Big Money in the Land of Grapes

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Something unusual is happening here in the Willamette Valley of Oregon. One big California industry is migrating north, and moving into the fertile rolling hills of Oregon.

That industry is the wine industry.  And its expansion may change the face of farming in area and create real estate profits for those in the region.

Within the last year, California wineries and investment firms have been snapping up wineries and vineyard properties here in the Willamette Valley. This is particularly uncommon because most Californians think that their state is the only decent producer of wines in the country.

No doubt, California produces an impressive 90% of the wine in the U.S. In a $35 billion industry that grew 2% last year, that gives the state a near monopoly.

California's wine industry is extremely established, with vineyards planted on just about every ideal piece of land.  Vineyard property is extremely expensive too. An acre of prime planted vineyard land sells for $200,000 - $300,000. And land that could be developed into a vineyard (if you can find it) will sell for $100,000 - $165,000.

In comparison, land in Oregon is relatively inexpensive.  My recent research found 23 acres of "plantable" vineyard land in the Chehalem Mountain AVA for $835,000 or $36,000 per acre. I also found 5 acres for the bargain price of $175,000.  And a small Pinot vineyard with a modest house, tasting room and 3+ acres of Pinot Noir vines recently sold for $689,000

Prime Oregon vineyard land is now attracting big money, thanks to the high quality vineyard sites that are selling at a 50 - 75% discount to California land.

This spring the big Kendall-Jackson Winery bought up 670 acres of land in the Willamette Valley in order to secure fruit for its Pinot Noir.

And San Francisco investment firm Bacchus Capital Management - named for the Thracian god of wine - is snapping up properties here too. Led by Sam Bronfman of Seagrams and Diageo fame, the firm has spent $50 million on vineyard acquisitions in Oregon and California.

Bronfman - like most of the revered wine experts - views Oregon as one of the premier regions for Pinot Noir. The grape thrives in France's Burgundy region and the Willamette Valley, making this small viniculture area a growth sector within the wine industry.

Commenting on his recent acquisitions, Bronfman said, "We think Oregon is a great place for wine, and its importance is growing in the nation and the world… the Willamette Valley is the best places to grow pinot noir [which is] delicious, and it's a great example of a noble variety."

Several high profile Bacchus acquisitions and investments in this region include Panther Creek, Wines by Joe, and Dobbes Family Estate.

During the last decade, I've frequently visited this amazing part of the country. And I've become a wine lover and collector, with Pinot Noir being my favorite varietal. 

Small producers have long dominated the Oregon wine industry. These are family farms, many of which are committed to the land, sustainable farming practices, and the highest quality product - even if that means the bottom line suffers.

The influx of new investment in Oregon by outside wineries and investors here highlights the value of the land, relative to other viniculture regions.

Next week, I'll write to tell you about a way to invest in the growing real estate boom without buying land in Oregon to setup a vineyard. Stay tuned…



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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