From a practical matter, a conservation easement is a negotiated reduction in development density where a number of potential homesites are donated to a conservation organization; thereby, reducing the ability to divide the land in the future. The result is that the speculator/developer’s premium is removed from the land’s value. The market bases the value on the properties location and recreational quality not development density.
There is no change to the land nor does land management usually change. A common provision is that hardwood swamps can be thinned but cannot be clearcut. The use of controlled burns is usually recommended. The most invasive requirement is that there is usually a short annual inspection to ensure the land has not been subdivided or degraded.
It allows recreational investors the opportunity to buy higher quality larger properties than they would otherwise be able to purchase for the same investment dollar. In the last few years it has become apparent that available land in South and Central Florida is extremely limited and that has caused investor/speculators to land bank North Florida properties for future growth. This has caused North Florida and South Georgia recreational properties that were selling for $3,200 or less an acre three years ago to bring $6,000 or more per acre today. These prices are looked at as a bargain based on values in the rest of the state. Another problem is that land is being subdivided at a very rapid rate making it difficult to find quality tracts over 300 acres. For example, in rural Suwannee County there are only two tracts of land, not owned by the government, larger than 1,000 acres in the entire county.
From an investor/recreational buyer’s perspective, a conservation easement does two important things; first, it keeps the price per acre of high quality land in check with recreational values by removing the investor/speculator from the equation. With the easement in place a buyer can oftentimes purchase a high caliber property with a great location for the same price as a less desirable property.
For instance, two years ago this firm received an offer for Old Fields
Plantation for almost $8,000 per acre by an investor/developer. If developed,
the density was 160 units. Essentially, the market valued the density
or undeveloped lots $6M or $37,000 a piece. For the recreational investor
looking for a high quality property, that additional money could be better
spent by adding acreage and not holding undeveloped lots in speculation.
At that price per acre it was no longer financially feasible
to hunt and fish on the property. The owner placed a conservation easement
on the property making it worth approximately $4,750 per acre at today’s
comparables (Chemonie $5,500, May’s Place $5,100, Rich Tract $5,250,
Whitaker Place $6,030, Little Ochlocknee $5,200, St. Joe to DEP $4,132,
Fincher’s Place $4,931, Dutton Place $4,000, River Creek $4,150,
Tahlequa $5,850 among others). Keep in mind that Old Fields is in the
Red Hills only 15 minutes from downtown Tallahassee, has a world-class
floodable duck pond, absolutely beautiful and one of the most intensively
managed quail plantations in the belt.
In order for the math to work out for both parties, the seller either sells the easement or takes a tax deduction for the difference in the appraised value before the easement and after the easement. For the 2006 and 2007 tax years (and expected to be extended) the landowner is able to deduct the appraised amount of the donation up to 50% of his adjusted gross income per year over 16 years as a charitable deduction.
A common misperception is that the person who placed the easement on the land made a better deal than the person buying the land with the easement already in place. We have not seen that in today’s market. With almost 30% of the Red Hills already under conservation easement and with another 100,000 acres estimated to be placed under easement in the next few years the market has valued these properties in the neighborhood of 40% below what it would be worth without an easement depending on the location and quality of the land. This usually equates to the amount of savings the landowner has made by placing the easement itself and no more. The principal difference is that the value was received through tax savings or sale of an easement and the landowner did not have to sell the land to harvest that value.
The market has proven that properties with an easement continue to appreciate
at the same rate as the overall real estate market, the only difference
is the cost basis has been artificially lowered by the easement. From
a liquidity standpoint, properties tend to be on the market longer as
the investor/speculator has been removed as a potential buyer.
This firm has the sales information on every quality recreational
and development sale in the Tallahassee/Thomasville area going back seven
years. We are intimately familiar with almost every sale. We have found
that the market values a quality property with a conservation easement
the same as it would a remotely situated property with little development
pressure. What we are unable to quantify with sales numbers is the fact
that these easement properties as a whole have a much greater recreational
quality than other unencumbered properties but are selling for the same
prices as otherwise inferior but non-easement properties. The hidden
value and result we are seeing is that buyers are receiving a premium
quality property but not paying for that premium.
Example 1) All three properties are on US 19 within a few miles of each other and very comparable other than one has an easement.
Cooksey Place 328 acres sold May 2006 for $7,370 per acre
Old Hornsby Place 414 acres (with easement on 279 acres) for sale for $4,765 per acre
Mays Place 1,251 acres sold April 06 for $5,100 per acre with an offer in May 06 for $7,500 per acre
Example 2) During the 4th quarter of 2006, St. Joe land sold 2,616 acres of primarily undevelopable land (80% wetlands) on the St. Marks floodplain and US 19 to the DEP for $4,132 per acre. At the same time, they have offered for sale 2,324 acres directly across the road with normal amount of wetlands (35%) for $7,500 per acre. It should be noted that on the opposite side of Tallahassee, the 2,800 acre Little River Plantation, is currently under contract at $7,500 per acre. It is not under easement.
Example 3) Chemonie Plantation has approximately 70% of the 2,407 acres under easement. It has a great amount of wildlife, high recreational value and great location in Leon County. In April of 2006, Chemonie sold to a recreational user for $5,500 per acre. Comparable properties in the area not under easement have been selling in the $12,000 to $15,000 per acre range.
Example 4) Bailey’s Mill, 436 acres in Jefferson County not under easement sold in the 2nd quarter of 2006 for $7,007 per acre. Bailey’s Mill has been land planned and has a density of 109 units and currently for sale for $9,500 per acre. Old Fields Plantation, 1,045 acres which borders it and under easement, is for sale for $4,765 per acre.
Example 5) Church Tract, Triangle Tract and Disston/Wood. This was part of a large plantation and located just north of the Florida state line in rural Thomas County. The zoning is one unit per acre but the Georgia State income tax and remoteness do not lend itself for developer/speculators. Regardless, back in 2004, and simultaneous to the larger closing, 363 acres sold for $6,464 per acre. In 2006 two other tracts, a 185 acre and 180 acre tract sold for $8,500 and $9,000 per acre respectively. At the closing, deed restrictions were placed on both tracts limiting the number of homesites to less than five per tract, making them defacto conservation easements.
The Red Hills run approximately between the Ochlocknee River west of Tallahassee to just east the Aucilla River and contain about 300,000 acres of the best quality soils, timber, water and recreation in the southeast. As such, the recreational lifestyle and demand for these properties is strong and conservation easements work exceptionally well. To date, 100,000 acres (1/3 of the total area) is already under conservation easement with another 100,000 projected in the next few years. The popularity is growing at a rapid rate, some conservation organizations have an approval list and others a waiting list. The primary organizations involved include Tall Timbers, The Appalachee Land Conservancy, The Nature Conservancy, The Suwannee River Water Management District and the Florida Department of Environmental Protection.
Prices,
plans, uses, dimensions, boundaries, locations, specifications, material, and
availability are subject to change without notice. Illustrations are artist’s
depictions only and may differ from completed improvements. This is not an offering
in the states where prior registration is required.