Juicy Gossip Friday

ONE : Know Your Landlord

In an interesting twist to the perpetually problematic art+real estate relationship, the owners of Sotheby's New York office are putting it on the market. Lisa Sandler of Bloomberg reports that the owners, RFR Holding LLC, bought the building back in 2003 from Sotheby's who at the time was facing anti-trust fines (they then leased the space back). The price RFR bought it for 4 years ago? $175 million. According to RFR, though, they've received offers as high as $500 million for it today.

That increase is a reflection of just how insane the NYC real estate market is, but there's much more to this story than record-breaking prices. Sotheby's is objecting to RFR's marketing of their building on the grounds that their lease agreement requires their landlord to offer them the building first:

"The company is pursuing its rights with respect to the right of first offer,'" Sotheby's said in a quarterly filing with the U.S. Securities and Exchange Commission on Aug. 9. If successful, "this could result in a material benefit to the company.'"

I haven't run out and received a degree in real estate law since we last talked, but I'm not entirely sure how doing so is going to help Sotheby's buy the building for a better price. If RFR knows the building could fetch half a billion dollars, they might as well price it up in that range, no? (Lawyers, feel free to educate me here). Of course, as the article points out, Sotheby's hasn't come out and said they want to buy their building. They may simply be pursuing this alleged breach of contract to see what they can get out of it.

But hang on, there's more. The real juice in this property game gossip is this little tidbit:

RFR's president, Aby Rosen, became a kingpin of New York real estate with the $375 million purchase of the Seagram Building on Park Avenue in 2000. He is an art collector and sits on the board of auction house Phillips de Pury & Co.

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TWO : From A to B and Back Again

In case you missed it when Tyler posted on it, Modern Art Notes super-guest blogger (and all around brilliant art world insider) Todd Gibson reframes the growing grumbling about "the direction that the initially promising Warhol Foundation Art Writers Grant Program has gone."

So think on this: if Andy Warhol were alive today, and if he were personally giving his foundation's money to arts writers, who would he bankroll?

But let me back up. Here's Tyler on what's spurring this discontent (with a link to Andrew Berardini with the details):

Meanwhile, at The Expanded Field, Andrew Berardini finds some of the many flaws with the Warhol Foundation's art-writers grant program, including cronyism and a lack of younger grantees. He's right. (Though specific examples -- they're there -- would make his case even stronger.) Last year the foundation asked me to encourage writers who blog to apply. This year? I'd say don't bother. After seeing who the grantees (and the panelists) were last year, I'm not.

OK, so to be fair I should quote Andrew, who pointed out:

Though nearly every project given in the last round of this grant project
is legitimate and deserving, the grantees are hardly an undistinguished bunch. [emphasis mine]

Disclosure: I applied for one of those grants last year, after considerable encouragement, and thought I would at least blog about the experience, but not getting one didn't end up being as interesting as I thought it might.

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THREE : Bubble, bubble, art world trouble?

The death watch for the contemporary art market has begun in earnest. Charlie Finch notes:

Those that believe the sky is the limit for contemporary art prices need only look at the current hedge-fund problems roiling the markets for a caution sign.

Even more ominous sounding is this tidbit:

The unseen leverage factor in contemporary art lies in the way many galleries do business: using the rising value of inventory as the basis for bank credit to pay day-to-day expenses, top-of-the-line rents and expansions to hot new neighborhoods like Loisaida. As art prices rise, debt becomes easier to acquire, gallery wall space increases to showcase the hot art for day-tripping collectors who write more checks, increasing the base value of all present and future works by in-demand artists, whose inventory valuations allow galleries to gain more credit. Reduce surplus collector cash and these equations unravel quickly, the way the inability of middle-class home owners to pay their mortgages is unraveling hedge funds managed by Wall Street's most prestigious firms, who should know better, but never seem to.

Todd Gibson is also concerned:

During the first two weeks of August, while everyone in the art world was away doing what art world people do during the summer, this long-awaited correction may have started.

Over at Art World Salon, Ian Charles Stewart is looking for some concrete indications of whether that pin is about to prick the spherical canopy around art prices, asking "does anyone know if auction houses are still offering sales guarantees this year?"

In a financial market turning south it is a common strategy to buy “put options” before everyone else notices; i.e. contracts to lock in now, a right to sell something in the future, to someone else at a price fixed now, when you think the market as a whole is falling. An Art market equivalent would be to agree with an auction house now to sell a collection later in the year, on condition of sale price guarantees, set now, at current pricing. Always a risk for the auction house (ask Phillips de Pury), in a real down market it can be a disaster. The smart auction houses understand this, of course. If they are nervous about market values, they stop giving guarantees. Perhaps only in some markets. Perhaps in all.

You'll have to head over there to find the answer to Ian's question.

Have a juicy weekend folks.