Vineyard and land investing can offer attractive risk-adjusted returns and excellent portfolio diversification due to its low correlation with other asset classes.
Evolution of the Land Price from 2010 to 2017 in numbers
Like Burgundy explosion for grand crus, Pauillac in Bordeaux, Big names are driving the trend. As brand appeal goes global, the associated regions explode in price.
Wine demand is on the rise. The US has doubled its per capita wine consumption form 7L to 16L over the last 10 years, seeking more quality, diversity, and thereby driving opportunities for new regions. At the same time, leaving room for good often forgotten wineries such as Beaujlais, Centra California, Piemont, Rhône, becoming the Stars of Tomorrow.
A Generation Change across the globe results in new talented winemakers aspiring to have best practices applied to their land and their properties expansion.
Over the last decade, The price of land for fine wines has more than doubled.
According to SAFER (Land registry organisation in France), OMC in Italy and the Silicon Valley Bank in the US, in super prime regions such as Burgundy Grands Crus or Pauillac, the value of the land has more than doubled in the last 10 years. This development applies as well in smaller and up-coming appellations around the world. This phenomenon is due to a global increase of fine wines consumption in the US and Asia, combined with a global trend of a desire to experience high quality wines.
There is a growing number of high quality up-and-coming producers who are seeking land with the opportunity to farm sustainably and lease them. Such wineries are also eager to buy the land after a first period of lease, as it is a key asset for them to continue to support their development and their brand. We see an opportunity to work closely with these top winemakers to select with them plots which may prove the best opportunities in their regions to invest in the future of high quality vineyards.
Investing in Vineyards and Land generates short as well as long term returns.
Before wineries, successions were made from parents to heirs who were perpetuating the values and wine style of the properties in the past.
We now see across the globe a generation of talented winemakers who aspire to have best practices applied to their land or expand their properties with best practices. They exist next to large groups who are slower to embrace change and these new winemakers are therefore quickly standing out in terms of quality, recognition and value for their wines. This is the segment the WSF SICAV – VTF Fund wants to support through its deep connection to the industry.
Driving land development with top winemakers will enable the VTF Fund to generate a first return through short term lease contracts. It will also enable the Fund to have land that should have an accelerated and improved resale value, when the Fund will be willing to sell some of its investments. As these programs are medium to long term, we will offer privileged terms for investors willing to invest over 5 years or more to recognise the cycle of such investments.
WHY INVEST IN VINEYARDS
& LAND THROUGH VTF
The market for land as an asset class for top vineyards is reduced, restricted appellations have to follow the regulations. Growing exponentially is not a possibility. The land is capped, supply is finite, and the appellation cannot be expanded. Appellation has surpassed land, the more interest for a region, the more appreciation for the respective land. In a world with a growing number of affluent individuals with desire for fine wine, this results in more consumption. From a macro stand point, investing in land, as seen from price trackers over the last decades, is a good place to be.
We work closely with top winemakers & rising stars of the wine business.
Top winemakers have unparalleled knowledge of which plots are available for purchase and would be of quality to make great wine. The market is ultimately closed for new investors wanting to participate in the vineyards and land performance. Transactions happen at massive premiums. Benefits of investing aside a winemaker include the right to pick the parcels as well as priority to select land. For the VTF fund it means that we can select quality assets with the support of winemakers, where we can lease the asset to the winemakers themselves for 5 years. This is value for the fund beyond the appreciation of the land.
Our partnerships to the winemakers give us priority access to the best land and vineyards.
Once the land has been farmed for 5 or more years by a selected winemaker, the fund has the option to sell the land to the winemakers which may have been able to raise sufficient funding by then. Alternatively the land can be sold to another investor, who will have the guarantee that the vineyard and the soil have been developed and preserved to the highest standards with environmental values.
In addition to land appreciation, the asset will generate income from the lease.
It typically takes 3 years for a château to transform a new plot. Which then would have been fertilised with chemicals, into a high standard plot, that meets the needs and expectations of a grand cru. By partnering with selected winemakers, VTF is eliminating this time barrier, as the soil would have already been farmed and kept at the highest standard as required by the industry.
Top Vineyards appreciate yearly and usually at an even stronger pace than the overall region appreciation.
VTF has privileged knowledge and access to pick the best plots for the future.
VTF through its farming partnerships, can secure an income for the land directly after its purchase making the asset work from day one.
Thanks to high quality winemakers leasing the land, VTF can either resell the plot to the leasing parties after 5 years or secure a higher valuation rate for the land thanks to its prime development at the time of resale.
Valuation of Vineyards & Land.
Valuation of vineyards is done by region as well as by sub region on annual basis.
The valuation levels accord to the local terroir official public records made by land registers of the respective countries. In France we use SAFER, which is the official summary of all transactions in France, and thereby is the benchmark for taxation in the country between land owners. The equivalent terroir official public records in Italy are performed by the OMC, and by the Silicon Valley Bank in the US.
Vineyards & Land Investment Activity.
Since several years, there is a global trend for UHNWs and a number of Silicon Valley Tech Entrepreneurs, as well as luxury conglemrates such as LVMH and Kering Group, to buy land & estates and thereby impact significant price increases in the corresponding regions.