Earnings Call Transcript
Pure Cycle Corp (PCYO)
Earnings Call Transcript - PCYO Q3 2024
Operator, Operator
Greetings. Welcome to the Pure Cycle Corporation Q3 2024 Earnings Call. At this time all participants are in a listen-only. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Mark Harding, President and CEO. You may begin.
Mark Harding, President and CEO
Thank you, Holly. I'd like to welcome everyone to our Q3 2024 earnings call, which covers the period ending May 31. For those listening online, we have a presentation deck available on our website, purecyclewater.com. There is a banner on the homepage that you can click to follow along with the slides. We will also make the presentation available for further review at your convenience. I will point out the transitions between slides as we proceed. Our second slide contains our forward-looking statements, which I believe you are all familiar with. Any statements in this presentation that are not historical facts are considered forward-looking as per the Securities and Exchange Act. In this presentation, I will briefly outline our strategies, spend time discussing our Q3 performance and results, touch on our asset trajectories, their potential, and provide some updates. Moving to Slide 4, we take pride in our strong leadership and Board. Our Board is substantial and provides significant guidance. Joining me is Marc Spezialy, our CFO, alongside our Leadership team, who have been with us for a long time. Each member brings considerable experience and knowledge from their respective industries. We operate across three main business segments. Firstly, our water segment holds a strong portfolio of water rights in a water-scarce area, which are valuable not only for monetization but also in our work with land development interests. Our second segment involves master-planned community development in the Denver Metropolitan Area, where we currently have one active community, expected to feature about 3,200 residential units and over 2 million square feet of commercial space. We are also developing single-family lots for sale to homebuilders while retaining some for our own portfolio to generate recurring revenue and additional value through asset appreciation. On Page 7, we show how each segment is performing on the balance sheet. We have excellent liquidity, with over $24 million in cash, along with a strong note receivable of approximately $33.5 million. This receivable is generated as we build our infrastructure in the land development segment and earns interest, repaid periodically through municipal bond offerings. Additionally, we have collateral from restricted cash used for letters of credit as we collaborate with local government jurisdictions. We are also growing the Sky Ranch CAB liquidity for an anticipated bond offering later this year, which we will discuss further in the presentation. Moving to Slide 8, I want to focus on our financial performance and the metrics we’re tracking. On Slide 9, our overall revenue is up around 45% compared to the same period last year, while gross profit has risen over 60%. This reflects the solid value in our assets and the company's effective handling of these appreciated assets. Further, our net income and earnings per share have increased over 30% compared to last year, showcasing our strong asset trajectory both in terms of value and quarterly performance. On Slide 11, we will break down segment performance. Each segment has shown attractive margins reflecting asset appreciation. The water segment focuses on delivering domestic and industrial water. The land development segment continues to grow liquidity by monetizing our Sky Ranch asset. Moving on to Slide 12, we will delve deeper into our Water and Wastewater segment, which has achieved significant growth in water sales, adding new customers every year. We’ve reported a record volume of water deliveries in the oil and gas sector. In our industrial segment, we recorded high delivery figures through the first three quarters, anticipating a strong finish to the year. We consistently invest in our water system to ensure adequate capacity for oil and gas customers. Colorado's regulatory environment is stringent, necessitating substantial investments from oil and gas operators, which enhances their comfort in doing business with us. We benefit from a rich oil formation situated above our water resources, facilitating a strong partnership with these operators. Now turning to the land development segment, we see robust results with 40% year-over-year growth. We are currently concluding phases of the Sky Ranch development, specifically finishing the first sub-phase of our second phase, which encompasses about 870 units. We are finalizing landscaping and addressing minor construction elements to ensure builders can secure building permits. Regarding the timeline of our projects, we have 400 lots in production, with further plans for an additional 180 lots in Phase 2D. We are expecting to complete the necessary groundwork and facilitate building activity by next spring. This visual representation will provide clarity on our progress. As you can observe, Phases 2A and 2B are completed and ready for foundations. The dirt work for Phase 2C is finished, and we are looking to expand into Phase 2D, which points to significant growth in the entry-level market segment of Denver. The affordable segment remains vital, with builders still competitive in delivering homes priced below $500,000, now that interest rates have stabilized. The single-family rental portfolio continues to expand, providing positive cash flow and benefiting from strong asset appreciation within the community. We've added 14 units so far, with plans for 17 additional units linked to Phase 2B, and our builders are aligning with market demands. We have various product types to cater to multiple price points, and further phases will introduce around 40 homes in Phase 2C and 26 homes in Phase 2D, nearing a total of 100 homes in our portfolio in the next two years. We are optimistic about the robust demand translating into significant growth, as evidenced by our income statement and asset appreciation figures. The increasing market demand reflects our strategic investments and operational efficiency. In summary, our assets are appreciating significantly, and we're seeing commendable growth in margins and cash flow, with gross margins at 62%. Despite our positive outlook, we are aware of the disconnect between our performance and share price, which continues to be disappointing. As part of our stock repurchase program, we remain active, purchasing shares weekly to leverage any market weakness. We've been repurchasing between 15,000 to 20,000 shares per quarter and plan to stay engaged in the market. Finally, I would like to welcome our newest Director, Sue Heitmann, who brings valuable experience as a retired partner from KPMG, and we look forward to her contributions to the Board. Now, I'll turn it back over to Holly, and I welcome any questions you may have for further discussion.
Operator, Operator
Thank you. At this time we will be conducting a question-and-answer session. Your first question for today is from John Rosenberg with Loughlin Water Partners.
John Rosenberg, Analyst
Yeah, good morning Mark. And thanks for taking my question.
Mark Harding, President and CEO
Good morning.
John Rosenberg, Analyst
I appreciate your presentation and I also really appreciate, actually, the depth of detail that you go through about the company each time. And of course, very nice quarter and good progress. And I share your frustrations about the share price. But a couple of things. Could you go into a bit more detail or granularity about the public improvement receivable and exactly how that works? And I suspect maybe that payments may accelerate as you grow your tax base. But I'd like to hear a bit more about that if I could.
Mark Harding, President and CEO
That's an excellent question. The straightforward answer is that when we construct infrastructure owned by a government entity, in our case, various agencies will oversee this infrastructure, including the local drainage authority, the county responsible for the roads, and the local government managing parks and open spaces at Sky Ranch. All of these investments are eligible for reimbursement. We invest in these projects, and a third-party independent engineering firm evaluates them to confirm their qualification for reimbursement, which we can then record on our financial statements. The repayment occurs through the homes we build in the area, which contribute to the overall assessed value. For example, if each home is valued at $500,000 and we build 1,000 homes, that results in an assessed value of $500 million. Tax implications arise from the mill levy rates applied to this assessed value, leading to periodic income that gets funneled into a bond offering. This process allows us to monetize portions of the assessed value over time. It typically involves a two-year cycle of building and bonding, and we plan to look into another bond offering later this year, primarily to refinance the first 500 units built. This refinancing is possible because we are nearing the end of our call premium, with original bonds issued around 2018-2019. As the housing market grows, the increased assessed values support repayment at the established mill levy rates. We anticipate seeing around $8 million from this refinancing later this year. Additionally, we constantly assess the recoverability of our note receivable with third-party evaluations to reassure our auditors of its sustainability. Sky Ranch's overall bonding capacity is approximately $400 million at full build-out, while we estimate public improvements will total about $300 million, providing ample capacity to manage ongoing improvements and build assessed value over time. It's worth noting that commercial development adds significant value, as Colorado provides substantial revenue from commercial taxes compared to residential taxes, which will further enhance our capacity for repayment.
John Rosenberg, Analyst
Thank you for that information. It's very helpful. However, I have a quick question regarding our financial statements. What specific items should we look for? I can't seem to find any references in your income statement or cash flows that indicate the repayment from the assessed tax related to the mill rate.
Mark Harding, President and CEO
It will be in the note receivable, and then the payments to the note receivable. So we haven't had any updates on that.
John Rosenberg, Analyst
Okay. You certainly had a revenue item of that in this last quarter, but it was mentioned as lumpy.
Mark Harding, President and CEO
It is lumpy. That's exactly right.
John Rosenberg, Analyst
But in the nine-month cash flow statement, I'm not seeing, I guess.
Mark Harding, President and CEO
There is some. You'll see because we.
John Rosenberg, Analyst
We can take that offline sometime.
Mark Harding, President and CEO
No, that's okay.
John Rosenberg, Analyst
Notes receivable as a negative number. But...
Mark Harding, President and CEO
Yes, your question is excellent because many people ask the same thing. You'll notice that even between bond offerings, the local municipality will pay us interest due to having excess revenues. This amount is not small; sometimes it can reach hundreds of thousands of dollars. When we conduct a bond offering, we receive millions of dollars. As a result, you will periodically see this reflected in the profit and loss statement when we record the note receivable, and later, you will see the recovery of that note receivable in the cash flow statement.
John Rosenberg, Analyst
I see. Okay. I do see an item payment on note receivable related party.
Mark Harding, President and CEO
Yes. Yes.
John Rosenberg, Analyst
Okay, thank you very much. And just to keep it kind of brief for other people, what is the enrollment of Sky Ranch Academy right now?
Mark Harding, President and CEO
Good question. It's right around 500 students. So, we had a limited offering of grades. So the middle school, which offers K-8, we opened up K-7. Next year we'll add the eighth grade. Following year, we'll add the ninth grade. And so incrementally, we add one grade of students per year.
John Rosenberg, Analyst
That makes sense. Okay. Well, I appreciate it. I would actually love to come to your event next week, but I can't. So, good luck with that. Good luck with everything else. Thanks a lot.
Mark Harding, President and CEO
And then just as you've highlighted that for all the other folks listening, we will have a Q&A session on there that will be a webcast. So if you can't make it out, but want to listen in on some of the Q&A, sometimes that's helpful as well. So if you can't make it, also take a look at that. And I think we've got that scheduled at 1:00, but we'll send another announcement out next week on that just to remind folks.
Operator, Operator
Your next question is from Tucker Andersen with Above All Advisors.
Tucker Andersen, Analyst
Good morning Mark.
Mark Harding, President and CEO
Tucker, nice to hear from you.
Tucker Andersen, Analyst
A lot different company than when I first met you, I guess.
Mark Harding, President and CEO
Yes. I think you and I met, and I may have been flying solo. No, we had a much more skeletal staff. But yes, we've grown quite a bit. And thank you for your continued loyalty.
Tucker Andersen, Analyst
I don't think land development was even on your long-range plan at that point. But anyway, and once again, as the previous caller, I apologize, I can't get there. I'll try to get on the Q&A, but will actually be somewhere on the Great Lakes at that point, visiting different ports. So it'll depend on where I'm, whether I can join you, join you remotely.
Mark Harding, President and CEO
One of these times we might have to try and do it in the winter, so you all can kind of parlay that into a ski weekend as well.
Tucker Andersen, Analyst
I feel even worse about the situation because my daughter lives in Denver, and I should be able to coordinate a visit with her. I want to thank you for the detailed information. The segmentation of Phase 2 was very helpful. As you go through that, what do you expect will happen to the average price of your lot sales? It seems like we are facing a situation where prices are continuing to escalate, but affordability is declining. Do you think you can keep achieving higher prices as you move through the different phases and sell the lots?
Mark Harding, President and CEO
Yes, we do. And so what we're experiencing, we have built in inflators to each of the phases. I have my builder contracts in there for Phase 2B and 2C as we've broken ground on each of those and we're pricing our Phase 2D specifically. And so we want to make sure that we maintain margins. But we're also partnering with our homebuilders, and so we really do want to be competitive in the marketplace and make sure that we're offering value to the proposition for our shareholders, but also give the homebuilders the opportunity to continue to compete because we want a high absorption on those homes. We want their participation in this. And so there's that delicate balance of getting the right number to maintain our development margins, getting the right number so our builders can maintain their margins and getting the right numbers so our homebuyer customers are aggressive and attractive for absorption of those. So, that's the line we walk. We continue to see price increase, and that's just a function of affordability in any market. Denver is no different than any other market, but we look at all three of those as we continue to add additional phases.
Tucker Andersen, Analyst
And does that mean as some of the other entry-level builders that, that you see more of a movement in terms of to keep that affordability in your builders towards duplex and rowhouses? Or is this sort of viewed as being the same mix as you go through the different phases?
Mark Harding, President and CEO
No. I mean, I think that, that mix, when you throw that mix in there, what it does is it allows them to be in a position and us as a single-family renter on there, it allows us to cater to a broader market of that entry-level segment. So, you have entry-level buyers for a traditional 2,400 square foot detached house, and maybe that is in the low-to-mid 5s. And then if you've got a 40-foot house and that may be at 2,000 square feet, they have a different price point. If you've got a duplex, that's a different price point. If you've got a town-home, that's a different price point. They're all entry level, but they're really trying to flex into having once somebody comes out here, they love it. They see the community and what we've built, and the attractiveness of a charter school and all those elements that we really have built into it. And you want to make sure that you have a variety of products that are available for all those types.
Tucker Andersen, Analyst
And is there any change or anticipated change in the mix of the builders that you're using?
Mark Harding, President and CEO
We continue to add builders. The thing that is really flattering is there almost isn't a week that goes by that I don't get revisited by a builder who's not here, who wants to be here. We have four or five builders that are in this portfolio. And as we move from Phase 2 to Phase 3, we may look to increase the capacity of that. Now that we're very well established, we have a very large and developed network of transportation. Instead of building 200 lots a year, growing to 400 lots a year, we may be looking at 600 lots a year and we may have six, eight builders in that portfolio. And so, yes, we'll continue to add to that portfolio and we'll continue to accelerate just because of the maturity of the project.
Tucker Andersen, Analyst
And as you add the single-family rentals, have you been and are you continuing to do all the management of those single-family rentals in-house? And do you view that as a sort of another division of the company? Or are you outsourcing that, or do you plan to outsource that, the management?
Mark Harding, President and CEO
It is 100% done in-house, both the leasing as well as the maintenance side. Fortunately, we don't have much maintenance because they're brand new homes. But the leasing side, we do have a separate website that we direct folks to through the affiliate residential network here, and it shows each of the model homes that we have available. It shows each of the model homes that are coming online, forecast dates for that sort of stuff and really have had very high success of renewal rates. So, we continue to be attractive, and that's another one in terms of pricing, right? We want to make sure that we're pricing our rentals in there at such a rate that it gives us a good return on the investment, but also gives an affordability index for the people that are renting such that we have multiple year tenants on that. And each of our rental structures is structured as a one-year lease so that we can make sure that the tenant is right for us, we're right for the tenant and we make market adjustments as appropriate.
Tucker Andersen, Analyst
Any thought on making any of those leases rent-to-own in terms of turning over that rental inventory?
Mark Harding, President and CEO
We evaluate the potential for acquisitions and look to build our portfolio. If a liquidity event arises that necessitates an acquisition, we could consider divesting a group of properties to another institutional investor. This decision depends on our liquidity and cash requirements. As long as these assets continue to yield double-digit returns in terms of cash flow and home appreciation, we prefer to retain them in our portfolio. However, there are always opportunities in this highly liquid market to sell them individually or as a package.
Tucker Andersen, Analyst
Yes. Well, that's exactly what I was thinking in terms of, if there was a bump in your cash flow needs and then you would capture the appreciation at one time is through a gradual increase in the rental stream. Because one of the questions that's been asked on previous calls and that you implicitly put into your presentation, but didn't expand on it as saying you now view a real leg of your company as land development. And with regard to cash needs and things like that, is there any reasonable possibility, given how tight the Denver market and the environments are, that you would be able to find another project with similar opportunities to King Ranch and expand beyond being a King Ranch land developer?
Mark Harding, President and CEO
Yes. You bet. You bet. I mean, I didn't highlight that, but we are very aggressive about being in the market for additional acquisitions. I will say, we've been very disciplined about it and we haven't lost an opportunity. But by the same token, we also haven't acquired an opportunity. And so the same conversations that we have with our strategic marketplace on where we want to acquire more land and more water, the priorities are probably more towards land than water, but we still are very much in the forefront of making those investments and keeping some dry powder to be able to do that. And our liquidity does provide us an excellent opportunity to sit down at the table and take advantage of that.
Tucker Andersen, Analyst
Well, as I think you've pointed out in the past, if I understood your comments correctly, that your water division perhaps gives you a synergistic advantage over other land acquirers.
Mark Harding, President and CEO
That's right. Absolutely right.
Tucker Andersen, Analyst
Yes. My final comment relates to the frustration regarding what seems to be a significant undervaluation of the stock, despite the strong performance you've delivered. I hope you keep in mind the idea that, in the short term, the market acts like a voting machine, but in the long term, it evaluates the true worth of your company. I just hope that the long run isn't too far off, because we all know that if it takes too long, we won't be around to see it. With that said, will you continue on your current path of adding value? If the market doesn't recognize that value and you have liquidity that gradually reduces the share base, do you have talented Board discussions about how to raise market awareness of the value you are creating?
Mark Harding, President and CEO
Absolutely. We assess this every quarter and month. We review our strategies, including investor relations outreach, my participation in conferences, and engaging with potential new investors. We analyze our industry peers and leverage relationships with them, as well as consider investor days and non-deal roadshows. There is significant opportunity here as we do not require capital, and it's clear that an investment with us continues to generate value. The company can keep reducing the number of shares, and we are committed to doing so. While there's always a call for a more aggressive stance, we hear that feedback clearly. Our aim is to enhance value and returns for shareholders while being mindful of the longer-term perspective. We are actively reviewing our dividend policy and the timing for declaring dividends. It's still on our agenda, and we hope to align it closely with a point where our annual revenues surpass our annual costs, which will give us more flexibility. We are nearing that milestone. Our approach will cover all bases, and I believe you're correct in suggesting that our performance metrics will become more apparent as we continue to deliver strong results.
Tucker Andersen, Analyst
I'm sorry to monopolize so much of your time, but thanks for everything you've done. And I think continuing to provide additional detail is one of the things that's going to help the valuation. So, good luck.
Mark Harding, President and CEO
Thank you, Tucker.
Operator, Operator
Your next question for today is from Geoffrey Scott with Scott Asset Management.
Geoffrey Scott, Analyst
Mark, how are you?
Mark Harding, President and CEO
Geoff, great. Thanks. That was my favourite – resident.
Geoffrey Scott, Analyst
Yeah, every time I drive bike, keeps getting bigger and better, so congratulations. A couple quick questions. On the commercial side, you said you are still a bit early. Is it going to be a 2025 event when we see activity or 2026?
Mark Harding, President and CEO
I would probably lean towards 2026. We do have some minor retail commercial, which could be a convenience store. However, if you look at the major commercial projects near the interstate, those are still over a year away.
Geoffrey Scott, Analyst
So 2026 activity?
Mark Harding, President and CEO
Yes.
Geoffrey Scott, Analyst
The price of a home is a function of the land cost, the water tap costs, the building cost and some profit margin. It seems like the tap fees have been fairly flat. Is that a fair characterization?
Mark Harding, President and CEO
No.
Geoffrey Scott, Analyst
Have your tap fees have gone up in the last 12 months?
Mark Harding, President and CEO
They have significantly. If you look at it, I would say it’s a couple of ways. When we started Sky Ranch, our average water tap fee was around $26,000.
Geoffrey Scott, Analyst
That was combined? Combined.
Mark Harding, President and CEO
Yes, it was combined.
Geoffrey Scott, Analyst
Water and wastewater?
Mark Harding, President and CEO
Water and wastewater. Right. And I think we've got a rate evaluation this month for our water tap fees that will take that up close to $30,000. So, $30,000.
Geoffrey Scott, Analyst
Is that $34,000 for water and sewer?
Mark Harding, President and CEO
I think that's the water. Yes. So, I think it's going to take it closer to about $38,000.
Geoffrey Scott, Analyst
Combined?
Mark Harding, President and CEO
Yes.
Geoffrey Scott, Analyst
Okay. What about the selling price of lots?
Mark Harding, President and CEO
The selling price of lots continues to rise.
Geoffrey Scott, Analyst
Lots are all different.
Mark Harding, President and CEO
They're different because there are different front footages and the categories. But we are continuing to see about a 10% or 12% increase in each of the phases that we have coming online. So, we started out with selling lots, and we knew that we needed to be aggressive because we were establishing ourselves both in terms of the market as well as a developer. And so I would say the lots that we sold in our first phase at $75,000 are now closer to $120,000.
Geoffrey Scott, Analyst
Okay. So they have continued to creep up nicely.
Mark Harding, President and CEO
Yes. We are balancing our approach by partnering effectively, ensuring that our homebuilders are profitable while keeping their margins in mind and making certain that our homebuyers find the home prices conducive to a quicker sales process. It’s crucial for us to maintain that sales velocity since the overall internal rate of return is a key aspect of this.
Geoffrey Scott, Analyst
Very true. Okay, thanks very much. Appreciate it.
Mark Harding, President and CEO
You bet.
Operator, Operator
Your next question is from Greg Vennett, a Private Investor.
Unidentified Analyst, Analyst
Good morning. Thanks for the presentation. The school, did we pay for the school or do we get reimbursed for the school? How does that work?
Mark Harding, President and CEO
Great question. No, we did not pay for the school. We did donate the land on which the school is built. We partnered with one of the largest charter school operators in the country, a Michigan-based group called National Heritage Academy. They operate over 100 schools nationwide and serve more than 60,000 students, with a very well-developed curriculum. We were actually their first K-12 campus, and they were so pleased that they are continuing to open more K-12 campuses. Most charter schools typically focus on the primary education level, K-8, but we aimed for a complete campus with a single operator, which is why we were excited to partner with them. They made the investments into the school and manage all school activities. I serve as the Chair of the charter school Board, and we maintain that relationship to showcase value to the charter school. It's been a strong partnership, and we're very satisfied with the first year of operation. We are eager to continue expanding into the high school, which is likely to start construction in 2026 for the 2027 school year. We will keep you updated on the progress.
Unidentified Analyst, Analyst
The capacity of the school we have now, the K-8 or K-9, I believe you said there's 500 students there now. Is that correct?
Mark Harding, President and CEO
Right. That's right.
Unidentified Analyst, Analyst
Yes. What's the capacity of the school?
Mark Harding, President and CEO
It's closer to 850.
Unidentified Analyst, Analyst
So you might be at capacity for that school in the next two years.
Mark Harding, President and CEO
Yes. That's right. That's the planning of then transitioning to the high school.
Unidentified Analyst, Analyst
So, is this a private school or is this related to the real estate? Is this a public school?
Mark Harding, President and CEO
It is a public school, meaning it does not charge tuition and is free for students to attend. Most of the students in the grades we serve live in Sky Ranch, but we also have kids coming from outside the neighborhood who attend the school.
Unidentified Analyst, Analyst
Okay. So are there plans for another? There's the plans for the high school, but are there plans for another K-9 school?
Mark Harding, President and CEO
That's a good question. I'm not sure. We have another site where we can establish another K-8 school. Typically, two primary schools will feed into a high school. If we were to develop this additional capacity, we would be serving students beyond those in Sky Ranch, including students from surrounding areas and land developments. There is an opportunity for this. We want to discuss how to proceed with NHA to ensure we handle this correctly. Personally, I believe that investing in education is invaluable. That investment will further enhance the value of the Sky Ranch community. So, Greg, we are having conversations about this with NHA, and we are open to making investments in the land as long as they are willing to increase their student capacity. If they start to turn away students due to capacity constraints, that would align with their interest.
Unidentified Analyst, Analyst
Okay. Are there any other educational options in Denver for young families that are as good as The Academy? Or do they have different choices?
Mark Harding, President and CEO
Colorado allows students to choose their schools, and the state funding follows them. You can attend your local school, a charter school outside your neighborhood, or a public school that isn't nearby, all based on availability. If a school faces capacity issues, they prioritize the students they serve. For instance, at Sky Ranch Academy, we first accommodate students who live in Sky Ranch. Once those needs are met and if there's still capacity, we accept students from the Bennett School District, which charters us. If there is still room and no new residents in the district, we then allow students from the neighboring City of Aurora who are within a specific geographic area to enroll. This priority system cascades down from local residents to nearby districts based on proximity.
Unidentified Analyst, Analyst
So, I have a different question. I'm not very familiar with the Denver market. Is there new competition entering the area? Or is there demand at your price points that has happened in other communities? I'm curious if you will be the top choice since there may not be any options available under $600,000. Are you aware of any communities that will soon be competing with Sky Ranch?
Mark Harding, President and CEO
I would say that, given our basis in the land, given our location, given the characteristics of the ground, we probably have a very competitive advantage to continue to compete against any new project that comes out there. There are always going to be more projects coming online, but the time lag of getting entitlements and getting through the process is tremendous and costly. And so you have fewer and fewer people that are actually doing what we do just because the market is so frustrating and every new project takes longer, costs more than it did the last project. That's not to say that there's not new projects out there, but I do think we have a stronger competitive advantage because of location, because of transportation access, because of how we handled the schools and because we're developing a tremendous product.
Unidentified Analyst, Analyst
Okay, so are the property entitlements for the 3,200 homes, or do they apply to each section, like Phase 2 and Phase 3?
Mark Harding, President and CEO
No, it's fully entitled.
Unidentified Analyst, Analyst
So that frustrating long process, you have a two-year or three-year whatever advantage, I guess or?
Mark Harding, President and CEO
I would think so. I would say that's probably accurate.
Unidentified Analyst, Analyst
Okay. All right. Thank you for taking my questions. Appreciate it.
Mark Harding, President and CEO
You bet.
Operator, Operator
We have reached the end of the question-and-answer session. And I will now turn the call over to Mark for closing remarks.
Mark Harding, President and CEO
So, I do want to, just to reemphasize, we are having our Investor Day next week. We've got a number of folks that have registered for that. Thank you. Look forward to seeing you out here next Wednesday. We will send out a reminder on the web link, or if all of you want to just jump over into our press release page on the website, that'll give you the link to the Q&A session. So if you can't make it out here for that, it's always helpful to hear how other folks are seeing it. And it's helpful once somebody comes out and sees the progress that we're making to get to their view of it as well. So don't hesitate to link in on that. And I'll be hitting various markets, whether that's going to be East Coast, Midwest or West Coast for a bit more, just investor chats and really trying to get out into the market and meet with investors and meet with new institutions on just non-deal roadshows and things like that. So as we get those scheduled, I'll shoot that out to you all and look forward to an opportunity to see you in person. But with that, I will close. And if you are listening to this with a rebroadcast and something piques your interest, don't hesitate to give me a call.
Operator, Operator
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.