Harvard University has quietly become one of the biggest grape growers in California's drought-stricken Paso Robles wine region, securing water well drilling permits to feed its vineyards days before lawmakers banned new pumping, according to records reviewed by Reuters.
The investment, which began as a bet on the grape market, has turned into a smart water play as the wells boosted the value of its land in the up-and-coming wine region of Paso Robles. But it has also raised questions about the role of big investors in agriculture in the midst of a water crisis.
"It remains to be seen what commitment they have to the business of agriculture," said Susan Harvey of environmental advocacy group North County Watch, which has been following the drought closely. "Is Harvard going to keep pumping ground water, or cut back on returns to protect water quality and quantity?"
Brodiaea Inc, wholly owned by the secretive $36 billion Harvard endowment fund, has spent more than $60 million to purchase about 10,000 acres in Santa Barbara and San Luis Obispo counties since 2012, making it one of the top 20 growers in Paso Robles.
Harvard Management Company, which runs the fund, declined to comment, citing a policy of not discussing individual investments. Brodiaea officials did not respond to repeated phone messages.
Dana Merrill, who owns a vineyard services firm near Paso Robles and sold land to Brodiaea in 2012, said the company was among several big investors that have entered the wine grape market in California in recent years. He said he didn't believe Brodiaea's land buys were part of a well-timed water play.
"You've got a value-added product, you've got agricultural real-estate as a hedge against inflation, and if you can be smart about operating it you can come up with a pretty consistent cash flow that can produce a return on investment that is not as volatile as other products," he said.
Real estate brokers said irrigable land in the heart of the Paso Robles region is running about $15,000 to $20,000 per acre, versus $3,000 for an acre of dry pasture - a spread that has widened sharply as the drought has tightened its grip....MORE
The Paso Robles area is in the most intense category of drought:
D4 - Exceptional Drought