In early November, as attention begins to turn toward a season centered on family, WestWater Research and the Bailey Program for Family Enterprise convened a Forum on how families can strategically manage a unique and vital asset—water. Family enterprises often operate within generational timelines and deploy values-based decision making, setting them apart from conventional businesses driven by market pressures and shareholder demands. In the same way, water is not like other assets. Water is a natural resource that must be physically managed and maintained and water rights, unlike other conventional market assets, are a right to use and not to own. Bringing together Patrick Cannon of Cannon Land Company, Amber Graves of Longs Peak Dairy, and Brecken Schaefer of NAI Affinity, the WestWater Forum provided an engaging discussion on the water management strategies executed by local family enterprises in Colorado.
Strategic Water Management Across Operations
Thinking about their respective organizations, the panelists highlighted the role of water at various decision-making points both for near-term operations and long-term business planning. In agriculture, the composition of a farming enterprise’s water portfolio paired with the confines of annual hydrology drive decisions around which crops to grow and where to deliver water supplies on a day-to-day basis. For developers, the hyper-local dynamic of water supply and demand has created a mosaic of municipal dedication policies that must be navigated. Meanwhile, groups with multiple business lines must consider how to put water to work in a way that maximizes beneficial use while meeting business initiatives.
Adding Liquidity to an Illiquid Asset
A key aspect of the water management strategy for family enterprises in the room was adding liquidity to water. Although physically volatile, water can be a highly illiquid asset. Investing in both infrastructure and relationships can provide optionality to water-dependent businesses. For example, well-connected networks of canals, laterals, and augmentation systems can give irrigators the flexibility to move water to where it’s most needed, store it for future use, or deliver it back to the system as recharge. Similarly, maintaining relationships with neighboring water users can facilitate water management strategies centered on water leasing or water sharing agreements.
Long-Term Investment Strategies
Where smart business decisions around the use of water can be paramount to near-term business success, continued water investments are core to the panelists’ long-term business strategies. As a non-traditional asset, investing in water requires getting creative, especially in a state with strong anti-speculation laws. Family offices in different states will need to consider their local laws. For developers, investing in water can take the shape of land acquisitions where water has already been dedicated for municipal use. Irrigators can add value to a water asset by bringing water rights with historically low productivity levels to their maximum potential use before divesting. They can also leverage additional value from water rights by using them as collateral on a loan to support further investment in the farming enterprise. In general, it is near impossible for water to retain value without beneficial use, but once paired with activities like agriculture, gravel pit mining, development, or oil and gas operations, the true opportunities for financial gain emerge.
The Family Dynamic
When asked perhaps the most important question of all – How do family enterprises work together as families, especially around what can be such a polarizing asset? The panelists agreed: Water keeps families engaged, it’s interesting, it’s dynamic, it requires creative thinking and constant attention and it’s that level of collaboration and active management that helps family enterprises thrive.
How WestWater Can Help
Managing water rights takes more than passive ownership – it requires strategy. WestWater works closely with each of its family enterprise clients to understand their water assets and long-term goals, then develop a plan in line with your family’s priorities to enhance value, ensure compliance, and support smart decision-making. From valuation and market monitoring to portfolio planning and monetization strategies, we provide a full suite of services to help clients make the most of their water holdings today – and into the future.
WestWater Forum: Water Strategies for Family Enterprise
