Boutique wine farm, fully-fledged commercial wine estate or luxury Winelands security complex – investing in a vineyard property has never been more attractive. By Silke Colquhoun
Sun-dappled vineyards stretch in symmetrical rows towards rugged mountains, framed by the vast African sky. Soft white clouds seem painted on a deep-blue oil canvas. In the foreground, a bottle of own-harvest wine perfects the magnificent picture.
Owning a vineyard is the ultimate lifestyle dream for wine connoisseurs, aspiring to live the good life and uncork their own cultivar. For those who can afford it, a delectable variety of wine estate investments beckon in SA.
‘The market is very diverse. At present we have wine farms in that range going from R39m to R250m’, says Clarence Collins, agricultural agent at Pam Golding Properties in Stellenbosch. These farms will have their own vineyard, wine cellar, production facilities and farmworker accommodation, sometimes a restaurant and guest cottages.
The lifestyle or boutique farms in Collins’ listings start at R20m for 4 ha, with R80m for 10 ha at the top end. ‘Lifestyle properties feature a small vine- yard and possibly an orchard, primarily for the aesthetics,’ he says. ‘But some owners have produced excellent wines, either as a boutique wine, where they do their own marketing or for their own use, for friends and family.’
Danie Hauptfleisch, agri-agent at Lew Geffen Sotheby’s International Realty for Paarl and Wellington, says: ‘A small boutique farm will not have the full spectrum of facilities, such as a bottling plant, delivery to the retail outlet or its own marketing.’ The owner will have to outsource these processes. Ideally, wine farmers wanting to make a profit should add value themselves by taking charge of everything from prime production – growing the grapes – until the wine bottles are on the retailers’ shelves, he says. ‘But it costs around R40 000 for every tonne of grapes you process. So it’s not worthwhile to process one or even 10 tonnes, as your break-even point is likely to be 80 tonnes.’
There’s great demand for wine farms, mostly from local business people – the majority from Gauteng – who buy into the scenic beauty and superior quality of life in the Cape Winelands.
According to a New World Wealth report, the number of high-net-worth individuals in the Paarl, Franschhoek and Stellenbosch areas has gone up by 38% between 2007 and 2015, making it the country’s fastest growing region for millionaires.
Prestigious wine estates that changed ownership recently, according to ballpark figures by Seeff Properties, include the 140 ha Uva Mira Mountain Vineyards between Stellenbosch and Somerset West for R65m, the 202 ha Klaver Valley for R96.5m and the 100 ha Cordoba on the slopes of the Helderberg Mountain for R58m.
In the same area, a 28 ha farm was purchased for R54.5m, understood to be home to Hidden Valley winery. ‘It was a very spontaneous decision to buy,’ the new owner, former Capitec CEO Riaan Stassen, was quoted on Food24.com. ‘The whole process – from my first look, then to the acceptance of my offer to purchase – took no more than two weeks. I think that, from a marketing point of view, one can do something really stunning here; combining good wine, good food and art.’
Mining magnate Patrice Motsepe’s African Rainbow Capital purchased 20% of Val de Vie Investments, which is right behind the Paarl estate that ranked top in the 2016 New World Wealth Report. Val de Vie combines vineyards, polo fields, equestrian and golf facilities with stunning scenery and security. A 0.2 ha plot recently sold for R9m. Other luxury estates in high demand, such as De Zalze and Brandwacht, offer families the Winelands lifestyle on a small scale and in gated security.
Although there are a number of high-end wine estates on the market, they can’t be named or advertised. ‘It’s a bit of a dilemma’, says Hauptfleisch. ‘It could destabilise their business if wine buyers see that a farm is for sale, because they would worry about quality fluctuation and supply.
‘That’s why we only divulge the brand name when there’s real interest, after the potential purchaser has signed a non-disclosure agreement.’
South African properties compare favourably on the global market. ‘For the price of a modest villa on the Algarve or cottage in Cornwall, wine lovers can buy their own vineyard in the Western Cape’, wrote the UK Daily Mail. In May, the London-based Telegraph listed a local property among ‘great estates’, such as a Chianti farm in Italy and an 18th-century chateau with vineyard in France. The article read: ‘And finally to South Africa, where you can buy a great estate for less than £1 million. The Faraway Estate, a seven-bedroom house with two separate cottages, covers 245 mountainous acres of the Overberg wine district. This land includes a multi-award-winning wine estate, aircraft hangar and landing strip. The views stretch to the edge of the Karoo 60 km away, and you can even glimpse the Southern Ocean through a gap in the peaks.’
Collins says: ‘The golden rule in property remains location, location, location! One of the best locations is the Helderberg area around Stellenbosch, known as the Golden Triangle wine-growing area. Here, you achieve the highest price per ha, and farms sold in early 2000 have experienced good capital appreciation. ‘Last year, some farms sold for more than R2m per ha, while some of the lifestyle farms go for as much as R8m per ha.’ As a guideline, Seeff says the Franschhoek valley tends to fetch the highest prices, ranging from about R1.2m/ ha at the top end, while Stellenbosch farms sell for about R800 000 to R1m/ha. Farms in the Paarl valley go for about R400 000 to R600 000/ha.
In addition to the location and land size, pricing is determined by the soil and climate (terroir); grape varieties; and the infrastructure and facilities of the estate, such as a winery; and accommodation such as a hotel, cottages and restaurant. Hauptfleisch says: ‘The traditional regions of Stellenbosch and Franschhoek are becoming much more expensive, therefore our areas of Paarl and also Greater Paarl (Wellington, Tulbagh and, down the valley, Riebeek-Kasteel) are perceived as much more commercially viable regarding the purchasing price, and when it comes to producing wine and taking it to market. There have been exceptional wines from this area recently.’
Recognition for South African wines is rising at home and abroad. Statistics by South African Wine Industry Information and Systems (Sawis) show a growth in local demand that is primarily driven by female consumers in urban areas entering the sweet red and rosé sector. This resulted in a 7.7% year-on-year increase in domestic volume by October 2015. Sawis further reports that exports to China have gone up by nearly 30% in 2015. South Africa ranks eighth among the world’s biggest wine-producing countries, with 22.2m hectolitres (mhl), which is just ahead of other new-world producers Australia (11.9 mhl), Chile (12.9 mhl) and also Argentina (13.4 mhl).
Wine farming is a competitive industry – there are 171 wineries in Stellenbosch, 128 in Paarl, 66 in Robertson, 33 in the Swartland and another combined 144 in the Klein Karoo and other regions.
‘On occasion, you will find that farms are run on family principles, and the new buyer turns it into a commercially-run business’, says Collins. ‘That way, quite a few farms are profitable.’
Sotheby’s Hauptfleisch adds that a wine estate is much more than just the building and land that surrounds it: ‘There is a variety of knowledge, culture and heritage behind it, and all of this contributes to a special brand.’
He advises investors to keep their focus on quality: ‘Find the best winemaker you can afford and aim to produce something that is unique.’
As, for instance, the sweet Noble Late Harvest of the 1960s, produced from overripe grapes by Paarl’s Nederburg and Stellenbosch’s Delheim and, a bit more recently, Diemersfontein in Wellington’s first chocolate Pinotage, which was initially met with a lot of scepticism, but became a celebrated success.
But even if a wine farm doesn’t deliver a high monetary return on investment, it’s still a trophy asset with a high ‘return on ego’, as the owner of the award-winning Tokara winery once said. And it would seem that for many wine investors, it is simply the privilege of living in a beautiful setting, while being able to sample their own wine with friends and family, that serves as more than enough reward.