MINNEAPOLIS — The pavement comes to an abrupt end on Lenox Drive in the Waterford development in Waconia, Minn., new houses segueing to farmland.
Only 40 percent of Waterford — about 60 acres — was developed before the housing market imploded. Land slated for new houses went back to the Waconia farmer who had long owned it, some of it repurchased at a fraction of the lofty prices developers originally paid.
Sell high, buy back low — it has become a winning investment strategy for some farmland owners in recent years.
Housing developers vacuumed up farmland during the housing boom, only to see demand for homes vanish. Now, with housing still struggling and agriculture booming, some dead developments are sprouting crops again.
The farming boom is a “silver lining” to the housing bust, said Keith Kern, assistant county assessor in Carver County, Minn. Granted, farms don’t produce as much tax revenue per acre as houses do. But “it’s better to see some part of the market increase as opposed to everything going into the tank.”
Farmland demand has soared in tandem with historically high crop prices.
For farmers scrapping for space, some land that seemed destined for housing just a few years ago now has more value for farm use.
Data are scarce, but the assessors’ offices for Minnesota’s Carver, Scott and Wright counties — all bridges between city and country — report instances of prospective development sites moving back to farmland. The same sort of shift has been occurring nationwide.
“We have had a handful of developments go back to agricultural production, and with ag markets going so strong we could see more of that occurring,” Kern said. “Certainly the ag market is the only market we have that is doing quite well.”
Plowshares Development and Centex Homes planned to carve Waterford from 160 Carver County acres known as the Siegle farm. The developers bought options on the Siegle property, as farmer Dennis Siegle wanted to continue farming the land if Waterford couldn’t be completed, said Todd Simning, Plowshares’ president.
In May 2005, Plowshares purchased almost 60 acres, paying the Siegle family $6.02 million or $102,000 per acre, county property records show. About a year later, Centex paid the Siegle family $2.2 million for 18 more acres, about $120,000 per acre.
But by the end of 2006, “nothing was making sense — land prices or home prices,” Simning said. Waterford’s progress stalled with 60 acres actually developed.
Options the developer bought from Siegle were left to expire, Simning said. Centex in 2007 put its remaining Waterford land into a national portfolio of “underperforming assets,” which was sold to Corona Real Estate. In 2010, the Siegle family bought 16 acres from Corona for nearly $106,000 or $6,500 per acre.
Siegle, who lives in a new home in Waterford, declined to comment for this report.
“Dennis is a very intelligent farmer and businessman,” Simning said. “We kind of joked (when housing was still booming) about some of the farmers who wouldn’t sell.”
It’s not just failed housing developments that are returning to their roots. The housing bust combined with a weak economy to soften the golf market in the past five years. A proliferation of courses in the 1990s and earlier 2000s didn’t help matters, either.
In Owatonna, Minn., after the troubled Hidden Creek Golf Course went back to the bank, the 151-acre property was sold to farmers Kevin and Kris Deml in 2009 for $650,000. The greens are now home to corn and soybeans, the clubhouse converted to a residence.
In Hayward, Minn., just east of Albert Lea, the struggling 62-acre Holiday Park Golf Course and driving range was sold to a large Iowa hog operator for about $390,000. Hog production, like crop farming, is also booming.
The defunct Hayward golf course is like several nearby tracts of land along Interstate 35 that have been zoned for development, but now are more attractive as farmland, said Ryan Rasmusson, assessor in Freeborn County, Minn.
With corn near $6 a bushel, notions of what is the highest and best use of land have changed. “It’s kind of turned on its head,” Rasmusson said.