Hall and Hall's Unique Partnership Structure

We normally try not to “toot our own horn” too obviously, but it has become increasingly apparent that our friends and clients do not fully understand our partnership approach to the real estate business. We feel that it is the most important quality that sets us apart from our competition and, over the last 40 years, has made us in all likelihood the largest ranch brokerage firm in the world. This partnership or team approach was originally developed in the late 1960’s and we believe that it is unique in the real estate world. It is completely different from most real estate firms who employ something more akin to the “eat what you kill” approach to the sharing of commissions. In a traditional firm all commissions earned are divided in some manner between the agent or agents involved in the deal and the firm. Beginning in the late 1960’s, Hall and Hall Incorporated (HHI) embarked on a different path. HHI entered into a “joint venture” relationship (now a formal Limited Liability Partnership) with a group of independent ranch brokers now referred to as “ranch partners.” The parties each agreed to perform certain functions and agreed upon how the profits and losses from these activities were to be divided. The partnership agreement requires that HHI as the managing partner provide funding, management, and at least one active ranch broker to the venture. The individual partners are each required to devote full time to the business of listing and selling investment quality rural property. We do not allow any “part timers” and most importantly we never base anyone’s compensation on his or her involvement or lack thereof in any specific deal. The partnership agreement calls for the repayment first of all operating expenses incurred by HHI and then the balance is divided amongst the partners, including HHI, based on each partner’s share of the partnership. Most partners come in at a junior level and work their way up to full partner over a period of up to six years. Some of our more conservative partners affectionately refer to this system as legalized socialism! This description certainly has some basis in fact. However, with 40 years perspective, it seems to have worked quite a lot better than most of the socialist governments with which we are familiar. Proof is partially in the record of Hall and Hall’s growth over that period from around $3 million in annual sales in 1972 out of one office, to a recent peak of over $300 million from 10 strategically-located offices throughout Montana, Wyoming, Idaho, Colorado, Texas and Nebraska. But there is quite a lot more to it than that.

THE BENEFITS
As the real estate business has evolved, we have come to have both buyer clients and seller clients whom we represent in real estate transactions. The partnership system is all about teamwork. We communicate formally in a conference call once each week, we meet physically three times each year, and the various partners are in constant daily contact as needed. Since our system places no premium on who actually does the deal, every partner is equally interested and equally invested in every deal or potential deal. There is absolutely no secrecy and everyone shares ideas and information fully. This ensures that a buyer client is exposed to absolutely every possibility on the market and our listing clients have the input and marketing ideas as well as the Rolodexes of 16 ranch partners being brought to bear on getting their property sold. Additionally, we guarantee the utmost in confidentiality when we represent the buyer and seller in a transaction. Our system also means that our clients can work with the partner or partners with whom they feel most comfortable. Many of our clients have stated that they have benefited immeasurably from receiving the input and advice of more than one partner. The bottom line is our system makes it possible to always do what is best for the client. This is especially true when it comes to meeting a client’s personal schedule or matching him or her with a partner who has specific expertise or specialized knowledge of different areas. The benefit to our partners is that it smoothes over the ups and downs of the traditional real estate cycle. It allows partners to maintain a more balanced personal life as each partner covers for the other. It removes the obsessive secrecy and competition that takes place within a traditional office. In short it immeasurably improves the quality of life of our real estate partners. The proof of this is that it is almost unheard of for a partner to leave Hall and Hall. We believe it is fair to say that happy partners lead to happy relationships with clients and prospects.

POTENTIAL PITFALLS
The primary potential shortcoming of a partnership system whereby everyone shares in the output of others is that it is possible for a partner to not hold up his or her end. We have found that there are two ways to avoid this happening. The first is to have complete transparency on virtually a daily basis as to what each partner is doing, what deals are happening, and what showings are taking place. We also maintain an active peer review system. The second is to be extremely careful to bring on partners who are, indeed, team players and for whom holding up their end is a top priority. Most of our partners have been individuals with whom we have dealt before, or who have come in with a long trial and training period. By taking these key steps, we have pretty much eliminated the pitfalls. We believe we have created a system that is designed with the client as the primary beneficiary. With certain key safeguards in place, it coincidentally also works well for the individual partners and for Hall and Hall. As a result, we feel that we have assembled the finest team of brokers in the U.S. who are uniquely joined to provide the highest level of personal service to our clients.

Purchasing a Ranch in Patagonia

Investment in the Patagonia region of South America – Chile and Argentina – is certainly not new. Europeans and some North Americans have been fascinated by this region for over a century. Hall and Hall's first foray into Patagonia was in 1996 when Ted Turner asked us to find a place where he could fish for trout during the Montana winter. The result was a 10,000-acre estancia called La Primavera on the Rio Traful in the Nahuel Huapi National Park just north of San Carlos de Bariloche, Argentina. He has expanded that holding dramatically over the years and now owns two other large estancias. Chile has seen the arrival of Doug Tompkins and his wife Kristine McDivitt who have bought and protected enormous parcels in both Chile and Argentina – often donating large acreages to the National Park system. Many others have led and followed and, much like those who have discovered the ranches of the northern Rocky Mountain Region, are finding the experience to their liking. The main characteristics are similar in many ways - vast open spaces with dramatic mountain ranges, beautiful clear rivers, streams and lakes. There is also the romance connected to the life of the gaucho and the elegance and sophistication of the estancia lifestyle, some of which was certainly imported from Europe many generations back. Another similarity is that this region boasts some of the world’s best fly fishing in a setting that is second to none. Hunting for Red Deer is reminiscent of our Rocky Mountain Elk with trophies of similar size to be taken. There are many differences as well - and those differences make this region even more compelling. For example, the proximity of Patagonia to the Atlantic and Pacific oceans offers a delightful added bonus to the angler of the sea run trout which tend to run large and powerful. You might also wish to check out our listings, Estancia El Pedral or Bahia Mala, where the native fauna includes seals, whales and penguins.

From a practical point of view, investing in land in Patagonia is relatively simple. While there is no prohibition against private ownership, often it is easiest to transfer the land and other physical assets through the sale of corporate stock. Many of our listings are set up in this manner. In Argentina, sale of land on the Chilean border can be held up by the Argentine Border Commission, although this is normally just a bureaucratic hurdle that can be avoided through the purchase of stock. Both Argentina and Chile have signed treaties with the U.S. which provide for foreign investors to be treated like locals. Argentina does tax capital gains on land as ordinary income - which is taxed at 35% in a corporation and at up to 45% as personal income – another good reason to adopt a corporate structure. As long as the correct paperwork is completed when the money is brought in, there is no problem with repatriating the gains as well as the original investment. Generally speaking, neither Argentina nor Chile has ever nationalized or taken away land that is privately owned by a foreigner. Private ownership of land has long been protected. Mineral ownership is all in the name of the Federal Government which grants concessions to private individuals and companies to exploit these resources. Landowners are permitted to charge for damages in return for allowing access to the minerals under their land. Looking at investment in this region from both sides, it is fair to say that we do not recommend land investment anywhere (even in the most stable of countries) to investors with a short time horizon, or for those who might need to sell precipitously. We specialize in “investment quality” rural real estate and the properties we offer have intrinsic qualities we believe will always have value. Inevitably however, there are going be periods of time when it will be difficult to turn this value into cash. There are clearly good times to sell and good times to buy in all markets. As this is being written, Argentina - where the currency exchange is 3 to 1 in favor of the dollar - is a good option for dollar investors. In Chile, the exchange is very much fair market but the Chilean economy is currently considered among the strongest in South America and would generally be considered by most to be the most stable place in South America.

The real estate business throughout Chile and Argentina is somewhat different than in the U.S. and Europe in the sense that the buyers and sellers pay their respective brokers. Consequently there is not one large commission paid by the seller which gets divided between the broker representing the seller and the broker representing the buyer. Buyers need to take this into
consideration when evaluating properties. At Hall and Hall we are uniquely positioned to help both buyers and sellers in this process. Through our advertising and our website, we are able to give properties extensive exposure to a marketplace of buyers which we have developed over our 60 years in business. It is critical for sellers of land to get this kind of exposure. In addition to this coverage, Hall and Hall’s reputation for successfully selling the very best properties is unparalleled. We bring a high level of credibility to the table. However, more important to investors interested in this fascinating region, Hall and Hall has set itself up to represent buyers through a unique network of resources that we believe is second to none in the region.

Our team consists of five brokers in the U.S. who have all traveled the region and can initiate the process here in the U.S. Once a relationship has been established here, you will be transferred to our team within the Patagonia region. You will be met in Buenos Aires by Brian Deane, a former bank executive who speaks impeccable English having actually been schooled in England. Brian has been with us since the Ted Turner days and has steered us carefully around the many pitfalls that await one who does not know the peculiarities of doing business in another culture. Brian is totally dedicated to our clients and has no other agenda as he operates as an advisor and confidante exclusively for Hall and Hall and our clients. The second half of the Argentine team is Shanahan Campos in the persons of Juan Shanahan and Santy Noriega. Juan is a long-time broker of estancias in the area who knows the entire region like the back of his hand and can show one everything that is for sale formally or informally. Santy is our wildlife and fishing specialist who is intimately familiar with these aspects of Patagonia. This combination of Juan Shanahan and Santy Noriega on the ground and Brian Deane to handle the business side is extraordinary as these men both have extensive experience and are of the highest integrity. Hall and Hall brokers also often travel and review properties with our clients and help to provide the interface between the two cultures. Please visit Shanahan Campos at www.shanahancampos.com.

The differences physically between Argentina and Chile are relatively dramatic. Chile lies on the Pacific side and receives much more annual precipitation than Argentina. The rivers tend to be bigger and the country is incredibly lush and green. Argentina tends to be more like the eastern side of the Continental Divide in the Rocky Mountain region where there is more open grassy
plains with less tree cover. The spaces are bigger and the views in some ways more dramatic because of the openness of the country. The weather is more dependable and the streams are of a more comfortable volume for the wading angler. The beauty of both is very much in the eyes of the beholder and we feel that it is extreme in both cases. In some ways we felt that Argentina was somewhat more populated and civilized simply because it is easier to get to by commercial air service and there are more towns and paved highways. As one proceeds south from Puerto Montt in Chile, travel is often done by air or boat, although the main gravel roads are of good condition. We found Chilean Patagonia to be stunningly beautiful in a very rich way and Argentina to be more vast and dramatic. Land values in both countries seem reasonable by comparison to similarly
beautiful places in the Rocky Mountain West. However, we will let you judge for yourself.