WINERY & VINEYARD VALUATION

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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

• 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

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

–Area and site specific costs   

- Vines, Trellis, Irrigation, 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”

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

• 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

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?