The falling apart of a proposed public purchase of a large ranch on the lower Musselshell River highlights the shifting underlying values of the Montana land market, and the friction of those changes with the regulations governing public land acquisitions.
The proposed acquisition of an 11,000-acre ranch by the US Bureau of Land Management (BLM), to be facilitated by the Rocky Mountain Elk Foundation (RMEF), has been rejected by the private land owner. The value of the "Lower Musselshell River Acquisition Project" property, as determined by an appraisal contracted by the US Department of the Interior, was not high enough for the potential sellers. The BLM and RMEF was interested in the property largely because its purchase would have leveraged access to 9,300 acres of public land that is currently not readily accessible to the public.
Acquisition of private lands by government is typically required to be at "fair market value" and to be verified by an appraisal. The appraisal cannot account for conservation values, or in this case the value of public access to public lands, unless those values would be recognized in the market by a typical market buyer. When that is not the case, the property is of higher value to the public than to a private market buyer, but yet cannot be purchased with public dollars at a higher than market price.
Also of interest in this case, there have been many large conservation land acquisitions in the area, most notably by the American Prairie Reserve (APR). The APR is a non-profit conservation organization with the stated mission "...to create the largest nature reserve in the contiguous United States." Many of these land purchases have been off-market, and are considered to be at high market values relative to the typical agricultural based land values in the area. Land purchases for the purpose of conservation are not allowed to be used as comparable sales for an appraisal of a federal acquisition property, as they are essentially special interest acquisitions. The buyers in these transactions had a special interest in purchasing the properties that is considered to be outside of (and potentially above) typical market considerations.
It is an interesting debate, at what point do special interest acquisitions become not so special. At what point do these sales in fact come to represent the market, if many or most purchases in an area are these types of purchases. Based on traditional appraisal theory however, and federal regulations, conservation is not an acceptable highest and best use. So currently under federal regulations, these transactions cannot be used as indications of market value, and this often frustrates potential sellers as it appears to have done in this case.
In my career as an appraiser, I have been responsible for multiple public acquisition projects not going through because I could not substantiate the values that land owners were looking for. Sometimes this is due to the federal regulations the appraisal is confined to, but often the value expectations of the land owners isn't supported by the market. Many land owners in the Montana land market base their expectations on speculative values, rather than market substantiated values. This can make public and conservation projects difficult, as these sellers can be operating from unrealistic expectations and be looking for returns that the market itself won't support.
