Baby Boomers Are Leaving Behind a Trail of Luxury Ranches

It is true that Western legend no longer captures American imagination as it once did. But the main reason many Colorado – and Western – ranch sellers can’t sell their big ranches is that so many are overpriced.

Many sellers have over-improved their ranches with enormous homes—and bigger, often unsightly outbuildings—which buyers must furnish, staff, equip, maintain, heat, and insure.

Many are engaged in costly and counterproductive “wildlife management” practices including installing high fences, removing predators, culling wild animals, applying pesticides and artificial feeding.

Many Western ranchers attempt year-round ranching in areas that are under deep snow in winter requiring them to raise irrigated hay all summer to feed livestock often sheltered indoors in costly facilities all winter. Ultra-priced show cattle and horses are additional economic drags.

Together, these can create unsustainable overheads, to the point that, as a rancher friend of mine remarked, “The cost of the ranch is just the down payment”.

Because the market punishes bad investment, one man’s problem can be another’s opportunity. Here are some ideas to reduce your investment, slash expenses and increase value:

• Buy someone else’s white elephant at a deep discount. Sometimes more than one sale is necessary to reflect real value: As they say, “In real estate, it’s often the third owner who makes money”.
• However ethical, every broker works for the seller. Insist on an appraisal from a qualified, unbiased appraiser who specializes in ranches.
• These are complex businesses. Every $100,000 increase of profit or loss, when capitalized at 5%, increases or decreases effective cost by $2-million. So, make sure the appraisal includes the “economic approach” to value in addition to the “cost” and “market” approaches.
• Most ranches’ market value comes more from recreational and ecological features than agricultural production value. Landowners can best increase their land’s value by improving the health and vigor of the habitat and the wildlife it supports, and by carefully adding improvements designed to appeal to amenity users.
• Be wary of the advice of the land grant college agricultural/wildlife departments and wildlife “managers” because so much of what they teach raises fixed costs, wastes money and harms wildlife and habitat. Instead, learn how to practice regenerative wildlife and agricultural management. Get in touch with groups such as HMI (Holistic Management International), and the Savory Center to learn about these methods.
• Holistic ranching is an important tool to add value. In the value-add process (and many holistic managers miss this part), it’s important that all improvements are designed to appeal to the “amenity users” who will someday pay top dollar for the ranch.
• Before you raise livestock or hay, invest one week and a few thousand dollars in the Ranching for Profit school.

Owning a ranch is a big responsibility and a lot of work. The dividends are untaxed appreciation—and a lot of fun. And if the ranch is bought right and then thriftily managed to build wildlife populations, improve habitat and create “romance,” there is every reason to expect a big payday if and when the owners decide to cash out.

NOTE: this article was originally published to WSJ.com on August 22, 2019. It was written by Katherine Clarke.

For the next generation of property owners, sprawling Colorado ranches require too much upkeep and expense

Decades ago, a generation of America’s wealthiest, raised on television shows like “Howdy Doody” and “The Lone Ranger,” headed west with dreams of owning some of the country’s most prestigious ranches. Now, as those John Wayne- loving baby boomers age out of the lifestyle or die, they or their children are looking to sell those trophy properties.

That generational changing of the guard has led to an oversupply of ultraluxury ranches on the market. Nowhere is the glut more apparent than in Colorado, where some of the biggest and most storied properties are located.

Jeff Buerger, a local ranch broker with Hall & Hall in Colorado, said there are more large trophy ranches on the market right now than he can recall in his nearly three decades in the business. There are about 20 ranches priced at over $20 million on the market in the state, according to a Wall Street Journal analysis of listings.

Some of Colorado’s most prominent listings include a nearly 12,000-acre ranch near Meeker, owned by retired professional golfer Greg Norman, which has been for sale since 2011; it is listed for $50 million. Henry Kravis, the billionaire co-founder of private-equity giant KKR , put his Colorado ranch, known as Westlands, on the market for $46 million in January. Discovery Channel founder John Hendricks relisted his ranch near the Utah border, plus an adjacent resort, for $279 million in May. (He and his wife, Maureen Hendricks, first put the property on the market for $149 million two years ago; that price didn’t include the resort.)

Despite a strong local economy, buoyed by tourism, the aerospace industry and the cannabis industry, the surge in supply has led to a lack of urgency from buyers—and is putting downward pressure on prices. Some ranches have sat on the market for years. “Savvy investors… take their time to compare and contrast. They get analysis paralysis,” Mr. Buerger said.

For the children of ranchers, the Wild West doesn’t always have the same draw as it had for their parents. Ranch operations are labor intensive, and keeping up with costs can be a struggle. And grandchildren would often rather play videogames and hang out with their friends than go fly-fishing in the wilderness.

“If you look back in the day to the ’70s and ’80s, there were these guys…raised with this mythology of the West,” said Ken Mirr, a local ranch broker. “It was attachment to something Hollywood produced. Their children aren’t necessarily always as interested in operating the properties. Sometimes the kids just see cows and think ‘What should I do with this?’”

Many of the ranches have sprawling mountainous landscapes, forests, meadows, rivers, fisheries and big-game-hunting facilities. Mr. Kravis’s has its own golf course. Operating costs vary dramatically, depending on how much infrastructure ranchers have on their land and the level of agricultural activity but can often be millions a year.

And ranching is an increasingly tough business. The increasing expense of upkeep and infrastructure, coupled with the declining price of beef, is squeezing ranchers on both ends, experts said.

“I know a lot of multimillionaires who run cattle and still lose millions of dollars a year,” said Tony Caligiuri of Colorado Open Lands, a land-conservancy group. “One guy I talked to recently in oil and gas said he’s hoping to get his loss down to $1 million a year. His ranch hasn’t turned a profit the whole time he owned it.” In some ways, wealthy ranchers who can afford losses are keeping the industry afloat, Mr. Caligiuri said.

Nearly three decades ago, California real-estate developer Ronald Boeddeker and his wife, Kitty Boeddeker, bought a sprawling property close to the ski resorts of Steamboat Springs. “My father grew up as a rancher in California, and just loved the outdoors and horses,” said Cary Krukowski, Mr. Boeddeker’s daughter and a Denver-based concert and events promoter. “He was a farmer at heart.”

The Boeddekers relished the ranch for years, fishing and white-water rafting, and building an 11,000-square-foot log mansion and a hunting lodge.

“ “Sometimes the kids just see cows and think ‘What should I do with this?’” ”
—Ken Mirr, ranch broker

Mr. Boeddeker died in 2010. The children, who are in their 40s and 50s and are spread all over the country, struggled to keep up with day-to-day cattle and hunting operations on a property that is larger than all the boroughs of New York City combined. They decided to sell. Ms. Krukowski and her siblings listed the roughly 221,000-acre ranch for $100 million in 2017, but have since lowered the price to $70 million.

As a child growing up in Durango, Colo., David R. Duncan, a winery owner based in Napa, remembers his father Ray Duncan ’s attraction to the cowboy lifestyle. “He was always reading a book on cattle science. I remember it had a red cover and seemed about 4 inches thick.”

At that time, there was a fascination with ranching, which had been glamorized by the likes of business magnates like T. Boone Pickens and Ted Turner. “I have a picture of my dad sitting on a horse wearing a V-neck cashmere sweater and a cowboy hat,” laughed Mr. Duncan, 53.

Ray Duncan died in 2015; the family ranch—Diamond Tail Ranch near Jelm, Colo.—is on the market for $44.9 million.

Most ranchers are secretive about what they paid for their properties, and public records are largely opaque, making it hard to determine the value of these ranches. “In ranching and farming, you never tell anyone how many cattle you have or how many acres you have,” said Tom Bradbury, a Denver real-estate developer whose family is listing their South Comanche Ranch near Byers for $22 million.

Hall & Hall agent Brian Smith said he believes the highest number ever paid for a Colorado ranch was $175 million. That record was set in 2007 when the Forbes family sold their more than 170,000-acre ranch in Southern Colorado to hedge-fund manager Louis Bacon, a spokesman for Mr. Bacon confirmed. More recently, William Bruce Harrison, a scion of one of Texas’ largest oil fortunes, paid roughly $70 million for an 83,000-acre ranch in Colorado’s San Luis Valley known as Cielo Vista in 2017, according to people familiar with the deal. While the price represented a significant discount to its $105 million asking price, the sale was still a major transaction for the market.

“ “At the end of the day, land is the one thing that can never be reproduced. It’s always going to be a great place to park capital.” ” —Jeff Buerger, local ranch broker with Hall & Hall in Colorado

For many sellers, it is a waiting game. Ranch broker Christy Belton is listing Big Creek Ranch, a 4,850-acre property near Steamboat Springs, for $39.9 million. It was first listed for $59 million a decade ago, and has been on and off the market several times since.

Ms. Belton said the initial price was much too high, especially since they were hit soon after with the financial crisis, which sent the value of recreational ranches plummeting. “Hindsight is 20/20,” she said.

Owner Greg Lamantia, a 62-year-old Texas beer distributor who bought the property with his family almost two decades ago, said he can be patient. They were testing the market initially, he said. Now, they’re more serious. “If it doesn’t happen, we’ll just take it off the market and enjoy it some more,” he said.

Unlike other sectors of the U.S. high-end real-estate market, ranches can’t fall back on international purchasers. Broker Tim Murphy said there is virtually no demand for ranches from international buyers, many of whom “don’t get it.”

For ultrawealthy out-of-town owners, these ranches are frequently geared toward fishing and hunting. But some want the experience of actually herding cattle and plowing fields—and often face lower property taxes if they engage in agricultural activities. Others lease some of their land to local ranchers. “They have high-stress, fast-paced lives,” Ms. Belton said. “When they can spend some time going around and around on a tractor, it’s cathartic.”

As the cowboy romance fades, sellers are also trying a new tack: targeting conservationists.

“The last wave of buyers was the baby boomers who fell in love with John Wayne and wanted that experience for themselves,” Mr. Buerger said. “Today, it’s more about conservation. You’re starting to hear more landowners talking about wildlife habitat enhancement and ecological work.” Other targeted groups include wealthy families from the East Coast or Silicon Valley.

Hall & Hall’s Mr. Buerger said he is ultimately optimistic about the market, provided the economy is good. “At the end of the day, land is the one thing that can never be reproduced. It’s always going to be a great place to park capital.”

Write to Katherine Clarke at katherine.clarke@wsj.com