Aquitaine - Bordeaux vineyards
If you have at least six million euros to spend, you could buy a vineyard in the renowned Bordeaux area, writes Sophie Kevany
Having about six to 10 million euros to invest is the first essential step to buying a mid-range Bordeaux wine property. Finding a good agent is the second essential and knowing a bit about about the market is the third – if you want to make money that is. If your aim is pleasure then you can stop at the first two.
“Prices vary hugely,” says Karin Maxwell, who runs her own agency, Maxwell Properties. “There is really almost no minimum and no maximum. But, for example, in St Emilion I have two nice little properties, although not in the top flight. They are about six million each, that’s for a good mid-range wine, a grand cru classé.”
The head of AXA Millésimes, a branch of French insurance company AXA which owns a number of vineyards, Christian Seely agreed. Speaking last month at a dinner in the UK for the Wine Education Trust, Seely said vineyard investors should be looking to spend between seven and 10 million euros.
He also advised that the typical time horizon for a high quality vineyard investment would be between 20 and 30 years. “The risk of aiming for the highest quality is that it is a very long-term investment, but the possible reward is high,” he said, explaining that this was the preferred strategy of AXA Millésimes, which aims for low yields and a strict selection process in the vineyard.
About the possibility of bank loans, Maxwell explains that only some people get them. “It’s not that easy,” she says. “You need 10% deposit and then at least 50% of the sale price.” In effect, you might as well have the whole lot. Then, she adds, there is the issue of stock, which people often don’t budget for and which can sometimes throw out the entire project.
“Equipment is generally included in the price,” Maxwell continues, “but wine stock isn’t. You never know what the value of that is until the last minute because they do the stock-take just before the sale.”
Maxwell says, in some cases, with the agreement of the vendor, it is possible to finance the stock over two years and pay a third of the stock price on completion, a third at the end of the first year and a third at the end of the second year.
Stock values vary but you could be talking about figures of between 500,000 and a million euros. “It depends on the wine and on whether it needs keeping or not before being marketed,” she explains.
At a very top château, you might not have any stock at all because it has all been pre-sold, except for the stock in their vats or barrels.
Eventual return on investment (ROI) in vineyards is not immediate, but for many this may not matter. As the old maxim goes, if you want to make a small fortune in wine it is best to start with a big one.
Seely advises that ROI should only be expected after 20 to 30 years. “The risk is high, but so is the possible reward,” he says. Maxwell, however, believes return on investment probably depends on why people are buying in the first place. “People who want a return on their money will put it in a bank or other investment vehicle,” she says. “People who want a lovely family home and something interesting to do will look at châteaux.”
About half of Maxwell’s clients buy for the real estate and the other half, for pleasure. “It is a lifestyle. Lots of people buy it for that. They might be fed up with working in a London office but still want something that uses their business skills, while giving them a nice lifestyle.”
The advice from Seely is that buyers looking for more than a hobby should ignore thoughts of a pretty farmhouse. “Does it have potential for greatness? Will it be easy to convince the world that it does?” he asks. “It is helpful when the answer to both questions is yes. I would therefore recommend resisting the temptation to buy a vineyard that looks cheap in an obscure part of the world.”
Maxwell’s advice to anyone wanting to make money out of a châteaux is to find an outlet. “Here in Bordeaux there are many very capable people who can produce wine to a high standard. Much more difficult is selling it,” she says.
“The most important thing when buying a vineyard is to have commercial skills and an outlet for sales,” she stresses. “I have buyers who have existing outlets in the UK for example.”
Both Seely and Maxwell agree, however, that now is a good time to invest in Bordeaux. For his part, Seely tells potential investors to aim high to capture a growing market for fine wines, driven by a new generation of rich young professionals in Russia and Asia.
He also predicts the market for sweet dessert wines, such as Sauternes, could be on the rise. “Prices could be higher if people recognised these great wines,” he says, adding that it would only take a small movement in demand in Asian market, for example, to dramatically change values.
Maxwell reports that there are plenty of châteaux on the market, the most she has seen in 15 years, and the price per hectare is still low, making it a good time to invest. At the same time the market for French wine seems to be coming out of a trough.
“The price per hectare is reduced at the moment,” says Maxwell. “Prices start around €15,000 per hectare, rising to several hundred thousand per hectare.” She adds that says about 50% of sales are due to inheritance issues and tax and 50% are due to poor sales or because owners have over invested in equipment without enough profit.