Conservation lease turns into ownership

Aug 27, 2010
by DTN

When lottery players hit the jackpot, they’re usually set for life. Not so for Shane and Kristi Daniels.

They’ve won the lottery—twice. But rather than a life of leisure their jackpot promises years of hard labor.

They’re planning a party to celebrate.

The Daniels’ jackpot is Horse Creek Fen Ranch, 3,480 acres of rolling grassland 50-plus miles southeast of Valentine in Nebraska’s vast Sand Hills.

Five years ago, Shane and Kristi won the right to lease it for five years with an option to buy.

That right was the grand prize in an unusual beginning-rancher program set up by the Nature Conservancy, which owns the ranch, and the Sandhills Task Force, a conservation group dominated by ranchers. Out of 60 inquiries and five applications, the Daniels were selected. DTN wrote about the Daniels and the program last year.

Now, thanks to a cooperative banker and Uncle Sam, Shane and Kristi, both 32, have won the second lottery—the financing that will enable them to exercise their purchase option just as the lease is about to expire. Assuming the Cherry County commissioners approve the Nature Conservancy’s proposed conservation easement August 31, the ranch will belong to the Daniels several weeks from now.

That’s the outcome the conservancy and the task force had hoped for. The conservancy could have achieved its environmental goals by simply selling the land with a conservation easement. By working with the Sandhills Task Force to set up and mentor a beginning rancher, the conservancy hoped to encourage small, environmentally friendly landholdings and instill a conservation ethos in families like the Daniels. Having worked the land for five years under the terms of the easement—including no draining of the 100 acres of wetlands and no non-agricultural development—Shane and Kristi are enthusiastic about the easement’s environmental and economic benefits.

Impossible dream come true

For the Daniels, owning Horse Creek Fen Ranch represents an impossible dream come true. During the years when they had no money or land—nothing but Shane’s Sh experience working for other ranchers—their goal, says Kristi, was always “Some day we would have our own place.” Yet without the Nature Conservancy’s help, says Shane, “There’s no way we could have bought a ranch.” The goal was “just too tough.”

Now that they’ve achieved it they are, says Shane, “Excited—and nervous.” Between their mortgage, their operating note, their cow-herd note and their equipment note, he calculates that “by October 15, we could be a million dollars in debt.”

Listening to Shane tick off the challenges ahead, Jim Luchsinger smiles. “It’s like being a real rancher, isn’t it?” he says— and the Daniels smile at the thought of being real ranchers.

Luchsinger is the Nature Conservancy operative who has worked with the Daniels from the beginning. There were, he says, applicants who had some money or land and thus would have faced fewer challenges. But the whole idea was to give someone a chance who wouldn’t have had one otherwise.

“We didn’t want to pick someone who we were absolutely sure would be successful,” Luchsinger says.

Over the last five years, the Daniels had to work harder than they’ve ever worked, both on the ranch and off. There were some near-disasters along the way. The stress level was high. And it will stay high, Shane says. “The next five years are going to be just as critical as the first.”

Won’t be easy

It won’t be easy to build equity in cows while paying off their real estate loan, half of which is from a USDA program for those getting started in agriculture. Their deal with the conservancy calls for them to pay the 2005 price, minus the appraised value of the easement. Price appreciation provided the equity that enabled them to buy the land. They haven’t been able to put away a nest egg, and they’ve mostly fed others’ cows.

As a result, financing didn’t come easy, Shane says. “Before we found the bank that’s going to work with us, we talked to a half dozen banks that said flat out ‘no, it’s too risky, there’s not enough equity.’” One banker told them she’d lend them the money if they’d agree to immediately sell the land at today’s price and pay off the loan. They would have pocketed a profit on the deal, Shane says, but “We said no. We want to be ranchers.”

And whatever challenges being ranchers brings, the Daniels believe they can overcome them. “Yes, we’ll have to have our off-theranch jobs,” Kristi says, but she’s “very confident as far as the future goes.”

The Daniels made more money when they lived in town and worked for other people. But having their own ranch is worth the sacrifice, a true cause for celebration. Says Shane, “I just can’t imagine myself living anywhere else.” — Urban C. Lehner, DTN