Vineyard values and grape prices continue to hit new highs in Napa County, but the ongoing thirst for prime wines from the region continues to propel acquisitions of brands and properties that can put the Napa name on the bottle.
Some estate vineyards in the valley’s prime cabernet sauvignon regions of Rutherford and Oakville are pushing $500,000-an-acre sale prices, and the county district average price for that grape variety passed $7,000 a ton last year for the first time.
“Almost any Realtor or appraiser out there is saying it has gotta stop,” said Hal Forcey, who has done more than 600 winery appraisals in his four-decade career. “If you look at the best vineyards in France, we have a lot to go before we hit the $1 million-an-acre point.”
Among the Napa County wine mergers-and-acquisitions deals in the past two years that have caught the eye of industry veterans are the acquisition of Outpost Wines in the Howell Mountain appellation to a French insurance company; E. & J. Gallo Winery’s purchase of the prime 600-acre Stagecoach Vineyard; the bankruptcy sale of Sullivan Vineyards to the U.S. arm of a Mexican wine company; and the rumored $400 million sale of Heitz Cellar to an East Coast billionaire of the banking business.
The volume of Napa County wine-related mergers and acquisitions may have ebbed a little but continues to be “robust,” said Sean Maher, managing partner of Aspect Consumer Partners. He is set to be part of a M&A activity panel discussion at the Business Journal’s Impact Napa Conference on Aug. 29. Forcey is set to moderate the panel.
Part of the dip in activity may be related to county government’s slower approach since 2015 toward approving new or expanded vineyards and wineries, and that is leading to a runup in value for properties with approved projects, Maher said.
“If you need a variance, it’s a really good reason not to get your permit approved,” Maher said. “It very difficult to go in from scratch to get a winery permit in Napa County.”
Local governments can suggest applicants seek variances on projects that deviate from limits on, in the case of wineries, annual case production or numbers of visitors allowed under their general plans or zoning codes.
However, that practice can become a political lightning rod for concerns that too much is being allowed outside of community-planning processes that had a lot of public involvement before approval.
In Napa County, concerns over traffic congestion and pollution from visitor traffic to rural tasting rooms and events centers and about commercial activity some deem nonagricultural led to revisiting county policy on what’s allowed at a rural winery and asking voters to limit vineyard development in woodland areas.
Voters narrowly rejected Measure C in June, but because of the slim-margin decision, county officials have been seeking input on whether such protections are needed.
That’s why approved entitlements, and what’s allowed for production and projects under them, are important for winery and vineyard sellers to understand before seeking buyers, according to Richard Mendelson.
He’s a three-decade wine industry attorney, currently of counsel at Dickenson Peatman & Fogarty in Napa, as well as broker of Premium Wine Properties and an adviser with investment banking firm Houlihan Lokey in San Francisco. And he’ll be part of the M&A panel at Impact Napa.