Newsletter

Climbing Peaks, Troughs and Plateaus in Napa And Sonoma

Quality is King

As we make our way through the first quarter of 2018, we can look back and say one thing for sure, the last year has been a year that we won’t soon forget!  This newsletter highlights values over the last two decades and identifies interesting trends for premium vineyards and prime areas throughout Napa and Sonoma Counties.  First and foremost, quality is king.  Whether it is Napa Valley Cabernet Sauvignon or Sonoma Coast Pinot Noir, quality is the undisputed driver of prices.  Like many things these days, the value cycle continues marching forward.  Natural events, stock market, politics… it’s been one big blur. Fortunately for us, wine country is an excellent place to watch it play out.

Let’s keep things positive by pointing out that 99.8% of area vineyards were not impacted by the wildfires of October 2017.  That said, our thoughts and prayers go out to all of those who were not so lucky.  There is more positive news.  Grape prices in Napa and Sonoma Counties have increased.  The annual grape crush report notes an increase in wine grape prices by 11% in Napa County and 8.2% in Sonoma County in 2017.  Grape prices provide a solid foundation for vineyard values.

sonoma-coast-pinot-noir

sonoma-coast-pinot-noir

Maximizing Value

With respect to vineyards, maximum value comes from combining the most desirable appellations with the most desirable varietals for the particular area.  In Napa County that means ultra premium quality Cabernet Sauvignon planted in areas like Rutherford, Oakville, Howell Mountain and other prime regions.  In Sonoma County that means Pinot Noir in the Sonoma Coast and Russian River appellations.  These combinations command the highest prices leading the way to increased values for our entire region.  Quality matters.  The same principle is true when discussing Chardonnay, Sauv Blanc, Zinfandel, Syrah or other varietals.

In other words, if you have old vine Zinfandel in Dry Creek Valley, premium Chardonnay in Los Carneros, or cult quality Cabernet Sauvignon in Alexander Valley the same rule applies, quality is king when maximizing value.

Climbing Peaks, Plateaus and Troughs

*Values reflect highest quality vineyards in highest demand Appellations / Varietal combination

NAPA VALLEY

napa-valley-vineyard-chart

SONOMA COUNTY

sonoma-vineyard-values

Up, Down, Sideways… Repeat

Aside from some of the macro elements that impact value, one variable has become much more dominant…. scarcity: the lack of more quality land to plant.  For all intents and purposes, Napa County is planted out… and has been for quite some time.  In Sonoma County, quality plantable land is becoming much more limited.  It is not far-fetched to point to scarcity as a value driver in a world-class wine-growing region.  Lacking ground to plant, existing vineyards become more desirable… and you guessed it, more valuable.  Scarcity can also be a potential hedge / insurance policy against macro economic downturns.

As mentioned previously, Napa County has been effectively planted out for years.  Reviewing the chart illustrates that the highest end vineyards and regions in Napa County essentially flattened out during recent economic downturns, including the Great Recession, while other regions were pummeled.  In Sonoma County values for the highest end vineyards have had a different pattern filled with peaks, troughs and recoveries as a result of economic turmoil. A question in my mind is whether the ultra premium vineyards in Sonoma County have recently entered the scarcity hedge plateau status of their neighbors in Napa County.  I suppose we will find out eventually.

When naysayers comment on the prices of our prized vineyards, I point to Bordeaux and Burgundy where vineyards come at a much higher premium.  Putting things in perspective and using other world-class grape growing regions as a guide, we have plenty of room to appreciate. Either way, it is my view that quality land and vineyards are only going to continue their upward trend over time.

Currently vineyard values range from $150k – $450k / acre in Napa Valley and from $90k – $175k / acre in Sonoma County.  There is a wide range but it all comes back to condition, location and quality.

The Tax Man

As they say, the only thing certain in life is death and taxes. For now, let’s focus on taxes.  A big question is how the new tax law is going to affect California? Looking into the crystal ball, the answer is we don’t know for sure.  What we do know is that California is the greatest economic engine in the country and buyers still want to live and work in the Golden State. We also know that our legislators are looking into creative solutions to reduce the burden of this new law.  Despite this and other challenges wine country is still one of the most desirable places to live, work, and produce world-class wine grapes. People will still want to invest in Napa and Sonoma Counties.  The future is bright.

Cheers!

David Ashcraft

Download PDF Here

vintroux_2018_spring_newsletter

 

 

 

 

Quick Wine Country Facts

Top 10 Vineyard Owners In Napa Valley 
1. Treasury Wine Estates3,416 Acres
2. TIAA / Silverado Investment Mgmt Co.2,500 Acres
3. Bayview / Laird Family1,811 Acres
4. Constellation Brands1,330 Acres
5. E&J Gallo1,123 Acres
6. Beckstoffer Vineyards1,015 Acres
7. Jackson Family Wines690 Acres
8. Antinori California561 Acres
9. St. Superey Vineyards / Chanel Inc.535 Acres
10. Yount Mill Vineyards / Napa Wine Co.500 Acres
(Source: WineBusiness.com)
  • Devastating Fires Spare Vineyards, Mostly

A recent survey by Sonoma State University’s Wine Business Institute found that 99.8 percent of  the region’s vineyards — or 138,937 of the 139,204 acres of vineyards on the North Coast — were not affected by the October
fires. (Press Democrat)

  • Perspective

From a 1988 interview with Napa Valley winemaker Louis P. Martini, on what it takes to make wine:

“A winemaker has got to be a bit of a farmer, a bit of a scientist, a bit of an artist and a bit of a businessman.  That does keep it from getting boring.”  (Mike Dunne – Sacramento Bee)

From a 2005 interview with Merry Edwards:

“Pinot noir pretty much is the only red varietal not blended, and that’s a new thing for people to experience. Cabernets, merlots and syrahs have all these blendings going on, and that’s a good thing, but to blend pinot noir would be a desecration. Pinot noir needs purity.  If you put a small amount of something else into it, you can just taste and smell it immediately.”  (Mike Dunne – Sacramento Bee)

  • Sonoma County Sustainably Farmed Grapes

72% of the vineyard acreage in the county – more than 42,083 acres – has been certied sustainable.  Nearing the goal of 100% by 2019, to become the nations first 100%sustainable wine region. (Marekt Insider)

Buyers Compete In Sellers Market, Spring 2017

So what are the current real estate values in wine country? The latest information shows continued price increases across the board. Even the median home price in Sonoma County has doubled in the last five years.... Read more

Things That Make Wine Country Awesome

Let’s focus on the positive. After more than a year of the most bizarre political theater in memory, it is time to put the circus back in the tent… at least for a moment. Your sanity will thank you. ... Read more

January 2015 – Trends, Insights & Analysis

In this edition we will touch on vineyard sales, an overseas buyer update, the 2014 crop, the drought and ways to conserve water, the winery market and permit challenges, a spot check (RRV), 1031 Exchange quick reference, and a few other interesting tid bits. Let’s get started!... Read more

Spring 2014 Newsletter – A healthy real estate market continues in wine country, higher grape prices, balanced supply and demand, and much, much more…

There’s a lot that can be said about last year starting with a brisk and healthy real estate environment,an improving economy and serious stockmarket advances. Closer to home it can be said that 2013 was a good year, 2013 was a big year, and 2013was a year where California crushed 4.23 million tons of wine grapes and prices held steady. So far,2014 is looking good too. In Napa and Sonoma Counties, the same goes for the sale of vineyards,vineyard estates and wineries. Buyers are interested.... Read more

August 2013 Newsletter – More Than Your Typical Harvest In Wine Country

As we are approaching the harvest of 2013 it is very clear that wine country is experiencing more than the annual flurry of harvest activities. Recent headlines in the media have documented the renewed interest in wine country real estate from lifestyle buyers and continued interest from industry players. Market activity is brisk and there is not enough quality inventory. Numerous high profile winery, vineyard and estate sales have taken place.... Read more

The Vineyard Economic Symposium

My clients have their noses to the grindstone, wanting to make artisan wines, as they gently press the juice from each tiny little grape, Today’s audience concerned with gently squeezing the profit from each investment of vineyard property.... Read more

The Economics of Ag Land

As grapegrowers, we believe this is a time to recognize the County’s successes that have resulted from its commitment to preserving ag land. ... Read more

So where exactly is wine country?

So where exactly is wine country? I can’t tell you how many times I’ve heard friends say that they are heading up to “Napa” for the weekend when they very well know that they are going to Healdsburg in northern Sonoma County. ... Read more

Fall in Wine Country

Fall in wine country is one of the most enjoyable times of year for a number of reasons. Gorgeous weather with warm days, cool nights and spectacular sunsets. The harvest is finishing up and leaves are changing colors. ... Read more

Drought Busting Deluge

With this years drought busting deluge of rainfall in Northern California, lets consider why a visit to wine country might not be bad idea.... Read more

Napa and Sonoma Wine Grape Prices 2016

As we keep moving headlong through Spring 2016 the final numbers for the 2015 harvest are in. More of a confirmation than producing any major surprises: Grape Prices Are UP…. Again!... Read more

Fall In Wine Country

Fall In Wine Country, Fall is a wonderful time of year as we begin to truly experience the change from summer heat towards mild temperatures... Read more

Looks like rain, maybe

Looks like rain, maybe - Napa and Sonoma wine country, California for that matter, has been waiting for an end to this four year dry spell... Read more