Vineyards: Investment with 'sex appeal'

Last updated 09:55 24/08/2017

Misty Cove founder Andrew Bailey is selling a vineyard the company co-owns with Moa founder Josh Scott in Onamalutu, Marlborough.

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Fancy a glass of Marlborough sauvignon blanc? How about from your own vineyard?

Global demand for the variety has pushed land prices in the region far above what the average small-time investor would consider spending.

But rural investment firm MyFarm is offering an alternative to going it alone: pooling money from a group of shareholders to make vineyard ownership attainable.

The latest figures put the average price for a hectare of established vineyard in Marlborough at $190,000. 

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MyFarm is asking for a minimum buy-in of $100,000 as it tries to raise $3.2 million to buy an 18-hectare established sauvignon blanc vineyard in Onamalutu, near the Wairau Valley.

Chief executive Andrew Watters said investors were in it for the returns - about 7 per cent a year - but the added attraction of owning a vineyard also helped.

"It's a stable, secure land-based investment. But the fact it's in wine, a growing industry, and there's a little bit of sex appeal with viticulture, has a beneficial image," he said.

Watters said investing in a vineyard was similar to commercial property, but there was no operational risk, land prices were on the rise and there was no issues finding tenants.

"Marlborough sauvignon blanc is geographically limited. We're seeing continued increasing demand and eventually that will be positive for prices," he said.

MyFarm already had a contract in place to buy the vineyard off its owners, wine company Misty Cove and Moa founder Josh Scott.

Misty Cove founder Andrew Bailey said he chose the Junction Vineyard site because it had the ideal microclimate for growing sauvignon blanc.

The company, which exports its wine almost exclusively to Europe, became the first in New Zealand to produce sauvignon blanc and pinot noir in cans last August.

Watters said the vineyard itself made up $2.65m of the overall spend, a price that worked out about $145,000 a hectare, while the rest would be spent on expanding the property.

The money that was raised would be used to form Junction Vineyard Limited Partnership, which would then lease the vineyard back to Misty Cove for a period of 10-years.

"It's a new model for us, plenty of people are leasing out their vineyards in Marlborough but we're just making it available for the wider public," Watters said.

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MyFarm had traditionally focused on dairy and sheep farm investments, but in the last 18 months it had raised $12m to buy two vineyards in Marlborough.

Watters said wine companies were attracted to leasing, rather than buying, vineyards because it allowed them to free up capital to invest in other areas of their business.

They were also able to secure their fruit supply in what had become an increasingly competitive market where companies were expanding and looking further afield for land.

New Zealand Winegrowers figures showed Marlborough had 25,135 hectares of vineyard in 2017, a figure that was predicted to grow to about 29,300 by 2019/20.

Bayleys Marlborough viticulture sales specialist John Hoare said the growth of the industry had pushed up land prices throughout the region.

A report from the Ministry for Primary Industries said while the average price was about $190,000 for a hectare of vineyard, prices could fetch $250,000 or more in desirable areas.

Hoare said there was also growing interest in leasing vineyards, which he said was attributable to the fact wine companies did not have to bankroll debt to buy them.

On average, he estimated companies were paying about $10,000 a hectare in rent each year. 

- The Marlborough Express


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