Patricia Kluge: Billionaire's Ex-Wife Faces Foreclosure
Patricia Kluge, the 1980s society queen and ex-wife of billionaire media mogul John Kluge, has fallen on some hard times. Kluge was famously awarded the largest divorce settlement in history (a reported $1.6 million a week) but she seems to have figured out a way to spend it – and then some.
She's allegedly in default of nearly $23 million on her gilded mansion in Virginia, which made headlines for its outlandish $100 million price tag when it first hit the market in October 2009. Sotheby's didn't get that asking price, nor the drastically reduced $24 million it was eventually priced at. Instead, on Feb. 16, the 23,538-square-foot home will be auctioned on the Albemarle County courthouse steps.
Kluge's house isn't the only possession she's losing: Her antiques and jewelry have already been auctioned through Sotheby's. Her winery was foreclosed on and its inventory also sold off at auction. On top of that, several lots in the Vineyard Estates subdivision she devised for her property were also auctioned.
The Hook reported that according to court records, Kluge borrowed a whopping $66 million for the house, winery and subdivision.
How could Kluge have blown through her fortune and now lost it all?
An Outsized Ambition
From the sound of it, ambition got the best of the nude-model-turned-landed-gentry.
Kluge entered the Virginia wine industry in 1999, flush with cash and an outspoken desire to be the most prestigious winery on the East Coast. That kind of hubris irritated the rest of the Virginia wineries who aimed to promote the state's wines as a whole. Kluge wasn't looking for friends; instead she pumped a reported $50 million into developing the winery. Of that, $27 million was said to be spent on state-of-the-art equipment alone. In comparison, a source at one well-regarded winery down the road says they haven't spent that much in their 30-plus-year history.
Kluge spared no expense. She also lured renowned consultants and a winemaker from France whose salary was rumored to be $1 million. And while most Virginia wineries produce about 5,000 cases a year, Kluge tried to bottle 50,000 to 60,000 cases. But those in the wine industry say her unrealistic timeline is most likely where Kluge went wrong.
As one insider puts it, "The old saying goes: 'how do you make a small fortune in wine? You start with a big one.' But you can't spend like a drunken sailor because it's already expensive.
"You plant three years before you get useable fruit...it takes a decade just to figure out what you're doing," the source says. "The problem wasn't with the grapes or the winemaking, it was bad business."
Interestingly, Kluge's wines were well received. Kluge Estates was a regular winner in the state's Governor's Cup wine awards. But one of her many business missteps was in her pricing. The Kluge Estates New World Red, a Bordeaux-style red blend, was originally priced at $75 a bottle. That's steep for Virginia wine, no matter how good it is.
Bob Kocher, owner of Once Upon a Vine wine shops in Richmond, Va., sells more Virginia wine than any other retailer and is intimately familiar with the challenges of the industry. "The problem with Virginia wines is the first thing they build is a huge, beautiful tasting room that costs a million-and-a-half and they want you to pay for it by charging a high price for their wine. Napa started in barns, they didn't start in tasting rooms. [Kluge Estates] was trying to make a fast dime when they should have made a slow nickel."
The price of the New World Red was reduced several times until it ultimately went for $22 a bottle.
"I don't think she was a person that really knew the wine industry in general and I think she just went overboard telling people she would go global before even she went Virginia-wide," Kocher says. "I think she just overspent."
The Beginning of the End
The winery's debts piled up and Kluge did what she could to save it. She took out multiple mortgages on Albemarle House (above), the home she built with ex-husband Kluge and had lavishly decorated with rare antiques from around the world. In a January 2010 interview, Kluge told Luxist that she and third husband, William Moses, were looking to downsize. What she didn't mention was the true dire financial straits she was in.
A month later the price of Albemarle House was chopped in half, to $48 million. By April, Sotheby's announced it would be auctioning the contents of the estate in its first home auction in 20 years. The auction, which included a $3.8 million Imperial Chinese clock and custom $300,000 sporting guns, was estimated to bring in $14 million. The resulting sale exceeded that, earning $15.2 million. Next on the auction block was Kluge's jewelry. In late April 2010, Sotheby's auctioned her personal jewelry collection, a sure sign of the coming apocalypse for Kluge. That sale earned $5 million.
All was quiet on the Kluge front for the next six months while Kluge struggled to stave off creditors. Until October, when Kluge Estate Winery was hit with foreclosure. Last month the 960-acre winery and vineyards were auctioned but failed to sell when no one stepped up to top lender, Farm Credit, and its $19 million bid. So for now the winery stays in the hands of Farm Credit. Bill Shmidheiser, a lawyer with Farm Credit, said the bank hopes to sell the property and that $19 million is a good deal for any buyer considering the $50 million Kluge and Moses spent creating the winery.
Most recently the winery's inventory was sold at auction. Due to Virginia alcohol laws, only licensed sellers were able to attend. Much to the dismay of the state's wine industry the wine sold at bargain-basement prices and even had to be stopped after one case sold for just $2. A Virginia wine insider says that upset the other wineries who are now expecting a flood of inexpensive Kluge wines to hit the market, devaluing their wines. "It makes us all look amateurish."
The most recent foreclosure to wallop Kluge is that of her Vineyard Estates subdivision. Much to the displeasure of the rest of tony Albemarle County -- which is filled with multi-acre plantations including Thomas Jefferson's Monticello -- Kluge launched a plan to subdivide a portion of her 300 acres into the luxury "Vineyard Estates." The development would offer plots from $1.5 to $13 million and offer a selection of pre-screened architectural plans as well as a "global concierge" service.
Five lots in the 24-lot subdivision -- it's first phase -- went into foreclosure when the partner on the deal, First Colony Corporation from North Carolina, went bankrupt. The subdivision's 122 acres are assessed at $6.9 million and Vineyard Estates LLC owes $8.2 million, according to a property auction notice. Only one house was built in the subdivision as a spec house. In an interesting twist, Kluge and Moses bought that house back at the foreclosure auction: They were its only bidders. The home, Glen Love Cottage, is 6,600 square feet and assessed at $2.76 million. They paid $3.675 and currently live there.
"Vineyard Estates has suffered from a lack of sales as have many other real estate projects during the recent economic downturn," Bill Moses said in a statement.
The Final Straw
In an interview with The Hook, Moses outlined the fall of the winery. Apparently in 2008 an equity investor was lined up to partner with the winery when, on the eve of the banking collapse, Farm Credit called in its $34.8 million loan. Moses says it was a non-monetary default. The winery had simply not met its 2007 sales projections. Kluge and Moses' outsized ambitions had gotten the best of them.
"There was no way we could immediately repay the loan," Moses told The Hook. "We had over-leveraged the company."
And while they tried for a year-and-a-half to desperately to save the company -- negotiating with the bank and selling their belongings -- it still wasn't enough. In the end, Moses said, "it was like swimming laps with lead weights."
Reader Comments (Page 1 of 20)
Alaimo Jan 21st 2011 6:25PM
Wow... things really MUST be rough if the best outfit she can manage for her formal vineyard portrait is a baggy blue sweatshirt!
donbro2 Jan 25th 2011 7:27AM
vote palin/huckabee in 2012 for a far better america..lower taxes/and some funding for small business...the left is to hateful. we have had enough..god bless this great republic..
polkaidot Jan 25th 2011 7:51AM
She must be the working class now. What goes around comes around. The cycle effect.
Vero Jan 25th 2011 9:21AM
hahahahahahahaha....
priority109 Jan 25th 2011 10:08AM
LOL--that's how "they" dress.
Woo Jan 25th 2011 10:12AM
What a moron! If you can not spend all that money in a judicious way then you deserve to fail. I could have lived off a fraction of what this dame blew off. Spend wisely and shop smarter.
Belkin Jan 25th 2011 10:58AM
What is it about the rich? They take a nice house and stuff it so full of furniture that you could barely walk through it. Pretty gaudy as well.
carolesinoasis Jan 25th 2011 11:38AM
wow, what a dumb %#$@#. I lost everything working a real job making 48K a yr. Just cause you have money doesnt automatically make you smart. See how she likes the world from the otherside. She may appreciate shopping bargains at Winco like I do. What an utter waste, that money could have helped other people, children, battered women, or animals.
Mr. Zantzinger Jan 25th 2011 11:44AM
You must be bourgeois class. The really rich wear old clothes and drive old cars.
punchy Jan 25th 2011 11:45AM
while her appearance may not look like much, it wouldn't surprise me if she paid a couple of thousand for the sweater alone. i think it is funny how she wasted all that money.
she is simply dumb. and deserves to be broke. if i were her husband who gave her all that money as well as the house- i'd be laughing my ass off at her!!!!!
likeiwassaying Jan 25th 2011 12:17PM
What a moron! If you can not spend all that money in a judicious way then you deserve to fail. I could have lived off a fraction of what this dame blew off.
tyrebitre Jan 25th 2011 12:35PM
"You must be bourgeois class. "------------------ And anyone not lecturing a class who uses "bourgeois" must be in the "anal & irritating" class.
Nanci Jan 25th 2011 12:51PM
http://youtube.com/watch?v=d_PiKumEPVU
Check out our you tube and see how fast a fortune can be depleted by lawyers
Scary
Bank of Hawaii was the co trustee and we can't find a lawyer willing to sue them everyone is afraid to sue the Bank of Hawaii They and their lawyers destroyed our father's net worth And the stepmother is living in her native Palau supporting her 11 brothers and sisters BE CAREFUL THIS is what can happen to a fortune
racquetguy1 Jan 25th 2011 1:23PM
This is an obama success story. Take a rich person who employs people have them lose everything and hopefully have them depend on the government for food, shelter and health care. The perfect scenario for obama-world. The evil rich earner get his or hers.
Oscarito Jan 25th 2011 1:26PM
That was a good one. Rich people dressing poor......LOL
Jeff Jan 25th 2011 1:41PM
What kind of an ignorant arrogant ass&%^$# thinks they can spend their way out of debt. I mean really you have to be the dumbest, out of touch moron on the planet to think you'll never run out of money no matter how stupid you spend it. Who could be so ignorant?? Oh, ya I know... OBAMA!!!! And he's doing it in your name and with your money!!! Wake up America. If you don't, the next article about ignorant no minds who blew it all and ended up in the poor house will be about YOU!
brownblanc Jan 25th 2011 1:54PM
It's probably a simplistic looking (but brand name) cashmere sweater with a big price tag
JONZIE Jan 25th 2011 4:06PM
what a small person you are to even make such a statement
michaelc2b Jan 25th 2011 5:34PM
Designer sweatshirt...
Lassie Jan 25th 2011 7:49PM
Reading this article made my heart soar like an eagle.
Hahahahahahahahahahahahahahahahahahahahahaha....(deep breath)...hahahahahahahahahahahaha
The sad thing is, even in her sorely reduced circumstances, she is living MUCH MUCH MUCH better than even the ordinary McMansion-dwelling peons. Coming down in the world for her only means driving a brand new BMW and not being driven by a chauffeur in a Rolls .