CAPE WINE ESTATES STILL IN HIGH DEMAND

In spite of the general economic slowdown, the demand for wine farms in the Cape Winelands shows no signs of abating and 2015 saw a number of big ticket commercial farm sales which each realised between R58 million and R96m, translating to between R450 000 and R580 000 per hectare.

This is according to Dr George Cilliers, Winelands Co- Principal of Lew Geffen Sotheby’s International Realty who says: “Most of the recognised brand estates which had been on the market for some time were sold last year, including Cordoba which fetched R58m, Uva Mira for R65m and Klaver Valley which nudged the R100m mark at R96.5m.”

Cilliers says that the current market buoyancy is expected to continue in 2016 and he attributes this to several key factors.

“There has definitely been an increase in foreign interest on the back of the weak Rand, but foreign interest is also driven by the lack of good investment opportunities in Europe and the spiralling global economic turmoil”.

“Another driving factor,” says Cilliers, “is the rising demand for South African wines, especially in emerging markets like China and, according to recent figures from SA Wine Industry Information & Systems (SAWIS) we exported a whopping 418m litres of wine globally in the 12 months ending November 2015.”

“However, despite our own sluggish economy, a surprising number of investors are still local, typically successful business entrepreneurs attracted by the trophy value of owning a vineyard or looking to invest in the Cape and move down at a later stage. We also receive inquiries from active retirees seeking a lifestyle change.”

Cilliers says that the flip side of the cachet of owning a successful commercial vineyard and the potential profit to be made is the hands-on commitment and expertise required to maintain its success in a competitive market.

“An increasingly popular alternative for investors looking to buy into this prominent market is to become a partner rather than outright owner, and this has clear advantages for both parties”.

“The investor begins to reap rewards and realise returns much sooner as the business can continue seamlessly without any upheaval, while the financial boost allows the farm owner to increase capacity and drive marketing; possibly even taking the farm to the next level.”

Cilliers adds that by taking on a partner the farmer not only continues to enjoy the fruits of his hard labour, but will hopefully to experience exponential growth beyond his initial ambitions.

“In some cases investors are also able to introduce new channels to market, thereby instantly increasing sales volumes.”

“We constantly have foreign buyers looking for investment opportunities where the business will require minimal investor involvement and will continue seamlessly after the purchase,” he says.

In 2015 Cilliers brokered a record-breaking partnership between Ernie Els Wines and a private German investor, realising one of the highest prices ever achieved for a wine farm transaction in the Western Cape.

Several high profile deals with prominent offshore investors in recent years has also fuelled foreign investor interest, drawing their attention to the excellent investment opportunities and value for money on offer in the Winelands.

These partnerships include: Mont Rochelle in Franschhoek to Virgin Atlantic’s Richard Branson and neighbouring Dieu Donné, Klein Dassenberg and Von Ortloff were bought by Indian billionaire Analjit Singh and amalgamated into Leeu Estates.

Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty, says that savvy partnerships in this industry can be very lucrative and rewarding investments, but cautions first-time investors that thorough due diligence is essential to maximise returns.

“The romance of the ancient art of viticulture and the enticing allure of scenic estates in idyllic settings can easily distract from the more mundane factors which are the cornerstones of every successful commercial estate”.

“Historical farms tend to be more attractive to buyers, but these properties often need extensive and costly modernisation so a newer farm with an established infrastructure will often yield quicker and possibly more substantial returns.”

Geffen adds that it’s equally important to consider the strength of the current management structure as this will also determine the level of involvement required by the investor.

Cilliers believes that the Cape Winelands will increasingly appear on the global investor radar as there are very few comparative investment opportunities elsewhere in the world.

“The enticing synthesis of investment opportunity, excellent value for money, unique lifestyle and abundant natural beauty will continue to be major draw-cards, and with the current devaluation of the Rand, substantial investment in a wine farm here at the moment equates to buying a couple of rows of vines in a well-known estate in Bordeaux.”