Bordeaux may be undervalued. Some Bordeaux, that is, if you review the past 12 months of winery deals in the French wine region best known for its famed classified growths. But classified growths rarely come on the market, and in 2016, buyers looked increasingly to lesser-known wineries, snapping up small estates because they believe quality winemaking and a decent price will attract new wine drinkers.
Roughly "80 percent of all vineyards sold in Bordeaux are less than 5 million euros in value," said Michael Baynes, partner at Maxwell-Baynes Vineyards, the exclusive local affiliate to Christie's International Real Estate.
While it's impossible to know how many vineyards change hands each year, due to the lack of official statistics, according to Michel Veyrier, CEO of real-estate firm Vinea Transactions, real-estate agents know where the deals take place: "There are two main markets in France. The South of France, which includes the Languedoc, Côtes du Rhône and Provence, and Bordeaux. These two markets account for 90 percent of all vineyard transactions in France."
Baynes reports that last year Maxwell-Baynes Vineyards alone sold 13 châteaus—previously seven sales indicated a healthy year. Other brokers are doing equally well, pointing to a robust market for 2017.
"The demand for estates in the range of 5 to 10 million euros is very strong," said Thierry Rustmann of Thierry Rustmann & Associates. "There's always demand for Pomerol and St.-Emilion classified growths, but they can be difficult to find. There's a demand for 1855 classified growths which cost 150 to 200 million euros, but it's rare they come on the market. Right now we're handling transactions in St.-Estèphe and Moulis, beautiful estates that are changing hands."
Asian investors keep the market lively, but there's also strong interest from French industrialists, institutions and local owners seeking to expand their holdings.
Baynes reports that Chinese buyers have dominated the market since 2010, and now collectively own more than 150 estates. But last year, buyers came from France, England, Taiwan, America and Brazil.
American entrepreneur Tom Sullivan is a prime example of the new buyer. The Miami millionaire behind Lumber Liquidators, Cabinets to Go and Proton/SunHydro bought Château du Parc in St.-Emilion in September and claimed that he was negotiating deals on other properties. In October, Sullivan continued his buying spree with Château Gaby in Canon Fronsac and Château Moya in Castillon Côtes de Bordeaux. Most recently, he finalized a deal on Château Auguste.
"We were attracted to Château Auguste primarily due to its outstanding terroir," Sullivan told Wine Spectator. The 74-acre Bordeaux Superieur estate is organically farmed and produces more than 16,000 cases a year. "Over the past decade or so the current owner [Steven Meijer] has mastered the sensitivities of organic farming while maintaining strong production volumes, allowing us to take over a vibrant and healthy vineyard free of pesticides and chemical treatments."
Organic was also a factor at the 43-acre Gaby and 20-acre Moya. Seller David Curl had purchased the estates in 2006 and invested considerably in their improvements, including the conversion to organic farming. The sale included stock of bottled vintages from both châteaus. Damien Landouar remains the general manager and winemaker, and he shares Sullivan's commitment to organic viticulture.
"We believe that Bordeaux is justified in presenting itself as the home of the greatest wines in the world," said Sullivan. "With the power of this brand coupled with carefully chosen vineyard parcels, outstanding management and organic sustainable farming practices, we believe that our products fit a profile that wine consumers are seeking out."
So why focus on lesser known properties? Cost for one thing—a top classified growth is out of reach for most buyers. Baynes says the top estates, which sell for more than $50 million, attract institutional investors and corporations. The smaller estates, which sell in the $5 million range, attract individuals. A decade ago, people saw little value in the petit châteaus. Now they see potential.
Rustmann says estates selling for 3 to 15 million euros are particularly attractive. "Under that price, you're looking at estates at the end of their life, they need a lot of investment. But at 3 to 4 million euros, you really get a beautiful estate with good terroir, a good appellation, commercial performance, and a sound return for your investment," he said.
Another attraction at smaller estates is innovation. No one wants to mess with a classified growth's identity. But at Auguste, Sullivan plans to shift the focus from red wines to rosé, where he sees sales potential. "We intend to show consumers that everything that makes a Bordeaux red great can be applied to rosé wines, which we believe can be the best in the world."
Going into 2017, Baynes predicts that a relatively weak euro coupled with strong demand for Bordeaux wine will result in a steady stream of investors. "Prices in the prestigious appellations such as St.-Emilion and Pomerol have fully recovered from their lows at the end of the 2000s, while Bordeaux Superieur appellation prices have stabilized and are now seeing signs of price growth," he said.
