Flipping Art

Many times we hear that exposing a work in the auction market might impact future value if it reenters the market too soon. That is the case in many instances, but also if an artists is growing in popularity, then it re-entering the marketplace can also generate large gains.

Bloomberg looks at such a piece by Israel Lund, which has be sold four times in less than a year while increasing in value by 1500 percent. It originally sold from the artists studio for $7500. With that type of gain, many buyers are not necessarily collectors, but investors looking to take advantage of a bubble in a hot category, such as contemporary art.

Bloomberg reports

Israel Lund’s grainy, washed out yellow and gray painting was sold four times over 11 months, jumping more than 1,500 percent in price along the way.

It was among 124 artworks produced in the past three years that came on the block at this month’s New York auctions -- a 114 percent increase over May 2013, when 58 pieces in the same age range were traded, according to Artnet Worldwide Corp.

The new art totaled $28.4 million at Christie’s, Sotheby’s (BID) and Phillips, almost three times the amount generated by 97 lots sold in May 2007, the height of the last art market bubble, according to Artnet. All but 29 lots, which were sold to benefit nonprofit institutions, were flipped by their owners.

Fueled by a flood of new collectors, flipping art has intensified recently as works by untested artists resell for escalating prices. It’s an early warning that a segment of the art market is showing characteristics of a financial bubble, advisers and collectors said.

“There always have been explosions in the art market and this is one of these boom moments,” said Miami-based collector Mera Rubell, who with her husband Don started buying emerging art in 1964 on a $25-a-month budget. “It does feel like the 1980s with high prices and waiting lists. This kind of fast flipping and such exuberant price acceleration is something new.”

Solo Debut

Lund’s untitled painting surged to $125,000 last week at Christie’s, an auction record for him and a gain of 1,567 percent, from $7,500 at his New York solo gallery debut last June. Estimated at $30,000 to $40,000, the canvas was one of four Lund pieces to go on the block during a marathon of Impressionist, modern, postwar and contemporary art sales in New York that tallied $2.3 billion.

The first painting by Alex Israel to appear at auction surpassed $1 million at Christie’s on May 12. Created in 2012 at the Warner Bros. studio in Burbank, California, “Sky Backdrop” depicted the California sky in gradations of pink and blue. A year and a half ago, Israel’s sky paintings sold through his gallery for about $70,000 to $90,000, dealers said. Javier Peres, whose Peres Projects represents Israel, declined to comment.

“This segment of the art market is a bubble,” said Todd Levin, director of New York-based Levin Art Group. “It doesn’t mean that the entire art market is a bubble. The $142 million Francis Bacon is an entirely different thing than the $1 million Alex Israel.”

Highest Price

The highest price for a flipped work last week belongs to a 2011 painting by Mark Grotjahn, “Untitled (In and Out of the Darkness Face 43.01),” which sold for $6 million. In October 2011, the work made news by fetching $1 million at a benefit gala for TWO x TWO for AIDS and Art, an annual auction in Dallas that raises money for the Dallas Museum of Art and for AIDS research.

“Art is a viable commodity, it’s very clear,” said Jeff Poe of Blum and Poe gallery in Los Angeles, New York and Tokyo, which represents Grotjahn. “Flipping isn’t a concern, it’s a reality.”

Oscar Murillo is a poster boy for the flipping craze. The artist’s 2011 abstract canvas of doodles and dirt fetched $401,000 at a Phillips auction in September. Less than two years earlier it sold through a gallery for about $7,000, according to Stefan Simchowitz, a Los Angeles-based collector and entrepreneur, whose client was the seller. The auction price generated a 5,600 percent return for the owner.

Temptation Great

“The temptation could be too great” to flip, Poe said.

Last week, four paintings by Murillo at auction tallied $790,750, each surpassing its high target. Murillo’s 40 works generated about $7.1 million at auction in one year.

A 2011 trompe-l’oeil painting by Tauba Auerbach soared to an artist record of $1.8 million at Phillips on May 15. The year it was created, prices for new paintings by Auerbach ranged from $40,000 to $60,000, dealers said.

German artist David Ostrowski achieved a personal auction record of $281,000 for his 2012 piece, “F (Between Two Ferns),” four times its high estimate of $70,000. Layered with white paint, paper and lacquer, the canvas looked almost monochrome save for an uneven blue bracket at the center. Ostrowski’s works have been selling out at gallery shows and fairs in the past year, with prices at about 25,000 euros ($34,140). Peres, whose Peres Projects represents Ostrowski, declined to comment.

‘Financial Sport’

Flipping art has “definitely become some kind of a financial sport,” said Mera Rubell, whose Rubell Family Collection/Contemporary Arts Foundation in Miami is known for its trend-setting exhibition of young artists. “It’s painful to see.”

In December 2012, the foundation unveiled commissioned, monumental paintings by Murillo during the Art Basel Miami Beach contemporary-art fair, catapulting the career of the Colombian-born, London-based artist.

The Rubells have no intention of selling their Murillos, she said.

“We believe his best work is yet to come,” Rubell said. “We are lucky to be part of his story. It doesn’t compare with the money.”

Source: Bloomberg