Issue link: http://winesandvines.uberflip.com/i/718029
September 2016 WINES&VINES 33 FINANCE ward a wealth gap that could leave niche players in a challenging position in years ahead. Real estate prices also have continued their steady march upward, with pricing logically tied to the value of the grapes produced, and lenders happy to finance the acquisitions. Whether this financial optimism and free-flowing capital are traits that indicate we are at the top of the market or solidify the return to a healthy market is uncertain, but the recent trauma of the Brexit, which some of our expert panel address, and the pending uncertainty of the U.S. presiden- tial race point out that cyclicality and sea- sonality in finance is an eternal construct, and past is often preamble. Based on the past we've seen and documented during the past five years, one might favor making hay while the sun shines. One cannot time or top the mar- ket, but it seems clear from all our experts that now is an exceptional time to lock in long-term loans at advantageous rates, and there is growing concern that we may be at, or close to, a top of the market. In the case of larger well established brands and vineyards producing premium product, timing may also be optimal for exits through M&A. As always, smaller niche producers may have a much harder time on the M&A front, though credit appears readily available to all. One difference in this high market mo- ment from those past, according to our experts, is the relatively modest arrival of new lenders and acquirers. One can hope that even if the good times can't continue at the levels currently on display, the en- trenched and experienced lenders and buyers may be more likely to weather any unforeseen financial storms. On the unforeseen front, the recent Brexit vote in the United Kingdom cer- tainly qualifies, and it put global markets in a spin. As to whether and when the Brexit will impact wine finance stateside, our experts seem to feel its too early to tell, and likely a good way off. One Brexit silver lining may be that the low interest rates we've enjoyed for so long may remain that way for a bit longer. The Fed no longer seems motivated to raise rates as they had previously indicated be- fore the vote. There's been at least a bit of a near-term Brexit bonus in the form of interest rates moving meaningfully lower in the days after the Brexit compared to the days before. Still, unexpected upheavals in other parts of the world have derailed U.S. mar- kets before. Those considering new funding now—versus awaiting better times later— may benefit from a bit of "hope for the best, but plan for the worst" advance planning. It's unlikely, now or ever, that "it's different this time," so look to the op- portunity currently represented as just that—an opportunity—not a long-term prediction of the future. Enjoy the finan- cial warmth being provided while it is still around, as most seem to feel there's a downturn on the horizon. Ben Narasin is a venture capitalist and freelance wine journalist. His work has appeared in the San Francisco Chronicle, Wine Enthusiast and other media outlets. DEBT What are you seeing in terms of real estate values and the size (and types) of winery construction projects happening? JASON HINDE (JH), EXCHANGE BANK: Real estate values in general have been increasing across the board. From our vantage point, we see wineries con- tinue to buy vineyards to control more of their grape supply as well as both local and out-of-the-area investors buying up vineyards of all sizes. Generally speaking, the sales prices I've seen for vineyard land have a reasonable correlation to the price of grapes the subject vineyard produces, which is a good thing! I would have con- cerns if grape prices were flat and values were briskly increasing. ADAM BEAK (AB), BANK OF THE WEST: Real estate values continue to increase—par- ticularly in Napa, where values are up 14% year-over-year, with positive increases across the entire North Coast. In terms of the size and types of projects, there's been a lot of variety: larger projects (with regard to production) as well as mid- sized, smaller and vertically integrated proj- ects. On the financing front, we're seeing everything from M&A work to production to vineyard re-plantings to tasting rooms and visiting centers. The whole industry is mov- ing in a positive direction, at least in the pre- mium regions. MARK BRODY (MB), UMPQUA BANK: Real estate values seem to be, broadly speak- ing, at their peak. Napa vineyard prices are We asked our panel of finance experts what's been happening in the wine industry during the past year. Here's what they had to say about: KEY POINTS Rates remain low; competition for loans among banks remains high; and according to an expert panel, debt financing is readily available. The experts say that now is an excep- tional time to lock in long-term loans at advantageous rates, and express growing concern that the market may be close to its peak. Unexpected upheavals in other parts of the world such as Brexit have de- railed U.S. markets before. Those con- sidering new funding now may benefit from a "hope for the best, but plan for the worst" strategy. "ANYONE WHO HAS PICKED UP A NEWSPA- PER KNOWS THAT THE M&A GUYS ARE HAVING A GREAT YEAR." Jason Hinde, Exchange Bank