State of the Ranch Market and Spring 2011 Newsletter

Spring is here...

By Greg Fay

With spring upon us and the snow just beginning to melt in the mountains the intermountain west is beginning to blossom. It has been a great winter and we are looking forward to a productive spring and summer season. With our snowpack above normal this year the rivers and lakes are going to be in great shape for anglers and ranchers alike. With Fay Ranches having sold over $150m in ranch real estate in 2010 we are optimistic that 2011 is going to be productive as well.

Fay heads to NYC and You're Invited...

Fay Ranches presents at Urban Angler in NYC

Mark your calendars for May 4th from 5 to 7 pm and plan on dropping by the Urban Angler Fly Shop at 206 Fifth Avenue, 3rd Floor in New York City for some wine and cheese and to visit with Greg Fay and Ryan Flair, Founder and Owners of the west’s most prestigious ranch brokerage firm, Fay Ranches, Inc . Both avid fly anglers, Greg and Ryan and the other sixteen brokers at Fay Ranches have been selling ranches with a particular focus on fly fishing in Montana, Wyoming, Colorado, Idaho and Oregon for the past two decades. This is a great opportunity to visit with them about the investment quality of purchasing a ranch out west with your own stretch of river.

This is Greg and Ryan’s second year as a guest of Urban Angler and we had such a great turnout last year that three full days in the city was barely enough time to get with all of you. If you’d like to make a personal appointment with Greg or Ryan, they will be available in New York City on Tuesday, Wednesday and Thursday, the 3rd, 4th and 5th of May. Please feel free to email Greg or Ryan directly if you’d like to set up a time to visit with either of them while they are in town, [email protected], [email protected].

We look forward to seeing you there!

2010 Fay Expansion

2010 Fay Expansion

2010 and the first quarter of 2011 was a period of growth for Fay Ranches with new offices opening in Telluride and Denver, Colorado, in addition to offices opening in Buffalo, Wyoming and a new office in Bend, Oregon. These satellite offices complement the existing offices in Jackson, Wyoming, Sun Valley and Boise, Idaho, and Lewistown, Missoula, and Bozeman, Montana. Fay Ranches now has 16 Brokers working out of 10 different offices throughout the Rockies and the Northwest.

Overall Market Summary

James Esperti & Chip Lenihan

We still aren’t entirely sure what the percent effect has been, but there has been a significant adjustment in ranch values over the past four years. The finest recreational ranches with the highest quality amenities (frontage on a trout stream for example) have been affected the least.

I would characterize the current state of the market as rebounding. Both statistically and anecdotally, we have seen a significant improvement from 2009 to 2010 and the first quarter of 2011. Fay Ranches gross sales volume returned to pre-recession levels in 2010. Additionally, according to ranch appraiser Clark Wheeler’s most recent market trend newsletter, in 2010 the ranch market returned to its 10 year average in terms of volume of acres traded. These are very positive statistics that are indicative of a turn in the market.

The ranch market has historically been characterized by sustained moderate growth. My hope and prediction is that we return to this market condition and ideally the speculative component that drove us to spike in 2005 does not return.

Coming to Grips with Reality

Coming to Grips with Reality

James Esperti & Chip Lenihan

It has now been three years since the ranch market slowed down. For most sellers it took a couple years to adjust their expectations and for others it has taken all three, but they are there. The ranch market is an under leveraged market and, consequently, there hasn’t been the distress like we’ve seen in the residential and commercial sectors. Ranch sellers who were testing the waters with an inflated asking price have, for the most part, taken their ranches off the market to wait for a sunnier day. The vast majority of ranches being offered for sale today have serious sellers who understand the market conditions and have decided it’s time to do business.

Some of these land owners see opportunity in other sectors of the business world and are simply looking to sell in order to extract capital (even if it means taking a loss) to take advantage of these opportunities. Montana Wealth Management, a wealth management firm located in Bozeman, MT which specializes in working with agricultural families who are selling their farm or ranch, is seeing strong interest in families selling property to create supplemental income or to transition into retirement. According to Chris Nolt, a principal in Montana Wealth Management, “the decision to sell can be very difficult, but when a family finally makes that decision, they see the value in reallocating the capital from the sale of their ranch to a more diversified portfolio of investments. Also, by using strategies such as a 1031 exchange or charitable remainder trust, a family is able to avoid taxes on the sale, preserve their wealth and create stable cash flow for retirement which is often three to four times what the ranch has been generating.”

With the acceptance of the adjustment in ranch values by sellers and an unmistakable increase in activity in many real estate markets from coast to coast, investors are starting to feel more comfortable making a purchase. The buyers that are looking are intent on finding the right ranch at the right price, and they feel both objectives can be met. The buyers in the market today are looking for a long term hold and are motivated as much by the recreational opportunities and the subjective values of spending time with family as they are with investing in a ranch as a safe haven for cash and as a hedge against the forecasted/impending inflation.

We are feeling more optimistic than we have in a few years. A year ago it was tough to have a positive conversation with another ranch broker and now all the chatter is positive.

April and May are great months to begin or continue your search for a ranch, there is excellent inventory and you’ll be on schedule to close this summer. The weather can be unpredictable but the pre-runoff fishing can be some of the best of the year. I hope this newsletter finds you well. If you have any questions or would like to discuss the market conditions further or have any questions about the ranches we have listed, please give us a call.