At the beginning of the coronavirus lockdown, articles appeared on Bloomberg and other news websites about an increase in business activity in the art finance sector. The significant auctions are scheduled to take place in
At the beginning of the coronavirus lockdown, articles appeared on Bloomberg and other news websites about an increase in business activity in the art finance sector. The significant auctions are scheduled to take place in the following weeks, and they will serve as the first significant benchmark for the market ever since the coronavirus crisis started. However, the expansion of art financing is evidence that business is doing well even after all this time directly from Ipass.net.
In the midst of the crisis caused by the coronavirus, many art collectors are opting to take out loans secured by their art collections rather than try to sell their works in a market that is currently unstable. For the past quarter of a century, Barbara Chu has been a partner at Emigrant Bank Fine Art Finance. In this capacity, she has acted as a consultant to major private and public investors and developed new lending categories. The Chu stated that “we are very busy providing solutions” to the problems.
She went on to say that even those individuals who did not require immediate liquidity were stockpiling dry powder. People want to be able to have the liquidity to take advantage of opportunistic investments or just bolster their liquidity during this incredibly volatile period because we don’t know how long this is going to last. As a result, we have been working with a lot of clients to provide solutions to either cover margin calls or seed other investments.
Some of these collectors are using the liquidity to reinvest in art, but there are not yet significant discounts available.
“People are looking for opportunistic investments in every sector,” she said. “people are looking for opportunistic investments.” There has not yet been a widespread practice of steep price reductions in the art world. The majority of people who are in possession of really valuable items are not necessarily under pressure to sell them at this time.
“In an atmosphere like this, there is a race to the top in terms of quality,” Chu continued. “People go after the triple-A stuff, and the triple-A stuff is not necessarily going to be traded at a discount. ” [Case in point] It is essential that individuals understand that there will not be any benchmarks established until we have information regarding the performance of summer sales. And even then, it’s possible that we won’t be able to figure out what’s really going on with the various market segments because they’re all going to act in their own unique way.
The Chu emphasized the need for “impartial, independent, and objective advice” for collectors who are looking to make decisions about what to do with their art at this time. When you get advice from an auction house or a dealer, it will be different than when you get advice from someone else because they are motivated to try to get things to sell. And there are some things that you probably do not want to sell right now because, either A, they are going to maintain their value, or B, they are not going to get you the best price possible. Or, C, it could be something that the market simply cannot accommodate at this time. And you don’t want to light it on fire.”
Companies such as the London-based Fine Art Group and the New York-based Athena Art Finance provide art secured lending based solely on the value of the art (rather than against the borrower’s total net worth, as is the case at banks), and they lend fifty percent of the work’s value for a period of time that is typically between one and two years.
According to statements made by Freya Stewart, CEO of art finance at the Fine Art Group, during this time period, she has seen a threefold increase in the number of loan inquiries. These statements were made to CNN Money last month.
Lending that is related to art is becoming an increasingly popular business. The previous year, the accounting firm Deloitte estimated the size of the business to be between $20 and $25 billion.
Stewart, who has a background in finance, made the following observation by drawing on her experience: “In 2008–2009, we saw that institutional lenders and hedge funds used only one or two sources of capital for their loans.” In 2009–2010, they initiated a massive diversification effort, eventually reaching approximately five or six lenders. My observations lead me to believe that you can now observe more experienced collectors behaving in a manner that is somewhat comparable to what you just described. At least twice in the past month, people have come to us eager to diversify their lender base and obtain financing through our company.
Stewart mentioned that she has recently seen collectors who were not prepared to make a purchase the first time around return to her. “I’m working with somebody today, and we completed all of this work together a year ago,” I said. He came to the conclusion that the circumstance was not ideal at the time. Now, he calls you up and says, “I need the money extremely quickly, in a couple of weeks.” Can you do it? ‘ Yes. Done. We reissued the new term sheet within an hour, and everything is in order at this point.
Athena Art Finance’s Managing Director of Marketing and Client Relationships, Naomi Baigell, has experienced something very similar. She explained, “We are a relatively unique specialty lender, and people frequently feel as though they need to get to know us a little bit.” However, just recently we signed on a new customer, and it was the first time we’d ever met. Through an advertisement that we had placed with the Armory Show, which was the primary sponsor of the event, he was able to locate our company. Just now, he called us. And at this point, we are working to close the deal.
As a result of the lockdown, she has never had the opportunity to meet the client in person, and in order to determine the fair market value of his artwork, she was required to conduct the examination at his residence while he was absent.
Stewart mentioned that she has been trying to act in a somewhat more reserved manner recently. “We are reducing our loan-to-value ratio—not significantly, maybe just five percent for new loans—so that is another way that we are managing some of the risks. You are achieving a satisfactory level of harmony between the loan-to-value risk and the valuation risk.