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May 3, 2013 3:02 pm
A new breed of property buyers, tired of mere trophy houses, is turning to viticulture. Fine wine represents a liquid asset with a blend of cultural depth, personal colour and value palatable enough to attract serious inward investors to some of the world’s most established vineyards. And for investors in search of expert advice, Christie’s is opening “Vineyards by Christie’s International Real Estate” in Hong Kong on May 25: a service for buyers with a tailored network of specialists in fine and rare wine and property, headed by the aptly named Bonnie Stone Sellers, chief executive of Christie’s International Real Estate.
It’s easy to see the attraction of grapevines, among our oldest cultural symbols, the conduits of lifeblood. Their fecund tendrils were celebrated on ancient Egyptian tombs and in Greco-Roman painting, before spreading via Persia to China by the end of the Han Dynasty in the third century AD. In medieval Europe, tapestries, marriage chests, synagogue and church portals, oak beds and manuscript margins were covered with the stuff, well before 18th-century dining rooms were decorated with gilded grapes and ewers.
And we are, between us, quite accomplished at drinking fermented grape juice. In 2010, 26,216,967 tonnes of wine (36bn bottles; five for everyone on Earth) were produced globally. Italy and France both made over 4.5m tonnes, double the quantity of the US and four times as much as Australia. Europe still dominates production, and prices are recovering for established producers – who were deemed old-fashioned a decade ago. Now, with some established vineyards with a château in Europe selling for 40 per cent less than prices a decade ago, the old is coming back into fashion.
Asia’s huge demand for western high-end goods eagerly embraced wine too after China’s abolition of alcohol taxes in 2008, when Hong Kong became the premier wine-trading hub. Volume sales in China grew by 194.5 per cent between 2007 and 2011, and the forecast growth from 2012 to 2016 will continue, albeit at a more modest estimate of 47 per cent. By then, Vinexpo (a wine exhibition and forum that alternates annually between Bordeaux and Hong Kong) expects China to be the world’s second-largest consumer of wine, just behind the US.
The top-end Asian consumers have long embraced the classic estates, those in the mould of Lafite Rothschild, of which 10,000 bottles were discovered in an abandoned (albeit guarded) house in Wenzhou, near Shanghai, last November. But they were deemed to be fakes, in common with 70 per cent of the “Château Lafite” sold in China. The genuine 50,000 imported bottles hold a premium, and so control over production of the finest wines at the cusp of a growing market stands to be a very profitable business. But will international buyers be able to acquire vineyards at this stellar level?
That remains to be seen. Last summer, Napoleon’s favourite Burgundian vineyard at Château de Gevrey-Chambertin was bought – along with its medieval residence – by Louis Ng, executive of a Macau casino empire, for a reported $10m. At double the appraisal value, it’s still only the price of a large apartment in, say, London’s Knightsbridge or Upper East Side Manhattan; an apartment likely to have a balcony in lieu of five acres of premier cru and grand cru vines seeking Unesco World Heritage Site status.
Ng is acknowledged as a connoisseur of wine, but the Burgundians were up in arms, proclaiming a desecration of the long-evolved patrimoine to the temporary whims of the super-rich. In reality, the reception of international investors is very variable. In Bordeaux – the world’s largest region for quality wine production – Asian buyers are seen as the salvation of an industry badly affected by the recession and a slump in prices, especially at the inferior end of supérieur.
“Bordeaux is quite different to Burgundy: it’s been international for at least 700 years,” says Michael Baynes of Maxwell-Storrie-Baynes, a real estate agent based in Bordeaux. The firm is a member of Christie’s consortium of established affiliates that collaborate to offer advice and enablement services. There are other established companies, such as Vignobles Investissement of Montpellier and the American Vineyard Agent.
Christie’s say the benefit of their affiliate network lies in providing a complete service to navigate the often bewildering legalities of ownership (in France the title documents, or relevé parcellaire – for vineyards are detailed and require investigation – and the quasi-governmental agency Société d’aménagement foncier et d’établissement rural (Safer), has a further role in checking purchases: some aspects are mandatory, others optional). Also offered is expertise in the responsibilities of production, fine and rare wine prices, negotiating with a period of exclusivity, and the local dynamics of distribution.
France is exceptionally bureaucratic. Bruno Mottet recently used Maxwell-Storrie-Baynes’ services to take on Château Seguin, with 133 hectares under vine producing a modestly priced supérieur. The family already owns the Château La France, 20km away, and intend to develop a distribution company called Bwine, but even they needed help to guide them through French property law, so the complexity facing inward investors must be formidable.
“At any one time, about 80 of the 8,000 Bordeaux châteaux are for sale, a 1 per cent turnover,” says Baynes. “The causes of sale are often quite typical, like a family of three brothers who inherit, none of whom can afford to buy the other two out, so they sell.”
In an average year, 30 Bordeaux vineyards change hands, and in the past 30 months roughly two Chinese buyers per month have bought estates. That means that more than two-thirds of the vineyards currently sold are going into Chinese ownership. And it seems that parcels of the region’s 126,000 hectares – producing 430m bottles of wine – can be bought without much competition from European buyers. “A moat, towers, and 50 hectares is precisely what Europeans don’t want any more,” Baynes adds.
Who are these new investors? There are two types: the established wine producer, who already owns a château, understands the processes and spots an opportunity to expand; and the international buyer, a committed oenophile investor who typically knows less, but spends more. In both cases, Christie’s will examine audited accounts, navigate legislation and contracts to help smooth the process of purchase and establish the right business model and relationships.
Being one of the European dying breed that regards a medieval château as highly desirable, I wonder whether the châteaux themselves are lived in by the new investors, or given over to the management. Or even left empty.
“Many choose to live in them – it’s one of the great personal pleasures”, says Baynes. “Buyers have included an American diplomat who wanted to entertain in a vineyard setting, and an American financier and wine connoisseur who simply wanted to make the best possible wine.”
Baynes adds that “very few of the vineyard owners of this region do it for money – it’s a passion thing. They’ve made a fortune, and want to take on a vineyard for pleasure.” (Bruno Mottet confirmed that his main incentive was heritage, his company’s development, restoring the château and operating a bed-and-breakfast to help stay well on the right side of breaking even.)
But to make good wine in quantity, personal passion needs backing with serious capacity in terms of labour and machinery. And, as consumers often drive demand for style, the greater the commercial investment, the less personal the end-product. Much of the wine will be shipped to Asia. So will it change character?
The Appellation d’Origine Contrôlée (AOC) is applied to protect the local designation of distinctive food produce across Europe, perhaps especially in France where the concept was invented and where food producers are still held in high regard by the French government. Its strictures are unscientific, enforced by a blind tasting.
But Jancis Robinson, the FT’s wine columnist, holds that Chinese wine drinkers enjoy “extraordinarily dry thin red wine, wherever it was made. This is changing but only slowly and certainly not strongly enough to effect a change in winemaking in Bordeaux.”
Production is nonetheless subject to an increasingly erratic climate. Last autumn, Nyetimber, a world-class sparkling wine from Sussex, in the south of England, scrapped its harvest rather than lower its standards. Such are the painful decisions necessary to uphold a fine marque. It takes a glass-half-full character to take on a winery. But for the dedicated, with a deep appreciation and millions of thirsty customers in thrall, the rewards are there to be enjoyed.
Jonathan Foyle is chief executive of the World Monuments Fund Britain
The cost of maintaining historic buildings is high – but for those who want to live in a château, there’s a whopping tax benefit. If you buy one as a private house, you’ll pay 5.02 per cent stamp duty, so on a €10m estate, expect a tax of €500,000.
If, however, the château is an asset of the company controlling the estate, it demands a fixed-rate duty of just €125, the price of a case of bog-standard claret. But – as always – beware capital gains tax.
Taxe foncière is the major property tax, with wide variations: rural is usually cheaper than urban, and there are tax exemptions for agricultural land. There is also a special provision for the new landowner in the form of tax exemption for two years.
● Château Renoir, Bordeaux, France: built in 1802 above 16th-century cellars, this château sits at the end of a tree-lined driveway. It was bought by the current owners in 2001, and benefited from restoration that lasted two-and-a-half years. €3.55m, www.christiesrealestate.com
● Ortaglia Estate, Tuscany, Italy: a villa 20 minutes from the centre of Florence with two guesthouses, two swimming pools, 34 hectares and a further 11-hectare vineyard. €12.9m, www.savills.com/international
● Adgeston Vineyard, Isle of Wight, UK: believed to be Britain’s oldest working vineyard, set on a south-facing slope of around 10 acres. £695,000, www.hose-rhodes-dickson.co.uk
● Château Les Vents, Medoc, France: dates back to the 19th century, with eight main rooms, 280 sq metres of living space and the capacity to produce 360,000 litres of wine. €3.922m, www.christiesrealestate.com
● Twin Oak Ranch, California: “trophy ranch” with 200 acres and “vineyard potential” in the Santa Ynez Valley. £22.35m, www.vinesmart.com
● Ribera del Duero Winery and Vineyard, Burgos, Spain: a farm in the Ribera del Duero wine region with 65 hectares of land, of which 35 are vines. €17.2m, www.christiesrealestate.com
● Cantina Vineyards, Perdriel, Argentina: 25 acres of organic old vines near the region of Mendoza, generating 100 tons of grapes $1.258m, www.bbiargentina.com
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