Vineyard Defaults Surge as Bargain Wines Hurt Napa
Napa land values, the highest among U.S. wine regions, are based on wine appellation, or a property’s geographical boundary, and soil quality, according to Correia, the appraiser.
As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank.
[Guambat presumes this refers to the Silicon Valley in the SF Bay Peninsula, and not the plastic surgeon district in LA.]
“We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”
[This may have a ring of familiarity about it to those who were there 20 years ago. The wine flowed like blood.]
Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak
Napa winery and vineyard loan defaults rose fourfold to 18 in the year through January, according to San Diego-based research firm MDA DataQuick.
The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside, California. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less expensive labels, the industry consultant said in a March 5 report.
Sales of super-premium bottles priced more than $15 declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV
“No more is it about stocking wine cellars with 5,000 bottles of Screaming Eagle,” said Bacchus Capital’s Kaufman, referring to a Napa “cult cabernet” that can sell for $750 or more a bottle. “High-rollers are discovering that there are lots of drinkable $20 to $40 bottles of wine.”
[Guambat got a good case of the screaming eagles last time he saw a 20$ bottle of wine. Shoulda got a couple of cases while he was at it.]
Mortgage defaults will also hit Napa residential parcels owned by hobbyists, or those who intend to produce 100 to 300 cases a year, said Deborah Steinthal, principal of Scion Advisors. In October, the Napa-based consultants forecast that “hundreds of properties will go into foreclosure.”
That’s the scenario facing Sandra Sutherland, who bought a four-bedroom house and more than seven acres of chardonnay, merlot and pinot noir grapes for $2 million in 2005. She and her business partner haven’t made loan payments to Charlotte, North Carolina-based Bank of America Corp. since January 2009.
Labels: Economy, Real estate markets