For most investors, a flat in London, a suburban town home in Melbourne or office space in Hong Kong’s burgeoning Kowloon East are smart investments: Financial hubs with solid population growth and strong economic fundamentals with consistent tenant pools. But for some, that’s just not all that glamorous. On the other hand, vineyards and ranches have become the go-to option for something with a little more panache. “These items offer scarcity as well as lifestyle. The balance between preserving wealth and enjoying life is key,” is how Paul Benson, consultant for Summit Sotheby’s in Park City, Utah sees it. Among Asian buyers, “It seems wine and vineyards are high on the target list, especially in areas where there is exclusivity,” he notes.
Land of Value
“It depends on the person investing in the vineyard. The trend is that Hollywood actors are buying [vineyards] as lifestyle properties… It’s an aspirational purchase,” begins Engel & Volkers Italia Managing Director Marco Rognini. “In Italy it’s also connected to the ‘Made in Italy’ ideal, to be involved with something purely Italian. But there are entrepreneurs interested in investing in vineyards and the focus is economic and financial. In the last few years, Asian buyers have been purchasing here.”
Lifestyle or otherwise, a vineyard or a ranch remains, essentially, a real estate asset, and when stocks plunge or currencies flutter wildly, property remains largely constant. “Paper assets can become worthless in the case of bankruptcy or extreme legal challenges… but real estate never loses complete value,” begins Sotheby’s Wine Country agent Donald Van de Mark. In addition, agricultural investments are dynamic by nature and can provide unexpected revenue streams. In Van de Mark’s neighbourhood, Sonoma in California, vacation rentals are legal and can pay for the property’s annual carrying costs in a single lucrative summer vacation season. And then there’s the food product. “Not only are new, huge markets such as Asia opening up for grape wines, but farmers are trying new crops and methods such as growing truffles outside of France and Italy. So creative investors can find opportunities that are entrepreneurial.” As consumers increasingly turn to grass fed beef, free-range eggs and organic produce — to go with their wine — so too increase potential revenue streams.
Suzanne Perkins of Sotheby’s IR in Santa Barbara is cautious of non-cattle ranches though they do have their upsides. “I don’t do too much orchard. Avocado orchards are not as highly sought after as they used to be. Tax wise they’re still good because of the depreciation — you can depreciate each tree, same as vineyards.” An Asian client recently opted out of the long-term appreciation of Perkins’ super-exclusive Rana Ranch (US$60 million) for a property in Arkansas because of its revenue streams.
All About Terroir
Like wine itself, vineyards and ranches are all about location. Benson points out that France remains the ideal, and Van de Mark adds Napa and Sonoma to the list of growing hotspots. Tradition rules with regards to ranches: Texas, Colorado, California, parts of Canada and Australia. And though ranches are on the rise, it’s still vineyards that Asian buyers are after. “Many Asian buyers are first generation grape wine drinkers and they are smitten. Large well-located properties with cash flow and cachet are also popular,” notes Van de Mark. Nonetheless ranches do have their charm, and Perkins has generated enough business from Asia — 60 percent overall — to have her eponymous website translated into Chinese. “There seems to be growth in the ranch world overall and the Asian market is well aware of this growth and desirability and therefore have become attracted to it as well,” says Benson.
Asian investors are looking to Italy as well. A Hong Kong investor recently made a major purchase in northern Italy for business and pleasure. Italy is becoming a target for vineyard rarity as total vine land shrinks. Italy has lost 135,000 hectares of vine since 2000. Italy also appeals for its relatively un-industrial industry. The vineyard sector is experiencing the same funk the Italian market is in general, but prices are still higher than other agricultural land. In the prime Alto Adige and Trentino regions vineyards cost upwards of £600,000 per hectare, followed by Tuscany and Piedmont at around £400,000. Puglia in the south is the least expensive, but that’s against the national average for farmland of £40,000. “These areas right now offer very interesting real estate opportunities… to combine property with production of quality wines,” notes Rognini.
Vineyards, ranches and farms are not without their hazards. Cost and location are obviously at the top of the list, and Benson recommends seeking out “irreplaceable” locations with low running and maintenance costs. “Sonoma Ranch Estate, a 140 acre listing of mine, is less than one hour from San Francisco, which is an unbeatable location. But also look for proven and ample water resources, fertile, usable ground, good and/or longstanding contracts/licenses for sales of crops or livestock, views, good neighbours, proximity to conveniences, and clear title with few easements,” adds Van de Mark, pointing out that a complete survey that will grant a property a more comprehensive American Land Title Association policy for California properties.
“The most important thing is working with a knowledgeable ranch broker,” stresses Perkins. “Your geologist, your ground hydrologist and your attorney are the key people you want involved.” So who’s really in the market for a vineyard or a ranch? Almost anyone looking for a holiday home that may offer a moderate yield. Tropical resorts aren’t for everyone. “In northern California the typical buyer is a successful couple seeking a gathering place for friends and family as well as a more stable investment and a fantastic lifestyle,” finishes Van de Mark. “A place to breathe, unwind and imagine the next phase of their lives.” Of the “Why?” Perkins theorises, “I think it’s the peace that it affords. Of walking out of your house, not locking your door and everything you see around you belongs to you. It’s really liberating.” Cheers to that.