Roland Peens wanted to buy a wine farm but, like most people, didn’t have deep enough pockets – especially when some 20-hectare wine farms in the Western Cape sell for no less than R31 million.
Today he is known as a director in WineCellar.co.za.
While on a wine tour, he and Extreme Fighting Championship President Cairo Howarth reasoned that while many individuals wanted to own a wine farm but lacked the means to buy one on their own, if they clubbed together they could use fractional ownership to each get a share of one.
They approached winemaker Gordon Newton Johnson to join their venture and eventually made a bid for a 60-hectare farm in the Hemel-en-Aarde Valley near Hermanus.
They renamed the farm Hemelzicht, and came up with a novel investment proposal.
In exchange for R1 million, investors get:
- A 1% holding in the wine farm;
- Members-only single vineyards and limited-release wines;
- Collectively, 20% of the bottles of wine produced annually on the farm as dividends;
- Owners will also be able to sell their allotted wine dividends back to Hemelzicht to match excess demand of current and vintage wines;
- No lock-in period or service costs;
- Owners with a 3% or larger shareholding are offered a bespoke wine-making experience; and
- They will also be able to stay seven nights a year at the luxury four-bedroom Icon Villa, or 15 nights in the luxury three-bedroom Vineyard Villas, set to be completed in 2022.
The plan is to raise R80 million in this way.
This money will not only be used to buy Hemelzicht but also to develop the farm, with a state-of-the-art winemaking cellar, an owner’s tasting room and later on the development of a high-end cellar, restaurant and other hospitality assets.
Start-up capital will provide funding for the capital projects as well as 30 months’ running costs. It expects to break even in 2026.
Although it is still early days, Peens says there is a lot of interest. He expects Hemelzicht to reach its capital raising target by the end of February.
Tapping the wine market
Though these plans are ambitious, running a successful wine farm is not easy. Wine farmers, for instance, joke that the only way to make R1 million running a farm is to start with R2 million.
Peens is not blind to these difficulties and hence says Hemelzicht will be run on business principles. For example, there will be a board comprising Newton Johnson, Howarth and Peens as executive directors, with a further three to five shareholders coming on as non-executive directors.
Peens will be CEO, and the operations will be divided into winemaker and viticulturalist, sales team, and administration.
Peens says the ultimate goal is to have Hemelzicht become a leading producer of world-class, exported fine wines.
He says South Africans tend not to see wine as an asset class, so they don’t see it as an alternative investment.
This is because the average bottle of wine in SA is relatively inexpensive.
According to Statistics SA, in April 2019 the average bottle of red wine was R64.38 and white wine R55.49. By comparison, the pinot noirs made in the Hemel-en-Aarde Valley are some of the most expensive wines sold in the country, ranging in price from around R300 to just under R1 000 a bottle.
When Hemel-en-Aarde Valley wines are priced in dollars, they are, however, significantly cheaper than wines of equal quality made elsewhere in the world.
According to the Hemelzicht prospectus, the US market price for 93-point wines – a wine of superior character and style – in Burgundy is $227 (R3 376) a bottle. By comparison, a wine of similar quality from Hemel-en-Aarde sells for only $45 a bottle (R669).
Hemelzicht is still in the early days when it comes to tapping the fine wine market. It will, for instance, only be making 10 tonnes or 7 000 bottles of wine this year.
There are plans to ramp up production to 60 tonnes or 40 000 bottles in 2022 and then produce 150 tonnes or 100 000 bottles from 30 hectares by 2026.