Mansion Global

Chinese Businesses Seek Investment Opportunities With Purchases of French Vineyards

The wines from these properties are often sent back to China to fuel the growing market there

Save

In July, Chateau Fauchey —a 15th-century property on the banks of the Garonne River—was purchased by Hong Kong-based investor Profitsun Holdings for an undisclosed price.

MAXWELL-BAYNES VINEYARDS
In July, Chateau Fauchey —a 15th-century property on the banks of the Garonne River—was purchased by Hong Kong-based investor Profitsun Holdings for an undisclosed price.
MAXWELL-BAYNES VINEYARDS

China is already the world’s biggest consumer of red wine and is predicted to become the second largest wine market by the year 2020, making a surge of recent sales of French vineyards to Chinese business interests a potentially lucrative investment.

The fact that the wineries include gorgeous vineyards and vistas and centuries-old castles and estates, make the properties that much more alluring, since tourism is a secondary potential return on the investment.

In July, Chateau Fauchey—a 15th-century property on the banks of the Garonne River—was purchased by Hong Kong-based investor Profitsun Holdings. The property covers some 67 acres, including 16 acres of AOC Cadillac Cotes de Bordeaux vines. The deal was negotiated by Maxwell Baynes, the exclusive affiliate to Christie’s International Real Estate for Bordeaux and the Southwest of France. The sale price was not disclosed. The property produces mostly Merlot, with some bottles of Cabernet as well.

The property produces 40,000 bottles a year.

MAXWELL-BAYNES VINEYARDS

"Profitsun’s chairman is passionate about Bordeaux and its wines," broker Michael Baynes explained in an email. But be that as it may, buying the vineyard was primarily a business decision.

"Profitsun is set to use wines from the château for its private clubs in Beijing, Shenzhen and Hong Kong," the group’s chairman told Decanter China.

More:Where Power Players Escape From It All

More than 100 Bordeaux wine estates have been purchased by Chinese investors since 2010, according to Bloomberg,  Yet, foreign buyers have long found French wine properties to be an appealing investment. Daniel Lam, a wine specialist in Bonhams Hong Kong office, sees this latest spurt of acquisitions as reminiscent of the 1980s, when "the U.S. and Japanese investors, not to mention other European investors" bought up similar French properties, he explained via email.

Jamie Ritchie, Sotheby’s global head of wine and Mr. Lam both believe the trend to acquire French properties will endure. "Given the growth in the interest in wine, as both an enjoyable drink and as an asset class, and wineries as a prestigious, life-enhancing assets, we envisage this trend continuing," Mr. Ritchie wrote in an email.

"The fine wine market in China, as well as throughout Asia, continues to broaden in terms of the number of clients and diversify in terms of the range of wines. This is illustrated in two ways: firstly, by the exports of wines from France at varying price points, and, secondly, by the acquisition of properties (both vineyards and châteaux), primarily in Bordeaux, but also in Burgundy," Mr. Ritchie said.

In March, Vinexpo CEO Guillaume Deglise predicted that by 2020, China’s wine sales will surpass France and the U.K., and grow to a total value of $21.7 billion, second only to the U.S. at $38.6 billion. For most of these investors, purchasing a French vineyard at a relatively low price, and then exporting the wine produced back to China at a markup of nearly three times, provides the incentive to buy.

More:Vineyard Dreams: Owning One of These Elite Properties Has to Be a ‘Love Affair’

But wine supply isn’t the only consideration. For Chinese entrepreneur James Zhou, his newly reopened Chateau Renon estate and vineyard in Tabanac, which he purchased in January 2015, serves a more personal purpose. The estate and vineyard consists of 12 acres of grounds along with some 20 acres of vineyard. Mr. Zhou said he plans for the property to serve as his family’s base in the area along with providing a "venue for entertaining people from the Chinese wine industry," a statement from broker Maxwell-Baynes read in part.

The property includes 16th-century cellars along with a main building erected in 1802 that was renovated in 2002 by a Bordeaux architect and a specialist in Feng Shui.

New Century Tourism Group, founded by billionaire Chen Miaolin, owns 160 luxury hotels across China and is believed to be eager to develop its Bordeaux estate as a tourist attraction, as well as a commercial winery. New Century boughtChateau de Birot in Cadillac Cotes de Bordeaux—a 62-acre property built in the second half of the 18th century—in December 2014. The value of the land was estimated at between $8,400 to $36,000 per acre, though the purchase price was not disclosed.

"There are strong synergies with hotel and hospitality, which correspond well to our expanding global hotel group," a senior representative for the Chinese firm told Decanter.

More:Alibaba’s Jack Ma Buys $23 Million Property in New York’s Adirondacks

In a more recent deal, in January, Chinese food and beverage multinational Golden Field purchased Domaine de Bellair in Castillion, a 136-acre vineyard and estate that produces 400,000 bottles per year.

"This is an important moment for us as a company; to own our own Bordeaux vineyard is an exciting step and although we plan to keep the existing wine distribution channels we will also export to Japan, Taiwan, China and southeastern countries to make the most of the distribution network we have developed there," sLu Cheng Chang, Golden Field’s chairman,  told The Drinks Business at the time.

Indeed, Chinese purchases of French vineyards have become commonplace, especially since Alibaba’s Jack Ma started the trend in February 2016, when he purchased Chateau de Sours.  But despite the apparent explosion of purchases, Chinese interests still own only 1.3% of the 7,400-odd châteaux that dot the Bordeaux region, according to Agence France-Press. The region's top foreign owners remain the Belgians, with the Chinese now in second place but catching up fast, the U.K.’s Telegraph reported in January 2015.

According to Mr. Lam, the impact of this trend in France "is minimal," while the impact in China has been noticeable. He explained via email that the boom in acquisitions has "manifested in the domestic demand for French wines in coastal cities such as Beijing, Shanghai, Xiamen and Guangzhou."

 

Article Continues After Advertisement