The Man With a Million Acres

He's from Kentucky, makes his own bourbon, drives a Ford pickup—and flies in a private plane. These are some of the few details that have emerged about Brad Kelley, 55, a deeply private billionaire who made his fortune in the discount cigarette business. Mr. Kelley, whose hobbies include breeding rare, exotic animals, very rarely gives interviews. He doesn't tweet or use email. He is also one of the largest private landowners in the country, spending by his own account hundreds of millions of dollars on about a million acres—or about 1,600 square miles. The state of Rhode Island, by comparison, has a land area of 1,215 square miles. According to the Land Report 100, which tracks land ownership, Mr. Kelley is the fourth-largest private landowner by acres in the U.S., just behind Liberty Media Chairman John Malone, media mogul Ted Turner and the Emmerson family, headed by timber magnate Archie Aldis Emmerson. Mr. Kelley says it wasn't his goal to become one of the country's biggest landowners. "I grew up on a farm and that's about as good an explanation as there is," he says in an interview. "Land is something I know. It's something I have an affinity for. It becomes part of your DNA." Ranches, which are Mr. Kelley's specialty, don't tend to yield much of an annual return. Instead, their value is in the underlying appreciation of the land: According to the U.S. Department of Agriculture, the national average value of U.S. ranchland rose 12% compared with five years earlier; in Texas, it is up 30% compared with five years ago. Investors make cash on ranches when they are subdivided and sold to developers or as "trophy ranches," where the wealthy can fish and hunt. Texas oil baron T. Boone Pickens describes his strategy with ranches as "simple: Change the use of the land." He recently joined six other investors in a new ranch fund called Sporting Ranch Capital. The plan, says the fund's manager Jay Ellis, is to buy 12 to 15 premier ranches in Colorado, Wyoming, Montana, Oregon and Idaho, fix them up and then resell them as "trophy sporting ranches." In August, the fund made its first purchase—a 760-acre ranch in Colorado with a 2.6-mile fishing stream and five lakes—for about $6 million in cash; the fund hopes to put it back on the market in 2014 for over $10 million. Mr. Kelley's ranch strategy is different. He looks for good deals on cattle ranches in out-of-the-way places he thinks are undervalued, and holds on to them. He likes to buy adjoining parcels because it's more efficient to operate a ranch in large blocks and because it tends to be easier to buy property when it's right next door: He already knows what he's buying and what the seller is like. And he doesn't develop the land he buys: "We don't try to inject our way of doing things on other folks," he says. In this way, he has pieced together existing cattle ranches in remote parts of Texas, Florida and New Mexico. Once he has bought the land, Mr. Kelley does what some ranchers call "resting." He keeps the cattle operations running, almost always leasing the land back to the previous owner, who already knows how to run the existing operation. Mr. Kelley says his operations break even...more