UPSTART wine producer Palandri Limited is drawing up plans for a property trust investment product that would own and manage vineyards.
Included in the project will be about 285 hectares of vineyards at Mount Frankland in the Great Southern where Palandri has developed most of its in-house grape growing capacity through a range of prospectuses during the past five years.
Its current prospectus, its second one to target the US with a $29 million target, would add a further 45ha of vineyards to the group’s portfolio if successful.
The trust’s operations would be to own and manage vineyards, including non-Palandri operations, in a similar fashion to the Beston Wine Industry Trust.
The concept is not new. About two years ago, Evans & Tate tried to spin off a vineyard management operation through the establishment of a new vineyard near Manjimup through a managed investment scheme. The project failed due to a lack of investor interest.
However, Palandri’s concept is different in that existing vineyards would be included.
“We are trying to fold our own vineyards into a property trust which we can offer,” Palandri director Rob Broadfield said.
“We have been approached by other vineyard operators to manage theirs as well.”
Mr Broadfield said the group was working with two potential banking sector partners.
Palandri has established itself as a major Western Australian wine producer and exporter, after a controversial start in life when its management trod on the toes of Margaret River’s traditional producers.
Despite its unconventional style and a period that has not been kind to MIS promoters, Palandri has been one of the most successful fundraisers during the past few years.
Since 1998, it has raised $95 million through its prospectuses and now claims to have $110 million in funds under management and a loan book of $35 million.
The group has also significantly restructured its business, a process that started 18 months ago when it consolidated ownership of all the business entities into one public unlisted company, Palandri.
Prior to the restructuring, this entity (previously called Margaret River Wine Production) was majority-owned by seed capitalists who received about $2 million in dividends over the pre-consolidation years when prospectus promotion was the mainstay of the business.
MRWP was merged with what is now known as Palandri Wine Production, which owns the winery and the brands. Before that merger, PWP’s ownership was dominated by prospectus investors. As a result of this consolidation seed capitalists such as Darrel Jarvis, who controls 32 per cent of the group and Anthony Riggall (8 per cent) have had their stake watered down to below 50 per cent of the parent company, which now has more than 2000 shareholders.
Former director Rob Palandri, director Mark Norton and director Peter Kailis, whose family sold Baldivis Estate into the group, control under 10 per cent between them.
Since the merger the group has also simplified the business structure under the stewardship of compliance manager and company secretary Neil Hackett who joined the group from the Australian Securities and Investments Commission.
With its second US fundraising under way, Palandri not only claims to have one of the few product rulings available in the marketplace (19 projects by the end of May compared to 155 at the same time last year), it also says its American wine sales are well above projections despite adverse currency movements.
In September, Palandri struck a deal with US distributor Marie Brizard to supply its wine at $US72 a case free on board, with a trigger to renegotiate the price if the Australian dollar appreciated above US60 cents.
While that trigger point has been reached, Mr Hackett said there had been no need to enforce the clause because volumes had exceeded expectations.
He said that case sales had already reached 20,000, close to the 2003 calendar target of 26,000 cases.
In addition, 35 per cent of the case price is contracted to be spent on sales and marketing in the US – part of the brand building costs that investors agree to when they sign up.
Mr Hackett said that meant more than a third of the sales revenue was insulated from movements in the Australian dollar.
“We are still comfortable at US70 cents, but at some point a discussion has to be had,” he said.
Palandri is aiming to sell 100,000 cases to the US within four years. It sells about that amount within the Australian and New Zealand markets at the moment.