Displaying items by tag: consignments

Sotheby’s, the auction house under pressure from activist investors to boost profit, doubled the amount it can borrow to make art loans in a bid to win clients and top consignments.

Sotheby’s secured a credit line of more than $1 billion to make such loans from a consortium including General Electric Capital Corp., according to a filing last week. The New York-based auction house previously could borrow as much as $550 million under that line.

The international auction house Sotheby’s reported that their second-quarter profits rose 7 percent, thanks in part to a $6.8 million net income tax benefit recognized by the company. Sotheby’s said that second-quarter profits reached $91.7 million, or $1.33 a share, up from last year’s profit of $85.4 million, or $1.24 a share. Expenses rose 2 percent to $171.6 million for the auction house.

Bill Ruprecht, Chairman, President and CEO of Sotheby’s, said, “Our business and the market for quality art at the high end continue to be strong. We saw significant sales growth in Impressionist, Modern and Contemporary Art and posted the best results in the market in the vast majority of key sales this spring. We continue to see fierce competition for high-end consignments and as a result, lower auction commission margins.”

Sotheby’s announced its financial results for the first quarter of 2013, which ended March 31. The auction house’s first quarter total revenues were $101.7 million, a $3.2 million decrease from 2012. The decline was mainly caused by a reduction in auction commission margin from 18.1% to 15%. However, the quarter’s net auction sales increased 23% compared to last year’s first quarter.

High-grossing categories, including Impressionism as well a Modern and Contemporary Art, remained highly competitive. In an effort to enhance revenue and strengthen auction commission margins, Sotheby’s changed its buyer’s premiums structure rate on March 15, 2013. Buyers now pay 25% on the first $100,000 of a work’s selling price; 20% on the portion of the price above $100,000 but under $2 million; and 12% on any remaining amount about $2 million. Since most sales for the first quarter of 2013 took place before this shift occurred, it did not have a substantial impact on Sotheby’s results for the first quarter of 2013.

Due to the nature of the auction seasons, first and third quarters tend to bring in lower revenues than the second and fourth quarters. Typically, first quarter results are not an accurate gauge of expected full year results. Sotheby’s Chairman, President and CEO Bill Ruprecht said, “The first quarter showed a solid increase in auction sales compared to the prior year, but the results illustrate how competitive the market is for the highest value consignments. That competition resulted in lower commission margins, which is reflected on the bottom line.”

Peter Brant, chairman and chief executive officer of the White Birch Paper Co., has fallen from billionaire status and is turning to his contemporary art collection to help recapitalize the family newsprint business. An early patron of Andy Warhol, Brant recently pledged 56 works to the lending arm of Sotheby’s including works by Warhol, Richard Prince, and Jean-Michel Basquiat. Brant also pledged pieces to a unit of the Deutsche Bank AG and his former business partner, including a Warhol from the early 1960s that is said to be worth around $35 million.

Ranked as one of the largest contemporary art collectors in the United States, Brant joins a number of wealthy collectors who have started taking out loans backed artworks to fund their ventures. It is rumored that Brant used his art collection to provide some of the capital needed to buy White Birch out of bankruptcy in 2011.

According to an annual report, Sotheby’s Financial Services provides consignment loans secured by artworks that borrowers have agreed to sell through the auction house, permitting them to get some of the proceeds as much as a year ahead of time. The auction house also makes term loans on works that clients aren’t planning to sell in order to solidify relationships with borrowers that will hopefully lead to future consignments.