NOTE 6 – WATER, LAND AND OTHER FIXED ASSETS

The Company’s water rights and current water and wastewater service agreements, including capitalized terms not defined herein, are more fully described in Note 4 to the 2022 Annual Report.

Investment in Water and Water Systems

The Company’s Investments in water and water systems consist of the following costs and accumulated depreciation and depletion:

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During the three months ended November 30, 2022, the Company acquired three deep water wells in the Lost Creek Designated Groundwater Basin for $0.3 million.

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Construction in Progress

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The construction in progress account represents costs incurred on various construction projects currently underway that as of the balance sheet date have not been completed and placed into service. The construction in progress account consists primarily of costs incurred related to the construction of 11 homes to be used in the Company’s single-family rental business and water facilities being constructed, which the Company anticipates will be placed in service during the next 12 months. During the three months ended November 30, 2022, the Company incurred $1.0 million of costs related to construction of single-family rental units and $0.2 million related to water and wastewater construction projects.

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Single-Family Rental Homes

During the three months ended November 30, 2021, the Company completed construction of the first three units being utilized in its single-family rental business. The costs of the units are capitalized and when applicable are depreciated over periods not exceeding thirty-years, which is dependent on the asset type. All three units were placed in service and leased effective November 1, 2021.

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During the year ended August 31, 2022, the Company contracted for construction of 11 additional rental units to be used in the rental business. The Company began construction on one single-family detached unit in March 2022 with an estimated completion in December 2022, with the remaining ten units, comprised of single-family detached houses, townhomes, and paired homes beginning, construction in the summer of 2022 with estimated completion dates in the third and fourth quarter of fiscal 2023. During the three months ended November 30, 2022, the Company incurred costs of $1.0 million related to the construction of these 11 units, which costs are included in the construction in progress account as of November 30, 2022.

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The Company has reserved a total of 46 lots in Phase 2 (ten of which are in Phase 2A and under construction as of November 30, 2022) of Sky Ranch to build additional rental units.