FIRST PUBLISHED WINE & SPIRIT MAGAZINE, 2006
This year, you could be forgiven for thinking that Bordeaux chateaux owners must be bathing in asses' milk, gold-plating their Mercedes' and getting their grapes peeled by crowds of simpering nymphs. The average price rises for the 2005 vintage was 68%, and 93% of Bordeaux cases put up for sale found buyers, up from 74% for 2004. Single bottles of Pétrus and Ausone (or rather, the expectation of them) are currently exchanging hands for around €2,200. For wine that will have cost around €20 per bottle to make, at a generous estimate, that is a fairly hefty profit. No wonder then that the investment in Bordeaux blue chip properties has similarly spiked.
After a number of distinctly chilly years, the most sought after appellations – namely Margaux and Saint Emilion cru classés – are seeing properties being snapped up within 24 hours of going on the market.
In the past year, the biggest sales have included Chateau Montrose to the Bouugues family (for a cool €120 million), Chateau Cantenac Brown to British investor Simon Halabi (for an estimated €50 million), Chateau Guiraud to the Puegot family (for around €20 million) and Chateau Soutard for €35 million to a French insurance company. Right now, Chateau Pichon Longueville Comtesse de Lalande is under offer from Hermès, Chateau Lascombes is being fought after by a number of interested parties, and there are rumours that just this week the Moueix family was offered €800 million for Petrus (they turned it down).
Meanwhile, as is so often the case in Bordeaux, while the top 100 property owners are sitting pretty, the rest can only look on forlornly, their noses pressed against the glass. A stark reminder of the reality for most wine makers is that Crédit Agricole, the French bank, are the biggest property owners in Bordeaux. Not because they've been happily snapping up jolie petit vignobles to lavishly entertain their clients, but because they have acquired so many through repossessions, loan defaults and bankruptcies.
Frederic Dubois, of investment bank Lazard, who deals with many chateaux sales in the area, explained the evolution of the market. ' Whereas previously land values rose and fell as a whole, now prices at the top end have been heavily increasing over the past 24 to 36 months, while at the other end of the market there is virtually no movement at all. The bottom price currently for an AOC Bordeaux property is the prime d'arrachage (the money the government pays you for pulling up your vines).'
If you're brave, there are some amazing bargains in the smaller appellations, where prices are at their lowest for years. Today, €800,000 could buy you an 18th century property in the rolling hills of Entre deux Mers, with 10 hectares of vines attached.
But buying is the easy bit, making the wine slightly trickier – selling the hardest of all, and big buyers are picky, of course. They are looking for well recognised brands, which really means classification (on either bank; not just the original 1855 classification).
Alain Reynaud, owner of Saint Emilion’s Chateau Quinault, believes there are two kinds of people who buy Bordeaux property, ‘Those who do it for the lifestyle, and those who do it for the terroir and the desire to make a great wine’. Much of the current market is led by ego purchases, where buyers want an impressive building as well. ‘Many buyers feel wine is fashionable, a status symbol. It's like art; there's only one in the world, and I'm the owner. It's the ultimate ego buy’.
For the lucky ones who can fulfil this criteria, there are buyers lining up. This makes it hard for overseas investors to buy into Bordeaux. Currently, according to Dubois, Indian investors are looking to buy top end names, Chinese investors want brands and volume sales, wealthy Russians are circling, and more and more successful new world winemakers are coming in, paying for the prestige of adding a Bordeaux to their portfolio.
But money alone certainly doesn't talk in this market – if you arrive with bodyguards and conspicuous new money, you're unlikely to make it through the wrought iron gates. Dubois explains why, 'Most of these chateaux are still family owned. While international companies make investments with the intention of growing them and then selling them on – and see that final transaction as a mark of success – when you've inherited something, your duty is to develop it and pass it on to your own family. Not to do so is a failure.'
This then translates into the idea that, 'If we have to sell, we must at least sell to a 'good' name and not introduce anything vulgar into the neighbourhood.' It eases the pain.
That's not to say the Bordelais will be unwelcome to the 'right' foreigners. As Jean Christophe Mau, owner of Chateau Brown in Pessac Léognan pointed out, 'Overseas buysers who come here tend to do it because they want to make the best wine they can – look at the Bonnie family who bought Chateau Malartic Lagravière. They are Belgian, and made their money in household goods, not in wine, but have invested heavily and are making an excellent quality Pessac Léognan that is good for the whole appellation. Of course overseas buyers like this are welcomed.'
But even purchasing the big chateaux requires a steady head; wine is a long term investment, and you only get one vintage per year to make your profit. To get the big prices at en primeur, you need consistency – which means even if you buy and invest heavily, there will always be a five to ten year time lag before your prices move up. And of course – there’s one problem that you can’t control, no matter how much money you throw at it; the weather during the 2006 growing season has been challenging, to say the least. This means that the 06 wines likely to be around 50% less than the 05s; a sobering lesson for any buyer who thinks he is going to make a fast buck.
Prices Today, and 10 Years Ago
A Saint Emilion grand cru classé: Now €15 million, then €8 million
An Haut Medoc cru bourgeois: Now €5 million, then €3 million
Chateau Margaux: Now €600 million, then €200 million
A 10 hectare Entre deux Mers family run estate: Now €500,000, then €500,000.
What went to whom for what... all in 2005/6
• Saint Estephe 2nd growth Chateau Montrose to Martin Bouygues, the 8th richest man in France who also owns a stake in Paris St Germain football club, for €120 million.
• Sauternes 1st growth Chateau Guiraud moved out of American hands to a French consortium led by the Peugeot family for around €20 million.
• Margaux 3rd growth Chateau Cantenac Brown went to British property developer Simon Halabi, 73 of the 2004 Times Rich List, worth around €50 million. Halabi said that the purchase was the result of, 'a personal passion for Bordeaux, its history and its wines’.
• Chateau Pichon Longueville Comtesse de Lalande is in the middle of a protracted sale to luxury house Hermès (the Hermes family has just privately purchased Chateau Fourcas Hostens).