Art Collecting When Money Is No Object
Contemporary Art Auctions at Christie's and Sotheby's Are Expected to Shatter All Records
By SCOTT MAYEROWITZ
ABC NEWS Business Unit
May 14, 2007 —
The art world is expecting a new set of record-breaking purchases this week as auction houses Christie's and Sotheby's each hold major sales of contemporary art.
Once outcast to the sidelines of serious big-dollar collecting, contemporary art is now scorching hot as evidenced by the expectations of multimillion-dollar bidding this week.
A Mark Rothko painting is expected to fetch more than $40 million when it is put on the auction block at Sotheby's Tuesday night. The following evening, one of Andy Warhol's paintings could go for $35 million or more at Christie's.
The market has climbed at astronomical rates thanks to a new breed of younger, richer art buyers who are are willing to shell out big bucks to get the piece they want. The buying is fueled by super-rich Asians, Russians, Europeans and a crop of wealthy Americans who made billions in hedge funds and real estate.
"There's a huge amount of money around the world available at the moment. You've got a lot of newer collectors coming in who basically have the financial facility to win any bidding war," said Brett Gorvy, co-head of post-war and contemporary art for Christie's.
"It's been the last year and a half where we've seen staggering prices for the best work," Gorvy said.
Even the auction houses have had trouble predicting the supercharged bidding.
In November, Christie's offered a Clyfford Still painting that was estimated to bring in $5 million to $7 million. It sold for $21.3 million.
"That demonstrated the focus of collectors on the very, very best, and also the ability of collectors not to be held back by previous price structures," he said. "Basically, they are making the market and they are making it at auction."
Incredible Auctions
The highlight of that Tuesday night sale at Sotheby's, which kicks off this season's frenzy, is expected to be the $40 million Rothko painting from the collection of David Rockefeller.
A work by Francis Bacon is expected to go for $30 million. Two Jackson Pollock paintings are expected to fetch $16 million to $25 million, and a painting by Jean-Michel Basquiat is forecast to draw around $8 million.
That's $119 million for just five works.
"This has become a field that people are fascinated by," said Anthony Grant, senior specialist of contemporary art for Sotheby's.
Just five years ago, works in the evening session sold for $250,000 to $15 million. Now, Sotheby's is seeing works go for three to four times those prices, Grant said.
Big Profits for Auction Houses
Both Sotheby's and Christie's charge 20 percent on the first $500,000 of the sale price, and 12 percent on anything above that.
So if Sotheby's sells the Rothko painting for $40 million, it will make $4.84 million off the painting. And that's just one lot.
The following evening at Christie's, the record sale price for an Andy Warhol painting -- set just late last year -- is expected to be shattered.
In November, Christie's sold Warhol's iconic image of Chinese Communist Party Chairman Mao Zedong for $17.4 million.
Wednesday's sale has two works that could break that record.
The first is a 1962 painting of Marilyn Monroe, known as "Lemon Marilyn" for its color. A similar work called "Orange Marilyn" sold for $16.5 million in November.
"We believe this is going to do better than that. It's a fresher painting to the market," Gorvy said.
But the piece that's really excepted to steal the show is a 1963 Warhol painting called "Green Car Crash," the graphic depiction of a car accident that includes the the car's driver hanging impaled from a nearby street post. Christie's estimates it will sell for $25 million to $35 million, but even that figure could be conservative.
"We're starting really with an understanding that this painting in an amazing masterpiece by the artist, coming to the market at exactly the right time," Gorvy said.
But Sandy Heller, who advises collectors on purchases, said that while it "is a great piece," it is also "a very tough image" that some might find hard to live with.
"It's hard to put an image of impaled figure in a burning car in a home where you have little kids," Heller said.
Who Are the Buyers?
Sotheby's Grant said that among the new groups in the market were hedge fund managers, a group not hurting for disposable income. The industry magazine Alpha estimates The top 25 hedge fund managers made a combined $14 billion last year.
"They seemed to have gravitated toward this field and modern painting, and I think that does account for a fair amount of what's going on," he said. "I think any new group coming in is going to drive up prices."
Heller described the new buyers as more international and younger.
It used to be that the only buyers with enough money for these works were in their 50s and 60s -- people who amassed wealth after a career working. Today, people have great amounts of money at a younger age.
But Heller dismissed the idea that hedge fund money was pushing up prices.
"There are maybe 10 hedge fund collectors. They're not driving this market," Heller said. "They're part of it, but it's like saying the Russians are driving the market or the Asians are driving the market or the New York real estate guys are driving the market. It's not any one thing."
Heller, who is based in New York, has been known to work with some big-name hedge fund managers. He would not talk about his clients or specific work, except to say that he would be at this week's sales.
"You hire me when you want every advantage," he said.
International Exchange
Some in the art world have said that a weak U.S. dollar has given international buyers more leverage.
"I don't think this is a currency play," Heller said. "I think this is a wealth play."
Allan Schwartzman, an art adviser and the first curator of the New Museum of Contemporary Art, said today's buyers had "spent enough on houses, lifestyle, boats, cars and whatever."
Today's buyers come from a generation that had more access to art and is more familiar with the names of artists.
"Another generation that has emerged, that was familiar with and comfortable with art or conversant enough that there is an easier crossover point to art appreciation and art collecting than the previous generation," Schwartzman said.
"I would say that the vast majority of them are people who make money with money," such as hedge fund managers, investment bankers and to some degree those in real estate, he said.
Schwartzman said that what happened at auction was playing a dominant role in the contemporary art market. In the early 1980s, the action houses wouldn't take anything that was less than 10 years old because they didn't want to participate in contemporary art.
"Nowadays, you see artists who have their first show one year and then there's something at auction by them the next," he said.
"There's a number of people collecting contemporary art who would rather get the work than [worry about] the price," Schwartzman said. "That's why you see things selling for twice, four times, 10 times what the general market felt their value was going into that particular sale."
Maybe they really want that particular piece, he said, or maybe "the money is really not that significant to them."
"All of which is a reflection of the level of wealth of the top people perusing art today," Schwartzman said. "It's people who have done really, really well."