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NEWS OF GRAPES AND WINES IN EASTERN NORTH AMERICA The Rise & Fall of Kluge Estate Winery Virginia showplace goes to auction after Farm Credit forecloses on $35 million loan More than 900 land acres—including 164 acres of vineyard—were part of the Kluge Estate package put up for auction by Farm Credit of the Virginias. harlottesville, Va.—By 12 noon on Dec. 8, seven bidders had registered for a much-anticipated auction in Charlottesville. Despite the efforts of Patri- cia Kluge and William Moses to find addi- tional investment capital, the Kluge Estate Winery and Vineyard went on the auction block. In 15 minutes, it was all over. Farm Credit of the Virginias, the lien holder on the property, made an opening bid of $19 million, and there were no other bids. Patricia Kluge and her husband, William J. Moses, started the winery in 1999, intent on establishing a world-class vineyard and making the winery one of the largest and most influential in Virginia. Located south of Charlottesville, not far from Thomas Jef- ferson's Monticello, Kluge's estate included 2,000 acres and a 45-room English-style "manor house" known as Albemarle House. Approximately 200 acres were planted to vineyards; the couple built an elaborate tasting room known as the Farm Shop, and Kluge hired the internationally known "Flying Winemaker," Michel Rolland, as the consulting winemaker. C The winery's first release was the limited edition Kluge Estate 2000 New World Red, priced at a breathtaking $495 per bottle. Only 289 bottles of the wine were produced, each one signed by Kluge and then- winemaker Gabriele Rausse. At that time, most wine in Virginia was sold for less than $50 per bottle, and the release of a first wine from a new winery at such an exalted price created a lot of publicity for Kluge Estate. Later releases of Kluge Estate New World Red were priced considerably lower, the 2001 at $58 per bottle and the 2005 at $25. Wines & Vines' most recent data show an annual production of 40,000 cases. In 2007, Kluge and Moses decided to expand the winery into national and inter- national markets, and obtained a loan for nearly $35 million from Farm Credit. Last October, Farm Credit foreclosed on the loan and scheduled the auction. A total of 906.6 acres of land, including 164 acres of vineyard, the Kluge Estate Farm Shop tasting room, wine production buildings, vineyard and winemaking equipment, six employee houses, a 34,000-square-foot HEADLINES p106 FEATURES p109 106 Wines & Vines JAnUARY 2011 former carriage museum and offices were all part of the sale. The acting trustee for the bank, Wil- liam Shmidheiser III, indicated that Farm Credit will continue to look for a buyer for the property. Whether it will remain a vineyard and winery will depend on the ultimate purchaser. Civil action In addition to the foreclosure on the 2007 loan, Farm Credit also filed a civil suit Oct. 29 against Kluge and Moses as guarantors of that loan. The civil lawsuit contends that in September, Kluge and Moses transferred more than seven acres and property to the John W. Kluge Jr. Trust, a trust held in the name of Kluge's son. At that time, Kluge and Moses were attempting to restructure their loan, and Farm Credit thinks that the gift was made "for the purpose of shielding and/ or concealing assets" from the bank. Farm Credit wants the gift voided, seeks a lien on the land and property transferred to the trust, and wants the property to be sold to help reduce the couple's debt to Farm Credit.