It has always been the holy grail of finance to find ways to make assets work twice over. In the case of fine wine, whilst drinking it is one reason for buying it, historically it has also been bought with a view to its rising investment value in the future. But it has rarely been an asset against which finance can be raised. That is until now.
Last December saw the first large financial transaction in the UK, where an experienced fine wine investor raised significant finance against the security of the value of his cellar. Such transactions are very specialist and in this case, an ambitious US private bank was keen to assist its longstanding customer with a sizable loan facility secured against his fine wines, which are curated by Octavian. To assist in the financing process, Octavian was able to provide detailed records - including in-house photography (see image above) - showing the storage history of the wine, which underpinned the valuations ascribed to the holdings. In addition, the lender was able to rely upon the integrity of Octavian’s systems to be assured that this cellar of fine wine will remain in Octavian’s safe keeping for the duration of the loan.
This is still a very new area of lending and many private banks are still considering whether they wish to provide finance secured against a consumable asset such as wine. Unlike the more usual collateral for borrowing, fine wine has some very particular characteristics.
Similar to gold or jewellery, fine wine is eminently portable so securing the asset for the duration of the loan is vital. But in the case of fine wine, the storage of the wine can have a direct impact on the future value of the holding. But future value also relies upon the past storage to ensure maximum value is achievable.
“The difficulty for some owners is their ability to prove the cellarage conditions of the wine over a reasonable period,” says Vincent O’Brien, Managing Director at Octavian. “But where, as in the case of Octavian, we provide certificates for all holdings, this provides incontrovertible evidence for lenders. We are also aware that it also acts as a significant enhancement of value, when investors are selling wine which we have curated.”
Increasingly, the top-end companies, like Octavian, which provide services to those who collect fine wine, find themselves providing much more than just a storage facility. In essence it is often much more about risk assessment and mitigation. So security of storage and conditions of storage are paramount, together with proof that this has occurred. But in addition, ensuring the right insurance is in place for the right risks and at the best price requires proven expertise. The delivery and transportation of a client’s selected vintage also requires team experience.
Certification provides incontrovertible authentication
But for many owners, they look upon their wine collection with emotional pride, in the way they take pride in a special property, linked to happy memories. Those who are charged with looking after a collection which has often been assembled lovingly over many years, need to ensure not only all the risks are covered and the bank kept happy, but, above all, the vintages are handled with personal care and attention.