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sw363535
Honored Advisor

Farmland sells. and sells and sells and resells

 

We have a local real estate guy who has skirted propriety for years selling Realestate by phone auction...... where you never know if there was another bidder or not....... and if there wasn't ....... never know if anything was ever actually for sale.  When they stop answering the phone.  It is criminal but the progressives don't look down from Topeka over little stuff.

Yesterday I attended a land sale in Liberal, Kansas where there were 41 different parcels offered in a large conference center with computer video walls and no wifi for the bidders to confer......only phone handling representatives and wandering answer men with laptops.  handled by the Peoples Company. Clive Iowa.  Why they don't want us to think they are from Des Moines is beyond me..... but most of the sale was beyond me.  

First inning ------ 41 different auctions came to 41 different winners ----in line by same auctioneer.          2 hours approx

Second inning ------ one slow auction to sell all 41 properties..... twice..... winners at 25Million for 10K acres.     1/2 hr

Third inning----- encouraging all 41 initial winners to raise their bids to knock out mr big.taking raised bids.       1 hour

Fourth inning---- encouraging anyone to group more than one tracts and bid on that to break the top bidder.      1 hour

Fifth inning ---- confusion while previously sold land is regrouped into wants and new deals.  Computer spins it all into a bidders list of the top buyers on each tract as groups or individually.  the total goes up.        

sixth inning ---- eat while the minds whirl and the bidders are encouraged to think of new groupings.  leaders change back to one entity     now at 32 million.... total

7 th inning ----  encourage bidders to find ways to bid your desired tract out of a group.    leaders go back to smaller groups as leader gets knocked out of the top

8th inning ----- one bidder overbids the elevator complex(tract 41) and separates it from the land 1-40 tracts ---

The big bidder looses heart.  for a while another big bid for (1-40).   total in the 36 million range...

9th inning    one outside investor raises the bid on the best water. tracts 1-7. at 5k/acre.  approx.   several individuals bid enough to break up a group 10-11-12 to separate and push the overall group bid into a 50k increase bracket stopping that grouping.  another absentee investor groups 8,9, and 13-18 and pushes it higher..... another goes after several and an ethanol plant buys a pasture in its area.   The big bidder leaves without trying it again and the bidders wear out .......gavel drops and its over.

I am sure this is common in Iowa but this new algorithm auction style is amazing and overwhelming.... 

Lots of potential to publicly scam.  yet interesting totally.  It took me 4 hours to figure out how to break the one group our tract was in...... 

hint................ when first two innings were over and we had a tract bought for 670.  The big bidders bid of 25M took us out.   we asked what it would take on our tract to get it out of the group  answer  1200.   well the 1st big bidder hung in there and rebid every time the group upped the total.... new group were formed ,,, now ours 12 was in with 10, 11, 12, 38 for a lot more than we could afford. again we asked 1000   big bidder kept taking it   up to a total of 37m.  

I finally woke up to the fact that if other folks were bumping their bids, they were helping me so I waited to the end and asked again...... what would it take to get 12 out of the group and be high bid.    860.  we bid it and the big guy left and it stopped.  thank God.  I felt like we bought it three times.... and we did.

Now if that makes sense to you great....... after 24 hours it sort of does to me also. 

Usually a big bidder blows everybody out and gets it all for cheaper than .......... for a few hours I thought it was great because smaller bidders got to buy something after being grouped against the big bidder.  But when I studdied the results most of it went to less bigger absentee investors.  Locals got three tracts of the 41....... even when the 38M bidder said no.

The total certainly was very good for the seller in this area $3600 per acre average for irrigation..... high at $5k will learn the costs of pumping water in the sw.... but a lot of more marginal ground got sold at a good price.... and the seller probably came out ok.....

Bumping the sale was that it is in one of the few locations around that still has pretty good water.   When the water is gone it will sell for $700-800.  at best.

I heard the auctioneer say "raising your own bid is the best thing you can do if you want to buy something". at least 40 times and when I figured out the process he convinced me it was a true as he was grouping small bidders to take out the big bidder.   You never get old enough to see it all........................

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6 Replies
WCMO
Senior Advisor

Re: Farmland sells. and sells and sells and resells

I assume this type of auction is basically whatever combination results in the highest overall $$$ ?  I've never even watched an auction like that.  Have had a few in the area, but never so many tracts or possible combinations.  Would need a good spreadsheet to keep up, and every time a new grouping was bid, it could change the dynamic of the whole thing.  Complicated.

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sw363535
Honored Advisor

Re: Farmland sells. and sells and sells and resells

yes I got caught up in expressing the style of the sale.  I used too many words and still missed the point.... point was they squeezed the bidders in every way possible.  Selling it then taking it back and turning it for another view and a resale.

Creating competition for the big buyer by organizing the rest of the crowd.  at every point raising the total.

IMO-- of the 40 tracts of land sold, only 3 could be considered high quality soils.   It is a very sandy soil type with low organic matter.  It was flashy, dressed up, with lots of makeup and 2/3 of it has very good water .   What sold the sale was the water which is nearly gone in the majority of the region.....12o miles in any direction..... these wells probably average 900 to 1200 gallons per minute... when most of the area is down to 200 to 300 gallons per minute and 25 years ago were 1200 to 1500 across most of the region.  It was a gathering of fish bidding on the last bathtub of water.

The land was probably in the lower 1/3 of quality in the area, but it has pretty good water --- keep in mind every well is different and there were poor wells even in this group.  As well as dry land that has a hard time raising grass.  It was the gambit of possibilities that was ............. Well I think it is always risky to bid on something you haven't seen and think land is land.  It was a very optimistic sale.

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Packard27
Senior Contributor

Re: Farmland sells. and sells and sells and resells

The operative word in your post was the last one. Complicated.

____________

"I try not to ever invest in things that I don't understand."

Warren Buffett

sw363535
Honored Advisor

Re: Farmland sells. and sells and sells and resells

Thanks Packard ...... out of the 14 successful bidders --- 3 had experience with the ground or grain bins they bought.

Mostly outside investors in the other 11....... 

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southernfarminn
Frequent Reader

Re: Farmland sells. and sells and sells and resells

  • 10,935.17 acres
  • 41 tracts
  • 14 buyers
  • 91 bidders
  • $38 million changing hands
  • $3,464 per acre -
  • The new Grant Cardone's will be the ones in farm land
  • as Grant says “Luck is just one of the by-products of those who take the most action.”
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sw363535
Honored Advisor

Re: Farmland sells. and sells and sells and resells

Now we will see the ripples of those prices rumble through the area.... could be a stressful place for a while

That computer program allowing multiple tracts in unlimited combinations is pretty slick.  That phrase has multiple meanings as well..

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