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Mixing romanticism and business in a Bordeaux chateau
By Juwai, 13 July 2012
When Zhang Jinshan, founder of the Chinese beverage company Ningxia Hong, decided to sell French wine, he wanted to ensure its quality. So he bought his own vineyard. Laura Latham reports for The New York Times.
July 12, 2012
-- Following a trend set by other Chinese, who have bought 20 of the 8,500 Bordeaux vineyards over the past four years, the 48-year-old businessman bought the Château du Grand Mouëys in February. But the purchase was not purely a commercial decision.
“Château du Grand Mouëys is extremely historic, with a big vineyard and forest,” Mr. Zhang said, speaking through a translator. “It is the sleeping beauty of Bordeaux.”
In addition to the romanticism attached to a 10-bedroom neo-Classical mansion and its 170 hectares, or 420 acres, of land and vineyards, there is also is the business side.
The property, which was listed at €5.95 million, or $7.3 million at current exchange rates, has the potential to produce 40,000 bottles of wine a year. Ten percent of them are expected to sell in Europe, with the remainder being shipped to China for what the company says are all-but-guaranteed sales.
“The natural conditions in France are excellent; the wine here is very special. We want Château du Grand Mouëys to become a great wine of Bordeaux,” Mr. Zhang said. “We needed a chateau large enough to offer a good level of production, we also want to develop wine tourism and attract Chinese visitors.”
Although still a small minority, the Chinese owners of Bordeaux vineyards have become the talk of the wine industry. Some are successful corporations that own several companies in China or Southeast Asia, while others are entrepreneurs who wanted second homes in Europe to diversify their assets. Several buyers, like Peter Kwok, a businessman from Taiwan, have given estates to their children or have installed family members and trusted employees as full-time site managers.
Owning a French vineyard has always been regarded by international property investors as a status symbol and, for most Chinese buyers, only property in Bordeaux will do.
“Bordeaux is seen as the capital of the wine-producing world,” said Alexander Hall, a wine expert who also acts as a real estate consultant through his company, Vineyard Intelligence. “Private buyers who are into wine want a beautiful second home with vineyard. As a region, Bordeaux contains the top premier crus in the world and, in China, if you want to be seen as successful, you have to have the best.”
Michael Baynes, managing director of the French real estate agency Maxwell-Storrie-Baynes, says most Chinese purchasers are aware that vineyard prices in Bordeaux are stagnant, so it is a good time to buy.
A chateau with a vineyard that produces a regional Bordeaux appellation wine in the Entre-Deux-Mers region of southwestern France would sell for about €12,000 to €15,000 per hectare today, the same amount as the lowest sale price in 2010, Mr. Baynes said.
And, he added, vineyards now selling for €15,000 to €25,000 a hectare probably sold for €25,000 to €40,000 a hectare 10 years ago.
“In terms of land, values over the past decade have been at an all-time low. It means there is a good supply of properties for sale, and prices are still quite reasonable. Interest from Chinese and Southeast Asian investors has stabilized the market,” he said, adding that while prices have not yet risen, they are expected to do so within two years.
Mr. Baynes added that he now had what he characterized as 12 “serious negotiations” in progress between chateau owners and Chinese buyers. “Sales can take up to 12 months,” he explained. “The Chinese like to do their research and require a lot of information. They also like to negotiate.”
According to real estate agents in this market, investors usually want to pay less than €10 million, with average sales to Chinese buyers at €5 million to €8 million. And, while lifestyle and long-term capital appreciation is important, they also report that the central reason for the Chinese interest in Bordeaux is often wine production.
“The most common criteria for purchase is the volume of production,” Mr. Baynes said. “Buyers are looking for estates that produce wine of a certain level of quality. They typically have a market for a certain number of bottles, often in excess of 100,000 per annum, and want a vineyard that will service that amount of production.”
Clément Duhamel, a French real estate agent based in the Beijing office of the Oscar France agency, said the company only began working with potential vineyard investors at the start of the year. “But we have had a number of enquiries for vineyards of 10 to 30 hectares, priced at around €5 million, preferably with a small chateau,” he said. “Clients plan to start with something small to see if it’s a good investment, then buy bigger.”
Chinese buyers have also been purchasing wineries in Hunter Valley, in Australia, and Napa Valley in California, where high-profile deals include the sale last year of the Sloan Estate to a Hong Kong company for $40 million.
There is the belief among property agents that, faced with changes the Chinese government has been making this year and the country’s slowing growth, wealthy Chinese want to spread their assets. “Property is a way to put your money abroad,” Mr. Duhamel said. “Investors are nervous of the future development of the Chinese economy.”
For many potential Chinese buyers, a wine production business would also complement their current operations.
Chongqing Mexin Group, a door supplies company in Chongqing, China, recently introduced Bevoutlets, a food and beverage retail business. Its board of directors, like Mr. Zhang, decided to purchase a vineyard in Bordeaux to guarantee wine supply and its quality.
“French wine is very popular in China but there are many counterfeit wines here. In order to keep the quality as well as lower the cost, we decided to invest in a French chateau,” said Jing Zou, manager of the company’s international department.
The company is seeking an estate with a chateau and outbuildings that can be converted to residences for Chinese and local staff. With a budget of €3 million, the properties that the company is considering include an estate with a 15th-century chateau and five hectares of land, two of which are planted with Merlot vines, priced at €1.06 million. It also is viewing a 12.5 hectare vineyard with chateau in need of renovation, listed for €2.2 million.
Mr. Baynes said some investors had a checklist that was not always analytical. “Buyers often do want the fairy tale chateau with towers or turrets, as well as typically rural French surroundings,” he said.
According to Mr. Hall, Chinese buyers also want a story. An estate is more attractive if it has an interesting past or its wines have won international awards or been served at a famous event, like a celebrity wedding.
None of the region’s high-profile names, like Château Lafite Rothschild or Château Margaux, have yet been associated with Chinese interest — although, Mr. Hall said, “it’s not a matter of if but when.”
Some property agents say there are concerns about Asian buyers being likely to erode the core character of the French wine industry, but they note that Bordeaux wines have borne the mark of many nationalities over the centuries, and Chinese owners are investing in improving production and, in most cases, keeping on local staff.
“Chinese investors are looking to build a successful business from French wine,” Mr. Hall said. “Many of the properties were on the market because the previous owners couldn’t sell their wines. With the current strong market for French wine in China, Asian buyers believe they can make a viable business out of Bordeaux.”
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