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Napa vineyard developer gets $50 million

PREMIER PACIFIC HAS PLANS FOR 2,300 ACRES AS SUPPLY OF NONBEARING LAND SHRINKS

NAPA – Premier Pacific Vineyards received a $50 million equity commitment to acquire and develop more than 2,300 acres of high-end winegrapes in the North Coast and the Pacific Northwest.

The recent commitment, obtained from Commonfund Realty, the 20-year-old real estate investment arm of Connecticut-based endowment adviser Commonfund, allows Premier Pacific Vineyards to acquire two properties each in Mendocino County, Oregon and Washington and undertake $100 million in vineyard development.

Dick Wollack, co-CEO of Premier Pacific Vineyards, said high barriers to creation of more vineyard acreage in the high-quality wine regions are squeezing the supply of top-class grapes at a time when sales of high-end wine are growing quickly. The prospects of long-term returns higher than commercial real estate attracted Commonfund Realty.

Excluding prices for increasingly scarce existing or potential vineyard land, the cost of vineyard infrastructure such as metal stakes and irrigation tubing has soared about 50 percent in the past five years because of outside pressures such as high oil prices and global demand for steel, according to U.C. Davis management professor Robert Smiley.

Higher development costs plus a few years of lower grape prices have discouraged planting, according to Bill Turrentine, president of Turrentine Brokerage in Novato.

This trend is evident in a comparison of the number of nonbearing acres of top winegrape varieties from the high-quality California coastal regions as a percentage of total acres for those grapes and regions, according to Premier Pacific Vineyards’ analysis of the 2006 state Grape Acreage Report.

From the 1999 high point of 26 percent nonbearing during the surge in late-1990s plantings, the proportion plummeted to 3.5 percent, or 3,248 acres. Roughly 5 percent of vine acreage is replaced per year.

“Not only is this the lowest percentage, but the absolute number of acres under development is lower than at any point since 1983 when the industry was one-third the size,” Mr. Wollack said.

Nonbearing acres are vines that haven’t reached full production after planting or replanting. The state figures that to be three years, but growers of grapes for fine wine put that maturity time at five to six years.

Detailed county acreage figures aren’t due out until early summer, but preliminary figures of 523,000 for statewide winegrape acreage shows no change in total and nonbearing acres from 2005 through 2007.

Eric Morham, president of Constellation Brands’ Icon Estates fine-wine division based in St. Helena, said he would be hard pressed to find 4 percent to 5 percent nonbearing cabernet sauvignon, chardonnay and sauvignon blanc in the North Coast. Demand for such varietal wines will lead to high prices for grapes and likely higher prices per bottle.

“Wine sales in our segment are growing at 8 to 9 percent,” Mr. Morham said. “Connect the dots.”

Premier Pacific Vineyards’ new Mendocino County properties are located around Ukiah and have a total of 641 acres, with 268 plantable acres. The land in Oregon’s Willamette Valley appellation covers 689 acres, with 385 acres suitable for vineyards. Premier Pacific added 3,723 acres, ready for 1,703 acres of grapes, from the Horse Hills Heaven viticultural area of southcentral Washington.

The Commonfund commitment brings the total equity raised to $250 million, including two funds for CalPERS, since Premier Pacific launched in 1998. Total plantable acreage under management is 7,580.

For details on Premier Pacific Vineyards, call 707-224-6565 or visit www.ppvco.com.

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