Don’t blame 1031 exchanges for the market slump; Orientalists are still sentimental but now they’re also buying for pride; Brooklyn’s bootleg Bacon; Sotheby’s African Art makes records
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Sotheby’s Modern & Cont African Art = £4m
African art is having its own moment this week as Sotheby’s was able to sell 80-odd works from 56 artists who represented 20 countries in a £4m sale. They made nine records in the process.
The top works featured four paintings by Ben Enwonwu including one discovered through Sotheby’s valuation app. The portrait was unknown to Enwonwu collectors because it had remained in the hands of the subject’s family since its creation in 1971. Christine was offered with a ridiculously low estimate of £100k considering the recent performance of the artist’s portrait of Nigerian princess Tutu which sold for £1.2m in 2018. The low estimate brought out four bidders who would soon learn that there is no discount for Enwonwu’s works. Thirteen minutes of bidding drove the final price to £1.1m, pretty close to the previous year’s record. Enwonwu’s Africa Dances from 1970 also achieved £471,000 ($596,333) three times the low estimate of £150k. Ten Enwonwu paintings were offered and all 10 sold for a combined value of £1.8m ($2.3m) or 45% of the sale total.
Enwonwu dominated but he wasn’t the only African artist to attract value. South African Gerard Sekoto’s Cyclists in Sophiatown was painted in pre-Apartheid South Africa. The work sold near the top of the estimate range at £362,500 ($458,961.) Works by El Anatsui, Jakob Hendrik Pienreef and William Kentridge rounded out the top ten list.
Why the Brooklyn Museum Is Selling that Bacon
We got a quick text after publishing the announcement that the Brooklyn Museum is offering its Francis Bacon Pope painting from 1958 for sale with a $6m low estimate. Just before publishing we had checked the Brooklyn Museum’s site for any mention of the painting. Our interlocutor happened to have a copy of the catalogue raisonné and was offering two images from the entry for the Tangiers painting that explained the low estimate.
The auction house disclosed the story behind the work’s survival in their press release but the story told in the catalogue raisonné is a bit more pointed and shows that the artist still had strong feelings about the painting’s survival nearly 25 years later.
The Orientalist Turn
Colin Gleadell reveals the consignor of Sotheby’s upcoming Orientalist pictures sale set for next week that comes amidst new interest in this somewhat specialized market. The British Museum is holding a large exhibition of Orientalist works from a Malaysian collection assembled by Sayed Mohamad Albukhary at the same time that Sotheby’s will sell 40 paintings from the Najd Collection. The Najd sale hopes to bring in £40m but Gleadell says the full collection comprises 150 works and was assembled by Nasser Al-Rashid.
The subtext to this guessing game about buyers and sellers is that the market for Orientalist works, once the subject of a path-breaking work of cultural history by Edward Said, is no longer Western sentimentalists. For some time, the main buyers of Orientalist art have been Muslims, often from the cities and countries depicted in the exoticized images. Gleadell explains the transit:
As the 20th century progressed, demand diminished, until 1970, … Brian MacDermot, the enterprising British stockbroker, spotted an opportunity, opening the Mathaf Gallery, specialising in Orientalist paintings, in Belgravia in 1975.
Mathaf specialised in works that could then be bought for under £2,000 each. MacDermot placed them in gold frames with Arabic motifs and sold them to his Middle Eastern contacts. Whereas buyers had previously been from the West, now people from the locations represented in the paintings – Egypt, Turkey and the Levant – began to buy.
Captivated by the genre’s technical brilliance and historical significance, they … regarded the paintings … with cultural pride. Nowadays, 75 per cent of Orientalist paintings sell to Middle Eastern buyers.
The End of 1031 Exchanges Didn’t Destroy the Art Market
Artnet’s resident columnist has decided that the art market’s pull back this year is all because of the end two years ago of art works qualifying for like-kind 1031 tax exchanges. Why 1031 exchanges would suddenly effect the market two years into the new tax law isn’t explained by the exuberant writer and he couldn’t be bothered to seek out a tax expert either.
It wasn’t the tax shield alone that made 1031s so vital to the art market; it was also the speed they demanded. Resellers had to file paperwork identifying their replacement asset(s) within 45 days of offloading the original one(s) and complete the new acquisition(s) within 180 days. These stipulations created urgency and velocity in the trade. Sure, you could hold a work for as long as you wanted. But once you decided to flip it, you had to get the replacement(s) in house fast.
Without digging deeper into the exact machinations, the point was that everybody won—and kept winning. 1031s kept the art market churning, throwing off millions of dollars for American collectors, dealers, and auction houses to catch like they were all inside a money machine that blows a tornado of $100 bills around a glass cube.
Unfortunately, the exact machinations are kind of important. Most people familiar with the use of 1031 exchanges don’t describe them as inducing sales because of speek. They viewed them as market lubricants because the like-kind exchanges offered an alternative to market transactions. Buyers and sellers could swap paintings using the tax savings as a sweetener but the attraction was as much about using art to buy art without any cash liabilities. In other words, 1031 exchanges facilitated non-cash transactions which would never appear in market data. That was the point, no cash was involved and the tax savings was the profit.
The use of 1031 exchanges is hard to quantify. Most of the transactions involved private deals and were facilitated by “qualified parties,” intermediaries who held the cash between transactions or facilitated complex swaps. Most lawyers and financial advisors with involvement in the art trade assume the end of 1031 exchanges for art would have an effect on the market. But most believed it would be in the private market which happens to be doing quite well these days.
So any presumption that the auction market’s slump is a product of the loss of 1031 exchanges needs some more than the airy declaration that “things have shifted, and I’d wager that the death of 1031s play at least a supporting role in the drama.”