by Cyril Penn
May 19, 2021
Two Paso Robles properties leased by Rabbit Ridge Winery – a 310-acre vineyard with a winery – and a hilltop estate on 160 acres – are being put up for sale in connection with a Chapter 11 case filed by Northern Holdings, LLC, a holding company affiliated with Rabbit Ridge owner Erich Russell.
Per court order, the properties are being marketed by Hilco Real Estate with an initial bidding deadline of June 10. Built in 2002, the 45,000 square foot winery’s permit allows for 400,000 cases of annual production. For details on the properties, see a brochure Hilco put together here and a news release here.
Some of the vineyards need to be replanted.
Northern Holdings LLC filed for Chapter 11 in the U.S. Bankruptcy Court’s Central District of California Northern Division last year (Case No. 8:20-bk-13014-MW). It gets complicated and convoluted, but in court filings Farm Credit said it has been in workout mode with Rabbit Ridge owner Erich Russell for several years – that there are at least four workout agreements involved – and claims penalties and interest bring the total Farm Credit is owed to $19 million but that it would accept $15.4 million to deem the indebtedness to be paid in full. The county is owed $3 million in back taxes on one of the properties.
Northern Holdings managing partner Lee Codding told WBM that depending on how sale and recapitalization efforts go, Rabbit Ridge may move operations to a different facility in the area and expects to continue sourcing grapes from the vineyards involved on a contract basis. He’s aiming for recapitalizing with Rabbit Ridge emerging debt free, even if a bankruptcy trustee recently filed a motion asking the judge to convert the case to a Chapter 7.
Codding said an appraisal was performed in March 2020 for a third-party and that assuming an 11 percent to 12 percent appreciation for area real estate and vineyards in the ensuing period, the value of the assets ranges between $30.5 million and $33 million.
Codding said he would like to find a new source of lending to take out Farm Credit and to retain the 160-acre Live Oak Vineyard site. Regardless of how things work out, however, he said Rabbit Ridge is operating as an entity independent of the properties, is working on a rebranding and relaunch (see below), and is working with a new national sales agent based in Phoenix.
A tasting room located at the winery property in Paso Robles closed when the Covid-19 lockdowns started in 2020. The tasting room will reopen this Friday.
At one point, Rabbit Ridge produced more than 250,000 cases but over time volume declined with lost placements and a natural erosion of brand presence. Trader Joe’s was a big part of the business many years ago.
Rabbit Ridge currently produces about 15,000 cases.
Rabbit Ridge is no stranger to controversy. Two decades ago the winery was based in Sonoma County but moved production to Paso Robles and sold its tasting room and Sonoma winery following a battle with the county over over unpermitted buildings. In 2001, Rabbit Ridge agreed to pay TTB $810,000 to settle charges that it mislabeled wines.