growth of -- when I got into this, call it, a million years ago, 30 years ago, tap fees were $5,000, $6,000. And now tap fees are in some areas of the Denver metro area, $60,000, single-family home. So it tells you, if it's $60,000 per home and you get 3 homes per acre, water is worth a hell of a lot more than the land.

So how many -- you said 80% of water rights left in 2032, how many homes could you service with that 80%?

So probably we budget we can serve about 60,000 homes.

From this?

From this portfolio. Actually, I think it's -- we'll have more than that. We'll have -- I think it only uses about 12% of the portfolio.

Only 12%?

Yes.

So I take 88% of the 60,000, and that's what I have left.

Yes. 55, call it, 50 -- somewhere between 50,000 and 55,000 connections still in inventory.

So you would probably argue that the value of that water right portfolio in 2032 would be at least worth as much as the $600 million that you've monetized?

I would argue that.

Right?

Yes. No. I mean, if you look at it, if I'm going to get -- just keep the math simple, if I'm going to get $50,000 in 2032, $50,000 for a tap fee and I've got 50,000 tap fees, that's $2.5 billion.

Yes, it's amazing compared to your market cap there.

Right. And we have to build the system. It will cost us $1 billion to build the system for that. But still, that's a lot.

$2.5 billion of revenue, of which you would make a 60% gross margin or 50?

You know what, yes, call it 50.

Are your water rights secure? I mean, I should say how secure?

They are. I mean they're adjudicated, they're fully entitled. We continue to add nuts and bolts on acquisitions to firm up the usability of them and things like that. But yes, they're very secure. That's kind of the interesting thing is, and I tell the story a lot about how I got into this. I mean I'm in Denver, native. I grew up in Colorado, and there's just not when you could pick up a paper, but there was never a time when you didn't pick up the paper and read something about water. It was always in the forefront. And so I got out of business school and the economics class said, if you've got to fixed supply and a growing demand, right, that's where you want to be because price will adjust. And that's what we've seen, 10x the price of what it was when we got into this business.

It's interesting that the metrics by which Wall Street looks at company's sales and earnings, it's like you don't fit into that. But the value has been growing, right? So it's going to take time before you're able to fit within the conventional metrics of value and what makes stocks go up.

Because I'm not sure what the conventional metrics are. It will be earnings and cash. Yes. It is that. You're right. But then once you're there, I mean, we're just -- we're really there. And then I would argue from a business model standpoint, there's no better on 100 years, you're going to be doing the exact same thing with water as you're doing now. In 100 years, are you going to be buying stuff from [ Gap ]?

I don't know.

You don't know. Are you going to buy a Tesla in 100 years?

I might.

If you get to this $2 billion, let's say, in revenue that you were mentioning before, underwater, like what time frame are you looking at? I mean there's a lot of capital that is needed so that you really want that excess capital that you were talking about before, I don't really see that if you have that opportunity. I don't know how you...

It really is inculcated in our service area, right? So if you look at 24,000 acres, that -- the carrying capacity of that land is more than 100,000 homes, right? And they're not going to build 100,000 homes. Are they going to build 50,000 homes? Are they going to build 20,000 homes? I mean any number of those really do allocate the portfolio. So I would say because we have that exclusive service area, because it's an asset that generates money for the school trust that that portfolio gets built out. Does that get built out in 10 years, 20 years, 30 years, 50 years? Yes. But that's Wall Street, right? They want to know with some degree of certainty that that gets belt out in a period of time. And I can't speak to that because I don't own it. If I did, I can sure tell you how fast I would be pedaling.

Geoff, put his hand back up, Mark, if you want to take his call for question.

Mark, it's not a question. It's just a comment. Where I started was when you first bought Sky Ranch, the -- what I thought was a relative -- well, a very low risk and what I thought was going to be a moderate to high return. And it's exactly what has resulted. The normal Wall Street metrics don't apply, right? You have a line of sight with a very, very successful Sky Ranch development for a company 5 or 6 years from now with twice its market cap in cash in the bank, right? And the risk attached to that is very low. The residual, if you get to that $600 million is you still have 80% of your water rights, which have a defined value, right? So what everybody should be looking at is an extraordinarily low risk, 0 downside, right? And you can fill in the blank on what the upside is going to be. Your number on what inflation is going to be and what lot sales are going to be over the next 5 or 6 years is we're all going to come up with a different number, but it's not going down from where it is now, right? The question is you buy it at $11 or $12. And the only thing you know is that in 6 years, it's going to be higher.

Right. And Geoff, I will tell you, that's exactly why we did that this year, right? I did that forecast to show everybody to do the math. I mean if you haven't dug into it and if you didn't want to worry about all the details on it, that's exactly what it is.

Yes. You have so much that you can monetize over the next 10 and 20 and 30 years. And whether or not you earn $0.50 next year or $0.55 or $0.60 is absolutely irrelevant. That's my view. Right?

Yes, yes. No, you're exactly right because you sit there and say, choose $600 million is within our control. Is that 5 years or 7 years? Okay. That matters some, but scale, right? We're at $250 million now in market cap. So...

The per tap revenue now is how much?

It's about -- for a full tap, it's about $40,000.

That's what you're actually getting.

Yes.

A full tap means one resident?

One -- yes, one resident. Yes. And what -- I mean -- and I think we did this at year-end. We showed that graph at year-end. If you look at our year-end, it's up on the website, but we position ourselves. We showed everybody where we're at compared to other water providers, and we're right in the middle of pack.

Can you talk about how much that tap fee has grown for Jim's benefit, for everybody's benefit, over the past?

Yes. I was just going to ask you.

The interesting thing...

How is it regulated?

Good question. So there's a quasi-regulated market for water in Colorado, right? The tap fees are a portion to the cost of acquiring and developing water. The rates per 1,000 gallon, what I charge everybody monthly, I get about $1,500 per connection per year. That's much tighter than, say, the tap fee is because the tap fee is a portion not only to the cost of the system, but the next incremental cost of the system. And the problem for the metro areas as you've got a high concentration of density in Denver, but you got to go farther and farther away to get that next increment of water. And so we've developed all the close-in water. Now we're going every project, every water project that brings water to the Denver area is $1 billion, right? It's not just, oh, let me buy water and put a pipe in the ground. I mean billions of dollars to get that water back.

Around this figure, like Trump says.

Right. And so at the end of the day, what does that position you? I mean it positions us on the right side of the curve because that cost is going to go up, that tape is going to go up and our supplies are all locally oriented. So we're using the water where our water sources. I've got some water that's out there that would cost me a lot, but I continue to accumulate that and work with partners to be able to develop that as they're building their other projects. So I'm going to be in some of those projects for some of that capacity.

[indiscernible] Can you hear me?

Yes. Yes, I think you may have your phone in your...

I love these discussions for years. And when we're looking, dreaming about the future, let's take what you have said about instead of 0.5 acre foot per tap, you're down at 0.27. That tells me that you've got significantly more than 60,000 taps in your system. Isn't that right?

That is right. I tend not to emphasize that because people go blind on 60,000 units. But I think you're right. I think we can serve more than that. We'll continue to build the system out. We'll see how the requirements are on the regulatory climate. And I think we can serve more than that, but the math is pretty compelling at 60.

Mark, let's take it. We have a hand up from Linda from William Blair. You have to unmute yourself.

So I ask this question frequently. I've been a shareholder on behalf of our clients for decades. And I do understand the value that you all are accruing and I've understood it all along. But having said that, if I, let's say, bought the stock 20 years ago, I'd be even money right now or in 2006, let's say. So as a long-term investor, first, I have to qualify that by saying in the long term, we're all dead. And I'm wondering when it is that shareholders can actually realize the value inherent in Pure Cycle.

Yes. The question...

Because the opportunity cost almost a negative return at this point for me.

Yes. And you're right. And that ultimately is -- I guess, if we were -- if we dial back the conversation 20 minutes ago, the core frustration that we have is you look at the company 10 years ago at $12 a share. And so we went from -- the interesting thing is Jeff went through this model, but we went -- we bought Sky Ranch at $3 a share. And then shortly thereafter Sky Ranch, it went from $3 to $10. And the challenge for us was, and this is just reciting the time line. When we went from $3 to $10, $12, that was in 2006, '07, and Sky Ranch was ready to go. We were looking at developing Sky Ranch. Not -- we didn't own it, but the developer that we had done the water deal with on Sky Ranch was looking to develop. Then the world fell out from under us in 2007 and the recession took everybody that held land down, including the guy that had the land. And so making lemonade out of those lemons, that enabled us to buy Sky Ranch, right? He -- the value of Sky Ranch in 2006 was $50 million. I bought it in 2010 for $7. And so we were capitalizing on that unfortunate time period. And our equity had Sky Ranch, had that not happened. Sky Ranch would have started in 2006. Instead, Sky Ranch started in 2018. And so that was the disconnect there. It wasn't that the value of the company had changed, but the time line of monetizing that changed significantly. And then you go from that, you go into 1 or 2 other things that sort of didn't stop it, but it delayed it. We started Sky Ranch really in earnest in 2019, 2020. We had a much higher time projection on that. And then you've got interest rates changing, COVID changing. And so all those sorts of things have kind of beat into somebody saying, I see all this value, but it just hasn't been unlocked just yet. And I'd say we -- that's why some of the change of our guidance is we think it is unlocked. We think that that is happening now. We have that foreseeability in it. And I am as frustrated about that share price being $12 when I put a portion of that into my kids' trust and there I paid taxes on it, and I get no benefit from it. Anyway, I recognize that, and I just don't think that's going to be the case over the next 5 years as it was over the last 5 years.

Why was there almost a 9-year gap from when you bought Sky Ranch to when you started monetizing it?

It was mostly just getting that market back, getting the Denver housing market back from the recession. I mean, I wouldn't say that didn't start coming back until '13, 2013. And then with that, you had a bunch of properties that were that were -- they had lots. They had finished lots that they still could build on. And so they were eating through that inventory. And I was kissing every frog in town, saying I'd partner with a developer and not putting my developer hat on. And then nothing happened, put that developer hat on and sort of said, okay, fine, I get this model. I think we're good at this. I think this is something that we can deliver to the market.

What do you mean you kiss every frog in town?

To partner with a developer. We weren't a developer. We weren't. No.

You became a lot developer because you had to almost?

I thought it was something that would be the right thing. I went -- the Board keeps coming back saying, okay, you're right, but show me, what's your next great idea. And when I come in and I say, okay, I think we can develop these lots. They're like, we have a lot of confidence in you, but we're not going to know if you're -- us. So unless you get us someone on this board that knows that, the answer is no. And so we went out and got -- I got one of the top guys in Pulte, who had retired from 30 years of career at Pulte and then brought in one of the largest commercial developers in the Denver area to our Board. And they're like, Jeff, this is how I would do it.

So I'm sorry, if I may ask a follow-up, please. So if you think that there is -- that value will be realized more quickly in the next 10 years than in the last 10 years. Can you give us any kind of soft guide as to bottom line growth as to EPS growth?

Yes, that's a great -- you bet. You bet. And so I go ahead and pull up our last 2 decks, the year-end deck for last year and then the first Q1 of this year. And really, what I do is I show this year -- or last year, this year, 2028 and then build out. And then when you look at that build-out and if we're -- and I think Jeff Scott really kind of summarized that when he was just walking through the numbers on it. If we're going to be $600 million in cash, and we've got 20 -- if you keep the share count the same at $25 million or 25 million shares outstanding at $600 million, that's going to be about $40 a share in cash.

What are the key economic drivers or some of the key drivers of the economy around Denver?

Climate, climate, climate. I would say our best kept secret is for years, I don't know how it happened, but every time the Broncos played on Monday Night Football, it snowed. And it was great for the skiing industry, but everybody thought, "Oh, God, I'm not going to go there. It's too cold, and it's just not. And so it -- we have the highest education per capita of a major city in the U.S. So we have a highly educated young workforce. It was the cable capital of the world because we were -- the first mile was free. We were a mile higher than everybody else. And so that communication seemed to have an advantage for folks. So that was a lot of it, but it's a very diversified economy. Financial services, it was in the '80s, it was heavily oil and gas, still have a robust oil and gas segment, still have a very robust technology segment. And it's just active folks that come out that they're outdoor oriented and it's getting to be crowded.

Mark, just one point of clarification. You said $600 million divided by '25, not $40, be like $24 a share.

Is that $24 a share. Okay. So that's doubling.

Yes. And then you have the residual of all the water rights.

That's just sky -- right, that sky rights, the water rights. And you have like the recurring -- the assets.

Yes. But the cash, you'll either distribute it to shareholders or buy something else?

Correct. I mean I would think that we continue to grow that stream. That's also not counting what we would have is probably another -- well, we'll have -- if you take a look at the rental -- single-family rental portfolio and just the equity value of that, that should be around $100 million as well. So it's anyway.

You intimated that you had a share buyback program. And how big is it?

We bought about 100,000 shares. That's not much. We're not making the market in it. And we're using some of that, right? We're using some of that liquidity that we wouldn't otherwise to grow the -- accelerate the development of lots and otherwise. So I'd say our buyback is about as conservative as we've been historically on how we are investing our capital -- your capital.

And did you intimate your plans for dividend? It was kind of vague what you said. So I'm trying to.

So if you look at the threshold of passing -- having our recurring revenue pass the overhead, our overhead, that's that threshold. That's probably happening next fiscal year within the next year to 2 years is where I'd say that, that threshold occurs. And we -- the Board is looking at that very seriously.

And the buyback, you have a maximum price, right, around $10, that's correct?

No, we don't have a price on it. Just -- we put a cap on the number of shares that we were going to buy. The Board said go out and get 200,000 shares, and we're about halfway there. Still it's modest.

The theory behind starting it or keeping it small or what...

Accelerating it?

Yes.

I would say it's based on how that -- how the liquidity position grows. And if we're not able to otherwise use it by putting it into another land investment or another water investment, putting it into T-bills is not the right thing to do with your capital. So we would say, okay, we're going to be more aggressive about that if we're not deploying -- if we don't see ourselves deploying that within the next 2 to 3 years, then that's -- we're not just building that cash for that future.

Do you actively compare the IRRs you would get out of your own stock versus like the projects that you might be able to invest? Is this something that you look at on a...

Yes. That's -- I would say we do, but that's probably not the driver of it because that's -- you have to have the assumption of how are you going to take in that land and at what price. If I were looking at, okay, land, I knew I could buy this land at this price versus distribute shares at this price, that IRR would be comparable, but it's hard to say that this is where I can choose to put it there. It's just the timing of that.

I mean like if your stock is so undervalued, right? Like I mean, is there anything out there that you could find potentially more attractive than your own stock right now?

Yes. No. There is not. I agree. There is not. And so the reason we're not is, well, that's not true. Let me take that back. I'm going to dial that back. There is. It's just I can't control the decision-making on it.

That would be if you can get the land. If you can get the land.

Right price, right.

Then you have an interminable future. And that's what you're buying.

That's exactly -- if I ended up going out and acquiring 10,000 acres and got it at a good price and knew with certainty that I had a 30-year inventory of land and water and my stock still wasn't behaving, you bet. I'd be buying every share back with the profits that we make. I would absolutely do that. The reason I'm not doing that is the questions got asked earlier is, hey, what are you going to do after the next 6 years when you got a pot full of money and nothing else to develop.

Are your acquisitions restricted to your service area?

No. I mean we're looking at a particular area of influence, though, where our systems already are, where our water systems are, where we can easily extend water to in that area. So it's not an infinite portfolio. And it is geographically specific to Denver. Right. Well, I'm going to go ahead and see if we can't close this out for all of you, but I want to really thank everybody for their engagement on this and for your stewardship and trust in your invested capital. If your technology wasn't working, you didn't chime in, don't hesitate to give me a call. We'll likely try this a couple of times a year to be able to drill down on some of the color here and continue to give you guys guidance as to where we're headed with that. But with that, thank you very much. Mark, I'll let you close that out. Thank you.

Bye everybody.