$35 million crunch: Credit lines force Kluge Winery foreclosure
The upscale wine businesses built by Patricia Kluge are under foreclosure, according to a pending legal notice, and although this marks the second forced auction this year on a Kluge property, this one–- at nearly $35 million–- looms much larger and could dismantle the award-winning winery founded 11 years ago by a billionaire's ex-wife.
The latest foreclosure notice claims a total debt of $34,785,000 and lists assets of the Kluge Estate Winery and Vineyards to be auctioned off, including 907 acres in southern Albemarle, 164 of which are vineyards. The sale would also include the well-known Farm Shop and tasting room, as well as offices, production buildings, six employee houses, and a 34,000-square-foot former carriage museum.
The December 8 sale takes place at noon at the vineyard office building on Grand Cru Drive in the southeastern part of the county. Another auction on December 11 in Madison would sell off 15,000 cases of Kluge Estate wine, including its 2005 New World Red and sparking wines. (The Madison sale is open only to those who are state-licensed to sell alcohol.)
According to attorney Bill Shmidheiser of the law firm of Lenhart Obenshain, the millions owed by Kluge and her husband Bill Moses comes from three three lines of credit–- two from 2007 and one in May 2009 for another for $5 million–- all secured by Kluge Estate Winery and Vineyard LLC. Besides the foreclosure, lender Farm Credit filed a lawsuit against Kluge and Moses October 29 in Albemarle Circuit Court.
"The best way to put it," says Bill Moses, "we had a non-monetary default declared in '08." A covenant in the loan had to do with sales, which were not up to target. Even though the payments were current, according to Moses, the bank called the loan.
"Since 2008, we've been trying to get the loan refinanced or find an investor," he says. "As you know, the past two years have been the worst economic climate."
It's been a year of ups and downs for Patricia Kluge. In September, billionaire John Kluge, her second husband and the father of her son, died at 95 years old. And despite racking up many awards and getting two sparkling wines served at the wedding of the year–- Chelsea Clinton's nuptials in Rhinebeck, New York–- the Kluge Estate finds itself selling upscale products in a still-weak economy. Kluge and Moses said they'd been seeking a financial partner when the bank lowered the boom.
"From our perspective, it is disappointing that at the very moment when these talks appear to be the most productive, they have chosen to take the initial steps toward dismantling the winery as an operating business," the couple said in a prepared statement.
Earlier this year, the couple fought off another foreclosure–- a luxury spec house they developed at Vineyard Estates–- by purchasing (and now inhabiting) the house known as "Glen Love." The latest move appears to be the biggest foreclosure in Albemarle history, coming less than six months after a $17.4 million foreclosure of a planned subdivision.
It's been a year of auctions for Kluge, not all of them foreclosures. In June, Sotheby's brought in $15.2 million by selling off the contents of her on-the-market, 45-room mansion, Albemarle House. Earlier this year, Sotheby's auctioned some of Kluge's jewelry for about $5 million.
Last year, the winemaker put Albemarle House up for sale for a record $100 million, and then in February dropped the price to $48 million. The house and 300 acres are still listed on the Sotheby's website, and are not part of the foreclosure.
Despite the cash-raising sales, Kluge and Moses recently donated $1.2 million for the Kluge Moses Science Building, a cutting-edge science building at Piedmont Virginia Community College that received its grand opening just last month.
Anyone interested in bidding on the winery should bring a $250,000 cashier's check to get in the door, and the winning bidder must pony up another $2.25 million by December 10 for the deposit.
"Patricia Kluge and William Moses have worked very hard to make this a successful enterprise and worked for a couple of years to avoid this, and I hope they can," says lender's attorney Shmidheiser. "What they've assembled is a world-class vineyard and wine, but they haven't been able to market it as quickly as they'd like," says Shmidheiser. "I'm still hoping they can save this."
So does the Kluge/Moses family.
"We will not give up, nor will we go quietly into the night," says the statement. "Stay tuned."
Updated November 2 with comments from Bill Moses.