Pure Cycle: Water Assets Expansion and Strategic Growth Plans

2024-04-15

Pure Cycle Corporation, a company specializing in Water/Wastewater provision, had been actively investing in water assets for more than 30 years. The company operated in three primary business segments: Water, Land Development, and Single Family Rentals. Within the Water segment, Pure Cycle offered crucial water service connections for developing land as master planned communities, resulting in high margins. The company's assets were noted to have a low basis in comparison to their fair market value, showcasing disciplined acquisition practices.

In the second quarter, the company reported revenue of approximately $8.5 million, with robust margins observed across all segments. Pure Cycle had to halt Phase 2b due to interest rate hikes that impacted its homebuilder partners. Seeking additional capital to expand systems in anticipation of residential demand, particularly in the Southern Niobrara field in Colorado, was a key focus. The company's strategic approach involved collaborating with homebuilders, pursuing acquisitions for water utility integration, and concentrating on commercial development opportunities.

Within the Single Family Rentals segment, Pure Cycle identified significant potential, with high occupancy rates and modest rent increases. The Water segment boasted excess capacity, catering to residential lots and commercial/industrial clients. Revenue from Sky Ranch, a master planned community, was diversified, including income from oil and gas activities. Enhancing capital allocation decisions, boosting asset utilization, and attracting more investor interest through strategic initiatives and positive outcomes were among the company's objectives.

Looking forward, Pure Cycle planned to host an Investor Day event to showcase its progress and future opportunities. By leveraging its diverse business segments and strategic investments, Pure Cycle aimed to propel growth, optimize asset value, and deliver value to shareholders in the ever-evolving business environment.