Squeeze Play: A Napa and Sonoma Wine Grape Development

One of our wine grape developments is a 2,900-acre vineyard that was purchased in 2017. The asset is located in Lake County, California in the Napa and Sonoma wine region. The investment is in close proximity to the Red Hills, Guenoc and Alexander Valley American Viticultural Areas (“AVA”). This close association with these AVA regions provides our clients with access to a number of outlets for their wine grapes. This asset is currently in the process of being transformed from ranching and row crops into a high-quality 2,900-acre vineyard. Our wholly-owned farm management firm, AM Property Services, is highly experienced in the vineyard sector and will develop the property over a three-year period — a process that is influenced by the availability of suitable vine stock. Our plan calls for implementing a “high box” trellis system throughout the property. Increasing labor costs and advancements in mechanical technology have made the high box system one of the most economically feasible for vineyard operators. AgIS will be planting Cabernet Sauvignon, Petit Syrah, Malbec, Teroldego, Petit Verdot and Sauvignon Blanc grapes and when the property is fully developed it will continue to be managed directly by AM Property Services.

Wine grape production is based on consumer tastes and values. Unlike other commodities, wine grapes have many different price points, varietals and growing regions, not just in California, but around the world. We focus on the Napa and Sonoma regions along with the Central Coast regions, due to the traditionally lower volatility in pricing of grapes with local wineries. This allows us to plant varieties that are in demand among U.S. and non-U.S. consumers.

The Napa and Sonoma area is one of the world’s premier regions for wine grape production. The robust and flavorful varieties of grapes grown in the area are a function of its soils, water and climate. The Pacific Ocean has a significant influence over the climate, providing adequate rainfall in the winter and cool temperatures at night during the summer months. Soils in the regions are superior for vine health and growth, while water is conservatively used to grow grapes to their optimal maturity for winemaking.

Disclaimer: Our belief of future market performance is based on expectations that may or may not come true. Investors should perform their own due diligence before undertaking farmland investments.