A recent post by Artvest Partners suggested that there is an astounding amount of art pledged as collateral against loans right now. A sign of just how much momentum the art loan business has gained with the dramatic recovery of the art market:
In consultation with several industry leaders, Artvest estimates the current size of the pre-dominantly US-based art financing market to be in the range of US $7 billion and growing.
Artvest’s Michael Plummer, who came up with this number after speaking with several principal figures in the art loan business, did a little further back-of-the-envelope analysis at our request. If $7bn is out on loan (with twice that amount likely to be held as collateral), what would be the revenue stream for the art loan business. The answer was suprising:
It comes out to $498,750 million, or a blended rate of 7.125%. The reason the number is not higher is that a majority of loans are through private banks which lend at rates between 2.5% and 3.5%. My numbers include estimates on origination and arranging fees (upfront fees ranging between 0.5 – 2%)