Private Sales Go Public: Why Christie's and Sotheby's Are Embracing Galleries Like Never Before
Private transactions constitute an essential and increasingly profitable business segment at both Christie’s and Sotheby’s. In 2010 such sales accounted for 10 percent of the houses’ $10 billion in combined art sales, contributing $448.4 million to the bottom line at Sotheby’s — up from $327.8 million in 2006 — and $572.4 million at Christie’s, more than double the take four years earlier. Both firms hope to see those numbers swell and have made brick-and-mortar investments to further that goal.
“One is pretty much maxed out in terms of how many auctions one can do a year and in how many different venues,” says Stephane Cosman Connery, head of the private-sales division at Sotheby’s. “For a long time we were purely dedicated as an auction house, but there are many opportunities on the private market because of the international reach that Sotheby’s has. It seemed like a very logical place to progress into.” Marc Porter, chairman of Christie’s Americas, is less effusive if no less positive. “Selling privately is just another distribution channel for us,” Porter says.
In recent years, both houses have been involved in high-profile private transactions. Sotheby’s, for instance, brokered the $24.3 million sale of Nicolas Poussins painting "Sacrament of Ordination" by the trustees of the U.K.-based Belvoir Estate to the Kimbell Art Museum in Fort Worth, Texas, this past September. In 2007 Christie’s played a similar role in the $68 million deal that transferred Thomas Eakinss "The Gross Clinic," 1875, from the Jefferson Medical College at the Thomas Jefferson University in Philadelphia, where it had resided for more than 125 years, to joint ownership by the Philadelphia Museum of Art and the Pennsylvania Academy of the Fine Arts.
To compete in this lucrative market with each other as well as with blue-chip dealers, the two firms are creating spaces dedicated to private-sales activity. Sotheby’s has opened S2, a 3,500-square-foot Richard Gluckman-designed gallery on the second floor of its York Avenue headquarters in Manhattan, which it inaugurated in September with an exhibition of 40 paintings by Sam Francis, priced between $25,000 and $1 million. According to an outside source, 10 works had sold by the second day. Sotheby’s plans to hold 8 to 10 exhibitions per year. On view through November 11 is "These Days," a group show of young artists organized by the downtown scene maker and independent curator Vito Schnabel.
Sotheby’s also owns Noortman Master Paintings, which was established in Maastricht in 1979 and is now located in Amsterdam. The gallery was acquired from founder Robert Noortman in 2006 for $56.5 million worth of Sotheby’s stock and assumption of more than $26 million in gallery debt, including $11.7 million owed to the auction house. Although Sotheby’s declines to discuss the arrangement, the acquisition gave the firm a critical foothold in the art-fair business, since Noortman is a regular exhibitor at TEFAF Maastricht.
In fact, Sotheby’s has a long history of private dealing. In 1990 it partnered with Acquavella Galleries of New York to buy 2,300 paintings from the Pierre Matisse Gallery for $143 million following the dealer’s death. The Matisse inventory proved a gold mine for the Sotheby’s partners, who gradually sold off the works both privately and at auction at a significant profit.
Two other ventures involving New York galleries were less successful for Sotheby’s. In 1996 the firm acquired André Emmerichs 57th Street space but shuttered it two years later. In 1997 it bought a 50 percent interest in Deitch Projects but later sold the stake back to Jeffrey Deitch.
For its part, Christie’s acquired London-based Haunch of Venison in 2007, and soon opened a New York branch in Rockefeller Center. When Haunch recently moved to West 21st Street, in Chelsea, the house proceeded to transform the contemporary-art gallery’s former quarters into a hub for private sales and occasional public exhibitions; called 10 Rock, it is set to open in January.
Going forward, both houses’ venues should produce plenty of action. "We’re seeing growing interest from our clients wanting to buy and sell privately," says Caroline Sayan, Christie’s international managing director for private sales, who notes that in the first half of 2011 such transactions brought in $467 million, a 57 percent increase over the same period in 2010.
"It’s a very nice position to be in," says Connery, "to be able to offer a client two different avenues to suit their needs and to suit what is logical for the market."
Collectors looking to off-load works of art could have several reasons for favoring private over public sales. "There are a lot of sellers out there who simply don’t want to take the risk of bringing their things to auction," says Tania Buckrell Pos, a London-based art consultant. "It’s either too public, or a work will be burned if not sold when they put a high reserve on it."
"There are also the sellers who want to be discreet," says Philip Hoffman, managing director of the London-based Fine Art Fund, who recently acquired a $3 million work from 1970 (he declines to name the artist) through the private-sales department at Sotheby’s. "Perhaps there’s a family dispute over a work of art or a family is in financial distress and doesn’t want to be seen that way. So they sell it privately."
For buyers these transactions have the allure of avoiding potential competition in the salesroom that might lead to losing a prize or, worse, losing any sense of restraint and chasing a desired work to an untenable price. "I like to buy at auction if it’s a good buy, but it’s tough," says Mirek Klabal, a New York and Palm Beach private dealer who estimates he did at least $100 million in private transactions with Sotheby’s and Christie’s last year. "Look at what happened to the Picasso at Christie’s London last June." Estimated at £4 million to £8 million ($6.2–12 million), Picassos fresh-to-market portrait of Dora Maar, Femme assise, robe bleu, 1939, sparked a bidding war, killing any chance for a bargain, and rose to £18 million ($28 million).
Klabal also stresses the personalized attention provided in these deals. "What I like about buying privately is that there’s good service, it’s behind the scenes, and we can bring the clients to the piece and physically show it to them," says the dealer. The result can be very profitable for all concerned. Five years ago, for example, Klabal made a $2.2 million private purchase through Sotheby’s of Salvador Dalís 1935 "Spectre du soir sur la plage" on behalf of a customer who in May 2010 put the painting up at auction at the firm’s New York location, where it made a then-record $5,682,500.
How have galleries responded to having giants like Sotheby’s and Christie’s on their turf? "The traditional galleries resist our movement into the market and we believe unfairly restrict our access to art fairs for the reason of [Haunch of Venison’s] ultimate ownership," says Porter, referring to the gallery’s exclusion from Art Basel and Frieze.
"We don’t think that serves the art-collecting public," he continues, pointing to the benefits Christie’s offers in this field: "We have the broadest knowledge of the art holdings worldwide because of all of the appraisal work we do for collectors and all the sales history we have. We have all the historical information, and we know everybody who’s new in the market."
While granting that auction houses "have the information necessary in order to bring buyers and sellers together behind the scenes," consultant Pos questions whether that activity "interferes with their day job" as auctioneers and is far from happy about how it impacts hers. "It clearly interferes with what I do," she says of the added competition for supply, "because my value is trying to source things privately and to buy and sell privately."
Lucy Mitchell-Innes, president of the Art Dealers Association of America, takes a more positive view: "Anything that enlarges the pond we all swim in is a plus for the global art market." Mitchell-Innes also points out that her members have both a protected niche and certain business advantages. "The auction houses have had no impact in the primary market, which continues to be dominated by gallerists, who nurture the careers of their artists," she says, adding that because of their previous sales, the galleries know where the prime works are. "An auction house may have a broad reach, but it is not as deep when it comes to expertise and knowledge." As for the customers themselves, at least some see little difference between the two entities. "It’s just like selling at a gallery in the off-season or consigning to Gagosian. It’s the same
idea," says the New York art trader Alberto Mugrabi, who has made private deals as both buyer and seller at the $5 million level and above through the auction houses.
Whatever the business looks like to outsiders, the transition from dedicated auctioneers to part-time dealers was not an easy one for the houses, according to Dominique Lévy, who was hired by Christie’s in 1999 to develop private sales. "Curiously enough, it was like swimming against a big wave," recalls Lévy, currently a partner at L&M Arts of New York and L.A., "because people in the auction world were really focusing on their sales, their catalogues, and anything available for private treaty was seen as taking a buyer away from the auctions." Then the houses introduced a commission structure in which specialists get direct percentages when they sell something privately. "Suddenly," she says, "it became lucrative for an auction specialist to do a private treaty sale. Incentivizing has really changed the culture."