Terra Firma Winter 2015

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Unbridled. Unleashed.



WINTER 2014 Vol. 69 No. 1

TerraFirma Under All Is The Land


www.nationallandconference.com 1-800-441-5263



President’s Message . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 News Briefs from National . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Winter 2015 Edition

Member News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Published by the REALTORS® Land Institute 430 North Michigan Avenue Chicago, Illinois 60611 Telephone: 1.800.441.5263 Fax: 1.312.329.8633 E-mail: rli@realtors.org Website: www.rliland.com Listing Website: www.thelandconnections.com

Newest ALCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Chapter News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 New Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Blog Corner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Editor/Publisher Michele Cohen, Chief Executive Officer/ Executive Vice President Editor Amanda Jenkins, Professional Development and Project Manager


Graphic Designer David Hunter

Government Affairs Briefing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Russell W. Riggs, Institute Government Affairs Liaison, National Association of REALTORS® The Economy in 2015: Ready to Shift into Higher Gear At Last? . . . . . . . . . . . . . . . . . . 9 William R. Emmons, Assistant Vice President and Economist, Federal Reserve Bank of St. Louis Soil Science: A quick Primer for Land Professionals . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Kirk Goble, ALC, Owner/Broker, The Bell 5 Land Company Riparian Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Daniel P. Dalton, Esq., Dalton & Tomich, PLC Easement Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Donald J. Sherwood, MAI, SR/WA, FRICS, Director of the Fort Worth office, Integra Realty Resources, DFW, LLP. Basics of Timberland Investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Bob King, ALC, Certified Forester, United County Land & Lifestyle Realty Assessing the Value of Wind Turbine Lease Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Brad Haight, Esq., LeaseGen

Copyright 2015. All rights reserved. Reproduction in whole or in part without permission is prohibited. Views expressed within the publication are not necessarily endorsed by the REALTORS® Land Institute and information should not be construed as recommendations for any course of action regarding financial, legal, or accounting matters.


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UNBRIDLING. UNLEASHING. I am honored to carry on the tradition of this esteemed and relevant organization that stays connected to core integrity while staying current and relevant. The Institute is dedicated to UNBRIDLING AND UNLEASHING the potential in all who work with our most precious resource—the land. The Institute is adding to the member benefits with Smart Tools to support making money through the wise use of Terri L. Jensen technology, networking, marketing skills, knowledge, and Accredited Land more. An insert is included in this publication that explains Consultant Advanced some of the Smart Tools being rolled out in 2015 to add to your 2015 Institute professional arsenal to land deals. These include the Member National President Marketing Kit, Let’s Make Deals Marketing Sessions, E-Properties, ALC email addresses, Institute Perks, and enhancements to THE LAND CONNECTIONS— the Institute land listing site. In addition, nineteen best-in-class courses—with three new courses being rolled out in 2015—are under the LANDU umbrella. Knowledge enables the professional to outperform those without it and to give clients the highest level of service—knowledge is power. We are pleased to have Corporate Alliance programs in place to bring awareness of the Accredited Land Consultant (ALC) designation and the LANDU curriculum to all in the land business. Institute community service will take place this year through the new Institute Gives Back Program. A Benevolent Fund has been put in place to help members who are strongly affected by natural disasters. The Speaker Center has been expanded. The Institute has the resources to supply a presenter to cover current topics and trends in the business. Government affairs and advocacy continue to be a priority benefit of the Institute. We have a voice in D.C. We are tapped into as experts to bring information to lawmakers and have an eye on land use rights, taxation, water rights, and more. The 2015 National Land Conference: UNBRIDLED. UNLEASHED. will take place in Tucson, Arizona, on March 23-25. The Institute awards will be presented this year at this “must attend” event along with learning, networking, and deal making opportunities. The venue is a first-class resort—bring family and friends. Recordbreaking attendance is expected this year. 2015 is going to be a banner year for the Institute and those in business that involve land. Members drive an organization and I look forward to riding with you.

Terri L. Jensen Accredited Land Consultant Advanced 2015 Institute National President

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Benefits 1. Home of the esteemed Accredited Land Consultant (ALC) designation 2. Professional Development through LANDU 3. 2015 National Land Conference: UNBRIDED. UNLEASHED. 4. THE LAND CONNECTIONS Listing Site 5. Let’s Make Deals Virtual Marketing Sessions 6. Legislative advocacy and a voice in Washington, D.C. 7. Institute Member Marketing Kit 8. A subscription to TERRA FIRMA, the official Institute publication 9. Access to a national network of land experts 10. Corporate Alliance Program 11. e-Properties listserv 12. The Institute Gives Back program 13. ALC Exclusive Email Addresses and programs 14. Access to a national network of land experts 15. Leadership opportunities on local and national levels 16. Resources that keep you current and competitive 17. Member Web Profiles 18. Strategic alliances with related organizations 19. Participation in the creation and development of industry knowledge and standards 20. Member-to-member networking 21. Institute Award Programs 22. Member Perks (Partner Discounts) 23. Accredited Land Consultant (ALC) Retreat 24. Strong chapter organizations that promote knowledge sharing and business development at the local level.


Meet The Institute’s 2015 National Board of Directors Terri Jensen, ALC Advanced 2015 National President Farmers National Company Omaha, NE TerriLJensenALC@cox.net Bob Turner, ALC Advanced President Elect Southern Properties Cordova, TN bturner@southernprop.net Brandon Rogillio, ALC Advanced Vice President Rogillio Real Estate Baton Rouge, LA brandon@ rogilliorealestate.com George Clift, ALC Advanced Immediate Past President Clift Land Brokers Amarillo, TX George@cliftlandbrokers.com

Danny Smith, ALC Advanced Accredited Land Consultant Designation Committee Chair Smith & Smith Realty Wildwood, FL dannysmith@ccim.net Flo Sayre, ALC Advanced Accredited Land Consultant Designation Committee Vice Chair Farmers National Company Pasco, WA fsayre@farmersnational.com David Hitchcock, ALC Advanced Education Committee Chair Coldwell Banker Commercial Saunders Real Estate Lakeland, FL davidh@ saundersrealestate.com Norma Carleton Education Committee Vice Chair Keller Williams Realty Jarrell, TX consultcarleton@cs.com

Kirk Weih, ALC Government Affairs Committee Chair Hertz Farm Management, Inc. Mt. Vernon, IA kweih@mtv.hfmgt.com Renee Harvey, ALC Advanced Government Affairs Committee Vice Chair Century 21 Harvey Properties, Inc. Paris, TX rharvey@c21php.com Kyle Hansen, ALC Future Leaders Committee Chair Hertz Real Estate Services Nevada, IA kyleh@hertz.ag Aaron Graham, ALC Future Leaders Committee Vice Chair Land Pros Realty Gretna, NE aaron@landpros.com

Ex-Officio Board Members John Pierpoint Institute Treasurer National Association of REALTORS® Chicago, IL jpierpoint@realtors.org

Russell Riggs Institute Legislative Staff Liaison National Association of REALTORS® Washington D.C. rriggs@realtors.org

Michele Cohen Executive Vice President and CEO REALTORS® Land Institute Chicago, IL mcohen@realtors.org

2015 Institute Representatives to NAR Committees Professional Standards Committee Christina Asbury, ALC

Commercial Legislation & Regulatory Advisory Committee Randy Hertz, ALC Advanced

Resort and Second Home Real Estate Committee George Harvey

Land Use, Property Rights, and Environmental Committee Paul Bottari Renee Harvey, ALC Advanced

Business Issues Policy Committee Kirk Weih, ALC

Federal Financing & Housing Policy Committee Cathy Cole, ALC Advanced

Global Business & Alliances Committee George Harvey

Commercial Committee Danny Smith, ALC Advanced Brandon Rogillio, ALC Advanced Public Policy Coordinating Committee Randy Hertz, ALC Advanced

Commercial Real Estate Research Advisory Board Bill Burruss, ALC George Clift, ALC Advanced

TerraFirma Winter 2015



2015 Institute Officer Inductions and Reception

The Institute Goes Global The Institute’s leadership team met with the Michael Tseng, Executive Chairman of REPro Knight Frank, at the National Association of REALTORS® Convention in New Orleans in November. Tseng is an International Delegate to the REALTORS® Board of Directors. Institute leadership and Tseng discussed the Institute’s free International Membership and bringing LANDU courses and the ALC designation to Taiwan. Members of the Institute’s Leadership Team (left to right: George Clift, ALC Advanced; Brandon Rogillio, ALC Advanced; Michele Cohen, Institute CEO/EVP, Terri Jensen, ALC Advanced)

The induction ceremony and social for the 2015 Institute Officers took place in New Orleans, LA, on November 6, 2014 at the Omni Hotel. Chuck Wingert, ALC Advanced, 2013 Institute President, conducted the oath of office to the 2015 officers: Terri Jensen, ALC Advanced, 2015 National President; Bob Turner, ALC Advanced, 2015 President Elect; and Brandon Rogillio, ALC Advanced, 2015 Vice President. George Clift, ALC Advanced, became the 2015 Immediate Past President.

Institute Military Transition Program (MTP) Extended Twenty-three military veterans have been welcomed into the Institute Military Transition Program (MTP). Several MTP members have already become leaders within the organization by completing ALC educational requirements, writing for the Institute blog, and being appointed to the 2015 Future Leaders Committee. Career opportunities have been extended to some members of this elite group. The board has approved to extend the program through December of 2017. The program is designed for those who are looking to build or enhance a career in the land business and who served in the military starting in 2000. Those who join as part of the MTP program in 2015 receive the following: a one-year free membership in the Institute, invitations to MTP Conference calls with industry leaders and other MTP members, one free LAND 101 course, and one free elective LANDU course of the member’s choice. These courses must be completed in 2015. Scholarships for MTP members are also available through the John Eshenbaugh Military Scholarship.

The Institute was honored to receive a special invitation to the grand opening of the new Global Real Estate Theater, hosted by Cofeci-Creci, the organization that oversees real estate sales and practices in Brazil; CILA, a confederation created to represent the interest of real estate professionals in 14 Latin American countries; and Juwai Limited/ Juwai Luxe, a Chinese property listing website. Chuck Wingert, ALC Advanced, 2013 Institute President, met with real estate leaders from Brazil, Mexico, Argentina, Bolivia, Peru, Turkey, Australia, and more to discuss the importance of land education for global real estate professionals and the prestige of the ALC designation. Professionals from the Philippines became members through the Institute International Program at the REALTORS® Conference and Expo.

“This quite honestly is probably one of the best recognitions of my military service that I could think of. Thanks for the opportunity.” –Matt Fletcher, MTP Member, President of Three Rivers Group, Idaho. M o b i l e F r i e n d l y We b s i t e s Fo r L a n d P r o f e s s i o n a l s


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Chapter Administrator of the Year Patricia Webb Texas Chapter Administrator Patricia Webb, Texas Chapter Administrator, has received the 2014 Chapter Administrator of the Year Award by the National Institute. Webb reaches outside of the common circle to bring LANDU courses to the Texas Chapter and to apply for continuing education units for LANDU courses offered by the Chapter. She understands organizational goals and visions and works with National to ensure solid member services and membership development.

REALTOR® Legislative Meetings & Trade Expo The National Association of REALTORS® Legislative Meetings & Trade Expo will take place in Washington, DC on May 11-16, 2015. The Institute will have a strong presence at the committee meetings to represent the opinions and priorities of all land professionals. Meetings of the following committees will take place with representatives from the Institute attending: Commercial, Business Issues Policy, Global Business, Professional Standards, Public Policy, and Resort and Second Home. Opportunities exist for attendees to meet with government officials and their staffs on the Hill. On May 12, an Institute Government Affairs Meeting will be held from 1-2 p.m. at a venue to be announced in Washington D.C. Russell Riggs, Institute Government Affairs Liaison, will cover government affairs topics relevant to land professionals.

Can’t Fight It, So Join It

Land Markets Survey The 2014 Land Market Survey was the first of future biannual reports aimed to develop accurate information on current trends in the land markets and on the general state of land sales. The results were representative of over 625 land professional respondents from across the United States. In 2014, the survey covered data such as types of land transactions, mineral locations and sales, categories of buyers and sellers, purchases by region, length of time on market, sales growth, median acreage of land sales, global investor numbers, and transaction financing. While overall median land prices steadily rose 4 percent, individuals and families continued to invest in land and account for 58 percent of buyers in land sales transactions, according to the survey conducted jointly by the REALTORS® Land Institute and National Association of REALTORS®. In addition, the survey also revealed that 17 percent of land purchasers are corporations/partnerships, 17 percent are investors, and 10 percent are expansion farmers. According to the survey, 43 percent of the purchases where individuals/families were buyers were purposed for farm and ranch (24 percent agriculture and 17 percent ranch) and 31 percent for recreation. Of those surveyed, expansion farmers purchased 98 percent of land for farm and ranch (85 percent agriculture and 13 percent ranch). Investors purchased a diversified portfolio of land (21 percent agriculture, 20 percent timber, 17 percent development, 14 percent commercial). Of the 17 percent of land purchased by corporations, development land accounted for 30 percent, commercial land accounted for 26 percent, and 17 percent accounted for timber. Terri Jensen, ALC Advanced, 2015 Institute National President of REALTORS® Land Institute, states that the findings “follow my experience in that 70 to 85 percent of land buyers are expansion farmers/individuals/families; the balance are investors and/or 1031 exchange buyers.” The results appropriately correlate to the findings that responding land professionals across the United States primarily focus their practices in agriculture (69 percent) and recreation (59 percent). The market and growth for land is steady. The survey recorded that over a period of twelve months, ending in July 2014, the median land price change was growth of 4 percent.

More and more communication and spreading the buzz takes place via the internet. Stay up to date with Institute benefits, professional career tips, and market trends by connecting with the Institute on our social sites. “Like” us on our Facebook page—Realtors Land Institute, “Follow” us on Twitter--@ RLILand, and “Connect” with us on LinkedIn—REALTORS® Land Institute/Accredited Land Consultants and the member exclusive listing group Lands for Sale Network.

According to Jensen, “Land prices are noting stable versus rapidly rising prices with decreases noted in some areas. Most decreases reflect zero to 10 percent decreases and increases. The zero to 5 percent increase in more than 50 percent of responses notes the transition to stability versus rapid changes up or down.” For information on the survey and to participate in the future, contact the Institute at rli@realtors.org.

TerraFirma Winter 2015



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AFFAIRS BRIEFING Russell W. Riggs Institute Government Affairs Liaison National Association of REALTORS®

News and Notes from Inside the Beltway EPA Moves Forward with WOTUS Rule Despite Controversy The EPA and the Army Corps of Engineers continue to move forward with a proposed rule that attempts to clarify the geographic scope of the Clean Water Act’s jurisdiction over the nation’s waters and wetlands. This proposed rule would bring under federal jurisdiction all tributaries of streams, lakes, ponds and impoundments as well as wetlands that affect larger downstream waters. The public’s response to the EPA’s proposed rule on the “Waters of the U.S.” almost broke the Internet. Since the comment period on the proposed rule closed on November 14, the EPA has received over 500,000 comments, many of them heavily critical of the proposed rule and how EPA has been moving this proposed rule through the process. Both REALTORS® Land Institute and the National Association of REALTORS® (NAR) sponsored regulatory Calls-for-Action to encourage members to write letters to the EPA and the Army Corps of Engineers to describe how this proposed rule, if finalized, would have a negative impact on their individual businesses and the economy as a whole. Changes in Congress as a result of the recent elections will also have an impact on this issue. With the House firmly under Republican control and the Senate changing to a slim Republican majority, there will be opportunities to increase the visibility of this issue. Senior Senate Republicans said they will do “everything” possible in the next Congress—from introducing stand-alone legislation to making Congressional Review Act challenges—to stop a proposed Clean Water Act jurisdictional rulemaking, though they acknowledge the appropriations process may be their best opportunity to quash the regulation. Additional oversight of the regulatory process through Senate committees is also likely, with Sen. James Inhofe (R-Okla.) becoming chairman of the Senate Environment and Public Works Committee in January.

FAA On Slow Path to Permit Drones for Commercial Use The House Subcommittee on Aviation held a hearing in November on “U.S. Unmanned Aircraft Systems: Integration, Oversight and Competitiveness.” NAR sent a letter for the hearing to the Subcommittee, encouraging them to push for the FAA to release their proposed rule quickly so the process of getting a final rule on commercial use of Unmanned Aerial Vehicles (UAVs or drones) can proceed.

The good news is there was a clear bipartisan message at the hearing – the FAA needs to get its proposed rule on commercial use of UAVs out ASAP, to speed along the process of getting to a final rule. Members had concerns for safety and also that the U.S. may be missing out on job opportunities/a potential boost to the economy by restricting the use of drones. There were also concerns with how the FAA will enforce a rule (including the regulations already in place), as they apparently don’t have the money/personnel to be very proactive on that front. Timing: The FAA is behind schedule to meet several Congressional deadlines – proposed regulations regulating small UAVs will likely be published for public comment at the end of 2014. They are due in September 2015, but a lot of doubt was expressed as to whether that’s possible; more likely for it to be 2017 or later. Safety concerns: Many members expressed concern with safety issues with drones. Points that were raised include training for pilots, educating the public on the National Air Space and applicable rules; lots of discussion on the issue of collisions and near-collisions with planes, or of drones hitting buildings/people. In addition, the issue of a risk-based system of UAV regulation was raised; i.e.; UAVs used for low-altitude, short-duration flights in unpopulated areas should be regulated less than UAV flights in populated areas. This is all still in the development phase though, and it’s unclear if the FAA is incorporating such concepts into the proposed rule. Economic Implications: There was concern from many Committee members that the U.S. will fall behind/lose out on a lot of potential economic growth due to the restrictions on drone use. Suggestions include increasing the number of testing sites for drones and making them more geographically diverse (currently there are six in the U.S.), working closely with European counterparts who are moving more quickly in the field of drone safety to compare data, and working to streamline/speed up the exemption process.

Like Kind Exchanges Still on the Tax “Reform” List The like-kind exchange rules have been firmly fixed in the tax law since 1924. The most recent significant modification was in 1991. The exchange technique permits the deferral of capital gains taxes, so long as the taxpayer satisfies numerous requirements and consummates both a sale and purchase within 180 days. Real estate investors place a very high priority on retaining the current like-kind exchange rules.

TerraFirma Winter 2015



The exchange rules often provide a REALTOR® with an opportunity to facilitate two transactions: the sale of the relinquished property and the purchase of the replacement property. Any curtailment of the exchange rules will make both pieces of exchange transactions more difficult to conclude and would mean that many transactions would not take place. The like-kind exchange technique is among the most important of all tax provisions for real estate investors and commercial Realtors. Current law provides investors with the maximum flexibility in managing their real estate portfolio and the Institute and NAR oppose any change that would undermine the deferral mechanisms associated with exchanges. While no legislation has been introduced in the current Congress (which began in 2013), members of Congress in both Houses and both parties have expressed the desire to overhaul the tax system, and some leaders have indicated that “everything is on the table.” Both the House Ways and Means Committee and the Senate Finance Committee have held wide-ranging discussions and hearings to look at all current-law tax provisions and have both released reports that proposed repealing Section 1031. The Obama Administration’s budget for Fiscal Year 2015 also proposes limits on the deferral provisions of Section 1031. NAR joined with a number of other commercial real estate associations in strongly condemning these proposals as being harmful to economic growth, job creation, and likely to lower property values. While these discussion drafts are a long way from becoming active in Congress, the Institute and NAR are working with other interested stakeholders to oppose the repeal of the like-kind exchange provision and to educate Members of Congress and their staffs on the importance of this provision to the economy. About the author: In his position with the National Association of REALTORS®, Russell Riggs serves as Institute’s Government Affairs Liaison in Washington, D.C., conducting advocacy on a variety of federal issues related to land. Riggs will be a presenter at the 2015 National Land Conference, taking place on March 23-25.

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The Economy in 2015: Ready to Shift into Higher Gear At Last? William R. Emmons1 Assistant Vice President and Economist Federal Reserve Bank of St. Louis The economic recovery is now in its sixth year. Since mid-2009, when the current recovery began, economic growth has averaged only 2.3 percent per year, compared to 3.0 percent during the first five years of the previous recovery (2001-06). Many forecasters expect an economic acceleration in 2015; but they have been too optimistic every year since the recovery began. Will the economy finally shift into higher gear in 2015?

The case for optimism about the economy in 2015 There are at least four good reasons to expect the U.S. economy to perform better in 2015 than at any time since the Great Recession ended—lots of slack, supportive financial conditions, five years of healing by consumers and businesses, and a sharp drop in energy costs. Remaining slack and pent-up demand. The economy appears to have plenty of under-utilized labor, capital, and financial resources. Despite an unemployment rate under 6 percent, there appear to be many able-bodied non-working adults not currently counted as unemployed who would rejoin the workforce if faster growth and better employment opportunities appeared. These re-entering workers could prevent inflationary wage pressures from building. Few businesses report capacity bottlenecks of any kind, although transportation networks in the middle of the country are straining to handle both booming energy production and bumper crops of corn, wheat, and soybeans. On the demand side of the economy, households’ deferred purchases of cars and trucks during the recession and slow recovery could foreshadow several years of above-average production and sales activity. Homebuilding and house purchases likewise have been weak for a long time, suggesting some pent-up demand. Business investment has underperformed recent recoveries, despite good cash flow and favorable financing conditions. A period of vigorous business investment activity is a plausible forecast. Favorable financing conditions. Businesses face record-low borrowing rates, whether they are investment grade or not. Banks report that they are eager to make business loans. Publicly traded companies can access equity finance on good terms. Corporate profits and cash flow are near record highs relative to national income. In short, businesses that wish to invest and hire additional workers face an unusually favorable financial environment.

Financing opportunities for households are mixed, depending on the individual family’s financial situation. For those with good credit and steady incomes, consumer borrowing rates are near all-time lows. Weaker households have fewer options than before the recession, but sub-prime auto and credit-card lending is returning. Virtually any family with a college-age child can access government student loans, and this form of financing is rising more rapidly than any other, surpassing $1 trillion in 2013. Healing of private-sector balance sheets and improving sentiment. Both corporate and household balance sheets were hit hard by the Great Recession. Recovering asset values and the growing economy have done much to restore the health of private-sector balance sheets. Non-financial corporate businesses have made more balancesheet progress than non-corporate (generally smaller) businesses, but the business sector overall is in good financial shape. Business bankruptcies, for example, are running at the lowest sustained level in at least 30 years. Household balance-sheet trends are more variable, diverging largely along demographic lines. Younger, less-educated, and non-white families (in particular, African-Americans and Hispanics of any race) were hit hardest by the Great Recession and generally have not recovered much wealth. Older, college-educated white and Asian families, on the other hand, have weathered the boom and bust of the last decade much better. Business and consumer sentiment indexes have hit post-recession highs. Together with tangible signs of progress rebuilding their financial strength, many businesses and households could be poised to increase spending in the coming quarters.

TerraFirma Winter 2015


Feature Sharply lower energy costs. Domestic oil prices have declined more than $30 per barrel since June, with retail gasoline prices also down about 30 percent. Other fuels are trading at or near multi-year lows, as well. The boost to business and consumer cash flows of lower energy costs could provide a significant boost to sentiment and spending power in 2015.

spending, tax collections, and transfers—shifted decisively toward restraint. Fiscal policy has exerted a multi-year drag on growth measured in terms of shrinking government employment, slowing purchases of goods and services (such as military outlays and roadbuilding), and declining contributions to business and consumer spending through policy changes (such as tax cuts).

The case for pessimism about the economy in 2015 (and beyond)

The stance of monetary policy, meanwhile, has remained much more stimulative—at least in intent, if not in effect. Although the net impact on economic growth in recent years is not clear, the intent of policymakers through late 2014 has been unambiguous. Monetary policymakers expect to tighten policy at some point in 2015, or soon thereafter.

Despite real progress in the private sector recovering from the Great Recession, there are several reasons why 3-percent-plus growth seems unlikely in the medium- to long-run. The arguments include the increasing likelihood that structural changes have permanently lowered the economy’s sustainable growth potential; an ongoing shift from stimulative to restrictive fiscal and monetary policies; widespread ongoing financial weakness among a broad swathe of U.S. households; and poor growth conditions abroad. Structural changes in the economy. Evidence is accumulating that the U.S. economy simply is not capable of growing as fast as it could in the past. The two main components of economic growth—a growing labor force and productivity growth—both have increased slowly during the first five years of recovery. Moreover, there are reasons to believe that slow growth of both factors is likely to continue in the future. The U.S. civilian labor force grew at an annualized rate of only 0.13 percent during the first five years of recovery from the Great Recession; in contrast, the labor force grew at a 1.11-percent annualized rate during the first five years of the previous recovery. This alone explains about one percentage point of slower growth during the current recovery than the previous one. In terms of people, the average annual increase in the number of available workers between mid-2009 and mid-2014 was only 330,000, compared to an annual average increase in the number of available workers of 1,633,000 from late 2001 through late 2006. Some of the slowdown in labor-force growth clearly is due to the aging of the population and slower growth of the working-age population. If the fraction of the adult population that is older than typical working age is increasing, then we would expect slower growth of the labor force. But even among prime-age workers (25-54 years old), the slowdown in labor-force growth has been more pronounced than basic population trends would suggest. While the overall population aged 25 or over is increasing, the group that is 25-54 is shrinking. Moreover, this group’s labor-force participation rate dropped from 83.1 in 2008, to less than 81 percent in late 2014. The result is a net decline of about four percent in the number of people aged 25-54 who were working in late 2014, compared to 2007, before the recession. Growth in the productivity of each hour’s work also has been slow in the current recovery. The annualized growth rate of non-farm business productivity was only 1.28 percent during the first five years of this recovery; it averaged 2.55 percent at a comparable stage in the previous recovery. This explains another 1¼ percentage points of the comparatively slow recovery we are experiencing. Shift toward restrictive fiscal and monetary policies. Both fiscal and monetary policy supported growth in the immediate aftermath of the financial crisis in 2008 and 2009. Beginning in early 2010, however, the stance of fiscal policy—including federal, state, and local government

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Widespread household financial weakness. Consumer spending has been a drag on the recovery, contributing 1.47 percentage points toward average annualized real-GDP growth during the first five years of recovery. Consumer spending contributed 2.12 percentage points to average growth during the previous recovery, a sizable 0.65 percentage points more. Residential investment contributed 0.15 percentage points during both periods. Recently released Federal Reserve data confirm that the average family significantly reduced both its debt-to-assets ratio and its debtto-income ratio between 2010 and 2013. However, both ratios remain above their respective averages for the period 1989-2010. Thus, it is reasonable to expect further weak growth of household debt as families strengthen their balance sheets by reducing or slowing the growth of borrowing. Poor international growth environment. A final notable growthdampening factor is the poor international growth environment. Europe and Japan remain close to recession while major emerging markets like China, Brazil, and Russia have slowed. The international value of the dollar (for example, the JPMorgan broad real effective exchange-rate index) has been strengthening since mid-2011, which also may exert a mild drag on U.S. growth.

Will the economy shift into higher gear in 2015? Both longer-term structural factors, like the growth potential of the U.S. economy, and short-term cyclical influences, like the stance of fiscal and monetary policies and international growth conditions, point toward moderate U.S. growth in 2015 and beyond in the 2to 3-percent range. However, it is quite possible that growth could exceed 3 percent in 2015, as the positive factors combine to outweigh the negatives, at least for a while. Perhaps the most important factor for the 2015 outlook is the course of energy prices. A continuation of recent low energy prices could make 2015 the strongest year of the expansion so far.

About the author: Bill Emmons is an Assistant Vice President and Economist at the Federal Reserve Bank of St. Louis. He conducts policy analysis and speaks frequently on topics including the economy, housing and mortgage markets, banking, financial markets, financial regulation, and household financial conditions.

1. These views are mine alone and should not be attributed to the Federal Reserve Bank of St. Louis or the Federal Reserve System.

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Farm and Ranch Management • Real Estate Sales • Auctions • Appraisal • Insurance Consultation • Oil and Gas Management • Forest Resource Management National Hunting Leases • Lake Management • FNC Ag Stock Winter 2015

Registrations are strong for the 2015 National Land Conference: Unbridled. Unleashed. The 2015 lineup includes general sessions led by world-renown experts in their fields, increased targeted breakout sessions, the Newer Greatest Cowboy Auction on Earth, the first Giddy-Up Golf Scramble, and several networking events that will build lasting connections—and business. Unbridle and unleash your potential—learn, network, and make deals! If you have not already registered for this must attend, one-of-a-kind conference, visit http://nationallandconference.com/ or call 1.800.441.5263.

12 Winter 2015TerraFirma


Partnerships are still available for the 2015 National Land Conference, a range of opportunities are available and customized programs can be developed. Contact an Institute Staff Member for opportunities at 1.800.441.5263.

The Loews Ventana Canyon Resort The Loews Ventana Canyon Resort is located in the stunning Catalina Mountain range in the Sonoran Desert, with serene desert landscape and two Tom Faziodesigned PGA golf courses . It has two signature heated pools, a jacuzzi, a deluxe, full-service spa, luxury guestrooms, first-class restaurants, and the nicest staff ever. Not far away a re the vibrant, eclectic sights of Tucson and all the excitement this southwestern gem has to offer. Pull up to the hotel and you will see Frank Lloyd Wright-inspired architecture surrounded by indigenous saguaro cactus trees. Take in the natural beauty—the very essence of the southwest. That calm, relaxing feeling is just the beginning of a wonderful experience. The Institute room block is limited in number and is on a first come, first served basis. To reserve rooms, visit http://nationallandconference.com/.

Bring Your “A” Game to the


The course is a Tom Faziodesigned championship 18-hole golf course, located just steps from the resort lobby. Giddy-Up Golf will be a 9-hole scramble on the Canyon Course. This course winds through the inspiring beauty of the Esperero Canyon and incorporates the massive rock formation known as Whaleback Rock. March 25, 2015 (Ticketed) 1:00 p.m. Tee Time Loews Ventana Canyon Resort Canyon PGA Course Price: $80 per player

The NEWER Greatest Cowboy Auction on Earth The Newer Greatest Cowboy Auction on Earth held during the 2015 National Land Conference: Unbridled. Unleashed. will be a “WOW” experience. The bidding will come alive with Institute Auctioneers leading the way. An exciting addition to the auction is e-bidding; use your smartphone to bid on silent auction items. Unique donations will surely create an impressive bidding battle between attendees. Be there for the “WOW” event with trips, artwork, subscriptions, celebrity autographed items, and more going to the highest bidder. Those who like silent auctions, you, too, will not be disappointed! Just some of the items to whet your appetite…and to get your bidding juices flowing:* 1. A guitar signed by country-western celebrities 2. An exotic getaway to an Island retreat 3. A duck-hunting trip 4. A mountain-surrounded vacay in Utah Be on the lookout for instructions on how to use the e-bidding tool. *To donate “can’t live without them” items and to add to the fun, call 1.800.441.5263.


Winter 2015 13

Preliminary Schedule of Events 2015 NATIONAL LAND CONFERENCE


Economic Micro The State of Land Lending/Working with Lenders Bill Davis, Senior VP, Chief Credit Officer, Farm Credit Services of America Past Presidents’ Meeting 11:00-11:45 a.m. Future of 1031 Exchanges…and Taxes Concurrent Committee Meetings I Dave Franasiak, Esq., Principal, Government Affairs Committee Williams & Jensen PLLC ALC Designation Committee Noon-1:15 p.m. Lunch Concurrent Committee Meetings II Our Man on the Hill Update Future Leaders Committee Russell Riggs, Institute Legislative Education Committee Staff Liaison, NAR Finance Task Force 1:15-1:30 p.m. Partner Visits 1:30 p.m. Sessions Resume 1:30-2:15 p.m. A Changing Climate: Fires and Board of Directors Meeting Forests Zander Evans, Interim Director, The Forest Guild 2:15-3:00 p.m. Climate and Land Issues Gene Takle, PhD, Professor of Agronomy Registration Opens and Director of Climate Sciences, ALC Exclusive Session (ticketed) Iowa State University Placing a Value on Your Business 3:00-3:45 p.m. Identifying and Building Your Brand Dan Duffy, Chairman & CEO, United Marshall Brown, CPCC, CEO, Marshall Country Real Estate Brown & Associates Partner Exhibits Open 3:45-4:00 p.m. Partner Visits Welcome & Recognition Ceremony 4:00-4:40 p.m. Take Your Pick Break-Out Sessions I American Indian Eagle Dance • Technology Uses for Your Business: Nobu Hata, Introduction & Color Guards Director of Digital Engagement, NAR Larry Ilfeld, ALC, 2015 Conference • Mineral Leasing, Title, and Valuations: David Smith, Chair, Sperry Van Ness Commercial Senior VP, Farmers National Company Real Estate Advisors • Types of Land Auctions: Jimmie Dean Coffey, CAI, Tucson CEO Welcome Business United Country Auction Services Philip B. Tedesco, RCE, CAE, CEO, 4:45-5:30 p.m. Take Your Pick Break-Out Sessions II Tucson Association of REALTORS® • Real Estate Opportunities in North American Shale Institute Welcome & Passing of the Plays: Michael Elliot, Managing Principal, Energy Gavel Ceremony Real Estate Solutions, LLC Michele Cohen, CEO, REALTORS® • The Increase in Regional Wines and New Vineyard Land Institute Development: JoAnn Wall, ARA, CEO/Principal Awards and Recognition Appraiser, Central Coast AgAppraisal, Inc Terri Jensen, ALC Advanced, 2015 • What Land Professionals Should Know About Institute National President, Farmers Soils: An Introduction: James Walworth, PhD, National Company Department of Soil Water, and Environmental Networking Events Science, University of Arizona Meet and Make Money 6:30-7:45 p.m. Best be Biddin’…Networkin’… President’s Inaugural Cocktail Havin’ Fun Reception The Greatest Cowboy Auction on Dinner on your own–Enjoy! Earth


3:00-3:45 p.m. 4:00-4:45 p.m. 5:00-5:45 p.m.

10:15-11:45 a.m. 10:15-11:00 a.m.

MONDAY, MARCH 23 8:00-10:00 a.m.

2014 CONFERENCE BEGINS 10:00 a.m. 10:30-11:30 a.m.

Noon-3:20 p.m. 3:20-5:00 p.m. 3:20-3:40 p.m. 3:40-3:50 p.m.

3:50-3:55 p.m. 3:55-4:05 p.m

4:05-5:00 p.m.

5:00-7:30 p.m. 5:15-6:00 p.m. 6:00-7:30 p.m. 7:30 p.m.

TUESDAY, MARCH 24 7:00-7:50 a.m. 8:00-10:10 a.m. 8:00-8:50 a.m. 8:50:-9:30 a.m. 9:30-9:45 p.m. 9:45-10:10 a.m.

POST-CONFERENCE ACTIVITY Wednesday, March 25 1:00 p.m. Giddy-Up Golf (ticketed) Tuesday, March 24 8:00 a.m.- 4:00 p.m. Companion Tour: Tucson at Its Best! (ticketed)


Continental Networking Breakfast 7:30-9:00 a.m. Breakfast Round Table Topics Economic Macro • AgLand Apprasials/Values: JoAnn Wall, ARA About the Economy • Timber Trends: Bob King, ALC Mark Dotzour, PhD, Chief Economist, • Leveraging Land Auctions: Bill Sheridan Real Estate Center at Texas A&M • The 1031 Exchange Tool: Ray Brownfield, ALC Advanced What’s in KC’s Crystal Ball Now? • Using Social Media: Caleb McDow KC Conway, Senior Credit Risk Officer, • Resort and Second Home Market: George Harvey SunTrust Bank • Client Needs and Site Selection: Butch Armistead, ALC Partner Visits • Effective Business Strategies: Randy Hertz, ALC Barstool SPAT with Economists Advanced Bob Turner, ALC Advanced, Moderator, • The Asian Market: Minor Taylor, ALC Southern Properties • Building Small Business Websites: Aaron Graham, ALC

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The Road to the ALC: Flo Sayre, ALC Advanced Effective Farmland Management and Marketing: Murray Wise, ALC • Using the USDA Web Soil Survey for ID and Mapping of Soils: James Walworth, PhD • Mentoring the Team for Success: Bill Eshenbaugh, ALC • Land Contracts: Danny Smith, ALC Advanced • Absentee Land Owner Management: Wendy Forthun, ALC • Technology Uses for Your Business: Nobu Hata • Building a Strong Chapter: George Clift, ALC Advanced • Tips for the Professional Land Woman: Renee Harvey, ALC Advanced • Energy Production on and near Agricultural Lands: A Threat, an Opportunity...or Both: George Frisvold, PhD • Developing an Effective Network: Marshall Brown, CPCC • Wind Farms and Performance: Gene Takle, PhD 9:15-10:00 a.m. Take Your Pick Break-Out Sessions III • Fisheries and Water Management: Greg Grimes, President, Aquatic Environmental Services, Inc. • Land Investment Funds: Phillip Wiggins, CEO/Founder, Strattford Land • Highest and Best Use: Sharon Woods, CRE, Principal, Target Market Analysis Team Leader, Land Use USA 10:15-11:00 a.m. Take Your Pick Break-Out Sessions IV • Beyond Location, Location, Location: The Geography of Better Deal Making: Simon Thompson, Director of Commercial Solutions, Environmental Systems Research Institute (ESRI) • The $562 Million Dollar Deal: The Story: Dean Saunders, ALC, Coldwell Banker Saunders Real Estate • 2014 Farm Bill, Agricultural Land Markets, and Land Values-Impacts so Far: George Frisvold, PhD, Professor & Extension Specialist, The University of Arizona 11:00 a.m. Adjournment • •

HOST HOTEL: Loews Ventana Canyon 7000 N Resort Drive Tucson, AZ 85750 (conference rate upon availability) For reservations call 800-234-5117 and mention the REALTORS® code.

Full details at: www.NationalLandConference.com


The REALTORS速 Land Institute extends special recognition to the partners and sponsors of the 2015 National Land Conference for their commitment to the organization and to land.











Winter 2015 15


Soil Science: A Quick Primer for Land Professionals Kirk Goble, ALC Owner/Broker The Bell 5 Land Company “Under All Is The Land.” Indeed, the essence of all we do… the motto of the National Association of REALTORS® could not better encompass the enormity of that statement so succinctly. Indeed, the essence of all we do is upon, within, and determined by the land— its location, structure, depth, topography, and a myriad of other land factors that dictate and influence our lives and, certainly, our livelihood. We build our homes, cities, factories, and roads on the land, and put the lines and pipes to serve them under it. We till and farm and irrigate the land to feed ourselves and much of the rest of the world. We draw imaginary lines on the land and fight wars over it. Land is literally and figuratively our foundation. Of particular interest to the land brokers who comprise REALTOR®S Land Institute is that portion of the land we call soil. “It’s not dirt, it’s soil” is an oft used distinction between what you plant your crops in and what you track into the house on your boots. While the words are colloquially used interchangeably, the study of soils is a fascinating exploration into the resource beneath our feet. Land brokers, particularly those involved in farm sales, can benefit from some basic soil knowledge. Many farm brokers were raised on farms and work in the agriculture communities where an understanding of “good dirt” is common. The underlying reasons that make up good soil are important to the users of the land, particularly farmers, and means that those who broker that land should also have a basic understanding of the elements of soil science. Topsoil is the uppermost layer of soil and comprises the elements that make crop production possible. Topsoil is a very valuable and precious resource—it takes 500 to 1,000 years to create a single inch of topsoil that can be lost in minutes to erosion or improper management. Soil is developed from parent material (rock) over the span of millennia by the ongoing natural actions of weathering: wind, water, heat, cold, freezing, thawing, chemical and biological action, topography, and time. Constant, careful, and deliberate management measures must be applied to property manage our topsoil resource, keep it healthy and productive, and prevent unnecessary loss due to erosion. The largest manmade environmental disaster in the U.S. was the great Dust Bowl of the 1920s and 30s. Because of mismanagement and lack of foresight and understanding, a vast area of the central U.S. was devastated by loss of topsoil due to improper farming practices and sustained wind and resulted in economic collapse and the largest relocation of our population in U.S history as farms went broke and people left the land. This is not just past history that can be acknowledged and forgotten, because without vigilance, it could happen again. In just the last 5 years, virgin grasslands in sensitive, arid areas have been plowed and planted with the expectations of profits from high commodity prices. When Those prices inevitably adjust downward, those fragile soils may be

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subject to excess erosion.

Photo taken on November 10, 2014, in Bent County, Colorado, by Jack Goble.

In the wake of the Dust Bowl, the Soil Conservation Service was formed by the Federal Government to research the causes and prevention of massive soil erosion and take steps to train landowners, make relevant law and policy, and buy back and set aside formerly privately owned land for restoration. The establishment of our system of National Grasslands came about by these efforts. Other government efforts that offered landowner incentives to take highly erodible lands out of production produced programs such as the original Land Banking program and the decades-old Conservation Reserve Program still in use. The efforts of decades of the soil conservation movement are evident throughout U.S. farmland with the use of terracing, tiling, contour farming, grass waterways, strip farming, retention of crop residues, irrigation management, and numerous other practices that are a part of modern American agriculture. Soil is very much alive. The makeup of topsoil includes the geosphere (rock and parent material), the biosphere (millions of bacteria, fungi, worms and other life), and the atmosphere (air and pore spaces for water movement and oxygen for chemical and biological action). A healthy soil is teeming with life. Preserving and enhancing a soil environment that can host and encourage biological action is a goal of proper soil management. Management and the health of topsoil is critical and includes proper tillage methods, prevention of soil erosion, and retention of crop residue to enhance organic matter content. The Natural Resources Conservation Service (NRCS), formerly the Soil Conservation Service, is an agency of the United States Department of Agriculture (USDA) that provides information, education, services, and assistance to landowners to develop and maintain conservation plans. Most crop price support, crop insurance, and cooperative assistance programs offered by the Farm Service Agency (FSA) require that a landowner must have an NRCS approved conservation plan as a condition of participation in the program. NRCS is also responsible for creating and updating the Soil Survey, a valuable source of information in both printed and on-line digital form (more later in this article).

It is common for a farmer or landowner to discuss soil types in terms of the soil’s texture, such as a “loamy” soil or a “clay” soil. Soil is comprised of three soil texture types, all based on the size of the soil particles. The three basic soil textures, in order of size from largest to smallest, are sand, silt, and clay. A loam is a mixture of varying amounts of sand, silt, and clay. Specific soil textures are determined by using a soil textural triangle based upon the percentage of sand, silt, and clay in a particular soil sample. (see Illustration). NRCS provides an on-line calculator that can be found at: http://goo.gl/eZ7HBo. Soil health and fertility status is best determined by an on-site sampling of soils, usually in a grid pattern, submitted for laboratory analysis. The soil test lab report provides valuable information on the makeup of the soil, its pH (acidity or alkalinity), and cation exchange capacity (CEC). CEC is a determination of the ability of the soil components (primarily clay and humus) to allow for the absorption and transport of soil nutrients from the soil to the plant roots. It is essentially a measure of the soil’s ability to hold nutrients and feed the plants. Fertilizer recommendations are based on the results of a proper soil test. Variations of soil types on a farm, and even in a particular field, can be identified and accounted for. When the information is translated to geospatial formats, current precision agriculture technology using GPS location equipment has the ability to make on-the-go adjustments for varying soil types and fertilizer needs. A farm broker often needs to provide soil information on a property to prospective buyers. As always, the landowner, manager, or operator is a good first source, particularly if they utilize the services of a crop production advisor who analyzes the soil conditions periodically. A very good general source of soil information is the USDA/NRCS Web Soil Survey, an online resource that provides information on most U.S. soils. A broker can readily create a soils map from the Web Soil Survey and accompanying summary of soil capability, average expected crop yields, and more. The Web Soil Survey is found at websoilsurvey.nrcs.usda.gov. The opening page has links to a vast amount of soil information, education, and a tutorial on using the survey. A handy green “start” button opens the survey itself. The process is started on the Area of Interest (AOI) tab by defining the subject parcel as a specific area which narrows the parcel search to the level of section, township, and range. Other methods to find and define the AOI are street address, GPS coordinates, and other reference maps, in addition to the Public Lands Survey System legal description. Once the map is zoomed to the general selected area, a specific location is automatically plotted on an aerial map utilizing the AOI tool to define rectangular or trapezoidal parcel boundaries. Once the Area Of Interest is defined, a click on the Soil Map tab creates a map of soil types shown on the subject parcel. Once presented with the soil map, a click on the Soil Data Explorer tab provides an extensive selection of soil attributes, analyses, and limitations on use for the area defined. Ag lands would utilize info such as crop production capability classes, expected yields, and erosion susceptibility. One can also find info and potential limitations in regard to septic system leaching fields, road construction, and other engineering and construction topics. Once the map and information is selected, the user clicks on the Shopping Cart tab to obtain the map and report in digital form for download, or in printable form. The information is free, despite use of the term “shopping cart.” For the brokers who wish to provide basic soils information for a particular parcel, the Web Soil Survey is a quick, easy to use tool that provides the ability to create a comprehensive soil map and report for any listing. This is a good way to work with your clients to provide valuable information on a sale property and impressive data to prospective buyers. More specific information and education can

be obtained locally at the nearest USDA Farm Service Agency. Most counties in the U.S. have an office and can direct you to the best sources of information, including a locally or regionally available soil scientist. A comprehensive understanding of all items soil related would require much study and education, but a great deal of this valuable information can be obtained, analyzed, and presented for free through the programs explained here. Hopefully, you will have gained a bit of historical perspective and information on a useful tool to help you better provide the services of a professional land broker and member of the REALTORS® Land Institute.

About the author: Kirk Goble, ALC, is the owner/broker of The Bell 5 Land Company in Greeley, Colorado and has been a member of the Institute for over 20 years. He has served twice as Colorado Chapter President, was the Chair of the Institute’s National Education Committee, and has been on the Board of Directors of the National Institute. Goble is an award-winning LANDU instructor and was the recipient of the 2013 Land REALTOR® of America award.


www.LandWatch.com | (855) 708-3845

TerraFirma Winter 2015



Riparian Rights Daniel P. Dalton, Esq. Dalton & Tomich, PLC As with many things, reasonableness is often in the eye of the beholder. Therefore, simply saying that the rule restricts one to a “reasonable” use is often unhelpful. At most, reasonableness rules out the obvious non-reasonable uses. For example, a landowner living on a river would not be permitted to build a dam on her property and stop the river. What about disputes where both landowners have conceivably reasonable arguments? Fortunately, there are also some general principles for landowners to follow on closer questions.

Riparian rights refer to a system of allocating water rights among landowners along the path of a waterway. Riparian rights have their origins in American common law, and before that in English common law. The riparian system is used primarily by the Eastern and Midwestern United States. The central idea of riparian rights is that landowners whose property adjoins a body of water have the right to make reasonable use of that water as it flows through or over their property. As with many legal concepts, conflicts involving riparian rights often come down to what a court decides is reasonable in a given situation.

What Are the Rules of Riparian Rights? A case that is often recognized as the first in the U.S. involving riparian rights illustrates the type of conflict that can happen between landowners on a body of water. In Tyler v. Wilkinson (1827), there was a dispute between an upstream mill owner and a downstream mill owner. The question was what rights did each mill owner have in the water from the stream? Could the upstream mill owner substantially impede the flow of water to the downstream mill owner? The court discussed the common custom which stated that a landowner could use water as long as it did not decrease or obstruct the water flowing to the next landowner. However, the court modified the common custom and concluded that there may be some decrease of downstream water as long as such a decrease was reasonable given the uses of the landowners. Thus, the concept of reasonable use in water rights became law.

18 Winter 2015TerraFirma

First, riparian rights continue indefinitely and cannot be lost due to non-use of the water. However, if there is a dispute between two landowners, courts tend to view the existing use more favorably than the new use. Second, riparian rights are typically not severable from the land. This means that the riparian rights are transferred with the land and cannot be sold separately. However, some states have modified this general principle. There is also a difference between navigable and non-navigable waters. Navigable waters, such as a large lake or river, are considered to be public waters, and the land below such waters public land. Thus, the land is subject to public land laws, and landowners may not prevent the general public from traveling on these navigable waterways. However, the public right of way generally ends on the high water mark of a landowner’s property. Further, the public right to travel is typically subject to local nuisance laws. In other words, the general public may travel in public waters and across the adjoining land up to the high water mark of one’s property as long as such travel does not create a nuisance for the landowner. While each state has slightly different rules regarding water rights, landowners with riparian rights are generally permitted to: access the water, install a dock anchored to bottomland, anchor a boat to bottomland or secure it to a dock, use water for domestic purposes, and maintain exposed bottomland. It is worth repeating that each state has slightly different rights and restrictions in regard to water rights. For example, Great Lakes states such as Michigan or Wisconsin will likely have rules associated with lakes that a landlocked state may not have. While some rules are written in state statutes, many are found in the case law from each state. In the case of a person encroaching on the riparian rights of landowners, the enforcement mechanism is usually a trespass suit or a nuisance suit. As has already been discussed, a court will decide a dispute like this by using the reasonableness factor. As a result of this factor, cases involving riparian rights are very fact-specific, so it is vital to present your case in a way that will present your side of the dispute as the reasonable side. As stated above, courts tend to favor pre-existing uses over new uses. Courts also tend to favor

“natural” purposes over “artificial” purposes. “Natural” uses are those which are essential for the existence of the landowner and his family, while “artificial” purposes are those having to do with prosperity and recreation. So for example, in a dispute where one landowner wants to use a body of water for domestic drinking water and the other landowner simply wants to build a larger dock for his party boat, it makes good sense that the court would likely see the first landowner as having the more reasonable claim. This makes it very important to choose a good attorney when navigating a riparian dispute with either the government or a private citizen.

In regard to priority, the general rule is that the first appropriator of a water source may use as much water as is needed to satisfy his right. A later appropriator will not be allowed to continue a use if that use somehow impedes the rights of the first appropriator. However, the first appropriator is also not permitted to change his use of the water, if that change will damage the use of a later appropriator. So while the system favors the user that is first-in-time, it also affords protections for later users.

Prior Appropriation Rights

While most states use either riparian or appropriative rights, some states have a hybrid system of dealing with water rights. As you might suspect, a hybrid system recognizes both riparian and appropriative rights. The usual reason for a hybrid system is that a state originally operated under riparian rights but has since adopted parts of the appropriative system. Typically, this works by the state allowing riparian landowners to keep their rights as part of a prior appropriation system. The existing riparian rights are usually given priority over appropriative rights even if the water is not necessarily being put to beneficial use. As with the other systems, there are some differences between how states administer these hybrid systems. States with hybrid systems include Kansas, Nebraska, North and South Dakota, Washington, Oregon, Oklahoma, Texas, and most notably California.

The riparian system is not the only system for handling water rights in the U.S. Much of the Western United States operates under the prior appropriation doctrine, also known as the Colorado Doctrine. This doctrine has also been referred to as the “first in time-first in right” doctrine. This system of water rights was initially developed in the West during the gold rush in response to the overall lack of water in the region. In the mining camps, water would be diverted from streams to places where it was needed to process the ore. The miners developed the simple rule of whoever put the water to the first beneficial use retained the right to that amount of water. This was essentially a first-come, first-serve system. The prior appropriation doctrine has evolved since its early days as a somewhat-simplistic invention of gold miners. Today, the main principles behind the doctrine begin with the foundation that, unlike in riparian rights states, water rights are not connected to land ownership. Instead, a person who does not own land adjacent to a body of water can have rights to that body of water if she is the first person to put that body of water to beneficial use. The remaining water can be utilized by other users so long as the subsequent uses do not impede the first use. However, again unlike riparian rights, appropriative rights can be lost due to a period of nonuse. Appropriative rights can be held by private citizens or entities and also by public entities. The prior appropriation doctrine has four elements: intent, diversion, beneficial use, and priority. In the past, intent could be shown by any number of activities on-site such as surveys or preparation to install equipment. Today, intent is usually satisfied by simply applying for a permit. Diversion of the water, while historically required for appropriation rights, has been somewhat deemphasized in recent years. However, some point of diversion is typically still required to establish the right.

The Hybrid System

Regardless of what system of water rights a landowner is under, there will always be issues unique to each state. There will also be issues that are unique to each individual conflict. The upshot of all this is that buyers and sellers need to be aware of these water rights when dealing with property near water. If a conflict arises, the fact-intensive nature of these claims as well as the legal complexities involved should lead anyone involved in such a conflict to consult a good attorney.

About the author: Dan Dalton, Esq. was named one of the top land use and zoning attorneys in the United States by Martindale Hubble in 2012 and one of the top 25 attorneys in the State of Michigan in 2010. His practice focuses on commercial litigation with an emphasis on banking, business and land use and zoning law, including Religious Land Use and Zoning (also known as “RLUIPA”).

The most important element of appropriation right is usually beneficial use. Satisfying the beneficial use element goes a long way in making sure that a use is protected under the law against later uses. The idea behind beneficial use is to prevent waste and conserve resources to the highest extent possible, especially in the dry western states. What uses count as “beneficial” uses under the law is a question that varies from state to state. A use that may qualify in one state may not qualify in another. It is best to consult local case law on questions of any particular use.

TerraFirma Winter 2015



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Winter 2015 21


Easement Valuation Donald J. Sherwood, MAI, SR/WA, FRICS Director of the Fort Worth office Integra Realty Resources, DFW, LLP.

First, what is an easement? According to the Dictionary of Real Estate Appraisal, an easement is “an interest in real property that conveys use, but not ownership, of a portion of an owner’s property. ” By definition, the ownership of real estate is endowed with a bundle of rights. The concept of bundle of rights maintains that like a bundle of sticks, real property ownership may be wholly intact (fee simple estate) or may be “unbundled” and conveyed in part to a third party. In real property ownership, one has the inherent right to use the property, to sell it, to lease it, to enter upon it, to give it away – or to refuse to do any of these things. For example, the creation of a lease conveys to the tenant a portion of one’s rights for the specific term and space occupied by the tenant according to the terms of the lease. During the lease period, the tenant may have a measurable interest in the property (leasehold estate). The creation of an easement is somewhat similar in that we are dealing with concepts of time and space. By definition, the creation of an easement conveys a portion of the total bundle of rights to a third party. The challenge before the appraiser is the measurement (in terms of dollars) of the market value of the rights conveyed.

Under the State Rule, the appraiser will be required to estimate the value of the easement plus damages to the remainder, if any. Using the same example: Value of Whole Property 120 acres @ $10,000 per acre


Value of the Part Acquired 10 acres in easement @ $10,000 per acre @ 50% $50,000 Value of the Remainder Before the Acquisition $1,200,000 - $50,000


Value of the Remainder After the Acquisition 120 Acres @ $9,500 per acre (Encumbered with 10 acres in easement)


Damages $10,000 Part Acquired


Total Compensation


Valuation The task before the appraiser is to evaluate the “rights conveyed” by the creation of the easement and to properly measure these rights. The principles and methodology applied to appraising property for partial acquisitions apply to the valuation of easements. All easement valuations are partial acquisitions under the theory that the property owner retains some residual rights within the easement area. The value of an easement is measured by what the property owner has lost from the bundle of rights NOT by what the grantee has gained. Under the Federal Rule, the value of the easement will be based upon the difference between the value of the whole property before the taking and the value of the property after the taking with the easement in place. In the following example, the $60,000 of total compensation includes both the value of the easement rights being acquired and any damages to the remainder property that may result due to the placement of the easement. Value of Whole Property Before the Acquisition 120 acres @ $10,000 per acre


Value of the Remainder Property After the Acquisition 120 acres @ $9,500 per acre $1,140,000 (Encumbered with 10 acres in easement) Total Compensation

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The challenge for the appraiser is ascertaining where these figures come from. The answer: THE MARKET! The appraiser’s task is to see what effect, if any, an easement has on the sale of property encumbered with similar easements. In the case of residential property, most urban properties within platted subdivisions are likely encumbered with common utility easements. In most situations, these easements extend along the property line and have little effect, if any, on the sale of the home. Thus, the market tells us that the easement has little value, if any. Why? The presence of the easement does not affect the use or utility of the property. The easement does not place any undue burden or hardship on the ownership. When investigating an easement, some important questions should be addressed by the appraiser. It is imperative that the appraiser understand the nature of both the legal and the physical rights being sought. Some questions may include: n What is the proposed use? n Where is the easement located? Can it be moved? n Is the easement located along a property line or within a setback

area? n What will be the construction method used (open cut versus

boring) n Who will maintain the easement and how often? n Does the easement leave a remnant or gap? n Will the easement be surveyed and monumented? n May either party alter the construction or grade after completion?

n Will the landowner have to obtain permission to use the easement

area? n Can the landowner cross the easement with roads, utilities, etc.? n How will the easement holder access the easement? n Who pays property taxes and insurance? n Will the easement cause a loss in view, security, etc.? n Will the easement benefit the owner in any way? These issues are often found within the easement document but may require discussion with the condemnor. In terms of legal encumbrance, it is important to recognize that the easement will impact the ownership title and may affect both current and/or future uses. One key question is “will the easement affect the use and/or the utility of the property that results in a change in highest and best use?” Also, the easement may include accessory rights such as the ability to access the easement and the ability to expand the use within the easement (add additional pipes in the future). From a physical standpoint, it should be recognized that most of our activity occurs on the surface. Thus, impacting the surface area tends to affect value to a greater degree compared to a subsurface easement where there may be little, if any, impact on surface use. Damages as a result of an easement (both temporary and permanent) as well as the easement itself are difficult to measure. By nature, the real estate market is an imperfect market. The presence of an easement on a property is only one of many factors buyers and sellers are dealing with during the buying and selling process. While some buyers may react negatively toward an easement, others may view this same easement with total disregard. For example, in heavily vegetated hunting land, having a cleared area may provide an opportunity to develop a viable hunting stand with a clear field of fire. Others might view this same easement as aesthetically displeasing. One method used by appraisers includes matched pair sale analysis. In this analysis, the appraiser will attempt to find two similar sales, one encumbered with an easement and another without, and measure the impact the easement has on value. Care must be used in that one example may not be sufficient to apply to all situations. Also, by having multiple pairings, one can establish a general trend of the measured impact. In measuring the impact, it should be noted that the total difference between encumbered and unencumbered includes both the easement and its affect (damages). A second method may be the result of interviews with buyers and sellers. This method can also be abused by inconsistent questions asked and in the selection of the sample of buyers/sellers asked. To assist appraisers and right of way professionals, the following Easement Valuation Matrix has been developed. The matrix should be used as a general guide in looking at the effect an easement may have on the total bundle of rights. This chart should not be considered an exclusive list as to the type of easements and their effect on the total bundle of rights but should be used only as a guide to general effects on the total fee ownership. In establishing the matrix, special emphasis should be made as to the impact the easement has on the use and utility of the real property. Special note should be given that in developing this chart, one seller actually negotiated the easement based on the concept that they were purchasing 50% of the rights in a sewer line easement along a property line for a suburban office site. In this situation, the purchaser

Percentage of Fee


Potential Types of Easements

90% - 100%

Severe impact on surface use Conveyance of future uses

Overhead electric, Flowage easements, Railroad ROW, Irrigation canals

75% - 89%

Major impact on surface use Conveyance of future uses

Pipelines, Drainage easements, Flowage easements

51% - 74%

Some impact on surface use Conveyance of ingress/egress rights

Pipelines, Scenic easements


Balanced use by both owner and easement holder

Water or sewer lines, Cable lines, Telecommunications

26% - 49%

Location along a property line location across non usable land area

Water or sewer line, Cable lines

11% - 25%

Subsurface or air rights that have minimal effect on use and utility Location with a setback

Air rights, Water or sewer line

0% - 10%

Nominal effect on use and utility

Small subsurface

Source: Right of Way Magazine “Easement Valuation” Sherwood, May/June 2006

of an office site negotiated the sale based on an unencumbered value of $7.27/SF. The area within the easement was purchased at 50% or $3.64/SF. Furthermore, it is interesting to note that this office site abutted a high voltage electrical transmission line right of way. The presence of this easement adjoining this sale did not appear to affect its value, use or utility. In another situation, a sale encumbered with an overhead transmission line easement was purchased for suburban residential development. In this situation, the buyer netted out the easement indicating that the remaining rights had little to no value. These types of situations over the past thirty years allowed the development of the above matrix. Additionally, matched pair sale analysis can also be employed to develop the percentage of rights acquired. However, care must be taken in this analysis as the unit price differential may include not only the easement rights but damages to the unencumbered remainder. The following sales have been analyzed to show how one can use matched pair analysis to ascertain the contributory value of an easement. The first step in this process is to find sales that were encumbered with similar easements to those being appraised. In this analysis, it is important that the appraiser find out what rights were acquired. Often, this is difficult to obtain as the easement may be either undefined or difficult to locate in the public records.

TerraFirma Winter 2015



In the following example, the encumbered property is a 100.112 acre rural tract that sold in June 2012 in north central Texas. At the time of sale, property was encumbered with two monopole high voltage transmission lines (HVTL) containing 9.40 acres that traversed the property in a southwest/northeast direction. Also, this tract had extensive road frontage and the easements crossed the property in such a way as leave a similar amount of acreage and road frontage on either side of the easement. The property sold for $300,336 or $3,000 per acre. Once the encumbered sale has been located, the next step is to find similar unencumbered sales in the same market area. Ideally, one would locate an unencumbered sale that is identical except for the encumbrance. However this rarely, if ever, occurs. In this example, the comparison sale containing 84.34 acres sold in December 2010 for $269,888 or $3,200 per acre. The market did not indicate a change in market conditions and this sale was found to be highly similar except for its road frontage. The sale required an upward adjustment of 5% for its frontage along a gravel road. Thus, its adjusted price was increased to $3,360 per acre. The encumbered sale had a net unencumbered area of 90.712 acres (100.112 acres – 9.40acres). Utilizing the unencumbered value of $3,360 per acre, the value of the unencumbered area would be $304,792. Subtracting this number from the actual sale price of $300,336 would indicate that the contributory value of the easement area was negative $4,456. Assigning a value of 90% to the easement, the contributory value of easement would be $3,158. Adding the unencumbered value of $304,792 plus the easement value of $3,158 indicates a total of $307,950. Subtracting this figure from the actual sale price of $300,336 indicates damages of $7,614. In order to better explain the above example, the following chart is shown that basically represents a hypothetical taking of our sample property.

acquired), the amount of damages would increase to $10,773. As a side note, in interviewing the broker, he stated that the encumbered sale’s extensive road frontage seemed to negate any damages. This example illustrates the difficulties in reaching an empirical figure. It also illustrates the need for a greater sampling of market data. Additional sales may indicate greater or lesser rights and/or damages. The rights included in an easement can vary depending on multiple considerations such as the type of structure, the location of the easement and other physical factors. Thus, this stresses the importance of good and thorough confirmation of the easement rights, verification of the location of the easement, determination of the size of the easement and having an adequate number of comparisons from which one can surmise general trends. Even with all this information, the imperfections of the real estate market must be tempered with the skill and experience of the appraiser. Another observation was obtained from interviewing the buyers, sellers and/or brokers in these situations. Some observed little or no damages from the presence of the easements while others stated that substantial damages were present when the market indicated otherwise. While these perceptions may reflect actual market reactions, care should be taken with unsupported claims of damages.

Conclusion In every situation, the appraiser must explore the rights being acquired and allow the market to dictate the effect the easement will have on the remainder property. In most cases, the presence of an easement may be one of many deciding factors affecting value. Isolating the effect of an easement on the property requires extensive research and evaluation.

About the author: Donald J. Sherwood, MAI, SR/WA, FRICS is the Director of the Fort Worth office of Integra Realty Resources, DFW, LLP. With over 30 years of appraisal experience, Sherwood has performed appraisals on all types of real property.

Value of Whole Property 100.112 acres @ $3,360 per acre


Value of the Part Acquired 9.40 acres in easement @ $3,360 per acre @ 90% $28,426 Value of the Remainder Before the Acquisition $336,376 - $28,426


Value of the Remainder After the Acquisition 100.112 Acres @ $3,000 per acre (Encumbered with 9.40 acres in easement)


Damages $7,614 Part Acquired


Total Compensation


While this example tends to support the numbers within the chart, it should be noted that this example assumes that the easement had residual rights of only 10%. If in fact the rights remaining in the easement were increased to 20% (indicating 80% of the rights were

24 Winter 2015TerraFirma

The Premier VIDEO MARKETING SOLUTION for the Luxury/Farm & Ranch Real Estate Market

512.422.3158 YourFriends@NewStoryMedia.com


2015 New Institute Initiatives Let’s Make Deals

Let’s Make Deals land marketing sessions are online marketing venues for members of the Institute to present their properties to other Institute members and to potential buyers to make deals happen. The first thirty members who register will have the opportunity to present a listing for 30 seconds to potential buyers. Members are welcome to invite buyers to be participants. Let’s Make Deals will take place triannually at noon CT on the first Thursday of the following months— April (2nd), July (9th), and November (5th). Archives will be kept of all Let’s Make Deals sessions and will be posted at www.rliland.com.

Member Marketing Kit

The Institute Member Marketing Kit was developed by the Institute for use by its members to help promote the REALTORS® Land Institute and the ALC designation. Included in this kit will be: n Interview Techniques n Social Media Marketing Tips n Apps for Marketing n Tips for writing an effective press release n Tips for working with the media n Networking advice n Institute Marketing Resources

ALC Retreat

ALC Logo Store

Wear or display your Institute’s logo proudly, by purchasing items through the ALC Logo Store. There will be a wide variety of items for purchase including coffee mugs, padfolios, golf shirts, umbrellas, license plate holders, hats, bags, and more.

Institute Gives Back

In September 2015 the Institute will be giving our members and community the opportunity to donate through the Institute to a national and/or international end hunger organization. The national Feeding America and the international Freedom from Hunger will be the organizations to benefit from the donations.

The first Annual ALC Retreat will take place in October 2015. All ALCs will be invited to a weekend retreat for the opportunity to relax, network, and play in the outdoors. This opportunity will give you a chance to meet with other ALCs and discuss best practices for business while participating in an activity.

Institute Perks & Discounts

ALC Email Addresses

Enhanced THE LAND CONNECTIONS Listing Site

ALCs will have a new benefit to enjoy in 2015: all will be provided with an Institute email address. The email address format will be FirstNameLastName@ALC.land (ex: JohnSmith@ALC.land ). This email initiative will be a SMART TOOL for marketing your designation and promoting your business. Stay tuned for more information.


e-Properties is a benefit to all Institute members. Share listings with fellow participating members through this resource. Directions: 1. Go to www.rliland.com and sign in using your last name for your username and Institute number for your password. Once signed in go to My Member Profile 2. Go to “E-lists” un “My Features” 3. Begin sharing your listings with other Institute members who are participating.

The Institute Perks and Discounts are discounts offered by companies and organizations who can be of service to you and your business as a way of saying thanks for being a part of the Institute. THE LAND CONNECTIONS will have a new look in 2015. In addition, all Accredited Land Consultant designees (ALCs) will be identified as having the designation on the listing site. Do not miss an opportunity to market your listing. Over 12,000 properties are currently posted on this Institute listing site. To increase the chance of attracting a buyer or seller, make sure your listings are posted at www.thelandconnections.com.

Land Rising Star Award

In 2015, the Institute will debut the Rising Star Award—a special recognition of a land professional who has demonstrated promise. The Rising Star Award recognizes a member approaching a midlevel in his/her career who is on his/her way to making significant contributions to the land profession and to the Institute.

Winter 2015 25

Member News

Member News The Institute is pleased to recognize the below members for their outstanding accomplishments and contributions. Nancy Surak, ALC, represented the seller in a deal that closed in St. Petersburg, FL, for a multi-family development that will serve veterans with special needs, specifically those transitioning from a VA hospital or medical center. The community offers veterans and their families permanent, supportive housing and integration into a more self-sufficient lifestyle. Beth Cristina, ALC, has been elected to serve as President of the Louisiana REALTORS® in 2015. Beth has previously served as Secretary Treasurer, Director at Large, Vice Chair of the Strategic Planning Committee, and Vice President of Region 4. She was also recently recognized as the 2010 REALTOR® of the Year in Louisiana. Brandon Rogillio, ALC Advanced, has been selected to serve as the Federal Political Coordinator (FPC) for Congressman Garret Graves. As an FPC, Rogillio will advocate on behalf of all REALTORS® and the REALTOR® Party, respond to all NAR Calls for Action, and develop a relationship with Congressman Graves. Bob King, ALC, Forester, is a newly approved LANDU Instructor for the Timberland Course. He served as the Chapter President of the South Carolina Institute Chapter, now the Carolinas’ Chapter, in 2003, 2004, and 2007. He will be facilitating a topic round table, Timber Trends, at the 2015 National Land Conference on the morning of March 25. Bill Eshenbaugh, ALC, received The Henry H. Blanton Lifetime Achievement Award from the Florida Gulf Coast Commercial Association of REALTORS®, for his many years of leadership, service, and expertise. Eshenbaugh has also created the John Eshenbaugh Military Scholarship for Military Transition Program for members of the Institute to participate in LANDU courses. Ray Brownfield, ALC Advanced, 2012 Institute National President, was interviewed on This Week in Agribusiness on October 18. Ray shares a land values forecast, buyer and investor trends, and other insight into the state of the current land market.

Myers Jackson, an Institute auctioneer and LANDU Instructor, teamed up with the reality television show Texas Flip N Move to raise funds for charity. With Jackson’s auctioneer talents and participation on the reality TV show, they raised over $7,000 to help fight a childhood cancer during a two-minute auction. Dean Saunders, ALC, donated $25,000 to the Florida Cattlemen’s Association (FCA) Foundation through the Saunders Gives Back (SGB) Program. The SGB program is set up for FCA members to be able to participate in funding the FCA Foundation through property referrals to Coldwell Banker Commercial Saunders Real Estate. The donations from this program help to sustain and preserve the heritage of Florida cattle ranchers. John Rupp, ALC, and President of the Kansas Chapter has been named President of J.P. Weigand. Rupp has been with the company for 12 years.

Institute Membership on the Rise 2014 was a record breaking year for the Institute. 201 new members joined the Institute, the highest number in the Institute’s history for a one-year period. The buzz is out that the Institute is a strong organization for knowledge, networking, member benefits, and making deals. Thank you to all of our current members who helped in this endeavor and welcome new members!

Whitetail Properties Make a Splash The Institute is excited to announce the commitment of Whitetail Properties to encourage all its brokers and agents to join the Institute and work to attain the ALC designation. With 27 Whitetail professionals joining in 2014, this value leads to productivity and success for the company and individual agents. “It is my goal that every one of our agents joins this organization and earns the Accredited Land Consultant designation; this accreditation is highly revered and recognized by consumers, clients and colleagues.” --Dan Perez, Broker, Whitetail Properties

26 Winter 2015TerraFirma

Newest ALCs

Congratulations to the newest Accredited Land Consultant (ALC) Designees of the REALTORS® Land Institute Ricky Ward, ALC RE/MAX Champion Land Brokers 5021 N Broadway, Suite C Poteau, OK 918-658-8067 ricky.ward@remax.net Ricky Ward, ALC, has experience in all facets of real estate transactions, and functional knowledge of buying and selling real estate. Having worked for the USDA for almost 30 years, Ward has an indepth knowledge of the financial aspects of real estate and real estate financing. He is a Broker licensed in Oklahoma and Arkansas. Terry Pauling, ALC EXIT Realty North Star Indianola, IA 515-962-5686 Terry@itownrealestate.com As a licensed Real Estate Broker in Iowa and Missouri for almost 10 years, Pauling’s current position is broker of EXIT Realty North Star’s Branch Office in Indianola, Iowa. His area of focus is on the Indianola commercial market, with secondary emphasis on Warren County Farmland and the residential market in and around Indianola. Pauling was the 2014 President of the Iowa Chapter of the REALTORS® Land Institute.

Membership Ambassadors

A special thank you to the following Ambassadors who brought valuable new members to the Institute in 2014. Aaron Graham, ALC Arlan Brown, ALC Bart Miller, ALC Ben Alder Ben Crosby, ALC Bill Eshenbaugh, ALC Bob Turner, ALC Advanced Brent Wellings Bruce Charlie Chernak Cathy Cole, ALC Charles Wingert, ALC Advanced Charlie Latham, ALC Christ Taylor Christy Belton, ALC Gary Hubbell Craig Browne, ALC Dan Crocker, ALC Dan Perez Dann Degen David Jirasek, ALC Dawn Truax Dean Saunders, ALC Fletcher Majors, ALC Erskine Donald, ALC Flo Sayre, ALC Advanced Ford Cartwright Frank Roberts, ALC Gary Hubbell Dietra Robertson, ALC George Clift, ALC Advanced! Ivan Judd, ALC Jeramy Stephens, ALC Advanced

Joey Burns Jon Hjelm, ALC John Lile, IV Jonathon Stevens Justin Mason Justin Osborn Kem Winternitz, ALC Ken Richardson, ALC Lou Jewell, ALC Maggie Thomas Martin Jurisch Mike Konstant, ALC Michael Murphy Molly Suarez Myers Jackson Ray Brownfield, ALC Advanced Rick Doak Rob Langford Robin Baker Sheelah Clarkson, ALC Sherman Shanklin Steve Purviance Suzy Moore Terri Jensen, ALC Advanced Terry Pauling, ALC Tom Niewohner, ALC Tom Percival Tom Smith, ALC Trey Allen Wayne Cooper, ALC William Rollins, ALC

Jonathan Goode, ALC AlaLand Co, Inc. Marion, AL 256-825-4331 jonathan@alalandco.com Goode has been a professional land agent with AlaLandCo since 2008, serving the historic Black Belt of west Alabama. He is the only real estate agent in Perry County that focuses completely on rural land sales. Goode specializes in marketing rural properties online, and is a contributor for Landthink.com, writing articles focused on helping people buying and selling rural land. Lance Langehoven, ALC The Commercial Professionals The Woodlands, TX 281-766-4352 Lance.Langenhoven@TheProfessionalsGrp.com Langehoven was born in Johannesburg, South Africa, and his earliest memories are of growing up on a tobacco farm. In 2012, Langehoven founded The Commercial Professionals, using the latest tools to analyze deals and work with clients. It seems fitting that his career path has taken him back to the origins of his earliest memories—working with the land. Andy Flack, ALC Homeland Properties Huntsville, TX 936-295-2500 andy@homelandprop.com Flack has 29 years of experience as a State of Texas licensed real estate broker, specializing in the land/ timberland real estate business. He has consulted and/or directed sales of 500,000 acres in Texas since 2002. Alan Noy, ALC Wingert Realty Vernon Center, MN 507-491-3572 alan@wingertrealty.com Noy has substantial agricultural background, having produced crops and managed livestock for most of his life. He began in real estate career in 2009 and specializes in agricultural land. Tom Howard, ALC NH Conservation Real Estate Moultonborough, NH 603-986-8766 TomHoward@NHConservationRE.com Howard is licensed and active in the State of New Hampshire, from 1987-present with experience in residential, second home, commercial and land markets and a focus on conservation land since 2004. He has served as the Conservation Manager for the Lakes Region Conservation Trust, Meredith, NH, 1996-98.

TerraFirma Winter 2015


Chapter News

Chapter News

Carolinas Chapter The North Carolina Association of REALTORS® President Tomp Litchfield was a speaker at the Carolinas Chapter meeting in Greensboro, NC. Litchfield discussed land issues, shared updates on the state level, and inducted the Carolinas Chapter Officers. John McAllister, ALC, of Columbia, SC was awarded The Land REALTOR® of the Year award for the Carolinas Chapter. McAllister was also the 2007 President of the National REALTORS® Land Institute and was the Chair of the 2014 National Land Conference.

Oklahoma Chapter

Bob Bahe, ALC, was presented with an award recognizing his service and dedication to the Oklahoma Chapter of the REALTORS® Land Institute. Bob was the first president of the Oklahoma Chapter and was instrumental in its development.

Illinois Chapter

Colorado Chapter

The Illinois Farm and Land Chapter of the REALTORS® Land Institute named David Klein, ALC Advanced, of Soy Capital in Bloomington, IL, the Illinois Land Broker of the Year at the Chapter’s annual meeting. He is an active member of the National Institute and Illinois Chapter and served as the chapter’s president in 2012-2013. Klein earned the ALC in 2006 and the ALC Advanced in 2014 and is a member of the ALC Review Committee of the National Institute.

Bart Miller, ALC, President of the Colorado Chapter, was named the Land REALTOR® of the Year at the Chapter’s September meeting in Grand Junction. Bart was also recognized at the Colorado Association of REALTORS® state convention in October. George Harvey, Past President of the Colorado Chapter and the Colorado Association of REALTORS®, made the presentation during the Ceremony of Champions.

Iowa Chapter The Iowa Farm and Land Chapter of the REALTORS® Land Institute was spotlighted in the article “Is the Investment Community Getting Back Into Farmland?” on Agriculture.com on November 14. Kyle Hansen, ALC, shared, “Factors contributing to current farmland values include lower commodity prices and increasing interest rates. Other factors include: lack of stable alternative investments, cash on hand, and limited amount of land on market.” The chapter’s recent survey on the state’s agriculture lenders and brokers was also referenced. The REALTORS® Land Institute Iowa Chapter announced the 2014 chapter award winners at its annual dinner. Congratulations to the following members in Iowa: Farm and Land Broker of the Year Award Kyle Hansen, ALC , 2014 Iowa Institute Chapter President Volume and Acres Sold for the Year Award Jeff Obrecht Deal of the Year and New Member of the Year Award Chris Smith, ALC

28 Winter 2015TerraFirma

Texas Chapter The Texas Chapter of the REALTORS® Land Institute had a busy 2014, offering six LANDU classroom-delivered courses. Providing education to 100 students, the Chapter offered Tax Deferred 1031 Exchanges, Land 101, Practical Navigation, Land Development, Land Investment Analysis, and Timberland. “This past year has been an unusually full one with the variety of courses we offered. We covered several areas of the state to try to accommodate as many students as possible. The rewards were great as attendance was up and believe that had something to do of the frequency of the classes. Additionally, we did classes back to back to make a trip easier for those coming from out of state as well as from around our great state of Texas, in all its vastness.” —Cathy Cole, ALC Advanced, 2015 PresidentElect, Texas REALTORS® Land Institute

Chapter News Florida Chapter

Wyoming Chapter

Henry Rogers, ALC was awarded the REALTORS速 Land Institute Florida Chapter Land Realtor of the Year Award. Six Florida Institute members played a major role in rewriting the Florida New Vacant Land Contract (VAC-10). These members, Danny Smith, ALC Advanced; Bill Eshenbaugh, ALC; Dean Saunders, ALC; Ben Crosby, ALC; Ryan Sampson, ALC; and Richard Dempsey, ALC, provided their knowledge and expertise in a work group that discussed updates and improvements to the contract.

Danny Smith, ALC Advanced Bill Eshenbaugh, ALC

Dean Saunders, ALC

The Wyoming Chapter is back! The past few months the Chapter has been diligently working at becoming a strong and vibrant chapter again. Under the leadership of Chia Valdez-Schwartz, the Chapter looks forward to an exciting year of growth and networking opportunities. They are having a meeting in conjunction with the Wyoming Association of REALTORS速 in February.

Chapter Leadership Arkansas


President Jeramy Stephens Vice President Joel King Secretary/Treasurer Gar Lile

President Dan Flanagan, ALC Vice President Norm Bjorling Secretary/Treasurer Kent Kraft

Carolinas President Dick Havens Treasurer Christina Asbury, ALC

Colorado Ben Crosby, ALC

Ryan Sampson, ALC

Richard Dempsey, ALC

Revitalization and Repositioning Congratulations to the following chapters for revitalizing and bringing awareness to what they offer to the public and land professionals.

Missouri Chapter

With Barry Upchurch, ALC, as the President, strong leaders with a passion to revitalize the chapter, and the backing of the Missouri Association of REALTORS速 CEO, John Sebree, the chapter is building and focusing on bringing awareness about the organization to the public and land professionals.

President Bart Miller, ALC President-elect Justin Osborn

Florida President David Hitchcock, ALC Advanced Vice-President Myers Jackson Secretary Lisa Jodray Treasurer Clay Taylor, ALC

Tennessee Chapter


Jimmy Settle, ALC, has been elected as the 2015 President of the Tennessee Chapter. The chapter is excited to rebuild as Bob Turner, ALC Advanced, 2015 National President Elect, prepares to take the reins of the Institute as President in 2016. Memphis, TN, is the location of the 2015 LANDU Education Week on June 7-16.

President Wayne Groover Vice-President FD Brown Secretary Sam Bowers, ALC Treasurer Huddy Hudgens Jr, ALC CCIM

Iowa President Eric Schlutz, ALC Vice President Matt Adams

Kansas President John Rupp, ALC Vice President Tim Gates, ALC Secretary/Treasurer Mike Regan

Mississippi President Barry Upchurch, ALC Vice President Michelle Stone, ALC Secretary/Treasurer Boyd Harris

Tennessee President Jimmy Settle, ALC Advanced Secretary/Treasurer Bob Turner, ALC Advanced

Texas President Rusty Lowe, ALC Secretary Marc David Bradberry Treasurer Minor Taylor, ALC, CIPS, ALHS,TRC

Wyoming President Chia Valdez-Schwartz Secretary/Treasurer John Gibbs, ALC

TerraFirma Winter 2015


The official land listing site of the REALTORS速 Land Institute

www.thelandconnections.com *The server for the site is Lands of America (LOA). Those active members who have accounts with LOA will have their properties displayed on our listing site. If you are not a current subscriber to Lands of America and are an active Institute member, you will have three months free on LAND CONNECTIONS. After three months, you would need to have a level of a subscription to stay posted on the listing site.

30 Winter 2015TerraFirma


Basics of Timberland Investing Bob King, ALC, Certified Forester United County Land & Lifestyle Realty

History of Timberland Investing Although landowners have made money from timberland since the earliest sawmills were built, this asset class received little attention from institutional investors until 1974. This was the year Congress passed the Employee Retirement Income Security Act. Before this law was passed, pension funds and endowments were invested mainly in equity and fixed income instruments. The new law encouraged these institutional investors to diversify their portfolios to include other investments like real estate holdings, which included timberlands. Changes in the tax law in 1986 increased the amount of institutional investment in timberlands even further. The new law did not allow U.S. forest product companies to take advantage of capital gains tax rates for timber harvests. With the loss of this tax advantage, many forest product companies began to sell their timberlands to tax exempt investors like pension funds, foundations and endowments. From 1986 to 2007, most forest product companies realized they did not need to own large amounts of timberland to provide their mills with a steady and reliable flow of wood. They decided it would be better financially to monetize the timberlands and use the capital for investment into wood processing facilities and to improve their balance sheets. During this 21 year period, the total investment in timberlands by institutional investors increased from less than $1 billion dollars to over $60 billion dollars. The millions of acres of timberlands sold during this period were purchased by several entities. The largest buyers were pension funds, university endowments, charitable foundations and high net worth individuals. The majority of these timberlands are managed by Timber Investment Management Organizations (TIMO). TIMOs assist the investors in locating and purchasing timberlands and also manage the timberlands for their clients. There are approximately 17 different TIMOs in existence today. The four largest TIMOs are Hancock Timber Resource Group, Forestland Group, Campbell Global and Resource Management Service. These four TIMOs manage over 15 million acres of timberland for their investors. Instead of selling their timberlands, some forest product companies moved their timberland holdings into Real Estate Investment Trusts (REIT). REITs have better tax advantages than holding the lands in a C-Corporation. The four largest REITs today are Plum Creek, Rayonier, Weyerhaeuser and Potlatch. Together they own over 17 million acres of timberlands.

Why Invest in Timberland? Historically, timberland returns have compared favorably with stocks but with much less risk and volatility. U.S. timberland investment performance is measured by the NCREIF Timberland Index. This index is published by the National Council of Real Estate Investment Fiduciaries. Over the last 20 years, according to this index, returns from timberland have been almost equal to returns from equity

investments as measured by the S&P 500. The rest of the story, however, is timberland investments had less than half the volatility of the equity investments. The volatility of timberland investments over this time period was equal to 10 year treasury bonds. This demonstrates the low risk nature of timberland investing. Timberland is an excellent addition to an investor’s portfolio for two other reasons. First, timberland is a hedge against inflation. Historical data on timberland returns and inflation show there is a positive correlation between the two. Second, because timberland returns typically move counter cyclically with other asset classes, it provides overall portfolio diversification, which lowers portfolio volatility and risk. Another favorable characteristic of timberland is trees continue to grow in volume, and thus value, regardless of what is going on in the current economy. If timber prices are unfavorable, the timber can be stored on the stump and allowed to grow until prices become favorable again. This cannot be said for other investments like stocks or gold. While waiting for stock prices to increase, the number of shares of stock owned are not increasing. With gold investments,

TerraFirma Winter 2015


Feature while waiting for the price of gold to increase, the ounces of gold owned is not increasing. There is one more unique difference between investing in timberland verses other more traditional investments like stocks, bonds or gold. Timberland is a tangible asset that can be enjoyed while owned. One cannot go hunting or horseback riding on a share of IBM stock or a gold brick. Timberland ownership, however, allows the investor to have a place to enjoy and create memories that will last a lifetime. To many timberland owners, this is the most important characteristic of the asset. Along with the upside to timberland investing, there are a few negatives. Unlike investing in the stock market, investors in timberland must have long term investment horizons. As witnessed over the last several years with the recession and housing market crash, there is also market uncertainty. Another negative is the fact that timberland is a fairly illiquid asset. It may take 6 to 18 months to sell a timberland property. Timberland investments are also subject to damage from fire, wind, insects or disease. Geographic diversification of timberland properties, timber age class diversification and good forest management, however, can lower these environmental risks.

How Money is Made Growing Timber The value of timberland appreciates in several ways: 1) land appreciation, 2) real timber price increases, 3) biological growth and 4) forest product growth.

Land Appreciation Unless the timber property is located in an area of high growth, land appreciation contributes only about 5-7 % of the overall asset appreciation. However, the appreciation of the land can be significant if it is located in parts of the county that are experiencing rapid growth. Many times the timberland will develop a higher and better use where the value of the timber component of the investment becomes secondary to the value of the land component. There are many tracts of land that had a highest and best use for growing timber that are now golf course communities, residential subdivisions and shopping malls.

Real Timber Price Increases The housing crash of 2008 pushed softwood sawtimber prices down to levels not seen since the early 1990’s. Sixty-five percent of the total demand for softwood timber is from construction and two-thirds of this demand is from new construction. Most forest economists, however, predict the future for timber prices is bright. Several factors should help timber prices rebound and reach new highs over the next 4 -5 years. First, the housing market will slowly but surely rebound, thereby increasing demand for softwood timber. Housing starts have been at historic lows over the last four years. In order to keep up with future demand for housing, this deficit must be made up. Currently, housing starts are around one million units per year. This should increase to over 1.5 million starts by 2017. Second, exports to China will continue to increase. The U.S. is currently exporting ten times more wood to China than just seven years ago. Most of the timber being exported to China is coming from the Pacific Northwest.

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Third, imported lumber from Canada will decrease because of the devastation of Canada’s timberlands from the mountain pine beetle. The mountain pine beetle infestation has reduced timber volumes by more than half in western Canada. Canada provides the U.S. with onethird of its lumber supply. Less lumber being imported from Canada will result in a greater demand for softwood timber in the U.S. Because it takes 40 to 50 years to grow a tree to sawtimber size in Canada, it will be decades before they can import lumber into the U.S. at the same levels as before the pine beetle devastation. The combined effect of these three factors will push demand and prices for softwood timber to new highs over the next four to five years. Because softwood timber is the primary product grown on U.S. timberlands, this will help increase returns from this asset class. The long term outlook for timber prices is even more optimistic when considering worldwide demand for paper and wood products is ever increasing but the number of acres devoted to growing timber is decreasing. Thus, landowners who are investing in timber now will be assured of good markets and high demand for their forest products into the foreseeable future.

Biological Growth and Forest Product Growth Money is made growing timber due to the biological growth of trees and also due to the change in forest product class as a tree gets larger. When a tree grows, it adds more volume and is therefore more valuable. However, not only does a tree add value over time by virtue of gaining more cubic foot volume, trees grow into higher value forest products as they get larger. For example, in the southeast, loblolly pine trees become merchantable when they reach about 15 years of age. Merchantable means the trees are large enough to be sold to a timber buyer for money. At this time, the trees are approximately seven inches in diameter. Trees this size are used for pulpwood, which is used in the manufacture of paper products. Pulpwood trees are worth about $7.00 per ton. The value of this seven inch tree is $1.50. In seven years, this tree will be approximately 10 inches in diameter and can be used to make small-dimension lumber. The value of trees in this forest product class is $14 per ton. The per-ton price has doubled from what it was when the tree was seven inches in diameter. The value of this 10 inch tree is $4.50. Because of the combined effects of volume growth and forest product value growth, the tree increased in value 300% in a five year period. If the tree is allowed to grow another eight years, it will be 14 inches in diameter and be classified as a large sawtimber tree. These size trees can be used to manufacture large dimension lumber or plywood and are worth $30 per ton. The value of the single tree will now be $22.50. That is a 500% increase in value over an eight year period. That is the power of the combined effects of biological growth and forest product value growth in timber. Not only do the trees gain more volume growth over time, the value of those units of volume increase over time as the tree moves into higher value forest product classes. This example did not take into account increases in timber prices. When factoring in economist’s projections of the increase in real timber prices in the future, these numbers could go even higher.

Ways to Invest in Timberland There are several different ways to invest in timberland. The method selected depends on the investor’s total capital to be invested, the amount of liquidity desired and the amount of participation in the

Feature management of the timberlands the investor wants. A way to invest in timberland that offers high liquidity, does not require a large amount of capital to be invested and does not require active management of timberland is to purchase shares of timber related publicly traded stock. Two examples are timber Real Estate Investment Trusts (REITs) and timber Exchanged Traded Funds (ETFs). The difference between the two is when investing in a timber REIT, only one timber company’s stock is being purchased. Timber ETFs, on the other hand, are similar to mutual funds and are made up of stocks from multiple timber companies. Another alternative timberland investment strategy is the outright purchase of timberland. This method offers low liquidity but a higher level of control. Pension funds, endowments, and charitable foundations who have large amounts of capital to invest and who do not have the desire or experience to manage the timberlands usually hire Timber Investment Management Organizations (TIMO) to purchase and manage their timberlands. TIMOs typically offer two types of products, individual accounts and commingled funds. Individual accounts offer more control of the invested capital but require a much higher amount of capital investment. Minimum capital requirements of most TIMOs for an individual account are around $30 million dollars. A commingled fund is made up of capital from multiple investors and therefore has a lower capital entry requirement. The amount of control over the investment is less with a commingled fund, however these funds usually offer greater portfolio diversity, which results in less risk to the investors. Another common way individuals invest in this asset class is to purchase timberland and either manage the timber on their own or hire a consulting forester. These investors may own as little as ten acres or thousands of acres. Typically, a property should contain at least ten acres of timber to be able to sell the forest products to a timber buyer at prices that make the enterprise profitable.

must pass a rigorous competency exam that measures knowledge and skills, complete at least 60 hours of continuing education every three years and also adhere to the Society of American Forester’s Standards of Professional Practice. This article covered the very basic aspects of timberland investing. Before committing a significant amount of capital to this asset class, the investor should do their due diligence on which timberland investment alternative best meets their goals. The recession of the last six years has created a window of great opportunity for investing in timberland. As the general economy continues to recover and the housing market makes a comeback, wise prudent investments made in timberland now should provide excellent returns.

Bob King is owner of United Country Land & Lifestyle Realty in Anderson, S.C. He has over 25 years of experience in forestry consulting, land sales and land management. He is an Accredited Land Consultant, Certified Forester and instructor for the “Timberland” course for the REALTORS® Land Institute. Bob specializes in the sale and acquisition of timberland, recreational properties, farms and private estates.

Financing farmers and ranchers since 1916...

There are many characteristics to a property that make it a good timberland tract. If investors are not knowledgeable about purchasing timberland properties, they should hire a forester/realtor to assist them in their search. Some of the most important things to look for when purchasing a timberland property are: 1) the property should be located in an area that has one or more mills nearby that purchase the type of forest product being grown, 2) the property should have productive soils to grow the most profitable timber species, 3) the vast majority of the property should be able to be logged, and 4) most importantly, the property can be purchased at a price that allows for a good rate of return growing timber. After a timber property is purchased, the forest needs to be managed properly. A well-managed forest will produce much more valuable timber than a poorly managed forest. If the investors do not have expertise in this area, they should locate a competent consulting forester. A good place to start is to contact the Association of Consulting Foresters of America (ACF). ACF membership has a minimum requirement of a bachelor’s degree in forestry and at least five years’ experience. ACF members also have no conflict of interest with timber buyers or forest industry and are required to adhere to the high standards of the ACF Code of Ethics. To be even more confident a consulting forester has the education and experience to manage the timberland, choose one that is also a Certified Forester by the Society of American Foresters. In order to be a Certified Forester, the forester

...and we’ll be here tomorrow. ®


TerraFirma TerraFirma Winter 2015


New Institute Members

Welcome New Members They are more than real estate people‌they are land people! October 1, 2013- September 31, 2014

Sam Harper Pro Crop Llc Royal, IA samh@procropllc.com JayNell Roberts L.l. Spencer Real Estate Emory, TX jaynell@jaynellroberts.com Keith Allison Realty Executives Associates Knoxville, TN keith@theallisonteam.com Ben Ulmer JD Johnson Realty & Investments Madison, MS ben@jdjohnsonrealty.com Ben Van Dyk Real Estate Centre Coaldale, Alberta, AB ben@theboss.ca Daryl Weems Re/max Centex Realtors Waco, TX dweems@remax.net Keldah Hedstrom United Country Peaceful Escape Real Estate Corvallis, OR keldah@peacefulescape.com Mark Giuliani Newmark Grubb|pearson Commercial Visalia, CA mgiuliani@pearsonrealty.com Nick Krier Land Pros Realty Lenexa, KS nick@landpros.com Ron Beach Peoples Company Clive, IA ron@peoplescompany.com Tom Percival Percival Land & Timber Consultants, Inc. Lumberton, NC tompercival@nc.rr.com

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Dan Specht New Harvest Land Brokers, Llc Yankton, SD dan@newharvestland.com

Brandon Stafford Lile Real Estate, Inc. Little Rock, AR bstafford@lilerealestate.com

Greg Walker Re/Max Elite Castle Pines, CO greg@sdenver.com

Vivian Bridaham Big Sky Sotheby’s International Realty Bozeman, MT vivian@bridahamcollection.com

Brad Butler Butler Land & Timber Co, Birmingham, AL brad@butlerlandandtimber.com

Lorna Murray Remax Equity Group Beaverton, OR Lorna@portlandlistings.net

Patrick MacNeil Johnson City, TN patrick@tcigrouphq.com

Michele Lesher Express Realty South Mustang, OK homesinokc@gmail.com

Jonathan Filarsky Weiss Realty LLC Durand, WI jon@weisschoice.com Grant Wyffels Richmond Hill, GA grant.wyffels@yahoo.com Slade Gleaton National Land Realty Charleston, SC sgleaton@nationallandrealty.com Christine Hauser Town & Country Realty Corvallis, OR christine@christinehauser.com Tyler Boley Mossy Oak Properties of the Heartland Albia, IA tboley@mossyoakproperties.com William Titterington KW Commercial Texas Gulf Houston, TX bill.titterington@kwcommercial.com Joe Blackburn Tutt Land Company Enterprise, AL joe@tuttland.com Danny Ladd Fred Dacus Associates Realtors Jonesboro, AR djladd@suddenlink.net Brandon Baker United Country Real Estate. Clarksville, VA bbaker@unitedcountry.com Michael Gill DH Land Company, Lometa Texas Lampasas, TX mike@dhlandco.com

Luke Murphy Southern Land Realty Tallahassee, FL luke@southernlandrealty.com Rusty Lane South Auction And Realty Swainsboro, GA rustylane82872@yahoo.com Michael Nall United Country Certified Real Estate Lakeland, FL mike@usauctioneering.com Joe Samuels Jos. T. Samuels, Inc. Charlottesville, VA joe@jtsamuels.com Matthew Armstrong AltaTerra Realty & Auction, LLC Paris, TX matt.armstrong@altaterrarealty.com Brandy Brown Nextage Pikes Peak Property Colorado Springs, CO brandyb@nextagerealty.com Wendy Johnson Re/max Landmark Terrell, TX wendy@rmlandmark.com Paul Penrod Re/Max Elite Mt. Vernon, IL paul.penrod@yahoo.com Robert King Alalandco Dadeville, AL alalandman@gmail.com

Jeff Wolpert Newmark-Grubb/Pearson Commercial Fresno, CA jwolpert@pearsonrealty.com Chris Anderson Town & Country Realty Ramona, CA chris@realestatechris.com Gerald Gracey Keller Williams Realty Weatherford, TX gracey45jr@yahoo.com Ron Beitzel Four Seasons Land Company Westerville, OH rbeitzel@fourseasonslandco.com David Percival Percival Land & Timber Inc. Lumberton, NC davidpercival07@gmail.com Ricky Ward, ALC Remax Champion Land Brokers Poteau, OK ricky.ward@remax.net Janet Porterfield Porterfield Real Estate Group, Llc Woodland Park, CO jaaap@msn.com Todd Robertson Land Pros Duncan, OK landpros.todd@gmail.com John G. Lile V Lile Real Estate, Inc. Little Rock, AR jglile@lilerealestate.com

New Institute Members Gardner Reynolds Legacy Farms and Ranches NC Raleigh, NC gardner@legacyfarmsandranches.com

Randy Dickhut Farmers National Company Omaha, NE rdickhut@farmersnational.com

Stephen Jusseaume Private Label Realty Greenwood Village, CO stevejusseaume@hotmail.com

Karl Bundesen Century 21 Bundesen Petaluma, CA karl@bundesen.com

Tim Mason Re/Max Midwest Real Estate Group Princeton, IN timmason@remax.net

Brian Smith Hall And Hall Steamboat Springs, CO bsmith@hallandhall.com

Donna Williams Suchocki Keller Williams Realty Palm Harbor, FL myrealtorresource@yahoo.com

Jacob Culler Target Realty LLC Orangeburg, SC jculler@targetrealtyllc.com

Michael Autrey Colorado Group Realty Steamboat Springs, CO mikeautrey@mybrokers.com

Lonnie Gustin Hayden Outdoors, Llc Craig, CO lonnie@haydenoutdoors.com

Justin Mason Whitetail Properties Real Estate Paducah, KY jmason@whitetailproperties.tv

Lori McFadden Keller Williams Realty Angel Fire San Marcos, TX azureranches@outlook.com

Bob Rich Svn - Miller Commercial Real Estate Salisbury, MD bob.rich@svn.com

Caleb Mc Dow 505 Ave. A, NW Winter Haven, FL caleb@crosbydirt.com

Mark Williams Whitetail Properties Marion, KY mwilliams@whitetailproperties.tv

J. Meryl Stoltzfus Beiler-Campbell REALTORS Millerstown, PA farms84@yahoo.com

Jim Allen Coldwell Banker Commercial Saunders Real Estate Lakeland, FL jimmy@saundersrealestate.com

Scott Twillmann Legacy Appraisal Services, Llc Waxhaw, NC scottt@nrpsforesters.com

William Strait River Valley Realty Dover, AR williamstrait63@gmail.com

John Hayes Keller Williams Lake Travis Austin, TX john.hayes@kw.com

Stan Gardner Gardner Home Team Owasso, OK ght@gardnerhometeam.com

Drew Ary Williams And Williams Worldwide Real Estate Auction Company Tulsa, OK drew.ary@williamsauction.com

John Hayes Keller Williams Lake Travis Austin, TX john.hayes@kw.com

Cane Yeary Cartwright Real Estate Lufkin, TX cane@cartwrightrealestate.com Eva Loken Jack White Real Estate Eagle River, AK eva@evaloken.com Ford Cartwright Cartwright Real Estate Lufkin, TX ford@cartwrightrealestate.com Peter Mazeine Providence Land Advisors, Llc Charlotte, NC pmazeine@earthlink.net Joshua Barkhimer United Country - Neeley Forestry Service, Inc. Camden, AR jbarkhimer@neeleyforestryservice.com

Brenda Kirkley United Country - Neeley Forestry Service, Inc. Camden, AR bkirkley@neeleyforestryservice.com John Neeley United Country - Neeley Forestry Service, Inc. Camden, AR daniel@neeleyforestryservice.com Kathleen Dewoina Prudential Real Estate Professionals Salem, OR dewoina@aol.com Bernard Uechtritz Briggs Freeman Sotheby’s Ranch Dallas, TX bupolo@gmail.com

Kimberly Lowry Mason & Morse Ranch Company Helena, MT kimberly@ranchland.com

Robert Warmbir Hertz Farm Management Kankakee, IL RobW@haltd.org

John David Neeley United Country - Neeley Forestry Service, Inc. Camden, AR jdneeley@neeleyforestryservice.com

Steve Purvis Vicksburg Realty LLC Vicksburg, MS shpurvis50@gmail.com

Brady Saunders Keller Williams Realty Spring Hill, TN brady@gobrady.net

Bo Burkes Tom Smith Land And Homes Starkville, MS bo@tomsmithland.com

Jeff Heil Whitetail Properties Ste. Genevieve, MO jheil@whitetailproperties.tv

Todd Henon Todd Henon Real Estate Group / Keller Williams Realty Chattanooga, TN henongroup@gmail.com

Carey Bond RE/MAX Kerrville Kerrville, TX info@careybond.com

Beth Potts Keller Williams Realty Partners, Inc. Overland Park, KS Beth@bethpotts.com

Timothy Rogers Tim Rogers Real Estate Services, Inc. Dubois, WY timrogersrealty1@gmail.com

Brian Bierschenk Skogman Realty Cedar Rapids, IA bbierschenk@skogman.com

Troy W. Jacobs Coldwell Banker Harris Mchaney & Faucette Bentonville, AR tjacobs@coldwellbankerhmf.com Travis Kaddatz United Country Jones Swenson Auction Marketing Mertens, TX travis@jonesswenson.com Patricia Bulinski Bear Island Land Co., Inc Ely, MN trishab@citlink.net Jonathan Fleming Saunders Real Estate Lakeland, FL jfleming@saundersrealestate.com

Gary Bierschenk Skogman Realty Cedar Rapids, IA gbierschenk@skogman.com Casey Berley No Fences Land Co. Rockwall, TX caseyb@nofencesland.com James Jay Johnson Farmers National Company Omaha, NE jjohnson@farmersnational.com Jason Pettigrew No Fences Land Co. Bedford, TX jasonp@nofencesland.com Russell David Taylor Keller Williams Realty Austin, TX rdtaylor@kw.com


Winter 2015 35

New Institute Members Pam Davis Chubb Associates, Ltd. Thomasville, GA pam_davis7@hotmail.com

R. Wayne Jefferies Rw Jefferies & Associaties Durango, CO colosw@sprynet.com

Elizabeth Stuart United Country-Stuart Associates Lebanon, VA unitedcountryoffice@gmail.com

Robert Aiken Harry Norman Realtors Cumming, GA robert.aiken@harrynorman.com

Eugene Schoeck Realty USA Unadilla, NY eschoeck@realtyusa.com

Brady Cowan Clift Land Brokers Amarillo, TX Brady@cliftlandbrokers.com

Blair Bachman Texas Diamond Properties New Braunfels, TX landsource@msn.com

Lisa Mayer Round Top Real Estate Round Top, TX lmayer86@gmail.com

Austin Bryant Tulsa, OK austinmbryant@gmail.com

Hunter Harrigan Harrigan Land Company LLC Sedalia, CO hunter@harriganland.com

Cameron Burrell Burrell Note Strategies Converse, TX burrellnotestrategies@gmail.com

David Hueneke Total Realty Co. DeWitte, IA dave@totalrealty.com

Bob Regester Colorado Mountain Realty-Mossy Oak Prop. Divide, CO bregester@mossyoakproperties.com

Justin Grimwood Bayfield, CO jmgrimwood9911@gmail.com

Rick Taylor Southwest Land Associates, Llc Uvalde, TX rick.taylor@yahoo.com

Robert Gash ColoradoCountryBroker.com Cedaredge, CO rob@coloradocountrybroker.com Calvin Perryman Great Southern Land Camden, AL calvin@greatsouthernland.com Dave Peterson Summit Property Rapid City, SD dakotaproperties@wildblue.net Bill Patrick Tom Smith Land Brandon, MS bill@tomsmithland.com Dan Murphy Team Murphy Realty, LLC Lake City, CO dan@teammurphyrealty.com Timothy Lockhart Keller Williams Realty Arlington Wichita Falls, TX timothylockhart@kw.com Enid Schlipf Praire Land Gold Real Estate Gridley, IL eschlipf@gridcom.net Chris Truax Regal Pines Real Estate Inc. Pagosa Springs, CO truax32@gmail.com Billy Long Ranch Marketing Associates Basalt, CO billy@rmabrokers.com Shari Heidtbrink Farmers National Company Lincoln, NE stewbrink@outlook.com Scott Henrichsen Hertz Farm Management Omaha, NE ScottH@Hertz.ag

36 Winter 2015TerraFirma

Charles Keelen Illinois Agland Services Inc. Harvard, IL aglandser@aol.com Neal Bolton Piedmont Resources Realty,inc Atlanta, GA wnbgaland@aol.com Tina Marie Kropke Premier Commercial Realty Lake In The Hills, IL tinak@premiercommercialrealty.com Jeff Davis UC Southern Properties LLC Chatham, VA davisforestry@verizon.net Carol Janice Friedlander Friedlander Commercial Real Estate, Llc Castle Rock, CO janfriedlander@comcast.net Steve Bilicek Texas Ag Realty Richmond, TX steve@texasagrealty.com Elaine Stucy Stucy Realty Co. Castle Rock, CO elaine@stucyrealty.com James Zeller Keller Williams Commercial St. Paul-Woodbury, MN kwc.sps@gmail.com

Jared Souza Mirr Ranch Group Denver, CO jared@mirrranchgroup.com Phyllis Tietjen Keller Williams Brazos Valley College Station, TX phyllis.tietjen.realtor@gmail.com Bryhn Craft Midwest Land Group Overland Park, KS bcraft@midwestlandgroup.com Neil Hummel CENTURY 21 The Neil Company Real Estate Roseburg, OR neil.hummel@century21.com Larry W. Jackson Jackson Realtors, Inc. Kosse, TX larry@jacksonrealtorsinc.com Heike McInally Birgit Enterprises Riverside, CA commercialandland@gmail.com Brian Andrus Stonebridge Real Estate Co., Inc. Clearwater, FL brian@andrusbroker.com Mary Garbett KW Commercial Texas Gulf Pattison, TX mary@marygarbett.com Sandra Kahle Kw Commercial Orange Park, FL skahle@kwcommercial.com

Jordin Hance Coldwell Banker Commercial Valley Spence Maynor Realty Cyprus Partners Lancaster, CA Birmingham, AL jordin@cbcvalleyrealty.com spence@cypruspartners.com

Chip Fortenberry Crosby & Associates, Inc. Winter Haven, FL chipfortenberry@gmail.com Ronald Charity LandPros Realty Olathe, KS ron@landpros.com Kevin Hart High Point Auction Company Rochester, MN kevin@highpointauctioncompany.com Jacob Hart High Point Auction Company Rochester, MN jacob@highpointauctioncompany.com Peg Pannell Smith Coldwell Banker Commercial Nrt Rockwall, TX peg@pegpannellsmith.com Rachel Pickens Metro First Stillwater- Pickens Real Estate Group Stillwater, OK rachelcpickens@gmail.com Annemarie Beavers Southern Heritage Land Company Gainesville, GA rbeavers@beaversrogers.com Mary Lyons Heritage Texas Country Properties Brenham, TX tootie2@sbcglobal.net Aaron Milliken Whitetail Properties Niota, IL aaron.milliken@ whitetailproperties.com

New Institute Members John Wendt, III Coldwell Banker Mason Morse Real Estate Carbondale, CO john@masonmorse.com Derek Fisher Whitetail Properties/Southern Central Kentucky Pittsfield, IL derek.fisher@whitetailproperties.com

Christian Wallace Whitetail Properties Real Estate Lincoln, NE luke.wallace@whitetailproperties.com

Dave Skinner Whitetail Properties Alvaton, KY dave.skinner@whitetailproperties.com

William R. Cary, II Land Solutions, Inc. Fort Myers, FL wcary@landsolutions.net

Cory Degen Re/Max Masters, Inc. Greenwood Village, CO Cory@DegenTeam.com

Ward Charter Charter Realty Zamora, CA wardcharter@hotmail.com

John Debitetto Land Solutions, Inc. Fort Myers, FL jdebitetto@landsolutions.net

Jason Schendt Whitetail Properties Papillion, NE jschendt@whitetailproperties.tv

Matt Glander Whitetail Properties Lawrenceville, GA matt.glander@whitetailproperties.com

Douglas Meschko Land Solutions, Inc. Fort Myers, FL dmeschko@landsolutions.org

Bill Minor Whitetail Properties Indianapolis, IN bill.minor@whitetailproperties.com

Robert Mintz Land Solutions, Inc. Fort Myers, FL rmintz@landsolutions.net

Boyce Flener Whitetail Properties Morgantown, KY Todd Bigbee boyce.flener@whitetailproperties.com Whitetail Properties L. Monique Gonzalez Wichita, KS Impeccable Properties LLC todd.bigbee@whitetailproperties.com Sugar Land, TX Austin Gann mgonzalez Whitetail Properties @impeccable-properties.com Barnsdall, OK Enoch Poon austin.gann@whitetailproperties.com Amstin, LLC Joe Gizdic Lutz, FL Whitetail Properties enochpoon@gmail.com Roodhouse, IL Steve Stanley joe.gizdic@whitetailproperties.com United Country-Stanley Realty Robert Stalberger Harrisonville, MO Whitetail Properties steve@harrisonvillemorealestate.com Pittsfield, IL Rich Baugh bob.stalberger@ Whitetail Properties whitetailproperties.com Mt. Pleasant, IA Brent Grosse rich.baugh@whitetailproperties.com Whitetail Properties Ronald Lewis La Porte City, IA Lewis Realty Company, Llc brent.grosse@whitetailproperties.com Birmingham, AL Marty Major ron@lewisrealtyco.com Rocking X Land Company Ltd Dean Anderson Hudson, CO Whitetail Properties mmajorland@gmail.com Jenks, OK Tom McFarlane dean.anderson@ Whitetail Properties whitetailproperties.com Wichita, KS Grant Olson tom.mcfarlane@ Whitetail Properties whitetailproperties.com Central City, IA Tim Propst grant.olson@whitetailproperties.com Whitetail Properties Colin Colley Caney, OK Whitetail Properties tim.propst@whitetailproperties.com Manhattan, KS Steve Purviance colin.colley@whitetailproperties.com Whitetail Properties Gabe Adair Laverne, OK Whitetail Properties steve.purviance@ Van Meter, IA whitetailproperties.com gabe@whitetailproperties.tv Melody Rising Mel Finnell Whitetail Properties Results Realty, LLC Killbuck, OH Clarkston, WA melody.rising@ melfinnellre@gmail.com whitetailproperties.com

Jason Ziegler Whitetail Properties Frazee, MN jason.ziegler@dakotaproperties.com

Michael Price Land Solutions, Inc. Fort Myers, FL mprice@landsolutions.net

Robert Starodoj Coldwell Banker Mason Morse Real Estate Aspen, CO star@masonmorse.com

Gus Wechsler Bresur Cereales SA Buenos Aires, gus.w@me.com

Ed Garono Re/Max American Dream Bel Air, MD edgarono@mris.com

Luis Savinon CLS Santo Domingo, caribhousingprojects@lycos.com

Michael Posey The Sheelah Clarkson Agency Hendersonville, NC michael@sheelahclarkson.com B J Chip Lenihan Telluride Real Estate Corp Telluride, CO chiplenihan@gmail.com Jim Peacock Jim Peacock Real Estate Jacksonville, AR peacockrealestate@yahoo.com


Tom Siddons Keller Williams Lakeway, TX tomsiddons@tomsiddons.com

We’ve got specialized knowledge of the land. And the visibility, tools, and support of a worldwide network of independent offices and agents. That’s why you need to partner with a CENTURY 21 Farm & Ranch professional.

Dorian Goll Triad Realty Clear Lake, IA doriango@netins.net Michael McGarry Lone Eagle Land Brokerage Inc. Montrose, CO mike@eagleland.com Eric Chavez Re/Max Commercial Ontario, CA echavez@remaxcre.net



© 2015 Century 21 Real Estate LLC. All Rights Reserved. CENTURY 21® and the CENTURY 21 Logo are registered service marks owned by Century 21 Real Estate LLC. Century 21 Real Estate LLC fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. Each Office is Independently Owned and Operated.

TerraFirma Winter 2015



LANDU: All About You “I dwell in Possibility.” --Emily Dickinson, Poet Whether you are working toward earning your ALC, are an ALC, working toward the ALC Advanced, or simply want to gain knowledge in certain areas, LANDU has learning for success for everyone. Knowledge is power and adds credibility and service ability to clients. Three new courses developed and instructed by experts in their fields have been added to the seasoned LANDU curriculum!

LANDU Course Choices: n 2015 National Land Conference Choice Option

(16 contact hours) n Advanced Tax Deferred 1031 Exchanges for Land Professionals (8 contact hours) n Agricultural Land Brokerage and Marketing (16 contact hours) n The Auction Tool (8 contact hours) n NEW Auction Verdicts & The UCC 2-238 (16 contact hours) n The Basics of Eminent Domain Law (8 contact hours) n Building Business Through Technology (16 contact hours) n Essentials of Negotiations (16 contact hours) n NEW Google Earth for the Land Professional (16 contact hours) n LAND 101: Fundamentals of Land Brokerage* (16 contact hours) n Land Development (16 contact hours) n Land Investment Analysis* (24 contact hours) n NEW Legal Aspects of Real Estate (16 contact hours) n International Aspects of Real Estate (16 contact hours) n Marketing Strategies (16 contact hours) n Mineral, Oil, and Property Rights (16 contact hours) n Practical Navigation for Land Professionals (16 contact hours) n Site Selection (16 contact hours) n Tax Deferred 1031 Exchanges* (16 contact hours) n Tax Implications of Real Estate (16 contact hours) n Timberland (16 contact hours) *These courses count as a requirement toward earning the prestigious ALC designation. 104 total course hours are required toward earning the designation. They also count toward earning the ALC Advanced.

Additions to the LANDU Curriculum Three courses are being added to the LANDU Curriculum in 2015: Auction Verdicts & the UCC2-328 , Google Earth for the Land Professional , International Aspects of Real Estate . Auction Verdicts & The UCC 2-328 with Mike Brandly, CAI, AARE Counts 16 credit hours toward earning the ALC Designation and toward the ALC Advanced This course will cover how courts from around the country have ruled in high profile auction cases, establishing laws that every auctioneer must follow. In addition, it will explore the history and importance of the UCC 2-328, and students will learn how they could save $30,000 in real estate auction sales.

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International Aspects of Real Estate with Kurt Stanberry, Esq; Adrian Gil, PhD Counts 16 credit hours toward earning the ALC Designation and toward the ALC Advanced The term “global marketplace” has never been more descriptive— particularly when it comes to real estate. Whether you’re an international investor, want a vacation property, or a first generation immigrant living in the U.S., purchasing in an unfamiliar market can be daunting. Similarly, many Americans want to buy or invest in foreign real estate. This course will prepare any real estate professional to work with and provide much needed guidance to buyers, sellers, and investors Google Earth for the Land Professional with Eric Pimpler Counts 16 credit hours toward earning the ALC Designation and toward the ALC Advanced This course will focus on using Google Earth to visualize land development projects. It will cover how to create personalized projects in Google Earth, symbolize the properties, add text, and attach files, photos and video. Instruction on how to overlay existing project files over the Google Earth terrain will be discussed. In addition, the course will examine how to use Google Earth to better understand the terrain of a land parcel and the viewable area of a property from any point.

LANDU: Choose Your Preferred Delivery The courses of the REALTORS® Land Institute are for real estate professionals who specialize in or have an interest to learn more about land and skills to improve sales potential in the real estate arena. These courses may be taken by anyone who wants to add to their knowledge. Successful completion of LANDU courses count toward the prestigious Accredited Land Consultant (ALC) designation or ALC Advanced. LANDU offers courses through traditional classroom courses, online classes, hybrid courses, and independent study opportunities. Hybrid courses combine independent study with optional instructorled phone lectures and discussions; No travel is needed. Online courses are in an online classroom setting. Interaction takes place with the professor and the students on demand—24/7. Traditional classroom courses are held across the country and offer participants the chance to attain knowledge while networking with like-minded professionals. LANDU Education Week Plus is a unique opportunity to complete between one and six courses while learning, interacting, and building relationships with other land professionals. Each course is taught by an approved Institute instructor who will share current information and trends. In 2015, LANDU Education Week Plus takes place in Memphis, TN, on June 7-16. Blended course offerings are exclusively offered during LANDU Education Week and combine independent study with face-to-face interaction. National Land Conference is an elective course credit option. This option includes the submission of a substantive white paper developing information on a topic covered at the conference. Independent study is self-paced with no instructor or classmate interaction. Students have 90 days during which to complete the program. Currently Land 101: Introduction to Land Brokerage is the only course offered as an independent study course.

Education “LANDU education week was amazing. I am so glad I took the time to take all of the classes I needed to complete my requirements. I learned so much and met so many people with immeasurable experience. The resources and tools I received are invaluable. I would suggest to anyone that taking the time an effort to participate in the LANDU education is well worth it! DO IT!” —Beth Potts/Kansas City

LANDU Loan Assistance Program The REALTORS® Federal Credit Union has the resources you need to complete your ALC courses to join the ranks and become a member of this elite group. Enroll in the Accredited Land Consultant (ALC) loan program and you may qualify for the ALC Designation Loan. The ALC loan will help you pay for: n Membership to the

REALTORS® Land Institute n 104 LANDU contact hours

required for the designation n ALC Final Exam Fee n ALC Application Fee

You may apply for a loan up to $5,700 to cover the expenses of the ALC designation.

Rock ‘N’ Roll in Memphis at LANDU Education Week Plus The dates are set. LANDU Education Week Plus will be taking place in Memphis this summer from June 7-16. During these ten days of best-in-class education, students will have the opportunity to complete one to six LANDU courses. All courses count toward earning the prestigious ALC designation and the ALC Advanced. LANDU Week’s 2015 schedule consists of the three required course for earning the designation and three elective courses. These six courses total 104 hours, the total required hours needed to complete the education requirements of the ALC designation. This is also a unique opportunity for designated members to earn hours toward the ALC Advanced while increasing their power through knowledge. June is a terrific time of year in Memphis. You might consider fitting in a visit to Graceland, visiting a piece of history at the Lorraine Motel, going to Sun Studios where the real Million Dollar Quartet--Elvis, Jerry Lee, Carl, and Johnny--jammed, or trying some of the tangy and sweet Memphis style BBQ on Beale Street. Make your plans to increase your power through knowledge—and maybe fit in some “Blues and BBQ” time.


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TerraFirma Winter 2015



Education Hot Topic Web Seminar Series Ins and Outs of the 2014 Farm Bill On February 18th, Dr. James Mintert and Dr. Michael Langemeier will present on how to determine which of the new federal farm programs are best for specific needs. The hot topic web seminar will cover opportunities to reallocate the base acreage program based on planting history. They cover the three farm-income support options: Agricultural Risk Coverage (ARC)-County program, Price Loss Coverage (PLC) program; and the Agricultural Risk Coverage (ARC)Individual program. The seminar examines the provisions of each program and economic analysis to help guide clients in the decisionmaking process. This presentation is also available for purchase in the Institute’s General store on the website at www.rliland.com.

ALC Fast Track has Traction A Fast Track to the ALC designation is available to those real estate professionals who hold the following designations: n CCIM (Certified Commercial Investment Member) n SIOR (Industrial & Office Realtor) n CRE (Counselor of Real Estate) n AFM (Accredited Farm Manager of ASFMRA) n ARA (Accredited Rural Appraiser of ASFMRA) n RPRA (Real Property Review Appraiser of ASFMRA) n AAC (Accredited Agricultural Consultant of ASFMRA) n MAI (Member, Appraisal Institute) n CAI (Certified Auctioneer Institute) n SR/WA (Senior Right of Way Professional of IWRA) n Those who hold either a B.S. or M.S. with a major in real estate

or a program related specifically to land will also be able to Fast Track to the ALC Designation. Individuals who apply for Fast Track consideration must provide proof of holding one of the approved designations or degrees AND successfully complete the three LANDU required courses — Land 101, Land Investment Analysis, and Tax Deferred 1031 Exchanges. For additional information about earning the ALC designation through the Fast Track program, call 1.800.441.5263 or write to rli@realtors.org. Visit www.rliland.com/education or call 1.800.441.5263 for more information 10 Apps for Every Land Professional The land professional must be mobile and connected to keep up with the industry and clients. Apps have become important tools to being connected. Land apps abound and choosing the right ones to use is essential. Join Eric Pimpler on October 14th for a presentation covering The 10 Apps Every Land Professional Should Know and Use. From mapping property and determining soil types to marketing property, this is an opportunity to learn about the available apps and participate in a quick tutorial on how to use them. For more information or to register please visit www.rliland.com/hot-topicseminars. ALC-to-ALC Teleconferences The REALTORS® Land Institute’s Education Committee is pleased to sponsor the ALC-to-ALC Teleconference Series, exclusively for ALC designees. These conferences are opportunities to bring together ALC designees to share experiences, stories, and best practices—while connecting with colleagues. The ALC-to-ALC Teleconference Series is free to all ALC designees. The following are the topics and dates of the 2015 teleconferences: April 8 at 10 a.m. CT: Best Practices for International Business August 15 at 10 a.m. CT: Best Practices Using the Google Earth App October 7 at 10 a.m. CT: Best Practices for Negotiation

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Education Feature

Assessing the Value of Wind Turbine Lease Revenue


Brad Haight, Esq. LeaseGen For a landowner with wind turbines on his/her property, understanding the value of the future revenue stream from those turbines is essential – when selling the property, selling the wind rights (where allowed), for estate planning, and maybe in the case of financing or divorce. For buyers of this land, the need for an assessment is equally important – they need to know the value of the asset they are buying. 4 The wind business does not lend itself to simple explanations. Therefore, a multi-pronged approach to assessing this value is required. At the broadest level, consideration should be given to the areas of the business that most directly affect (i) how much a landowner will be paid for turbines on his property and (ii) what may affect that revenue. Addressing these issues requires consideration of three general areas: 1) legal and regulatory issues; 2) operations and production; and, 3) project risk factors. Assessing these issues is a complex exercise. But it is essential if an assessment is to be useful. The information below generally discusses some of the issues in this analysis. 1) Legal A number of contracts and regulations overlay every wind project, and all should be considered. a. The lease The main agreement behind the revenue to a landowner is the lease or easement. These are cumbersome agreements, and rarely are any two the same. The compensation rates vary and sometimes change during the term. Also, the mechanics for calculating rates may change. Often the rate is a royalty of the total paid the project owner (a percentage of “gross revenue”). But under some leases there will be exceptions to the royalty, such as for certain project costs, some of which may apply at the time of assessment or may apply in the future, depending, for instance, on potential regulatory changes. In all, an understanding of long-term lease economics is essential to assessing value. While lease review is the starting point, because lease revenue usually depends on gross revenue, gross revenue should be analyzed. This requires analysis of other contractual arrangements that drive revenue and of the regulatory issues, project operations, and project risk factors that may affect that revenue. b. The power purchase agreement Usually, the project owner is paid under a power purchase agreement (“PPA”).6 These are long-term contracts between the purchaser (most often a utility) and the project owner. Like leases, all PPAs are different. Their lengths vary as do the

42 Winter 2015TerraFirma

purchase prices (and many other contract elements). A PPA usually has a term between 15-30 years. During this term the purchase price may adjust, and as with the term these adjustments affect value. All economic elements of the PPA require consideration, as do any PPA peculiarities that may affect the revenue stream, especially any elements that bear on gross revenue because these may affect the landowner royalty and thus value. c. Regulatory The wind business is highly-regulated. These regulations can affect operations or impose costs that could be netted from a lease or PPA, reducing revenue and affecting value. By example, wildlife or military issues can require curtailment (affecting production).8 The balancing authority (the party controlling the grid) may impose additional charges that, depending on the PPA and/or lease, could be deducted from gross revenue. These are a few of many examples of regulatory issues that can affect revenue and value. Ongoing familiarity with industry issues is therefore important to assessing the effect of different applicable (and potentially-applicable) regulatory issues on revenue and thus value.7 2) Operations Just as all contracts are different, so too are all turbines and project operators and counterparties. And these differences affect value. Production, which determines revenue, depends on the turbine. 9 Some turbines are more productive than others. Similarly, some turbines have better operating histories and manufacturers. GE, Siemens, Vestas and others have proven track records. Some manufacturers are out of business, have neglected their equipment, or produced defective turbines. Good equipment makes for better projects, and better projects create more value. Therefore, it is important to consider the equipment installed, its fleet history, its design life, and who is behind it. Consideration also should be given to the various parties involved with the project. A project owner’s strength and sophistication bear on its ability to manage the project, meet its obligations, and thus maximize revenue. If an owner lacks resources or has shown a history of failure to meet project obligations, then there is a greater chance that revenue will be negatively affected. While “bad” owners are the exception, a number of projects are being poorly run, and this affects revenue and the likelihood of a project’s long-term continuation – all affecting value.10 3) Risk factors and project continuation11 While the great majority of projects continue at least for the term of their PPA (and historically most continue after that), there is no guaranty. A project may terminate at any time, for any number of reasons,12 ending lease revenue. A number of factors could lead to


4) About LeaseGen LeaseGen was started by an experienced energy lawyer, who saw a need for a resource to help landowners understand the value of turbines on their property. Based on over 10 years of work representing landowners and developing, financing, and building wind projects, and with input from other industry lawyers and experienced engineers, financiers, economists, and meteorologists, LeaseGen built a proprietary model for helping landowners (or purchasers) assess this value. Whether selling or buying or estate planning (or selling wind rights, when allowed), LeaseGen is able to help its customers assess the value of the turbines on their property or on the property they are buying.

Brad Haight, Esq. has practiced law in the renewable sector for over 12 years. He focuses on solar and wind development transactions, representing developers, landowners, equipment designers and manufacturers—including manufacturers selling to major wind turbine OEMs—in various transactions, involving development issues, renewable energy leases, and project sales. Haight represented landowners in connection with projects involving over 20 different developers in five states. 3 4 5

this result. At the end of a PPA, the utility may not extend its contract – it may not require the power, or it may not need the renewable power for compliance purposes. If there is no other option for selling power, then that project could become a stranded asset, potentially eliminating revenue. Similarly, any number of other issues could factor in to a project’s ability to continue beyond its PPA or design-life, such as: community opposition; new curtailment risks; equipment obsolescence. These and other factors should be noted, especially as the US fleet of projects ages and the potential revenue becomes more uncertain. Some additional thoughts related to project continuation (post-PPA) are worth noting. To date, most projects have continued beyond their original PPA – through repowering (turbine replacement) or upgrades. But this cannot be guaranteed. Where projects are continued, the likelihood is that revenue will be different, and maybe markedly different (also meaning the value associated with that period will be different than that for the PPA-period). Assessing the likelihood of a project’s continuation is a difficult exercise, requiring consideration of what can go wrong, and then making appropriate adjustments to value, based on the multiple factors that either support or work against that project’s continuation. A considered and careful analysis of the project and the market are therefore important to assessing value.


7 8

9 10 11


Copyright LeaseGen, LLC 2014. www.leasegen.com. A buyer’s need for an assessment presumes the wind rights (where allowed) have not been severed. Note that lease revenue cannot be presumed to continue for the lease term. A 40-year lease does not mean 40-years of revenue. Even if revenue does continue for the term, it may adjust (upward or downward) over time (sometimes based on a schedule and sometimes not), and it may end prematurely if the project fails. Only considered analysis will help to understand what may affect revenue. Power sales under a PPA is not the only model. Projects may operate as “merchant” plants, selling power on the spot market, or a utility may own the project. These scenarios are beyond the scope of this article but also require consideration. Depending on the particular interconnection and (if applicable) transmission arrangements, review of these agreements also may be appropriate because these are critical to power sales and thus revenue. Similarly, non-regulatory matters (e.g. sounds issues) could lead to curtailment arrangements. While these issues may not be driven by regulation, they may affect production and thus value and therefore should be noted. Production also depends on the wind resource, among other things. In certain cases, a meteorologist review may be appropriate. Discussion of meteorological issues is beyond the scope of this article. Consideration of the operations and maintenance provider and/or asset manager also may be appropriate. Decommissioning (turbine removal) issues also could bear on valuation, depending, for instance, on the project’s age. The potential cost (and thus the potential effect on value) will depend on a number of factors, including: 1) equipment location, size, and type; 2) lease and permit requirements; 3) decommissioning security requirements, if any; 4) owner self-help rights; and/or, 5) re-sale costs. Decommissioning presents additional issues beyond the scope of this article. LeaseGen is prepared to assess these additional issues if requested. The 2013 termination of two relatively-young Texas projects is a case in point.

TerraFirma Winter 2015


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Blog Corner

Reflection Time Luke Worrell, ALC Worrell-Leka Land Services, LLC It is the time of year when we often sit back and ponder what “was”. It amazes me how hard it can be to really decipher what has transpired in only 12 months. January 2014 seems like a lifetime ago to me. As the clock ticks down to another new year, I encourage you to look back on the “highs” of 2014 while leaving the “lows” where they belong. The REALTORS® Land Institute is a large organization and my world here in West Central Illinois is pretty small in the grand scheme of things. That said, here are some of my thoughts on what took place in 2014 and where I think we might be heading… n A new Farm Bill! After years of political posturing and agonizing

yo-yoing, we do indeed have a new farm bill. That said, the implementation of the new bill will surely be a talking point in 2015. Has the USDA staff been trained to handle the massive load of paperwork and restructuring? Have any farmers fully crunched the numbers yet on the different coverages and policies? Will it work? Nothing is perfect, but I think the entire nation was ready for some definitive action. Right or wrong, we have a bill in place that allows us to actually plan and not just kick decisions down the road. n Record production! I can’t speak for the rest of the nation, but

West Central Illinois farmers had a banner year from a production standpoint. Predominantly cooperative weather from start to finish in conjunction with developing practices, genetics and management made for a huge crop. I’m thankful to be in an area loaded with fruitful soils. I talked with a tenant in September and I could tell he was slightly disappointed with his corn yield – 224 bushels per acre. Think about that for a second. When a farm produces a yield of 224 and it garners a “so-so” response, that is an indication of a crazy year! n Commodities markets soften. Record production on a national

scale isn’t always roses. The United States had enormous carry-over even BEFORE our enormous crop. This takes a toll on the supply side of the old reliable “supply vs demand” discussion. Check out the following comparison of commodities prices from the first business day of 2014 and December 8, 2014 at CGB-Naples on the Illinois River. These calculations are basic and do not account for different marketing tools, but the point is clear: corn and beans aren’t worth what they were when we ushered in 2014. This rudimentary math is also coming off of the heels of a very nice run during the fall. Producers were dealing with much larger drops in prices for much of 2014.

Price on

Price on

January 2, 2014 December 8, 2014 Difference Cash Corn Bid $4.15 $3.75 -9.64% Fall Corn Bid $4.21 $3.84 -8.79% Cash Soybean Bid $12.99 $10.64 -18.09% Fall Soybean Bid $11.27 $9.92 -11.98%

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n Strength and firmness in the land market. On January 10, 2014,

our company auctioned 100 “Class A” acres near Franklin in Morgan County, Illinois for $13,600 per acre. In the last month, four other farms with fairly similar characteristics were sold at public auction by four separate firms. The farms sold for $13,500, $13,500, $13,500 and $13,750 respectively. Besides making an appraiser’s job temporarily easy for a change, this current rash of sales clearly shows me that we have strength in the market. Regardless of the fact that corn and beans saw decreases in worth during 2014, we are finding that there is just as much strength, if not more, at the end of 2014 as there was in the beginning. There appears to be plenty of demand and a shortage of supply when it comes to tillable acreage in West Central Illinois. The list could conceivably go on for pages, but those are the four things that stick out to me during 2014. Every year is unique in agriculture; it’s the details that change from year to year. Here are the questions that loom large for my region heading into 2015. Will the land market finally follow commodity prices downward? History shows that the land market moves slower than commodities when there is a correction or pullback, but will that subsequent move actually come to fruition in 2015? There are arguments to suggest both “yes” and “no”. The prices are essentially where they were at the start of 2014, but with a lower capitalization rate. Time will tell. Speaking of commodities, where are they headed? This question will be asked at year-end until the end of time, but it will remain applicable. Just how big was the 2014 crop? Final USDA data is yet to be released, but I think there is little question it was a record year. The start of the 2015 growing season will likely play a monstrous factor in marketing opportunities throughout the full calendar year. We just put a record yield on top of a large carry over. Another huge crop could really see the commodities market free fall. Conversely, a “planting scare” might give us all what we desperately seek – a bump in prices and the chance to sell grain above the breakeven price. Will input costs waver as well? My geographic area hasn’t seen a large-scale move in either direction, but that could change based on how the questions above play out. I know farmers would salivate over cheaper fertilizer, chemicals and seed, but they very well may not get that wish. How chaotic will it be to implement the new Farm Bill? I hope all USDA employees take time to rest over the holidays because I imagine this spring will be utter chaos across the nation’s offices. Insurmountable paperwork is a possibility and lengthy lines likely. We should be grateful there is even a bill to begin with, but it isn’t a certainty it will reach its designed goal smoothly. What about leases? Cash rents should be lower, but by how much? Leases are always a step behind the times as some long-term leases are still wrapping up. Basic thought would suggest a decrease, but common sense doesn’t always prevail in the business world.

Blog Corner What is the next global issue to affect the US farmer? We live in a small world now. An issue on the other side of the globe can affect the American farmer nearly instantaneously. I don’t think I can even name all of countries that had issues which indirectly affected my business in Central Illinois in 2014. Was anyone thinking about Ukraine on January 1, 2014? There are always political and weather issues that spontaneously develop. I don’t expect 2015 to be any different. So what are the answers to these questions? I am not telling you. For one, I don’t know the answers. Secondly, even if I did know, I need material for future blogs and articles! What I can tell you is that 2014 was incredibly interesting and I assure you 2015 will follow suit. There was plenty to look back on with a satisfactory perspective. Likewise, there is plenty to ponder as we head into the uncharted waters of 2015. Prepare for another wild ride.

About the author: Luke Worrell, ALC, specializes in agricultural real estate and land management in west central Illinois. He writes articles included in the Institute blog.

A Proud Sponsor of the RLI Since 2006 Our "out of the bowl" strategies have helped many RLI members to sell more real estate when either their 1031 can't be completed or the client would like to "cash out" and still defer taxes without using a 1031. Let's keep those hard earned sales proceeds in your clients' pockets instead of sending them to Washington DC. Best wishes, David Fisher 713-702-6401 david@cresknowsrealestate.com www.cresknowsrealestate.com

Blog Corner

How to Succeed by Not Being Yourself Caleb McDow Sales Associate Crosby & Associates Years ago as a child while I watched Mister Rogers Neighborhood, he told me I was special. He told millions of other children the same thing. And the reason we were all special? “Just by being you”. This message was meant to inspire confidence, and to encourage children that they didn’t have to DO anything special just to BE special. And he was right. Everyone is special to someone. However, when it comes to being a land broker, “just being you” isn’t going to get you very far. If there is nothing special about your business, your approach, or the way you achieve success, what is going to drive customers and clients to your door? The answer: very little. Maybe a Google search turned up your company’s webpage and provided a phone number or maybe your kids are in a soccer league with people who happened to become clients. But these pathways are not the mark of a thriving, growing, successful company. Those identifiers can be achieved only through specialization. As is true in all business, a real estate company must be specialized to differentiate itself from its competitors. The company or individual must possess a core competency – something the company does better than anyone else. This is what drives competition and keeps the market machine churning. If every company tried to do everything, no company would be ANY good at ANY thing. Specialization allows a company to capitalize on what it does well and leave the rest to others to do well. No company can compete by trying to do everything. The solution is to compete in a smaller sect of the market. In land brokerage, that specialization takes on many forms. It could be a particular geographic area, a specific property type, or even a certain type of buyer. But whatever the definition, the company or the individual broker must have something that they can point to and say, “THIS IS WHAT WE DO BEST!” Once you have identified your specialty, you must communicate a clear message to the client that they should hire YOU. You must make it painfully obvious that the very thing they want done is the very thing you do best—and you do it better than anyone else. Also, It isn’t enough to simply DECIDE what you do (or want to do) best. This is a very important and necessary step, but it is only the beginning. Defining and honing that specialization is an ongoing and never-ending process. It requires constant focus, adapting to the current environment, and assessing your success. Recently, I have spent a considerable amount of time defining what I do best and how I can better focus on my area of specialization. I want my business to be driven by the things I do well, the things I do best, and by doing all of those things better every day.

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Consider the following two statements: “I am a real estate land broker. I assist my clients with buying and selling land.” “I am an agricultural real estate broker focused in the state of Florida. I have in-depth knowledge of the Florida agricultural market and focus on finding medium to large acreage in row crops and citrus for my clients to purchase.” See what I did there? Both statements are two sentences long. But, the second says just about everything about me, my area of specialization, and why a client should do business with me. I challenge each of you to write a similar sentence that defines what you do, not in general terms, but as focused and specific as you can make it. Hopefully, it will be a simple exercise. But if not, it would be well worth your time to think about what to write and get it down on paper. This will force you to consider what your specialization is and will serve to give your business better direction and drive. So, ask yourself: “What is my area of specialization? What do I do best?” Spend a lot of time on the answers. I am sure “you’ll have things you want to talk about. I…will…too.” Have a good day, neighbor!

About the author: Caleb McDow joined the Institute in 2014 and is a former Military Transition Program member. He is a land specialist for Crosby & Associates in Winter Haven, FL, and regularly blogs on real estate issues.



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