3 Of The Most Lucrative Land Deals In History
By Justin Kuepper
This is a reprint of an article on Investopedia.
The real estate industry may see some large land deals these days, from the $200 million Penthouse in London to the $2 billion Antilla building in Mumbai, but these pale in comparison to some historical land deals. Many of these land deals occurred at very low prices, even by historical standards.
The Alaskan Purchase
The U.S. purchase of Alaska from Russia in 1867 is considered to be one of the largest land deals in history. Fearing another war with Britain after the Crimean War, Russia rushed to sell Alaska to the United States for just $7.2 million, or about two cents per acre, in order to prevent nearby British Columbia from taking over the territory, and to bolster its struggling finances.
How much is this land worth today? The state encompasses some 586,412 square miles, or more than 375 million acres. Even at a cost of just $100 per acre, that would equate to more than $37 billion. Moreover, as of August 2012, the region also produces some 426,834 BOE/D of oil and natural gas worth billions in revenues each year. Alaska is one of the few states with no income tax.
The Louisiana Purchase
The Louisiana Purchase from France in 1803 is another U.S. acquisition that’s considered to be one of the largest land deals ever. With a purchase price of just $15 million (or about $233 million in 2011 dollars), the U.S. added some 13 states worth of territories at less than three cents per acre (or less than 42 cents per acre in today’s dollars).
Interestingly, the Louisiana Purchase almost didn’t happen for a couple reasons. President Jefferson was widely criticized for acting above and beyond his constitutional authority, especially given his strict interpretation of the Constitution. Secondly, many Federalists worried that the U.S. was funding a war against Spain by selling to Napoleon in France.
So, how much is the Louisiana Purchase worth today? The deal encompassed some 800,000 square miles, which equates to approximately 512,000,000 acres. With land costs today averaging between $1,000 and $4,000 per acre in the continental U.S., the total value of the Louisiana Purchase is therefore likely to be more than $1.2 trillion.
The Treaty of Tordesillas
Back in the 1400s and 1500s, Spain and Portugal were the world’s two largest superpowers carving up the world. The discovery of the New World by Christopher Columbus led to some disputes about who had rights to certain territories. Eventually, the two countries agreed to divide the world along a meridian 370 leagues west of the Cape Verde islands.
Unfortunately, the New World turned out to move mostly west in direction and the deal turned out to be rather one-sided. Spain ended up colonizing the vast majority of South America with the exception of present-day Brazil, where Portuguese is still spoken. After 1898, the treaty became somewhat obsolete as the two world superpowers grew less influential.
While the total value of this deal is impossible to calculate, the control the Spain maintained over most of Latin America played an important role in history. The majority of the countries in the region asserted their independence in the early to mid 1800s. By the 1900s some Latin American countries were participating in the World Wars as U.S. allies.
The Bottom Line
It may be easy to gasp at the current real estate market and the tens to hundreds of millions of dollars spent acquiring palatial estates. However, these purchases seem inconsequential compared to a time when countries could sell an entire state.