Harvard University's endowment (valued at $39 billion as of 2018) is the largest academic endowment in the world. The private investment company has been quietly snapping up farmland and related water rights to properties located in the California region.
Instead of purchasing the land in Harvard Management Company, Inc.'s own name, asset managers secretly formed a wholly owned subsidiary - called Brodiaea, which was the vehicle to purchase more than a dozen investments in California vineyards over the last six years.
Harvard formed Brodiaea in 2012, and by 2015 the company had already acquired 10,000 acres in Santa Barbara and San Luis Obispo counties for roughly $60 million, according to Reuters.
In April, the Harvard Crimson said that Brodiaea had continued to acquire California vineyards, especially ones sitting on massive aquifers.
There are no tourist nor visitors allowed on many of the vineyards owned by Harvard, the Wall Street Journal said on Monday, adding that the endowment is acquiring rights to large water sources in the arid Central Coast region, all under the name of Brodiaea, which is masked as a grape-growing business.
Drought has plagued much the Central Coast in recent years, hitting the agriculture industry the hardest.
"Drought has The Central Coast experienced drought conditions for 30% of the past two decades, compared with 14% of the prior 100 years, a 2015 study found. Droughts have led to spikes in withdrawals from aquifers, many of which aren’t recharging as much during rainy season," said Noah Diffenbaugh, a Stanford University professor.
The Journal said the endowment now values its vineyards at $305 million, up 300% from 2013, while most of its other natural-resources investments have performed poorly.
Harvard’s green thumb dates back to 2012, when Matt Turrentine and James Ontiveros, local vineyard managers, established an agricultural investment advisory firm named Grapevine Capital Partners LLC. and pitched the idea of water rights to Harvard. As history shows, the endowment was all about plundering natural resources.
Grapevine Capital “identified an area where the groundwater is very good, and it’s outside the red zone,” said Tony Correia, an agricultural-land appraiser specializing in vineyards.
Wine-industry analyst Rusty Gaffney wrote in 2015 that Mr. Ontiveros had spoken to him of the land Grapevine helped Harvard acquire, telling him “the region had sufficient underground water aquifers to be successfully farmed despite recent climate changes and drought conditions.”
In 2016, Brodiaea hired drilling companies to drill 12 wells on its Cuyama Valley property. When the wells were completed, the vineyard opened, pumping up aquifer water to feed the plants.
Cindy Steinbeck, a vineyard owner whose family had grown grapes in the area for decades. Wrote to Harvard in March 2016 saying its use of mysterious companies “seems designed to obfuscate Harvard’s activities in the area.”
“Such an investment does not make economic sense,” she wrote, regarding massive premiums, Harvard was paying for the land, “if your intent is simply to grow and sell grapes. It would, however, make perfect sense if the investment wasn’t for farming but rather for the brokering of water.”
A Harvard official responded that Brodiaea is “purely agricultural in nature” and that the vineyards prioritized water conservation.
The Journal notes that some local farmers are not concerned about Harvard’s purchases of vineyards, others, however, express concern that the aquifers will be used to benefit landowners who are based on the other side of the country.