John Malone Tips on Investing in Land
Fortune article on John Malone: Link
Malone wants his land to generate at least enough revenue to support itself.
"People say to me, ‘Why don’t you own a bunch of gold because of how you feel about the government?’" says Malone, a libertarian who is not enamored of the federal government’s handling of debt or, really, the federal government as whole. "But I have a really hard time owning assets that aren’t productive."
Malone figures that his cropland will get a 5% operating return as an investment, while his forest investments in New Hampshire and Maine should get closer to a 2% to 3% real return. Ranching, he says, gets close to zero in terms of an operating return. But it does have potential for appreciation, especially in times of inflation.
"In the long view in real dollars," contends Malone, "cropland is probably best, because it’s producing a commodity that is consumed by a world market." One thing Malone likes is that the demand for farm and wood products (and, to a lesser extent, beef from ranching) is independent of domestic fiscal and monetary policies. "You’re not dealing in strictly the local currency," explains Malone, "so you get protection from the fact that the thing your asset produces is desired by a worldwide market. To me it looks like one of the safest places you can invest money is productive land."
"John Malone is as tough in his timber dealings and is as disciplined in his ranch acquisitions as he is in any transactions made on the Street." The 290,000-acre Bell Ranch — about 453 square miles of New Mexico — was originally listed for $110 million in 2006, then dropped to $85 million in 2010, when Malone entered the picture. Malone is believed to have paid between $60 million and $65 million for the ranch. "He’s very open-minded and thoughtful about the process it takes for a seller to sell," says Ron Morris of the Colorado-based Ranch Marketing Associates, who has represented Malone in several large Western land deals. "But John’s not foolish. In my experience with him, there’s no second chance. He’ll make one offer and moves on."