Art & Finance Newsletter #21 - Spring season is around the corner
Good morning to you from the Shanghai Pudong International Airport Terminal 1.
Spring Festival officially begins today here in China and most shops and services will be closed until the end of the festival next week. Fine time to be heading to London.
On to the art market...
Art Loan Book Acquired in London
Fine Art Group, an adviser to wealthy families and individuals, has acquired the art-lending division of Falcon Group.
Falcon Fine Art’s book contains more than 10 loans to clients based mainly in the U.K. and Europe, Freya Stewart, who runs Fine Art Group’s lending operations, said in an interview ahead of planned announcement Friday. Collateral includes works by Andy Warhol, Pablo Picasso, Wassily Kandinsky and Alberto Giacometti, she said.
Fine Art Group started its lending business three years ago, charging annual interest rates in the “mid-single to high-single digits,” Stewart said. Like other boutique lenders -- and unlike banks -- it uses art as collateral, not a borrower’s total assets. The company established a $300 million credit fund to finance loans with investments from large family offices, institutions and high-net-worth individuals and can fund a loan of as much as $150 million, Stewart said.
Last year was a strong one for art lenders.
U.S. Trust, a unit of Bank of America Corp., extended more than $1 billion of art loans in 2018, a record, according to Evan Beard, a bank executive who said results were helped by market volatility, rising interest rates and the elimination of so-called 1031 exchanges, which allowed the deferral of capital-gains taxes.
Bloomberg - Art Loan Book Acquired in London
European Commission Considering Further Oversight of Luxembourg Freeport
Members of the European Parliament are stepping up their fight against alleged money laundering and tax evasion through the use of freeports—high-security warehouses which hold art and other valuable assets, such as cars, wine and jewellery, tax free.
In a letter dated 8 January, the German MEP Wolf Klinz called on Jean-Claude Juncker, the president of the European Commission, to close loopholes that potentially allow for financial crimes to be committed.
Referring specifically to Le Freeport Luxembourg, which opened its steel turnstiles to VIP bankers, art dealers and collectors in August 2014, Klinz says the storage facility had “been alleged to be a fertile ground for money laundering and tax evasion”.
Despite the tightening of regulations, Klinz believes the “path to adequate regulation […] remains long and fraught with complexities”. Governments will still have to rely on freeports themselves reporting suspicious transactions as well as cross-border co-operation.
Klinz’s letter reveals that the financial intelligence unit in Luxembourg is “painfully understaffed” with only 16 personnel handling 20,000 suspicious activity reports filed by Le Freeport and other financial intermediaries in 2017.
He concludes: “It is apparent to me that the risk of maintaining a facility of Le Freeport Luxembourg’s reputational profile within the EU customs territory could greatly outweigh the benefits.”
The Art Newspaper - European Commission Considering Further Oversight
Guggenheim Will Sell a Zao Wou-Ki in HK
Sotheby’s announced on Tuesday (29 January) that it would offer Zao Wou-Ki’s large-scale 1958 untitled oil painting in its Hong Kong Modern art evening sale on 31 March, where it is poised to bring in HK$60m-HK$80m ($7.7m-$10m). Though certainly no small sum, this estimate seems almost conservative given the recent boom in the market for the Chinese-French abstract artist, especially in light of the work’s illustrious provenance—it is being deaccessioned by New York’s Solomon R. Guggenheim Museum, where it has been since it was gifted to the institution by the original buyer in 1964.
Known for his immersive non-representational oil paintings that blend Eastern and Western art making techniques, demand for Wou-Ki’s work has gone through the secondary market roof since his death in 2013. A posthumous uptick in prices is not unusual, but according to Emilio Steinberger, a senior partner of Lévy Gorvy gallery, which began working with the artist’s foundation in 2016, says that “in the period of time we worked with the foundation, we have noticed that the interest in his work globally has greatly increased”.
The Guggenheim has recently been focussed on growing their Chinese Modern and contemporary art collection under its Asian Art Initiative, although a representative for the museum declined to comment on the deaccessioning of this particular work or whether the proceeds would be used to acquire additional works by Asian artists.
Of Sotheby’s drumming up the work’s museum provenance, Steinberger says: “As with any internationally recognised artist, a strong provenance can, of course, add [to the] desirability of a particular work. And the fact that it has such a strong provenance and not been seen in public for some time will greatly enhance the interest in the piece.” The work will be on view at the auction house’s New York location from 5 to 10 February ahead of the sale.
The Art Newspaper - Guggenheim Will Sell a Zao Wou-Ki in HK
Your final reminder about the PCD organized China Now event at the 12 Hay Hill Mayfair on 12th February. Delegate tickets are sold out, but there are tickets available for the drinks reception held in the evening.
If you are in London and cannot make the event but would like to meet shoot me a note and we'll set a time. It's always a pleasure to meet with you folks!
Speak soon,
Blake