Wednesday, November 10, 2010

Do I hear $3 million?

From the Casper Tribune-

The Big West Ranch, located near Arminto, was up for auction on Thursday.

Auctioneer Harold Musser didn't speculate about the apparent take of nearly $3 million, whether it would have been higher a few years ago. "If you want to sell today, you take today's money," he said.

That's just the way the free market works.

Well, sort of.

The yield got a boost from the auction process. It wasn't a simple matter of running through the bidding once and calling it good.

The ranch was divided into 14 large tracts, with varying degrees of deeded land and assorted state, federal and private leases. In the first cut, each tract was put up for bid. But "winners" in the round actually won nothing. They only established a set of baseline prices.

Once high bids for each tract were posted, a second round of bidding commenced. Now, ranchers had an opportunity to bid on combinations of tracts, or even the entire ranch, and to raise bids on individual tracts.

Accordingly, a high bid for a particular tract could be wiped out by a combination bid for several tracts. A combination of tracts, moreover, could be negated by someone else's combination of tracts. If someone offered -- and some people did at one stage or another -- a bid for the entire ranch that exceeded the total for the tracts, then that action wiped away all previous activity. However, if new recombinations exceeded the bid for the entire ranch, the bid for the whole was itself annulled.

In latter stages, as it became clear who was still in and who was out, and who had an eye on what, auction representatives stood at the elbows of some bidders, encouraging them to up the ante.

The Big West Ranch is a little over 92,000 acres in size; however, only about 11,200 acres is deeded land. Nearly 61,000 is leased from the BLM and about 18,000 acres from the state.

The number of ways in which 14 tracts can be combined is a mathematical calculation beyond the expertise of this column. The apparent result on Thursday was bids from four buyers totaling $2,990,000.

But even that was not the end. It was a reserve auction. So an invisible thumb had been applied to the scale of pure, free-market capitalism all along.

Finally, finally, finally, two bids were accepted, totaling $2.11 million for about 62,427 acres.

High, low or in between what the land may have been worth yesterday, or may be worth tomorrow, really didn't matter. On this day, the winners paid what the market, and the process, could extract.

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