Forbes Heirs Sell Elk-Hunting Millionaires a Cut of Dad's Ranch
(Note: This Bloomberg edition of "Lifestyles of the Powerful" leads the reader to think that some property rights are being "given up." At this level of power and wealth, nothing is ever really "given up" -- such power brokers make few, if any "concessions.")
November 9, 2005
By Miles Weiss email@example.com
The latest installment of one of the world's glitziest estate sales is about to unfold at the Colorado ranch of the late publishing magnate Malcolm Forbes.
His children plan to raise $70 million by selling access to the ranch so capitalists can commune with black bears, coyotes and mountain lions.
The Forbes siblings have given up their right to develop about half the ranch's 171,400 acres (69,363 hectares) near Fort Garland, Colorado, qualifying for conservation-land tax breaks.
They've also created a company, Forbes Trinchera Ranch LLC, to sell stakes granting ranch access, documents filed with the U.S. Securities and Exchange Commission [SEC] say.
The easement lets millionaires build 10,000-square-foot (929-square-meter) mansions that can serve as base camps for hunting elk and bighorn sheep.
The family, while managing an estimated $1 billion inheritance, joins western landowners in using conservation easements to cut taxes as land values soar.
"They are using the tax code and the land for all the benefit they can get,'' says local real estate agent Bruce Steffens, who specializes in selling farms and ranches through his Steffens & Co. Realty in Monte Vista, Colorado. "That is just smart.''
Christopher "Kip'' Forbes, 54, vice chairman of Forbes Inc., a closely held New York publisher, will manage the new limited liability company, whose other principals are his sister, Moira Mumma, and his brothers Tim Forbes, 52, Robert Forbes, 56, and Steve Forbes, 58, Forbes magazine's editor-in- chief and a former Republican candidate for U.S. president who advocated lower taxes.
The company says it will raise as much as $70 million by selling private shares, letting stakeholders become partners in one of the largest ranches in Colorado.
The ranch already has a lodge with 25 suites, which the Forbes family promotes as a corporate retreat and luxury accommodations for hunters. The Colorado Department of Wildlife supplies Trinchera with hunting licenses for elk and bighorn sheep that it can resell to guests.
The company's June 21 SEC filing says, "Forbes Trinchera Ranch LLC's business is conservation stewardship affording active and passive recreation for its owners and their guests while protecting and preserving the natural environment of the ranch.''
Monie Begley, a spokeswoman for Forbes Inc., declined to elaborate on rights [that] investors receive in return for a stake in Forbes Trinchera.
Steve Forbes and Lee Johnson, the family's attorney in Denver, also declined to comment.
The Forbes conservation easement, which covers about 81,000 acres at the Trinchera ranch, permits the construction of 17 single-family residences as large as 10,000 square feet. The land itself can't be sold to other individuals because the conservation easement bars any subdivision.
The new Trinchera ranch company represents the latest step by the Forbes family to take advantage of the business publications, real estate and artwork that Malcolm left behind when he died in 1990 at the age of 70.
In February 2004, the family sold nine Faberge Imperial Easter Eggs, collectively valued at $70 million to $100 million by Bloomfield Hills, Michigan-based Sotheby's Holdings Inc. auction house.
The eggs were sold to Russian billionaire Viktor Vekselberg for an undisclosed price. Forbes paid $45,000 to $1.86 million per egg for most of the collection in the 1960s and 1970s.
The easement lets the Forbes family reduce its income taxes, which may be an issue after they sold the eggs at an appreciated value.
The Colorado ranch was one of several trophy properties that Malcolm acquired in amassing an inheritance of as much as $1.23 billion, according to a Forbes biography by Chris Winans titled "The Man Who Had Everything,'' (St. Martin's Press, 1990).
Malcolm's other real estate purchases included the 47-room Chateau de Balleroy in the Normandy region of France; the former governor's mansion, known as the Palais Mendoub, in Tangier, Morocco; and the Pacific island of Laucala in the Fijis.
Forbes acquired his first piece of the ranch in 1969, paying about $22 an acre.
Agricultural land in Costilla County, where the ranch is based, now sells for about $1,000 an acre, according to Arnold Valdez, the county's former land-use planner.
Trinchera is located on Sangre de Cristo, an 1843 Spanish land grant parceled out before Colorado became a U.S. territory.
It's located about 187 miles (301 kilometers) from the ski resort of Aspen, Colorado.
Begley, the Forbes spokeswoman, declined to comment on whether the Forbes children had claimed a tax deduction when they donated the conservation easement last December. The family's company gave the easement to Colorado Open Lands, a charitable trust based in the town of Lakewood that has preserved 175,597 acres in Colorado.
In general, easements can reduce the value of a property by as much as 50 percent by eliminating development rights, says Steve Small, an attorney who wrote the Internal Revenue Service's regulations on easement deductions when he worked for the agency.
Most landowners will then get their property appraised at the new lower value and deduct the difference in value to offset taxable income or capital gains, Small says.
"The people who call us are usually capitalist conservationists,'' says Small, who advises landowners on the tax aspects of conservation easements. "They tend to be looking at making sure the deduction is done correctly.''
Other ranches have similar plans, in which buyers take an interest in the ranch and receive the right to use the entire property as well as build a house on specific acreage, says Michael Landreth, a ranch broker in Eagle, Colorado.
As one example, he cites the Shadow Creek Ranch near Kremmling, Colorado.
"The neat thing is you can come in, spend $2 million to buy your 70 acres, build a really neat house, but have a 6,000- acre ranch that would cost $25 million to buy at your total disposal,'' says Landreth, who has been in the ranch brokerage business for about 20 years. He says these recreational ranch houses sell for $2-6 million each.
The Forbes ranch would appeal to nature lovers, given that it is home to elk, mule deer, black bears, golden eagles, coyotes and mountain lions, the easement says. The easement permits activities on the ranch such as hunting, bird watching, hiking, horseback riding, camping and mountain climbing.
Conservation easements often allow a limited amount of development, such as the 17 residences that can be built on the Trinchera ranch.
Open-space advocates say that this type of flexibility encourages more landowners to place easements on their land.
"Seventeen homes is one every 5,000 acres, which is not bad in the scheme of things,'' says Will Shafroth, executive director of the Colorado Conservation Trust, a non-profit foundation in Boulder that supports land trusts such as Colorado Open Lands.
"Trinchera could have been the kind of place that was chopped up into very small pieces.''
The Forbes family in the late 1990s had plans drawn up to subdivide the Trinchera ranch into 35-acre residential lots, says Valdez, Costilla County's land-use planner in 1998 and 1999.
The Forbes family never pursued the project -- which would have been allowed under law -- beyond submitting a plan, he says.
"It was very frightening to look at,'' says Valdez. "It was a massive subdivision.''
Copyright 2005, Bloomberg.