CORPORATE COLLECTING
A Guide for Artists
BY JOAN SEIFRIED
Edited by Patricia Frischer and Lisa Roche

Corporations collect!

• Why do they collect?
• Who buys for them?
• What establishes the kind of art they buy?
• Where do they buy?
• What is the state of the art market for corporations?

All of these questions will be answered in this article aimed at clarifying this topic for artists.

Let’s start with why corporations collect. Let’s talk first about the contemporary art market. Why do corporations collect living artist’s work?

• First, some corporations collect to be seen as community-involved. That’s when they actually take an interest in community works and hang local artists.

• Other corporations take an interest in the social scene’s status of collecting. Let’s face it; the high-end contemporary art world is synonymous with fashion and celebrity. It didn’t used to be this way. A reporter on Art News recently told me that in her same base of Miami, corporations “are on the list to collect the next hot young thing”. That’s the next hot young artist, not necessarily his/her work. The March 2005 Armory Show in New York had 40,000 visitors in 4-days and made $45 million on the opening night. Yes, you saw celebrities: Carole Lander, Steve Martin, Candice Bergen, Catherine Deneuve and Will Farrell. So the world of contemporary (young) art is a fashionable “scene”. If a corporation is a major player in this “scene” it makes them young, hip and involved.

• It is also a great excuse for a tax-deductible-public-relations-inducing party. Saatchi & Saatchi in London started out as an ad agency and now Saachi’s private collection is better than most contemporary museums and Saachi, himself, is seen as an “eye”—a major taste-maker and career-maker, too.

• And, of course, we can’t ignore collecting art as a major financial investment.

Who buys for corporations? Some gallery owners are also consultants to large corporations. Using a gallery owner, a corporation can actually hang thematic shows. After all, the best gallery owners are really curators. Pierette Van Cleve of Art Cellar Exchange has a large presence on line at www.artcellarexchange.com. ACE also has a program, “Walls for Artists 92101.” For emerging local artists, this program is designed so that artists can get the jump on corporate collections by hanging on the walls of businesses, downtown.

Some larger corporations have a permanent on-staff person who collects for the corporation. Some have a long-time private consultant who “finds” artists through her own exposure to gallery shows and brings these artists to the corporation. There’s a few consultants that do that in San Diego. What kind of art do these consultants look to collect for their corporate clients? The answer is simple – they look for things that appeal to the CEO and they like things that are not too controversial. Aside from that, each corporation has its own style. British Rail buys Impressionists and Old Masters; Saatchi and Saatchi buys cutting edge European talent ( beautiful young thing art).

As an aside, British Rail Corporation invests 50% of its budget on Old Masters and Impressionists which cites annual returns of 11% over the last 25 years. However, Dr. Moses (Mei/Moses Fine Art Price Index) disagrees on the choice of style as an investment vehicle, saying work that doesn’t come to auction (in other words, work of contemporary artists), is the highest profitable class of art to invest in; not Impressionists and Old Masters.

What do corporations look for? We already discussed social conscience, style, profitability and the eye of the CEO. What makes a work hot? Marc Porter, President of Christies America, says rarity, quality, freshness, condition and fashion….Interesting that the head of a billion dollar auction firm cites fashion!

Corporations, through their consultants, also de-assess works; in other words, what they can’t use anymore. For example, they will often have their consultant donate to a charity auction. ( Be aware that under California and New York law, 10% of the proceeds from a resale have to go the artist. This is often overlooked, is controversial, and not always done.) Corporations are also not shy about making a profit from those works that have increased in value. Sometime, look at the Mei/Moses Fine Art Price Index online for fun. Even the presence of such a scholarly index, out of NYU School of Business, indicates a boom market for art. Dr. Moses says art as an investment vehicle is able to retain its value and provide portfolio diversification benefits.

Artkrush, a site just opened on global art perspectives, has a lead story on the Madonna (corporation) loaning two Frido Kahlos to the Tate in London. This is also a huge benefit to having a corporation collection. Each time they loan something to a show, especially a prestigious one, the value of the art work goes way up because of provenance and exhibition history. There is no way I can tell you as an appraiser just how much it does, but it is a sizable leap in value.

Now to my final point: How do the big corporations actually invest in art? Ariel Solana, who is Global Head of Private Banks at ABN-AMNO discussed the big board’s decision to use “fund of funds” format for investing. That’s what banks do, invest. Banks like to invest in other organizations’ funds, like Lord Gowrie Fine Art Fund, the Fernwood Organization in Boston/NY Office in Fuller Building, the Art Dealer’s Fund, the Collectors Art Fund and the China Fund. These funds buy hot work and stable work. In the next 10 years, $30 billion will move into these art funds.

For more information on art as an asset class; in other words, art as an alternative investment movement in the financial corporate industry, look at Artnet Financial Series website. Here are some colleagues of mine who do very high end advising and purchasing of art:

• Jon Bourassa of Citibank Art Advisory Services
• Viscount Dupplin of Hiscox Insurance and Art Advisory
• Consultant Daniella Luxembourg, Appraiser formerly at Phillip’s Auction House, now corporate consultant in art as an investment.

Sometimes, a corporation will underwrite an art event and use this as a test ground for how well the art looks on their lobby walls, as happened lately with our Port Authority and British Airlines when they provided space for a charity show on behalf of the Food Bank. Note, that as artists, you can’t write off the fair market value of your pieces that is donated to a charity auction, but a collector or corporation can.

Let’s also remember that corporations don’t just collect 2-dimensional art. They collect sculpture…big time. I just appraised a work by a local sculptor, Christopher Lee, for a bank downtown, and the Wolfstein Sculpture Garden is a treasure trove of local sculptors in La Jolla. Photography is up and coming for corporations. Believe me, this is the next big thing. Where canvas might not appeal to every one of the corporation’s clients, a photo will. Contemporary photography jumped 35% worldwide in sales in 2004; one of the worlds’ fastest growing media. Paintings grew 4.4%, to give you an example,e in 2004. (Artprice) Charles Ray, Cindy Sherman, Richard Prince, Nan Goldin are the heavy hitters. Americans hold a market share at 80% of world wide sales, and so do American photographers.

In May 2005, sale of photography at Christies, a Dianne Arbus “Child with Toy Hand Grenade” sold for $350K. In May sales, how did contemporary painting do? Well, Christies set a new record at $31.7 million more than last year’s sale, which makes it $133.7 million in one day. That was the day Edward Hopper’s “Chair Car” (’65) brought $14 million, DeKoonig’s “Sail Cloth” (’64) brought $13.1 million and Rothko’s piece at $10.1 million. So post-war painters are appealing to large collectors. But since demand is high in general, almost everything at the big auctions is snapped up in a frenzy. Since May of 2000, (Artprice) prices of paintings done by artists born in 1940 or later rose 58.1%. At this end are young artists who ask for a million or more. So if that can happen, the market is exceedingly strong. Art Net online reports the five most popular artists they sell – they are not you but: Andy Warhol, Christo, Damien Hust, Picasso and Frank Stella.

What and where are the shows corporations look toward to buy and be seen buying? Recently, the most popular international contemporary Art Fairs are:

• Art Brussels April 15-18
• Art Chicago April 29-May 2
• Art Frankfurt May 29-June 2
• CIGE China May 2-5

Now you say, “I can’t hang in shows like that without a gallery behind me. It’s very expensive. The entry fee is often in the five figures for a booth”. You’re right. But each of these shows has an underground or, more appropriately, a loft movement, and around each show every hotel garden, loft and coffee house springs forth with local and developing talent. Corporate collectors and of course their agents, like myself, like a party and you will see them there. I saw it myself at Art Basel in Miami Beach! The town didn’t close until 5 in the morning. So don’t despair! These large art shows, for all their glitz, offer opportunities to be seen in alternative venues.

Markets for selling your art has also gone online with such services as Artprice classified, at $16.58 monthly. You can sell online and small corporations without the budget to hire a consultant will have someone looking there. But if you are a consultant, the place to be seen is at the major auctions, which are themed – in other words, post-modern work, contemporary prints…one each season. Revenue from fine art auctions worldwide rose 37% between 2003-04 at $3.5 billion. And 2004 doubled that. And take heart; the most money is made by young artists who are a “discovery” on the auction scene. This can change in one season, however. Such an example is Jeff Koons, who had never sold at auction until 1990, and in 2004 was the most in demand contemporary artist. But auctions are what we call secondary markets. Some artists can’t break into auctions because they are too new to be traded secondarily. They either sell out of their studio or with a gallerist. That means that they are too young or busy to actually have a secondary (auction) market, or their gallery won’t allow them to go to auction and will buy back their work. The average price for the “new wave” 25-42 year old artist at auction is $80K a work. Now that’s at the big three, Phillips, Christies and Sotheby’s.

So the corporate world is big on the arts horizon, especially now that the prices for a post-war painting can reach $14 million. There seems to be a boom market, and it is a bohemian/fashionable scene to be in. No one can predict when it will change from being a friendly elitist, status-symbol event to purchase art in public. Yes, investing in art is a major risk and a major reward; art is the new pork belly stock of the twenty-first century. Don’t like that idea? You’ll like it when a huge insurance firm buys your work for $1 million because they think you’ll increase in value…Some works increase faster in value today than the hottest blue chip stock, and the corporate world is paying attention to that.

Can San Diego develop such an international scene with a great Art Fair? With our border status, perfect weather, growing hip hotel scene, and the growth in international investments here… we could do it!

Questions? Email me at joanseifried@cox.net

This article was written from a lecture first given by Joan Seifried in 2005 at the San Diego Art Institute Professional Artist series organized by Stephen Wagner.

Click here for Art Rocks! interview with Joe Vilella on Corporate Collecting

Look for other topics in the SmART Collector

Tips on Corporate Collection - Summary By Paul Vauchelet (Report from COVA's Collectors Round Table on October 12, 2004)

Collecting Emerging Artist - Betti-Sue Hertz at the Oceanside Museum of Art (Report on the Art Collectors Round Tables, 2004)

Commissioning Art - Joan Seifried at Galerie D'Art International written by Lisa Roche (Report on the Art Collectors Round Tables, 2004)

For more information contact info@SDVisualArts.net