All Forum Posts by: Mason Moreland

Quote from @Jay Hinrichs:

 what varietals are grown in West Texas ?   I would think this is very state specific.  

Not to hijack Justin's thread, but definitely can be very area-specific. Not only the varieties grown, but also the rootstocks grafted to those varieties. Here in my area we see a lot of Rhone, Spanish, and Portuguese varieties. Tempranillo, mourvedre, and most warm region whites are big here. Typically drought-hardy rootstocks like 1103P or even own-rooted vines. East Texas you see lots of hybrid grapes like Black Spanish, Blanc du Bois, etc that can tolerate the disease pressure, high rain, and high humidity. Each area of Texas is vastly different in what varieties are grown and rootstock they grow on though, like comparing Fresno with Lake Tahoe, climate differences-wise. The vineyard operational mechanics however remain essentially the same across regions. Only wrinkle you may see is in regions with extreme winters where vines are buried each year and dug up in the spring by hand (Ningxia China, the Rockies, northern Great Plains, etc) .

Hey Justin,

One of the rare times a post is exactly what I do! I think I can assist on this one :)

First, let's clarify. 

Is it a vineyard (growing grapes to sell/use)? 

Is it a winery (creating wine from grapes either to market brands -"labels"- themselves or to sell wine to other wineries)? 

Or is it both (growing grapes+using them in the winery)? 

There are HUGE differences in evaluating each kind of asset and, although they are in the same supply chain, they are as different in their operations as a general contractor is from an Air BnB host (also in the same supply chain!).

Vineyard valuation models from appraisers are typically a blended market value/discounted cashflow blend, unless the operation is generating boatloads of cashflow above and beyond market value, then they will typically switch to DCF only. That is usually not the case as market value for existing vineyards is typically over-inflated beyond DCF in many markets (it's a "sexy" asset!). Think of this as an agricultural business where you are underwriting new capital costs for improvements (better equipment, staffing, operational changes, etc), yearly input costs (crop insurance, general liability insurance, fertilizers, chemicals, diesel fuel, equipment repairs, electric for water pumps, irrigation repairs, tractor operator labor, vine care labor, harvest labor, etc), and estimating yield (tons/acre) and sale price ($/ton). That last bit is where things get difficult on vineyards and a newbie can get into serious trouble. Yield estimation must be done conservatively and with understanding of how yields affect insurance prices (they correlate directly). The other big "gotcha" on vineyard underwriting is input costs. Many people grossly underestimate the amount of labor that goes into a traditionally operated (non-mechanized) vineyard. It's absurdly large. For example, on our acreage pre-conversion to mechanized pruning when vines our young, our vine care labor costs will swing from $600-800k down to $75-100K after mechanization. Easy to mess up your underwriting estimating labor!

On wineries, things are a bit more straightforward. It is a commercial/retail business with some hard assets (biggest assets by far will be real estate and stainless steel tanks, and maybe any newer specialized machinery though that depreciates very quickly). It will be valued primarily on DCF, with some factoring in of the value of the real estate and stainless tanks (at least they should! an equipment appraisal is wise for tank value, metals are nuts right now).

Feel free to shoot me a DM and we can connect on this sometime. Background on me: we syndicate, develop, and operate a portfolio of large mechanized wine grape vineyards in west Texas and own/operate a custom crush winery (winery which provides bulk wine, fruit processing, winemaking, and wine services to other wineries). I have underwritten dozens of new vineyard developments, existing vineyards, existing wineries, and new winery development. Background before wine industry (and still going strong) in commercial and residential real estate and am, somehow, still a part-time wildlife biologist.

A bit outside my wheelhouse (vineyards in Texas), but I'd be happy to assist you however I can! Shoot me a DM and I'll see if can connect you to the right type of platforms or people.

Woof, just starting to recover from new baby!

Looks like it will likely be a vineyard primarily for attraction, not commercial production focus, based on the size and location. Looks to be maybe 20 acres currently centrally located on the parcel. Enough to provide a small winery or two with grapes. This area is more difficult to grow in with more disease/pest pressure than the high plains AVA, but less than say East or North Texas. That is likely why it appears to NOT be setup like some of the ones in California where you own a portion of the vines. If I had to guess this is going to be 100% focused on the development of homes to drive profit, with the vineyard being a visual improvement for the development.

Just my take after doing some online and map snooping around. For context on my perspective, we develop and operate large (200+ acre per site) commercial scale vineyards here in the High Plains AVA of Texas. We also do traditional residential real estate investment as well.

Cool project in a pretty area! Hope they absolutely crush it. Seems a bit out in the boonies to me, but I'm not super familiar with how far people are willing to commute in that area vs. DFW, Houston, etc. I used to drive 1.5-2 hrs each way to my W2 when I lived in DFW -barf-

It will be a lot of fungicide sprays in that area… most of the vineyards in the Hill Country are small for premium production due to high farming costs or are strictly for show.

80%+ of Texas grapes are produced up here in the high plains AVA where it’s much easier and cheaper to grow. That’s where we operate.

will look into this more later, waiting for our new baby to arrive!

Quote from @Jillian Kemmerer:

Thanks all! The Solar company offered us a lease, but it wasn't very appealing to the seller - Essentially, it is a situation of "been there, done that" for him. Also Gas leases. (Yes, all leases have ended with no renewals)

There is electricity, but septic and wells would be needed - so I was thinking I would parcel into 10 or even 20 acres lots - this would satisfy the agricultural desires of the zoning, and will allow for building. 
No big developements - think larger family properties, lots of privacy, etc.

Around here, lots are going for A LOT even for half acre parcels. I have no doubt I could make money - it's just figuring out how to get there from where I am = )

If their hearts are set on a particular solution, give them your advice professionally but let them have at it. Both of those solutions (subdivide, sell a piece to the solar company) have the hassle of re-platting the parcel. Find their "three levels deep" reason of why they are selling and solve that ignoring the solar company for a moment. Not trying to be rude here at all just FYI. The best places for genuine advice aren't echo chambers  :) 

Solar leases should typically have a development period where they are paying $X/acre per year no matter what (say 5-7 years), then the lease terminates automatically if they don't build anything on their leased area at the end of that period, then it goes up during the construction period, and again during operations with a yearly escalator. In the great plains you might see something like $30/acre for 5 years with an extension option for more $$, $300/acre for two years of construction, and $500/acre for 30 years for operations with some sort of yearly compounding escalation of the fee. Economics on the initial development period should equate to a little better than a similar AG lease (grazing, rental cropland, etc) for the area.

I usually deal in much larger utility scale solar farms (>1,000 acres) but I might recommend trying to lease ground to the solar company instead of selling. 

Leasing an easement creates a cash-producing asset you can buy with the parcel without having to subdivide it, increases the value of the land, et cetera. 

Just make sure you have an attorney experienced in solar leasing look over the lease. You'll want to work in a removal bond, fee escalation (for inflation, 1.5% per year compounding during operational period is industry norm), and them covering any increases in property tax due to the panels or solar equipment. Happy to chat if you want a rundown on that angle (DM me).

Seeing Odessa and Midland on that list is pretty comical. They are definitely lacking a bit of key data here: actual demand and sales volumes.

While your home value (listed prices, taxable values) is unlikely to go down in the last ten years here, the realistic movement/demand of homes at those prices is all over the board. To put demand into perspective for Midland (which is more white collar than Odessa and has less intense swings), we have seen market rents for one B to B+ class SFR property we own swing from $1,700/mo to $3,000/Mo within a year. That is fairly normal here. Stability and Midland/Odessa in the same sentence is a joke! Those other TX markets on the list look like they hit these parameters really well.

-end bashing my own market- 😂

Excellent answer by my nominal doppelganger. From an ag real estate guy's perspective here, don't forget it will also be highly seasonal since sunflowers are annual plants. Just 3-5 months of the year depending on where you are at. The scenery will likely be much less impressive during the winter and spring (out here our sunflower fields are just a giant expanse of dirt then, LOL!)

Also, people often just plain suck. Don't let it take your peace. They'll judge you for having a fancy car (sorry, I try not to) or they'll judge you for having a junker. 

If you're just getting started, don't stress about your car. Keep it very tidy inside and washed and you'll be fine. Focus on being the best agent they've ever had and go "three levels deep" as David Greene always says.