Lindsay Pollock raises the question on twitter of why Dawnay Day, the British property investment firm, was cited in a recent New York Times article as the owner of Lucian Freud’s record-setting “Benefits Supervisor Sleeping” painting. The answer to that question is that Guy Naggar, the consignor of the Freud at Christie’s during the credit boom, was Dawnay Day’s Chairman and the $34 million proceeds from the painting were being used to support the business. Naggar was, as the Times of London put it, desperate “to raise cash without making it known that his business was in trouble.”

Be that as it may, the New York Times story also points to the common connection between art collecting and real estate fortunes. Tom Wolfe presciently captured a facet of the debt-fueled real estate mindset when he described how developers would use the first draw of construction loans to buy themselves luxury items like large sport-fishing boats. Dawnay Day’s principals seemed to have a taste for yachts and art–on a bigger scale.

The New York Times story details this. But to get the full effect, one must click through and read the stories of the hardships the Harlem tenants endured while Dawnay Day’s executives were yachting:

With company money, Dawnay Day executives also indulged their personal hobbies. Yachts were bought to entertain friends and relatives. Local British papers say they decorated their office with multimillion-dollar works of art including a Damien Hirst, and a Lucian Freud called “Benefits Supervisor Sleeping,” which was auctioned by Christies in May 2008 for $34 million. […]

According to British press reports and interviews with British executives familiar with the company’s unraveling, Dawnay Day found itself overexposed as the credit markets started to tighten in early 2008. By the summer, Dawnay Day’s loans and debts were being called in, and the company fell into receivership. Assets were quickly sold. […]

Peter Bennett, director of the Swiss-based Blue Water Yachting, which has been trying to sell one of Dawnay Day’s yachts for $6 million, said its executives were too optimistic. He had met some of them when they were chartering their yacht.

“They just thought the boom was going to keep going,” he said.

Dawnay Day, an empire toppled by the credit crunch (Times of London)

Tenants Struggle as a British Landlord Goes Bust (New York Times)