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Going private

24 September 2011

12:00 AM

24 September 2011

12:00 AM

One of the greatest Renaissance paintings remaining in private hands, Hans Holbein the Younger’s ‘The Darmstadt Madonna’, was sold discreetly this summer. It was not offered at auction but sold by private treaty sale — auction-speak for a negotiated private sale rather than a public auction — in a deal brokered by the art consultant and former head of Sotheby’s Germany, Dr Christoph Graf Douglas. This seminal panel painting, begun in 1526, was commissioned by Jakob Meyer zum Hasen, Mayor of Basel, who is portrayed alongside his family praying at the feet of the Virgin and sheltered by her cloak. It is the artist’s first major altarpiece to represent a new and Italianate form of ideal beauty. Unsurprisingly, it was on the list of works of art that are not allowed to leave Germany.

Negotiating a private treaty sale was the only viable option in this case, given how few institutions or collectors in the country might have been able or willing to pay the heirs of the House of Hesse their asking price of more than €50 million — a fraction of the painting’s value on the open market — and how long it might take them to raise it. (When the Städel Museum in Frankfurt’s final offer of €40 million was rejected, the White Knight, once again, was the industrialist and contemporary art collector Reinhold Würth, who had similarly acquired the Fürstenberg collection of Old Master paintings as a philanthropic gesture in 2003 and placed them on public display in the medieval Johanniterhalle in Schwäbisch Hall. The altarpiece will join this collection when the building’s security has been enhanced.)

What is perhaps even more interesting is the phenomenal rise in the number of discretionary private treaty sales that are organised not by agents or dealers but by the auction houses. In one sense this is nothing new: in 1778, James Christie famously negotiated the sale of Sir Robert Walpole’s celebrated picture collection to Catherine the Great for a colossal £40,000. But what became a device favoured for complex negotiated sales of expensive heritage items offered to the nation in lieu of tax has simply evolved into another means of selling any high-value work of art. It is tempting to declare it the preferred instrument of a new generation of collectors who know what they want and Want It Now.

These are not the kind of people who sit back and wait for what might turn up at auction. They place their orders, and sit back as their agents, dealers or, increasingly, auction-house staff — not infrequently in collaboration — search their databases to find it.

The figures are telling. In 2000, Christie’s sold £124 million ($185 million) of works of art by private treaty sale, representing just over 8 per cent of the firm’s annual sales turnover. By 2010, private sales amounted to £369 million ($572 million), 11.5 per cent of its total sales. In the first half of this year, over £286 million ($467 million) of private business has already been notched up, some 14 per cent of total sales. Sotheby’s figures are comparable. Last year saw some $495 million in private sales, and its figures for the first half of this year, $448 million, represent a striking 114 per cent increase on the same period last year.

Unsurprisingly, the lion’s share of private treaty sales is in highly desirable post-war and contemporary art, with Impressionist and modern art taking second place and Old Masters and jewellery sharing the third and fourth slots. American paintings and books and manuscripts also generate strong private sales.

Earlier this month, for instance, the Kimbell Art Museum in Fort Worth announced its acquisition of Poussin’s ‘The Sacrament of Ordination’. After the long-celebrated painting failed to sell at Christie’s in December against an estimate of £15 million–£20 million, the museum hired Sotheby’s to represent it anonymously in negotiations with the trustees of Belvoir Castle, represented by London art agent Robert Holden, and a figure of $24.3 million — £15 million — was agreed.

There is every reason to believe that the number of private treaty sales will continue to rise — and not least because French auctioneers have just won their battle to conduct private treaty sales in France (effective from 1 September 2011). According to Caroline Sayan, Christie’s international managing director of private sales, ‘We are offering private sales to our clients as an avenue to market more and more. Auctions are not as weighted an anchor as they once were.’

What appeals to clients is that they can both buy and sell outside the auction seasons, and do so discreetly and with less risk of a work of art being exposed and ‘burned’. Many are prepared to pay more than they might have to at auction for buying in this way. Otherwise, costs to the clients are similar to the auction channel. For the auction houses, with no need for glossy catalogues, marketing, public views and auctions, costs are surely considerably less.

One might ask why so many buyers and sellers should favour auction houses above art agents and dealers. ‘Most private sales are generated by clients,’ says Alex Platon, international head of private sales in Europe for Impressionist and modern art at Sotheby’s. ‘A lot of business is circumstantial. After a sale, the unsuccessful underbidders might ask us to find them something comparable. If something sells well, owners of similar works of art approach us. They know that our global reach is unparalleled.’ So, too, are the language skills of the relatively vast and cosmopolitan staff of the auction houses.

The big question is the extent to which private treaty sales have an impact on auctions, and how that might affect the wider market. As more and more important works of art are creamed off for transactions made behind closed doors, will we see increasingly less interesting works of art at auction? Does this matter? Heaven knows that the once thrilling evening auctions of Impressionist and modern, and post-war art have already become dull enough, as packed audiences watch auction-house staff manning telephones slowly extract bids on largely unexceptional material (estate sales are the exception here). It is like watching Wimbledon in slow motion.

Many people presume that the auction houses control the art market, largely because they are the only people telling us what they are up to — at auction, at least. The reality is that their business represents only a fraction of the global art market, not least at the top end. One example in the public domain is probably the largest private art sale ever: part of the estate of the legendary post-war art dealer Ileana Sonnabend that was dispersed in two parts in 2008 for some $600 million. As one of the most successful of New York agents specialising in 19th- and 20th-century art put it, ‘The art market is booming, in spite of the economy, and the private market is enormous, and getting bigger. You would not believe the number of people selling works of art for $5 million or $10 million, many of them few have heard of.’

How this growing private business affects the wider market is that it draws material away from public auctions, and public auctions remain the barometer of the art market. Their figures are more or less the only accurate data available to analysts, and to price websites such as Artnet, which are used to value works of art. If the quality of material coming to auction continues to weaken at the top end and sale totals decline, there is a danger that people will presume that the whole art market is going down, too.

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