Speaker 1great job. We're excited to have you. Go find us some water and bring it to us and then we'll serve you. I said, oh, okay. Well, are you going to pay for that water? And they said, no, you'll pay for it. Oh, okay. Who's going to pay for the engineers and the attorneys? The developer. But we have to give the water to the municipality and then they serve us, but we pay for everything and we don't
Speaker 2control it. Yep. Hey, what's going on, everybody? Welcome back to the Land Development Podcast. I am your host, Ryan Glick. If this is your first time joining us each week, when you tune in, you're going to hear a couple different types of shows. Sometimes when you tune in, we have an interview style show, which is what we're going to have today, which I'll introduce our guest here in just a second. Other times we have industry news. That's where we pull up a few different headlines and we talk about what it means for the land development industry. And I guess one quick housekeeping item before we intro today's guest. I haven't talked about this for at least a few episodes now, but those of you who have been tuning in for a while now, if you wouldn't mind taking the time to head over, if you're listening on Apple and leaving us a rating and review over there, or if you're listening to the Land Development Podcast, please do so. And if you're on Spotify, they don't have the review, but they have a rating. If you could leave a rating for the show, that goes a long way in helping more people find the show on those different platforms. And if you're tuning in on YouTube, well, you can hype this episode if you do that and also make sure you're subscribed to us. So with all of that out of the way, I'm excited today to have with me Sean Flanagan. Sean is a water resource broker at Hydrosource. Sean, thanks for joining me. Good morning, Ryan. Thanks for having me. Yeah, well, we talked before we recorded here that the topic we're going to be getting into today is not something we've talked about a whole lot on the show before. I mean, it's been mentioned mostly in passing, not necessarily a key topic, and that's the topic of water and water rights and I guess all things water. So definitely excited to get into this topic and help shed some light on it for all the people listening into the show. All right. Well, I think where I would like to start before we get into the details of that is where I start all of these just getting into your background, how you got into this space. And so could you talk through how you went from being more on the commercial real estate side and then eventually getting into water resource management, water brokering?
Speaker 1Absolutely. I'll do my best to keep it focused here. Water is a bit of a rabbit hole, so sometimes it takes me in odd engagement paths I never expected to be on. But backing up a couple of years, I've been in the water industry about two and a half years at this point. And I've been in the water industry for about two and a half years. And I've been in the water industry for about two and a half years. And I've been in the water industry for about two and a half years. And I've been in the water industry for about two and a half years. And I've been in the water industry for about two and a half years. Which blew by super fast. Prior to this, I was mostly involved in industrial speculative development and had a fancy corporate chair at a couple well-known shops here in the Denver market and wider, always had kind of the national focus. But with the last corporate job that I had, when that job ended, I had a non-compete scenario that I had to deal with. And what I wanted to do was try to stay water-free. And I was able to do that. And I was able to do that. And I was able to stay real estate adjacent as best that I could while attempting to learn something new. I'm one of those ever-learner type guys. And water rights are hyper-complex. So they took a lot of focus and some cold calling of opportunities to try to get in front of some folks. Nobody just handed me this chair or all of this knowledge. In essence, there was a period of time where I couldn't call my normal industrial friends or brokers or developers or whoever, but I wanted to work. I wanted to stay local. You heard me a moment ago say I was working national. Well, today I work more local than anything with intention. The core goal of that was to avoid getting on airplanes. I have nothing against traveling for work. It is fun in the early years. It starts to burn off that fun side later. But water is so hyper-local. It's so complex. It's so nuanced locally that I knew I'd be in my mobile office driving around in my truck. So it was kind of a scenario of I needed some something to do. I wanted to stay close to what I was doing, but I needed to differentiate myself. And this is kind of my favorite part of these discussions is I wanted to ask you a question, Ryan. How many licensed real estate brokers do you think there are in the state of Colorado? There's no wrong answer here, but as this goes forward, you'll figure out why I'm asking this.
Speaker 2What do you think? Oh, gosh. I mean, you say, is this commercial brokers or is this all brokers? Anything. Residential, farm and ranch, whatever. What do you think? Oh, gosh. Maybe, I don't know, 15,000, something like that.
Speaker 1That's a good guess. One day I should validate this with a real data point. But my assumption is about 10,000, including all the residential folks. With water brokers, here's what's going to blow your mind. There are 10, 10 of us that I'm including myself in that now in the state of Colorado. And of those 10, about eight of them are over the age of 70. That simple scenario, to me, was a game changer. I realized if I can learn this, if I can start to build a client pool, if I can stay relevant, stay active, stay learning, I may be one of, on a single hand, folks actually doing this of any real skill and knowledge. So I found Hydrosource. They gave me an opportunity to join them. Didn't necessarily hand me a whole bunch of money. I was like, I'm going to do this. I'm going to do this. I'm going to do this. I'm free engagements or anything like that. Asked me how I was going to contribute to the company. So it was a scenario of they offered to teach me some of the basics and give me the opportunity to join the firm. And maybe they would give me some engagements as things went forward. They did end up providing me with some learning opportunities. I made tens of dollars, not a lot in the first couple of years. But I started to build my client book. I started to get familiar with different things. And then I started to get some repetitions, some real engagements with real activities, some valuation, broker opinions of values type stuff. And today, I am confident that, A, I don't know everything about water. I never will. But I'm confident that I can learn whatever it is nuance-wise in whatever local area I'm working in. Today, I work on both sides of the Continental Divide, West Slope and Front Range. I work all the way up to Fort Collins, all the way down to Pueblo. I was down in the San Luis Valley valuing some 1800s water rights for an original ranch down there. So it's been fascinating. I've got things I'm selling. I've got things I'm buying. Sometimes I just problem-solve, consult as well. But it's fascinating. And it is a scenario where I have almost completely flipped my land acquisition strategy. The other side of my business is land use consulting, and I do still invest and try to self-develop. But with a different lens now, I look at the water problem or question first. Going through a zoning evaluation, or how dense could we make this? Or what other typical tidal defects are there? Things like that. I ignore that, go straight to water. Does the land have water? If not, can it have water? If it doesn't have water, well, my value offer is going way down. But I know that I can go and solve that problem and find the water. So it's flipped my pursuit strategy completely on the investment and development side of my business. So I love it. It's complex. It's big dollars. Also, I mean, people might not realize that your $10 million land deals are probably closer to $7 million of water attached to $3 million of land. So that's a generic example, not applicable to all. But the core concept I'd like to convey is that land without water, in my opinion, is worthless. There are solutions to bring water to land. There isn't always. But land that can't get water to it, to me, I wouldn't touch it. Not at all. I wouldn't focus on it for a minute. Yes, I get paid to solve people's problems. In that circumstance, of course, I will try. I'm always willing to try to help. But buying it personally, I wouldn't do it.
Speaker 2Well, that's good. This whole background that you have and just that initial synopsis of everything that you're involved in right now, I think that's a good place for us to dig into a little bit deeper. And so for people listening in who may have water be an afterthought to them. And again, we've got people listening from all around the country. And so it may or may not be something that is a part of their deal that they're really focused on. They may not think about it as much as maybe in Colorado or other states where maybe it's a bigger deal than it is in some other locations. But with that said, I want to back up a little bit and really go to the basics of this whole concept. And so in your role, and we think about the water, we think about the land, we think about the water, we think about the water rights for a piece of property. I guess my assumption to it is that, or I guess maybe not an assumption, but- So it sounds like if you own the land, if somebody previously may have the rights to the water on that land, and so that's something that you have to pay attention to. Could you kind of walk through these different scenarios when you're looking at a piece of land that you need to think about when it comes to water?
Speaker 1Yeah, absolutely. So let's think about a piece of land that is adjacent to kind of the growth boundary. We are right on the cusp of infrastructure, on the cusp of zoning, on the cusp of things physically existing, whether it's rooftops or warehouse roofs or whatever that may be. There's kind of two scenarios. The land itself can have water tethered to it. So for example, you can have groundwater underneath your land that you own. You could also have land that has groundwater underneath you, but you don't own it. Those are two nuances with groundwater, and groundwater is a little different than surface water. And surface water, for example, are things like streams and ditches and springs and things like that. Your land can also have ditch rights attached to it. Let's say hypothetically that piece of land 50 years ago was an active farming operation or cattle. Some ag operation where they're using water rights as part of their daily business. So you can have 100 acres with some senior ditch rights attached to it, and the water physically flows to your property as part of some old former operations in the ag world. You can also have land that doesn't have anything. It has previously had some variation of either groundwater or surface water, but that water has been sold. So now you're looking at land. Let's call it barren. But don't get scared off quite yet. Something to think about. How close are you to municipal boundaries? Are you within the municipal service district? Are you within a water conservation district boundary? Are there other opportunities for your waterless land to get served through new infrastructure dragging, drag a new pipe? So even if you don't own the water rights, you can still potentially. Tap on to the municipal system and pay your standard tap fees.
Speaker 2Can I can I ask a question just really quick on that? Oh, absolutely.
Speaker 1The time.
Speaker 2So the the water rights. So you have to not only be concerned about the water rights on the piece of property that you're looking at, but also upstream. Is that right?
Speaker 1Yes. So seniority. Here's what you're hinting at is even though you own a ditch right, let's focus on ditch rights for half a second. Your Detroit could be junior to somebody else's. So hypothetically, you've got. Let's just make this very obvious. You've got a 1950s, very junior water, right? Somebody took their water right to water court, confirmed something. You're in the queue, but your priority number 270. The farmer upstream or up ditch has a 1850s water right. More realistically, it's probably the 1870s, 1890s, something like that. Very senior would be 1860s to 1890s. There isn't a lot of water rights before the 1850s because Colorado didn't exist. Before then there are other legal nuances that you can go through to try to quantify some of that stuff, but that's too deep into the weeds for today. Going back to the seniority concept, if your water right is junior, meaning you're in a higher number priority, you're not number one, you're not number two, you're not number three. Well, if those farmers, ranchers, whoever need that water upstream and it's a drought year such as this, what will happen is, is there will be a call on the river. The water commissioner or the local division operators will basically call everybody downstream that's junior and say, "Shut off your diversions. You're not allowed to have water right now. Your water is too junior. You're out of priority." And that farm at the top of the river, they're getting their water. But something to think about, what's a better scenario? Would you rather be at the bottom of the river with a very senior water right and an attorney, or would you rather be at the top of the river with a junior water right and a shovel? Both will take you to water court in the end, for sure. But either way, just a fun joke to think about, just because you have water rights doesn't mean you're going to get them every year. The other concept to think about is, and this is dramatically different from land, if you don't use your water in Colorado, you could lose it. You could be forced into an abandonment scenario. In Colorado, you have to use your water and it has to be put to beneficial use. Meaning it needs to go into a municipal system to serve domestic houses, or it needs to be put on the farm to water your corn or water your cattle, those types of things. There's multiple other beneficial uses, but if you go for a period of 10 years and you're on a farm and you're not watering your crops and you have basically no data points to say, "I've used this water," the water commissioners can put you on an abandonment list and take it away from you. So just because you own it doesn't mean you own it forever. For example, with land, you can own land, never step foot on it, and you will never lose it, assuming you pay your taxes and all those types of things. With water rights, you could own it, you could own a piece of paper that means nothing and never get your drop of water ever. So in Colorado, there's a couple of nuances to think about. It's called prior appropriation, which is the system that basically says first in time, first in right, which is what details that seniority concept we talked about earlier. Different from the rest of the country. The rest of the country is riparian rights, meaning if the water touches your land or you're adjacent to that river, you can use it. In Colorado, because a ditch runs through your property or a stream or a creek or a reservoir or whatever, doesn't mean you own that water, doesn't mean you can use that water and take that water. Somebody upstream that was there before you, prior appropriation, they'd use that water right. So it's a little bit of a nuance with water, but here's the upside to it, or maybe not the upside. But where I foresee more activity going on, and this is one of the reasons why I'm thankful you invited me to speak on your podcast today. And something that was a complete learning experience for me a few years back, when I first came back to Colorado, let me pause for half a second. I grew up in Castle Rock, so I'm a Colorado local in my mind. I moved to Chicago and spent 10 years in the speculative industrial development world, came back to Colorado, still with the development company, and was attempting to get a job. I was hoping to get building permits for a big project up in Northern Colorado, and was told, "Great job, we're excited to have you, go find us some water and bring it to us, and then we'll serve you." I said, "Oh, okay, well, are you going to pay for that water?" And they said, "No, you'll pay for it." "Oh, okay, well, are you going to, who's going to pay for the engineers and the attorneys?" "The developer." "But we have to give the water to the municipality and then they serve us, but we pay for everything and we don't control it?" "Yep, that's pretty much how it works." So, the difference between developing urban versus developing on that municipal periphery like we talked about, in Colorado in the Mountain West, you're not guaranteed water. And even if you have a will serve letter, you still may be in a scenario where you can't get service unless you go out and buy water rights, which is what I do. As a water resource broker, it's my job to assist in that transaction, whatever that means. Whether it's selling it, selling a resource. Whether it's not using. Or finding a resource to bring it to a municipality to develop it. That's where I started in this business. Not as a water broker, but as a developer being told, "Go find water." And it blew my mind. I didn't understand it. It was the exact opposite of basically everything east of us. A scenario of, "Oh, just tap onto the system, pay us a big fee and mitigate your wetlands so you can build a big box and move on." In Colorado, not the case. We got through it. We ended up acquiring the water, dedicating it, all that kind of stuff. The diligence process is different as well. Something to think about when it comes to, "Is this water right going to be of use to you in your future development, Mr. Developer? Or is this water right useless and worthless?" Just because you own a water right doesn't mean it's valuable either. There are so many contradictions in the water right business that it just kind of blows my mind. And it's absolutely a scenario where it's kind of a rabbit hole. I keep digging more. I keep digging. There's a water court system that is how all of this kind of gets sorted out. It goes all the way back to the beginning of time in Colorado. They have documents that are recorded that are handwritten cursive that go back to the early 1900s that are the justification and the actual legal rights to all this because there is no title records for water rights. There is no title insurance for water rights. It doesn't always be a deed. Usually, it's special warranty deed. But that's not always on title or on record. So it's a scenario where it's important to do your diligence upfront. And usually, that means hiring an expert. Of those experts, usually, there's an attorney involved. Usually, there's some engineering, some analysis involved. But typical to real estate, your broker can do a lot of this work with the help of those professionals. Obviously, I can't wear a legal hat. I am a licensed real estate broker because water rights are real property in Colorado. So I do have to abide by all the rules for typical brokers as well. But that doesn't mean I can't convey my opinion based on diligence that I've done. research that i've gone through discussions i've had with those attorneys and engineers things like that but yeah that the water diligence is a little bit different um a couple comments here to think about with water it's kind of a combination of three or four different things you've got to have the legal right you've got to own a piece of paper a deed or whatever that says you're allowed to have this much water you've got to physically be able to get wet water just because you own a piece of paper it doesn't mean there's actual water that's available climate change is real you've got to be able to move that water convey it somehow whether it's a ditch system or getting it into a municipal system or whether it's a well that pulls water out of your ground to get it up to the surface you also have to prove non-injury here's another concept that's going to blow your mind right in water rights just because you have a water right and you want to change it to do something different with it doesn't mean you're automatically allowed to do that it doesn't mean you're not allowed to do it either but when you go through the water court process you have to prove non-injury and it's the exact opposite of our criminal system whereas you're innocent until proven guilty well in water rights basically you'll file file your application and everybody on the the river system on the ditch system will put up their hand and say you're killing me whatever you're doing it's going to destroy my business my crops are dying the cows are going to die and i'm going to you know shriveling up and oh i'm dying here that's how it all starts every single person on that ditch is going to oppose whatever you're doing because they don't know they don't know that you're not injuring them so then it's on the change whoever's doing the water court application it's on them to prove that they're not damaging the other senior water right holders upstream or downstream so that's that's different and then of course the last piece of the puzzle is of course financial feasibility just because you can't do that you can't do that you can't do that you can't do that you've found a piece of paper that says you own something it's attached to real wet water called a spring or a stream or a heavy use river you can get the water to where you want you're not injuring anybody well maybe it costs too much then you're back to square one you know just because it's available and you can check all these other boxes there's still a buyer and a seller typical negotiation on value sometimes we don't get there i have been selling water and a wide variety of values in the agricultural market in the agricultural market in the agricultural market in the agricultural world if i'm selling water rights to farmers and ranchers to stay agricultural the value is a little bit lower if we are selling a senior water right that was agriculturally used but it's getting dedicated to a municipal system that water right tends to have more value and it's a density game it has nothing to do with you know knocking on the farmers or you know beating up the ranchers in in comparison to the tech world or anything like that it just has to do with density think about how the water is being used when it goes into the municipal system it goes into households there's a sink there's a refrigerator there's a shower there's a toilet there's 10 toilets there's whatever that may be on the farm you've got one tap and it just kind of flood irrigates or it goes into a pivot and it's being used that way so the the more dense you can use water the higher the value is similar to real estate usually raw land a little bit cheaper than a multi-family building so it's somewhat counterintuitive it's hyper complex but it's fascinating and i find that i'm on the earlier front end to land development deals and i'm aware of things that are coming down the pipeline years ahead of other groups because the smart developers are figuring out their water
Speaker 2problems first this episode of the land development podcast is brought to you by groove full disclosure groove is my company so i'm about as biased as it gets but stick with me for a second because i built this for exactly the people who listen to the show groove takes your developments phases lots and sales and puts them in one place instead of scattered across a dozen different spreadsheets here's one example if you sell lots to a builder on a takedown schedule that whole deal usually lives in a contract and a few spreadsheets that never quite line up in groove it's one record the schedule the price stepping up at each takedown the lots and when one comes due you close it right into a sale same goes for the rest of it your inventory your pricing even a live map of your lots on your own website one system always current if you develop land and sell lots head to let's groove dot com slash demo and watch the quick video there it's under two minutes and if you like what you see there's a button right there to book a demo all right let's get back to the show i have a bunch of things i wrote down here while you were talking there that i i want to i want to dig into a little bit more one of those is uh we talked about you had mentioned the abandonment uh concept where you have this piece of land you haven't been using your water rights that you have but if you own this piece of land and you sell the water rights to somebody else even though you're not using them you obviously don't have the rights anymore anyway because you sold them but when people sell them are they is this a perpetual license forever like is this something they're selling it forever is it for a certain term so that way maybe you're not going to be there for 10 years but you eventually want to use that piece of land to develop something later on do people sell rights for like a 10-year term or is it when you sell them you're selling them more often than not once they're sold they're sold
Speaker 1okay they're they're done and gone and what i would tell you is a lot of times when you sell your water rights to a municipality that municipality will never let go of that water they will hold on to it in their system and sometimes they'll issue you a municipal tap credit which you could transfer and sell to another developer in their system but for the most part yeah they're gone the the abandonment piece is really a scenario of attempting to make sure that water is always put to beneficial use in the state of colorado and within the mountain west each state california nevada arizona utah new mexico they all have their own slight different nuances to how they deal with water rights but in colorado which is where i focus water rights are an asset of the people meaning you can't physically own them permanently you can use them and yes you have an ownership right to it so it's a little bit gray there but it's an asset of the people and so where i'm going with this is another concept that's important to to mention you can't buy water rights in colorado just to hold them for value appreciation it's called speculation uh it is frowned upon in the water industry yes it does happen yes there are groups that that is their primary strategy there are also scenarios where those transactions don't occur because they get quashed in water court or at the ditch board meetings or whatever and so it's a concept of really trying to make sure the water rights are beneficially used always and so going back to the abandonment piece if we're trying to make sure the water is always in beneficial use and you're not using it on your farm well then that water is going to get used by somebody else upstream the ditch rider will split it up apportion it out to the those who have senior rights or they'll offer it to somebody that's slightly more junior than you if you're not using it or whatever but you can still go to water court and fight that and try to get your water rights off the abandonment list and bring them back so even if you lose them there is scenarios where you can appeal that and it's such a rabbit hole of fun and complexity and i'm not an attorney but i do have to understand a lot of this and have fun with it as best i can
Speaker 2yeah well you and you talked about one of the other things i was going to ask about too was you know i i've seen just read articles over the last couple of years of different areas i'm not sure in colorado this is happening but there's other areas out west where certain developments are being declined because of water issues right there's not enough water to support the number of uh people that they're going to move into that particular area um i guess for you and in the call you know in colorado or in the denver area are you seeing that happen there or do you think how water rights work today do you think it's going to change in the future and because you had mentioned water is a it's it's something that is really owned by the people but these uh the people who have water rights are essentially uh although that money's i don't i don't know where the money goes either too so it goes to the person who owns the water right so if the people own it um i can't i don't imagine any of that money's going back to the people necessarily like via taxes or anything like that so and i'm i'm kind of rambling here on what i'm trying to get at but what i'm trying to get at is do you think this process of how it works today is going to change in the future as far as how this water rights process works it could absolutely change i
Speaker 1would say probably in overall probably not most of the nuance to colorado water rights is designed to prevent this scarce resource from diminishing so when we talk about beneficial use if it's not being used then it gets reallocated over here so it can continue to be used there aren't new water rights being found or created today we think that a lot of the finding of water rights is done that that happened decades ago with the original water buffaloes uh you do some historical reading about some of the bureau of reclamation dam projects things like that that was kind of the heyday of developing water. We think that's done. We think now it's more of a rejiggering of how water is used. How do we improve efficiency? How do we catch the second use water, things that are flowing through the sewer septic systems and things like that to reuse it? The water is emotional and political too. So you had touched on it a half a second ago of developments being basically told, no, you can't go forward. And it's not a scenario of we're going to physically prevent you from building those houses. You could build them, but there'll be no water in your pipes to connect it to. So you're going to have some angry residents if you try to go and sell those. What comes to mind most is thinking about Colorado Springs. So Colorado Springs has on its Eastern side, several large residential housing master plan communities that are in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. One of them was annexed within the Colorado Springs several years back. Earlier, it's called the Banning Lewis Ranch. And with that annexation, Colorado Springs committed to serve however many houses are in that development plan. Well, now if you're Colorado Springs Utilities and so-and-so developer adjacent to the Banning Lewis Ranch is also proposing another, let's call it 5,000 homes, but Colorado Springs Utilities only has so much physical water supply. So they're in the early throes of what they're doing. So they're in the early throes of and they have to choose, well, are we going to supply Banning Lewis Ranch that we've already annexed and committed to, or are we going to try to supply this new development that's trying to annex? Well, it gets very political. And as you can imagine, the county commissioners have to make decisions and sometimes they have to say no. And what it actually looks like is the last several years, several projects, Amara being the name of one of them, was not successful in its administration. And so they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing.
Speaker 2So they're in the early throes of what they're doing. So they're in the early throes of what they're doing.
Speaker 1So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. So they're in the early throes of what they're doing. One of the board members stood up, interrupted me before said a word. He already had tears in his eyes, Ryan. And I was just kind of like, oh, I don't even know where this is going. I've given enough presentations to boards that sometimes you don't know. And he asked me a simple question. He said, how would you feel, Sean, if the water that you've been paying for through taxes for the last 50 years never actually got to you? And what you did get out of the stream was yellow, salty piss water. How would you feel? And I'm like, yellow piss water? That does not sound good to me. At the bottom of the Arkansas, basically, the only water that's flowing through the Arkansas River is effluent. It's water coming out of the sewage treatment plants mixed with some true raw water. But for the most part, it's of horrible quality. And this board member happens to sit at the bottom of the Arkansas River. And with that whole municipal system, all of the counties within the system, basically have been paying mill levies to get water. And some of them have never even gotten water yet. So absolutely, he was emotional. I did not have a good answer for him. I definitely flopped on that one. But it was a good lesson for me that water is emotional. And just because I have a good use or a new idea for a use of water doesn't mean that somebody else wasn't using that water for 50 years or five generations. And they're emotional. Taking water out of somebody's faucet. If you turn on your faucet, no water comes out. You might be a little worried. Humans can only survive a couple of days without water. We could survive a month without physically eating. So water is absolutely emotional. And it's complex, and it's legal, and it's fun, and it's expensive. It's all sorts of good stuff.
Speaker 2Yeah. Well, do you have a favorite project that you've been a part of so far in your career?
Speaker 1Oh, man. On the water side of things, I don't know if it's my favorite, but at the moment, it's one I'm very actively focused on because I'd like to get this one across the goal zone. I am listing water for sale that was part of a defunct golf course that's no longer operational. It's the former Deer Creek Golf Course on essentially 470 and Kipling. I was brought in to sell the water to try to bring some assets back to help with the distress portfolio overall. And I... And I am quite confident that I am one of very few, if maybe the only person selling water in Southwest Denver. And there's a... This engagement touches almost everything we've talked about. The golf course has been shut down since 2022. So the county is claiming that we've abandoned our water rights, which is ridiculous because the golf course has only been closed for four years, nowhere near the 10-year mark. The county is also claiming that we are selling water speculating because we're trying to sell the water rights because the golf course is closed to pay taxes. The historical use nuance of these water rights is wildly complex. So from a favorite perspective, I don't know if it's my favorite, but it's complex. I've been too deep into this for a long time. The portfolio owner is quite a character himself. I'm going to leave his name anonymous for now, but it's a fun one. And I don't know where it's going to go. Ultimately, I think that the water is going to flow into Chatfield and we'll be able to paper trade it with the municipality to serve something in Douglas County probably, but we'll see where that goes. But it's fascinating. And I've had to do a ton of diligence on that one. There's engineers and attorneys involved. Yeah. Yeah, absolutely. Other than that, I would say second favorite engagement is probably up north. I am listing a reservoir, which is fascinating because it's a municipal component to their infrastructure system for several municipalities, both Johnstown and Milliken in the future, probably in the next five to 10 years, will need to rely on this reservoir as part of their ultimate water utility service and system. Just because you have a bunch of pipes and you own a bunch of water doesn't mean you're going to efficiently be able to serve folks and houses. You have to be able to serve that water as well. So I'm listing a reservoir for sale. So I'm selling golf course water and a reservoir, which are two things I never expected to be doing in my life. I've always been the buyer builder in the equation of land and real estate. So to be on the exact opposite of that, I'm learning. It's fascinating. I get to hang out with the municipal folks as part of this process. So those are just a couple of them. I have... More than enough buy and sell activities to try to keep me busy most days. And I would bet water is going to continue to be more scarce as we continue to navigate the rest of the century. It's not getting cooler. Boy, this week was a pure example of that. 105 yesterday.
Speaker 2Yeah. Yeah. We had the same thing here in Iowa. So it's been toasty. Well, that was a good example to put a little bow on a lot of the stuff that you had talked about previously, just examples walking through the abandonment. And the due diligence and everything that you had to go through there. I think at this point, just looking at the time, we should probably shift into the last segment, which is a lightning round. So I've got five questions for you based on your experiences. First one, what's the best career advice you've ever received? Ask dumb questions. Don't be afraid.
Speaker 1Just ask the dumb questions. It may feel dumb in a moment, but I guarantee you there's two other people on that call that also don't know or in the room or whatever. And eventually you will then start telling people to ask dumb questions because you will have learned so many little things by being confident enough to ask that it'll set you up for success.
Speaker 2I love that one because that is a motto that I have for this podcast because all the people that are listening out there, there's got to be somebody out there that would ask the same question that I'm going to ask. So they'll be happy I asked it, even if I look stupid. So all good there. All right. Second one, what's one lesson you've learned from a project that did not go as planned?
Speaker 1Just because you have a path to entitlements, and this is not necessarily water focused, this is maybe more land development focused. Just because you have a path to get there and it's very logical, doesn't mean you're going to achieve success. Protect your spending. Even if you think it's the most straightforward yes you're expecting, who knows? I had a, and I'll keep this brief, I had a project where I was taking a small piece of land that was zoned a rezone to convert it to industrial. 360 degrees around this property was all industrial. The county wouldn't vote to rezone it. And it was like the logic flaw was just mind blowing. And before I committed to spend the six figure spend on some engineering, I went all the way up to the board of commissioners. I had standalone one-off meetings. I tried to figure out whether I was going to get there or not. And I didn't agree to spend that dollar. I didn't agree to those 130 grand specifically because I knew the county wasn't going to vote in favor. And it's, even if it's the most logical path forward, don't spend until you have to.
Speaker 2All right. Third one. What's one thing young developers don't worry about enough?
Speaker 1Ooh, that is a really good question. What do young developers not worry about enough? I think patience. They're not worried about patience enough. I think back to my own earlier days in my career, I was a developer. I was a developer. I was a developer. I was a developer. I wanted to get everything done every day. And I believed that I could, which is a fallacy. You can't get through a full rezone, a full subdivision improvement, whatever in one day. And being so focused on finishing a task that you skip steps to get it done, that's going to blow up in your face. You can't get everything done every day. Take time, go slow. Don't respond immediately. Take your time.
Speaker 2That's my guidance. All right. Fourth one. Which asset class interests you the most today?
Speaker 1Water rights. That's an easy one. Water is a secret. It's big dollars. It's crucial. It's a scarce resource. You can't develop anything without water. So you got to come to Hydrosource. You got
Speaker 2to call me. And what's funny is coming into this, I wouldn't even have thought of water as an asset class. So very, very interesting. All right. Last one. What's one question you wish more developers would ask about water?
Speaker 1How long is this going to take? Everybody seems to think things go so fast. And what I have found is water is so municipally tethered to approvals, whether you're dedicating it, whether you're buying it from the municipality, any variation of any of that, there's municipal players involved. Anybody that has spent time in the entitlements realm, land or water, they'll know that if you think you have a six month schedule and you have a municipal body that you need an approval from, you need to build in some contingency cushion. Maybe it's another 60 days. Maybe it's another six months. Things never go as fast as you expect. And communicating or conveying a true appropriate timeline to a client is crucial. Most of the time they don't ask. And so if no one asks me, sometimes I forget that people don't realize how slow things go. And so it's on me to inform them. So I wish people asked me more. How long is this really going to take?
Speaker 2All right. Well, that brings us to an end here. Sean, what's the best way for people listening in to connect with you and learn more about your company?
Speaker 1Yeah, absolutely. You can find me on LinkedIn, Sean Flanagan. That's probably the easiest. Other than calling my cell phone, which I'm happy to provide a phone number, 720-362-0722. It's my same cell phone since high school. If it hasn't changed, I'll be there.
Speaker 2Perfect. Well, I will throw that on the show notes page. So those of you listening in, if you look down in the description for this episode, you'll see a link there to the show notes page. And I will throw Sean's LinkedIn profile link there on the show notes page as well as a link to his phone number. You can access them there. Otherwise, Sean, thanks for hopping on here and talking through this. A lot of really interesting things. I think you cleared up a lot of the questions I had coming into this. You also brought up a lot of things I hadn't even been thinking about. So really, really good stuff.
Speaker 1Awesome. Well, Ryan. I am quite confident that we might need to have a follow-up to this one, but let it stew and we'll come up with some more good concepts to add because there's probably another 30 minutes to an hour of stuff we've barely even talked about that I'd love to go deeper on. So until next time.
Speaker 2Yeah, for sure. And that brings up a good point, though. So those of you who are listening in, if there's things that we did not cover or things that you're still uncertain about, throw them in the comments and let us know. And when we do reconvene, we can bring up some of those topics and dig into them a little bit more. Yeah. So with that said, we'll go ahead and come to a close here. If you're not already subscribed, please click that button. We'd love to have you back for the next one. Otherwise, we will talk to you all next week. Thanks for watching.
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