NOTE 5 – 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 2021 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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Construction in Progress

Construction in progress 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 water facilities being constructed which the Company anticipates will be placed in service during the next twelve months. During the nine months ended May 31, 2022, the Company incurred (1) $1.2 million of costs related to its construction projects and (2) completed the three single-family rental units resulting in the transfer of $1.0 million of costs to a separate account for tracking the capitalized costs of the rental units.

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Single-Family Rental Homes

During the nine months ended May 31, 2022, the Company completed construction of the first three houses being utilized in its single-family rental business. The costs of the homes are capitalized and when applicable are depreciated over periods not exceeding thirty-years, which is  dependent on the asset type. All three houses were placed in service and leased effective November 1, 2021.

During the nine months ended May 31, 2022, the Company contracted for construction of the fourth house to be used in the rental business. This fourth house is also located in the first development phase of Sky Ranch and construction began in March 2022 with an estimated completion in September 2023.

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During the three months ended May 31, 2022, the Company contracted for construction of ten houses, townhomes and paired homes to be used in the rental business. These houses are located in Phase 2A of Sky Ranch and construction is expected to begin in the summer of 2022 with estimated completion dates in the second and third quarter of fiscal 2023.

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The Company has reserved a total of 46 lots in the second development phase of Sky Ranch to build additional rental units.