Byron Lutz
U.S. Telephone (Lake Worth, Florida): (561) 582-7801
Email: byronlutz@hotmail.com


50 Acres -- Bargain-Priced 2-Farm Package Includes
New Home, Vineyards & Worker's House

La Llave, San Rafael: US$105,000
Negotiable / Motivated Sellers


This property is one of the most interesting I have, the type of property
I would be happy to own myself because I'm partial to value, and under-
potentialized real estate. Two years ago it would have been priced at close to $200K.

HIGHLIGHTS:

  • LAND:  This actually consists of two farms, one (10 acres) inside city town limits of La Llave, and the
    other about a mile away (bicycle distance) just outside the town limits, but on a dirt road.

  • NEW HOME:  New 1,200-square-foot home, with two beds and one bath, plus room to add on.
    Tiled floors, and lovely wooded beams and wood tongue-and-groove ceiling. Out back is a storage facility
    and the home is beside about 9 acres of "parral-style" vineyard.

  • SERVICES:  Electric, city water, walking distance from small shops and schools in the pueblo
    of La LLave, located about 30 minutes on two distinct main highways from San Rafael.
    Previously had a land-line telephone. A gas-station, mini-market is a stone's
    throw from Farm #1, although I wouldn't advise throwing one.

  • POTENTIAL:  Under-potentialized property, priced below current market rates, and
    with vast potential for improved income and additional land in production.

  • LABOR:  Includes a worker's home on Farm #2, with labor and administration in place.

PARTICULARS

These farms have been run at a loss in 2008. A loss of 21,342 pesos for the larger
farm, and a loss of 3,972 for the smaller farm -- totaling 25,412 pesos (about US$6,600
at current exchange rates).

Total grapes harvested in 2009 were about 95,000 kilos, an amount the administrator says
should be at least 50 percent higher -- 150,000 within two years, and 180,000 in following
years if the farm is properly cared for.

These extra totals substantially increase farm income, because fixed costs must be paid
regardless of income. The reason expenses are high, and why the farm is not producing
what it should, is due to the cost of tractor work. The owners are only tractoring the
vineyards twice a year, which substantially hurts production totals.

Owning a tractor will lower costs by more than 10,000 pesos per year, and also solve the
problem of poor care because it can be tractored the four times necessary -- or even more --
rather than just the two times they currently tractor. In addition to that, the caretaker can do
the work when he needs to, and not wait for someone available to show up.

So, here are the two things which can cut expenses, and increase production:

1) OWNING A TRACTOR: Eliminating 10,740 pesos in expenses
2) SELF-ADMINISTRATION: Eliminating 9,600 in expenses

Both of these amount to a total of 20,340 pesos -- about equal to current losses.

By doing these two things, current expenses and income the figures show break-even on
the vineyard. However, the caretaker and administrator are also convinced that extra
tractor work will immediately increase production totals, which then creates positive income.

Most who move here eventually eliminate the administrator. He is necessary when
owners are absentee, so this is not something all folks can do right in the beginning,
but a goal they work toward.

The bottom line is that by cutting expenses and running the farms smarter, the
administrator believes an income of close to 45,000 pesos (US$12,000) is not
unreasonable. He cautions that this will not happen immediately, but should prove
the case in two to three years of tighter management.

The farm could also be aided by a few other little things, like replanting some of the
missing vines and redoing some of the post and wire where they could use better
better reinforcement -- both of which are minor expenses. The farm could also benefit
from fertiizer, which has not been done in years, and would further increase grape totals.

Other ways to add to income include wine-making, utilizing the vacant land which is not
being farmed, even perhaps leasing out the tractor to others if you purchased one new.

Below (beneath the photos) I go over expenses
and income in greater detail.


Various Property Views of Farm #1 (10 Acres):

NOTE: At this point I lack photos of Farm #2 (the 40-Acre parcel)


FARM DETAILS:

40 ACRE FARM:
The 35 acre-finca is actually 16 hectares according to the administrator
-- which means about 40 acres.

Below is a breakdown on how the farm is filed with the Wine Institute,
the number of hectares (in sq. meters), and notes explaining these varieties.

The INV records show just over 14 acres of vineyard on this farm, which
I think is in error. I was out of the farm his weekend and spoke to the caretaker,
Daniel, asking his opinion, and he thinks that the Wine Institute figures show
about 5 acres less grapes than actually exist there. Daniel added up the area
he is working -- rows of grapes, lengths in meters, etc., and says there has to
be about 19 acres of vineyard -- not 14 acres.

WINE INSTITUTE OF VINEYARD/VARIETY TOTALS

CHARDONNAY - 7500m2 (1.85 acres): This French grape is sometimes oaked
and is the most famous of the French whites. In Mendoza it is often purchased
for use as champagne. It's one of the earliest grapes to go to harvest here.

MOSCATEL - 20100m2 (5 acres): An Italian variety, and there are several types
types in Mendoza. Just two types are called Moscatel Rosado or Moscatel Alejandra
-- with the pink one, Rosado, being more prevalent.

PEDRO GIMENEZ - 10000m2 (2.5 acres): Called Pedro Ximenez in Australia

CEREZA - 10000m2 (2.5 acres): An Argentine white wine grape, although
the skins are not white but a darker tone in color. Some claim the grape is
similar to Pinot Gris or Gewurztraminer.

CRIOLLA - 10000m2 (2.5 acres): Also called the Mission grape in California,
and sometimes used there to make Angelica wine.

TOTAL: 57600m2 (14 Acres)

-- HARVEST TOTALS BY YEAR --

Below are the totals harvested in recent years, according to winery records
where they were sold, and the weigh bills when delivered.

2009 - 65,200 kilos mixed grapes
2009 - 6,180 chardonnay

2008 - 64,000 kilos mixed grapes
2008 - 6,060 kilos chardonnay

2007 - 83,000 kilos mixed grapes
2007 - 7,600 chardonnay

2006 - 77,850 total harvest (chardonnay & mixed)

TOTAL FARM EXPENSES: Below are the expenses, some of which are paid monthly,
while others incurred annually or paid over the course of the year.
They are summed and totaled below.

EXPENSES PAID MONTHLY

Administration: 500 pesos (6,000 year)
Worker salary (including benefits, workmen's comp, etc.): 2,000 pesos (24,000 year)
Electric: 50 pesos (600 Year)

EXPENSES INCURRED ANNUALLY

Property tax: Zero
Irrigation Fees: 1,800 to 2,000 pesos
Preventive Spraying (2 times per year): 2,340 pesos
Tractor work to spray vineyard: 1,260 pesos
Tractor plow work (2 times per year): 6,480 pesos
Herbicide: 1,400 pesos
Ant Control: 200 pesos

TOTAL ANNUAL EXPENSES: 44,280 pesos

Income figures from 2009 are not available because the grape payments are being
made in the form of wine over the course of the year, at the market price paid of the
wine at that moment. These grapes were delivered to the cooperative winery in
Goudge, which is a member of FECOVITA, which is a group of close to 30
cooperative wineries in Mendoza. They do domestic and export sales, and produce the
brand "Marcus James" which is sold throughout the U.S., and a higher-end wine called
"Cancillier". They also do "bulk" wine sales to other countries, as well as
concentrated grape must, which is mostly sold to the USA.

In 2008 this 40-acre farm netted 22,848 pesos in grape income, after deductions
for harvest cost (labor, harvest truck and delivery) at a cost of 15 centavos per kilo.

TOTAL INCOME: (21,432 pesos loss)


10 ACRE FARM

This farm shows Wine Institute records revealing 4 hectares of grapes (about 10 acres)
which also cannot be correct. The total are is 4 hectares, and there is a house and
outbuilding along with a driveway, etc., so it would be impossible that there were
"exactly" 4 hectares of grapes. The true figure would have to be about 3.5 hectares
(or just over 8.5 acres).

Although the Wine Institute records show a number of varieties, they have also been
sold as 100% tempranillo. This means one of two things: 1) Either they're being lumped
together as tempranillo because no one can tell the difference on delivery, or 2) Over the
years with replanting, etc, the other varieties have mostly disappeared and what remain
are almost entirely tempranillo.

WINE INSTITUTE OF VINEYARD/VARIETY TOTALS

TEMPRANILLO - 20000m2 (5 acres): A fine wine grape from Spain known for producing the
best red wines in that country. Some think it's name was a reference to the Spanish word
"temprano" which means early, because harvest was earlier than the common grape varieties.

SYRAH - 7200m2 (1.78 acres): A French grape also called Shiraz in some countries -- such as
Australia and South Africa. Some here in Argentina think the origin is Syrian and often
farmers refer to it as "Syrak" -- possibly because Spanish words rarely end in the letter "h",
and sometimes in Argentine handwriting an "h" looks like a "k". Others say it is certain the grape
came from Iran, because there is a city named Syrah in former Persia with an ancient history of viticulture.
Other believe Syrah was a grape the Romans brought from Syracuse. Whatever the origin, when
done right Syrah can be spectacular. It's my personal favorite wine from San Rafael, because for
some reason the grape thrives well here. I have never tasted any Syrah better than what I
have experienced which was elaborated here.

SANGIOVESE - 3000m2 (.7 acres): A red grape originally from Italy used to make
Tuscan reds and Chantis in Europe.

BONAMICO - 9800m2 (2.4 acres): Also called Canaiolo Romano.

TOTAL : 40000m2 (9.8 Acres)

-- HARVEST TOTALS BY YEAR --

Below are the totals harvested in recent years, according to winery records where
they were sold, and the weigh bills when delivered:

2009 - 31,000 kilos
2008 - 29,500 kilos
2007 - 33,080 kilos

TOTAL FARM EXPENSES:

Below are the expenses on this farm, some of the paid monthly, and others incurred
annually or over the course of the year. They are summed and totaled below.

EXPENSES PAID MONTHLY

Administration: 300 pesos (3,600 year)
Worker salary: 500 pesos (6,000 year)
Electric: 15 pesos (180 Year)
City Water: 6 pesos (72 year)

EXPENSES INCURRED ANNUALLY

Property tax: Zero
Irrigation Fees: 600 pesos
Preventive Spraying (2 times per year): 1,000 pesos
Tractor plow work (2 times per year): 3,000 pesos
Herbicide: 700 pesos
Ant Control: 100 pesos

TOTAL YEARLY EXPENSES: 15,252 pesos

In 2008 this 10-acre farm netted 11,280 pesos in grape income, after deductions
for harvest cost (labor, harvest truck and delivery) at a cost of 15 centavos per kilo.

TOTAL INCOME: (3,972 pesos loss)


EMAIL: byronlutz@hotmail.com
Or call Byron Lutz in Lake Worth, Florida, USA: (561) 582-7801