Miles Weiss and Katya Kazakina, of Bloomberg, have a fascinating article today about the art-finance activities of Peter Brant, who — like many big-time art collectors — is using much of his collection as collateral in order to borrow money. The Bloomberg report is pretty straight-down-the-line, however, which makes me suspect that they missed a rather more interesting story.
First up, there’s this:
Brant will also use part of the proceeds from the borrowings to finance the purchase of another major piece of artwork, the person familiar with the plans said.
Which is another way of saying that Brant is basically trying to put together a leveraged art collection, built on a combination of his own wealth, on the one hand, and borrowed money, on the other. That’s very dangerous, given that art by its nature doesn’t throw off any kind of interest or dividend payments. You can’t use cashflows from art to pay the interest on the debt used to buy it.
But then, more worryingly, we find this, a bit later on:
According to a separate September filing with New York state, Brant also pledged a 1963 Warhol work entitled “Merce” to Joseph Allen, his cousin and former business partner at White Birch. The 82-inch by 81.5-inch silkscreen of the late dance director Merce Cunningham sold in 1989 for about $2 million and is now worth $25 million to $35 million, said a person familiar with the piece who requested anonymity because the information is private.
I’m pretty sure the work in question is this one:
The piece is large, to be sure, and dates from the early 60s, which is the most valuable period in Warhol’s oeuvre. But an instantly-recognizable, iconic Warhol this is not. It’s smudgy, and monochromatic, and features Merce Cunningham — not exactly a household name, either in 1963 or today — with a chair on his back.
We don’t know, of course, how much money was paid for this painting in 1989: it wasn’t sold at auction. But there are some things we do know. For one thing, up through the end of 1987, the highest amount ever paid for a Warhol painting at auction was $660,000. In 1988, two paintings broke the million-dollar barrier, including Marilyn Monroe (twenty times), the first Warhol ever to sell at auction for more than $2 million. And in 1989, the year this painting was sold, there were three Warhols which sold at auction for more than $2 million: Shot red Marilyn, Liz, and Triple Elvis. Liz, of course, is Liz Taylor. All of these super-expensive Warhols were classic celebrity paintings.
If you had $2 million to spend and were in the market for a Warhol in 1989, you could have bought a large and colorful Race Riot, at Christie’s, for $1.76 million; or an enormous Flowers painting — twice the size of Merce — which sold at Sotheby’s for $1.54 million. Or even Double Elvis, which sold for $1.02 million. All of those would seem to be obviously more valuable paintings than Merce.
Merce is a pretty obscure work, which is why it’s hard to value. But we do have one public datapoint: in 1997, when Warhol works in general were maybe a tiny bit cheaper than they were in 1989, a smaller (35.5″ x 81.5″) Merce sold at Christie’s for a decidedly modest $112,500. To be sure, the bigger work will be more valuable than that. But not eighteen times more valuable.
And what about the idea that Merce is worth somewhere north of $25 million today? Well, there’s been precisely one Warhol sold at auction for more than $20 million in the past year, a Double Elvis which sold at Sotheby’s in May for $37 million. Go down the other Warhols which have gone for north of $20 million in recent years, and you’ll see a list dominated by Marilyns and Lizes and self-portraits, with a few iconic coke bottles and the like thrown in. Nothing remotely as dark or difficult or self-consciously Arty as Merce.
All of which is to say that you’d be well advised to take Bloomberg’s source, here, with a very large pinch of salt. I very much doubt that Brant actually spent $2 million on Merce in 1989, and I also very much doubt that it’s worth anything near $25 million, let alone $35 million, today.
But that doesn’t really matter, because Brant’s not selling it. Instead, he’s just borrowing against it. And when you borrow against art, you take it to a lender, and ask for a certain percentage of its value. It stands to reason that the numbers cited by Bloomberg are the numbers being used by Brant’s lender, who would seem to be Joseph Allen. Which means it’s entirely possible that Allen has lent Brant more than Merce is actually worth, thanks to a hugely overinflated valuation.
Not all Warhols have soared in value since 1989. Thomas Galbraith, of Artnet, put an index together for me of Warhol portraits of what you might call second-tier males: Joseph Beuys, Frank Stella, Sidney Janis, Bruno Bischofsberger, Miguel Berrocal, Gianni Versace, and Hartmut Stocker. He even threw Marlon Brando in there to sex things up a bit. And it turns out that every dollar you spent on one of those paintings in 1989 would be worth about $2.54 today. Which means that even if Brant did spend $2 million on Merce in 1989 — which seems improbable — fair value in 2012 would probably not be much more than $5 million.
What the Bloomberg story says to me is that Brant is playing all manner of weird games with his art collection, ascribing improbable values to certain works, and borrowing large sums of money against it to make it even bigger. Even as his “real” business — White Birch Paper Co — continues to struggle. And the lesson of this story, as far as I’m concerned, is that if Peter Brant comes up to you asking to borrow money against his art, treat the request very carefully. And don’t take anything he says at face value.