MANH January 2012 : Page 56

56 | the city | Art pop goes the art market roy Lichtenstein’s 1961 work “I Can see the Whole room!...and there’s Nobody in it!” sold for a record-setting $43.2 million at Christie’s post-War Contemporary sale, in New York last November. The Art of Collecting The super-rich battling for prized works are starting to realize that it’s not just about how much money you have, it’s about who you know. | By James Kaminsky | Even by the crazed, inexplicable and often whiplash-inducing standards that have come to define New York–based asset industries like real estate and stocks, the art-collecting racket has sent pulses racing of late. By most indications, business is booming. Just check the results from some recent closely watched auctions: a 1961 Lichtenstein went for a record-breaking $43.2 million at Christie’s; paintings by Twombly and Warhol snagged $9 million and almost $8 million, respectively, at Phillips de Pury. While contemporary art is riding high, most of the big-ticket sales are coming from a handful of modern titans, like Warhol, Richter and Hirst. Fewer collectors seem willing to roll the dice on emerging contemporary artists, which is the highly speculative side of the market. And the infusion of global zillions, much of it from countries like Russia and China, means that more and more mega collectors are battling it out for fewer available masterworks. “No one likes to admit it, but buying fine art has become something of a big, crazy game,” says one New Yorker who has been amassing art for decades and has a collection numbering “in the hundreds” of pieces. “There’s a satisfaction in beating others to a great work. These days we’re all looking for a real, definable edge.” Now more than ever, the modern-art business is defined by a handful of aggressive, incredibly wealthy buyers who set trends, influence tastes and establish eye-popping financial watermarks. But who moves the movers? Who whispers in their ears, plots out sales strategies and protects their vast investments? Superstar galleries and auctioneers play their very public roles, but a look behind the scenes of the high-end art world reveals a complex network of deeply influential consultants, advisors, insurers, conservators and even investigators, who all play a part in continued… | Jan/Feb 2012

The City Art

James Kaminsky

The Art of Collecting

The super-rich battling for prized works are starting to realize that it’s not just about how much money you have, it’s about who you know

Even by the crazed, inexplicable and often whiplashinducing standards that have come to define New York–based asset industries like real estate and stocks, the art-collecting racket has sent pulses racing of late.By most indications, business is booming. Just check the results from some recent closely watched auctions: a 1961 Lichtenstein went for a record-breaking $43.2 million at Christie’s; paintings by Twombly and Warhol snagged $9 million and almost $8 million, respectively, at Phillips de Pury.

While contemporary art is riding high, most of the big-ticket sales are coming from a handful of modern titans, like Warhol, Richter and Hirst. Fewer collectors seem willing to roll the dice on emerging contemporary artists, which is the highly speculative side of the market. And the infusion of global zillions, much of it from countries like Russia and China, means that more and more mega collectors are battling it out for fewer available masterworks. “No one likes to admit it, but buying fine art has become something of a big, crazy game,” says one New Yorker who has been amassing art for decades and has a collection numbering “in the hundreds” of pieces. “There’s a satisfaction in beating others to a great work. These days we’re all looking for a real, definable edge.”

Now more than ever, the modern-art business is defined by a handful of aggressive, incredibly wealthy buyers who set trends, influence tastes and establish eye-popping financial watermarks. But who moves the movers? Who whispers in their ears, plots out sales strategies and protects their vast investments? Superstar galleries and auctioneers play their very public roles, but a look behind the scenes of the high-end art world reveals a complex network of deeply influential consultants, advisors, insurers, conservators and even investigators, who all play a part in Getting deals done. “As more and more money and collectors come in, the deal-making has become more byzantine,” says the New York– based collector.

For Winston Art Group—formed just two years ago and already the largest independent art-advisory and appraisal company in the U.S., with offices in New York, Los Angeles and Boston—it has all led to a bull market. “Our job is to be a sort of patient advocate for our clients,” says Elizabeth Von Habsburg, Winston’s managing director. “At the high end of the market, collectors are far more sophisticated than in the past. But you’d be amazed at how many who have billions of dollars don’t do the due diligence when buying expensive art.”

Even savvy buyers need help in tracking the global art market. “It’s easy for a specialist like me to sell a masterpiece. It’s far more difficult now to sell an average piece at an average price,” says Loic Gouzer, senior vice president and international specialist for Christie’s Post-War and Contemporary Art Department. “Everyone wants something great. Serious collectors today need to be on the ball almost 24 hours a day and 365 days a year to not miss opportunities.” Companies like Winston are often a high-end collector’s first stop to secure lusted-after artwork, assess prices, structure deals, trace provenance or sniff out counterfeits. The firm employs specialists in everything from samurai swords to old masters, and works with clients to determine the best financial packages for purchases or sales, and the best places to get them done.

Winston’s wealthiest clients are increasingly veering toward private deals—no surprise in an era of Wall Street occupations and “Shoot the one percent” bumper stickers. “With the economy so volatile, there are a lot of high-net-worth clients who don’t want to be seen spending a huge amount of money at auction,” says Von Habsburg. “Private sales are much more discreet.” This shift in perception is not lost on the big three auction houses. “Auction is a peculiarly public forum in which to offer art works for sale,” says Zach Miner, head of the contemporary-art evening sales for Phillips de Pury. “Every season we’re judged on whether we’ve sold 90 percent of our lots or whether our estimates were right on target. All of those mechanisms that are happening on a private level are under the public lens with us.”

Appraisers like Winston Art Group are rarely alone in evaluating work presale. A relatively new breed of art-savvy insurance providers also gets pulled into the conversation. “In this market, we get involved with a potential purchase right at the start,” says Nikki Brown, regional director and global fine art practice leader of Aon Private Risk Management, a highly specialized, 5-year-old division of the world’s largest insurance broker.Looking to insure that impulse-buy $135 million Gustav Klimt? Your local Geico rep isn’t going to cut it. Brown and her team of art experts—all of them veterans of Christie’s or Sotheby’s—structure deals with insurers such as Axa or Lloyd’s of London that trade in the high-end art market. Aon conducts title searches to make sure a piece isn’t stolen. They instruct clients on how to display and protect art in ways that will mitigate risk. And, most Importantly, if there’s damage or theft, they’ll be on the scene (almost anywhere on the planet, and within 24 hours) ready to oversee the crisis and, if necessary, battle it out with the insurance companies. “Look, they’re insurance companies,” says Brown. “If they can avoid paying for something, they will.”

Brown’s team generally deals with a couple of big claims a month. Recently, a guest splashed red wine on a client’s $2.5 million contemporary canvas. Bummer! The best-case scenario—asking the original artist to restore his work—wasn’t possible, since the artist is deceased. So Aon did the next best thing: it hired the leading conservator specializing in that artist’s work. Aon brought in appraisers and negotiated with the insurers to determine the loss. The final tally was a $1 million drop in value—a big hit, sure, but it was the best possible outcome for the client. “It’s a very subjective process. If this client had an art claim directly with, say, State Farm, good luck. I can’t even imagine what that process would have looked like,” says Brown.

As valuations continue to skyrocket, determining the authenticity of art is trickier than ever. In particularly difficult cases of provenance, it’s time to call in the art detectives. “There are estimates that $200 billion in art changes hands each year,” says Robert Wittman. The international art detective recovered more than $225 million worth of stolen art during his two decades with the FBI; much of that time was spent working undercover. “It’s the wild, wild west out there.” Wittman, who retired from the bureau three years ago to set up his own art security business, says forgeries and thefts are on the rise. He uses a variety of investigative methods to trace the lineage of paintings for sale, and also sets up complex security systems and protocols for private collectors. (The latest trend: sophisticated surveillance systems monitored and controlled from anywhere via iPhone.) “With the value of artwork increasing every year, there’s a downside,” he says. “Everyone wants to tout the fact that art has become a good investment. But it also sends out a big message to criminals that it’s a great thing to forge or steal.”

It sends other messages as well. Some collectors ask: Have prices gone up for all the wrong reasons? Is the upper-end bubble about to burst? As prices have continued a steady march north, the elite of the old-guard art-collecting world seems to have been gripped by a spate of mudslinging and weird introspection, such as Charles Saatchi’s angry screed in London’s Guardian: “Being an art buyer these days is comprehensively and indisputably vulgar,” he wrote. “It is the sport of the Eurotrashy, Hedgefundy Hamptonites; of trendy oligarchs and oiligarchs; and of art dealers with masturbatory levels of self-regard. Do any of these people actually enjoy looking at art? Or do they simply enjoy having easily recognized, big brand-name pictures, bought ostentatiously in auction rooms at eye-catching prices, to decorate their several homes, floating and otherwise, in an instant demonstration of drop-dead cool and wealth?”

While the art world argues and obsesses over the stratospheric side of the market, others avoid the scrum altogether. Remember the lower end of the art business, characterized by affordable galleries, young, never-before-seen artists and a prevailing sense of discovery and fun? Kipton Cronkite does. Six years ago, while working as a financial analyst at Citibank, he kicked off KiptonArt, an entity devoted to showing and selling the work of such artists. A few years, a financial crisis and a layoff later, his hobby has become a full-time business. The company’s website now offers work from more than 1,800 emerging artists, many exclusive to the site, at prices ranging from $200 to $10,000. “While everyone focuses on world-famous works, there’s still a place for the emerging, unrepresented guys,” says Cronkite. “People who still have money are looking to buy up the blue-chip pieces, but they can’t buy everything at that level. So they’re looking to mix it up. It’s like a stock-portfolio diversification: You have x percent in blue chip, y percent in small cap stocks. That’s the category I’d place us in.We’re the small cap stocks. And if by chance one of those small caps hits somewhere down the road, they can hit big.”

Read the full article at http://digital.modernluxury.com/article/The+City+Art/929837/94324/article.html.

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