Happy August! A cooler than average growing season after major winter rains has been a welcome pattern this summer. I hope you have been soaking it up. On the real estate front the market has several competing variables creating an interesting dynamic to say the least. On the one hand, we are challenged with the […]... Read more
One of the most common questions I discuss with real estate clients is the value of a vineyard. What is a vineyard really worth? It’s not too hard to find different information quoting values per acre of vineyard in different areas. In Sonoma and Napa Counties the values are actually broken down to appellations and the prices can have a dramatic range. For instance a vineyard in the Sonoma Carneros area could average $80,000 / acre while over in the Rutherford Appellation in Napa County could come in well above $300,000 an acre. That’s right, more than 3X difference in value. Hence the question from clients who are just getting involved in the not so straight forward realm of understanding vineyard values.
Watch the video below for a quick recap.
The important thing to remember is that these values are starting points because there are a number of additional variables that come into play to determine actual vineyard value. To illustrate the range and unique quirks I am going to focus on the Russian River Appellation in Sonoma County and the Oakville Appellation in the Napa Valley. The Russian River Appellation flows through numerous towns including Healdsburg, Windsor, Sebastopol, Occidental, and Santa Rosa.
This chart shows two different values, $100,000 for an acre of Chardonnay and $125,000 for an acre of Pinot Noir. These numbers surely represent a starting point of discussion and reflect a modern vineyard in a prime location within the Russian River Appellation. However, there are a number of other factors to review that could push the price per acre higher or lower. Below is a general list to scratch the surface when reviewing a vineyard.
General Items To Review
• Age & Health
– It is important to know the age of the vineyard, is it 5 years old and just getting into production, or is the vineyard 40 years old with declining production and in need of replanting? Does the vineyard have any virus that may impact its longevity?
• Rootstock & Clone
– What selections of rootstock and clone does the vineyard have? Are they modern disease resistant rootstock or does the vineyard have AXR-1? Is the clone appropriate and desirable to current wine making trends?
• Soils & Irrigation
– What kind of soils are on the site? Are they Gold Ridge (most desirable soil for premium Pinot Noir in the Russian River Appellation)? Or, is the soil more clay based and better suited towards a higher yielding more average quality Chardonnay? Could it be the highly sought after Rutherford Dust, or red volcanic soils found in the mountain regions? Is there a reservoir, a ground water well, is it connected to a recycled water pipeline, or is the vineyard dry farmed? How do you deal with frost protection?
• Spacing & Vine Count
– The vineyard spacing and vine count are important because not every vineyard is planted in the same way. Some vineyards (older) have a wider 8’ x 12’ spacing making the vine count per acre much less than more modern spacing of something like 6’ x 9’. Then other vineyards have much more dense meter by meter planting. It’s not difficult to do the math and see how the vine count could impact yield and farming / maintenance expenses.
• Historical Yield
– Reviewing historical yields and comparing them to the over all pattern of other growers in the area can highlight interesting trends. For example, if the last several years have produces relatively steady yields across the region but a particular vineyard has seen yields trail lower, it’s time to start asking question. Is the vineyard simply getting older and producing less? Has a virus taken hold and limited production? Or, have farming practices changed in effort to improve quality (and hopefully increased wine grape prices)?
• Price Per Ton
– This is something everyone is interested in and can be deceiving depending on how you look at it. First and foremost the price per ton can be an indicator of quality based on the price paid, as well as the winery purchasing the fruit. That said, a lower price per ton is not always a negative sign. Often times, a lower price per ton correlates with a higher overall yield providing reasonable income.
• Farming Costs
– The farming costs are important because they can also range in a dramatic fashion depending whether you are farming organically utilizing mostly hand and human techniques versus mechanical harvesters and non- organic compounds in the vineyard.
All of these factors play into the final value of a vineyard and can push the numbers higher or lower.
Now we’re going to move over to the Oakville Appellation where all the above factors play a part and we’re going to discuss an interesting twist. The Oakville Appellation is located between Yountville and Saint Helena in the Napa Valley and is considered one of the most sought after locations for Cabernet Sauvignon and Bordeaux varietals in the world.
This chart shows two values, $300,000 / acre for vineyards of 5 acres or more and $500,000 / acre for vineyards associated with Luxury Estates. It is clear there is large gap between the two figures and it essentially comes down to scale. Keep in mind Oakville is one of the most desirable wine country locations in the world. Exclusivity certainly plays a role in creating “extra” value when a smaller two to five acre vineyard is attached to a luxury vineyard estate. As the vineyard increases in size the vineyard value moves back towards the more “standard” $300,000± / acre. Definitely an interesting twist in the equation, but one we’re all familiar with.
I hope this snapshot view into how the experts discuss vineyard values was helpful. I am confident that the next time someone asks you what a vineyard is really worth that you immediately know the correct answer, it depends. If you should have any questions or feedback please don’t hesitate to pick up the phone or send an email.