What you need to know to buy a Bordeaux château

Over lunch on the stone terrace at Château Fonplégade in St. Emilion, France, owners Stephen and Denise Adams took in the sweeping views of their neat rows of organic vines. The American couple bought the estate in 2004 and spent millions to restore it, including $1 million just to rebuild a critical vineyard retaining wall. Maybe you're one of those wine lovers who think people like the Adamses are living the ultimate wine fantasy. You're not alone. Two packed seminars on how to buy a Bordeaux château, held at wine trade fair VinExpo three weeks ago, show just how widespread the fantasy is. Dreamers from all over the world were scribbling notes and listening intently to a panel of experts, via headphone translations in English and Chinese. One by one, real estate brokers, architects, bankers, lawyers, and surveyors, part of a network called WI & NE, outlined what to know before taking the heady plunge. IT TAKES TIME First, in case you're thinking of flying to Bordeaux during your summer vacation to snap up a chateau, forget it. “You don't buy a wine estate just like that,” real estate broker David Lawton, the president of the network group, told the audience. “The process takes about six months to a year. It's important to see a variety of properties. And you need a team of specialists to help you assess the risks.” Don't let that discourage you. The owning-a-chateau fantasy costs less than you might imagine. Yes, in prestigious appellations such as Pauillac (home to Château Lafite-Rothschild) vineyards cost up to €3 million ($3.3 million) a hectare. (The Adamses paid $37 million, but Fonplégade is a Grand Cru Classé whose neighbors include Château Quintus, owned by first-growth estate Château Haut-Brion.) According to several real estate brokers, about 80% of the Bordeaux châteaux typically on the market are priced at less than €5 million, with many in the €2 million to €3 million category. If you're American, today's weak euro will boost your purchasing power. But don't expect properties at this price point to produce the kind of stellar wines you find at top châteaux. Most of them are in pretty, lesser-known appellations whose wines are labeled basic Bordeaux or Bordeaux Superieur. Later, I stopped by the booth of Maxwell-Storrie-Baynes, the Bordeaux real estate affiliate of Christie's international vineyard program, which was displaying seductive photos of châteaux for sale. One of the firm's executive partners, Michael Baynes, told me that a recent client, a former New York investment banker, had looked first in the Napa Valley and then found an estate in Bordeaux for half Napa's going price. YOU'LL NEED HELP Much of the VinExpo seminar was devoted to the necessity of getting professional advice at each phase: before you buy, while finalizing the deal and post-sale in managing your estate. Surveyor Michel Martin, for example, pointed out that a plan of the vineyards might reveal discrepancies — a mistake of half a hectare could make a big difference in the price. An accountant stressed the importance of an audit of winery equipment and debts. Representatives from laboratories explained the need to analyze the soil in the vineyard, check vines for disease and make sure that plantings conform to French regulations. France's most famous fine wine region has long drawn foreign investors, which in the last few years have included a steady stream of individual and corporate Chinese buyers. More than 100 châteaux are now Asian-owned, a mere grape in a picker's bucket when you consider some 7,000 wine-producing estates are spread across Bordeaux's many appellations. Over coffee the next day at one of VinExpo's pop-up cafes, Alex Hall, whose company, Vineyard Intelligence, provides advice and due diligence for château buyers, offered some cautions. “A lot of people are selling the dream,'' he says. “But you're not just buying a country house, you're also buying a business.” It may be the fanciest farming on the planet, but as Mr. Hall points out, “The chateau and winery won't run themselves. You need the right people, and the wine has to be good enough to be salable. Owners have to work hard just to break even.” It's tough for international buyers to get a loan from a French bank, so be prepared to pay cash. Still interested? WHERE TO START Plan your visit for late fall or winter. Châteaux owners are busy until the end of harvest and not available on weekends. After Nov. 15, you can get the latest hard numbers on production, plantings, buildings, machinery and other assets. “In the end, the most important question to ask before you buy,” Stephen Adams told me as we sipped the 2009 vintage of the Adams' sleek second wine, Fleur de Fonplégade, “is how you're going to sell your wine.” Some châteaux come with ongoing relationships with Bordeaux negociants, or importers, who buy the wines every year and distribute them internationally. But some do not. With 10 hectares of vines, you'll produce about 5,000 cases a year, and your friends and local restaurants can't buy them all. The Adamses initially bypassed the negociant route and set up their own distribution company in the U.S., but they found it didn't work well. They changed their strategy and started wooing negociants. Denise Adams admitted, “We didn't ask enough questions and made some mistakes.” Her husband, a private equity investor whose holdings include Good Sam Enterprises, bought six Bordeaux châteaux, then sold four of them when he realized that, no matter how much he invested, he wasn't going to be able to improve quality sufficiently to raise prices and make money. That was partly because there's a limit to how much you can charge for basic Bordeaux wines from lesser appellations. Fonplégade was always the flagship of its group, and a delicious 2014 barrel sample showed just how much the wine has improved since their first vintage. SUCCESS STORIES “People arrive in the emotional fog of a love affair with wine,” explains Mr. Baynes. “I have to fan their investment banker side back to life.” He spends a morning helping new clients define their goals, expectations and price range, and he sketched out a recent buying scenario. His full-service agency, Maxwell-Storrie-Baynes , which charges the seller 5% to 6%, prides itself on doing everything from finding you a hotel room when you first arrive to locating appropriate properties and helping find people who can manage your estate. They even have a Chinese-speaking expert on their staff. One of his clients, an Australian businessman, came to Bordeaux late last October, returned in January, and in February made an offer of €2.2 million on a 7-hectare estate, Château Haut Picoron. It's just 10 minutes from St. Emilion in the Côtes de Bordeaux Castillon appellation, where some of Bordeaux's most-value-for-money château buys can be found. Negotiations typically take six weeks to eight weeks. Then comes a non-binding letter of intent that sets out the offer's main elements and a 20- to 40-day period of buyer exclusivity, during which Mr. Baynes oversaw the essential due diligence. It was a turnkey operation, but there was a lot of checking to do — verifying that vineyard plantings complied with appellation d'origine contrôlée (AOC) rules, making inventories of equipment, analyzing the estate's financial structure and staff, and determining how much working capital would be needed after the sale. A price doesn't necessarily include the stocks of older vintages in the cellar. These need to be inventoried and appraised by an expert. The Australian client signed the contract in March and closed late last month — just in time to sit on the terrace and contemplate the vines, glass of wine in hand.