Bloomberg News

No $10 Million Check Needed for Argentine Vineyards

June 26, 2012

O. Fournier Barrel Cellar

The barrel cellar in the O. Fournier winery in Uco Valley. Argentina's personal vineyard market is expanding after pioneers at Vines of Mendoza started marketing parcels to international investors in 2006. Photographer: Sara Matthews/ofornier.com via Bloomberg

At the southern end of Argentina’s Uco Valley in the foothills of the Andes, Jose Manuel Ortega Gil-Fournier is helping make investors’ dreams of producing wine from their own vineyards come true.

An investment banker at Goldman Sachs Group Inc. (GS:US) and Banco Santander SA (SAN) before leaving the world of finance in 2006, Ortega is selling 140 hectares of land planted with malbec and other varietals for $150,000 per hectare.

More importantly, he promises to do all the work in caring for them. Ortega is counting on the allure of vines that produced his 93-point Alfa Crux Blend (2003) and 94-point O. Fournier Syrah (2002) to distinguish him from other sellers of personal lots in Mendoza province, the hub of the country’s wine industry.

“The Uco Valley is producing not just the best wines in Argentina but some of the best in the world,” said Daniel Pita, a hedge fund lawyer from Sao Paulo who bought into the Ortega project without ever having visited Mendoza. “If you look at other regions that are famous for good wine, like Bordeaux and Napa, you can’t even think about investing there.”

Argentina’s personal vineyard market is expanding after pioneers at Vines of Mendoza started marketing parcels to international investors in 2006. They have since sold 106 plots that produce 240 unique wines.

Ortega’s program is the first by an established Argentine winery to admit “partners,” as he refers to clients who buy property surrounding his namesake bodega 90 minutes south of Mendoza city, the provincial capital.

Colonial History

“We’re inviting 85 investors, wine lovers, to share the experience of being a winery owner without having to write a $10 million check,” Ortega, 44, said in an interview at his restaurant, Urban, which looks out toward the snowcapped Andes. “We’re socializing the pleasures of owning a vineyard and making wine.”

While Mendoza’s wine industry dates back to the Spanish colonial period, the parched, rock-strewn Uco Valley, 1,000 meters (3,280 feet) above sea level, was little developed a decade ago. Since then, it has attracted the world’s top vintners.

Not far from Ortega’s O. Fournier winery, French oenologist Michel Rolland joined winemakers Benjamin de Rothschild and Laurent Dassault in creating Clos de los Siete, a group of seven bodegas whose Monteviejo and Lindaflor blends are standouts.

Argentine Risks

Putting money into Argentina, whether you’re talking land, companies or bonds, may seem risky given its history of defaults, devaluations and confiscations.

President Cristina Fernandez de Kirchner surprised investors in April when she seized YPF SA, the country’s biggest oil company, from Spain’s Repsol YPF SA. (REP) In December, Congress passed a law blocking foreigners from owning large swaths of rural land.

“It is of concern but I don’t really believe that the nationalization trend is going to be widespread,” said Tom Biery, a co-founder of Houston-based oil and gas producer Quail Creek Companies, who’s looking forward to serving his own Uco Valley wine at parties in a few years. “And while our investment isn’t insignificant, it isn’t huge either.”

Ortega had planned to start his private vineyard project in 2008 but delayed it when the U.S. real estate collapse and the fall of Lehman Brothers helped spark a global economic slowdown.

“We put it on hold for a while and late last year decided that the U.S. economy was getting better, Asia was getting better and Brazil was booming,” he said. “We thought those would be three major markets to point toward.”

Bottle Design

As well as the land, purchasers get their vines planted and maintained for three years. They can also work with Ortega’s staff to design bottle labels, blend their own wines and ship them abroad. Ortega estimates annual maintenance costs after the first three years will average about $4,000, which can be offset by selling grapes to the winery or marketing the wines.

About 10 vineyard owners will be able to build residences on their plots, which could be rented out to a luxury hotel Ortega plans to break ground on later this year.

Once you’ve taken your seat at Urban, the sale is an easy one. The towering glass-walled restaurant leaves you looking past vines heavy with plump malbec clusters to the jagged peaks of the Andes.

Urban’s cuisine is overseen by Ortega’s wife, Nadia, whose eponymous restaurant near Mendoza city was voted Argentina’s best last year by the country’s National Culinary Academy.

Lunch Menu

At Urban, my wife and I settle into a four-course lunch with wine pairings. Our repast begins with a cream of parmesan and chardonnay-caramelized onions, transitions to a pork loin over a mash of potato and orange with soy sauce and ends with an olive oil sorbet. With accompanying wines, the total is 260 pesos ($58) each, a quarter of the cost of the tasting menu at Napa Valley’s Auberge du Soleil.

Michael Evans, co-founder of Vines of Mendoza, says the combination of high-quality wines and affordability is the hook that keeps drawing investors to the country and the concept of private vineyards. “The more people come down and see that they can make wine in Argentina and be exposed to the magic of this place, the better for all of us,” Evans said.

Muse highlights include book reviews and a look at Olympic dining.

To contact the reporter on this story: Bill Faries in Miami at wfaries@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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