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Passion and Prudence in Fine Art Buying
By Reed V. Horth, for CBP Magazine
The Art of buying high-end Art combines equal parts pragmatism and lunacy. Meaning,  for someone to spend over $1M on something they ostensibly do not need, both the right and left sides of the brain must be functioning in tandem. Buyers must be pragmatic, as no one wishes to spend this type of money without some form of guarantee that what they are getting is…
  1. Fairly-priced
  2. Authentic
  3. Not subject to repossession by a disgruntled former owner or descendant.
  4. AND that there is a potential for this investment to grow.
Conversely Art buyers must have passion, in all its varied forms. Oscar Wilde said, “The artist is the creator of beautiful things…. [but] all art is quite useless”. Art is unlike any other asset-class as it is one which may or may not produce a specific and quantifiable return on investment. However, it does provide owners with a sense of pride, culture and status which are not equally conferred upon those owning any other form of asset.
The connotation of an art owner or investor is “educated” whether or not this actually means formally educated or simply a student of life.
Recent auctions, in which Jackson Pollock’s “Number 19, 1948” sold for $58,363,750 at Christie’s New York (in a sale which garnered more than $495,000,000 in aggregate sales), prove that the vibrant market of the ultra-rich is not waning.  The purchaser almost certainly sees this work as a prudent way of parking nearly $60M for a certain period of time, but also understands that the perception of an owner of a Pollock is different from someone who owns either a less-known artist or something merely decorative.
No millionaire/billionaire ever wishes to be told “no”. In the auction setting, the spectacle of bidding against another equally-moneyed cohort is part of the passion-based art purchase. Successful buyers will often bid a work up simply because they are not acclimatized to losing at anything in their everyday lives. This winner-take-all attitude also transcends in to the dynamic Art fairs, such as Frieze, The Armory, Maastricht, Art Basel and Art Basel at Miami Beach. The early access to the art is essential in beating all other comers on the best works. Collectors vie to be the first or most visible purchaser of a prominent work. The plebian public may have a pick of the rest once red-dots are placed on the best of the best.
However, private art buyers tend to be less passion-based and more pragmatic in their approach. As the private market is inherently quiet by its very nature, buyers and sellers can maintain a degree or anonymity not available when the press and paparazzi are buzzing at their feet. Of the top 10 prices paid for art in the world, 5 were purchased through private sale.  These include Cezanne’s “Card Players” (Sold for $259M in April 2011), Pollock’s “No. 5, 1948” (Sold for 140M in November 2006), de Kooning’s “Woman III” (Sold for $137M in November 2006) Picasso’s “La Reve” (Sold for $155M in March 2013) and Klimt’s “Portrait of Adele Bloch-Bauer” (Sold for 135M in June 2006). Although we are aware of the names of the buyers now, the art was purchased with little fanfare and no public recognition until after they were closed. Unlike Real Estate, in which a great property listing will be passed amongst varied brokers in order to saturate the market and discover a sale, the very best art properties are sometimes only shown to one person, the buyer. This privacy and intimacy often afford a buyer access to better, more exclusive works and/or better prices, sometimes a combination of both. Market saturation of a particular art property can potentially turn off buyers to perfectly sanguine works. Further, brokers who do saturate the market often lack experience, an understanding of market nuance and industry expertise essential to bringing a transaction to a successful close. After all, this is why they are saturating the market to begin with… Fishing for buyers.
As with everything, balance is essential. A passion-based purchase of a marquis Art property can be made with prudence and pragmatism if given to correct resources. In other words… Yes, you can reconcile “Head” and “Heart”.

Reed V. Horth, is the president, curator and writer for ROBIN RILE FINE ART in Miami, FL. He has been a private dealer, gallerist and blogger since 1996, specializing in 20th century and contemporary masters.

Posted by Reed V. Horth on 6/18/13

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