At JTC we administer many luxury assets for our clients, and this often includes helping them with the purchase, ongoing ownership and sale of art. We also work with a range of specialists where external services are required.
Gillian Ralston Jordan from JTC’s Luxury Asset team spoke to Guy Vaissiere, Director at The Fine Art Group, about how clients can finance high value artwork.
What financing options are available for clients?
The ability for collectors to release some of the value tied up in their artworks has become an increasingly important aspect when considering an overall wealth management strategy. The past eighteen months have seen clients’ traditional revenue streams interrupted by the pandemic, and our art finance team has received a significant uptick in enquiries from new clients looking to generate liquidity from their art assets.
Art-secured loans are used for a variety of reasons, whether to provide interim capital for deployment in other business areas, or simply to inject some liquidity into a trust or structure. The fact that art can be leveraged without cross securitisation to other assets, and without the usual in-depth credit underwriting that one would expect from a bank, means that loans can be executed quickly across a wide range of jurisdictions. The use of art finance in the sophisticated management of significant collections is becoming more and more prevalent.
Apart from the impact from Covid, what other significant developments have been seen in art finance recently?
We have seen a noticeable increase in art finance being used for the acquisition of blue chip paintings and sculpture. The recent V-shaped recovery of the art market this year has seen the demand for purchase finance take off, particularly from Asian clients. This type of finance quickly delivers up to 50% of the value of the artwork to be acquired, thereby ensuring the buyer does not miss a one-off chance to obtain a great object, whether that be at auction or through a private sale opportunity. It is also not unusual for collectors to leverage existing works in order to facilitate the acquisition of new pieces.
There is clearly a correlation between the demand for art finance from Asia and the continued development of the art market in the region. Evidence of growth in Asia is seen by Christie’s moving to an expansive new Hong Kong headquarters and Sotheby’s transferring members of its senior management team to the region.
In addition to purchase finance and term loans, another commonly-used type of art finance is the consignment or “advance” loan. This is where the artworks are financed prior to sale, providing immediate liquidity to the seller, thereby allowing more time for a buyer to be found and sale proceeds to be maximised.
How quickly can funding be arranged?
Usually an art loan is funded in 2-3 weeks from the date of initial enquiry, although we did recently execute a transaction in under a week. Purchase finance transactions tend to require fast funding in order to meet a deadline. An art loan is a tailor-made financing solution, and our team is well-used to adjusting a transaction timeline in accordance with clients’ requirements.
The Fine Art Group is a vertically-integrated art services business, with a world-renowned team of art experts at its core. This enables all the valuation, artwork due diligence, and any other expertise that may be required to be carried out in-house, ensuring absolute confidentiality and discretion, as well as an unrivalled speed of execution.
Are there any restrictions on the type of art which can be used as loan collateral or its location?
The majority of art loans are secured on Impressionist, Modern and Contemporary paintings and sculptures, including C20th British Art. Fine jewellery is also acceptable collateral, and this is also an area where we are seeing an increasing demand for finance.
In terms of locations, we lend to borrowers across the globe and have specialist fine art storage facilities across the USA, Europe and Asia.
About the Fine Art Group
The Fine Art Group is an independent, global team of art advisors and art finance experts. It is committed to supporting clients at every level of the art market across five core services: Appraisals, Art Advisory, Agency, Finance and Investment.
Founded over 20 years ago, The Fine Art Group has an unrivalled track record, occupying a unique position within the art ecosystem. From building a collection and acquiring art, appraisals, sale strategy and management to investment opportunities and art financing, The Fine Art Group has the experience and capacity to meet a wide range of needs and interests.
The recent incorporation of Pall Mall Art Advisors to The Fine Art Group, has enlarged the renowned team of experts and expanded the appraisals services worldwide. Pall Mall Art Advisors boasts an established presence in the Unites States and a strong performance track records that complements The Fine Art Group’s offering. Together, the in-house expertise spans Western art from 1500 to present, with an emphasis on Impressionism, Surrealism, Modern & Contemporary in addition to fine jewellery, watches and valuable collectables. Through a trusted network of vetted consultants, The Fine Art Group is also well placed to provide advice across most other categories in the market.
