The Man With a Million Acres

The Wall Street Journal

By Nancy Keates

Million-dollar deals—and reality television—are fueling the rise of well-connected young agents



He’s from Kentucky, makes his own bourbon, drives a Ford pickup—and flies in a private plane.

These are some of the few details that have emerged about Brad Kelley, 55, a deeply private billionaire who made his fortune in the discount cigarette business. Mr. Kelley, whose hobbies include breeding rare, exotic animals, very rarely gives interviews. He doesn’t tweet or use email.

He is also one of the largest private landowners in the country, spending by his own account hundreds of millions of dollars on about a million acres—or about 1,600 square miles. The state of Rhode Island, by comparison, has a land area of 1,215 square miles. According to the Land Report 100, which tracks land ownership, Mr. Kelley is the fourth-largest private landowner by acres in the U.S., just behind Liberty Media Chairman John Malone, media mogul Ted Turner and the Emmerson family, headed by timber magnate Archie Aldis Emmerson.

Mr. Kelley says it wasn’t his goal to become one of the country’s biggest landowners. “I grew up on a farm and that’s about as good an explanation as there is,” he says in an interview. “Land is something I know. It’s something I have an affinity for. It becomes part of your DNA.”

It has also become an increasingly popular investment in uncertain financial times. Some investors see land as a hedge against inflation, and low global interest rates have made land cheaper to buy. Higher world food prices and an anticipation of a recovery in the housing market have bankers pitching land as one of the few places to get real returns on an asset whose underlying value continues to rise. “It’s a nonperishable commodity and it’s as good a place as any to put my money,” Mr. Kelley says. “It’s better than derivatives.”

Dennis Moon, head of the Specialty Asset Management team at U.S. Trust, the private-banking division of Bank of America, BAC 0.00% says land appeals to people as an investment they can easily understand. His clients have more than doubled their direct investments in irrigated farmland—land that produces crops like corn, soybean and wheat—over the past year to about $175 million, earning a net yield of some 4% a year. Others are more cautious, warning that the high rate of growth could mean the market is in a bubble, the risks being volatility in agricultural commodity prices, farmland values and farm production costs.

Ranches, which are Mr. Kelley’s specialty, don’t tend to yield much of an annual return. Instead, their value is in the underlying appreciation of the land: According to the U.S. Department of Agriculture, the national average value of U.S. ranchland rose 12% compared with five years earlier; in Texas, it is up 30% compared with five years ago. Investors make cash on ranches when they are subdivided and sold to developers or as “trophy ranches,” where the wealthy can fish and hunt.

Texas oil baron T. Boone Pickens describes his strategy with ranches as “simple: Change the use of the land.” He recently joined six other investors in a new ranch fund called Sporting Ranch Capital. The plan, says the fund’s manager Jay Ellis, is to buy 12 to 15 premier ranches in Colorado, Wyoming, Montana, Oregon and Idaho, fix them up and then resell them as “trophy sporting ranches.” In August, the fund made its first purchase—a 760-acre ranch in Colorado with a 2.6-mile fishing stream and five lakes—for about $6 million in cash; the fund hopes to put it back on the market in 2014 for over $10 million.

Mr. Turner first got into buying ranches in 1987 for the fly fishing and stress relief. “I fell in love with the West; the wide-open spaces, the wildlife and beautiful landscapes. I knew immediately that I wanted more land—and lots of it,” he says in an email. But he also tries to make his ranch operations—most often raising bison—profitable. “We always consider investment value in addition to opportunities for recreation and conservation when we look at property,” he says.

Mr. Kelley’s ranch strategy is different. He looks for good deals on cattle ranches in out-of-the-way places he thinks are undervalued, and holds on to them. He likes to buy adjoining parcels because it’s more efficient to operate a ranch in large blocks and because it tends to be easier to buy property when it’s right next door: He already knows what he’s buying and what the seller is like. And he doesn’t develop the land he buys: “We don’t try to inject our way of doing things on other folks,” he says. In this way, he has pieced together existing cattle ranches in remote parts of Texas, Florida and New Mexico.

Once he has bought the land, Mr. Kelley does what some ranchers call “resting.” He keeps the cattle operations running, almost always leasing the land back to the previous owner, who already knows how to run the existing operation. Mr. Kelley says his operations break even. Several farmers and ranchers who work on land owned by Mr. Kelley didn’t respond to requests for interviews.

The value of Mr. Kelley’s land investments is difficult to calculate. “When he started buying ranches here, we all thought he was crazy,” says Johnny Carpenter, an Alpine, Texas, real-estate agent who sold Mr. Kelley about half a dozen ranches in West Texas over a five-year period. Since then, the value of the land Mr. Kelley owns in those areas, known to be scenic with views of mountains, has doubled, Mr. Carpenter says. Chip Cole, a ranch broker in San Angelo, Texas, who was involved in the sale of about 15 ranches to Mr. Kelley, says prices doubled in 2005 and 2006. In 2008, sales volume dried up, making estimating current values more difficult, though Mr. Cole suspects values have softened.

Few things make Mr. Kelley bristle more than being called a land speculator. He argues that he has sold about 15% of his total holdings over the past three decades; combined with the land he has bought, that’s an aggregate turnover of less than half a percent, most of it for management reasons. “We take great pride in improving our property,” he says, adding that he replaces and upgrades dozens of miles of fences annually and keeps water and wells running.

People who have worked for Mr. Kelley recall him showing up at his ranches with groups of friends and family for occasional hunting and fishing weekends. At night, the group played cards and drank bourbon.


Homer Mills, who started working for Mr. Kelley in West Texas in 1999 and helped him manage the dozen or so ranches he bought over the next five years, describes Mr. Kelley as a “good old boy from Kentucky.” He recalls that Mr. Kelley sometimes wore a kilt (“they’re comfortable,” says Mr. Kelley when asked), liked cooking (he made a “mean cornbread,” says Mr. Mills) and didn’t hunt, though he did fish. At one point Mr. Kelley sported a long red beard, earning him the nickname “ZZ Top.”

Colorful eccentricities aside, Mr. Kelley is also a shrewd businessman who avoids the limelight. Much of Mr. Kelley’s land is listed under LLCs with names like Spanish Trail Land & Cattle Co. and Texas Mountain Cattle Co. Brokers say they often deal with his business manager, an attorney named Greg Betterton, who works out of an office in Venice, Fla. “You don’t call Brad Kelley. He calls you. People all over the South try to get land in front of him. He’s been one of the most effective people at flying below the radar in this space,” says Joe Taggart, a managing director with LandVest, a real-estate and timberland-consulting firm based in Boston.

Mr. Kelley grew up in Franklin, Ky., near the Tennessee border, on a tobacco farm that also had livestock and a little grain. He always assumed he would become a farmer, he says. He bought his first piece of land—a farm with cattle near his childhood house—in 1974 when he was 17, shortly after graduating from high school. He dropped out of Western Kentucky University four times and never graduated.

As the tobacco industry shifted in the 1980s and the business of preliminary tobacco processing began to decline, there were a number of old warehouses around Kentucky that were no longer being used. Mr. Kelley got into the business of buying them and converting them for other uses, leasing them out to businesses like furniture and paper processing. One day, in the process of removing old equipment from a warehouse, Mr. Kelley came across some old cigarette-making equipment that still worked. He had wanted to get into manufacturing consumer products, so he seized the opportunity.

He started Commonwealth Brands, a small cigarette manufacturer based in Bowling Green, Ky., with discounted brands like USA Gold, Sonoma, Commonwealth, Country Value and a cigar called Brahman in 1991. He sold Commonwealth in 2001 to Houchens Industries, a Bowling Green, Ky.-based conglomerate, for about $1 billion.

Mr. Kelley doesn’t smoke. “I never defended it,” he says of his old business. “Hopefully it will be phased out of society.”

Mr. Kelley began investing in land outside Kentucky in 1997. He was drawn to West Texas, where he says he now has about 850,000 acres, because prices were good and he found the land beautiful and out of the way, he says. Once he bought something, brokers started contacting him about buying more land.

Mr. Kelley’s foray into Florida began in 1997 with the purchase of a house in Boca Grande for about $1 million. He sold that and bought his current three-bedroom, 5,923-square-foot house, also in Boca Grande, in 2000 for $5.5 million. He was looking for property to set up a place for his animal breeding operations—a hobby that started with rare breeds of cattle, he says. That led to the acquisition in 2004 and 2005 of some 40,000 acres in De Soto County, in the western part of the state for a reported $50 million.

Mr. Kelley now has a breeding operation on some of that acreage, known as Rum Creek Ranch, that’s dedicated to a range of endangered species including tapirs, anoas (small buffalos), hippos, rhinos, bongos (antelopes), bentang (wild cattle) and a host of others. He works with zoos and conservation groups, with the ultimate goal of reintroducing the animals back to their native habitat.

His primary home is in Franklin, Tenn., where he lives with his wife, Susan, and his three daughters. He bought his 8,176-square-foot house with a swimming pool and a tennis court on 26 acres in 2003 for $1.9 million.

He frequently travels to his different properties, he says.He owns about 60 properties in Simpson County, Ky., where he grew up, as well as land in New Mexico, Wyoming and Colorado.

Though he is still buying large pieces of land—mostly in Texas, where he purchased about 44,000 acres in adjoining cattle ranches over the summer, and Kentucky, where he bought the 800-acre Calumet Farm this spring—land only represents about a quarter of his businesjs interests. He owns some land in Chile and has looked at Argentina, but says there were too many transactional hurdles there. His other business investments are in venture capital in companies that range from telecommunications to construction materials, beer and energy technology.

Mr. Kelley says he just takes opportunities as they come. “There’s never been a grand plan. Life takes you a lot of places. Every day you adjust your compass,” he says.


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