DEBT AND OTHER LONG-TERM OBLIGATIONS |
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| DEBT AND OTHER LONG-TERM OBLIGATIONS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT AND OTHER LONG-TERM OBLIGATIONS |
NOTE 6 – DEBT AND OTHER LONG-TERM OBLIGATIONS As of February 28, 2026, the outstanding principal and deferred financing costs of the Company’s loans are as follows:
As of February 28, 2026, the scheduled maturities (i.e., principal payments) of the Company’s loans are as follows:
SFR Note 1
On November 29, 2021, PCY Holdings, LLC, a wholly owned subsidiary of the Company, issued a Promissory Note (“SFR Note 1”) to its primary bank to reimburse amounts expended for the construction of the first three single-family rental units. The SFR Note 1 has the following terms:
SFR Note 2
On August 30, 2023, PCY Holdings, LLC, a wholly owned subsidiary of the Company, issued a Promissory Note (“SFR Note 2” and, together with SFR Note 1, the “SFR Notes”) to its primary bank to reimburse amounts expended for the construction of the next 11 single-family rental homes. The SFR Note 2 has the following terms:
Lost Creek Note
On June 28, 2022, the Company entered into a loan agreement with its primary bank to fund the acquisition of 370 acre-feet of water rights the Company acquired on June 27, 2022, in the Lost Creek Designated Groundwater Basin area of Colorado (the “Lost Creek Note”). The Lost Creek Note has an original principal balance of $3.0 million, a ten-year maturity, monthly interest only payments averaging $12,000 per month for thirty-six months (which began on July 28, 2022), twenty-four monthly principal and interest payments of $42,000 beginning on July 28, 2025, fifty-nine monthly principal and interest payments of $32,000 beginning on July 28, 2027, and a balloon payment of less than $0.8 million plus unpaid and accrued interest due on June 28, 2032. The Lost Creek Note has a thirty-year amortization period and a fixed per annum interest rate equal to 4.90%. The Lost Creek Note is secured by the Lost Creek Water rights acquired with the note and any fees derived from the use of the Lost Creek Water rights. The Lost Creek Note does not contain any financial covenants.
SFR Facility Agreement On September 29, 2025, Pure Cycle and PCY Holdings, LLC and PCYO Home Rentals, LLC, each a wholly owned subsidiary of the Company, entered into a debt Facility Agreement (as amended in February 2026, “Facility Agreement” or “SFR Facility Agreement”) with a new banking partner. The Facility Agreement provides up to $10 million to finance new single-family rental homes. Under the Facility Agreement the Company guarantees payment and performance by its subsidiaries of obligations due under the Facility Agreement and related lending documents, which are secured by the single-family homes financed under the Facility Agreement. The Facility Agreement allows the Company and its subsidiaries the flexibility to close on multiple single-family rental homes over a short duration with a variable per annum interest rate equal to the Western Edition of the Wall Street Journal as Prime Rate, with a floor of 4.55%. Under the Facility Agreement the Company and its subsidiaries have the option to consolidate multiple single-family rental homes into term loans, which would bear interest at a rate per annum equal to current rate plus a margin of 2.75% at the time of conversion. The term loan will be amortized over 25 years with a five year balloon payment. The Facility Agreement contains financial covenants requiring the Company to maintain a minimum Tangible Net Worth of $75 million, minimum liquidity of $5 million, and a minimum Debt Service Coverage Ratio (as each term is defined in the Facility Agreement) of 1.00 to 1.00 for PCYO Home Rentals, LLC, and 1.30 to 1.00 for the Company. The Company received a written waiver from the bank regarding the $5 million minimum liquidity requirement for February 28, 2026, and was therefore in compliance with all covenants and requirements as of that date. As of February 28, 2026, the Company has drawn $1.3 million on one term loan with a fixed per annum interest rate equal to 6.34%. The term loan has fixed monthly principal and interest payments of approximately $8,800 and a balloon payment of $1.2 million due on October 21, 2030.
Working Capital Line of Credit On February 18, 2026, the SFR Facility Agreement was amended to add the Company as a direct borrower instead of as a guarantor and to include an additional $10 million in lending capacity in the form of an operating line of credit (the “Working Capital LOC”). The Working Capital LOC has a three-year maturity, monthly interest-only payments if the line is drawn upon with unpaid principal and interest due at maturity, and a floating per annum interest rate equal to the Wall Street Journal Prime Rate (6.75% as of February 28, 2026), with a floor of 4.50%. In the event of default, the interest rate on the Working Capital LOC would be increased by an additional 5.0%. The Working Capital LOC has the same financial covenants as the SFR Facility Agreement. As of February 28, 2026, the Company has drawn $0.1 million on the Working Capital LOC. The Company’s prior operating line of credit of $5 million expired on January 31, 2026.
Letters of Credit At February 28, 2026, the Company had 12 Irrevocable Letters of Credit (“LOCs”) outstanding. The LOCs guarantee the Company’s performance related to certain construction projects at Sky Ranch relating to the delivery of finished lots and as collateral for payment obligations outlined in the construction contract for certain single-family rental homes in Phase 2C. The Company has the intent and ability to perform on the contracts, after which the LOCs will expire at various dates from March 2026 through December 2026. As of February 28, 2026, the LOCs totaled $6.8 million, which are secured by cash balances maintained in restricted cash accounts at the Company’s bank. The Company has the ability to renew the LOCs with its new banking partner by utilizing capacity under the Working Capital LOC. LOCs issued under our Working Capital LOC have a 1.25% annual fee. |
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