Vineyard syndication model helps Marlborough wine companies unlock land value

A dam at Patriarch Vineyard, in the Wairau Valley.

A dam at Patriarch Vineyard, in the Wairau Valley.

Worldwide demand for Marlborough sauvignon blanc is creating demand for land in the region, as wine companies jostle to lock in grape supplies.

Leasing vineyards has been a common practice for years, but a new variation of the leasing model is helping wine companies unlock capital to fund their expansions.

Investment syndication company My Farm is taking offers from prospective shareholders to raise money to buy a 70-hectare vineyard in the Wairau Valley, which will then be leased back by its current owner.

The investors will put forward at least $250,000 to become part of Patriarch Vineyard Limited Partnership, an entity which will raise around $6.5 million, plus take on $4m in debt, to cover the cost of the vineyard.

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Winemaker Ant Moore, one of the current owners of Patriarch Vineyard, said the sale would allow his company New Zealand Wine Brokers to redirect its capital towards stock holding and marketing.

My Farm national sales agent Grant Payton said the investment was a passive one, delivering returns of 8 per cent a year with the wine company assuming all the risk.

"The beauty of this model is that the lessee takes all the risk, the climate, the production, and all those risks associated with horticulture, so the investor has certainty around their returns," he said.

"It's like a commercial property model in the rural sector."

Payton said there had been huge interest in the Patriarch Vineyard sale.

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Other companies had also approached My Farm to see if the syndication sale model would work for them, something Payton attributed to their desire to expand.

"You can release the capital out of one area to employ it somewhere else - it's all about growth at the moment, wine companies are looking to improve their wineries, grow their supply and ultimately grow their markets."

Wine companies wanting to secure more land and grape supplies in order to meet growing demand could use the method to free their capital from one block of land and invest in another vineyard, he said.

The sale of Patriarch Vineyard included the clause that New Zealand Wine Brokers would maintain the lease for 10 tears, with rights of renewal for two additional periods of five years.

ASB rural economist Nathan Penny said the ownership model made sense, as wine companies would be able to focus resources on building their brands.

"The next step for the Marlborough wine industry is increasing value, that's going to be the way forward rather than looking for more land and more grapes, which means building a brand," he said.

"But that costs money and companies and grapegrowers might not have that, so they will be looking for a helping hand."

If companies used the syndication model, leasing back land they used to own in order to free up resources to buy more, Penny said vineyard prices in the region would increase.

The Viticulture Model Vineyard Benchmarking Report for Marlborough, released by the Ministry for Primary Industries, said the average price for a vineyard was around $190,000 per hectare.

However, the report noted that prime areas in parts of the Wairau Plains could sell for as much as $250,000 or more per hectare.

Bayleys Marlborough viticulture sales specialist John Hoare said since June the real estate company had sold more than 550 hectares of producing vineyards and land for development for around $66m.

"Demand has mainly been from both existing growers and wine companies based here in Marlborough, although there is now investment interest from outside the Marlborough region to secure sauvignon blanc grape supply," he said.

 - The Marlborough Express


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