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R1m for 1% of a wine farm

Investors can get fractional ownership in a wine farm that aims to become a leading producer of world-class fine wine.
Heaven on earth. Image: Supplied

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.

Source: Hemelzicht

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.

Source: Hemelzicht

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.

Read: Fine wine as an investment vehicle is yielding ever-bigger money

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).

Read: The 50 best wines under R800

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.

Image: Hemelzicht

Read: Wine industry: Ban lifted a little too late

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Great idea … free wine for life, … nearly …

Would rather buy 30 Kruger Rands and stash them for a rainy day

No risk of confiscation, lockdowns, and weather..And of course labour issues

Novel idea, but not for me thanks

In the age of probable land confiscation one will have to be VERY careful !!!

One of the directors is chummy in Extreme Fighting circles probably be alright on that issue.

Invest 1,000,000 on hope, wish, luck????On a farm that”aims to become a leading producer of world-class fine wine.??” Na

The investor who is worthy of that term will be the one who buys this farm for 20 million on auction ten years from now after it has been developed with money that did not come from wine farmers. Then it will be an investment, until then it will be an expensive pet project.

This investment sounds like a terrible idea. Considering that the sale of alcohol has been suspended a few times over the last year, restrictions were placed on exports to arguably the most profitable market to sell the product and that in all likelihood this could continue for the next 18 months it really should be considered “speculative” at best. I suspect this investment will be like owning a car; nice when you still have the new car smell, but the reality of ownership will ruin the experience.

A lot of wine farms are in financial trouble today, not because of Covid necessarily, because it is a low margin business. The romance of wine making is for sale here, not a wine farm. Farming is tough, no matter how you look at it. If you want to buy good wine, spend your R1m online and buy the best South African wines.

Better still – French Reds – –

Ai

All on a thumbsuck from two guys who don’t even know which way to sit on a tractor.

I farmed for 45 year, ek weet.

All these partnership/ownership schemes come apart when the owner/farmer tries to explain that it did not rain, prices dropped, disease hit something, the stud bull fell in a hole, Philimon left the pump off blah blah blah……

Ya agreed and even the guys that don’t farm know how tough it is but this is not the Stooorie above, it’s all sounds so “romantic” and fun.

Ek is self n wynboer – het nou lekker gelag!!! Baie waar

Lol. You gave me a laugh there. All partnerships are formed in a hot bath of optimism and ambition.

Then the realities roll in and Philimon also rocks up.

Sounds like an advert from an estate agent trying to flog a dead horse. Who in their right mind would invest in anything to do with land in this country. Good luck.

I remember a prominent South African banker, who “retired” to a wine farm, once being quoted in the media as saying that wine farming is, quote “a return on ego”! I guess a former banker should know best.

Just put it on CrowdStreet or Fundrise and just do it on a proper crowdfunding platform.

Great Investment!!!!!

Invest in a farm where the government can stop sales – on a whim – causing millions of losses.

If this was France – St Emilion or St Denis – – – – I would do it in an instant.

Great Sales Pitch, lets compare:

Lowest Risk with highest Return for same period:
RSA Retail Bonds an investment of R1,000,000.00 after 7 years on a Fixed Rate of 7.25% and reinvestment will achieve a total return of R1,663,231.45
Pros:
1) Cash withdrawal Option
2) Change Contract from Fixed Rate to Inflationary Link Rate
Cons:
1) the country will default

Wine Farm investment R1,000,000.00 after 7 years will achieve R1,680,000
Pros:
1) You get 2 weeks stay
2) Couple bottles of Wine
3) An Alternative Asset
Risk:
1) Labour Secure BEE Scheme (20% given away),
2) EWC (100% loss),
3) Inexperienced Management (under performing asset)
4) Investors unable to withdraw the investment
5) Return on investment may be capped

I would say yes if you have a few million spare that you are prepared to depart with, otherwise the retail bonds are a better option.

No business or investment is worth starting from scratch unless you really know the market and you have a very competitive product that will be beat the market that being at least double the Retail bonds % with a risk factor of 25% on your total investment.

Holding cash will cause depreciation at 6% per annum because of Expropriation Through Inflation, that means your R1mil will be worth about R810,596.99 after 7 years

I just see a lot of wining from the investors here!

Is that winning or Whining 🙂

Management will be doing the wining and dining. Shareholders whining..!

A wonderful way to help keep South Africa’s reputation as a premiere wine producer!
Another way would be to take the same idea and buy a vineyard with chateaux inFrance ( for cheaper) and keep the profit offshore! Just an idea!

Thanks but no thanks.

It’s a NO for me…

There will be tears.

Whenever I see the word ‘bespoke’ in a marketing blurb then I know its not for me. I’d rather go to Tops and drop a few k on my own ‘bespoke’ experience and have a headache for a day, not for years and years and years.

These guys must be nuts! There are so many top class wineries around and the ones that are left after Covid and lockdowns will battle to survive the next 2-3 years. There will be no takers if they have any common sense.

Great idea. Invest in the sceme so the owners in the owners can sustain theyre living in a antother country vibe…

Tau Mogale’s “Am I a joke to you” meme comes to mind…..

Horrible idea. Once farms get taken that’s 1mil down the drain. Creative way to sell the farm off before it happens. What’s the return on this anyways? I’d rather rent out a house for that price, with tenant insurance for if the tenants decided to withhold rent.

But it would be nice to own a small fraction of my favorite red wine, Merlot producing farm.

Lol.buying into a farm in SA? What do you smoke?

End of comments.

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