Mark Harding: Thanks.
Operator: Thank you very much. Your next question is coming from Bill Cunningham, who is a private investor. Bill, your line is live.
Bill Cunningham: Hi Mark, how are you doing?
Mark Harding: Just living the dream, Bill!
Bill Cunningham: Good. You know, on the last conference call, I had made the comment about the unusually good results, which were a result of lot sales and tap fees, and we talked about how earnings are lumpy so we might not see the same results quarter to quarter, and this quarter proved exactly what you were talking about. I kind of did some penciling out of things ahead of time to kind of figure out what your numbers might be and thought it was 50/50 as to whether you’d be reporting a loss or a profit this quarter, so it was kind of a pleasant surprise that you actually squeaked through with a bit of a profit. Hopefully nobody else was surprised with the results being not as good as the prior quarter.
Mark Harding: No, that’s true, Bill. You know, it’s cyclical in a couple of ways. One, because of the way our year-end reports, that puts us into–and where we report, right? I mean, Denver, as most of you all found out, Denver’s a great place to live except maybe December-January-February, so cyclically we have–and we’re in the outdoor business, right, so a lot of our water supplies, outdoor irrigation, outdoor land development activities, outdoor sales for single family homes are all cyclical in the winter months. It is pretty predictable. We are grateful that we were still able to be profitable, and we will continue to strive to do that quarter over quarter.
Bill Cunningham: I do have a couple of particular questions for you. One is I was looking at the top fees sold in the totals – your 10-K at August 31 said that 618 taps had been sold in Sky Ranch. Your press release said four more were sold this quarter, but then you reported a total of 766 taps that have been sold so far in Sky Ranch, so I’m confused on the difference between the 766 and the 622.
Mark Harding: Yes, and really what we–and this was a real strong push to normalize the number of tap connections. There’s a difference between the residential connections, and then we have the CAB, the governmental entity that’s responsible for the parks and the open space and the outdoor irrigation, and they pay a tap fee but they’re only connection, and so that’s the difference. What you’ll see is when we report the number of irrigation connections, that’s a higher number, and so–and we’ve been really trying to normalize that for everybody so that people like you, who really drill down into the numbers, can get a feel for that $1,500 per connection per year amount, what is that applying to. That’s–now we’re really trying to give you all a little more clarity, is this applying that to 1,246 number of connections.
When we send out a bill, that’s not 1,246 bills because there may be one customer that might have 50 of those connections, but that equates out to the same number of connections, so that’s what we’ve tried to–I was figuring, would I do that statistic this quarter? I’m like, Cunningham is going to call me out on this thing! So I’m glad you did, I appreciate that, but we did that with you in mind specifically, for the detail orientation as well as Robert, who came back and said, okay, I’m really tracking this $1,500 per connection. We really want to give the market a better, clearer understanding of how to compute that number.
Bill Cunningham: Okay, great. Thank you. Then also, I have some questions on the different builders in Phase 2A. There seems to be a big difference from builder to builder as to what they’re doing there. I mean, KB looks like they’re going gangbusters, where they’ve sold 27 homes already, which I think is about two-thirds of their total, and Challenger with their homes seems to be doing okay also. Lennar has just started selling their single family homes, but their townhomes are still listed as coming soon–
Mark Harding: Pending – right, right.
Bill Cunningham: –and then D.R. Horton, we had talked about last quarter, where I guess they were having to do some revisions to their building plans with the County and hadn’t started yet, so I’m just wondering what might be going on with a couple of the laggards here with Lennar townhomes and the D.R. Horton homes.
Mark Harding: You know, those are the two largest builders that Dirk was referring to, and I’d say they all kind of look at their own scheduling and this is new for both of those builders. This is kind of a new project that they’re in, and I think Lennar has got–they’ve probably got–of their townhomes, they’ve probably got 18 spec townhomes under construction, so what they’re really–more Lennar than D.R. Horton, are really pushing for the seasonal downtime where they can build and then hit the market in kind of the March cycle with a ton of product. They like the product that they have because it’s very price-sensitive product. Those townhome products are going to do extremely well, and I think what Lennar’s forecasting is we want to have a good inventory of those.
I think we showed some aerials of that, and if we didn’t do it in the earnings presentation, jump on the website because we throw up a lot of our drone shots on that. You can see the bulk of the starts and the numbers out there, and I think we’ve got more than maybe 60, close to 70 vertical construction out there, of homes out there, and you’re right – KB’s done very well out there because they’ve got a paired product. Again, that’s higher density, better price points out there. Challenger is very competitive on the price, and then Horton–you know, they’re pulling lots of taps, so we know that they’ve got lots of building permits that they’ve got teed up, and then they’re just going to line build. They’re just going to throw everything they’ve got at it, do it all at once, and they’re pretty stylistic for the builders, each of .
