Dozens of North Coast wineries, vineyards change hands in past year

On the afternoon last month when winemakers David and Carla Ramey set out to inspect the 75-acre vineyard for sale west of Healdsburg, they knew they had to act fast. They had been looking for a vineyard for years and felt a keen sense of competition from other wine companies branching out to secure supplies of premium grapes.

Immediately after they saw the property, the couple sat down at a table in their Healdsburg home with a few key executives of their company, Ramey Wine Cellars, and each gave a thumbs-up to make an offer on the property.

"I absolutely felt that if we didn't move, somebody else would," said Ramey, describing the rapid-fire acquisition.

Since the start of 2012, dozens of North Coast wineries and premium vineyards have been sold, with an estimated $326 million - and possibly much more - changing hands in in a business where sales prices usually are kept under wraps.

The accelerated pace of deals in Wine Country reflects a recovering economy and a surging wine industry that's putting the pieces back together after tough years, experts said. Opportunistic companies with cash are looking to expand their brand portfolios and secure vineyard land as consumption of California wine grows steadily in the U.S. and abroad.

Meanwhile, a generation of winemakers are reaching retirement age and many are without children willing to take the reins. Others that struggled through the recession are seeking a comfortable exit. The bumper crop of 2012 nudged custom crush facilities into the mix, as wineries dealt with limited tank space.

The confluence of factors has led to a record number of transactions in the last year, industry analysts said.

"When you look at the 3,000 wineries that exist in the western U.S., the majority are really small wine owners," said Deborah Steinthal, founding partner of Scion Advisors. "That's why you're seeing land sales that have houses on them, and land sales that have a small winery. It's that dynamic that's going to take time. People retire, they get old, and they sell their business to their children or a third party."

A wave of turnover among vintners and grape growers is not unexpected. In 2007, Silicon Valley Bank and Scion Advisors surveyed hundreds of winery owners in California, Washington and Oregon, and found that 51 percent of owners anticipated going through a change in control of the winery during the ensuing decade.

While some of those ownership changes have happened, the recession slowed the pace of transactions, so there's still many to come, Steinthal said.

The Kunde family, which sold vineyards to Jackson Family Wines in November, and Pezzi King Vineyards, which was sold to Wilson Artisan Wineries, were examples of sellers motivated to resolve succession issues, she said.

Bill Foley, proprietor of Foley Family Wines, has sought out wineries that didn't have a succession plan, matching their owners' needs to exit with his desire to expand his brand portfolio and gain clout with distributors, he has said.

"We have seen a bit of a pick up," said Don Brian, principal at Global Wine Partners, a wine investment bank based in St. Helena. "Unlike some prior years here, when most of the deals might have been financially distressed, there's a lot more quality-oriented transaction opportunities for people now."

In 2007, when vineyard and winery valuations were approaching peak levels, it was a seller's market, according to an analysis by Zepponi & Co., a mergers and acquisitions advisory firm. Valuations peaked in mid-2008, around the time that Ascentia Wine Estates was formed to buy a collection of wine brands, including Geyser Peak, from Constellation for $234 million. But the meltdown in financial markets sent valuations tumbling, and consumers traded down to cheaper wines, leading to a buyer's market in 2009.

"In 2008, '09 and '10, almost all the sales were predicated on financial problems," said Joe Ciatti, principal at Zepponi & Co. "People were forced to sell, banks were putting pressure on them. It mirrored the economy and what was going on at that time. Those were ugly sales, for the most part. You couldn't sell a vineyard in 2009 if your life depended on it."

Distressed sales still are happening, but that trend has calmed as economic conditions improved. Public companies and institutional investors that bought big at the peak of the market also are cleaning up their balance sheets.

The California Public Employees' Retirement System, which has been unloading vineyard assets, needs to maintain a reasonable return on investments to ensure that its pension system remains funded. EPR Properties, which recently sold the Geyser Peak winery facility and vineyards, has a similar responsibility to investors to return a profit, which can be tricky in a cyclical business like the wine industry.