Winery Appraisers?

[UpstateNY]

I have appraised a number of wineries/vineyards in the Finger Lakes region of upstate New York, but I would like to touch base with someone, probably in California, who has some winery appraisal experience. Or, someone who can refer me to an appraisal firm that does winery work. Thanks...

 

[CANative]

Michael Pipkin from American AG Appraisal. You can look up his information at www.orea.ca.gov

 

[UpstateNY]

Thanks

Thanks Greg - I will give him a call.

 

[CANative]

Mr. Buruss,

Do you have anything like a generic cap rate for a smallish vineyard?

I have a property with 14 acres. About 8 are planted. 4 acres of still wine (Cabs) and 4 acres of sparkling (Pinot Noir) All trelissd, drip irrigation, on their 7th leaf. The Pinot is restricted to tonnage the cabs aren't.

Cab = 7-8 tons x 4 acres x $1,400 = $44,800 +-
Pinot = 5 tones x 4 acres x $2,200 = $44,000 +-

The owner does all his own work, but if managed, the expenses and manager's cut would result in a net of about half or $45,000 (NOI?). If I apply that to an imanginary 10 rate the value of the vineyard is $450,000.

For this appelation, almost everyone who knows anything says a good quality small vineyard brings about $50,000 per acre ($50,000 x 8 = $400,000) When I make adjustments to comp sales using the $50k per acre (on other assignments I've done in this area) it seems to result in an even bottom line (sort of proving the adjustmnt?) The best I can figure in cost of the vineyard is about $35,000 acre plus 3 years. This particular vineyard has about $400,000 into it.

Does this seem like I'm on the right track?

 

[UpstateNY]

Greg - since there are very few sales of pure vinifera vineyards in the Finger Lakes region where I live, I have used income potential to support valuations. And, I have used a 10 cap rate as somewhat of a "benchmark", so to speak, as I do not usually do a full blown income analysis on a winery as a whole. I base the NOI per acre on Cornell University studies gathered from vineyard owner's data. As far as cost figures go, Cornell also publishes typical establishment cost figures, as does UC Davis. They include all costs through the third year, when they are at a point of production. Of course your land costs are many times higher, but just add your land value to the establishment costs, which are pretty much the same in California as they are here.

As with any agricultural property there are risks involved (weather, insects, disease) so you need to input a risk premium into the cap rate, but a rate in the 10 to 12 range is likely safe.

 

[CANative]

Thanks Clay.

I'm working on an assigment of a 14 acre property with 8 acres planted (the rest of the parcel is not suitable for planting). I turned this assignment down about 2 years ago due to the vineyard, but I've since gotten more comfortable with small vineyard residential properties. For the most part the ones I've done have only nominal potential or actual income due to location and type of vineyard (last one had 5 acres of old vine, organic Zinfandel but he has them on wires so the price per ton is much lower) and the income is only a tiny fraction of the properties market value.

My current assignment however is in a premium location and the vineyard on this tract is part of a larger vineyard on a contiguous tract under the same ownership. The vineyard is of very high quality and can produce an income that is not a tiny fraction of the overall market value of the property.

My client is a long time client and a real bank that I am proud to be on their fee panel. The vineyard is too small to be of interest to the local CG that does vineyards. He says if I'm worried about the vineyard, I could just use an HC and not value the vineyard. I think that would be fine with the bank. But then I worry about getting myself into trouble because this would be an FRT and an "as is' value would be required under the supplemental standards implied by Statement 10 (I think) The bank says they don't need the as is value, that they often use "house and 5" appraisals using a HC and audits by the OCC pass with flying colors.:Eyecrazy:

I've got reasonably good sales comps (even though some of the sales are almost 4 years old) so I can get to an as is value using the sales comparison approach, but income data is mostly anecdotal. I can get some income figures for larger vineyards with no residential improvements but I'm not sure if that could be applied to small vineyard proeprties that are more residential in nature.

Yuck.. sometimes I hate appraising.

 

[UpstateNY]

Greg - If you have some production figures for 2-3 years for the 8 acres (tons/acre), and the prices paid per ton for the particular grape varieties that are grown there, you can establish the Gross Income. As far as a net income that you can capitalize, if the owners don't keep track then you should be able to find some average cost figures online on a per acre basis. I get them for my area from Cornell University studies, and I'm sure some university or organization in CA does the same. Could make a 6-figure difference in your valuation. Although with property values in CA it might not be that significant......

 

[erick anderson]

I've never been able to stay sober long enough to complete a vineyard appraisal.

 

[CANative]

I'm not overly fond of wine and I loathe wine snobs who speak of wines with an earthy body, hints of Meyer lemon, notes of pencil shavings and overripe figs, and a long finish with a big nose (or whatever it is they say.) LOL

 

[Wayne Tomlinson]

Vinyards

Grapes are becoming a really big item in western Illinois. It is a program which got off to a start about 20 year ago.

I got an appraisal order from a bank which was doing a guaranteed loan on a farm which had about 20 acres of new grapes. The banker said "I plan to make the loan, but I don't want to be in the wine business!!"

There was only one verifiable sale or a vineyard. It was an old established property which actually pre-dated prohibition. It was about 100 miles away. In central Missouri there is and was a strong grape market with grape planted land going for thousands $ per acre, but not in my area.

I had used the same farm as a comp about 5 years earlier, in mid 1980s when the bottom had dropped out of the land market. After much study, I valued the property as bare land, I discussed the grape coop which had grown up in the area and wrote the report.

A couple months later, one of the growers in the grape coop died. His widow tried to sell the property, no one was interested. The final outcome of that was that one of the other coop members agreed to operate the vinyard on a share basis and that is still apparently the solution.

The one I appraised is still growing grapes, and I have had no other requests, and I still don't know of any other sales.

That's my experience in the grape business. It still looks like a hobby in western Illinois.

Wayne Tomlinson