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CalPERS, Partner Buy Napa Valley Vineyard

November 02, 2002|From Bloomberg News

The California Public Employees' Retirement System said Friday that it bought more than 100 acres in Napa Valley, its first purchase under a $100-million plan to develop vineyards on the West Coast.

The nation's largest public pension fund bought the land with Premier Pacific Vineyards Inc., a privately held firm with which it has an agreement to acquire grape-growing parcels in California, Oregon and Washington state. CalPERS invested $6 million of the $6.6-million purchase price. The rest came from Premier Pacific.

CalPERS is increasing its presence in real estate in an attempt to bolster portfolio returns as stocks have sunk. The pension fund has $13 billion of its $135 billion in assets in commercial, residential and other real estate, and says it plans to boost that further.

"We're in the market now looking for other transactions," said Richard Wollack, co-chief executive of Premier Pacific.

CalPERS and Premier Pacific paid $60,000 for each of the 110 acres that will be planted, land known as the Suscol Bench Vineyard. It was purchased from Silverado Premium Properties, said Jeff Ottoboni, vice president of finance and administration at Premier Pacific.

CalPERS projects an annual return of 18% on the investment, according to a memo released at its Oct. 15 investment committee meeting.

CalPERS and its partner plan to buy land and sell developed parcels to wine producers within five to seven years, betting that winemakers will find it more economical to acquire existing vineyards. CalPERS and Premier Pacific will grow grapes for wines priced at $20 or more a bottle.

Demand for high-end wine is growing in the United States, and vineyard prices are following suit.

Sales of wine priced at more than $15 a bottle reached 15 million cases last year, up 8.7% from 13.8 million cases in 2000, according to Motto Kryla Fisher, a St. Helena, Calif., firm that provides consulting and research services to wineries. Sales grew 21% in 2000 and 10.7% in 1999.

The land bought by CalPERS is earmarked mainly for Cabernet. Sales of California Cabernet accounted for one-quarter of the high-end total last year, reaching 3.8 million cases, up 12% from 3.4 million cases in 2000.

Producing vineyards in Napa Valley fetched between $85,000 and $180,000 an acre last year, up from a high of $50,000 in 1994, said Michael Fisher, a partner at Motto Kryla Fisher.

Investors are eyeing vineyards now "because the stock market is lousy," said John Mattern, a principal at property broker Keegan & Coppin Co. in Santa Rosa, who specializes in vineyard land sales.

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