US water rights opportunities emerge among troubled dairy and energy firms

New private equity firm Bootstrap Ventures has reported seeing more opportunities among groups challenged by coronavirus but has had to delay the launch of its debut water fund.

The principal and co-founder of Bootstrap Ventures, a new water rights-focused private equity firm, said his company has adapted its strategy to focus on water rights leasing and acquisition opportunities created by the coronavirus pandemic.

Dennis Rogers said the firm is primarily seeing new opportunities among dairy farmers and oil and gas businesses.

“What we’ve moved to is being more opportunistic given the changing tide of the oil and gas industry here in the south-west [of America], who purchased rights in anticipation of massive drilling programs who no longer need those rights,” he said.

A wider dietary trend across the US to reduce dairy consumption had also been creating opportunities as cattle headcounts are being reduced, which has now been exacerbated by supply chain disruption and an inability to get dairy products to market, Rogers said.

“They now have excess rights available that they don’t necessarily want to lose, but can lease out. I would say the cattle and dairy industries are going to see the second largest strain on their operations in the next six months, after oil and gas. In Texas, they’re going to try to cut at least 20 percent of the operations of their daily production.”

The boutique firm has, however, had to delay the launch its debut water fund until Q4 2020 because of the pandemic. The BSV Water Fund will target institutional investors, family offices and high-net-worth individuals, according to Rogers, and will have a target of less than $100 million.

Bootstrap will continue to operate on a deal-by-deal basis, leaning on its book or existing investors of family offices and high-net-worth individuals to lease or acquire water rights. The firm has launched with offices in Irvine, California and Dallas, Texas, with the bulk of its activity the south-western water markets of Texas, Colorado, New Mexico, Arizona, Montana, the Dakotas and Wyoming.

Bootstrap typically acquires water rights with a value of between $3,000 to $6,000 per acre, with an average sell size of between 1,500 to 2,500 acres. To date, the firm has handled commitments with an average size of more $250,000.