Oil money, baby boomers heating up sales of Texas trophy ranches

Posted Saturday, Aug. 10, 2013  comments  Print Reprints
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Fueled by cash from the bustling oil and gas industry and baby boomers looking for their own private Ponderosa, sales of Texas trophy ranches are bouncing back after a Great Recession slowdown.

Cows aren’t necessarily part of the equation on these multimillion-dollar spreads, where the emphasis is on recreation and top-shelf amenities such as lavish lodges with guest quarters, scenic views, bountiful wildlife and running water, ranch brokers say.

“Anything that is priced right, we’re selling right now. What really sells is something that is the cream of the crop that is move-in ready where people don’t have to bring anything but their toothbrush,” said Trey Hallmark, a broker for The duPerier Texas Land Man, based in Boerne.

And in the middle of an epic drought, it’s mostly “about water, water, water,” he said.

“That’s what people are looking for. You can sell a 1,000-acre ranch for $10 million and they might spend 90 percent of their time on 5 acres on the water,” Hallmark said.

The uptick in sales of recreational properties has primed an 8 percent hike in Texas land prices over the first half of 2013, said Charles Gilliland, a research economist at the Texas A&M Real Estate Center.

“That’s a hefty increase. The recreational market appears to be thawing out,” he said, noting that the typical transaction this year is about 68 acres, compared with 100 acres during the Texas land rush in 2005 and 2006.

“Numberswise, the first half of the year has been pretty amazing. It might not last but it is here right now,” Gilliland said.

David Culver, a ranch broker with LandTx in Fredericksburg, says wealthy buyers are looking for private recreational features where they can play and entertain.

“Be it water, be it cliffs, be it hunting or be it growing grapes, they are looking for private opportunity on their own land.

“They want a hole of water their kids can jump in and where they can catch some fish. They want water that is bigger and more abundant than a little pool. They want to be able to use it,” he said.

Brokers say the oil and gas boom is fueling much of the demand for “silk stocking” Hill Country ranches where prices can go into the $50,000-an-acre stratosphere for properties with all the bells and whistles.

“What I’m seeing is that Texas is booming because of the oil money and construction,” said Jeff Soele, a broker who owns San Antonio-based Texas Best Ranches. “There is so much oil industry money, but there are lots of people moving here from out of state because they can get more bang for their buck.”

“In my opinion, it’s the year to buy because interest rates are still low and there is lots of supply going off the market,” he said.

Merrill Swanson, an appraiser with San Antonio’s Dugger, Canaday, Grafe Inc., says things are bouncing back after ranch prices dropped 10 to 20 percent during the recession.

“I think people have been waiting for five years trying to figure out what to do, so I think there is five years of pent-up demand,” he said.

The influx of wealth generated by the Eagle Ford Shale play in South Texas is also starting to move into the ranch market, Swanson said.

“It has taken a while for that money to start flowing out of there. Now that they are getting royalty money, they are deciding to buy land,” he said.

Well-heeled boomers

Jesse Lockhart of Lockhart Real Estate in Barksdale, who specializes in large ranches, said interest started picking up last fall.

“It’s all recreation land. It’s very seldom that we sell a ranch to a rancher,” he said, noting that he’s seen a 5 to 10 percent price hike since the first of the year.

“During the heyday from 2001 to 2008, we had some years where we had a 20 percent increase in value. We’re a long way from that, but we’re seeing some recovery,” Lockhart said.

Hallmark said some buyers are looking to park money in land rather than the stock market.

“They are nervous about the stock market with the highs we’re seeing. They don’t think it’s going to last. We’re seeing people diversifying into land holdings,” he said.

He’s also selling to California and East Coast baby boomers who like what they can get for their money in the Lone Star State.

And what well-heeled boomers want is a turnkey getaway.

“They are in their early 60s to 70 and they’ve already built custom homes in River Oaks in Houston or Highland Park in Dallas. They don’t want those headaches. They want something where everything is in place,” he said.

But some sellers are finding that an opulent 10,000-square-foot mansion doesn’t always mesh with other people’s desires.

“Some people do go overboard on improvements. You don’t want to build too big. What today’s buyers like is about 4,000 or 5,000 square feet with a nice finish and two or three guesthouses.

“They want to bring their friends and families to a nice place to hang out,” Hallmark said.

The working spreads

Giant working ranches are also selling as oil people seek investments that can appreciate and earn a return, said Sam Middleton of Chas. S. Middleton and Son in Lubbock.

“Cattle prices are high and interest rates are cheap, so I’ve been selling large ranches to large operators. These aren’t scenic ranches. They typically go from $250 to $600 an acre. They are 30,000 to 50,000 acres. They add up to a lot of dollars,” said Middleton, whose grandfather started the ranch brokerage in 1920.

He recently sold the 71,000-acre Canadian River Cattle Co. in Adrian to an oilman. The $33 million listing featured 29 miles of the Canadian River as well as a hunting lodge, a pilot’s quarters, a manager’s house and a paved landing strip.

“He bought the cows and everything. He even kept the same manager. It’s fashionable to say you own a ranch. I’ve sold that ranch three times. When you sell it several times, you grow to love those places,” Middleton said.

Dane Mount, a broker with Davis Vernon Real Estate in Vernon, recently sold the 37,000-acre Buckle L Ranch to an oil company.

Listed at $33.3 million, the contiguous tract near Childress includes 23 miles of the North Pease River and 35 miles of creeks and “great hunting,” Mount said.

“They bought that one and some other stuff. They see an upside in real estate,” Mount said. “We’re seeing buyers from California and all over the place. They can buy a lot of acres for their money in Texas.”

Drought anxiety

But there’s also a big uncertainty on the horizon — the now-3-year-old Texas drought.

“That has had a tremendous impact. We got some rain in the last few weeks in places that hadn’t seen rain in three years,” Mount said.

A July downpour in the Panhandle put a smile on Middleton’s face.

He said he’s lost sales to the drought in recent years.

Now he’s scrambling to get some “green” photos of his listings.

“If it starts raining, we’ll see an uptick in prices,” he said.

The drought is even a concern at a picturesque ranch known as Falling Waters, a 4,661-acre spread north of Uvalde that features a spring-fed stretch of Montell Creek that is lined with cypress trees and includes two lakes, Lockhart said.

“The creeks are running, but one fellow asked, ‘What happens if these springs dry up?’

“It’s a legitimate concern, so he backed away. The drought is having a very negative impact,” Lockhart said.

Hallmark concedes that the drought has been stressful.

“It’s not so bad when we have Texas buyers because they understand the drought. We have trouble with buyers from the East and West coasts.

“But the better properties still have water, and that’s what’s selling.”

Steve Campbell, 817-390-7981 Twitter: @stevecamp

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