Who’s snapping up SA’s bargain wine farms?
Rising wine exports and a weaker rand are luring more well-heeled international buyers to the Cape
Land expropriation jitters and drought would seem to have done little to dampen offshore investor appetite for trophy vineyards in SA. At least three local wine farms have been sold to international buyers so far this year at prices of more than R80m each.
Though Cape wine-farm buyers are notoriously tight-lipped about what they pay for big-ticket estates, the FM believes San Francisco-based investment firm Eileses Capital forked out about R100m earlier this year to buy Warwick Wine Estate near Stellenbosch. And while selling prices for other sales are being kept under wraps, the FM understands French and German buyers have been active at the top end of the winelands regions of Stellenbosch, Franschhoek and Paarl in recent months.
George Cilliers, co-principal for Lew Geffen Sotheby’s International Realty in the Cape winelands, says there is no doubt that sales volumes and prices of undeveloped agricultural land have dipped due to the drought and noise around the government’s proposed amendment of the constitution to allow for land expropriation without compensation. "In some areas of the winelands, prices of bare agricultural land are down 20%-30%," he says.
However, demand for revenue-producing wine farms remains surprisingly strong. Cilliers ascribes this to improved prospects for SA wine exports and a weaker rand.
"SA wine exports are up, so owning a branded local winery has become a more profitable investment — especially if you are paying in foreign currency," he says.
Pam Golding Properties also reports "business as usual" in the sector, with no noticeable drop in demand for established wine farms. The group has sold wine farms to the value of R3bn in the past five years, with notable recent sales including Stellenbosch wine estates Uitkyk and Cordoba.
Constantia Uitsig set a new benchmark for Cape winelands values when it was sold for about R175m — or nearly R3m a hectare — in late 2013
Clarence Collins, Pam Golding Properties’ agricultural and commercial specialist, says despite lower production volumes due to the drought, it appears the quality of SA wines has not been affected, which bodes well for ongoing demand.
Figures published by Wines of SA confirm that demand for local wines is on the rise. Total exports reached 448.5Ml in 2017, up 4.7% year on year and up about 60% on the 280Ml SA was exporting 10-12 years ago.
Kevin Layden, Seeff’s agricultural agent in the Stellenbosch and Boland areas, says owning a wine farm is still widely regarded as the ultimate status symbol among the world’s wealthy.
He says while SA wines are increasingly gaining global recognition, foreign wine-farm investors also get significantly better value in SA than in other wine-producing regions.
"Prices of small boutique wine farms start around the R20m-R30m mark, while top-end wineries can sell for up to R200m-R300m," he says.
Prices typically depend on location; how well the farm or wine brand is known; the quality of the terroir (soil, topography and climate); the size of the land under vine; building infrastructure such as hotels, restaurants and wineries; and the type of grape planted.
Layden says prices tend to be highest in the Franschhoek Valley, where farms fetch up to R1m-R1.2m a hectare, while properties in Stellenbosch and Paarl sell for R800,000-R1.5m a hectare and R300,000-R600,000 a hectare respectively.
That compares with the R7m-plus a hectare that real estate consultancy Knight Frank says investors typically pay for wine farms in France’s Bordeaux and Italy’s Chianti regions.
What it means
Prices for bare agricultural land in the winelands are down 20%-30%, but demand for revenue-producing farms remains robust
Seeff is marketing Chamonix Wine Farm at present for a whopping R235m. The 240ha Franschhoek farm dates to about 1688 and has some of the highest planted vineyards in the Cape winelands. It has about 50ha under vine, as well as an upmarket guest lodge.
If Chamonix’s asking price is met, the sale will go down as the biggest such deal in SA since 2011 — the year Boschendal, set on a 2,240ha estate between Stellenbosch and Franschhoek, sold for R700m.
However, Constantia Uitsig is believed to hold the record when it comes to price per hectare. The 60ha estate, previously owned by companies set up by business tycoon Tokyo Sexwale and former merchant banker Dave McCay, set a benchmark for Cape winelands values when it was sold for about R175m — nearly R3m a hectare — to former Pepkor CEO Pieter Erasmus in late 2013.
Other prominent wine farm sales in recent years include those of Stellenzicht in Stellenbosch (sold to golfer Ernie Els); Hidden Farm, perched on the slopes of the Helderberg between Stellenbosch and Somerset West (to former Capitec Bank CEO Riaan Stassen); Mont Rochelle in Franschhoek (to the Virgin Group’s Richard Branson); and neighbouring Dieu Donné, Klein Dassenberg and Von Ortloff, now amalgamated into Leeu Estates (to Indian billionaire Analjit Singh).