Buying Art At Auction Not For Amateurs!

by Joseph K. Levene

Alberto Giacometti’s Walking Man I, Sculpture sold by Sotheby's London for $104 million
An Auction Record for any Work of Art

Buying art at public auction can result in great upside, but for those lacking knowledge, it can also be be financial suicide.

The recent sale of the Andy Warhol 200 Dollars Painting, purchased $385K at Sotheby’s NY historic Robert & Ethel Skull auction and sold by the same owner in November 2009, for $46 million, is an example of great upside.

According to Scott Rayburn of Bloomberg.com, Lilly Safra purchased the bronze cast Alberto Giacometti’s Walking Man I, sculpture sold by Sotheby's London for $104 million. Mrs. Safra is the widow of Edmond J. Safra, the Lebanese banker who died in a 1999 fire in his Monaco apartment. 

The staggering $104 million price established two records, the highest price ever paid for a work of art at public auction, as well as the highest price for an Alberto Giacometti sculpture. More astonishing, Walking Man I is not unique; nine others versions exist. To be specific, Walking Man I is one impression from the numbered edition of 6 casts, plus 4 artist proofs created by the Giacometti.

The first cast, from the edition of 6 of Alberto Giacometti’s Walking Man was initially created for acquisition by David Rockefeller for the Chase Manhattan Art Collection, but in the end, the New York bank better known today as JP Morgan Chase, declined that cast, for a more desirable hand-painted version. As a result, in 1959 Aimé Maeght decided to purchase that cast, for the Maeght Foundation in Saint Paul, where it resides today.

The prior Giacometti Sculpture record was $27.5 million, paid forGrande Femme Debout II, at Christie’s, New York, in May 2008. Mrs. Safra's $104 million purchase of the 1961 Alberto Giacometti is a text book case that buying art at public auction is not recommended for Amateurs.

Mrs. Safra was aware of a second cast of the exact same Alberto Giacometti Sculpture as she was unable to successfully negotiate its purchase from a leading well establishing international art gallery in the $40-$50 million price range.

Frequently, art buyers overpay at auction. Some buyers think it is prestigious to buy at auction and some do not mind paying two or three times the auction estimate, especially buyers from Russia and the Middle East.

Others like the glamour and pereceived celebrity status of buying at auction and having their name appear in the paper. Still others view auction buying like a grudge match, and just want to win the lot by bidding more vs. the alleged underbidder, assuming one exists.

Finally, there is the naive buyer who keeps bidding even though they are actually not bidding against any other bidder. The naïve bidder is not aware the “bidder” does not exist as they are just bidding against a reserve price, the minimum price in which the auction house will sell the respective lot.

Many auction lots do not have more than one bidder; sure the more popular, and in this case, there were several bidders at the lower levels.

Sometimes, the auction house is placing consecutive bids on behalf of the seller's reserve, the minimum price the seller would agree to sell the respective Lot. Skilled auctioneers are like great actors; they know how to achieve the most advantageous results and in this case, the maximum possible price.

A skilled auctioneer can create an Oscar worthy moment by creating the appearance there are other bidders, when often times there is none, often called "bidding off the chandelier" rather than automatic protection of the reserve. They look around the room, take breaths, pause, and in the end, make it appear like there are several bidders.

Savvy art collectors recognize the benefit of having relationships with professional art dealers. When to stop and start bidding, is essential as determining if the lot should at all be purchased.

According to Reyburn, Mrs. Safra "has a net worth of $1 billion, according to Forbes’s 2009 listing of the world's wealthiest individuals, and has a home in London’s Belgravia district.

"Safra is the chairwoman of the Edmond J. Safra Foundation, a philanthropic organization that supports projects devoted to education, science and medicine, religion and humanitarian issues in more than 50 countries, according to the foundations website."

"She has a mansion, Villa Leopolda, at Villefranche-sur-Mer, near Monte Carlo. The property was valued at $500 million in 2008, making it the world’s most expensive house, according to the Guinness book of records. Goldschlager confirmed that Safra still owns Villa Leopolda."

Mrs. Safra also owns property in Geneva, Monaco and New York, said Forbes. In December 2009, she sold a 12th-floor apartment at 820 Fifth Ave. and 63rd Street to Kenneth Griffin, founder of Citadel Investment Group LLC, for $40 million, according to city property records."

For her sake, Mrs. Safra should not risk selling her $104 million Giacometti bronze sculpture anytime soon.