Commercial Real Estate, COMPANY ENTERPRISE, ESTATE/gIFT, TAX

WINERY AND VINEYARD VALUATION

Purpose and Use of Winery Vineyard Appraisal

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–Financing, lender’s collateral    

 

–Financial Reporting (FASB & International Standards)  

   

–Sale or Purchase   

  

–Disputes involving Value   •Dissenting Shareholders, Family Disputes, Divorces, Partnership Dissolutions •Eminent Domain    

 

–Taxes   •Estate Planning, Minority Discounts •Allocations for Income Tax Depreciation •Property Tax Assessment Appeals •Capital Gains Calculations

Understand The Current Economic Conditions

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• Consumer spending and tourism     

• Nonfinancial services     

• Manufacturing     

• Real Estate and Construction     

• Banking and Finance    

• Agriculture and Natural Resources     

• Employment (Federal and California)    

• Per capita alcohol consumption on the increase   

• Demand for both wine is on the increase    

• Industry Cycles     

• Consumer Preferences    

• General Economic Trends     

• Global Factors

Cost Approach Method

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–Land as Capital Cost (Return on, or opportunity cost of land)    

 

–Area and site specific costs 

    

- Vines, Trellis, Irrigatin, Reservoir, Wells, Pumps, Roads, Fences, Land Improvements    


- Facility FF& E (Fixtures, Furnishings, and Equipment)   

 

–Entitlements     


–Cost of Capital   

  

–Entrepreneurial Profit  

   

–Depreciation (Living vs. non-living) 


–“Mature” vs “Developed”

Market Approach Method

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Sales Comparison Approach:   

  

– Unit of Measure     

•Price per Acre     •Price per Ton?     •Price per foot of Cordon ?

     

– Characteristics Compared  

   

– HOMESITES    (Vineyard Estate consists of Vineyard, Land, and Homesite)     



Transaction method:    


• Most transactions are private; very difficult to get pricing, terms, other stats on private transactions     

• Obtain Merger & Acquisition data

Income Approach Method

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• Most commonly used approach for operating companies     


- Capitalized Cash Flows     


- Discounted Cash Flows     

• Invested Capital methodologies and EBITDA multiples   

  

- Can be high depending on the brand value     


- 7x to 10x is not unusual     


- Can exceed 12x with exclusive integrated estate wineries, when brand and real property assets are included

Going-Concern Business Value

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Winery types.      


There are three primary types of wineries:
an integrated winery, a merchant winery, and a hybrid winery. These types can vary in size and organization structure, and each has its own advantages. A merchant winery buys all grapes. A hybrid winery owns a vineyard, however buys a variety of grapes to blend or make their labeled-wines per their likings.     


Winery valuation as a going-concern business must consider the following pertinent questions:     

1. Are the books maintained on a cash or accrual basis?     

2. What inventory costing methodology is being used? (Fifo or Lifo)     

3. Where does the winery source its grapes?     

4. Are winery and vineyards leased from a related party?     

5. What are future capital requirements?     

6. Is the winery’s forecast reliable?