Fine Art as Loan Collateral

The New York Sun ran an article at the end of July about the growing popularity of using fine art as loan collateral. The article states banks are lending at approximately 50% of the market value of the property. Sotheby's offers consignment advances as well term loans and revolving lines of credit. Chrisite's has typically loaned money as consignment advances but given the state of the market and client/collector interest, the venerable auction house is now also considering other types of lending arrangements. Select banks and their private banking divisions are catering to high net worth individuals who own valuable collections and wish to make further investments by leveraging their art collections. Many of the banks seem to consider the practice more of a value added service for these high net worth clients instead of a standard lending practice.

Should the art collection as collateral trend continue it would seem logical more appraisal assignments for the intended use of loan col lateralization will become needed. Perhaps personal property appraisers should be marketing our services to the private banking divisions of major banks.

The article states "Select banks and the two major auction houses, Sotheby's and Christie's, have been offering art financing for a long time. But in recent years, as values in the art market have risen, more and more collectors have taken advantage of it." The article continues "the volume of lending that Sotheby's does has increased substantially in recent years. At the end of 2007, it had $176,380,000 loaned out, according to its balance sheet. At the end of 2004, it had only $92,291,000 in outstanding loans."

To read the full NY Sun article click HERE.