Call it the Piketty effect. The top of the Contemporary art market is crowded with buyers trading a very small number of works. Some of those buyers seem to be using art as a store of value. (Or, in the case of David Ganek who continues to unload works at the very top of the market, some of those are taking advantage of surge in prices to regain value lost in other arenas.) Carol Vogel does a very good job in the New York Times of outlining this Piketty effect where the growing wealth of the wealthiest is increasingly finding its way toward art that’s being used as a new kind of asset:
Christie’s estimates that it has 141 clients now willing and able to spend more than $50 million for just one work of art, Mr. Gorvy said. Officials at Sotheby’s say the number of buyers for art worth over $25 million has more than doubled since the market peaked in 2008.
As with any asset that increases in value, there’s always a group willing to take advantage of the opportunity. Ever evolving, the auction houses have created a new class of art purchase, the auction guarantee that offers the buyer a chance to either own the work or get quick return on capital:
“It’s a win-win situation,” said Abdallah Chatila, a Lebanese-born contemporary art collector who lives in Switzerland and who has guaranteed two artworks at Christie’s May sales. “I really want both works, and if they sell for more than the guarantee it can also be very lucrative.”
This spring, although most sellers are not revealed in catalogs, dealers familiar with their collections say David Ganek, the former hedge fund manager, is believed to be parting with a Twombly and a Warhol; Peter M. Brant, the newsprint magnate, is selling canvases by Basquiat and Haring; Steve Wynn, the casino magnate, a de Kooning; and Ronald O. Perelman, the New York investor, a Rothko. Most of those artworks have guarantees. (A guarantee is noted in catalogs, generally with a small symbol next to the work’s lot number.)
And that’s how the auctions have ended up with $680m in guarantees this season:
Sotheby’s reported nearly $280 million in guarantees as of April 15, more than four and a half times the $60.2 million figure for the first quarter of 2013; the proportion coming from outside parties is still in flux. As a publicly traded company, Sotheby’s is required to report guarantees. Christie’s, which is privately owned, is not, but officials there confirmed it has about $400 million in guarantees to sellers this season, of which some $300 million is given by outside parties.
Rush for Deals Before Top Art Goes to Auction (NYTimes.com)
