Last week, Jack Ma, the billionaire founder of Alibaba , purchased his second château in Bordeaux. He’s been on a shopping spree for châteaux since he purchased Château de Sours in February 2016. His first purchase was a large 80-hectare estate in the modest appellation of Entre-Deux-Mers where wine prices are a fraction of the more expensive Médoc wines towards its northwest and also a fraction of its more prestigious neighbors to its west (Saint-Émilion and Pomerol).
Local newspapers such as Sud Ouest, report that there are now around 120 Chinese owners of vineyards in Bordeaux. After the sale, according to Chris Mercer at Decanter, a flurry of calls from Chinese potential buyers of châteaux were received by real estate companies specializing in vineyard purchases such as Christie’s affiliate Maxwell-Storie-Baynes.
There are now plenty of real estate companies for buyers to work with including specialists like Wine Bankers as well as French financial firms such as Lazard LAZ-US +% and Rothschild who have their own specialists for vineyard acquisitions. Websites that group agents together are now plentiful including intervignes.com and vinesmart.com. There is plenty of information available about French vineyards that are openly for sale, but there are just as many who prefer to sell quietly through private brokers.
To find out about the properties that are discretely for sale, inside connections and local information are essential. The most sought-after properties that eventually find buyers never list publicly. For properties like these, working with an insider like Alexander Hall is useful. He is a specialist in vineyard acquisitions based in Bordeaux and offers a full advisory consultancy service for potential buyers. “The traditional vineyard real estate firms are basically shop windows, instructed by property owners to sell their property,” Hall explains. “I work differently and independently from the sellers. I advise the buyers only and I have no interest in which property they end up purchasing; giving the best advice to my client and making the best purchase for them is my goal.”
Hall founded Vineyard Intelligence in 2010 after leaving the financial industry and a brief stint working in wineries in New Zealand as well as Bordeaux. “We advise on the complex legal, financial and audit side of the business and at the same time offer technical expertise,” says Hall. This can include working with soil experts to offer an accurate valuation of the land, testing wine inventory samples for TCA and other faults, assessing the equipment, the stock, and the existing staff. The questions we ask are, ‘What are you really buying?’ and ‘What will it cost to get it right?’. I remind each buyer that they are buying a small business and they have to understand that buying the property is just one part of the finances they will need to keep the business going.”
The price of property in Bordeaux varies widely depending on location. For top appellations like Pauillac or Saint-Julien, vineyards can cost between €1 to €2 million per hectare; while a generic Bordeaux appellation can cost just €10,000 to €25,000 per hectare. The price depends, as it does throughout France, predominantly on the quality reputation of the vineyard and the appellation. So far, the purchases made by Chinese buyers including Jack Ma have not been in the top appellations.
Hall says a minimum €5 million total budget hits the sweet spot: One can opt for a Bordeaux superieur in Fronsac, Médoc, Graves or the Entre-Deux-Mers region. This budget can buy a 20 to 40-hectare property, with a winery on site. If you want to be in a better-known appellation, you can consider Saint-Émilion where you can buy a 4 to 5-hectare property with a house or small chateau. It all depends on the lifestyle, the purpose of the purchase and what the buyer ultimately wants from it.
Jack Ma’s two purchases show that he is looking first for size and also for an attractive environment. Château Perenne, his most recent purchase, is a 64-hectare estate with extensive grounds and a beautiful château. Similarly, Château de Sours, his first purchase, is an expansive 80-hectare property with a thoughtfully restored castle that has two guest homes for visitors in addition to the main castle. Both properties produce modest wines at fairly large volumes. There are plans for further renovations for both estates to receive a larger number of visitors, most likely from China.
For those considering buying a Bordeaux vineyard, Hall offers four tips:
- Think long term; at least a ten-year horizon
- Consider distribution and how you will sell the wine, the toughest part of the business
- Do a thorough due diligence and understand the total cost, including capital expenditure and working capital which can be extensive
- Don’t assume you can make a better wine than what the property is already making
Hiring someone like Hall as a consultant can mean an additional 5% on the transaction price but the exact fee depends on numerous factors such as size of the transaction and other requirements.
When I ask Hall if buying a vineyard in Bordeaux is a good investment, he smiles. “If your goal is to make money, there are lots of other industries that give you better returns.” He laughs and adds, “If you are thinking purely of returns, buy an apartment in Bordeaux! It is a much safer bet.” Buying a vineyard and a château is a lifestyle choice. Why does a millionaire or billionaire with multiple homes around the world need another apartment in Bordeaux? Owning a vineyard is the ultimate status symbol for the wealthy, a way to show one has finally arrived.
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