Territory Review 2012

Southwest Texas saw a slight uptick through Spring, 2012, in sales activity. Prices of good to premium quality land held steady or increased slightly, while the mid-quality and below retreated in value somewhat. Edwards County saw several rough hunting ranches trading below $1,000/acre for 1,000 – 2,000 acre offerings, and there is much to choose from in this segment, in this area and parts west. A significant sale occurred in July of 2011, being 8,400 acres in Val Verde County with 5.5 miles of Lake Amistad frontage, as well as US Hwy. 90, for $544/acre. The lake frontage is gorgeous, but mostly inaccessible, though there are wonderful lakeview homesites abound. We believe this sale is right where it should have been, as there are several area offerings on both the Pecos and Rio Grande Rivers, for up to $1,000/acre, and most of these have inferior location to the aforementioned 8,400 acres. 6,600 acres on the main body of Lake Amistad remains on the market for $2,400/acre with no takers. This same ranch traded for $685/acre in 2005! The venerable Indianhead Ranch of 9,800 acres, with Lake Amistad frontage, was offered throughout 2011 for $1,450/acre with no takers. Also, the well known 19 Mile Crossing Ranch, 8,450 acres on the Nueces River, NW of Uvalde, was offered for $895/acre with no takers, though the property is encumbered by Conservation Easement. We have seen the asking price of the fabulous 4 Aces Ranch on Live Oak Creek in Uvalde/Kinney Counties retreat from $3,250/acre to present $2,500/acre. The higher priced offerings continue to sit. 2,000 acres on the Nueces River closer to Camp Wood is offered for $5,000/acre with little interest, and the exceptional Dos Rios Ranch on Pulliam Creek at Barksdale has come down to $5,750/acre from $6,500/acre, but still no takers, though we did see a couple of extremely high $/acre sales on some offerings in the $2M range. Dry land in this area is ranging from $800/acre to $2,000/acre, depending upon size and amenities.

The Blanco Springs Ranch, being about 2,600 acres on Blanco Creek with Conservation Easement, had been offered for $1,750/acre for several years, and was finally sold thru a seller’s auction in 2011 for approx. $1,150/acre. This property is located in far NE Uvalde County, has live water, and a fair amount of deeper soil bottomland. We have seen offerings in Kinney County with bonafide live water moving slowly downward from the $2,000/acre hopes of 2009 closer to the $1,000/acre reality of 2012. The exceptional properties – those in the top 10% of quality – are exempt from this trend, however. What we see in spring, 2012, are some sales of smaller, exceptional live water properties in the $2M range that check in at high $/acre prices. The 87,000 acres owned by The Nature Conservancy, being several ranches not contiguous, some with Devil’s River frontage, has been offered at $350/acre with no takers. This offering is one that bears watching into the future, and is one of the more competitively priced opportunities in the zone. We are seeing values in Val Verde County west of Lake Amistad, in the Chihuahuan desert, retreating to $300/acre from previous high of $350/acre. Minerals and road access are major value factors in this area. This region remains a favorable location to invest in, in our opinion, if one shops hard and doesn’t get gouged by a cagey old rancher or trader. The recreation factor is good, and the proximity to San Antonio and the Hill Country (dynamic growth areas) is reasonable (2-3 hours). If you’re selling, price your offering competitively and be prepared to dicker with picky buyers. Remember, the ranching business in the desert ain’t gettin’ any easier.

The Western and Northern Hill Country saw some significant transactions, including several involving this office. LANDTX was listing agency of the sale of the 2,317 acre Brambletye Ranch, on Bear Creek west of Junction, for $2,350/acre, in which a backup contract offer was tendered. This ranch had about 3.5 miles of strong live water, decent improvements and highway frontage. The ranch was exposed to the public for one year, for $2,975/acre. This office was also listing agency of two large ranches on the James River, in Mason and Kimble Counties. Corn Springs River Ranch, being 2,282 acres with 1.5 miles of both sides of the fabulous James River, sold for $2,550/acre in spring, 2011, and Red Hill River Ranch, 4,104 acres with seasonal James River, sold for $1,625/acre also in spring, 2011. These sales all occurred after ample public market exposure. The Corn Springs River Ranch was resold in Spring, 2012, for about $3,400/acre, after being cleaned up and enhanced. This was considered an anomaly by this office. The Divide Country, in western Kerr County, saw offerings in the range of $2,000/acre - $3,000/acre, with sales occurring in the $2,000/acre range. This office participated in sale of 500 high fenced acres on US 83 that checked in at $1,950/acre. Unimproved land to the north is currently offered at $1,950/acre, while the immaculate Oak Knoll to the south, listed by this office, is getting a fair amount of attention (spring 2012) at $2,150/acre. Again, quality and perceived value are the two primary drivers – if the buyer thinks they are making a below market purchase, they are happy. If they think they are making a premium quality purchase at fair market value, they’re even happier! Big Oil Money is becoming a factor in this market, and should the current hot plays in both (Eagle Ford and Permian Basin) of those zones continue to develop positively, this would be a good thing for landowners considering making a sale!

Mason County continues to be a desirable address, and values in it continue to hold their own, for the most part. Good quality land on pavement is averaging $3,000 - $3,500/acre, while just to the north in McCulloch County, arguably the edge of the Hill Country, the same product averages $2,000/acre. This office sold 609 acres in NE McCulloch County for land-only value of $2,000/acre for superior land on pavement, in May, 2012. 332 acres on the Colorado River has been offered at $2,750/acre with no takers, puzzlingly. A meaningful sale of 1,168 acres with one mile of San Saba River frontage, high fenced with fancy deer and solid improvements, brought $3,500/acre. This was located in southern McCulloch County, and should be regarded as a “top 10%-er.” Another solid sale of 561 acres in eastern Kimble County occurred in early 2012, checking in at $2,750/acre. This property had live water and decent improvements, and is considered an “arms length” transaction. An above average 1,644 acres with live water was offered in far SW San Saba/McCulloch for $2,850/acre. This price was recently reduced to $2,450/acre. We have seen Sandstone Mountain Ranch in Llano County go under contract in spring 2012, but many of the overpriced offerings in Llano are starting to head south, so to speak, as competition amongst sellers is keen. Again, if it’s not an exceptional quality offering, be prepared to be priced competitively if you want action early in the game. Again, if you’re buying in this area, shop carefully and you will be rewarded with solid long term value and amenities.

The Central, Eastern and Southern Hill Country saw the stunning sale of the 5,200 acre O’Quinn River Ranch with about 4 miles total Blanco River frontage just east of Wimberley. This ranch traded for approximately $9,000/acre, but is in an area where small river tracts trade for $2,500 per front foot! We saw another sale of 592 acres on the Blanco River just east of the above, for $7,500/acre. This property is being offered for resale at $9,950/acre. LANDTX was listing agency of the 424 acre Circle A Ranch, on the Blanco River west of Blanco, which sold in spring, 2012, for $8,300/acre. Blanco County also saw several other significant sales, one being the sale of the Big T Ranch, on FM 165 and the Blanco River, just east of Blanco, for a “land only” value of about $5,750/acre. Another was the sale of the Running M Ranch, the equine showplace on US 290 and Miller Creek, just east of US 281, for a “land only” value of about $9,000/acre. Yet another meaningful transaction was the sale of the Diamond X Ranch, being on the headwaters of Miller Creek just west of 281. This 3,737 acres checked in at “land only” of around $4,350/acre, which to this observer was a stunningly high sale for a property not in the “premier” category. LANDTX presently has 1,062 acres in NE Blanco County under contract for $3,900/acre, one of the lowest prices in the area, but the quality of the property is average at best.

We saw 594 acres on the Pedernales River offered for $8,500/acre unsuccessfully, but right up the river, we saw 612 acres with both sides of river plus a nice creek with awesome lake sell for $9,500/acre. A well know Texas cyclist’s improved 447 acre ranch on the Pedernales River sold for $7.25M, after being shopped for up to $12M previously. Dryland tracts of 500+ acres were offered out of Redstone Ranch for $5,950 - $6,950/acre unsuccessfully, and we saw the sale of 173 acres with nice creek in far NW Blanco County for $7,500/acre. This tract is offered for resale for $11,250/acre at this time. This office managed the enhancement project and was listing agency in the sale of the awesome Crabapple Falls Ranch, being 1,381 acres with 2 miles of unbelievable Crabapple Creek, plus National Park-type infrastructure. This listing was offered at $7,250/acre, and closed for a confidential price. The sale of the Diamond K Ranch at Sisterdale, being 4,600 highly improved acres with an Orvis hunting facility on it, was touted to be in the range of $9,000/acre. Valero Oil purchased it as a corporate hunting retreat. This office participated in the private sale of 163 acres with a small live creek and nice lake, in western Kendall County, for $7,500/acre. We also marketed a 1,063 acre showplace in same area unsuccessfully for $8,500/acre, while offering 879 acres with live creek on US 87 north of Comfort for $6,950/acre with no takers. The quarry-ravaged “Claude Kelly Ranch” in same area has been shopped at $3,480/acre with no takers, though 50% of the acreage is essentially ruined by the quarrying. Other area offerings range from $5,500/acre on up, and they simply aren’t getting much attention at that price level at this time. Over in Bandera/northern Medina County, we saw the 2,300 acre Hightower Ranch on flowing Bandera Creek offered unsuccessfully for $2,441/acre, while closer to San Antonio, the 161 acre Privilege Creek Ranch got some interest at $8,500/acre, but no takers. We believe that activity in this area is increasing at this time. Buyers have been inactive for years, and are tired of only earning 1% on their CD’s, while watching the stock market bounce around at an unsustainable level. San Antonio and Austin remain vibrant, desirable markets and destinations. Wealthy Mexicans are flocking to both cities, and they like to have ranches along with their country club digs. We are seeing marginal quality properties slowly decrease in value in this area, and the premium quality offerings hold their own or increase. We are also now seeing a resurgence of investor/developers “on the street,” looking for the right opportunities. Scary!

The Inland Plains and Upper South Texas have become perhaps the most interesting of our areas due to the presence of the Eagle Ford Shale oil and gas play. Mineral owners are reaping windfalls of over $10,000/acre just to lease their land for drilling, and very little ranchland is for sale, and what is for sale usually has no minerals and a high price. This means very few sales have occurred in the past couple of years, as area land and mineral owners wait to see how the play develops. In the meantime, local road and fence builders reap the benefits! Many leases will be coming up for renewal in the next year or two, and the exploration/development is progressing. Drillers and producers are focusing on the hottest, most profitable areas first, and most of this activity seems to be between Karnes County and Laredo. The rich get richer. . . .though this means that as their wealth increases, it is very likely that their land holdings will increase as well through astute purchases funded by their windfalls. The information we have on the future of the Eagle Ford indicates that the oil wells are coming in big and pumping down fairly quickly, and the gas component is simply not economically viable yet due to the low price of natural gas. We also believe that there is significant environmental risk to the region, due to the use of large volumes of water and chemicals to “frac” the wells, and it is way too early in the game to accurately assess the true amount of potential damages.

From Cuero to Laredo, we are seeing average land trade for a median value of about $2,000/acre on the average, with a low range near $1,200/acre, and a high range of $3,500/acre. The Blanco Creek Ranch, being 3,700 acres on the Sabinal River in SE Uvalde County, sold for a “land only” value of about $2,600/acre in April, 2012. This is a fairly highly improved showplace with fancy animals and high fencing. The ranch traded for around $2,000/acre “land only” several years ago. We saw several resales out of the Williams Ranch in Frio County averaging around $2,250/acre, for tracts of about 1,000 acres. In Wilson County, this office offered 439 irrigated acres near Floresville unsuccessfully for $3,950/acre. We are seeing showy places in Wilson/Atascosa attract interest for close to $4,000/acre, but that number includes value of improvements. The extra-nice Jacob Ranch near Poteet sold in July, 2011, for $2,900/acre including improvements. This was regarded as an astute purchase by new owners. The sale of 567 acres near Nixon in January, 2011, for $2,645/acre was considered another astute area purchase.

On the overall, we saw values of premium properties hold their own in all areas, for the most part. In our opinion, values of inferior properties have plummeted up to 30% or more in some areas from the high of 2007. We expect these trends to continue through 2012, unless the Republican Party makes substantial gains in both Houses and wins a Presidency! If this occurs, we expect to see a substantial improvement in the marketplace, and general land appreciation to be positive once again, but not as frenzied as 2002-2007. Keep your fingers crossed. . .

There are definitely more buyers on the street in May, 2012, than there were at a similar time last year, and a few more significant transactions have closed in the past 18 months than previous. That said, we’re still in a pretty flat market compared to 2006, due to the ongoing standoff between discriminating buyers and proud sellers. I would say that overall activity is a tad more than we had forecasted last year, and we forecast for sales volume to increase slightly in 2012, and for value trends to continue as they have for the past several years, barring Republican victories. Premium, top 10% quality properties will increase in value, and all the rest will either hold their own or decrease slightly, depending upon quality and proximity to Eagle Ford Shale and Big Oil Money.

So, why should someone make a ranch investment in these uncertain and unstable times? We believe that land is by far the most unique and enjoyable thing to invest in, and is the most useful and practical investment available in our country today. It has proven to be a good long term investment. It is the ultimate product created by the ultimate Creator, and we regard our association with it and the interesting and fine folks who own and truly respect it as a blessing. There is a good reason it is called “real estate.”

Then, why should someone choose to sell a ranch in these times? We know that personal and family priorities often come into play, and the increase in values that occurred from 2000 – 2007 has not yet gone through total correction. Thus, one can still take advantage of this unprecedented runup and execute a “fair market value” sale feeling pretty good about the timing of their decision, as values have not retreated too much since 2007. The exception is a truly inferior property with poor access, no trees, no minerals with production, easements thru, etc.

As always, there are many exceptions to this report, and some sales have occurred which we have not reported in the article due to space limitation, plain ignorance or confidentiality agreements. This report is not to be considered legal or financial advice, please consult professional specialists in those fields.

Prices within each area can vary substantially due to various factors, and we always welcome new factual data and your opinions. We appreciate our many fine friends and peers who supply us with good information, and are committed to this ongoing project for years to come. You are welcome at our new office in Fredericksburg, or DC’s new home office in Mason, at any time to share a cup of coffee, talk about land conservation and property rights, and check out our unique, team-oriented operation and awesome mapping services. We hope that you will consider any of our professional services if the need arises, and we wish you and your family a safe and bountiful 2012 and beyond. Thanks for your consideration. David E. Culver, Broker