Christie’s Scraps Plans for Art-Investment Fund, Loan Division
Date: 20 Aug 2009 | | Views: 3285
Source: Bloomberg, by Lindsay Pollock
Christie’s International has scrapped plans to start an art-investment fund and a lending division, according to two people involved with the projects. The move is another sign that the global economic slump is hurting the once-booming art market.
At least seven employees working on Christie’s financial projects have been fired or have left the London-based auction house since December, the people said.
Christie’s spokesman Toby Usnik wouldn’t comment on the status of the investment fund or lending operation. He said “a handful of employees in financial services” have left the company this year, though he wouldn’t give specific numbers.
The auction house, owned by French billionaire Francois Pinault, reported a 35 percent sales decline in the first half of 2009. Christie’s announced “significant staff reductions” in January and another round of cutbacks in June without disclosing specific figures or names.
“Christie’s retrenchment, and the continued paring down of financial officers and staff is symptomatic of the state of the art market,” said Peter R. Stern of McLaughlin & Stern LLP, a lawyer who specializes in art issues. “These actions are necessary if the auction houses want to survive.”
The international art market has taken a battering this year. Christie’s worldwide sales of contemporary art plunged 69 percent during the first half of 2009, while its New York auction sales fell 51 percent during the same period. In May, Sotheby’s contemporary art auction in New York was down 87 percent from the previous year.
Christie’s was exploring ways to create a separate financial division, instead of offering loans and other services as part of the larger auction company.
The closely held company wanted to compete more directly with Sotheby’s Financial Services, a subsidiary of Christie’s main auction-house rival. The financial division of Sotheby’s, a publicly traded company based in New York, generated $6 million in revenue during the first half of 2009.
HSBC Holdings PLC and Goldman Sachs Group Inc. were both approached about the ventures, but talks fell apart, according to a person familiar with the plan. Spokeswomen Juanita Gutierrez of HSBC and Andrea Raphael of Goldman Sachs declined to comment.
Christie’s interviewed investment managers and bankers to gauge interest in an art-investment fund and took steps to establish a separate asset-management company aimed at raising $250 million to $350 million.
As the world economy continued to falter, Christie’s scrapped its plan and fired several executives in New York and London who were going to run the operation, according to the two employees involved in the project. Among those dismissed were Chief Operating Officer Michael Plummer, Senior Vice President Ed McGorry and Vice President Jeff Rabin, the employees said.
The major auction houses have traditionally used art loans to get consignments. Both companies give interest-bearing loans called “consignor advances” to collectors who agree to sell their art at an auction, usually within six months. The collectors must repay the loan, even if the art doesn’t sell.
Sotheby’s also offers term loans, which cover longer periods and use art as collateral if the loans aren’t repaid.