Romancing the West: beach house? They'll take a Big Sky ranch

Chief Executive, The, Jan-Feb, 2005 by Rebecca Fannin

When David Leuschen describes his Montana ranch, it sounds as if he's exaggerating. He owns about 200,000 acres of snow-covered peaks and gaping canyons outside Yellowstone National Park and runs 2,000 head of cattle on one of the larger operations in the state. He accesses the high-altitude portion of his ranch by all-terrain vehicle over 23 switchbacks, along a trail with 2,000-foot-high cliffs where the occasional mountain goat, wolf and grizzly bear is the only company. "This is arguably the most remote ranch in the Lower 48," he says.

[ILLUSTRATION OMITTED]

The views from Leuschen's Switchback Ranch, straddling the Beartooth and Absaroka Mountains, are nearly as stunning as the panorama from his New York office on Fifth Avenue, high above Central Park. A take-charge sort, Leuschen feels as at home in the muscular land of cowboys as he does in the fast-paced city of exees. When not overseeing operations at his ranch, he runs Riverstone Holdings, a private equity firm that invests in the energy and power industries.

While most CEOs might have a second home in the Hamptons, Nantucket or Palm Beach, Leuschen is part of a circle of top executives, including Ted Turner and Paul Allen, who are drawn to the ranches of the high-mountain West. They got into ranching not for ego but for love. For them, the image of the rugged cowboy is irresistible, as is the desire to keep the spirit of the Big Sky alive.

Leuschen, a Montana native, thinks nothing of flying from New York to his ranch near Cody, Wyo., home of Buffalo Bill. He spends weekends, a summer month and holidays on the ranch. He frequently invites business guests, a great tool for building relationships. In season, he hunts elk, mountain goats and bighorn sheep on his land. He also raises, trains and sells cutting horses, used for the cowboy sport of "cutting," or separating, a cow from the herd. "I'm doing this because I believe in ranching," says Leuschen. "It is my passion."

Ranch ownership also has its practical side. Many owners outsource the day-to-day operations to an on-site manager who oversees a self-contained community with a staff of people, ranging from a cook and a housekeeper to ranch hands who herd the cattle and maintenance workers who plow the roads and keep the fences upright. Common, too, is an amenities staffer, who helps with the special needs and desires of guests, such as a copy of the day's New York Times or warmer clothing for a snowmobile ride.

From a financial standpoint, ranches require an investment of time to figure out the best strategy. Most ranch owners run cattle on their property, and thus can pay a lower tax rate reserved for agricultural land. Some opt for the additional step of putting their ranches under a conservation easement, which, because it restricts development, lowers the land's value and in turn the tax rate. While some owners choose to subdivide their vast tracts into mini ranches to recoup some of the operating costs, most ranches are not income generators. In fact, wealthy owners can use the losses from them as a way to offset income from other businesses they control.

Buying a ranch is not as easy as it may appear. Most are purchased from families who have been on the land for generations but can no longer afford to operate them. These families are not eager to leave, yet they don't want to face selling to a developer. Prospective owners who can promise the family that they will preserve the ranch, rather than develop it, can often win out during typically long and sensitive negotiations. In many cases, the original family stays on, helping the new owner to manage the ranch while also keeping their Western way of life.

Charlie Gallagher, who runs the Denver-based private equity firm Gallagher Associates, has conservation in mind, too. He owns the 19,000-acre Grand River Ranch in northern Colorado, of which he has set aside 11,000 acres overlooking Rocky Mountain National Park for his own weekend escape. He has subdivided the remaining land into several smaller ranches, which he has put up for sale. The parcels that have sold so far have been purchased mainly by CEOs, he says, including a 2,752-acre plot bought by Jack McDonnell, chairman of the Denver high-tech group McData Corp.

In southern Utah, just east of the salmon-colored outcroppings of Zion National Park, David Neeleman, CEO of JetBlue, owns and operates the 4,000-acre Zion Ponderosa Ranch. "This is my piece of heaven," he says of the ranch, which he and his siblings inherited from their grandfather. Most of the land is still raw, but to keep the ranch in family hands and away from developers, he added a modest resort that offers cabins, horseback riding, nature hikes, rock climbing and fishing. Two of Neeleman's sisters help run the resort, which doubles as an executive retreat. A nearby real estate project, with about a dozen rustic-looking but luxurious homes for sale, is also part of the property.

To be sure, it's not a profit motive that's attracting CEOs to ranching. "I will never make back the money put into the ranch unless I sell it, and I expect the ranch to outlive me," says Leuschen, 53, who intends to someday pass it on within the family. He is in the process of putting the ranch under a conservation easement, which would restrict development on the land.