North Bay Business Journal

Monday, December 31, 2012, 6:45 am

Top stories of 2012: Happier times for wine

Also: New players in health care; Marin loses Grady Ranch

By Eric Gneckow, Jeff Quackenbush and Dan Verel, Business Journal Staff Reporters

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Page 3 of 5

5. SMART construction begins

Workers broke ground on the first phase of construction in the Sonoma Marin Area Rail Transit commuter rail system this year, following a project bond sale that ultimately reached nearly $200 million and the failure of opponents to gather enough signatures for a ballot measure that could repeal the sales tax that funds the project.

SMART awarded its first contract in January, a $104 million design/build contract to the joint venture of Alameda-based Stacy and Witbeck Inc. and Herzog Contracting Corp. The transit district’s Board of Directors has awarded more than $150 million to date, funding the construction of train cars, bridges and other elements.

Construction is proceeding along what SMART calls its “initial operating segment” between Santa Rosa and San Rafael. The ultimate vision of the system, spanning from Larkspur in Marin to Cloverdale in Sonoma County, was put on hold due to reduced returns in a sluggish economy.

While SMART estimates that the core segment will serve 80 percent of its projected riders, RepealSMART, the group gathering signatures for the repeal measure, argued that voters should be given a chance to repeal the quarter-cent Measure Q sales tax amid changes to the project. Those efforts failed to gather enough signatures to reach the ballot.

Contract negotiations in 2012 allowed SMART to expand its plans for the initial operating segment, adding plans for a station on Guerneville Road in northern Santa Rosa and Atherton Station in northern Novato. The transit district also identified a site in Santa Rosa that will serve as a maintenance facility for rail cars, and possibly the site of another station in the future.

Current plans are to begin operation on the initial operating segment in late 2015 or early 2016.

Eric Gneckow

6. Dozens of wineries, brands, vineyards change hands

It was a busy year for sales of North Coast wineries, wine brands and vineyards. Publicly noted sales alone numbered about two dozen, and there were many more happening quietly. Predominant themes among these transactions, according to the parties, were locking in a supply of grapes for growing wine sales amid worries of a looming supply shortage, wanting to exit the business because of “owner fatigue” and rising vineyard values.

Lancaster Estate winery

Lancaster Estate winery in Sonoma County’s Alexander Valley

Healdsburg-based Foley Family Wines, led by Fidelity National Financial and Fidelity National Information Services Chairman Bill Foley II, was among the most active purchasers this year. In May, it purchased Sawyer Cellars, a 6,000-case-a-year Napa Valley winery with 40 acres of Rutherford vines and a tasting room on Napa Valley thoroughfare Highway 29 as a base for the Foley Johnson brand.

In November, Foley made three high-profile acquisitions. First was a majority interest in the 12,000-case-a-year Lancaster Estate and 35,000-case-a-year Roth Estate brands, the Alexander Valley winery and Lancaster Estate tasting room, a 6,000-square-foot guest house and 42 acres of mainly cabernet sauvignon vines. Second was Langtry Estate & Vineyards and Guenoc brands, with current annual case production of 150,000, and related assets on 500 acres straddling Lake and Napa counties, with 150 acres of vines and 17 guest rooms in several houses. Third was the 206-acre mostly chardonnay and pinot noir Ramal East Vineyard in Sonoma County’s Los Carneros winegrowing region.

A base for the Foley Johnson brand was key in the Sawyer Cellars purchase. Grape-purchase contracts to help supply Foley’s Alexander Valley cab program for Sebastiani Vineyards and hospitality opportunities were key factors in the Lancaster purchase. After managing the Langtry and Guenoc brands for several months, Foley acquired them, and the property adds a tourist lodging destination to his portfolio. Ramal East will supply a lower-cost extension of the Chalk Hill Estate brand, to be released nearly in 2013.

Also active in securing sources of supply was Santa Rosa-based Jackson Family Wines. In May an affiliate purchased the 350-acre Ramal East Vineyard for $13 million. Jackson was busy in December, buying the Nunesdale Farm vineyards in Russian River Valley, including 200 acres of vines in Saralee’s Vineyard and Richard’s Grove and Tom Nunes’ 10-acre pinot noir and chardonnay vineyard, 877 acres of land on the Mendocino County side of the new Pine Mountain-Cloverdale Peak appellation from the Seghesio family and 49 acres of cabernet sauvignon vines in the Lost Acre vineyard at the north end of Alexander Valley from CalPERS’ Premier Pacific Vineyards portfolio.

Among prominent vineyard purchases by Madera-based E&J Gallo this year was the September purchase of the 2,000-acre Snows Lake Vineyard, which has 800 acres of vines. It the giant wine company’s first vineyard in Lake County.

Also spun out of the Premier Pacific Vineyards portfolio in December was the 63-vine-acre Tourmaline Vineyard in Napa Valley’s 2-year-old Coombsville appellation, which Sebastopol-based Paul Hobbs Winery acquired to secure Napa Valley fruit sourcing.

Locking up supply of Alexander Valley grapes motivated Oakville-based Silver Oak Cellars in August to acquire zinfandel-focused Sausal Vineyard & Winery, which has 75 acres of planted vines.

New York-based Constellation Brands led the return of publicly owned wine companies to North Coast M&A. In June the company paid Purple Wine Co. $160 million for the 600,000-case-a-year primarily pinot noir Mark West brand, a fast-growing brand Constellation said complemented its portfolio.

Another brand buyer was West Coast Wine Partners, which acquired Valley of the Moon Winery and Lake Sonoma Winery from Guerneville-based F. Korbel & Bros, producer of Korbel sparkling wine and Kenwood still wine. Speaking of the latter, Korbel in July decided to keep 550,000-case-a-year Kenwood after being in sale talks for several months with New York-based Banfi Vintners.

In spring, the growing production portfolio of Ken and Diane Wilson grew again with the acquisition of Pezzi King in Dry Creek Valley to Wilson Artisan Wineries in March and the former Blackstone winery from Constellation in May. Wilson subsequently leased the Blackstone facility to startup custom vintner and crowd-funder Naked Wines, which has a local base of operations in Napa.

Santa Rosa-based Santa Rosa-based Vintage Wine Estates, which has been purchasing a number of wineries in recent years, in July purchased a 40,000-square-foot custom winery and an a 24-acre estate vineyard in the McDowell Valley American Viticultural Area both near Hopland from Lodi-based Weibel Vineyards and Winery. Vintage plans to shift large-scale production from Healdsburg. At the beginning of the year, Vintage sold International Wine Accessories to an affiliate of Cotati-based Planet One Products.

One of the few distressed North Coast wine producer sales of the year was Sonoma-based Crushpad, which passed to a group led by Tiburon-based CastleGate Capital in an August debt acquisition. The operation was renamed The Wine Foundry.

Jeff Quackenbush

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