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| Feature |
Winning the Bidding Wars
Robert LaFranco
04/01/2007
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So Flaschen turned down the guarantee and gambled on a night of
wild bidding. But just hoping that enough buyers would appear who coveted the
Flowers piece among the myriad of other works was not enough. He dispatched
Polsky to negotiate with the auctioneers on how they would present and promote
the painting. Some collectors bargain with auction houses to exhibit a
noteworthy piece or collection as part of a tour. Polsky, instead, insisted upon
massaging the auction catalog essay, which is now a common practice for
million-dollar paintings.
For collectors out to maximize their profits, correctly
positioning a work within a given auction is crucial—and, to the savvy
collector, every aspect of this campaign is open for discussion. For example, a
collector should insist that an auction house sell his work toward the beginning
of an auction, when the most favored pieces are generally introduced. Polsky
advised Flaschen to sell through Sotheby’s because of a relationship he has with
an executive there that dates back 25 years. He negotiated the painting’s spot
on to the cover of the auction catalog, along with a 1,000-word essay praising
the work as one done at the "height of Warhol’s creative powers."
When the hammer finally fell on Flowers last
summer in London, it sold for nearly double Polsky’s estimate: $1.9 million.
Flaschen feels his timing was impeccable. "The art market—more than any other
market—goes through ups and downs that are highly irregular," he says. "Having
seen the prices do what they did in the 1980s and early 1990s, I saw that prices
were way out of proportion. I felt that in a normal market, that painting was
worth half as much as it would get at auction in today’s market."
Indeed, the high prices paid during last fall’s auction season
have many wondering if this "abnormal" is the new normal. Last November, another
Flowers, created with spray paint and silkscreen ink, fetched $6.6 million.
Together, Christie’s and Sotheby’s, far and away the two largest auction houses,
combined for more than $8 billion in sales in 2006, a 30 percent increase over
the previous year, according to published reports. Privately held Christie’s
sold $4.7 billion worth of art last year. Publicly traded Sotheby’s generated
nearly $3.7 billion in sales; during the first nine months of 2006, its profits
more than tripled to $37 million.
The fact that auction houses continue to offer guarantees to
collectors who approach them implies that they expect to see more record prices.
Robert Manley, a specialist in Christie’s postwar contemporary art division,
reported that a "staggering" number of guarantees were paid last season,
including for the Impressionist and modern sale last November that earned $491
million, a record for a one-event auction. As the spring auction season begins,
collectors around the world who have any plans to consign art wonder how long
this bull market can continue. If demand were to suddenly slacken, these auction
house guarantees may well disappear, leaving collectors at the mercy of a
falling market.
Odd Man Out
Most art sector experts peg the currently inflated market to
the overall growth in global wealth over the past few years. This supposition
entails that this sector is more highly diversified than the overheated market
of the 1980s, a run-up largely fueled by the Japanese penchant for Impressionist
art. Some authorities even speculate that a recession would not wholly dampen
the market because wealth is so dispersed and, perhaps more importantly, resale
prices for art do not necessarily follow the ebbs and flows of the Standard
& Poor’s 500, per tracking tools such as the Mei Moses Fine Art Indices.
But others remain more cynical about the sources of this rising
market. "It is a combination of speculators and dumb, poorly educated hedge fund
guys who hire someone to tell them they need something chic on their walls—and
then they all seem to flock to the same artists," says Dean Valentine, a Los
Angeles media investor with a passion for post-1965 art. Valentine is not the
first art collector to point a finger at newly wealthy fund managers, although
fresh collectors from Russia, China, South Korea, Singapore, Latin America and
Eastern Europe have also entered the market. Collectors still whisper about the
mystery man, thought to come from somewhere in the former Soviet bloc, who
outbid everyone from the back of the room at Sotheby’s in May 2006 and walked
away with Picasso’s Dora Maar au
Chat for $95 million, well above the $50
million high estimate. There are also rumors that he was just pretending to be a
novice unschooled in the protocols of where to sit or how to bid.
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