That's your lot
Paul Dunn remembers the first wine auction he attended, in 2008. He had only recently decided to start collecting, and was eager to acquire bottles quickly.
'I was starting from scratch. I had bottles at home, but in no way could it be called a collection,' he recalls over glasses of wine at the Hong Kong Golf Club in Deep Water Bay.
'Before that auction, I probably spent every day for a month going through different references, trying to identify first what I should collect and how much I should pay. I knew exactly what I wanted, I knew exactly how much I hoped to pay for it. I checked the auction results over the previous 12 months so that gave me an average of what [the price] was supposed to be. I wanted about 30 per cent of the [auction catalogue] - when you have nothing, you want every single lot; it's all important. I didn't think about the money, not because I didn't care, but when you're in love, you're in love.
'I was well-prepared. But when it started, I completely lost control. It was so fast - the pace is everything at an auction. The increments go up every two seconds for the most desirable lots, and the increments are normally 10 per cent. Before you know it, there's already three or four bids, then the fifth, and by the time you raise [the paddle] it's too late. As soon as they finish that lot, they bang the hammer then go onto the next one. And again, with that pace, they've done the second lot, then the third, fourth, fifth and sixth. I couldn't even catch up because I was trying to write down the final price of the bid - but by then four lots are gone. It was so confusing, it was chaotic, it was a mess - I couldn't believe it.'
Dunn, president for Asia of Dynamic Worldwide Logistics, managed to overcome his confusion; he estimates he spent from HK$3 million to HK$4 million at that auction, buying only Bordeaux first growths. And he's since become a seasoned buyer, making headlines for purchases such as last November's Christie's sale of 14 bottles of Haut Brion shipped direct from the chateau's cellar. They included the rare 1945 vintage and came housed in a bespoke console by furniture maker David Linley, for which Dunn paid HK$1.2 million. His collection has grown to about 4,000 bottles, about 75 per cent purchased at auction, with the rest coming from private collectors.
After the government eliminated the wine duty in 2008, Hong Kong became a beacon for auction houses such as Christie's, Zachys, Acker Merrall & Condit, Sotheby's, and Bonhams, intent on selling fine wine. This year has seen three headline-making auctions: a Christie's sale last Friday of the private cellar of revered Burgundian winemaker Henri Jayer, who died in 2006; Zachys' auction in January of the cellar of Dr Joseph S. Weinstock; and in the same month an auction by Acker that saw a 12-bottle original wooden case lot of 1985 DRC Romanee Conti go for HK$1.46 million.
Dunn, who also collects art, says he finds auctions 'very exciting'. But as he learned from that experience in 2008, it can be nerve-racking for first-time attendees. He can't stress enough the importance of doing research on prices.
'The most important thing is do your homework. If you don't it's going to be 10 times worse; you won't know what you're doing there,' he says. 'You have to know the market price and you have to be realistic. You can't use the price from five or 10 years ago, or even two, to compare to today's prices. Even though I did my homework [for that first sale], I ended up paying more on certain lots, bidding higher than I intended. In a good market, people are a lot more aggressive and you get caught up in the excitement. You have that desire, so you won't mind paying one or two increments more, especially when you don't have that wine and you want it. It's going to be the same for all beginners [collectors] - you don't have that Petrus '89 but you want it; you don't have the La Tache '90 but you want it because those are the signatures, these are the icons [of a collection].'
Simon Tam, Christie's head of wine for China, adds that what a buyer is willing to pay depends on how much he wants it. 'If you really want it, you might be willing to pay a 20 per cent premium on the wine; if you don't want it that much, stop below the market value. Be disciplined - know when to stop. With the exception of some [rare] wines, most will be available again [at a future auction]. You don't have to buy your entire collection at one auction.'
David Wainwright, managing director of Zachys Asia, stresses the importance of building up a relationship with the auction house by getting to know someone senior within the company. 'I like to be accessible for new customers and novices, because the only way to get new people interested in auctions is by educating them. This way, you can understand exactly how things work by having someone explain it to you. Auctions are complicated - there's a lot going on and it takes a while to get your head around it.
'Ignore estimates - they don't mean anything. Estimates for the same wine can vary a lot between us and the competition. Ignore them all and do your research on what it's worth. Just because you buy something at the low end of the estimate doesn't mean you got a bargain - if the estimate was high, you might have paid too much.'
Although wines selling at stratospheric prices make good copy, Dunn and the representatives for the auction houses say there are bargains to be had, even if the average person will consider them unaffordable.
'A wine auction - or any auction - relies on one thing: two people who want the same thing,' says Wainwright. 'If you go to an auction and you don't have that, then there's the opportunity to pick up a bargain if you're the only one who wants it. It could be something ultra-rare and expensive, or it could be something for every day.'
Buyers searching for lesser known wines or less famous vintages can also pick up deals, Tam says, describing how a collector looking for the Super Tuscan, Sassicaia, scored a bargain at an auction last year. 'I met someone who had tasted Sassicaia 2000 at a restaurant in Italy and it was Euro150 [HK$1,540] a glass. He bought it at auction for HK$2,000 to HK$3,000 a bottle; among his purchases was a lot of nine magnums dating between 1983 and 1996 - he paid HK$24,000 for nine. That's a bargain compared to Euro150 a glass,' says Tam.
'When clients are knowledgable, that's when they find the bargains. Lots of people know about the famous vintages, but what about 1997 and 2002 and other vintages that are incredibly delicious wines that are drinking well now. And in the current market, Bordeaux is not selling well, so it's the perfect time to buy.'
Dunn says that now that his collection has a respectable share of 'blue-chip' wines, he's become more relaxed at auctions. 'All beginners, including myself, end up overpaying. That's when you're in the first stage of collecting - you don't have it, you want it, so you don't mind going a little higher just to get it.
'At the second stage - when you already have a fair collection of wines - you tend to be more relaxed. I go to an auction, I know what price I should pay, and when the price is right for that lot, I will go for it; if not, I let it go because I already have it. That's the second stage. I'm still in it, but now I'm getting into something else - the really rarest and finest lots. For that, the game starts all over again. I'm definitely going to overpay again, because there's no benchmark. Can you tell me the price of the 1945 Haut Brion? It's so rare.
'Simon and I were talking about this and my main question was, 'What do you think the value is?' We were stuck because there was no precedent for such a lot at any auction - you don't know what to pay. There are not that many left in the world, so what's the price? [I thought], am I going to end up overpaying - I'm pretty sure; but will I end up getting a great deal? Probably,' Dunn says.
'For that particular lot of [14 bottles] of Haut Brion, the estimate was HK$1 million to HK$2 million. I set my target at HK$1.2 million. I had no reason to draw my line there, but had an idea if it did sell for HK$1.2 million, I'll want to get it - it's 14 bottles plus a very beautiful console. After I bought it, I was so happy because all of a sudden, I [realised] the price for this lot is equivalent to three lots of Petrus '89 or La Tache 2002 or 1999. I would be willing to sacrifice buying three future lots in order to buy this one. I tried to have a rationale behind the value. With the others, you can get them at any auction. If you miss your chance at one, there's always another chance to get it. But the Haut Brion, you'll never see it again. I got lucky .'
Dunn says he's learned to drop out when faced with determined buyers with bottomless pockets. 'There are some very strong buyers, who know exactly what they want and buy it regardless of the price. When you come across that, you don't want to keep bidding because the sky's the limit with these guys.
'I was at an auction and this person was crazy about the Burgundy producer, Rousseau. I know, because I wanted to get some Rousseau for my collection. I was pretty aggressive, but then I realised that every single bid I put in, he'd go higher. He just kept going until I reached my limit. I realised I had come across a really strong buyer and I didn't have the chance to get it.
'These are things a beginner needs to be aware of, because if you keep going, before you know it, you'll end up with a very high price. I tested [the buyer]; I wanted to see how far he would go. I raised the paddle one more time and he raised his very fast, then it happened again. I was way beyond what I wanted to pay - three times. I knew I wouldn't get it and if I did I would be very mad at myself because I knew I shouldn't be playing this game at auction.
'I did get three lots because Eric Rousseau - the owner of the domaine - was at that auction. He went up to shake hands with this guy and they were talking for about five minutes, and in that five minutes I got the Rousseau at the price I wanted.
'This is the kind of thing that happens at auction. There's no textbook about how an auction is going to turn out. There are so many different odds - the buying sentiment, the rhythm, the pace, the people involved. This is a classic example, and learning comes from experience. It's exciting.'