Kluge foreclosure: Lots of interest, zero bids

news-shmidheiesr-woodTrustee Bill Shmidheiser, center, talks with registered bidders who didn't bid, such as Wendell Wood, right.

It was quite a different scene from the Sotheby's auction in June that drew throngs of people and sales of $15.2 million when Patricia Kluge decided to unload her household furnishings. The December 8 auction was less glitzy and had fewer bidders, who apparently hoped to pick up the foreclosed Kluge Estate Winery and Vineyards for a song.

The opening minimum was $19 million. And as much as the auctioneer cajoled bids–- in $100K increments only–- no one raised their paddles. The bank, Farm Credit, took possession.

More than 50 people milled about the auction pavilion before the sale, most of them curious onlookers rather than serious bidders; people had been warned to bring $250,000 in cash or cashier's check for a deposit.

Trustee Bill Shmidheiser compared the crowd to a soccer team in which there are really only three or so players who matter, and the rest just show up. "Most of these are just showing up," he said.

The auction was scheduled for noon December 8, but was delayed about 15 minutes until one of the five registered bidders arrived. Not present in the crowd: debtors Kluge and her husband, Bill Moses.

The pair ran into trouble when Farm Credit called their $35 million line of credit because sales of the award-winning Kluge Estate wines had not met targets. When the foreclosure became public October 30, the couple vowed to fight to hold onto the winery.

On the block were 907 acres, including 164 acres of vineyards, the Farm Shop, office building, production buildings, six employee houses, the former carriage museum, and the auction pavilion where the sale was held. Another sale December 11 in Madison will auction off 15,000 cases of Kluge Estate wine to ABC-licensed sellers only.

Not included in the auction were the leased bottling equipment and tanks, although those could be had for $595,000, Shmidheimer told the attendees. Nor was the "Seated Torso" green-glass sculpture by Suzanne Pascal, nor Albemarle House, which Kluge put on the market last year for a record $100 million price, but has since dropped twice. It's now listed for $24 million.

Among those in attendance were developers Keith Woodard, who demurred when asked if he planned to bid, and would-be bidder Wendell Wood, who said afterward that the opening price was too high, and he didn't think selling the property in one lot was a good idea. "I'm interested in a couple of parcels," he said.

Meanwhile, the vineyard and winery are still a going concern, said Shmidheiser, an attorney with Lenhart Obenshain, and the Farm Shop will stay open until December 19, with wines available at 50 percent off.

"I've never seen a bank go to this extent to keep it going so the new owner can step into a working concern," he said. "We're not bottling any wine because the new owner may not want the Kluge label. I don't know why Bill Moses said it's being dismantled, because it's a working winery."

Moses did not respond to requests for comment by press time.

And next? "Farm Credit will have the sale after the sale," said Shmidheiser. "Sometimes the registered bidders want to see if they can get a better deal from the bank."

Updated 11am December 9.


Farm credit had no choice but to protect the interest of their shareholders.

The opening bid was most likely the amount that is owed to them. All they did was pay themselves so they could get the right to sell later and reduce their losses.

If they have a 5% loan cost then their carrying costs are 80k a month plus the costs of maintanance and real estate taxes.

Hardly scoundrels....

anyone know who the five registered bidders were? other than wendell wood, of course.

Well, Bill, maybe not scoundrels but tacky nonetheless. It seems that their actions and quotes were inelegant, i.e. Kluge employees are still owed expenses. As the bank that took over from Kluge they have a responsibility to the employees they let go, to the remaining business interests, to vendors and to the land.

Mrs. Kluge is a businesswoman, and I use that term loosely in this case, who hasn't a clue- money talks and BS walks.....

Mr. Kluge has since rolled twice in his final resting place........

Please, friendofpat, why blame Farm Credit? They are merely trying to salvage what they can of a bad business deal and honor their responsibility to their stockholders. The Kluges had a responsiblity to the employees, the vendors and the lender, and sadly for all, they were not able to fulfill those commitments. It's an unfortunate situation for everyone, but Farm Credit isn't to blame, and it may not make sense for them to continue to run a business if it isn't viable.

"Everyone" learned about "deals" and "steals" from the
banking and financial industries--the hard way.

Deleted by moderator.

The bank can go after the debtors if they choose to do so. They have up to I think 2 years to decide if they want to pursue trying to get the $$. I have A relative that unfortunately went through a forclosure.

If you are letting the vineyards go untended and wine spoil in the tanks, that is not keeping the winery running. Farm Credit is a bunch of scoundrels.

friendofpat, I'm not an expert on the situation, but I do live nearby, and someone is indeed tending to the vines. I see cars and workers out there most days.

Assuming the max was owed on the Credit line, being 35 million (and maybe less than 35m credit line was used). The bank takes the property for 19 million. Can the bank still go after the Kluge-Moses for 16 million or does the bank lose 16 million?

OK gang, thanks for the clarification - I am certainly not a businessperson and I get that the bank is trying to recoup it's losses. From where I sit it seems that both the bank and Kluge had to have made errors to reach the point of auction and then have a price set so that bidders don't even bid. I just would have started the bidding so that people - 5 of them standing there with checks? - could have engaged. It seems as though both bank and Kluge have made blunders.
I just really value what Kluge has done for the community and their commitment to VA wine. That gets lost in the finances and personal attacks sometimes.

Typical bank auction. No one to really blame, there is enough blame to go around. Everyone entered into the transaction (bank loan) with the best of intentions... The Kluges and the Bank... but the economy soured and perhaps the business plan was not the best.

As a banker I can tell you they (Farm Credit) does not want to be in the wine business, but must do what they can to try and get the best price possible. These intial auctions rarely work, it is just part of the process... the Bank is trying to determine a 'real value' and those interested in purchasing are doing the same.

This is a sad but true story that is repeating itself across the state, and country every day.

My bank is having an auction today, thankfully there are a few less zeros involved, but likely the same outsome as above, a few will show up, but no one will be willing to pay the bank's current minimum bid.

Given the current economy everyone wants a 'deal' (or 'steal' - which depends on your point of view)

friendofpat, if you don't know what you're talking about...

Farm credit will make the most of this property - they're trying to lose as little money as possible. Those very expensive vines are the major asset of the property. Look for them to sell the grapes to nearby wineries and use that cash to cover the carrying costs of the property until it can be sold at a more advantageous rate.

Another thing: PK may not have been the best businesswoman, but she did contribute an awful lot of time and money to the local arts community. That will be missed.

If the banks lose, we all lose.

The wine use to sell for up to $75 a bottle, now it can be had for $2 a pop. I hope Farm Credit loses a lot of money on this deal, they arent exactly social workers helping the poor. How did Mrs. Moses get to this point? I would love to buy the rights to that movie, truth is always stranger than fiction. I hope she sets up shop in town as a business consultant, they are many stupid people in town to keep her in diamonds, pearls and furs.