Hopping with Hopper, Hocking a Hockney: My Irreverent Takeaways from the Major Fall Sales

The big fall evening auctions of Impressionist, modern, postwar and contemporary works at Sotheby’s and Christie’s were a mixed bag, yielding generally solid but unspectacular results. The sweet spot for the typical offering fell slightly short of or just grazed the low estimate, with some very notable exceptions on both the upside and the downside.

In other words, the auction houses’ presale estimates of the prices that their offerings would fetch were often aspirational, but the reserves (prearranged, confidential prices below which works won’t sell) were largely realistic. It’s possible that the auction houses, seeing the handwriting on the wall, persuaded some consignors to lower their reserves before the sale. A few works sold for prices shockingly below low estimate.

Sotheby’s Nov. 14 Contemporary sale was 96.9% sold by lot; Christie’s Nov. 15 Contemporary sale was 85% sold by lot; 93% sold by value. (I wrote about the Impressionist/Modern sales here and here, and about the Ebsworth single-owner sale here.) A Sotheby’s spokesperson told me that since early this year, his firm is “no longer reporting ‘sold by value,’ which was widely misunderstood.”

Actually, it’s not that hard to understand, with a little help from CultureGrrl: The “sold by value” percentage is (or, in Sotheby’s case, “was”) equal to the total hammer price of successfully sold works divided by the total hammer price of all works in the auction (including those that failed to sell at hammer). A low “percent sold by value” usually bespeaks relatively expensive casualties, or else a large number of less pricey works that failed to sell.

A problem with that metric is that the more bids that a chandelier-bidding auctioneer and/or lowball genuine bidders lob at an ultimately unsold work, the worse the sale’s “percent sold by value” will look.

Enough with the technicalities. Let’s do some museum-related analysis of the artworld’s commercial side:

—Major Museum Exposure May Enhance Prices for Desirable Works (to museums’ disadvantage):

The two top lots in the major fall sales—Edward Hopper‘s $91.88-million Chop Suey and David Hockney’s $90.31-million Portrait of an Artist (Pool with Two Figures)—were both instantly recognizable to potential bidders as embodying what we know and love about those artists. (Both sold at Christie’s.)

Part of that broad-based familiarity (leading to robust bidding) was due to both paintings’ extensive museum exposure: The widely exhibited Hopper had been coveted by the Seattle Art Museum (SAM), which had expected to receive it as a promised gift from the late Barney Ebsworth (but then had the rug pulled out from under it):

If Ebsworth was a delinquent donor who failed to deliver on the full scope of his promises to SAM, the late Harry (“Hunk”) Anderson and his wife Mary (“Moo”) were model donors (and, to my eye, greater collectors than Ebsworth). They brilliantly fulfilled their mission to establish The Anderson Collection at Stanford in a new, purpose-built facility, to which they gave the cream of their collection, after having previously donated an important group of Pop Art to the San Francisco Museum of Modern Art and a collection of master prints to the Fine Arts Museums of San Francisco. (Some remaining works were sold last week at Christie’s.)

The luminous Hockney that headlined Christie’s contemporary sale had recently been the star of the Metropolitan Museum’s acclaimed retrospective for the artist. It garnered almost as much buzz for its unconventional conditions of sale (more on that, below) as for its sensuous, elegiac beauty:

Magritte, whose market cachet may have been enhanced by the acclaimed recent show of his work at the San Francisco Museum of Modern Art, sold well at Sotheby’s.

But two Magrittes offered by Christie’s lacked this one’s mysterious aura and failed to find buyers.

One of the most surprising (and costly) failures was this sparkling, jewel-like van Gogh, which may have fallen short at Christie’s because it was neither a roiling landscape nor a character-revealing portrait:

I’d like to think that a museum—namely, the Studio Museum in Harlem—deserves some credit for the widely noted ascendance of African American artists at last week’s auctions, with many presale estimates exceeded and auction records broken. The success at last May’s auctions at Sotheby’s of works donated by African American artists to benefit the Studio Museum’s planned new building may have paved the way for this month’s breakout results.

That museum has just announced further plans to increase the visibility of African American artists—Black Refractions: Highlights from the Studio Museum in Harlem, a widely traveling exhibition of more than 100 works from its permanent collection by almost 80 artists, organized in collaboration with the American Federation of Arts.

The disadvantage of museums’ helping to boost prices for certain works and artists by exhibiting them is that this makes the greatest art even more unaffordable for most museums. They must rely almost entirely on the kindness of donors. (Is anyone donating that Hockney? It’s a museum picture, if there ever was one.)

—Joe Lewis Reads CultureGrrl

Just kidding. But perhaps he has read me in the Wall Street Journal.

In any event, astute billionaire Joe Lewis, reportedly the “anonymous” seller of the Hockney, had the knowledge, guts or instincts to do what I have repeatedly called for (most recently in my Gloom at the Top post at the conclusion of last spring’s big New York auctions)—eschewing side-deals with made by consignment-hungry auctioneers with third-party guarantors and irrevocable bidders. These confidential prearrangements eliminate the downside risk from consigning works to auction but have increasingly appeared to be competition-killers, depressing the upside.

With a tolerance for risk honed by his life as a currency trader, Lewis took a chance and raked in all the profits. When works are guaranteed, the backer—whether the auction house itself or a third party—typically takes a portion of the upside if bidding exceeds the amount of the guarantee. Lewis apparently saw no compelling reason to give anything away. Throwing caution to the wind, he even sold his treasure without the protection of a reserve, allowing the refreshing anomaly of auctioneer Jussi Pylkkänen‘s starting the bidding at $18 million for a work estimated to hammer at about $80 million (which it ultimately did).

You can view the surprisingly calm, businesslike achievement of the highest auction price for a living artist at 24:23 in the Christie’s video, below, of the entire contemporary auction. Did everyone there feel that the result was preordained?

In her recent informative Art Newspaper article about the current state of play regarding guarantees, Anna Brady opined that “although guarantees have been the subject of criticism for inflating prices, it is hard to imagine returning to a market without them.” But I can easily imagine that, as should anyone who believes that the market would be healthier and consumer confidence would be stronger if auction prices were to returned to the classic definition of “fair market value”—“the price that property would sell for on the open market…that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.” Right now, buyers have no idea of what exactly has been concocted in behind-the-scenes machinations.

Speaking of risk-taking, here’s what Sotheby’s said in its third-quarter Form 10-Q report to the SEC, regarding its own financial exposure from auction guarantees:

As of September 30, 2018, we had outstanding auction guarantees totaling $377.7 million. Each of the auction guarantees outstanding as of September 30, 2018 has a minimum guaranteed price that is within or below the range of the presale auction estimates for the underlying property. Substantially all of the property related to these auction guarantees is being offered at auctions during the fourth quarter of 2018.

Our financial exposure under these auction guarantees is reduced by $134.6 million as a result of our use of contractual risk sharing arrangements with third parties, as discussed below. After taking into account these risk-sharing arrangements, as of September 30, 2018, our net financial exposure related to the auction guarantees was $243.1 million….

As of October 30, 2018, we had outstanding auction guarantees totaling $414.4 million and, as of that date, our financial exposure was reduced by risk-sharing arrangements totaling $296.1 million. After taking into account these risk-sharing arrangements, as of October 30, 2018, our net financial exposure related to auction guarantees was $118.3 million.

Each of the auction guarantees outstanding as of October 30, 2018 has a minimum guaranteed price that is within or below the range of the presale auction estimates for the underlying property. The property related to these auction guarantees is being offered at auctions during the fourth quarter of 2018 and throughout 2019. As of October 30, 2018, we have advanced $16.5 million of the total guaranteed amount.

—Some Journalists Need a Refresher Course on Presale Estimates: You’d think that pundits who regularly cover the art market would understand what a presale estimate is. They kinda do, but choose to disregard it in reporting auction results. Instead, they echo the auction houses’ postsale analysis, at the expense of accuracy.

I’ve griped about this numerous times, not only on CultureGrrl but also in my Nov. 15, 2008 Wall Street Journal piece, Making Art Sales Look Stronger, where I clearly laid out the problem:

Contrary to what you might expect, press accounts, relying on the information released by the auction houses, don’t normally measure a sale’s success by comparing an object’s hammer price—the last amount announced by the auctioneer—with the presale estimate of hammer price. Instead, they almost invariably compare the estimate of hammer price to a figure arrived at by adding hammer price to the commission that the auction house charges the buyer [i.e., the final price].

The result is an apples-to-oranges comparison that makes the sale results look better than they actually are, because they’ve been inflated by the commission.

After I wrote that, more art-market journalists were more careful about comparing apples to apples—presale estimates of hammer prices to the actual hammer prices (not to the hammer prices plus buyer’s premium). Having forgotten this lesson, they’ve again taken to saying that an auction result is within estimate in circumstances where the result is actually below estimate, unless you inappropriately add in the buyer’s premium (which is not part of the presale estimate).

This is a misunderstanding that auction houses are happy to encourage, in the interest of making their sales seem stronger than they actually are.

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