"The Growing Importance and Value Implications of Recreational Hunting"
JOURNAL OF REAL ESTATE RESEARCH 1 The Growing Importance and John S. Baen* Value Implications of Recreational Hunting Leases to Agricultural Land Investors† Abstract. This study considers the evolution and explosive growth of recreational hunting leases in America. The traditional European practice of leasing rural lands for the exclusive rights of tenants to hunt and ﬁsh is now an important revenue source for American agricultural land investors/owners. Hunting lease income can enhance value to the point that recreation becomes the highest and best use of rural land for both the market and income approaches to valuation. This study offers new perspectives for valuing the income component from recreational leases as a percentage of market value and proposes a hunting lease index for landowners and tenants to consider. Introduction The value implications of hunting lease revenues to America’s rural property owners are a subject worthy of research since agricultural lands are the predominant use of land in the United States. Farmland represents an estimated two thirds of all private land, 878 million acres (Geisler, 1995). It is likely that some of these private lands will become private recreational areas in the future. The general public has indicated a willingness to pay for uncrowded conditions on private land, in contrast to more crowded conditions in the U.S. national park system. The private marketplace (private leases on private lands) for recreational purposes is a classic case of resource allocations for supply uncertainty in the option price literature, as presented by MacDonald, Murdock and White (1987), Bartik and Smith (1984), Bishop (1982), Milon, Gressel and Mulkey (1984), and others. The market value of agricultural land is quantiﬁable through traditional appraisal approaches: market approach, income approach and cost approach. Included in the market value per acre are income components and/or “market drivers” that are difﬁcult to quantify or explain, which include, but are not limited to: • income from farming/ranching operations (a function of quality of soil, rainfall, commodity prices, management, etc.); • the perceived present value of development potential of land to a “higher use” (a function of location, distance to urban areas, supply, demand, etc.); • tax beneﬁts and income-sheltering; • intangibles, such as pride of ownership; • mineral rights income/potential; • recreational and lifestyle land uses. † 1997 Agricultural Real Estate award, sponsored by Hancock Agricultural Investments. *FIREL Department, College of Business Administration, University of North Texas, PO Box 310410, Denton, Texas 76203. 399 400 JOURNAL OF REAL ESTATE RESEARCH The purposes of this study is to attempt to quantify the recreational component of the “market value” price per acre for agricultural lands by using hunting leases. Recreational/ hunting rights leasing rates provide some insight into the recreational value perceived and/or consumed by investors of rural land purchased, but not leased to others. There are two indicators of increased demand in the future for private park land. First, in 1989 there were 270 million visits by people to federal parks and recreational areas (Houston Chronicle, 1996). Second, access fees were scheduled by the national parks to increase 100% to 166% during 1997–98, due to increasing demands, along with a government policy shift to make public parks self funding. As the number of visitors on public lands increases, the quality of the visits by many is considered diminished. As demand and crowding increase, it follows there will be increasing opportunities for private landowners. There are also proposals to consider limiting the number of persons per day into public parks, as well as hunting on public lands, and utilizing annual lotteries to allocate the natural resources. The widespread use of hunting leases in the South and southwestern U.S. is perhaps the best measure of the growth and “market value” of recreational leases and/or access fees to private lands. There are some indications that private parks and wildlife areas are currently being operated on a “for proﬁt” basis (Forbes, 1996) as a property's highest and best use. Hunting “leases” as they are called, also generally allow the tenants, and their guests, the following range of related recreational activities included in their written “hunting” leases or access permits: camping; bird watching; ﬁshing; hiking; off-road vehicle operation. “Hunting lease” revenues are income, in addition to agricultural or timber activities, on private lands. On many farms and ranches the annual sustained income from hunting greatly exceeds the income from cattle and/or farming operations. In Texas, “hunting lease” income often far exceeds agricultural income and therefore “recreational” use becomes by deﬁnition the highest and best use of the land: In appraising real property: The reasonably probable and legal use of property, which is physically possible, appropriately supported, ﬁnancially feasible, and that results in the highest value. (Appraisal Standards Board, 1996) Rural land, within reasonable commuting distances from metropolitan areas, is often classiﬁed as “farm or ranch land” and operated as a tax shelter for its owners under Internal Revenue Service guidelines. Often the underlying primary motivation of the owners is for the personal consumptive use of the recreational attributes of the land. While comparable sales are the predominant method of valuation for recreational/rural properties, the market approach only indirectly captures the “recreational value” along with all other land components. This study analyzes these hard-to-quantify attributes by considering contemporary market lease rates for hunting/recreational rights. The growth in hunting leases also creates new questions that must be addressed by professional appraisers of these properties. These issues will also be discussed in this study. Justiﬁcation for Research • There is an “open market” or “market value” for hunting/recreational access rights to private lands that has not yet been discussed in academic journals or noted in the real estate appraisal literature. These potential revenues have important value implications for agricultural landowners/investors. VOLUME 14, NUMBER 3, 1997 IMPLICATIONS OF RECREATIONAL HUNTING LEASES 401 • The market for recreational access rights to private lands is a very “inefﬁcient market” due to a general lack of leasing market information availability between tenants and landowners. There are many agricultural landowners who may not be aware that hunting /recreational rights and/or access to private lands is a potential source of additional income to farming and other operations. This is due in part to the fact that, quite often, farming tenants are subleasing recreational rights to third parties without full knowledge of the owners as to the extent or the revenues involved. • Hunting /recreational rights may actually cause some diminished land value, due to long-term hunting leases that can limit other uses of the land. This study may also have use in valuation and damage calculations among multiple users who may have formal simultaneous access rights that are in conﬂict. (See Exhibit 1.) Valuation of various land components can be difﬁcult without adequate data. History of Hunting, Leases and Literature Review Hunting leases, which originated in central Europe and the United Kingdom, were perceived to have value due to the reservation of shooting rights by the “Royals” who owned the game in the forest which had sporting, as well as economic, value as marketable commodities (venison, etc.). Indeed, “free” hunting rights may have been an important consideration for colonists coming to America in the 16th and 17th centuries, because the concept of the common man having the opportunity to hunt was unheard of in Europe, except in the case of illegal poaching of the “King’s” deer. The ﬁrst formal hunting lease of record, having paying tenants, occurred in 1800 and involved a ten-year lease to English gentry for all the game on the Albergeldie Estate in Scotland (Whitehead, 1980). Another formal lease appeared in England in 1812 and included exclusive rights under a “License to Hunt, Shoot, and Fish” in the Forest of Essex (Tomlins, 1812). Exhibit 1 Possible Simultaneous Land Users of Rural Lands Document of “Ownership” Land Tenure or “Right” Owner/User or Land Use Rights Landowner Owner Deed Agricultural Use Tenant Farmer Agricultural Lease **Hunting/Recreational Use Hunters/Campers Lease from Landowner or Sublease from Tenant Oil and Gas Operator Oil Company Mineral Deed or Oil and Gas Lease Pipelines Transmission Co. Easement Power Lines, etc. Transmission Co. Easement Airport Noise or Air Rights Zones Airport Boards Easement Timber Timber Co. Long-Term Crop or Timber Deed 402 JOURNAL OF REAL ESTATE RESEARCH Exhibit 2 Shooting Estates Market Analysis in Scotland Price Ten-Year Price/Acre Stag/Year Size Avg. Avg. British British Class Estate (Acres) Stags/Year Hind/Year Price Sterling Sterling A Glen Lochay 20,000 86 49 600,000 30 6,976 A Inrermearan 19,000 56 20 550,000 29 9,821 A Innerwick 5,583 21 54 375,000 67 6,944 B Landale 12,000 30 23 800,000 67 26,944 B Kinlock 18,000 19 10 350,000 19 18,421 B Dalchully and Coul 5,000 15 20 335,000 67 22,333 Source: information extracted and recompiled from an article by Hanson (1986) In modern Europe, the importance of hunting rights is central to the marketing and valuation of large estates. Hanson (1986) stresses the importance of the quality and quantity of stag hunting on a sustained annual basis as the central issue in the valuation of rural lands in Scotland as indicated in Exhibit 2. Hunting Land Valuation Perspectives Market value and land appraisals in Europe seem to capture the value of the hunting in four ways: • Class of Shooting Estate A = highest and best use of hunting with little other agricultural income; B = mixed use with agricultural income being signiﬁcant; C = pure agricultural use. • Number of Stags (Red Deer) harvested over a ten-year average. The average number of Hinds (female cull deer) is less signiﬁcant to value than an indication of size of a sustainable deer herd and ratio of males/females on a given property. • Price/Acre (in British Pounds) The lower the price/acre indicates recreation is highest and best use. • Price/Stag/Year indicates the present value of that property right (varies due to other income from agriculture, improvements, location, etc.). The hunting lease concept apparently came to the U.S. with German immigrants in the early 1930s (Sasser, 1995) when the ﬁrst formal lease appeared in central Texas. Approximately 98% of Texas is privately owned. Very little public land available, com- bined with a rapid growth in urban population has resulted in the rapid development of a free market for hunting leases. During the 1980s, Texas land under hunting leases expanded 19.6% from 30.6 million to 36.6 million acres to accommodate an estimated one million hunters/year (see Exhibit 3). Over the last two decades the hunting lease system has spread rapidly through the southeast and western states as well (Sasser, 1995). VOLUME 14, NUMBER 3, 1997 IMPLICATIONS OF RECREATIONAL HUNTING LEASES 403 Exhibit 3 Current Demand for Hunting/Fishing (Annual Licenses Issued in Top Fifteen States in 1996) State Total Licenses Issued* Hunting Only Texas 2,613,000 913,000 Pennsylvania 1,355,000 879,000 Michigan 1,824,000 934,000 New York 1,706,000 642,000 Tennessee 860,000 408,000 Wisconsin 1,474,000 665,000 California 2,722,000 515,000 Missouri 1,209,000 552,000 Ohio 1,231,000 479,000 Virginia 1,029,000 392,000 Minnesota 1,508,000 588,000 Louisiana 1,031,000 323,000 Georgia 1,087,000 403,000 Oregon 658,000 293,000 North Carolina 1,557,000 370,000 Total 21,894,000 8,356,000 *Many states offer both combination hunting and ﬁshing licenses and hunting-only licenses. Demand function, which is based upon ﬁxed supply of land, includes hunting on private and public lands. Source: U.S. Fish and Wildlife Service 1986 National Survey While there is an overabundance of white-tailed deer and other huntable species in many areas of the U.S., the quality of the trophy often appears to be as important a factor in land leasing rates as the absolute number of game animals in the region. In fact, there has been research conducted by McBryde and Henicke (1994) that relates the estimated market exchange price for buck deer relative to the Boone and Crocket world record book. Their research indicates the value (or access to land via lease, guided hunt, etc.) of a mature trophy deer ranges from $1400 to $6500 (in an animal unit based solely on the size of the animal’s antlers) (see Exhibit 4). Highly managed elk ranches are receiving $9500/hunter for trophy animals (Livestock Weekly, 1996) which is up con- siderably (171%) from $3500 / hunter from these same properties in 1992 (Wolfe, 1992). How this relates to land value per acre is dependent upon several factors including, but not limited to, density of deer population, quality of deer herd, ranch conditions, soil, management of land and hunting leases, and the marketing capability of landowner/ managers. In some areas, the importance of wildlife resources relative to land values and total farm income, has resulted in many rural landowners building 8-ft high game fences to better manage their herds. The cost of $12,000–$15,000 per mile to construct “game proof ” fences to keep animals in, as well as genetically inferior animals out, is an indication of “perceived” income, value added, or income potential from hunting-related access fees. A recent study (Texas Agricultural Statistics Service, 1996) compiled a list of more than 1233 highly managed, high-fenced operations in 194 of 254 counties in Texas. 404 JOURNAL OF REAL ESTATE RESEARCH Exhibit 4 Estimated Market Exchange Prices, by Gross Boone and Crocket Score (Package Hunt for White-Tailed Deer in Texas) 7000 6000 5000 Exchange Price ($) 4000 3000 2000 1000 0 100 103 106 109 112 115 118 121 124 127 130 133 136 139 142 145 148 151 154 157 160 163 166 169 172 175 178 Gross Boone and Crocket Score Source: McBryde and Henicke (1994) There has been very little published in regard to the value implication of hunting lease revenues as it relates speciﬁcally to land values. The Texas Real Estate Research Center (1988) plotted deer densities (see Exhibit 5) and concluded, generally, that hunting leases are such a prominent factor in the rural land market that “game populations can directly affect some land values.” Unfortunately no leasing data or land sales information was offered to support this generally accepted notion in the marketplace. The Economic Beneﬁts of Leasing to Landowners There are both direct and indirect economic beneﬁts when landowners lease land for hunting. Many rural “weekend places” are often purchased by urban dwellers for both investment and personal use. The hunting beneﬁts include: • Consumptive (used by the owner): —owners’ friends/relatives; —business associates entertainment;1 —more than 750 million pounds of wild meat are consumed per year in the U.S. (@ $1.75/pound=$1.3 billion/year (The Council for Wildlife Con- servation and Education Inc.); —annually shed deer horns and found skulls have a ready market that range between $75–$425/set (Geryak, 1997) based on quality and condition. VOLUME 14, NUMBER 3, 1997 IMPLICATIONS OF RECREATIONAL HUNTING LEASES 405 Exhibit 5 White-Tailed Deer Densities One dot = 2,000 deer. Source: Texas Real Estate Research Center (1988) • Leasing revenue on a: —per acre basis; —per member basis; —per day lease basis; —guided hunt basis; —species basis (some owners lease separately the following species/rights simultaneously to various parties: ﬁshing, deer, ducks, quail, etc. • Both Consumptive and Leased: —leased to others (owner’s right to hunt retained in the lease agreement). Supply: Landownership of Private Lands for Hunting /Recreational Leases in the U.S. Landownership in the US is heavily concentrated. The top half of 1% of the largest landowners (including corporations) have title to 40% of the nation’s land and the top 5% own three-quarters of the estimated 878 million acres of agriculture lands (Geisler, 1995). From data compiled from McCoy (1996) and Barrett (1997), there are twelve signiﬁcant owners controlling over one million acres of land and 102 individuals having in excess of 100,000 acres of rural lands each. (See Exhibit 6 for a partial list; a complete list available from author.) A signiﬁcant number of these entities manage their lands for 406 JOURNAL OF REAL ESTATE RESEARCH Exhibit 6 Major U.S. Landowners Having Hunting Lease Income/Potential Land % Lease Holding Head- Prime for Type Companies (Acres) quarters Location Use Hunting Lease Intern. Paper 6,400,000 Timber 90 Permits Georgia Paciﬁc 5,700,000. Timber 90 Season Weyerhaeuser 5,500,000. Timber 90 Season Champion Intern. 5,300,000. Timber 90 Season Boise Cascade 3,100,000. Timber 90 Varies Plum Creek Timber 2,600,000. Timber 90 Season Temple-Inland 2,600,000 Timber 90 Season Willamette Industrial 1,800,000 Timber 90 Permits Potlatch 1,500,000. Timber 90 Permits Total 33,800,000 Individuals / Estates / etc. R.E. “Ted” Turner 1,300,000. Roswall, NM, CO Cattle- 100 $10,000/ Guilded GA MT Buffalo 100 Elk Hunts, ﬁshing, etc. Archie Aldis “Red” 1,200,000 Anderson, CA Cattle- Emmerson CA Hunting Henry E. Singleton 1,150,000. Beverly NM, Hills, CA CA Pingree Heirs 975,000 Bangor, ME Timber ME King Ranch 860,000 Kingsville, TX, FL, Cattle- 100 $6 - $8 / Leases TX KY Oil Acre and guided hunt Huber Family 800,000 Rumson, ME, TN, Timber NJ KY, MO, WV Source: compiled by the author from various sources (McCoy, 1996; Barrett, 1997) hunting/recreational revenues. Economies-of-scale and expert land management of these large land holdings maximizes income potential, which includes the marketing and management of recreational leases and access fees. The Demand for Hunting Land Whether on public or private lands, the demand for hunting is perhaps best measured by the number of licenses issued per state per year. Exhibit 3 presents the number of licenses in the top ﬁfteen states, which totaled more than nine million hunting licenses in 1996. What cannot be determined is how many of these are for hunting on private land or public land and what the demand would be if there were fees charged beyond the cost of the license (in the form of access fees, hunting club fees and/or leases). A second measure of demand is found in the price per acre per year for leases in Texas (see Exhibits 7, 8). VOLUME 14, NUMBER 3, 1997 IMPLICATIONS OF RECREATIONAL HUNTING LEASES 407 Exhibit 7 Statistical Analysis 1996 Texas Farm and Ranch Hunting Survey Question as Survey reads: 1 Do more than half of the landowners in your county recieve hunting lease income ? No 41.5% Yes 28.8% Left Blank 29.8% 2 Is more than half of the range or pasture in your county leased for hunting? No 36.9% Yes 33.6% Left Blank 29.5% 3 Is more than half of the cropland in your county leased for hunting? No 54.5% Yes 13.2% Left Blank 32.3% 4a Do most hunting leases allow twelve month access? No 67.2% Yes 32.8% 4b What is the lease rate per acre? Avg. = $ 4.24 4c What is the average day lease per gun? Avg. = $ 95.45 / per day 5a Are most leases for a speciﬁc hunting season? No 37.4% Yes 59.5% Left Blank 3.1% 5b Lease rate per gun per session? Avg. $633.75 5c How many acres per gun? Avg. 234.04 acres D Deer No 19.1% Yes 80.9% E Exotics No 96.9% Yes 3.1% Pr Predators No 71.2% Yes 28.8% Q Quail No 61.3% Yes 38.7% T Turkey No 56.7% Yes 43.3% H Wild Hog No 66.4% Yes 33.6% 12 Hunting blinds or feeders provided in the lease? No 84.0% Yes 16.0% 13 Are small grains or other grains planted for the beneﬁt of game? No 79.6% Yes 20.4% 14 If yes, please estimate the acre planted as a percent of total hunting lease acres. Average 14.69% Source: Property Tax Division ,Texas Comptroller of Public Accounts (1996) 408 JOURNAL OF REAL ESTATE RESEARCH Exhibit 8 Recreational / Hunting Leases 1996 and Proposed Hunting Lease Index for 115 Counties in Texas Avg. Mkt Value of Avg. Value of Value of Hunting/ Lease Hunting Ranch Land Rec. Component Rate Component per As % Reporting per Acre per Acre1 Acre2 of Mkt Deer Trophy County ($) ($) ($) Value Density3 Quality3 Location3 Anderson 5.30 176.00 838.00 21 A C B Argelina 3.28 109.00 875.00 13 B C A Archer 2.87 96.00 323.00 30* C B B Atascosa 2.66 87.00 650.00 13 C C A Austin 8.00 267.00 700.00 38* A B A Bexar 6.60 220.00 829.00 26* A C A Bowie 2.63 88.00 560.00 16 C C C Brazos 7.10 237.00 894.00 26* B C A Brown 3.17 105.00 450.00 23 A B C Bandera 4.00 133.00 1,028.00 13 A C A Bell 7.32 241.00 750.00 32* B C A Blanco 4.64 154.00 1,329.00 12 A C A Bosque 4.00 133.00 750.00 18 B B A Brazoria 4.25 141.00 1,000.00 14 B C A Brewster 1.50 50.00 95.00 53** C A C Brooks 7.00 233.00 400.00 58** B A A Burnet 2.00 67.00 1,000.00 7 A C B Cass 1.85 62.00 575.00 11 C C C Callahan 1.38 46.00 502.00 9 C C C Cameran 0.50 17.00 1,500.00 1 C C C Chambers 4.75 158.00 1,000.00 16 B C A Crockett 3.50 117.00 300.00 39* B A C Cherokee 2.38 79.00 838.00 9 B C A Clay 1.00 33.00 403.00 8 C B C Cooke 2.50 83.00 738.00 11 C C A Coleman 3.00 100.00 502.00 20 A C C Colorado 8.00 269.00 850.00 31* A C B Comal 4.50 150.00 978.00 15 A C A Comanche 2.00 67.00 502.00 13 B B B Coryell 5.31 177.00 1,028.00 17 B B A Culberson 0.80 27.00 45.00 60** C A C Dimmit 7.50 250.00 400.00 63** B A A Dewitt 3.00 100.00 850.00 12 C B B Duval 6.75 225.00 400.00 56** B A A Eastland 7.00 233.00 502.00 46* B B A Edwards 4.55 152.00 300.00 51** A C B Erath 3.00 100.00 502.00 20 B B A Fayette 4.00 133.00 850.00 16 B B B Ft Bend 2.95 98.00 1,000.00 10 C C A Freestone 3.12 104.00 750.00 14 A C A Gillespie 3.13 104.00 1,000.00 10 A C A Goliad 5.25 175.00 664.00 26* C B A Gonzales 1.00 33.00 850.00 4 C B A Hamilton 4.62 154.00 548.00 28* B B B VOLUME 14, NUMBER 3, 1997 IMPLICATIONS OF RECREATIONAL HUNTING LEASES 409 Exhibit 8 (continued) Hardin 2.50 83.00 1,000.00 8 C C C Harris 2.62 87.00 1,000.00 4 B C A Harrison 3.10 103.00 838.00 12 C C A Hays 4.50 150.00 1,028.00 15 A C A Henderson 6.75 225.00 838.00 27* A B A Hood 1.00 33.00 1,250.00 3 B B B Houston 2.12 71.00 838.00 9 C C B Irion 2.50 83.00 300.00 28* C B C Jack 5.75 191.00 403.00 47* B A A Jeff Davis 1.00 33.00 95.00 35* C A C Jim Hogg 4.25 142.00 400.00 36* A A C Jim Wells 3.00 100.00 664.00 15 A A C Karnes 4.25 142.00 978.00 15 B B B Kendall 3.58 119.00 1,329.00 9 A C B Kent 1.79 60.00 246.00 24 C A C Kerr 5.88 196.00 1,329.00 15 A C A Kleberg 5.00 166.00 400.00 42* A A B Kinney 3.72 124.00 300.00 41* A A B Lampasas 3.60 120.00 548.00 22 B C B Llano 7.88 263.00 1,000.00 26* A C B Matagorda 3.50 117.00 750.00 16 B C B Leon 3.00 100.00 989.00 10 A C A Liberty 4.50 150.00 1,000.00 15 B C B Madison 6.75 225.00 989.00 23 B C A Mason 8.00 266.00 1,000.00 27* A C A McCullloch 5.50 183.00 548.00 33* A B B McMullen 5.00 166.00 400.00 42* A A B Marion 3.62 121.00 575.00 21 C C C Menard 3.92 131.00 446.00 29* A B B Medina 7.50 250.00 723.00 35* A C A Mills 5.50 183.00 548.00 33* B B B Mitchell 2.00 67.00 350.00 19 B B C Morris 3.00 100.00 575.00 17 C C B Motley 1.33 44.00 246.00 18 C C C Nacogdoches 3.00 100.00 838.00 12 C C B Nolan 2.25 75.00 350.00 21 A B B Palo Pinto 5.00 167.00 1,250.00 13 B B B Parker 6.75 225.00 1,250.00 18 B B B Panola 2.75 92.00 838.00 11 C B C Polk 2.53 84.00 875.00 10 C C B Real 3.75 125.00 446.00 28* A C B Red River 3.66 122.00 575.00 21 C C B Refugio 7.00 233.00 664.00 35* A A A Runnels 5.00 166.00 403.00 42* C B C Robertson 11.00 366.00 989.00 37* A C A San Saba 5.50 183.00 548.00 33* A B B Shackelford 3.83 128.00 403.00 32* B B C Shelby 2.75 92.00 838.00 11 C B C Smith 4.00 133.00 838.00 16 B C B Starr 2.83 94.00 400.00 24 B B B Stevens 9.75 325.00 403.00 81** B B B Stonewall 2.00 67.00 246.00 27* C B C 410 JOURNAL OF REAL ESTATE RESEARCH Exhibit 8 (continued) Avg. Mkt Value of Avg. Value of Value of Hunting/ Lease Hunting Ranch Land Rec. Component Rate Component per As % Reporting per Acre per Acre1 Acre2 of Mkt Deer Trophy County ($) ($) ($) Value Density3 Quality3 Location3 Sutton 3.50 117.00 300.00 39* A A B Titus 3.50 117.00 575.00 20 C C B Taylor 3.00 100.00 350.00 29* B C B Terrell 1.83 61.00 95.00 64** B A C Tom Green 2.77 92.00 300.00 31* B B C Tyler 1.35 45.00 875.00 5 C C C Uvalde 3.25 108.00 723.00 15 A B B Val Verde 2.50 83.00 300.00 28* A B C Victoria 7.64 254.00 750.00 34* A A A Walker 3.65 122.00 1,000.00 12 C B C Willacy 12.50 417.00 1,500.00 28* A A B Williamson 10.00 333.00 1,028.00 32* B A A Wharton 5.13 171.00 750.00 23 C B B Wilson 4.00 133.00 978.00 14 C C A Wise 5.75 192.00 978.00 20 C B A Wood 1.50 50.00 575.00 9 C C A Young 3.37 112.00 403.00 28* B B B Zapata 4.83 161.00 400.00 40* A A C Zavala 8.50 283.00 723.00 39* A A C Avg. 5.14 171.00 683.00 25% 1 hunting income capitalized at 3% 2 Gilliland (1994) 3 See Exhibit 9 for a detailed explanation of these ratings. * indicates recreational use as signiﬁcant; ** indicates recreational use as “highest and best use” by traditional appraisal deﬁnition Source: Author Landowner and Sportsperson’s Risks While the rate of return obtained from hunting leases is often low relative to the value of the asset (income from hunting/acre asset value/acre), there are ﬁnancial and legal risk exposures for landowners who lease their lands. The “perceived” risks by landowners may outweigh the “perceived” ﬁnancial beneﬁts of the income from these sources. The risk to landowners leasing their lands for recreational hunting is, however, apparently very low. According to the annual outdoor recreation-related injuries rates, there are 6.1 non- fatal hunting accidents per year per 100,000 participants compared with 3,313 non-fatal football accidents per year in the U.S. While there appears to be relatively low yields and low risk from hunting lease activities on many agricultural lands, landowners are still somewhat at risk from this income stream and should take steps to reduce or eliminate these risks. There are ﬁve primary methods of increasing landowner protection from liabilities in regard to recreational leases. Brieﬂy, the following can be used in any combination to reduce or eliminate landowner risk altogether: VOLUME 14, NUMBER 3, 1997 IMPLICATIONS OF RECREATIONAL HUNTING LEASES 411 • Insurance: Landowner obtains insurance that speciﬁcally covers recreational activities of “visitors,” “guests,” tenants, licensees, etc.; land tenant obtains insurance (there are several ﬁrms that specialize in hunting lease insurance). • Lease Provisions:2 Lease prevision may require tenants to obtain hunting lease insurance naming the landowner as “coinsured.” • Release of Liability and Indemnity Agreements: Waivers and releases of liability can be helpful, however difﬁcult to administer on large tracts of land for all visitors. Waivers vary by state as to their effectiveness in court. It is generally agreed that it is better to have one signed than not, in the event of an accident. • Landownership Form: Some large landowners choose to hold each tract of land in “stand alone” separate ownership entities (trusts, corporations, limited liability companies, etc.). • Master Leases with Sublease Tenants There is evidence that some major landowners lease both hunting and agricultural rights to one party who then subleases various rights (hunting) to other parties. There have not been any known court cases to determine if this is an effective risk shield for landowners. Overview of the Research Methodology Data were obtained from the 1996 Texas Farm and Ranch Hunting Survey which was sent randomly to landowners throughout Texas by the ofﬁce of the Texas Comptroller of Public Accounts (see the Appendix). Ten landowners in each of the 254 counties of Texas (2540 surveys) were randomly selected from the local landowner tax rolls. The purpose of the survey was to gain information on the relationship (if any) of private hunting lease income to the valuation of land. Landowners returning surveys totaled 414 or 16.3%. The information for this research was obtained in the form of the returned questionnaires in their “raw” form, which included both speciﬁc and general- ized (written responses) to various items on the survey. The questionnaires were sorted by county (142 counties represented out of 254 total) in the state and descriptive statistics are presented in Exhibits 7 and 8. The total database of recreational leases was then organized to correspond by county and regional land values published by the Texas Real Estate Research Center (Gilliland, 1994). While there are wide variations in land prices and hunting lease market value per acre within a county, the objective was to see if a general correlation exists between the two factors on a county-by-county basis (see Exhibit 8). Hunting lease income per acre, relative to land value, density of deer, generalized trophy quality, and locational factors relative to metropolitan urban areas was considered as follows (Exhibit 8.) The hunting lease component was captured as net operating income (NOI) capitalized at 3% which is the prevailing “CAP” rate for agricultural properties in the region and assumes no operating costs to landowners, which is generally true. A proposed hunting lease index (Exhibit 9) was developed and offers further explanations of variables found in Exhibit 8. 412 JOURNAL OF REAL ESTATE RESEARCH Conclusions Recreational hunting leases may have important value implications for agricultural land- owners in America. While there is an “open market” or “market value” for leasing access rights to private land, the market appears to be very informal and inefﬁcient. While leasing rates can vary due to a number of factors unique to individual properties, there appears to be a wide range of pricing structures (annual leasing, season leases, species leases, day leases, etc.) that tend to confuse both the landowners and recreational tenants as to what a fair market price should be for access to private land. The availability and ﬂow of market information is both fragmented and incomplete and begs for additional data collection, analysis and research. This study indicates both generalized and speciﬁc ﬁndings as follows: • There is a deﬁnite market for recreational hunting leases on private land. • Approximately 30% of the landowner respondents were unaware of the extent or market price of leasing rates in their county. • Respondents who leased year around access rights tend to receive higher rents than those leasing for the hunting season only. • Landowners who offer small grain ﬁelds, hunting blinds and feeders receive signiﬁcantly more lease money (50%–100%) per acre from their tenants. • Larger landowners tend to have higher per acre lease rates or rates-of-return from guided hunts than smaller owners. This may be a function of size, management, marketing and/or higher quality hunting. • Pasture land (wooded or range land) was more likely to be leased than cropland and at a higher rate per acre. • A recreational / hunting lease index has been presented for landowners and tenants to better judge the leasehold value of the recreational/hunting components of agricultural lands. Note: For a complete copy of a proposed Hunting Lease, Release of Liability and Indemnity Agreement, please contact the author at PO Box 310410, Denton, Texas 76203. Exhibit 9 Proposed Hunting Lease Index Value of Hunting Component1 Deer Densities2 Trophy Quality3 Locational4 A=High >50% Highest and Best Use A=High Density A=High Quality A=1–2 Hrs Drive B+C=120+ B=Med. 26–49% B=Med. Density B=Med. Quality B=3–5 Hrs Drive B+C=90 120 C=Low <25% C=Low Density C=Low Quality C=6+ Hrs Drive B+C=<90 1 hunting / recreational hunting lease value component as a % of market value; hunting / recreational hunting lease per acre .03 “cap” rate=value of hunting component. 2 Low densities can be indicative of very high quality deer. Density can also be manipulated on individual properties by culling. 3 Trophy Quality is as indicated by a reasonable expectation of average mature deer harvested in terms of the Boone and Crocket (B&C) trophy record system. 4 approximate driving time from nearest metropolitan area VOLUME 14, NUMBER 3, 1997 IMPLICATIONS OF RECREATIONAL HUNTING LEASES 413 Appendix 1996 Texas Farm & Ranch Hunting Survey Property Tax Division Texas Comptroller of Public Accounts Name_______________________________________________ Date___________________________________ Farm________________________________________________ Phone_________________________________ Address_____________________________________________ City____________________________________ County______________________________________________ Zip____________________________________ Please check the correct box. Do more than half of the landowners in your county receive hunting lease income? yes no Is more than half of the range or pasture in your county leased for hunting? yes no Is more than half of the cropland in your county leased for hunting? yes no Typical Hunting Leasing Situations Do most hunting leases allow 12-month access? yes What is the lease rate per acre?$_______ no Are most leases for a speciﬁc hunting season? yes Lease rate per gun per season $_______ no How many acres per gun? _______ What is the average lease rate per acre for hunting leases on the land classes listed below? $_______ native pasture $______ improved pasture $______ dry cropland $______ irrigated cropland Please check all game available on this lease. Alligator Quail Antelope Squirrel Deer Turkey Dove Water Fowl Exotics Wild Hog Pheasant __________ Predators __________ Please list facilities provided on the lease (examples: cabins, blinds, deer stands, feeders or coolers) Land Please check land categories listed below that are hunted. native pasture improved pasture dry cropland irrigated cropland Are small grains or other grains planted for the beneﬁt of game? yes no If yes, please estimate the acres planted as a percent of total hunting lease acres. ____________% Are game-proof fences used? yes no If yes, number of acres fenced: __________ What is your annual maintenance cost of game-proof fencing per acre? $_____________ What is the total cost to install game-proof fencing? $_______/linear ft or $_______/mile 414 JOURNAL OF REAL ESTATE RESEARCH Notes 1 Indeed, the sport (duck hunting) has become the prestigious business trip of the 1990s, right up there with golf, “They’re out there talking shop, doing deals @ $500 per half-day hunt in the Hamptons, Long Island, New York,” N. Keates, Wall Street Journal, January 10, 1997, B6. 2 Sample lease and release for liability are available on request from author. References Appraisal Foundation, The, Appraisal Standards of Professional Appraisal Practice, Washington, D.C.: USPAP, 1996, 138 (The Appraisal Foundation, 1029 Vermont Avenue, N.W., Suite 900, Washington, DC 20006). Barrett, W., This Land is Their Land, Worth Financial Intelligence, February 1997, 78–89. Bartik, T. and K. Smith, Urban Amenities and Public Policy, working paper #84–W11, Vanderbilt University 1984, 361–71. Bishop, R., Option Value: An Exposition and Extension, Land Economics, February 1982, 58, 1–15. Council for Wildlife Conservation and Education, Inc., The, The Hunter in Conservation, Newton, Conn.: CWCE, 14 (11 Milew Hill Road, Newton, CT 06470). Forbes, Environmental Entrepreneurs, December 16, 1996, 188–92. Geisler, C. C., Land and Poverty, Land Lines -Newsletter of the Lincoln Institute of Land Policy, November 1995, 7, 1. Geryak, J., AHA Animal Exchange and Taxidermy—Catalog, 1997 (5786 North Moller Road, Indianapolis, IN 40254). Gilliland, C., Texas Rural Land Prices 1993–94, Technical Rep. 1087, Real Estate Center, Texas A&M University, July 1994. Hanson, M., Something Worth Stalking About—The Estate Market, Country Life, August 1986, 570. Houston Chronicle, Park Fees Will Take a New Year’s Hike, December 31, 1996, 2A. Livestock Weekly, New Mexico’s Vermejo Park Ranch Joins Other Turner Acquisitions, October 3, 1996, 28. MacDonald, D., J.Murdock and H. White, Hazards and Insurance in Housing, Land Economics, November 1987, 63:4, 361–71. McBryde G. and G. Henicke, Strategies to Increase Economic Returns from Wildlife and Their Habitats. Kleburg Wildlife Journal, 1994, 27–28. McCoy, C., Plum Creek Plans to Buy Southern Timber, Wall Street Journal, August 8, 1996, A3. Milon, W., J. Gressel and D. Mulkey, Hedonic Amenity Valuation and Functional Form Speciﬁcation, Land Economics, 1984, 60, 378–87. Sasser, R., Hunting Lease System Spreading through U.S., Dallas Morning News, September 5, 1995, 22B. Texas Agricultural Statistics Service, Exotic Hoofstock Survey, TASS, September 6, 1996 (Exotic Wildlife Association, 216 Highway 27 West , Ingram, TX 78025). Texas Real Estate Research Center, Whitetail Deer and Land Values, Tierra Grande, 1988. Tomlins, T.E., Forest of Essex—Forest of Waltham Public Sporting Land Notice, published and ﬁled of record in the Steward’s Ofﬁce, East Heywalt Lodge, August 1818 (copies available from author upon request). Whitehead, K., Hunting and Stalking Deer in Britain through the Ages, London, U.K.: B. T. Batsford, 1980. Wolfe, G., Elk Management at Vermejo Park, Journal of the American Trophy Hunter, Fall 1992, 1:2, 32–35. VOLUME 14, NUMBER 3, 1997