It was a showdown in New Mexico earlier this year, as two billionaires, both from Fort Worth, Texas, battled it out to buy two enormous cattle ranches.
When the dust cleared, oil, gas and real-estate investor Bobby Patton, co-owner of the Los Angeles Dodgers, had won the 174,000-acre York Ranch, spending more than the $10.9 million asking price and outmaneuvering D.R. Horton , one of the country’s largest home-building companies. In a separate deal, D.R. Horton, founded by Donald Horton, outbid Mr. Patton for the nearby 292,779-acre Great Western Ranch, closing in July for around the asking price of $59 million.
The market for large ranches is on the rebound. The recession and droughts dampened demand for wide swaths of ranch land in recent years. Dry conditions forced ranchers to sell off their herds, creating a glut that drove down cattle prices. Now, with easing drought conditions across much of the country and higher cattle prices, ranches that had been sitting on the market have started to sell. A boom in the oil and gas industry and current 2% interest rates on ranch mortgages are also fueling big land grabs.
“It’s the perfect storm,” says Sam Middleton, a Lubbock, Texas-based ranch agent who is representing Waggoner Ranch. With 510,000 acres across six counties in Texas, Waggoner Ranch is one of the largest ranches ever to go on the market. The heirs of Texas cattle baron W.T. Waggoner listed it just a few weeks ago for $725 million. Mr. Middleton and Briggs Freeman Sotheby’s International broker Bernie Uechtritz say “hundreds” of interested buyers have called about the property.
Demand is particularly strong right now for mega ranches—those with over 25,000 deeded acres and often more than 100,000 total acres listed in the $10 million to $175 million range. Deeded acres are more desirable because they’re owned outright; ranches may also include acreage leased from the state or federal government, which allows them to graze their cattle in exchange for a fee. These properties typically have cattle operations, as well as recreational assets such as hunting, fishing or hiking. Some listings include mineral rights in the sale, which offers potential revenue from oil, gas, uranium, coal or other resources.
Hall & Hall, a ranch real-estate agency that listed both the York and Great Western ranches in New Mexico, says a substantial part of its $1 billion-plus in ranch sales since 2012 has come from these larger properties. The firm has sold seven ranches bigger than 25,000 deeded acres since 2011, three times the number it sold in the previous four years.
Buyers of these mega ranches are looking for income, such as a profitable livestock operation or fees from allowing wildlife-hunting, says Jeff Buerger, a Denver-based partner with Hall & Hall. More important, they are looking for a safe, long-term investment. The value of U.S. pasture land normally grazed by livestock rose 11% in the fiscal year 2014, which ended in September, from a year earlier, after averaging about 5% yearly increases for the two years before that, according to the U.S. Department of Agriculture.
In a statement from D.R. Horton, the company said the purchase of Great Western Ranch was a “long-term investment, with no immediate plans for development. It will remain an active ranch operation and be made available for use by our key employees.”
Michael Hewatt, a member of the D.R. Horton board, says the company will use it much like it does the two large ranches it owns in Texas: as a place to entertain brokers, bankers and other D.R. Horton vendors. “It’s a perk for the people we work with,” he says. He also says the ranch is a “good investment for the long term.” Mr. Horton has also personally purchased large parcels of ranch land in Texas and New Mexico, according to public records.
Mr. Patton is more likely to use York Ranch for entertaining than for raising cattle, says Thomas G. Fitzgerald, one of the sellers. Mr. Fitzgerald says the cash flow from the cattle was “insignificant” in comparison to the value of the land. There’s also some potential hunting revenue, from $25,000 to $40,000 a year. The ranch, which has elk, mule deer and pronghorn antelope, is allocated about 14 big-game tags—which signifies the number of animals that can be harvested. A three-bedroom, two-bathroom main house and a small airplane hangar with two landing strips came with the sale. It is very much a working ranch—it’s nothing fancy, says Mr. Fitzgerald. Mr. Patton declined to comment on his plans for the ranch.
A major ranch purchase also comes with bragging rights. Many of the bigger properties are known as “legacy” ranches in part because buyers want to stake their claim in history. These ranches stand out for their size, unusual location or a unique feature, says Eric O’Keefe, editor of the Land Report, which publishes an annual ranking of the largest 100 private landowners in the country. To make that list requires owning 100,000 deeded acres or more.
Billionaire Stan Kroenke, who owns the St. Louis Rams and soccer’s Arsenal F.C., bought a roughly 124,000-acre ranch in 2012 near Augusta, Mont., listed for $132.5 million by the estate of William and Desiree Moore, the late co-founders of Kelly-Moore Paints. Called the Broken O Ranch, Mr. Kroenke’s purchase elevated him on the Land Report’s list of largest landowners, where he currently holds the No. 9 spot. Mr. Kroenke didn’t respond to a request for comment. Liberty Media Chairman John Malone remains at the No. 1 spot on the Land Report’s 2014 list, with 2.2 million acres. Mr. Kroenke didn’t respond to a request for comment.
Much of the action is in New Mexico. Unlike Texas and Colorado, the state still has quite a few very large properties that haven’t been broken apart. Real-estate agents estimate that New Mexico has about 30 ranches bigger than 100,000 acres of deeded land. Land prices are lower, too. New Mexico ranch land sells for $200 to $300 per acre, compared with as high as $1,000 an acre in Wyoming, Montana and elsewhere.
Ben Scott of Dimmitt, Texas-based Scott Land Co. is representing a 109,000-acre Double V ranch near Roswell, N.M., listed for $26.2 million, or $240 an acre. Double V first went on the market in 2009 but didn’t sell. It was relisted in the spring of 2013 and is currently under contract.
Caleb Matott, also a Texas-based ranch real-estate agent, in August sold the 35,000-acre Red Bluff Ranch, listed for $7 million, near Roswell, N.M. The buyers were Mr. Horton and his wife, Martha, personally—not by the company, according to public records. In marketing the ranch, Mr. Matott stressed the legacy value of the property: “To stand on the same ground that John Chisum, John Tunstall, Billy the Kid, Pat Garrett and so many more have stood, makes a man walk with a little higher step in his stride. To own a ranch of the grandeur makes a person part of history.”
Mr. Patton has another property in New Mexico: He and Mark Walter, the Chicago financier who is also a co-owner of the Dodgers, bought the 93,403-acre Double H ranch in west-central New Mexico last year through Double H Holdings LLC, which was used to buy the York ranch. The sale price isn’t public, but the Rocky Mountain Elk Foundation, a habitat-protection organization that owned the ranch, earned at least $30 million in the deal, according to Blake Henning, vice president of lands and conservation for the Rocky Mountain Elk Foundation.
Vast ranch holdings by a few individuals can cause deep resentment in the community, Mr. Henning says. Since private landowners either ban the public from hunting on the land or use outfitters to sell expensive hunts, local hunters often complain, he says.
That resentment won’t go away soon. Competition for recreational ranches, particularly by owners of thriving oil and gas companies, has picked up. There’s a shortage of supply now of the largest properties, which tend to go to the same small group of investors. “There’s a finite group of potential purchasers. We are all aware of them and what their appetites are,” says Greg Fay, founder of ranch brokerage firm Fay Ranches.
Great Western Ranch closed in July for around the asking price of $59 million. A previous version of the story said the ranch had sold for more than its asking price.