Cape of Good Hopes

Tuesday, 17. July 2018 - 11:15

Warwick Estate

US-based Eileses Capital has made two significant South African wine estate purchases in the past couple of months, an indication that a new era of foreign investment in the Cape vineyards may be on the cards.  

Following its purchase of Warwick Estate, which had been in the hands of the Ratcliffe family for more than 50 years, Eileses moved quickly to pick up Uitkyk, a 600 ha property in the same Stellenbosch ward. The purchase price for Warwick, which has a strong commercial presence in both the local and international markets, was not disclosed. Industry analysts believe it may have been in excess of $20m; the purchase price of Uitkyk was in the region of $12m. 

This combined amount represents the highest upfront price ever paid by a foreign investor entering the South African market. While larger sums have been spent over time by such buyers — usually because of the cost of upgrading assets — at no time in the country’s recent history has there been an initial purchase in this price range. It’s estimated that a further $15m will need to be spent on replantings and cellar renovations at Uitkyk.

These purchases suggest that South African viticultural real estate may once again be in the cross-hairs of international investors. 

The details
The exit in February 2018 of president Jacob Zuma — whose term in office was characterised by corruption and investment-unfriendly policies — followed by the succession to power of businessman Cyril Ramaphosa, has brought a change in investor sentiment. Many of the country’s most prestigious wine properties are foreign-owned, a pattern that began in the 1980s and gathered pace in the Mandela era.

Under the leadership of Mike Ratcliffe, who took over the running of the business following the death of his father in 2004, the Warwick brand has shown significant sales growth in recent years. The cellar had thus become increasingly dependent on grapes bought from other growers in the region. Uitkyk’s location, as well as the historical potential of its vineyards, should provide Warwick with much of the fruit it will need to sustain its expansion.

The Uitkyk property was once one of Stellenbosch’s most important estates. Occupying a prime position along the south-western slopes of the Simonsberg Mountain to the north of the town, it yielded highly reputed wines under the ownership of the von Carlowitz family. In the past half-century, however, it passed through the hands of several owners, most recently landing up in the portfolio of multinational liquor group Distell. 

With vineyard ownership less and less of a key strategic imperative at Distell, a decision was taken to dispose of the estate. Kanonkop, widely regarded as the most obvious claimant to First Growth status in South Africa, is actually a sub-division of Uitkyk — a clear indication of the potential of the site.

Eileses Capital is an investment company controlled by Kishore Bopardikar and Charles Marston, who have worked together since 1991 in the technology industry, particularly with programmes used by the banking sector. As a result, they frequently had reason to travel to South Africa. Their personal interest in wine led them to the conclusion that Cape wine is significantly under-recognised in international markets. 

“The Western Cape has some of the most under-appreciated, under-valued terroir in the world,” says Charles Marston, MD at Eileses. “When well farmed, Stellenbosch produces fruit the equal of the best vineyards in the old and new worlds. Its soil is unique. The region’s winemaking history is centuries old. We invest here to harvest this raw potential.

Knock-on effects
Bopardikar and Marston believe that, with the growing recognition of the quality and value proposition inherent in Cape wine, it is only a matter of time before prices rise dramatically and with them the value of high-quality viticultural land in the Western Cape. They have already indicated that these two acquisitions do not represent the limit of their purchases and further shopping may follow over the next 12 months.

Ratcliffe, who negotiated the Uitkyk purchase on behalf of Eileses Capital, will remain on briefly to ensure an orderly hand over to new management, after which he will focus his attention on the Vilafonté business, in which he has been a shareholder with the American winemaking and viticultural duo Zelma Long and Phil Freese. Ratcliffe is confident that the team in place at Warwick will be able to take the business to the next level. “I look forward to taking a greater leadership role at Vilafonté and developing its potential as a unique, high-end brand.”  
Michael Fridjhon