For the right price
As rising art prices attract speculators along with collectors, chasing profits can be risky.
NOT every painting by Cy Twombly is created equal. That was clear at the annual London auctions last month. Barnes & Noble Inc Chairman Leonard Riggio made about 53% in less than three years when his Twombly painting sold for US$26.7mil (RM96.4mil), before fees, at Christie's on Feb 11. Another work by the late artist at the same sale failed to find a buyer.
As rising prices attract speculators along with collectors, chasing profits can be risky because values for different pieces by the same artist tend to vary widely whether it's Twombly, Gerhard Richter or Andy Warhol. That isn’t stopping billionaires from bidding up marquee works in a market increasingly being driven by the top end.
Global auctions of postwar and contemporary art reached US$7.8bil (RM28.1bil) in 2014 with sales fees, doubling since 2010, according to New York-based Artnet.
“Art is taste-driven, not performance-driven,” said Todd Levin, director of New Yorkbased consultancy Levin Art Group.
“No amount of money can buy you a better ounce of 24-karat gold than I can buy – the price is the same at any given moment. But every Richter or Twombly is unique, and therefore has a different value.”
Riggio's Twombly, a 1970 painting resembling a blackboard densely scribbled with chalk, was the top lot at Christie’s. The artist's 1967 canvas
depicting an oddly shaped figure with pencil and crayon, failed to sell after being estimated at as high as £800,000 (RM4.4mil).
“Even if it's something by Cy Twombly, who is so established, you are making a judgment call to pay a certain price for a certain quality,” said Wendy Cromwell, an adviser at New York-based Cromwell Art.
Twombly's blackboard paintings, created from the late 1960s to the early 1970s, are his most coveted. Another 1970 painting of loops on a grey background fetched US$69.6mil (RM251mil) at Christie's in New York in November, a salesroom record for the artist.
“Those pictures are almost a brand in and of themselves,” said Cromwell. “Anyone who wants something that screams ‘ Twombly!’ would go for that picture.”
Twombly's other series have commanded less. His painting from 1960 – showing clusters of body parts, Roman numerals and scribbles in pencil and crayon – sold for US$6.25mil (RM22.5mil) at Sotheby's on Feb 10, squeaking past the low target with fees. The work, sold by musician Eric Clapton, appreciated about 8% from two years earlier, when it went for US$5.8mil (RM21mil).
Multiple factors affect the price of an artwork, including its condition, provenance and freshness to the market. A piece can bomb at auction because it had already been shopped around privately or because the estimate is too high.
While postwar and contemporary auctions grab the spotlight, they only represented about 10% of the global art market in 2013, according to the annual report published by the European Fine Art Foundation.
“The press and pundits like to focus on art that has produced outsized returns, but in reality most art will never appreciate in value,” said Levin.
The 6,650 artworks that sold more than once at auction since the late 1960s have generated the average compound annual return of 9.6%, according to Michael Moses, a co-founder of the Mei Moses art indexes, which measure art performance by tracking repeat auction sales.
Riggio, 73, said he bought his Twombly because he loved the painting, not because he considered it a good investment.
“I just look at the individual piece: Whether I like it and can afford it,” he said in a telephone interview.
When came up for sale at Sotheby's on May 9, 2012, it hammered at US$15.4mil (RM57mil), near the low end of the expected range. After the buyer's premium was added, Riggio paid US$17.4mil (RM63mil), and a new auction peak for Twombly was set.
“I was the only bidder, it just happened,” said Riggio. “I thought it would sell for US$30mil (RM108.3mil). I thought it was that good.”
That's how much the work ended up going for earlier this month. Christie's had pegged it at £16mil (RM89mil) and guaranteed Riggio an undisclosed price regardless of the sale's outcome. He said he sold the painting because it wasn’t used as intended and he doesn’t like to keep things in storage.
Bidding for started at £14mil (RM78mil). The work enticed four competitors, “none of whom were bidding at those levels in the postwar field three years ago,” said Brett Gorvy, Christie's chairman and international head of postwar and contemporary art.
The painting ended up selling to an undisclosed client of Xin Li, Christie's deputy chairman in Asia, for £19.7mil (RM109.4mil).
Riggio took home the work's hammer price. His profit kept pace with the US stock market rally, as the Standard & Poor's and 500 Index rose 53% between the 2012 and 2015 auctions.
“I would have been happy just to get our money back,” he said.
Strong results require at least “two people on the same piece who want to spend a whole lot of money,” Riggio said. “If you get two paddles in there, you can go 20, 30, 40% higher than was expected.”
Such a competition occurred at Sotheby's on Feb 10, when three bidders lifted
a colourful, 3m-tall abstract painting by Richter, to an artist record of US$46.4mil (RM167.5mil). The result surpassed the high estimate by 49%.
“You are dealing with a super-duper, A-plus painting,” said Christophe Van de Weghe, a New York art dealer who frequently sells Richter works. “It's fine to overpay for quality.”
Cheyenne Westphal, Sotheby's co-head of contemporary art worldwide, won the piece on behalf of a client bidding by phone. Billionaire hedge fund manager Ken Griffin was the buyer, a person familiar with the matter said last week.
The 1986 canvas – a large, early example of Richter's transition from a brush to a squeegee – had been displayed at Museum Ludwig in Cologne, Germany, where it was on loan for 13 years until 1999. That year, the painting sold for US$607,500 (RM2.1mil) at Sotheby's in New York, the highest price paid for an abstract painting by Richter at the time.
The work remained in the same hands until 2013 when it sold privately to an Asian client for US$20mil (RM72.2mil) to US$25mil (RM90.2mil), according to a person with knowledge of the matter, who asked not to be identified because the information is private.
The day after the Richter record was set at Sotheby’s, a smaller, less-vibrant abstract painting made by the artist in 1990 couldn’t find a taker at Christie’s. The flop was a blow to the owner, who had purchased the piece for US$6.3mil (RM23mil) in 2011, paying more than double its high estimate of US$2.5mil (RM9mil).
The painting's price target at this year's auction was too aggressive at US$5.3mil (RM19.1mil) to US$6.9mil (RM25mil), said Van de Weghe.
“If you are dealing with average quality, the estimate has to be correct,” he said. “It's a connoisseurs’ market.” — Bloomberg