There is an unmet demand for working ranches for sale in the Southwest. This is both a challenge and an opportunity in the region.
“The buyer activity is pretty active, but there’s just been a lack of active listings and most ranchers I know are just not wanting to sell right now,” Paul Groseta, ranch realtor with Headquarters West, Ltd., told WLJ. Headquarters West focuses on Arizona and does a little bit of work in New Mexico.
“People are just kind of tire-kicking,” he added.
Paul Bottari, an accredited land consultant and owner of Bottari and Associates, had much the same to report.
“But I don’t have a problem with that. I come from a long-time ranch family. We just got a centennial award here for the Bottari Ranch in Nevada. It’s been in the family for over a hundred years, so I like to see the fact that these ranches are not on the market.”
Bottari focuses solely on Nevada and told WLJ that most of his buying interest is coming from ranchers from California and Utah looking to take advantage of the lower pasture prices in Nevada.
According to the USDA’s National Agricultural Statistics Service’s annual Land Values report, average pasture values across the country have been relatively level since 2015. In 2017, the national average was $1,350 per acre. In the Southwest, however prices are far lower. Though the most recent report does not include pasture price data for Nevada and Arizona due to too few sales, in New Mexico, pasture values are the lowest in the nation at $360 per acre.
“There is money looking at coming into this country, because people recognize the values here are lower on a per-animal-unit basis or on an acre basis than they are finding in some other areas,” Bottari said of Nevada. He said he has some investor interest, but most are commercial ranchers looking to expand and/or reduce costs.
“Californian and Utah buyers that are ag people are buying into this market because we’re not too far from their home, but our values here are less than what they can sell for in their area. So, they can sell a portion of their property in Utah or California and pick up something in Nevada to increase the size of their total operation.”
Deeded land and water
The Southwest is a unique region when it comes to agricultural real estate. Not only are the states an arid, challenging terrain, there is a lot of federally-owned land in the area. Nevada has the ignoble honor of having the highest percentage of federal land in the nation at 85 percent. Arizona and New Mexico have 39 and 35 percent of their landmasses owned by the federal government as well. And that does not address the issue of state land.
“Only about 15 percent of the state is private property—deeded land that you own,” said Groseta of Arizona. “Almost every ranch has significant land that is state land or federal land—Forest Service land or BLM land. A lot of people from other parts of the country just aren’t too familiar with that. You can have a ranch here that is all federal land or state land and just a small amount of private land.”
Where that deeded land is located is also an issue. Much of the Southwest has a “checkerboard” pattern where deeded land is intermixed with federal and/or state land. Most of Bottari’s territory is like this.
“You know, 62 percent of the private land in the state of Nevada is a checkerboard area.”
Given the abundance of federal land in the Southwest, the “split estate” is alive and well. A ranch may or may not have all rights—surface, water, mineral, etc.—attached anymore.
“Most any of them include any water rights that are attached to them. Without their water rights, nobody would buy it,” noted Bottari. “Currently, most of the ranches have had a previous owner that has held a portion or all of the mineral rights.”
Despite Nevada’s abundance of mines, mining outfits have been buying ranches in recent years for environmental mitigation purposes.
Groseta noted an interesting dynamic in his area regarding ranch demand and water.
“The new drought insurance program has really influenced prices on the big desert BLM ranches in the past one to two years,” he commented. “We actually started seeing people buying these big BLM desert ranches and pretty much their main motivation was enrolling in the drought insurance program.”
He said that the buyers did run cattle on the ranches, but the cattle were not the primary financial motivation for the purchase.
“It was kind of interesting to see people buying these ranches strictly for the enrollment in the program.”
Looking forward
Both men were optimistic about what 2018 will bring, and both cited expectations of a strong economy and good beef demand as their reasoning.
“I’m looking for continued demand in beef prices that will help the ranch demand coupled with continued better economy in the Phoenix metro area, which will have a ripple effect on the rural economy,” said Groseta.
“There appears to be good demand,” said Bottari, adding that the current regulations regarding National Environmental Protection Act (NEPA) requirements are a stumbling block to getting checkerboard ranches sold. He hopes that the Trump administration might tackle such regulatory hurdles in the coming year.
“I’m optimistic that the economy will continue to improve. I think the livestock end of it looks positive. I’m looking to have one of my best years in 2018.” — Kerry Halladay, WLJ editor
