Pure Cycle Spotlights Sky Ranch Cash Flows, Lowry Upside at Investor Day

Pure Cycle NASDAQ: PCYO used its annual investor tour and fireside chat to emphasize the physical scale of its assets east of Denver, with Mark Harding focusing much of his commentary on the company’s Lowry service area, Sky Ranch development and the timing of future residential and commercial cash flows. Harding said the company’s goal with the tour was to give investors a clearer view of assets that can be difficult to assess through balance-sheet descriptions and earnings presentations. He said the visit focused more heavily this year on the company’s water service area, the origin of its water and development activity around Lowry, rather than only on Sky Ranch.

Harding described oil and gas activity at Lowry as “fairly robust,” noting that tour participants saw multiple pad sites at different stages of activity. He said one pad site had recently completed fracking, another was being prepared for fracking, another was being graded for a rig and another was being drilled. Harding identified SM as the dominant operator at Lowry and GMT as another operator backfilling its position. He also used the tour to show how Denver’s growth continues to move east, in part because the metropolitan area cannot expand west. Harding said development south of Lowry is constrained by thousands of five-acre lots, while parts north of Lowry are affected by landfills and open space. He said the positioning helps illustrate the significance of Lowry and the surrounding service area as Denver’s expansion continues.

In response to a question about potential development at Lowry, Harding said the property is in unincorporated Arapahoe County, the same entitlement jurisdiction the company works with at Sky Ranch. He said the larger complication is ownership: the property is owned by the Colorado State Land Board, which manages land for K-12 education beneficiaries. Harding said the State Land Board must weigh multiple possible uses, including education, minerals, oil and gas and urban development. Harding characterized Lowry as a long-duration opportunity, saying 40 square miles represents “a 50-year inventory of land,” though he added that not all of it would be developed or conserved.

At Sky Ranch, Harding said the company continues to plan around what homebuilders will need 18 to 36 months ahead rather than focusing only on current conditions. He said Pure Cycle is generally trying to deliver lots on a just-in-time basis for builders, with residential production expected to run between 250 and 350 units a year, or around 200 units in a slower year. He said that level of activity could generate $20 million to $30 million in annual revenue for the company for the next seven years. Harding said the number of builders at Sky Ranch has increased from three at the start to seven now, reflecting shifts in demand and inventory planning. He said builders typically want more lots when the market is strong and fewer when it slows, whil...