Europeans go winery shopping

French entrepreneur Michel Reybier had a lot going for him when he entered the bidding for the Barrett family's iconic Napa Valley winery, Chateau Montelena.

He had the credentials, owning one of the great wine estates of Europe, the famed Bordeaux chateau Cos d'Estournel.

He had the money, a fortune built on a ham empire he sold in the 1990s and since expanded into luxury hotels and an oil exploration company.

And unlike most of the other bidders, he had euros, that 15-country currency that earlier this month climbed to an all-time high against the feeble U.S. dollar.

While far from the deciding factor in the Chateau Montelena transaction, the favorable exchange rate is driving a surge in interest in U.S. wineries and vineyards by foreign investors.

"It's time to go winery shopping if you're a European," said analyst Jon Fredrikson, owner of the Woodside firm Gomberg, Fredrikson & Associates. "There are lots of bargains out there."

Buyers bearing euros are able to pick up U.S. assets at fire-sale prices compared with what they would have paid just a few years ago. In the summer of 2004, one euro bought you $1.20. Today that same euro buys you $1.60, a third more.

Put another way, to come up with $100 million for a winery -- the low end of the Chateau Montelena estimates -- a European today would only need 62 million euros versus the 83 million he would have needed in 2004.

As the euro has surged, so has the number of foreign individuals, major wine companies and investment groups feeling out the California market. Some send lawyers. Some hire consultants. Some even come over in stealth mode.

"We've seen some Europeans coming over posing as non-Europeans," said winery and vineyard broker John Bergman, of Sebastopol-based Bergman Euro-National. "They're looking to take advantage of the market."

The weak dollar is just one of many reasons foreign investors are increasingly eyeing the U.S. wine industry, brokers said.

Unlike the swooning residential real estate market, U.S. vineyard and winery values have held up very well, especially in Napa and Sonoma, says veteran vineyard appraiser Tony Correia.

While the price ranges vary considerably by varietal and location, the top vineyards in the two counties have seen their values climb over the last four years, to $285,000 an acre in Napa and $125,000 an acre in Sonoma, according to the California chapter of the American Society of Farm Managers & Rural Appraisers.

That's caused in part by the high commodity prices worldwide, which have pushed up the values of farmland in general. Beyond that, vineyard values are being buoyed by the strength of the U.S. wine industry, which is enjoying rising profits as Americans show a thirst for higher quality wines, Correia said.

A looming shortage of fine wine grapes like chardonnay and pinot noir and obstacles to developing new vineyard land all bode well for future vineyard values, Correia said.

The general turbulence in the financial markets has also sent many investors looking for a port in the storm, and increasingly many are seeing land as just such a safe investment.

"You've got a lot of people that are just looking for hard assets, that if the whole world collapses, they own something that they can actually go out and sit on," Correia said.

Robert Nicholson, principal of International Wine Associates in Healdsburg, agrees that the relative strength and safety of the U.S. economy are key drivers of foreign investment in California wine properties.

"We are meeting with buyers all the time," Nicholson said. "They like parking their money here because they know it's going to be secure."

But interest is a far cry from action, and several brokers pointed out that recent major deals involving Europeans are still few and far between.

Earlier this year, British beverage giant Diageo snapped up Alameda-based Rosenblum Cellars for $105 million.

Last year, Tuscan vintner Piero Antinori, in partnership with Ste. Michelle Wine Estates, bought Stag's Leap Wine Cellars, the other Napa Valley winery that along with Chateau Montelena bested the French in the 1976 Judgment of Paris. Price: $185 million.

And Boisset America, the U.S. subsidiary of the Burgundy-based wine company, acquired Sonoma's DeLoach Vineyards out of bankruptcy for $17.5 million in 2003.

In many cases, European wine companies are attracted to acquiring U.S. wineries to improve their own products' access to the lucrative U.S. wine market, the second largest in the world, Nicholson said.

"It's not a tidal wave, but as the wine market becomes increasingly globalized, you're definitely going to see more of this," he said.

For every completed deal there are innumerable cases of inaction, with potential investors holding back out of fear, confusion about the U.S. market, or just not being able to get their act together quickly enough, brokers say.

One wealthy Italian family came to the Napa Valley recently to meet with investment banker Vic Motto about finding them a place to park a windfall.

"They had just sold some assets, and said 'We feel that with the strong euro, we'd be foolish not to buy something in America,' " Motto recalled.

Motto said he lined them up a great winery property, but they never consummated the deal, letting the opportunity pass.

The strength of the euro may have driven their interest in investing here, but ultimately it wasn't enough to overcome the uncertainty about the U.S. market, distance and cultural differences, Motto said.

"Because they are working with a strong currency, it tends to make the decision easier, but it doesn't make the deal," Motto said.

In the case of Chateau Montelena, Reybier prevailed ultimately because he showed the most passion for the winery, said Motto, who represented the Barrett family in the deal. Reybier convinced founder Jim Barrett and son Bo that the winery would be in good hands, and that's what carried the day, not his euros, Motto said.

"I think that this would have happened no matter what the exchange rate was," Motto said.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum

@pressdemocrat.com.