VINEYARDS: The Art of Selling a Vineyard; Part 2 – Selling
by Flo Sayre, ALC
Farmers National Company
Although it is somewhat romantic to purchase a vineyard, it can be stressful, emotional or drudgery to sell one that you have put your life and soul into and worked it for years. A buyer may not have the same passion as the seller.
Vineyards sell for a variety of reasons. Perhaps the owner has improved it to the point of capacity and wants a new challenge. Perhaps there is a death in the family and the succeeding generation does not have the desire or passion to continue. Possibly a vineyard has produced some exceptional grapes, wine or juice and a major player wants the label and juice bad enough to pay an exorbitant price for the vineyard. Perhaps there is financial difficulty that dictates moving on. These are some of the major reasons vineyards change hands.
Juice grapes hold very little, if any, additional value for the variety. That land is considered similar to row crop land except that the vines need to be scraped off to make way for a higher and better use. Unlike merely a few years ago, when grape cooperatives had shares and the shares in the co-op held some value, the co-0op shares are nearly worthless in today’s market. The returns are lower than most any other crop, especially in the western states, and growers are actually losing money in places. There is approximately $1000 to $1500 cost to pull the vines and remove the infrastructure from a site. Sellers may take a hit in price for this reason unless the buyer has a higher use for the land.
Wine vineyards have exponentially more hurdles in the selling process. Much of it is emotional; however, location within a specific AVA (American Viticulture Appellation) lends higher or lower value to a vineyard. One in demand can, and does, sell at a substantially higher value than the same plantings across the road if they do not sit within the desired AVA. Red Mountain AVA in southeastern Washington, is one of the smallest AVA’s known, and the prices for the vineyards and vineyard potential land can command 1½ to 2 times the price as similar land merely across the road, simply because of where someone drew the line for the AVA!
When selling there are specific disclosures required. The one most often overlooked is the 5-year crop pesticide and chemical use records. There are production records, income and expense records, labor hour records and sales contracts to disclose. Much of this type of information is disclosed only with ‘confidentiality agreements’ signed by potential buyers. In addition, there are state mandated disclosures that vary from state to state. In addition, some sellers may demand potential buyers to be registered and pre-qualified with a lender’s letter in hand before they will show the property or release any information about the property. If there are homes, buildings, commercial parts to the sale, then separate disclosures may be required for each endeavor.
One of the most important aspects of selling a vineyard (or any property for that matter) is keeping it clean, weed-free and presentable to the buying public. First impressions make a HUGE difference when buying a piece of property. Remember, sellers… Buyers often rely as much on emotional connection to a property as they do on business sense. A clean & showy place makes all the difference –especially if there is more than one the particular prospect is considering.
Vineyard sellers would also be wise to have in their possession (or at least make available or have access to) the weather data, seasonal harvest dates, freeze data and so forth in order for a buyer to make an informed decision about the property. The varieties, number of acres planted, age of vines, type of root stock if they are grafted cuttings, row spacing, plants per acre,, type of trellis, type of irrigation system… these are all pertinent to the sale. In addition, a recent soil analysis and pH analysis are very helpful to potential buyers and their brokers. The most important part of disclosures is BE HONEST! If there has been a disease or problem in the vineyard, disclose it even if it has been corrected. Detail any environmental concerns such as being downwind from a processing facility, excessive dust from a gravel crusher, dairy nearby (fly spots on berries), etc. The more honest, complete and accurate the disclosure is, the less liability the seller shoulders in any transaction.
And sellers should think through the end of the transaction. What are they going to do with the money? Bank it and pay capital gains, convert the sale into an IRS 1031 Tax Deferred Exchange, split a partnership or family holdings? Bring in a qualified CPA early in the process so there are no last minute surprises. And be prepared for a long ride. Vineyard listings – especially wine vineyards – either sell very quickly or they may take several years. If the numbers fit the return profile, they may sell quickly. If not, it may take a while. Investors don’t usually jump into the buying process on smaller acreages unless they have other similar property in the area or the holding and profit margin are substantial. As with most family-owned vineyards, that is not the case. You may need to take an additional harvest or two before you find the right buyer. Hang on for the ride!
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by Flo Sayre
Accredited Land Consultant
ABR, ALC Advanced, CNE, CRIS, TRC, Realtor, Managing Broker
Farmers National Company
Washington Land Broker of the Year… 2013
Tri-Cities Realtor Achievement award… 2013
Farmers National Company Silver Eagle Award… 2012 & 2013
Farmers National Company President’s award… 2015