Central Kentucky Farm Market (1^st Two Quarters, 2009)

            Since Kirkpatrick & Company is not only a leader among Central Kentucky horse farms but a leading appraiser of them, as well, we are often asked about the current state of the farm market in these difficult times.

            Due to the unique nature of most horse farms and the wide variance in quality and in utility of the improvements located on them, it is almost impossible to establish "average" criteria for improved sales of this nature.  Nevertheless, in addition to the normal due diligence and confirmation of sales, it is useful to study the trends of farm sales reported on the Multiple Listing Service (MLS) of the Lexington-Bluegrass Association of Realtors (LBAR), as seen in the chart at the end of this section.

Based on our considerable experience both in the brokerage and appraisal aspects of Central Kentucky real estate, in trending the sale price of horse farms in the Central Kentucky Area, we have adopted an average increase in farm values of 10% per year from 1996 through the present, with a very conservative cap of 25% for most farms.   

In 2008 there were numerous examples of the current strength of the market for horse farms in Central Kentucky, including a number of resales which reinforce the an appreciation rate of at least 10%/year, including:

Colonial Hill Farm—(139.83 Acres ±) located at 2975 Georgetown Road in Bourbon County, sold January 18, 2008, for $3,300,000 ($23,600/acre).  The seller had bought this property on December 2, 2004, for $1,740,500, so had received an increase in value of 89.6% in just over three years, without making any significant improvements to the property, which was improved with a 200-year-old ± Colonial residence, two horse barns with a total of 29 stalls (one of them a pre-fab building) and a double-wide manager’s residence.

Solstice Farm—(51.57 Acres ±) located at 1033 Iron Works Road in Fayette County, which we sold February 12, 2008, for $3,700,000 ($71,747/ acre).  Improved with a very high quality two-year-old 3,992-sf residence; two nice barns, completely renovated with a total of 15 stalls and farm office; two run-in sheds; equipment shed and shop; 5 paddocks and two fields.  We had represented the Seller of this farm when she purchased it on July 15, 2003, for $795,000 ($15,416/acre), subject to a PDR conservation easement.  She had torn down a 1,750-sf existing house and remodeled barns, etc. as above.  It is estimated that  the improvements made to the property cost $1,750,000, which results in an appreciation of 45% over approximately 4½ years or 10%/year.

Royal Pegasus Farm—(95.7 Acres ± in two tracts) located at 600 S. Yarnallton Road in Fayette County, sold July 1, 2008, for $2,900,000 ($30,303/acre).  Sellers had purchased the property on September 17, 2002, for $1,250,000/acre ($13,060/acre), an increase of nearly 23% per year.  Sellers had done very little to it other than to hook it up to public water.

Gracefield Farm—(312.799 Acres, 3646 Newtown Pike @ intersection of Iron Works Pike) sold June 16, 2008, for $9,282,935.92 ($29,677/acre).  An assemblage of five tracts of the best land available in Central Kentucky at the equine equivalent of the corner of Fifth Avenue and Rodeo Drive (Yes, I know they’re on opposite coasts).  Lots of road frontage and less than a mile from the Kentucky Horse Park.  Building improvements include 4 horse barns, with a total of 58 stalls (these are very nice frame barns of above-average construction in like new condition, with brick paved center aisle, large exterior windows, Lucas end doors and screens, etc. and two have tack rooms with a half bath); two six-bay run-in sheds with a feed room on the end, (average construction and condition); an 8-bay metal equipment shed with two additional enclosed and paved bays which serve as a shop (average construction and like-new condition); a new 5-bay equipment shed of average construction; a manager’s house, two tenant houses and a 2,300-sf residence converted to an office.

Gardens Glen Farm—(218.4 Acres ±) located at 3100 Old Lemons Mill Road in Fayette County, sold October 1, 2008, for $6,100,000 ($27,930/acre).  This farm had been purchased by the Sellers for $1,850,000 ($8,500/acre) on March 22, 2004, since which time they had completely renovated the farm, including construction of a magnificent new 5,552-sf manor home; two new horse barns with a total of 50 stalls plus eight auxillary stalls in an older barn; two equipment buildings; significant paved roadways and fencing, including a 1.1-mile grass gallop, a show arena, etc.  It is estimated that the sellers had spent approximately $2,750,000 in improving the property, so they had an estimated basis of $4,600,000 in it, less $273,200 ($2,506/acre) which they had received from the LFUCG Purchase of Development Rights program for half the farm, leaving a remainder of $4,327,000.  Therefore, it is estimated that the gain on the property was approximately 10%/year.

D³ Farm—(125.363 Acres) located on Rose Lane in Woodford County.  We sold this property December 1, 2008, for $2,250,000 ($17,850/acre).  Sellers had purchased this property on November 14, 2003, for $1,300,000, and had done very little to it in the way of improvements in the interim, so they had benefitted from 73% appreciation over 5 years, nearly 15%/year.  Improved with a lovely old home which had been completely restored before the Sellers had purchased the place, 3 good horse barns with a total of 47 stalls, plank fencing for 16 paddocks and 3 fields—all with automatic waterers.

It is significant to note that the average sale price and average price per acre in 2008 were the highest recorded since such statistics have been reported on the MLS.     

The table below presents a summation of farm sales of 25 acres or more that were reported to LBAR during the past five years in Bourbon, Fayette, Scott and Woodford counties, which are considered the primary horse counties in the MSA.  Since a number of farms each year are sold privately or are not reported to the MLS, this list is not all-inclusive, but it does demonstrate the trend of major sales.  Further, in 2007, the local MLS passed a rule which allowed a number of listed properties to be considered “office exclusives” which means that they were not included on the MLS, permitting several major sales to take place without ever being included in the statistical summaries. 

As can be seen from the chart, the average number of days between listing and closing of farm sales has ranged from 154-228 days, with an average of 188 and a median of 186.  However, unimproved farms were included under this category, as well as highly-developed horse farms, and, in the opinion of the appraisers, 200 days does not represent sufficient exposure to the open market for developed horse farms in today's economy.

While interest in the purchase of developed horse farms is still high, it is not uncommon to see overpriced farms remaining on the market for several years before generating any serious interest.

 Therefore, on balance, it remains the opinion of the appraisers that the definition of "a reasonable time for exposure in the open market" for highly-developed horse farms in this economy and this area is one year, provided they are not outlandishly overpriced, as some are.

Summary of Central Kentucky Farm Sales¹

¹ Includes farm sales of 25 acres or more in Bourbon, Fayette, Scott and Woodford counties, which are considered the primary "horse counties" in the Lexington Metropolitan Statistical Area, as reported on the MLS.

2009 Update

            During the first two quarters of 2009, farm sales weakened slightly, but there were encouraging signs toward the end of the second quarter in that the average sale was larger (144.706 acres) than it had been in the same period of 2008 and farms spent fewer days on the market (230) than they had, last year.  Further, there were a number of notable sales which did not make it onto the MLS, including:

Domino Stud—(365.31 Acres at 3744 Russell Cave Road, Fayette County) sold to neighboring Dixiana LLC on April 16, for $13-million ($35,586/acre).  This sale carries with it a very strong assemblage factor (25% ±), with which I am very familiar, having begun to assist the purchaser in attempts to obtain this property since shortly after he purchased the neighboring Dixiana Farm in 2004. It is improved with a 12,000-sf main residence in dated but good condition; a mile training track in fair/poor condition; 99 stalls in 9 barns, most of them in fair/poor condition; 6 employee houses, most in fair/poor condition; and assorted other outbuildings.  Excellent soils and location.

Hinkle Farm—(286.957 Acres on Ferguson Road, Bourbon County) sold on February 27, for $2,295,656 ($8,000/acre) with very little in the way of improvements. 

Barber Farm—(235.642 Acres on Jackstown Road, Bourbon County) also sold as part of a 1031 exchange for $8,555/acre ($2,015,918)—also with very little in the way of improvements.  This property had been obtained by the seller at absolute auction on April 29, 2008, to dissolve a partnership between Mr. Barber and his brother, Larry. Terms of the auction dictated that it was to be offered in four separate parcels and then offered as a whole entity.  The four parcels had been auctioned for an average of $7,200/acre; however, when offered as a single parcel, the property was sold for $7,511/acre ($1,787,618).  

                           Mr. Barber immediately put the property back on the market for $10,735/ acre, got no activity on it and ultimately sold it as above.

            Also, there were several notable sales which did make it onto the MLS and are included in the summary above:

Dearborn Farm—(290.58 Acres ± on Wisenberger Mill Road, in Woodford County, about 3 miles from Midway) sold on March 30 for $4,700,000 ($16,175/acre)—improved with 92 stalls, an attractive two-story brick residence which was seriously in need of renovations, well-designed breeding shed, three additional houses, etc.  It was sold as part of the dissolution of a partnership under a lease option agreement.

Glencoe Farm—(130.79 Acres ± @ 4435 Leestown Road, west of Lexington) sold on March 31 for $1,725,000 ($13,190/acre)—improved with 3 barns with a total of 38 stalls, a manager’s residence, an office/house and numerous outbuildings, all seriously in need of renovation.   

Former Stony Oak Training Center—(605 Acres ± @ 1023 Stoney Point Road, about 9 miles east of Paris in Bourbon County) sold March 13, 2009 for $5,750,000 ($9,500/acre).  This formerly was the Xalapa training center and sold to the neighbor who had bought the remainder of Xalapa approximately two years ago.  It had been one of the signature properties of Central Kentucky—highly-improved, with one of the signature training barns in Central Kentucky, a mile track, 47 additional stalls in 3 other barns, a nice log cabin, etc.  However, it had been purchased for $7-million ($11,570/acre), just less than two years earlier by a person who did very little, if anything, to maintain the place and it was in abysmal condition at the time of the most recent sale, so it is our strong opinion that the loss in value of nearly 20% is a factor of the condition of the property more so than the farm market.

Rivendell Farm—(194 Acres @ 1948 N. Yarnallton Pike, Fayette County) sold on February April 1, for $2,700,000 ($13,918/acre).  Despite the fact that the sale price was less than 50% of what the sellers had been asking for the property, it is the opinion of the appraiser that this sale price was more a reflection of the deplorable condition of the property, the fact that a significant portion of the better land had already been sold off, and the personalities of some of the sellers than it was of the market.  Still, the sellers made money off the property, having purchased it for $10,633/acre (as 258.628 acres) on December 5, 2003.  It is superb land and was improved with 5 good barns with a total of 74 stalls; 24 paddocks and 11 fields; a two story main house (average/average); three employee houses; a triplex, and assorted outbuildings.

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