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W i n e s & V i n e s s e p t e m b e r 2 0 1 4 49 c harles Banks, the founder and managing partner of Terroir capital, which in- vests in wineries and hotels around the world, is known to many as the former owner of Screaming eagle Winery in the Napa Valley. But since selling Screaming eagle and Santa Barbara county-based Jonata to business part- ner Stan Kroenke in 2009, Banks has been busy investing in wine ventures in california, South Africa and New Zealand. In california, Banks' investments include Mayacamas Vineyards in the Napa Valley, Sandhi and Qupé in Santa Barbara county, and Wind Gap in Sonoma county. overseas, investments include Mulderbosch in South Africa and Trinity Hill in New Zealand. Banks is a partner with sommelier and vintner Rajat parr in a Burgundy negociant project, Maison L'oree. He and his wife Ali also founded cul- tivate Wines, a venture that donates 10% of sales to charitable causes. And he's an investor in Blackberry Farm, a luxury hotel in Tennes- see, and the Inn at Mattei's Tavern in Santa Barbara wine country. Wines & Vines: How did you get involved in this aspect of the wine industry? Charles Banks: I was in the investment business, running cSI capital Management, when I fell into a dreamlike opportunity to be the manag- ing partner of a new vineyard development project with Arnon Milchan and Jerry Levin in Santa Barbara county. Jonata was an amaz- ing way to start in the wine business. Arnon and Jerry were excellent mentors and opened doors all over the world for me and our new project. Jonata led to an opportunity to buy Screaming eagle, thanks to Tom prentice, our viticulturist. We had a great run until my part- ner, Stan Kroenke, decided he didn't want a partner anymore. I had founded Terroir capi- tal in 2004, and this gave me the opportunity to take what I had learned and take Terroir in a new direction, focusing on building a global wine company. We didn't make our first win- ery acquisition until 2010. The first winery we tried to buy was Mulder- bosch in South Africa. I say we "tried" because it took me over three years to get the deal done. In the interim, we founded Sandhi with Rajat parr, became partners with Andy erickson and Annie Favia erickson on Leviathan, and bought Tulbagh Mountain Vineyards in South Africa, which we renamed Fable Mountain Vineyards. Then we kept finding more opportunities with great people like pax and pam Mahle of Wind Gap, Bob and Louisa Lindquist of Qupé, Robyn and Robert Wilson of Trinity Hill in New Zea- land, and the Schottenstein family, our partners in Mayacamas Vineyards. W&V: What do you look for when you make an investment in a winery? Banks: When we are looking at a potential ac- quisition, we put it through several filters. First and foremost, we look at the people. Are they a fit? people are everything to me in business. our partners need to fit in with each other and share our values. Next, we look at the place and the story to make sure they are inspiring, fit with the rest of the portfolio and don't create conflicts for our team. Third is potential. We must see and feel the potential to make something special and make a difference. We need to make wines that make a statement and have the potential to define whatever category we are in. Whether it's the chardonnay of Sandhi, the rosé of Mulder- bosch or the cabernet of Mayacamas, we have the goal to be definitive. The final criterion is financial. We need to see a clear path to profitability and long-term sustainability. our job ultimately is to provide the capital and discipline to get there. Some- times this requires significant patience. It took me six years to buy Mayacamas and over three to buy Mulderbosch—well worth the wait in both instances! W&V: To what extent have you used debt (as opposed to equity investment) in your winery ventures? Banks: We use very little debt, especially early on in the life of our projects. once the business is mature and stable, I am comfortable with a reasonable and sustainable percentage of debt. We work well with Silicon Valley Bank. They meet all our needs, and they are very conserva- tive, which suits us well. W&V: Some of your investments and partner- ships have been in new ventures, like Leviathan and Sandhi. But you've also invested in estab- lished properties like Mayacamas, Qupé and Mulderbosch. How do these older wineries fit into your overall strategy? Banks: It is extremely difficult to start new brands. The industry is very crowded and Investor Interview CHARlES BANkS How the founder of terroir Capital chooses wineries for investment on three continents By Laurie Daniel Highlights • the man known to many as the former owner of screaming eagle Winery discusses recent acquisitions. • Charles banks says three key filters in choosing an investment are the people, the place and the potential. • he says that it's much easier to take an existing brand and reinvigorate it than to make a new brand work. Wine industry Finance 2014 FreD lyoN F I N A N C E