How To Blow $100 Million In Charlottesville
Shortly after I moved to Charlottesville, Virginia, I stopped near the downtown area for some gas. Discovering that it wasn’t an ordinary gas station, I went inside to check it out. It was impressive. Besides some standard convenience store items, there were an array of artisan specialty goods for sale, including some lovely-looking French pastries obviously made by a skilled pastry chef. In an adjoining room, there was a sharp-looking restaurant. Was this gas station the wave of the future?
Over time, I began hearing things. The gas station/restaurant, named “Fuel,” was owned by local notable Patricia Kluge, née Patricia Maureen Rose. After divorcing her billionaire husband, John Kluge, she won a stunning divorce settlement. I soon learned much more about her, as Patricia Kluge was Charlottesville's most gossiped-about resident, known as the Cruella de Vil of local employers due to her imperious, demanding manner of dealing with her underlings.
Patricia Kluge, born in Iran to an English father and an Iraqi/Scottish mother, moved to England when she was 16. While working as a belly dancer, she met her first husband, Russell Gay, who published a skin magazine called Knave that his wife would soon appear nude in, and then write a sex advice column. There are reports that she also starred in adult films. After a divorce and a move to New York City, Kluge married John Kluge—35 years her senior—who’d end up paying her a record-breaking divorce settlement that The New York Times reported as $1 billion. It was probably more like $100 million, but Patricia kept the house—known as Albemarle House—a 45-room Georgian mansion on 9.9 acres surrounded by a 10,000-acre farm just outside of Charlottesville. This is the story of how Patricia piddled all of that away, with Donald Trump swooping in to grab up her devalued assets.
Patricia Kluge, with no experience in the wine business, founded a winery on the property because of her fondness for wine—the approach of a wealthy dilettante. I heard stories about her paying $1 million to a French consultant, and there wasn't just one of them. Operating the new business organically, learning as she went along, wasn't for Patricia Kluge. Instead, she set out to buy herself, from scratch, a world-class winery. That's a high-risk approach.
Kluge imported expensive oak barrels for the wine. She had the boxes it sold in designed by a distant member of the British royal family. Unchecked spending produced a high price tag on a bottle of Kluge wine, making it challenging to sell, even though the general consensus was that it was a fine wine. Chelsea Clinton served it at her wedding, and that sort of early success spurred plans of expansion. But Kluge had already spent so much by then that this required borrowing $65 million, secured against Albemarle House. Wines selling at Kluge’s price come under tremendous scrutiny. Most of them were made at French wineries that had decades to build their brand. Of the 30,000 bottles of Kluge Estate 2009 bottles produced, only half of them sold.
Meanwhile, the fancy place in Charlottesville where I stopped to get gas turned out to be the prototype of what Kluge, who had no experience, said was going to be a nationwide chain of 100 combination gas station-restaurants, all of them called Fuel, that would offer “American regional food,” each selling her brand of gasoline. The executive sous chef from Tru, a Chicago restaurant on its way to earning two Michelin stars, was brought to run the restaurant. Kluge’s cash receipts were never enough to sustain her businesses.
I remember when Fuel closed suddenly. I knew enough about the behind-the-scenes failures at the time—friends of mine worked there—to just shrug, but many in Charlottesville were shocked. Kluge Estate Winery and Vineyard spokeswoman Kristin Moses explained that it was very simple. "When we started out, the vineyard was only 12 acres,” she said. “Now it's 200. Then there's the new Vineyard Estates development, as well various charity projects. It got to be a problem to give Fuel a hundred percent attention." But it wasn't charity projects that brought down that lavish business concept. Fuel was bleeding so much cash that it was unable to afford even a chef. One of its line cooks, a Mexican who didn't speak English, did that job. By that time, the chef from Chicago was long gone, and the restaurant lost any buzz it might’ve had. A local businessman came along and bought it, reopening it as just a gas station.
As for the Vineyard Estates project the Kluge spokeswoman alluded to, the plan was to build 24 luxury homes that came with 24/7 concierge service. Half the residences were to have vineyards on their property, allowing them to become involved in the winemaking. The problem was there was no money to complete another extravagant project. It did, however, work out well in one way for Mrs. Kluge, as when she lost Albemarle House, she and her third husband ended up renting one of the Vineyard Estate houses that was built, presumably without the 24/7 concierge.
The final blow was the massive economic downturn of 2007-2008. Despite the $15 million Kluge and her husband netted in selling ruby rings, fox hunting guns, silver Faberge plates, and other baubles, Patricia Kluge filed for Chapter 7 bankruptcy in June 2011. She had to sell the Albemarle estate, which is where Donald Trump, her old friend from NYC, comes in. When a royal palace like Albemarle House—with its spa, home theater, 3500-bottle wine cellar, 2000-square-foot sitting room, gold wastebaskets, and floor-to-ceiling trompe l’oeil—goes on the market under distress, the word goes out on a frequency that Trump’s ears pick up on. The former president fired his first strategic shot with this statement to The Wall Street Journal: “Maybe someone is stupid enough to buy the house. I wish them luck.” Translation: “I want this fabulous place so bad I can taste it, but I need some time before I can get it for pennies on the dollar.”
The original asking price for the house, in 2009, was $100 million, then $48 million, then $16 million. In February 2011, Bank of America bought the Albemarle House back from itself for $15.6 million in auction when it was in foreclosure, believing it could unload the property at the same price. But Trump was able to purchase the home’s 217-acre front yard from a trust in the name of Patricia and John’s son for $150,000, and that included even the road leading to the home. Trump planted signs on the land reading: NO TRESPASSING. THIS LAND IS OWNED BY TRUMP VIRGINIA ACQUISITIONS LLC.
With all potential buyers scared off, Trump got the bank down to the fire-sale price of $6.5 million. Having paid $6.2 million at foreclosure auction for the winery, Trump made out like a bandit on that package. Not so for Patricia Kluge, 62, and her husband William Moses, 64, who were left broke, homeless, and unemployed. Trump threw them a bone, hiring them with a $250,000, one-year contract. She was to handle the winemaking, bottling (with Trump's name on the bottle now), and marketing, and he'd oversee legal and other matters. Roughly a third of their money went to rent.
The story of Patricia Kluge is a cautionary tale for cash-flush gold diggers. The message is to avoid hubris. Your husband was the one with the brains. You had the looks. If you love something, you don't need to produce it. You can buy as much of it as you want. And leave the paradigm-shifting business ideas to others. But when you've been handed $100 million, and then find yourself having to borrow against your house, know that your good run has come to an end. Now's the time to start planning. Get ready for the world of the house renter. The good news: you'll never have to pay for another paint job again.