There’s more to corporate art collection and art investment than meets the eye. From In The Black.
Art collecting owes more to fate than logic. Little did FCPA Tom Lowenstein realise when 25 years ago he enjoyed several bottles of white over lunch with artist John Olsen (and missed his plane back to Melbourne) and offered to help with five years in back tax.
At the time Lowenstein had become interested in art after being dragged round galleries by his wife and described himself as ‘a bit of a philistine’.
At retirement from his firm Lowenstein Sharp this year, Lowenstein boasted over 800 artists on his books and a collection of 330 works worth over $2 million. Although retired, Lowenstein will retain an association with the firm and has established Lowensteins Art Management, which is housed in Lowenstein Sharp offices. With his retirement, however, the firm’s art collection is to be auctioned.
The collection grew through Lowenstein’s relationship with artists and because through penury, many were forced to settle their bills with their works. Business people have been accepting artworks for services since time immemorial. One of the most famous collections is housed at La Colombe d’Or at St Paul de Vence in the hills behind the Cote d’Azur, France. The proprietor’s regulars were the cash-starved Matisse, Picasso, Miró, Bonnard and Braque. Lowenstein himself visited the hotel for two nights earlier this year.
Few can afford such artists or are the recipients of artistic donations but collecting needn’t be an over the top affair. Since the mid-1970s Allens Arthur Robinson has built an enviable collection of Australian contemporary art worth nearly $5m. With over 1000 works there is plenty to be enjoyed by the firm’s 1800 staff housed in 12 offices through seven Asian countries. But while the statistics sound impressive most paintings were acquired for modest prices. Chris Fogarty, group manager marketing operations at the firm, says: ‘There is a budget. A very small budget set aside for it.’
Although he won’t be drawn on the exact amount it is somewhere near six figures – $50 or so per employee – and most works cost under $5000.
Fogarty says that the art has a real tangible effect on the vibrancy of the office. The firm ensures that more people than the staff, and visiting clients, enjoy them. Internal tours are conducted. Much of the collection is already on or being put online. Works are regularly lent to galleries.
Fogarty says: ‘The aim of the collection is to purchase interesting, challenging, emerging Australian artists. I don’t say young because some artists don’t kick-off until they are 45 or even over 50.’ The firm has a part-time curator who works with a small group of partners who are interested in art in targeting new acquisitions and handling the (very) rare disposals.
On a more modest scale a company can have a collection worth a modest few tens of thousands of dollars. Such was the case of local insurance company Hannan Group International, which was taken over by Marsh in December 1997. The company had a collection of 12 works about $60 000, which have been on show and for sale at Kozminsky Art in Melbourne. The art was owned personally by Graeme Hannan and his partner Peter Grant. Hannan says: ‘The financial of tax perspective wasn’t even thought of at the time.’
He decided to buy some typically Australian art for the walls of his offices. From Hannan’s personal interest in art he came across the works of John Borrack, who specialised in watercolours of Australian landscapes. ‘We were able to put this together for a reasonable price.’ He says he deliberately didn’t want the offices to seem over the top or ostentatious, which resulted in his modest choice.
In August Kerry Stokes sold some 300 works from his collection in a rationalisation after buying 486 works from the Orica collection for over $10M.
According to his curator John Stringer, Stokes treats it as a recreational pursuit. Stringer, who has also worked for the Museum of Modern Art in New York, the National Gallery of Victoria and the Art Gallery of Western Australia, says that he would give different advice to an individual and a company in starting a collection.
He says: ‘To buy for purely financial terms is detracting from the reason why the artist created it in the first place.’
Chris Deutscher, executive director of auction house Deutscher Menzies says that the corporate collection is entering a new generation. He says: ‘The old Oricas and ICIs and BPs and ANZs have either sold, consolidated or rationalised.
‘One trend is that companies are getting proper advice. There were no professional consultants. Nowadays they will always employ proper consultants. We love it because it brings a different mentality to the market. Business people are dealing with hundreds of millions each day. They are not at all frightened by spending $500,000, $100,000 or $20,000 on paintings.’ In the 1980s there were only a few players in this market. He says: ‘People who are spending in the Sydney market want to be seen with the right pictures on their walls. It sends out signals of refined taste.’
Brian Kino, an art consultant who is also involved in the Metro 5 gallery in Armadale, Victoria, advises many on investing in art. Kino says that if a company is buying artworks to hang in public places then it makes sense to buy as an investment. Then after five years or more the organisation can sell and reinvest.
The advise for any aspiring collector is: ‘Do your homework’. Just as you may go to a stock broker for advice on shares, go to an art consultant for advice on investments. Unlike shares many artworks turnout to be poor investments making a consultant worth the 5-10 per cent of acquisition cost worthwhile. Big collections may be charged nearer 3 per cent.
Robert Gould from Gould Galleries says that it’s useful to become immersed in the market. Visit commercial galleries and find out who is being collected by the public ones. If using a consultant then check their credentials.
John Albrecht, gallery director of Kozminsky Art, says that the price point of the work is an important consideration. ‘Put simply, if you are buying a work within the $2000 to $10,000 range there will always be many buyers that will support art acquisition within this range – in essence, this range is where the Australian art market is predominantly at.’
He says for corporate collecting do not expect returns before a decade is up and to adjust the definition of what constitutes a good return on investment. ‘My experience is that well purchased art work will often show capital improvement but that this does not often cover what could have been earned from an alternative, dividend-paying investment.’
Kino says: ‘The problem with buying new artists is that 90 per cent will be worth nothing in 10 years time. The trick is to buy living artists who are between 40 and 60 that have an established reputation and are going up.
‘A good artwork is an asset. A bad one is not. It is the easiest way to make money if you know what you are doing.’
Investors need to remember that the highs are higher than in the stockmarket and the lows are much lower. Perhaps it’s just better to stick it on the wall and enjoy it after all.