Living/Working September 15, 2017

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Peller acquisitions show Okanagan wineries ripe for the picking

Andrew Peller Ltd. to spend $95 million to buy Gray Monk, Black Hills, Tinhorn Creek
Andrew Peller Ltd. CEO John Peller’s grandfather, Andrew Peller, bought a vineyard in B.C.’s Similkameen Valley and created Andrés Wines Ltd., in Port Moody, in 1961 | Joseph Chan/ARTiculation Group

Andrew Peller Ltd.’s (TSX:ADW) plan to buy three B.C. wineries in separate transactions totalling $95 million is the latest sign that larger companies are keen to buy wineries and vineyard land in B.C.’s Okanagan Valley.

Vancouver’s Bai family revealed in July that it is pumping an estimated $100 million into its wine business in the Okanagan in a move that industry watchers told Business in Vancouver was among the largest investments ever committed to B.C.’s wine industry.

The Bais have accumulated 247 acres of land and plan to spend $50 million to build a destination winery.

“While optics might appear that we kind of went out on some kind of drunken shopping binge, that is hardly the case,” said Andrew Peller CEO John Peller of his three planned B.C. winery acquisitions.

“It’s totally coincidental that these things have come to fruition at the same time.”

Peller has signed agreements to buy Black Hills Estate Winery and Gray Monk Estate Winery and a letter of intent to buy Tinhorn Creek Vineyards.

Each of the deals is independent of the others, and Peller expects all to close by the end of October.

In the case of Black Hills, owners of the company’s 456 limited partnership units must vote to approve selling the winery for what CEO Glenn Fawcett told BIV is a $31 million cash offer from Peller.

Peller would not confirm that price or reveal its proposed purchase prices for the other wineries, but B.C. wine blogger and author John Schreiner told BIV that he believes Tinhorn Creek is likely the most valuable of the three.

The proposed purchase of Tinhorn Creek includes 150 acres of vineyard land, whereas Gray Monk has about 75 acres of land and Black Hills has about 50.

No one from Gray Monk was available for comment by press time, but Schreiner said he believes the winery’s founders, George and Trudy Heiss, were unable to transfer title to the winery to their three sons – Robert, Steven and George Jr. – for the right price.

“The sons either didn’t have the resources to buy their parents out or were not all on the same page,” Schreiner said. “I think it’s a little of both, knowing the personalities of the three sons. What would that winery sell for? Probably $25 million to $30 million. That’s a hell of a lot of money for those guys to go to a bank and raise, to get a mortgage that size.”

Unlike the Black Hills and Tinhorn Creek transactions, the Gray Monk deal involves $17 million in Class A shares in Andrew Peller.

Black Hills and Gray Monk have both been on the market for a while.

Fawcett created Black Hills 10 years ago, when he devised a complex ownership structure that has both general and limited partnerships.

Fawcett owns 54% of a general partnership that operates the winery while six board directors and three others together own a 46% stake.

A limited partnership that Fawcett created owns the winery. It has 456 units that are owned by hundreds of individuals. The general partnership owns dozens of limited partnership units.

Profit flows first to the limited partnership, where all the partners are paid up to the value of their capital plus 30%. Any profit on top of that, such as from the sale of the winery, is to be split evenly with the general partnership.

Fawcett initially promised investors that he would find a “liquidity event” within five to eight years. Given that it has now been 10 years, Fawcett said that he thought it was time to allow shareholders the opportunity to cash in their investments even though many investors wanted to continue to own the winery.

One stipulation in Peller’s offer is that Fawcett stay on as winery CEO for at least two years.

Tinhorn Creek CEO Sandra Oldfield, in contrast, will give up that role to be a special adviser if the deal to buy her winery closes. Oldfield owns Tinhorn along with her husband Kenn Oldfield and Bob and Barb Shaughnessy.

“We did tremendous given our smaller size,” Fawcett said. “It’s because of our profitability and the prestige of our brand. That, I think, made the big difference for us.”


(Image: Black Hills Estate Winery is on the Black Sage Bench region of the Okanagan | Black Hills Estate Winery)

Black Hills likely has the highest profit margins on its sales because its wines are super-premium products. Its Nota Bene wine sells out fast and carries a $65 price point.

In contrast, Gray Monk is the largest producing BC Vintners Quality Alliance (BC VQA) brand, according to Peller, but its wine sells for much less than Black Hills’ does, in part because Gray Monk’s prime seller is Pinot Gris, which is a less expensive white wine.

While Black Hills sells about 15,000 cases per year, Tinhorn Creek sells about 40,000 cases and Gray Monk sells about 75,000 cases.

Peller said on a conference call that the purchases will propel his company to No. 1 from No. 3 producer of BC VQA wine, which goes through quality testing and audits.

The other two big producers of BC VQA wine are Arterra Wines Canada, which is the new name for what was Constellation Brands in Canada, and the Mark Anthony Group.

If all transactions close as planned, Peller will still have sufficient credit to pump approximately $25 million into its western Canadian operations during the next five years, Peller president Randy Powell said on the conference call.

To help reduce debt, Peller plans to either sell or develop its 5.24-acre former Andrés Wines site in Port Moody.

Port Moody’s planning advisory committee in March granted support for Peller’s proposal to rezone its industrial land into a high-density, mixed-use Westport Village residential neighbourhood. Peller wants to build a 32-storey condo tower, a 21-storey condo tower, several mid-rise buildings and a hotel, which would make it the densest development in central Port Moody.

Schreiner said Road 13 Vineyards and Chaberton Estate Winery could also be up for sale soon. •

gkorstrom@biv.com 

@GlenKorstrom 

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Infographic: Think before you quit your job

While some professionals may enjoy the thrill of leaping to a new job, many express regrets about leaving their last position

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Québécois cuisine finds full, lush expression at St. Lawrence

Chef JC Poirier brings exquisite, homey food of la belle province to Railtown

In 1967, Charles de Gaulle, then-president of France, uttered a rather controversial phrase while on a state visit to Canada. From a balcony in Montreal, he yelled “Vive le Québec libre!” to the masses gathered below. The fat was in the fire, and Canadian-French relations went through a brief rough patch.

Quebec has always been a bit of an “other” in our country’s cultural landscape, even while being a founding root of that landscape. As for the food, while French cuisine can be found in any city a mari usque ad mare, Québécois food is a bit harder to experience – and no, I’m not counting poutine, as an entire cuisine should not be defined by one dish, no matter how tasty.

In fact, until recently, the cuisine of la belle province couldn’t be found at all in Vancouver. Then, JC Poirier, master chef behind Ask for Luigi, Pizzeria Farina, The Pourhouse and Joe Pizza, decided a visit back to his roots might be a good idea.

The result is St. Lawrence. The tiny corner space that took over the former Big Lou’s Butcher’s shop in Railtown has been reimagined by Craig Stanghetta, that restaurant design darling, and the room is an ode to the kind of childhood that most dream of.

https://www.biv.com/media/filer_public/44/32/4432f50b-e580-42fb-ad6b-26a52960c456/03_st_lawrence.png

Framed photos of Poirier as a child line the walls, along with brass lamp fixtures, and curtained shelves over the eating bar. Cushioned chairs surround dark wood tables, plates are monogrammed and there’s a lot of that lovely fleur des lis blue. It’s small and spacious, brash and elegant, loud yet not obnoxious.

The food follows the same ethos. There is an unabashedly over-the-top use of sauce here. And butter. And cream. And cheese. Unapologetically lush, it’s also food that demonstrates an inordinate amount of technique and care.

Take the smoked bison ($18). It’s brined for almost a week, then braised and cold-smoked. Finished in the pan and served with sauce Ravigote, a kind of buttery vinaigrette with eggs, chives, capers and olive oil, it’s tender, juicy and well seasoned.

The daily terrine is another must-try. One night it’s rabbit with apricots, another, a pork-foie combo that elicits more than a few heartfelt groans.

Don’t look to find any poutine here. Instead, you can try the Pomme Duchesse à la Royale ($12), a very fancy name for an enormous baked potato that is piped back into its crispy skin, loaded with cheese curds and placed in a gravy bath. It’s a thing of beauty, just go with it.

It paired perfectly with a special one night of stuffed pig’s trotter ($36). The jellied foot was crammed with veal sweetbreads and large enough to feed two of us. Some even made it home for a midnight snack when we conceded defeat to save room for dessert. (Lose the battle, win the war, right?)

You can get a great sugar pie here ($11), served à la mode, but I recommend the rice pudding ($20). Served in a large crystal bowl, it’s enough to satiate four. Drizzled with salted caramel and topped with candied pecans and tiny cinnamon bun-style cookies, it’s a masterpiece of salty-sweet flavours. Word to the wise, if there are only two of you, then a half-portion might be a good idea.

As for the service, it’s just like the food – excellent and homey. The front of house is led by the fantastic Michael Ziff (Chambar) and the bar is overseen by the talented Yacine Sylla (Chambar, Café Medina). While you will hear a quite a few French accents – and perhaps even some franglais – the primary language here is that of welcome.

I won’t emulate de Gaulle’s sentiments entirely, but I will say a heartfelt “Vive la cuisine Québécoise!” Vancouver has been waiting a long time for this.

St. Lawrence

269 Powell St. | stlawrencerestaurant.com

Open Tuesday-Saturday, 5:30-11 p.m.

Anya Levykh is a food, drink and travel writer who covers all things ingestible. Find her on Twitter and Instagram @foodgirlfriday.

Vancouver Westender

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Federal Liberal tax reforms miss the real fat cats by a wide margin

It all seemed perfectly reasonable: tax the low-hanging fruit of “fat cat” professional corporations to fund programs for the poor. Who could object to that?

Turns out plenty of people object. A Hurricane Harvey of resentment has landed in Canada, and its torrent of political backlash is growing stronger by the day. The Liberal government will look back upon this day as the moment its political fortunes turned; the date the tide of public sentiment began to run against Justin Trudeau.

Finance Minister Bill Morneau looked decidedly uncomfortable at a recent press conference at which he justified the closing of “unfair tax loopholes” by “wealthy” small-business owners, although he admitted (after receiving complaints from Liberal backbenchers) he was open to modifications to avoid any nasty unintended consequences.

The prime minister was unapologetic. With mind-numbing unawareness, he reiterated his belief that his government was helping the middle class at the expense of the privileged one-per-centers.

Small-business owners across the country are left shaking their heads in disbelief. “Fat cats”? “One per-centers”? Who’s he kidding?

Small to medium-sized business is the heart and soul of the Canadian economy. Not only do small-business owners hire the majority of Canadian workers, they also take the most personal risk and work the longest hours in Canada. Moreover, they are vulnerable in ways the prime minister seems oblivious to.

As for professional corporations – those corporate vehicles set up by doctors, accountants and other professionals to manage their complex business practices – they are now being singled out as “tax cheats” for pursuing options governments of all stripes have encouraged them to take for decades.

The Liberals are right in one sense: there is a tax revenue problem in Canada. But they’re targeting the wrong group, and the problem is much deeper than they’re willing to admit.

The use of the term “unfair” is instructive, because it illuminates the staggering inequity that exists in taxation in our modern economy. In the 1950s and 1960s, large corporations paid approximately half of all government tax revenue; individual taxpayers made up the rest. Today, almost the entire burden of taxation has fallen on small-business owners and wage-earning Canadians.

Currently large corporations are the real “fat cats.” According to official records, some of Canada’s largest and most prestigious corporations pay virtually no tax. For example, according to a Canadian Business investigation, Canadian Pacific Railway, in the decade between 2004 and 2014, had total (net) income of $7.7 billion but paid $139 million in tax over the period for an effective tax rate of 1.8%.

If you’re a smart Canadian company, you’ll control your global operation out of Bermuda, the Cayman Islands or some other tax-friendly jurisdiction. Manage your affairs prudently and you’ll pay virtually no tax at all on your domestic operations.

There are two ways to attack the problem of insufficient government revenue: grow the economy with as yet unimagined policy changes or attack the tax problem at its source – the growing multinational tax advantage.

The Canadian economy, like other developed economies, has not adapted to the post-industrial economy. Our capital markets regularly misdirect Canadian savings into unproductive property and stock market investment where these vital resources are unavailable to grow the new “intangible” economy and help fill government coffers.

While multinational corporations continue to ship production, jobs and revenue outside the country and beyond the jurisdiction of the Canadian government, they still do business in Canada and present themselves as Canadian. But their contribution to our national treasury and well-being is tiny. Even worse, international companies like Uber, Facebook and Amazon, which are “disrupting” (i.e., bankrupting) many of our traditional tax-paying Canadian businesses, float on a sea of global tax avoidance that is breathtaking in its scope.

Yet who do the Liberals brand “unfair tax cheats”? Not the real tax avoiders but legions of hard-working, middle-class Canadian business owners.

Small-business owners, particularly university-educated professionals, have been a solid Liberal voting constituency for decades. With strong links into the community and a progressive world view, they have been essential to the Liberal Party of Canada for fundraising purposes, volunteer door knocking and voting on election night.

That’s what makes this so important as a turning point. The political blindness is staggering. Should the Conservatives wrestle this key demographic from the Liberals, it could turn the next election in their favour.

Robert McGarvey is chief strategist for Troy Media Digital Solutions Ltd., an economic historian and former managing director of Merlin Consulting, a London, U.K.-based consulting firm. McGarvey’s most recent book is Futuromics: A Guide to Thriving in Capitalism’s Third Wave.

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Allure of Amazon effect blinding city to negatives of Amazon impact

Enough already with the delusions, distractions and destructive promises.

Amazon.com Inc.’s HQ2 here in Vancouver? Is our mayor serious?

Where is he hiding the 1.8 million square feet Amazon wants? Where is the housing those tens of thousands of workers and their families would need?

How would he situate and celebrate a company that would further hurt the small  and medium-sized merchants in our city?

What concessions would he provide in this North American HQ2 contest to bring those jobs? Would he give what he has never contemplated providing others to come – or others to stay?

Would he advocate – as Amazon would doubtlessly seek – more generous provisions of a duty-free flow of goods?

Where is the public transit?

Yes, enough already.

These headline-grabbing fantasies steer attention from real housing issues, job-generating ideas and real challenges for the city’s space and how it uses it.

It is a cruel pretension that the City of Vancouver is in any way shapely to accommodate Amazon CEO Jeff Bezos’ intention to demand more space of any city than does the Pentagon of Washington.

But let’s not fully say no to Amazon among us quite yet. Metro Vancouver, on the other hand, has some definite possibilities. Surrey, Burnaby and Richmond particularly have attributes that appeal: space in all cases, access to an airport in Richmond’s case, and a go-forward attitude that green-lights business because those cities more easily can.

While it’s hard to fathom why Amazon might want two headquarters so geographically proximate, perhaps our mayor might wish to selflessly lobby for Metro.

My sense is that the job of regional representation is more credibly and persuasively placed with the head of the Greater Vancouver Board of Trade, Iain Black.

The New York Times last week looked at data from interested American cities – it didn’t have data for Canada – and concluded that Denver (followed by Boston and Washington) best fit Amazon’s extensive criteria.

Still, for any Canadian centre to contemplate Amazon is to contemplate a new environment of easier data flows and computer code sharing, heavier transmission duties and criminal treatment of trade secrets. These matters will be part and parcel of the logistical challenge.

In our own backyard in Vancouver, too, are hundreds of small vendors already under the effect of Amazon’s profound disruption. They experience, day after day, consumers inspecting products in their stores and then hopping onto their smartphones to buy the same from Amazon at a discount.

Anyone lobbying on Vancouver’s behalf would well know these merchants stand to be roadkill in any localization.

The allure of Amazon is incredible, no question. But the focus of a city strategy in building higher-paying jobs has to be careful not to concurrently hand bullets to those with the gun.

Our focus on those who have committed to the city should not be placed in favour of those who would capitalize on it, nor should we offer provisions that others have not been and might not be permitted to claim.

As a committed Amazon customer since 2000, when I’d be pleasantly surprised by an autographed copy of a book I’d order, I can appreciate not only its superb service but its vision for consumerism. But it’s an appreciation that entails some apprehension of its impact.

Just as our ride-sharing discussions haven’t adequately addressed adjustment programs for the incumbents – even our bike-sharing discussions haven’t – we’d need to understand how we would deal with the Amazon effect on our city.

The mayor’s lunge is another shiny object he’d like us to admire.

Rather than rush to create the PowerPoint presentation for the Amazon execs, we need the more significant conversations about our goals and how we get to them.

Kirk LaPointe is Editor-in-Chief of Business in Vancouver Media Group and Vice-President of Glacier Media.

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