Propriétés viticoles et vignobles - Le bureau viticole

Brick-coloured wine

bv — 2007-11-29T15:15:48Z

The French winery market has acquired a new type of investors: former industrialists having changed direction. Southern France - where bricks and mortar are worth just as much or more than vineyards - has learnt to exploit this detail. Prerequisite: be passionate.

ANALYSIS : CHARLOTTE MIKOLAJCZAK

Up until the 80s, a wine estate was basically considered a work tool. Wine estates were appealing - to both private and institutional investors - because of their vines and their wine production; the "inhabitable" part of real estate, castle or not, used to represent a mere 20% of the winery's total value. This is still the case in well-implanted wine-growing regions such as Bourgogne and Bordelais. However, this is no longer true in regions where grand crus (top ranking wines) are no longer made, such as in Provence, where the demand mainly targets the 'ornamental' aspect of wineries. A little over twenty years ago, of a new breed of investors emerged: industrialists from Northern Europe (France, Switzerland, Great Britain, Belgium, Holland, Germany and Scandinavia), 50-somethings, young retired business people or individuals looking to change direction, passionate about wine and bricks & mortar too of course, but even more so by the idea of creating a small company with the goal of setting up a family-based project and ready to invest their own capital (acquisition of a winery on a human scale). "Your troubles must not outweigh your pleasure" explained Stéphane Paillard - the wine expert turned wine-broker 15 years ago - from the Saint-Remy de Provence Wine Board. Translation: there is no point in taking on 60 or 80 hectares of vines when 20 will suffice to break even, with costs being entirely covered by sales of the product.

Authentic AOC wineries In Provence, this turnaround dates back to the 80s and heightened in the following decade. Why? "A strong real estate market concentrating an international demand", replied Stéphane Paillard, who nevertheless specified that "like the Languedoc-Roussillon or the Vallée du Rhône areas (except the Château-neuf-du-Pape area), Provence never really managed to attract institutional investors". Thanks to the added value of "bricks and mortar", these wineries have been able to capture a new clientele. "In Provence, the real estate value is behind almost 80% of all winery transactions", the wine-broker said. "The craze has begun rubbing off on regions that are not as suitable for such business, but in rather symbolic proportions: representing 1 to 2% of transactions in Bourgogne and a maximum of 5% in Bordelais". This does not mean that the Wine Board's portfolio is full of propositions. The segment only represents one niche of the real estate market in Provence. Moreover, the agency exclusively deals with top-of-the-line products, more specifically with what Stéphane Paillard calls "wine residences". "This is the name I have given to such estates", he said. A wine residence is "a small estate - 4 to 20 hectares - in a great location and completely free of unattractive views, noise or poor architectural aspects…" And the cost of such a place? "Considering the working capital, restoration work on the house and restructuration of the production tool all together, you'd need between 3 and 6 million euros on the Provencal market. Elsewhere, in regions where real estate is prized to a lesser degree, prices would start off from 2 million euros". An amount that is more or less considered "guaranteed", with the agency's priority being able to secure the liquidity of the investor's investment in terms of resale. At the same time, the Wine Board provides the investor with a first-class, turnkey service, as well as assistance in all legal, tax and architectural aspects involved in the acquisition, not to mention… oenological expertise. "Which more than often refers to the personalisation of their production," concluded Stéphane Paillard. "The red, white and rosé side of things can be changed, as can the type of wine, to make it more structured, more feminine, …" It goes to say however, the winery itself is never rechristened. In Provence, the key word is elegance, not ego.

Tax advantages of wineries

bv — 2007-11-29T15:13:01Z

Numerous former directors having sold their company and made a small fortune decide to reinvest their capital in wineries. This sudden interest in wines is not completely bereft of ulterior tax motives. Such assets do indeed escape assessment for the solidarity tax on wealth if the gained assets represent the main source of income for their owners. Wine estates are in fact more attractive to investors than the actual profession of wine-growing or the profitability of the wine business. 80% of the price of one of these beautiful country estates set on a sloping hillside in the middle of several hectares of vines is based on its bricks and mortar and only 20% on the quality of the vineyard. These country estates have been dubbed "wine residences" by Stéphane Paillard, an expert in wines and wine estates in Saint Remy de Provence (Bouches du Rhône department). In some respects, these residences endow their owners with a title of noblesse. Starting off at a mere 1.5 million euros, these humble abodes can fetch anywhere up to 15 million euros.

Il y a une magie du vin, mais elle est exigeante."

bv — 2007-11-29T15:08:00Z

At 44 years old, including 15 years spent in the French wine-growing areas looking for properties for sale, Stéphane Paillard is rather atypical of the people in high-level real estate. Established for the last few years at Saint Rémy de provence, he now coordinates the Bureau Viticole. This choice of specialisation owes nothing to chance and everything to vocation, a childhood in Provence. He talks with refreshing franknes about this market of enthousiasts.

The Bureau Viticole, you call that a concept ?

Yes. The market has woken up since the Eighties with the appearance of a new breed of investors. It used to be mainly industrials acting privately, for their own account, and who were looking for a certain type of service which was considerably more than was practised in those days. These investors were wine neophytes, they needed a different sort of assistance and it was in connection with the ermergence of this demand that I set up the Bureau Viticole in the Languedoc Roussillon area before finally settling down here in Provence.

This was a new idea ?

At the time, estate agencies used to sell viticural estates in addition to their usual range of properties. Specialising was a new approach. With this in mind, we have a very different way of working. For example, we represent an estate if we have exclusivity that is renewable for extended periods. In this way, wa have practically always sold the properties entrusted to us. Our involvement far exceeds the scope of simple sales negotiation and we have implemented the accompanying structures necessary to the buyer to take over under optimal conditions, or even to restructure their operations. In response to the demand from our customers for finding turnkey properties, we have over the years collected around us a small and reliable team of professionals in the areas of oenology, taxation, rural law and architecture.

You must be very sought after ?

Yes, but we only take a very small number of estates. Out of fifteen visits, we very often take on none, sometimes one, exceptionnaly two. Which explains why we haven't got some of those unsaleable deals that drag on the market, stuffed at the back of our files. We only select estates that match our customers.

What base do you use ?

My specialisation has developed naturally over time, a little like the picture of what I like in terms of wines. There are emotive wines and expressive wines and the properties that we represent correspond to one or other of these "appellations". An emotive wine, is one that is the image of its owner. At this risk of surprising you, the creation of a wine is the fruit of the addition of a mass of details. A little like buying a property. If 2 to 5% of details are missing, you go from an exceptional wine to a good wine. If 10 to 15% are missing, you will have a wine without vice or virtue, an ordinary but average little wine. This is where the owner is very important, his ability to manage such details, his culture, his goodwill, etc. It is in all these details that a wine is the mirror image of he who made it. An expressive wine is a wine which has character and, in particular, that of its region. Here, it's a wine which is going to express the Provence culture, perfumes, excitability, the "guarrigue" landscape. These are not worldly or well-known winess, these are simple wines. When you arrive in a property, you feel what it exudes in terms of emotion or expression. Basically, our "niche" is the wine's place of residence. He is the great specialist of character properties in Provence, while I have skills and a certain technical knowledge in terms of wine. It is our complementarity that helps to explain our success together.

Apparently, Yes! The "wine's place of residence", that's a good way of saying it...

Not only. This approach presents several aspects which correspond to the search and to the aspirations, which in fact are not always expressed, of the person consulting us. The charm, a certain research into the quality of life, the attraction of the myth of the wine, a thorough professionalism at all levels, the guarantee of a fair deal in terms of price and a true realism which tends naturally to demystify the wine world? You've got to thoroughly understand the motivations of thos who comme to see us in order to have just the right approach in terms of attraction between the property and a potential buyer, a little like a matrimonial agency. Working around the table before starting to visit the estates. For an estate, there are one or maybe two people who are the buyers corresponding to the property. One of our characteristics is that we do very few visits. My clients have no time to waste and neither do I. We recently sold the Château Crémade at Aix-en-provence in the AOC Palette in four visits no more over two years. Similarly, two visits were enough to realise an exceptional vienyard in Burgundy. An yet, these were investments of 20 and 55million francs.

Do you sell vineyards everywhere in France ?

Our natural sector is Provence, of course. The the regions surrounding it, the Rhône valley, Languedoc and, a bit further on, Burgundy or other areas, when we are asked.

Are there a lot of people looking for vineyards ?

We have, on average, two to three contacts a day. It's my respinsability to understand if the person who is coming to see me is really ready for an acquisition or they are only at the stage of wishful thinking. If I really understand what they are looking for and if they are ready to make the step, I should only show them two or three properties.

Do vineyards sell quickly ?

No. They have their own rhythm. For most of them, you need three to four years. One to three years of preparation, that is sorting out any problems that may arise, inheritances, joint ownership, sometimes financial or even land registry problems. You really have to springclean the palce and make everything clear before envisaging putting it on the market. The we need between six and thirty six months to finalise the sale under good terms for everybody. We really need to put the highest technology in servicing a transaction and I can tell you I am fanatical baout that, there has to be a meeting between an estate and an investor, otherwise...

What is this high technology ?

We implement a series of surveys carried out by experts accredited with the courts on all the items making up an estate so as to validate from A to Z the quality concerning the choice of a property. These experts are chosen by the client but paid by us, on our fees. In this way, everything is clear and the transaction is in good health. We have nothing to hide. It is a working philosophy that protect us from later worries. And that's normal, because we consider that we are not allowed to make mistakes.

"Si l'on veut faire du vin avec de l'argent, on ne fera jamais d'argent avec le vin."

Do you cultivate secrecy ?

Confidentiality, yes. I work only in the most complete discretion from the point of view of sellers as well as buyers. This is not a recipe, this is my way of life.

In fact, buying a vineyard is a fantasy or not ?

Everything depends on the motivations. There is a myth of the wine, that is clear and it is fairly masculine. If the approach is not too financial, not too dehumanised, if the search is not based on short term profitability ratios, one can expect an acquisition. Otherwise, the investment is bound to fail. One can always invest crazily in technology, make Pharaonic storehouses, employ the greatest oenologists, but all that will never be enough, wine is a product that has to be looked after. If you just try to make wine with money, you will never make money from wine. The expression "raise a wine" is not just by chance and it is not too strong. You need sensitivity, you need a project, you need to recognise the regional characters. Better than a fantasy, there is a magic in wine. But it is demanding.

And you must be able to resell...

Exactly. If you agree to investments that are not in relation to the property and, for one reason or another, the property has to go back on the market, you are sure to lose your shirt! Reasonable investment, meaning a guarantee of staying solvent. Sometimes, and particularly in Provence, it is better to concentrate such restructuring investments on the property element of an estate rather than on the production tool itself.

Does this market have a future ?

There is an exceptional future. I'm not talking about the wine market but about wine-producing properties. I would never commit myself on the wine market, which is world-wide and very subject to world economic fluctuations and it is evident that nobody can forecast developments in macro-economic terms. On the other hand, more and more people want to acquire a wine-producing property because, above and beyond the profitability of the balance-sheet, this is a remarkable long term proprietary investment. What you could rightly call a responsible head of family investment, likely in addition to fulfil a project, a passion and provide pleasure. To the extent that the investment is made with plenty of precautions. Which is what I try to do...

Interview by Nicolas de Rouyn