A Second Look at the NY Modern and Impressionist Sales with BAA

Last week saw the start of a group of art sales in New York City at Sobtheby's, Christie's and Phillips. I reported results of the Christie's and Sotheby's sales, and like most other trade sites, stated that sales were at the best decent, and perhaps a little underwhelming. That is true if you only look at the sales with an expectation that there will be some amazing prices realized, all over and above the expected value.

As appraisers we need to be cautious about the difference between price and value. Make sure we are spotting market trends and not getting caught up in hyperbole, and react rationally to realized levels of sales, and also take into consideration the value and prices based purely on a financial basis.

As many AW readers are aware, I find quantitative analysis a useful tool in tracking fine and decorative art trends. In response to last weeks sales Beautiful Asset Advisors released to the press a short report on the success of the NY sales of last week. The BAA/Mei Moses report looks at the NY art sales of last week from a purely financial perspective, and if the returns on the artworks in the sale were better than other financial indicators as well as when compared to past successful sales.  The BAA report believes the sales last week were more successful than what was reported in the press.

Using data from repeat sales the BAA report states the compound annual return for Sotheby's and Christie's Impressionist and Modern Evening Sales in NY was 11%. The BAA/Mei Moses database had repeat sales on over 1/3 of the lots in the two sales and was able to compute the compound annual return for these lots. By comparison the S&P average compound annual return equaled 5.8%.  To me, that sounds like a very successful results, and a very good ROI.

I highly recommend appraisers read the full press release from Beautiful Asset Advisors. Click HERE to to visit the site and download the report (once onsite click on Recent Press Releases to start the download).  This press release/report is free to view and download. It is an excellent reference tool for market analysis and in quoting from to potential clients.

Also, this week we should see the release of the new BAA/Mei Moses New World Art Indexes.  The new database will combine US information with the European Fine art database and the new art sales information from China.  The new database will contain over 27,000 repeat sale pairs for approximately 20,000 works of art.  Repeat sales is one of the more useful methods for determining compound annual returns in the art market.  BAA and the Mei Moses have been pioneers in promoting art indexes using repeat sale information.  I recommend all appraisers be familiar with the site at http://www.artasanasset.com/main and follow their reports and updates. I will post to the AW Blog more information on the new index when it becomes available to subscribers on the BAA site.

The BAA press release states:

The two evening sales this week have been reported in the press as   being below expectation with total sales less than those generated in November 2010.  However from a financial returns perspective the results were quite strong.  We have repeat sale data on over 1/3 of the lots that sold and the average of their compound annual returns (CAR) of these 31 lots was a strong 11.2% with an average holding period of 15.7 years. This strength is documented when these returns are compared to the returns that would have been achieved if the purchasers would have invested instead in the S&P 500 Total Return index (where dividends are reinvested tax free) for the same holding dates as the art.   The average CAR for the S&P investments would have been only 5.8%. 

At Sotheby’s November 2010 evening sale of impressionist and modern 19 lots sold that had a prior auction price that we could find.  The average of the compound annual returns (CAR) of these lots was 10.2 % and the average time between auctions was about 13 years. In May 2011 there were 15 such lots with an average CAR of 11.0% and an average time between auction sales of 16 years.  It is also interesting to note that none of these lots had a negative return.

 The highest priced lot, ALEXEJ VON JAWLENSKY’s WOMAN WITH A GREEN FAN, sold for almost $11.28 million.  It had also sold in 1975 and yielded a CAR, before transaction costs, of 14.6% over the 35.5 year holding period.   However the highest CAR for the evening was the 26.2% achieved by AUGUSTE RODIN’s THE THINKER which sold for $4 million and had appeared on the market 9 ½ years earlier when it was purchased for $440,000.

At Christie’s November 2010 evening sale of impressionist and modern paintings 23 lots sold that had a prior auction price that we could find. The average of the compound annual returns (CAR) of these lots was 8.4 % and the average time between auctions was about 12 years.  In May 2011 there were 16 such lots, including two of the highest priced works, with an average CAR of 11.3% and an average time between auction sales of 15 years.  It is also interesting to note that none of these lots had a negative return.

Click HERE to download the BAA press release.