Kluge Estate Winery and Vineyards was left in the hands of its lender Wednesday after an unsuccessful auction in which bidders were unwilling to top the bank’s opening bid.
Farm Credit Bank opened the bidding on the foreclosed property at $19 million, but none of the few bidders on site was willing to spend that much.
Farm Credit Regional Lending Manager Chip Saufley said he was “disappointed.”
The auction included 907 acres, including 164 acres of vineyards, a farm shop and tasting room, six houses, office and production buildings, a barrel storage cave and a 34,000-square-foot former carriage museum.
Owners of the Albemarle County estate had set out to build a world-class wine, vineyard and distribution network. However, owners Patricia Kluge and William Moses had not been selling enough wine to make financial ends meet.
Falling short of the sales targets required in the loan agreement, Moses said several weeks ago that the winery has been making interest-only payments on notes.
Kluge Estate owes an estimated $34.8 million to Farm Credit for a loan made in April 2007 when the couple decided to expand the winery to a national market.
The sale of the estate and its assets will be used to pay some of Kluge Estate’s debt.
Trustee Bill Shmidheiser said the bank hopes to sell the property it has been stuck with. Despite the lack of bidders Wednesday, Shmidheiser said he still believes $19 million would have been a good deal for a buyer.
“You’ve got somewhere in the neighborhood of $50 million that Patricia Kluge and Bill Moses put into the property over and above the cost of land,” Shmidheiser said. “I think somebody paying $20 [million] to $25 million is paying 40, 50 cents on the dollar of what it’s really worth.”
Shmidheiser said the estate is set up to produce about 34,000 cases of wine per year, compared with smaller wineries in Virginia that produce 4,000 to 6,000 cases per year.
Established in 1999, the winery, located just miles from Thomas Jefferson’s Monticello, is among the largest in the region.
Geoffrey G. Lindsay, president of Capital Realty Advisors in McLean, said he was surprised there wasn’t more competition for the estate Wednesday.
“I thought there would be some competition for it,” said Lindsay, who attended the auction out of curiosity and to connect with some major players in the state’s wine industry.
“What you’re getting here is more than just a winery. You’re getting 900 acres of land,” Lindsay said. “The question is: Is it going to make money for a new owner? And it’s not. It’s more a pride of ownership.”
“Most people that attend auctions are expecting to get a deal,” Lindsay said. “The people that came here didn’t get the deal they were looking for.”
Another auction is scheduled for Saturday to sell 15,000 cases of wine from the Kluge Estate. Only ABC-licensed sellers are invited.
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