The New Texas Land Rush
The boom in hydraulic fracturing brings a wave of oil barons buying luxury homes; demands include elevators, built-in grills and plenty of display space for trophy animals.
The shale-oil boom in the Lone Star State has created a different kind of gusher: oil executives flush with cash looking to buy luxury real estate.
Jennifer Whitney for The Wall Street Journal
House Hunt: Oil executive Rick Pfeiffer looks at a home on Ivy Lane in San Antonio that is listed for $1.03 million
"We can list a house and in two hours have an offer," says Beth Ferester, a real-estate agent in Houston. Some high-end homes in the city have sold for as much as 10% over the asking price, says Lisa Kornhauser, a local agent with John Daugherty Realtors.
Modern-day moguls aren't always looking for glitzy homes that boast their wealth, real-estate agents say. Instead, location and the home's layout are important, along with sleek, understated design and ample outdoor entertainment space. Mark Molthan, a builder in Dallas, says many energy executives like subterranean garages that can hold a dozen cars, elevators and cisterns to ensure they always have water to be able to irrigate their yards.
He recently finished a home for an oil executive that included a 1,000-square-foot trophy room for the exotic animals he'd shot in Africa. "It was like walking into a museum," Mr. Molthan says.
Many oil executives are looking for a spread where they can entertain. Popular amenities include large media rooms, wine cellars and trophy rooms for the avid outdoorsman. Barry Williams, an interior designer in Dallas, completed a $6 million home in the Preston Hollow neighborhood for an oil executive several years ago that included a media room featuring 20 of the owner's collection of stuffed game animals. Bob Simpson, founder of XTO Energy, which Exxon Mobil XOM +1.57%
took over in 2010, recently added about 5,000 square feet onto his nearly 14,000-square-foot Fort Worth home, adding an indoor pool and a sports court.
In Houston, where the median sale price is $172,000, sales of homes for $1 million or more jumped 24% last year compared with 2011, according to the Houston Association of Realtors. In San Antonio, where the median sale price is $156,900, sales of homes priced at $500,000 or more jumped 12% from 2011 to 2012, according to the San Antonio Board of Realtors. In Dallas, sales of homes in the $1 million-and-above range increased 10% in March, year over year.
Rick Pfeiffer, a 58-year-old CEO of an oil-field equipment-services company, has lived in Mumbai, Singapore and Darien, Conn. But these days, he's house hunting in San Antonio, the biggest city near the booming Eagle Ford Shale formation, a prime location for hydraulic fracturing. The drilling technique, which uses sand, water and chemicals under high pressure to extract oil and natural gas from rock formations, has helped Eagle Ford oil production grow by 184% last year compared with 2011, according to the Railroad Commission of Texas, which regulates the state's oil and gas exploration and production.
Mr. Pfeiffer is currently renting a condo in the Alamo Heights neighborhood, a high-end area located 5 miles from downtown. Agent Ellen McDonough is helping him and his wife look for a home in the $750,000-to-$1.5 million range with a swimming pool. The Pfeiffers are also looking in Olmos Park, Monte Vista and Terrell Hills, where Craig Rosenstein, president of Lewis Energy Group, recently listed his home for $1.92 million. Prices in those neighborhoods range anywhere from $217,500 for a three-bedroom, two-bathroom home under 2,000 square feet to $6.95 million for a 14,000-square-foot, six-bedroom, nine-bathroom estate.
Like Mr. Pfeiffer, many people connected to the shale and natural-gas industry are relocating to major cities in Texas. Exxon Mobil, for example, is building a new campus in Houston for employees, including hundreds who are relocating from its Virginia and Ohio offices, and Devon Energy DVN +2.67%
has opened an office in Abilene, Texas, to be closer to the nearby Cline Shale formation. Others are moving to the Dallas-Fort Worth area, where the Barnett Shale formation, which produces in 24 counties, accounted for 31% of well-gas production in Texas last year, according to the railroad commission.
Marcus Rowland, who recently retired as CEO of a drilling outfit, for example, relocated from Oklahoma and in 2011 bought a more than 8,000-square-foot, five-bedroom, five-bathroom Mediterranean spread, complete with an entertainment room and a pool, in Fort Worth's gated community of Montserrat. The neighborhood has 220 homes that range from $1 million to $10 million.
"So many companies have moved their headquarters here or increased their presence," says John Zimmerman, a local agent near Fort Worth who has worked with oil executives. Robbie Briggs, owner of Briggs Freeman Sotheby's International Realty in Dallas, estimates that 50% of his firm's buyers are connected to the shale boom. They include oil executives, attorneys, technology consultants, midstream-company managers and accountants.
Oil man Trevor Rees-Jones, who netted billions drilling in the Barnett Shale, has been buying up several properties in the University Park neighborhood of Dallas, according to public records. In the summer of 2011, he purchased two vacant half-acre lots with large oak trees that overlook the Dallas Country Club golf course. Then, in late 2012, he bought a third property nearby—a 1.47-acre lot—and tore down an existing 8,343-square-foot, four-bedroom, six-bathroom, two-half-bath home. According to appraisal reports, the total market value of Mr. Rees-Jones's vacant lots is more than $3 million; he bought the property with the existing home for $8 million. Mr. Rees-Jones declined to comment; local real-estate agents say he plans to build on one of the lots and to hold the two lots near the golf course as investments.
In Houston, Jeffrey Sheets, Alan Hirshberg and Don Wallette, all senior executives atConocoPhillips
, COP +1.57%
have purchased new homes over the past two years. Mr. Hirshberg bought a home in the tony area of Piney Point Village for $3.68 million in June 2011, according to public records. In May 2012, Mr. Wallette purchased a home in Hunters Creek Village for $1.25 million, and two months later, Mr. Sheets, the company's chief financial officer, bought a 7,177-square-foot home with a list price of $3.2 million from a former Houston Astros executive. Through a spokesman, all three executives declined to comment.
According to public records, Mr. Hirshberg's 11,374-square-foot home has two elevators and a pool, and Mr. Wallette's Spanish-style home, which was built in 2009, has marble countertops and an outdoor kitchen and bar. Mr. Sheets's home includes a game room, a pool and hot tub, and a patio with a built-in grill.
New construction has also benefited from the boom. From February 2012 to February 2013, single-family building permits rose nearly 30% in Houston, 18% in Dallas and 2% in San Antonio, according to the National Association of Home Builders. Sharon Ballas, an agent in Houston, says many spec homes are selling "at the Sheetrock stage" that buyers then customize to their tastes.
David Nichols, a real-estate agent in Dallas, says many residents tear down older homes in choice locations because finding a vacant lot in upscale neighborhoods can be difficult. Indeed, on a recent morning in Highland Park, the drone of construction trucks and workers could be heard along the streets lined with Tudor and French-style mansions. Many trucks made it difficult for Mr. Nichols to see past them as he inched his green Mercedes out into traffic.
Shale barons aren't just looking at residential real estate. Many of them also are buying land.
Energy Transfer Partners ETP +0.48%
CEO Kelcy Warren kicked off a ranch-buying spree when he bought the Boot Jack Ranch in southwest Colorado for $46.5 million in 2010, says Eric O'Keefe, editor of the Land Report, a quarterly magazine about landowners and their properties. Originally listed at $88 million, the 3,151-acre property included a 13,825-square-foot main residence, four guest log cabins and ample water rights. Mr. Warren declined to comment.
In the past two years, Cisco, Texas-based brothers Farris and Dan Wilks have been buying up almost 200,000 acres in ranchland. The Wilks brothers founded Frac Tech, a company that performs services to increase oil-well productivity, and sold it for $3.5 billion to Singapore's Temasek Holdings in 2011. Their most notable ranch buy was Montana's 62,000-acre N Bar Ranch, listed for $45 million, which they bought from software entrepreneur Tom Siebel in January 2011. Tim Murphy, a broker at Hall and Hall whose firm has worked with the Wilks brothers, says they continue to look for more ranchland, not just for future land assets but for recreational purposes, too. "They like to hunt," he says, "and really are enamored by the thousands of elk, antelope and deer."