Wealth, Mystery and Huge Profits at Recent Art Sales

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People inside and outside the art market trying to make sense of the huge quantities of money that the world’s richest 0.1 percent threw at last week’s auctions in New York have come to at least one conclusion: The art world is in the midst of a spectacular seller’s market.

The paintings that went for enormous sums not only reaped giant profits for their owners, but were in many cases sales of opportunity: The owners took advantage of the growing body of billionaires aching to invest in brand-name modern and contemporary art to cash in on an earlier acquisition. Lining up beside them in growing numbers were speculators, known as guarantors, whose backstage involvement assured they would share in the rewards.

Mystery still surrounds the identity of the person who claimed Picasso’s 1955 painting “Les Femmes d’Alger (Version ‘O’)” with a winning bid of $179.4 million with fees — a record for any artwork at auction — at Christie’s on May 11.

But the seller appears to be a Saudi Arabian collector based in London, according to three dealers with knowledge of the matter who said they could not be identified because of agreements.

The painting had been acquired in 1997 for $31.9 million at Christie’s sale of the collection of Victor and Sally Ganz in New York. After just 18 years of ownership, it has made its seller at least $100 million.

Skate’s Art Market Research in New York said that 28 percent of the lots offered during the November season, including at last week’s sales and at the preceding week’s Impressionist and modern auctions at Sotheby’s, were similarly “repeat” sales of works that had previously been bought at auction.

This was the highest ratio recorded by Skate’s since it began collecting data in 1985, and as such it has branded the two weeks as “the most speculative auction season ever.”

Christie’s various sales of Impressionist, modern and contemporary art reaped $1.7 billion, the “highest single week total in auction history,” according to the company. Sotheby’s and Phillips weighed in with a further $472.5 million and $127.9 million, respectively, from their sales, making it the first week of auctions to take in more than $2 billion.

Much of the interest was stirred up by “a raft of wealthy new buyers from Asia, the Middle East and to some extent America that is prepared to pay record prices at the moment,” said Philip Hoffman, founder and chief executive of the Fine Art Fund in London. “They think prices are going to continue to rise. So much money is being accumulated, and the people who buy art all want the same things. They want Picassos, Monets and Warhols.”

In this market, a work like “Les Femmes d’Alger (Version ‘O’)” was billionaire’s catnip. The Picasso, inspired by Eugene Delacroix’s 1834 Orientalist painting, “Women of Algiers,” was among several 20th-century masterworks prised out of collections by Christie’s experimental “Looking Forward to the Past” sale on May 11, aimed at ultrawealthy collectors of both modern and contemporary works.

Picasso remains the biggest-selling name in modern art, generating as much as 10 percent of the 3.3 billion euros, or about $3.7 billion, of auction sales of modern art last year, according to a report published by the European Fine Art Foundation in March. He is the only artist to have achieved three auction prices of more than $100 million.

Besides yielding its owner at least $100 million, the sale of the Delacroix-inspired Picasso is likely to have made an unidentified external guarantor a few million dollars. It’s little wonder that these third-party financiers are showing up more frequently in sales. Guarantors commit to bidding on a painting, thereby ensuring its sale, and receive a portion of any bidding that exceeds the pre-arranged guarantee — in auction jargon the “upside” — as well as a slice of the fee the buyer pays. This reduces the already slender profit margin for the auction house.

“Third-party guarantors can make millions, but they have to want the artwork — they end up owning it if doesn’t sell,” said Lock Kresler, director of the London branch of Dominique Lévy Gallery, who attended Christie’s “Looking Forward” sale.

Just before the auction, Christie’s announced that a “person with a financial interest” would be bidding on the Picasso, taking some pressure — and the risk — off the sale.

Not that there was any. Mr. Kresler, like everyone in the salesroom, was amazed to see five telephone bidders prepared to pay more than $120 million for the late Picasso, which was described by Jussi Pylkkanen, Christie’s global president and the night’s auctioneer, as an “iconic” work.

Critics have been less impressed. John Berger, author of “Success and Failure in Picasso,” said the aging artist’s riffs on Delacroix were empty of content. “It remains a technical exercise,” he wrote. “If there is any fury or passion implied at all, it is that of the artist condemned to paint with nothing to say.”

Seven lots after the Delacroix sold, the enduring appeal of the Picasso brand was further underlined by the $67.4 million paid by another telephone bidder for the 1938 portrait of Dora Maar, “Buste de Femme (Femme à la Resille).” This had been a guaranteed sale at about $55 million for the American casino magnate Steve Wynn, who bid up to $125 million on the “Femmes d’Alger,” according to Bloomberg News.

But slimming the profits for the auction houses themselves was the ample use of guarantees. Christie’s was the more expansive with both its own and third-party financing, helping it to gain an edge in market share. Owned by the French billionaire François Pinault, 78, the auction house is under no obligation to publish its profits or losses.

Eighteen of the 35 lots at Christie’s $705.9 million “Looking Forward” sale were guaranteed, while a further 49 of the 82 lots at its $658.5 million contemporary auction on Wednesday night had financed minimum prices.

Sotheby’s, publicly listed and mindful of shareholder value, was more cautious with financing. Nineteen of the 63 lots in its sale of contemporary works on May 12 carried guarantees.

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