do you want to own vines in the côte d’or?

Update 15.12.2011(14.12.2011)billn

beaune-champs-pimont-saferWell do you?

That’s a hard question to answer in the current market. I provide for you here a window to a relatively ‘cheap’ entry into the world of premier cru pinot noir (Chambolle-Musigny would cost you 5x the amount), but the financial transaction and subsequent model will make sense to relatively few of you I think.

Anyway, our starting point is the current ‘offer‘ via the SAFER website.

In effect you would pay €184,000 (plus an 8.5% ‘fee’ for SAFER) plus €3,500 for 0.43ha of Beaune 1er Cru ‘Champs Pimonts’ – nicely situated fifty year-old vines, though don’t ask me how good the plant material is – but even as the owner, you cannot do very much with the land, because with this purchase you also grant a ‘fermage’ agreement to the Dufouleurs so that they can carry on as before. Fermage is a long-term rental agreement, usually renewed every 20 years, and as a non-accredited winemaker, you or I would have little chance to change things, but as the new owner of the land/vines, you would, of-course receive a rent, currently worth 4.4 barrels per hectare which makes 1.93 barrels in this case. 75% of this would be ‘paid’ in bottles – representing approximately 400 bottles – the remaining 25% in cash, i.e. currently €794.

So assuming you could also convert your bottles to cash, your annual return on this investment would be only about 1.6% – though comparable to the return from many banks’ deposit accounts, but also, from some perspectives, a better chance of preserving your invested capital. This latter point is largely what is driving new investment in the Côte d’Or; not the traditional business models of buying the land and amortising the costs of the land through selling wine over 10-20 years, because the land is too expensive for that today, but rather the preservation of the value of (some) capital as part of a diversified investment portfolio – it is fair to say that it is a minority of people who can plan and invest in such a way.

Anyway, assuming you have a spare €200k which you would like to ‘preserve’ and don’t feel worried by phylloxera biotype B, this could be the thing for you. But I hope you like the incumbent’s wine, because I doubt they would let you take your rent in grapes, or specify how you might like the viticulture to be done in your rent’s 2 rows of vines…

Ooh, I almost forgot; just because you have the cash don’t for a second think that it’s a done deal. The opaque organisation that is SAFER might just consider you not fit and proper purchasers, and if so, that’s that!

Agree? Disagree? Anything you'd like to add?

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