In auctions, unlike in life, there are guarantees

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Christie’s backed $429.8m worth of art in its record-making contemporary art sales this week

Guaranteed: Christie’s sold Warhol’sTriple Elvis, 1963, for $81.9m (estimate in the region of $60m)

Never before has so much money been spent on art in such a short period. In just four days, more than $1.66bn was spent on post-war and contemporary art in Sotheby’s, Christie’s and Phillip’s evening and day sales. And never before have the auction houses been so stratified. For the fourth consecutive season, Christie’s set a record for the single most expensive auction in history with its $852.8m sale on 12 November, smashing the $745m record it had set in May. It more than doubled Sotheby’s $343.6m total, and made more on its top lot, Warhol’s Triple Elvis, 1963, which sold for $81.9m (estimate in the region of $60m) than Phillips did in its entire $51.9m sale.

These are staggering leaps in value. In just 30 months, Christie’s has grown the value of its contemporary evening sales 120%, from $388.5m in May 2012. “Christie’s is a different animal than Sotheby’s,” says the dealer Kenny Schachter. “They smell different; they look different. Success breeds success.”

Comparisons may be unfair: Christie’s is a privately run company, while Sotheby’s is public and has to report to shareholders. “Christie’s is able to do things that Sotheby’s can’t. They are able to keep secrets which, in this business, is a very big advantage,” says the dealer Christophe Van de Weghe.

Ultimately, though, both houses are keeping more secrets than in previous years through their use of guarantees, a practice both are pursuing aggressively. Guarantees mean that either the house or a third party agrees to financially back a work before the auction. Neither company is obliged to reveal the people or prices involved in these deals. Almost half of the works on offer in Sotheby’s and Christie’s evening sales were guaranteed: 46% of Sotheby’s evening sale on 11 November (36 of 78 lots), and 46% of Christie’s 12 November auction (37 of 80 lots).

This week, the value of these deals was astronomical: The Art Newspaper has calculated the combined total of both houses’ guarantees to be at least $614m. Our sums are conservative, based on the low pre-sale estimates of the underwritten works (most guarantees are believed to be mid-estimate). Sotheby’s guaranteed $184.2m worth of art in its evening sale, a sum overshadowed by Christie’s, which backed a phenomenal $429.8m. This figure is more than the total value of its November 2012 evening auction, which made $412.2m.

“The auction houses are speculating to accumulate. They’re giving guarantees in order to be seen as the guys who can handle that kind of art,” says the London-based dealer Hugh Gibson, of Thomas Gibson Fine Art. The practice seems to be paying off, especially for Christie’s. It has been particularly aggressive over the past couple of years and the soaring success of its sales is attracting the best consignments. “There was so much excellent and high-priced material at Christie’s that many people were wondering whether there could be that many buyers in one evening to absorb it,” says Allan Schwartzman, a partner of Art Agency Partners. “The market rose to it, Christie’s did extraordinarily well and the sell-through rate was phenomenal,” he says. Christie’s sold 94% by lot, with only five works failing to find buyers.

Sotheby’s sold 86% by lot, a solid rate given that the house was offering fewer quality works. Many of its estimates were too ambitious, Schwartzman says. “Even hungry buyers at high-price levels are becoming selective about where they want to put their money,” he says.

Interestingly, Sotheby’s top two lots were not guaranteed. Mark Rothko’sNo. 21 (Red, Brown, Black and Orange), 1951, which had first been exhibited in the Museum of Modern Art’s landmark 1952 exhibition “15 Americans”, sold for $45m (the estimate, available only upon request, was said to be between $35m-$50m). Jasper Johns’ tiny Flag, 1983, had been acquired directly from the artist by the consignor and sold after fierce bidding for $36m (est $15m-$20m).

In contrast, two works with hefty guarantees both flopped. Koons’ Moon (Yellow), 1995-2000, a work said to be from the collection of artist Damien Hirst, was estimated to sell between $12m to $18m and was bought in at a chandelier bid of $11.5m. Sotheby’s had also guaranteed Warhol’s yellow Little Electric Chair, 1964-65, which was estimated between $7.5m to $9.5m, but failed to find a buyer. Both works, underwritten by Sotheby’s, now belong to the house. “When you guarantee works, you have to do so at the right number,” Van de Weghe says. “Guarantees can be a helpful tool if you’re a seller, but not if you’re an auction house and you lose millions on works that you’re going to have to eat.”

“The question is, where we will go from here—will the market continue to grow? People have been saying the bubble will burst for the past three or four years but it’s just got bigger and bigger,” Gibson says. “I don’t see any reason why Christie’s won’t break the billion dollar mark in May next year. There are still a lot of great works out there.”

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