What's the difference between an acre of a Napa Valley vineyard and an acre of a Sonoma Valley vineyard? About $100,000, depending on the exact location of those vines.
Napa Valley vineyard land is a rare commodity, said Rob McMillan, executive vice president and founder of the wine division of Silicon Valley Bank. “It trades more like diamonds than ag land.”
“We’re talking about the best properties of the best properties of the world. There’s not that many of them,” McMillan said.
One acre of “prime” area vineyards is valued at between $225,000 and $300,000, according to a new report on 2011 agricultural land and lease values by the California chapter of American Society of Farm Managers and Rural Appraisers.
“That’s ground zero for making wine,” said Hal Forcey, accredited rural appraiser with American Society of Farm Managers and Rural Appraisers. “That’s where everybody wants to be.”
“Secondary” area vineyards can sell for up to $165,000 an acre, the report noted.
To compare, vineyard land in Sonoma County has values per acre of between $60,000 to $140,000. Mendocino vineyard acreage has values from $14,000 to $75,000 an acre.
Last year was a banner sales year in Napa County, said the land values report. Sales and values were strong, with a number of vineyard, winery, and estate properties trading hands. These sales were fueled by the presence of local and international investors, plus a marked increase in lifestyle buyers, the report said.
“There still seems to be that aura around Napa Valley vineyards and wineries,” independent real estate broker Gerry Bosch said. “Those with money always look for the best investments.”
Sales in 2011 ran the gambit, including distressed commercial and trophy quality properties. Trophy vineyard, winery and residential estates in the heart of the Napa Valley continue to sell at unprecedented prices, the report said.
Forcey estimated about half a dozen winery properties and another 15 to 20 commercial land and vineyards were sold in 2011. But 30 to 40 percent of all sale prices cannot be confirmed because of non-disclosure agreements, Forcey said.
One of the biggest sales was recorded in June when Sloan Estate, an ultra-private winery and vineyard in Rutherford, was sold by owner Stuart Sloan to Goldin Financial Holdings, a Hong Kong-based conglomerate, for $40 million.
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Additionally, the Eagle & Rose Estate Winery in Pope Valley was sold for an undisclosed amount, Frazier Winery was sold in April 2011 to Zhang Winery of China for close to $11 million and T-Vine Cellars in Calistoga was sold last May for close to $3.5 million. Approximately 25 acres from a Duckhorn property on Cabernet Lane was also sold in 2011.
McMillan pointed out several kinds of ag land buyers. “There are strategic buyers such as companies trying to buy a number of properties. There are buyers that were bottom feeders looking for a good deal. More recently, there are international groups looking to buy property in Napa County,” including those from China, Japan, Argentina, the Netherlands, Italy and France. There’s also the affluent buyer looking for some kind of combination of house and vineyard, he said.
Key factors driving the Napa County ag market start with two short grape crops and limited inventory in the pipeline, coupled with an improving economic outlook and improving wine sales, the report said. “These facts justifiably fan concerns of an impending grape shortage, with most industry experts anticipating higher grape costs in 2012.”
“Increasing grape demand is driving grape prices higher, which in turn is putting upward pressure on land and vineyard values,” the report stated. As a result, market demand and values should remain strong throughout the region.
Vic Motto, CEO of Global Wine Partners in St. Helena, said that demand for prime ag land has not subsided. “Anyone who had an excellent vineyard that put on the market, it wasn’t on the market very long,” Motto said.
“There is a demand for Napa-quality vineyards that is pretty much recession-proof. There are fewer buyers but enough to absorb whatever good properties that are out there,” he said.
“For some of these properties in Napa, they only come up once in a lifetime, maybe,” McMillan said. “If you want a Napa cab there is no substitute,” he said. “They can say ‘I will pay whatever I need to get it.’”
Bosch urged some caution for potential buyers seeking Napa Valley land.
“It’s farming,” he said. “You never know when you’re going to have a rough spring or winter.”
In 2012, “the thing that will drive purchases for strategic buyers is the shortage in grapes,” McMillan said. “Those buyers are going to be making more purchases this year. They need those properties.”
“If wine and grape prices are going up, land prices will follow,” said Mark Couchman, president of Silverado Premium Properties. “How much I can’t tell you.”