Investment firm buys Arizona town's water at auction

Nov. 2, 2007
The Town of Prescott Valley sold 2,724 acre-feet of effluent water for more than $67 million during an innovative two-day auction on Oct. 29-30. The town awarded the effluent water to the highest bidder -- Water Property Investors LLC, a New York-based water-resource-investment firm -- for $24,650 per acre-foot. Water Property Investors can re-sell or use the water to meet state water supply requirements for new subdivision developments. The auction attracted both local and national bidders...

• Arizona town sells effluent water for more than $67 million to a water-resource private-equity firm; The water resource can support the development of up to 12,000 homes.

PRESCOTT VALLEY, AZ, Oct. 31, 2007 -- The Town of Prescott Valley sold 2,724 acre-feet of effluent water for more than $67 million during an innovative two-day auction on Oct. 29-30.

The town awarded the effluent water to the highest bidder -- Water Property Investors LLC, a New York-based water-resource-investment firm -- for $24,650 per acre-foot. Water Property Investors can re-sell or use the water to meet state water supply requirements for new subdivision developments.

The auction attracted both local and national bidders through the use of a unique price-floor bid process that the town's consultants, WestWater Research LLC, developed and arranged. The town set a minimum-bid price by negotiating a $53-million agreement with Aqua Capital Management, a Nebraska-based private equity fund. The agreement would have awarded the effluent to Aqua Capital at $19,500 per acre-foot if the town did not receive a higher bid during the two-day auction.

"An auction format with a price-floor agreement is an innovative way to address the increasing water needs in the Southwest and to create a market environment for water trading," said Clay Landry, managing director of WestWater Research. "The price floor protected the town from losses and the auction format encouraged a competitive-market outcome worth $14 million more than the original price-floor agreement."

For more information about the auction visit www.waterexchange.com.

WestWater Research LLC is a transaction and asset valuation advisory company to the water sector. The company specializes in water-asset sales and acquisitions, water resource economics, water right and asset appraisals, and project finance services.

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