Published on June 25, 2000
© 2000- The Press Democrat

BYLINE:    SAM KENNEDY
Staff Writer

PAGE: E1

Nick Gust didn't win the Kentucky Derby, but the Santa Rosa rancher made a bundle off horses last month.

Gust's Hard Rock horse ranch, which he bought in 1995 for a little more than a half-million dollars, wasn't even for sale when a real estate agent contacted him. The agent told Gust that he could name his price for the 83-acre property, which includes a house, a swimming pool and stables on a picturesque hilltop between Santa Rosa and Rohnert Park.

The price was $4.5 million -- paid by a computer engineer from Cisco Systems in Petaluma.

That transaction was symbolic of the changing face of Sonoma County, as working ranches are being acquired for vineyards or as the private preserves of newly minted millionaires -- often transplants from Silicon Valley.

And with every horse ranch sale, at stake is a special niche of Sonoma County's rural history and culture.

In just the first half of the year, more than a dozen Sonoma County ranches devoted to raising and training horses have been sold. The value of such 25- to 100-acre ranches has doubled since 1998, according to Coldwell Banker real estate data.

``This year [2000], the majority (of buyers) have been related to high tech, and certainly the majority have been out-of-area buyers,'' said Carrie Belle Riggs, Gust's real estate agent.

Hard Rock's buyer was Dyke Shaffer, who works for Cisco in Petaluma designing optical networking equipment for the Internet. Several weeks after the sale, Shaffer married a dressage expert, exchanging vows on horseback at Hard Rock. The couple, who are on a horse-buying trip to Germany, were unavailable for comment.

In Sonoma County, newcomers like Kathy Jaraczewski, who recently moved from Livermore to a ranch north of Santa Rosa, are increasingly turning to the region because it's still cheaper than the South Bay.

Meanwhile, residents like Joanie Wilson, who is selling Green Vista Stables, just west of Santa Rosa, are hoping to capitalize on the increased demand for agricultural land.

The most publicized horse ranch purchase occurred this spring when the founder of a Portland-based telecommunications company bought 381-acre Moon Ranch from Peter Pfendler, who made millions in airplane leasing and has been a controversial defender of his Sonoma Mountain property, east of Petaluma, since acquiring it in 1993.

Pfendler bought Moon Ranch for $2.2 million, sold the development rights to the county Open Space District for $1.4 million, and then sold the property for $4.1 million - earning $3.3 million in seven years.

Still, Pfendler's profit was hardly exceptional considering that the value of the county's largest horse ranches, those larger than 100 acres, has more than quintupled since 1998, according to Coldwell Banker's data. The average price of 100-plus-acre properties was $3,238 an acre three years ago -- it's $18,291 an acre today [2000].

Even though price per acre is a rough measurement because property value varies widely depending on numerous factors such as location, it offers an indication of just how much horse ranch prices have risen in a short period of time.

Increasingly, ranch owners such as Gust who had no plans to sell are drawn to the marketplace by the promise of exponential earnings.

``Based on the fact that the market is so high, some of these folks are cashing out,'' said Julie Hunter, a local real estate agent for Hunter Prestige Properties.

When Gust bought Hard Rock five years ago, the property was somewhat dilapidated. The ranch was vacant after languishing on the market for a couple of years.

Gust had been told the property was dry, but he found water and installed a well. He also built fences and refurbished the barns, which eventually boarded about 75 horses.

But Gust's improvements hardly account for the 800 percent return on his initial investment five years ago.

This inflation is, in part, due to pressure not only from the new high-tech money in Sonoma County, but also from the ever-expanding wine industry, according to Michael Murphy, chairman of the Sonoma County Horse Council.

Analysts predict that vineyards, which now account for nearly 52,000 acres of the county's agricultural land, will expand by 20 percent over the next several years.

``Horses are number two in terms of agriculture,'' Hunter said.

And when property owners convert ranches to vineyards, they inevitably displace some of the county's 140,000 horses. ``Where do these horses go?'' asked Hunter, a horse owner herself. ``It's really a challenge.''

It's a question on the mind of Joanie Wilson, who recently put Green Vista Stables up for sale. After owning the 23-acre ranch for 10 years, Wilson felt the lure of the marketplace. Her land, she said, is particularly valuable because it's close to Santa Rosa and ideal for both horses and grapes.

"Since I would like to keep my horses here, I would prefer that it goes to a horse enthusiast, but it's really premium for both."

The current market is also a double-edged sword for some ranch sellers hoping to capitalize on property value increases. Even though they can sell at a premium, sometimes they can't afford to relocate anywhere nearby.

``It's actually been difficult for my local clientele to sell and use their equity to purchase upward for a larger horse property,'' said Riggs, a real estate agent for Coldwell Banker.

Sometimes, buying downward is a problem, too. Chris Beaty recently put Grun Tal Ranch on the market with the intention of relocating from the 52-acre property to something smaller nearby. But, Beaty said, she's afraid that the high price of Sonoma County land will force her from the area.

``I just can't see us leaving, but we might move somewhere else ... probably up north a bit,'' said Beaty, who attributes the spike in land values to the high-tech boom.

``The money in Silicon Valley -- I don't think anyone could have foreseen that,'' she said.

Indeed, real estate agents report an influx of buyers from the South Bay. This is a clientele, real estate agent Riggs noted, that is particularly vulnerable to stock market fluctuations.

Recently, Riggs said, she was involved in a sale where the buyer had to rescind his offer after the Nasdaq market -- and his net worth -- plummeted.

Still, she said, there seems to be no shortage of buyers since, compared to the Bay Area, Sonoma County is an affordable alternative.

One such person is Kathy Jaraczewski, who retired from high-tech communications and moved from a small Livermore ranch to a 42-acre property north of Santa Rosa last year. She said she looked into San Mateo County ranches but found them prohibitively expensive.

"Horse property is almost unreachable down there,'' she said.

But a good deal for Bay Area horse enthusiasts could be bad news for locals, lamented Sheila Giovan, [an agent for Windermere Wine Country Properties].

``The little guy,'' she warned, ``is going to get priced out of the market.''