Leasing Art

Last week the Financial Times ran an interesting story on leasing art and the art leasing firm Artemus. Artemus was founded last year by a group of collectors and high-level investors. The plan is to lease quality fine art to high net worth individuals and corporations. Artemus plans on leasing what collectors are interested in, purchase it and then lease it.  A typical lease term is 5 to 10 years, so these are not short-term contracts.

The Financial Times reports

Art addicts worldwide must, at some point, have imagined how Picasso’s 1955 masterpiece “Les Femmes d’Alger (Version O)” — sold last month for $179.4m — would look perched above their own mantelpiece. But given that the budget of the average aspirational art lover does not quite stretch to a Picasso, the answer could lie instead in renting, rather than buying, sought-after works.

The New York-based art-leasing firm Artemus is poised to capitalise on this appetite for big-name art market darlings. The company was founded last year by the Durst Organization (the property company behind the One World Trade Center development), the investment banker David Storper, and the financier and art-world stalwart Asher Edelman. A well-known corporate raider in the 1980s, the latter also runs Edelman Arts, a secondary-market dealership, and Art Assure, which “specialises in asset-based lending using art as collateral”, among other services.

Artemus aims to attract moneyed individuals and corporations — its website targets media companies, hedge funds, law firms and banks. “We focus on serious art — art with liquidity that looks good in a hotel lobby, in a new building or as part of a private collection. We focus on 400 artists who trade regularly at auction,” Edelman says. And indeed Artemus’s artist roster includes Andy Warhol, Henri Matisse, Marc Chagall, Richard Prince and Jean-Michel Basquiat.

Its business model is intriguing. “We have our own inventory [for leasing], which is minor,” says Edelman. Normally, “an art adviser will recommend a series of works for a collector, and we will go about acquiring those. We also offer the option of acquiring collections and leasing them back to the collectors concerned. Basically, we buy things collectors want, and buy things they have.”

Clients pay an annual lease of “only a fraction of the price of an entire collection”. “The minimum is $1m, regarding the value of the collection, and the maximum is around $100m,” Edelman says. If the client would like to acquire the collection at any time during the five-to-10-year arrangement, they can do so for a small premium above the collection’s initial value.

Connecting with collectors is also integral to the Hong Kong-based company Art-Lease, which counts the New Zealand consulate among its clients. Art-Lease itself does not own any art. The chief executive, former hedge-funder Michael Nock, has partnered with several collectors who have each agreed to make around 50 paintings available for lease (these individuals get a cut of any income). Nock also hires out works from his own foundation and private collection, which includes pieces by Zeng Fanzhi and Wang Guangyi. The fee is usually 6 to 8 per cent of the value of the piece (split equally between the owner of the work and Art-Lease); the minimum lease term is 12 months.

“It gives me an excuse to keep collecting, especially the works of artists I bring to Hong Kong from overseas,” Nock says. “We try to price so that clients will rent rather than feel inclined to buy.” There is a high percentage of renewals and the business is profitable, he emphasises.

In an increasingly crowded marketplace, most art-leasing businesses are trying to put their own spin on services offered. Fellini Gallery in Berlin, for example, pledges that rental fees paid can be converted into credit, which then goes towards 50 per cent of the purchase price. Its inventory encompasses several Asian artists including Yujun Chen of China and Kwang-Hwa Chung of South Korea; all artists receive a percentage of leasing fees, which may prove particularly profitable for some of the emerging artists featured by the gallery.

As for the clients: “start-ups have a natural affinity for leasing, as do individuals who work in start-ups,” says Yuri Lee, director of Fellini Gallery. “Museums more often borrow artworks than lease them, but it depends on the type of work as well as the exhibition.”

Another firm, ArtMgt in New York, runs a similar enterprise, sharing the leasing revenue from a work with the artist. Its founder, David Andrew Frey, explains that ArtMgt serves multinationals and creative professionals seeking art for a variety of film and interior design projects.

A lease can allow up to 100 per cent of the monthly payment to be included as an operating expense, says Fellini Gallery’s website. Offsetting leasing charges against tax is cited as a key benefit by most art-leasing firms.

At the other end of the scale are companies such as Ginger White in Bethnal Green, London, which leases contemporary art to offices, businesses and homes at “sensible prices”, starting from £1.50 per week for some works. Another London company, Rise Art, which offers works for rent or sale, suggests prospective clients take a “personality quiz” to help determine their “art profile”. The business has even appointed a team of “art insiders” who select the artists for the stock list. This eclectic group includes Chris Ingram, entrepreneur and ex-chairman of Woking Football Club, who owns around 650 works.

But Lisa Schiff, a New York-based art adviser, is sceptical about the art-leasing model. “I do see a radical future where ownership isn’t so interesting and access supplants [it], but that would require a massive economic shift which I am not sure will happen in our lifetime, or ever,” she says. “For the moment, I do not find this leasing model even remotely compelling but, admittedly, it might be very forward-thinking.”

The London-based dealer and writer Kenny Schachter is another expert on the Rise Art panel. “I am not so sure it’s the way forward, as much as it’s a way forward. You get a meaningful taste but not the full caloric implications of downing a rich meal. Besides, as an owner of art, you are charged with the care for life, and shackled by the financial risk that can ebb and flow like hemlines.

“But I am 1,000 per cent behind anything that fuels appetites to live with art, be it on a month-to-month basis or for life. And anywhere in between,” he says.

Source: The Financail Times