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the art market ・exclusive, with controlled access

While a “mature” market may be “fair” and present an even playing field for all market participants, the art market remains “exclusive,” with access controlled by market participants.

Five panelists who met during Art Basel to discuss the art market turned their attention to a number of topics, including market-defined hierarchies and market-controlled access.

I quote from the article that appeared in Artsy as the words are fun, worth reading in the original, and insightful:

Rennie, the veteran collector, described visiting Mary Boone’s gallery [Mary Boone Gallery] in the early 1990s, dressed in a ripped ski jacket, and asking two young men standing behind a desk and a woman sitting behind a typewriter whether Mary was in. Both men said no. As Rennie began to explain who he was and why he was visiting, the woman behind the typewriter jumped up, extended a hand and said, “Hi Bob, I’m Mary Boone.” That kind of selective attention, he said, happens routinely in the art world.

Further along in his collecting career, in 1999, Rennie said, things changed “very clearly” for him and his wife, after they acquired Mike Kelley’s John Glenn Memorial Detroit River Reclamation Project (Including The Local Culture Pictorial Guide, 1968-1972, Wayne/Westland Eagle).

“I found that when I mentioned that, I got into the club,” he said. “We all of a sudden got access to works that other collectors couldn’t be the custodians of.” He challenged anyone listening to “try and get a Mark Bradford.” You can’t, he said, unless you have a relationship with museums or an existing collection deemed strong or important enough to merit the opportunity to buy one of his works.

Observed Olav Velthuis of the University of Amsterdam,

“It is that part of the market that makes it attractive to people, the whole spiel about the waiting lists, and about getting access and not getting access.”

The art market presents a “a status mechanism,” an indicator of where people “are in this global cultural elite.”

See:

“The Art Market Has Changed Dramatically – But Is It a Mature Industry?” | Anna Louie Sussman, Artsy, 8 July 2017

#art #artmarket #realestate  #collecting #collections #ArtBasel #luxury #smartluxury

 

 

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Chicago ・66% of office buildings certified LEED or Energy Star

“Green certification is no longer an oddity or nice to have. In many top markets it’s an oddity if you’re not green certified.”

Nils Kok, associate professor, Maastricht University, the Netherlands

Chicago now has the highest percentage, 66%, of certified LEED or Energy Star office buildings among the 30 largest real estate markets in the United States. (CBRE and Maastricht University study, 6 July 2017).

See:

“Chicago Grabs Lead in Green Office Buildings, Study Shows” | Emily Chasan, Bloomberg, 6 July 2017

“2017 National Green Building Adoption Index” | Maastricht University, CBRE, Real Green, 6 July 2017

 #Chicago #LEED #EnergyStar #commercialbuildings #commercialrealestate #officebuildings #CBRE #MaastrichtUniversity #realestate #emissions #energy
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luxury ・ evolving

Sara Bernát, a freelance brand strategist and Ph.D candidate at Humboldt Universitat, Berlin, focuses on the sociology of luxury.

The aim of her research is “to study social, cultural, and economic forces that have culminated to shape and define the concept of luxury throughout modern historical eras.”

She observes that educated millenials are no longer able to ignore irresponsible social and environmental impacts of product manufacture that promotes and seeks to fulfill heedless demand and unbridled consumption.

Consumerism, however, is core to our existence today. It is also tied deeply into psychological and social behavior. And so, the solution to the sociological and environmental threats lays within.

Rather than becoming the social pariah, a number of new luxury brands recognized that traditional luxury may carry the solution.

With its limited production, carefully sourced materials and respect for craftsmanship, sustainability could be innate to luxury.

See:

“How luxury is the millenial’s unlikely weapon to fight social inequality” | Sara Bernát, Luxury Daily, 4 July 2017

Sara Bernát | LinkedIn

 

#luxury #smartluxury #realestate #art #resilience

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Max Beckmann’s “Hölle der Vögel” (Birds’ Hell) (1937-1938) Sells for US$45,834,365

Max Beckmann’s “Hölle der Vögel” (Birds’ Hell) sold for US$45,834,365 at Christie’s London Tuesday evening (June 27).

The painting, executed in oil on canvas in 1937 – 1938, drew three bidders and sold to Larry Gagosian. It is understood that Mr. Gagosian was bidding on behalf of the New York collector Leon Black.

Art dealer Richard Feigen acquired the painting in 1983. Hölle der Vögel” (Bird’s Hell) has remained in his collection until now.

See:

“Boosted by Gagosian’s Record Bid on Beckmann, Christie’s Notches a $190 Million Impressionist and Modern Sale” | Colin Gleadell, Artnet.com, 27 June 2017

Christie’s Impressionist and Modern Art Evening Sale, London, 27 June 2017, Results | Christie’s

Max Beckmann Hölle der Vögel, 1937-38 (special catalogue) | Christie’s

 

#art #artcollections #artmarket #MaxBeckmann #BirdsHell #HöllederVögel #Christie’s #LarryGagosian #LeonBlack #realestate #resilience #luxury #urbanluxury #NewYork #London

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coastal property, coastal property values, & flood risk

For those considering an investment in real property (residential or commercial) along the eastern seaboard of the United States, insights are offered in an article published in April by the New York Times, “When Rising Seas Transform Risk Into Certainty” (Brooke Jarvis, 18 April 2017).

Some highlights follow. The upshot? Conduct your discovery and due diligence carefully. Try to think long-ish term (what are your long-term investment investment horizons, when do you plan to exit, e.g., sell your house or property, etc.). Consider a  variety of numbers (not only interest rates, number of bedrooms and bathrooms, square footage, appraisals, etc., but also sea levels, projected sea levels, flood zones, insurance premiums, any projected rise of insurance premiums, etc.). Ask your lender (if you are financing), real estate professional, and insurance professional lots and lots of questions.

  • Economists aren’t sure if coastal property values will decline gradually, as the life expectancy of homes shrinks, or precipitously, “the first time a lender refuses to make a mortgage on a nearby house or an insurer refuses to issue a homeowner’s policy.” (Sean Becketti, chief economist, Freddie Mac)
  • “Hundred-year flood zone” | A hundred-year flood zone sounds like sounds like a factor of time, as if the land were expected to flood only once every 100 years. What it really means is the land has a one percent (1%) chance of flooding each year.
  • If the property that you are considering buying is in a “hundred-year flood zone,” then in order to get a federally backed mortgage, you will be required to pay for flood insurance through the National Flood Insurance Program (N.F.I.P.).
  • Congress created the N.F.I.P. (the National Flood Insurance Program) in the late 1960s
  • The N.F.I.P. was intended to encourage safer building practices
    • The N.F.I.P. offers insurance coverage, some of it subsidized, to communities that meet floodplain-management requirements;
    • People that want to buy a house in a flood-prone area are required to buy N.F.I.P. insurance coverage.
    • The N.F.I.P. provides grants for mitigation projects, like elevating houses, meant to reduce flooding damage.
  • Critics of the N.F.I.P. observe that N.F.I.P. flood insurance, by bailing people out repeatedly and by spreading the true costs of risk, incentivizes people to build, and stay, in flood-prone areas instead of encouraging safer building practices.
  • As storm damage becomes more costly, the N.F.I.P. is getting deeper and deeper (in the order of tens of billions of dollars) into debt. The expense of insuring coastal properties is increasing. Taxpayer-subsidized premiums are not able to meet the costs of insuring the coastal properties.
  • In 2012 and 2014, Congress responded to the N.F.I.P.’s troubles with bills known as Biggert-Waters and Grimm-Waters.
  • The Biggert-Waters bill of 2012 cut subsidies and phased out grandfathered rates so that premiums would start to reflect the true risk that properties face, achieving “actuarial soundness.”
  • Prospective buyers are disturbed less about the risk of high waters and more about the certainty of high premiums.
  • Insurance provides stability, both financial and mental, in an uncertain world, and implies “mastery of risk”.
    • As waters rise, flooding in low-lying places without sea walls will become more and more common.
    • The presence of water will become less about chance and more about certainty.
    • Few insurers are willing to bet against a certainty.
  • The math of the “collective hedge against helplessness” (insurance) in the face of climate insecurity will get harder.
  • AIR Worldwide models the risks of catastrophic events for insurance companies and governments.
  • According to AIR Worldwide, $1.1 trillion in property assets along the Eastern Seaboard lie within the path of a hundred-year storm surge.
    • $1.1 trillion represents only the risk on the East Coast under current sea levels.
  • According to a 2008 analysis by Risk Management Solutions (R.M.S.) and Lloyd’s of London, annual losses from storm surges in coastal areas globally could double by the 2030s.
  • In 2015, the N.F.I.P. asked R.M.S. and AIR Worldwide to update its modeling of financial exposure from possible storms to properties it insures across the country
  • In 2016 and 2017, the N.F.I.P. transferred some of its risk to large, private companies known as reinsurers (insurance for insurance companies)
  • A vote to reauthorize (or not) the N.F.I.P. is scheduled to take place in September of this year
  • Some believes it is time to start limiting coverage for properties that are flooded over and over.
    • Multiple losses “should force us to shift our position where we make an offer of mitigation to a homeowner, and if they do not choose to take it, we don’t renew their policy.”
  • Flooding is the most common, and most expensive, natural disaster in the United States.
  • Private insurers have long declined to cover flood risk.
  • Some private insurers are beginning to show an interest in covering flood insurance for the first time.
    • Again, prospective buyers are disturbed less about the risk of high waters and more about the certainty of high premiums.
    • The end of subsidized coverage and the possibility of higher premiums encourages private insurers
    • As flood insurance premiums increase,
    • private insurers have a greater incentive to compete.
    • Private insurers can seek and obtain private underwriting from companies such as Lloyd’s of London and A.I.G. subsidiaries.
  • More accurate risk analysis, with powerful computers running more simulations that include more variables, also incentivizes private insurers
    • Premiums from private insurers can now cost 30 to 35 percent less than those policies bought through FEMA
    • Yet, private companies issue such policies in the belief that the outcomes against which risk is covered will not occur
    • Private insurance is “of course” not interested in covering severe-repetitive-loss properties or buildings whose exposure is higher than what can be recouped in premiums.
  • Mike Vernon, an insurance agent in the Hampton Roads area of Norfolk/Virginia Beach, gets most of his business from referrals from real estate agents. He observes
    • “We’re often actually making the building worse to bring down premiums,” filling in basements, or preparing a house to let water flow through it instead of keeping it out (yes, the house may be damaged by moisture, but at least it won’t be pushed off its foundation). “Or we’re eliminating something good, like a sunroom on a slab.”
    • “People are getting killed. To an appraiser it’s still worth $300,000, but to the real world it ain’t worth nothing, because it’s not going to sell.”

See:

“When Rising Seas Transform Risk Into Certainty” | Brooke Jarvis, The New York Times, 18 April 2017

The National Flood Insurance Program (N.F.I.P.) | FEMA

“Biggert-Waters Flood Insurance Reform Act of 2012 Timeline” | FEMA

“H.R. 3370 – Homeowner Flood Insurance Affordability Act of 2014” | 113th Congress, Congress.gov

#realestate #risk #riskmanagement #propertyvalues #floodrisk #insurance #NFIP #FEMA #resilience #smartluxury #art #collections #collectionsmanagement

 

 

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the luxury market is driving LEED & green building tech

The use of  advances in green building technology and LEED (USGBC’s Leadership in Energy and Environmental Design) by U.S. developers and architects is increasingly market driven.

Such initiatives have oftentimes been borne out of environmental regulations and tax subsidies initiated at local, state and federal levels.

It appears, however, that such environmental regulations and tax subsidies are no longer sole primary drivers.

Rather, market demand is also driving the adoption of green building technology and LEED in the design and development of luxury buildings.

People understand the need for and benefits of green building technologies and carbon neutral energy programs. Developers, architects, and designers are beginning to follow suit.

Here are some examples:

  • Marcos Corti, CEO, Consultatio, the developer of Oceana, the first building on Bal Harbour, Florida to be LEED certified:

“The trend is to go LEED and to continue that path. It is on everybody. If the government or the leader is not going that way, I think the entire population is going that way, so it isn’t going to change.”

  • Stephen Glascock, President and Managing Partner, founded New York-based Anbau in 1998 based on the vision that “good design makes good business.” The Anbau focus is on residential condominium development in New York City, seeking value and appropriate risk-adjusted returns.

“We don’t get any subsidies for LEED stuff. All the sustainable stuff comes from what we feel is the right thing to do.”

  • Christopher Gandolfo, vice president of development, Swire Properties. Swire Properties is active globally. Brickell City Centre is 9.1-acre city-within-a-city, a retail-led mixed complex of luxury condo towers, class-A office buildings, a five-star hotel, and an open-air shopping center, engineered and built on platforms over the street level that link shops, restaurants, hotel and the other buildings.

“We are pioneer for the time. I’d like to believe other good developers will follow suit. It is up to the public to demand it to some degree as well.”

LEED “helps keep the very large team of designers, specialist consultants, and contractors who work on a project like 520 W 28th Street focused on the project’s performance and indoor air quality goals, and it gives our buyers an extra level of comfort that we achieved these goals.”

  • Brandon Specketer, partner at COOKFOX Architects, “architectural studio dedicated to a vision of integrated, environmentally responsive design. We believe good design is sustainable and we are committed to being wise stewards of our shared natural and cultural resources.”

COOKFOX project 550 Vanderbilt in Prospect Heights, Brooklyn utilizes Biophilic Design principles throughout the building to connect residents to the natural world for enhanced creativity, clarity of thought, and improved well being.

“LEED isn’t a checklist. It is a standard of quality that helps everyone meet a certain standard.”

See:

“Green Building in U.S. Luxury Developments Continues to Flourish” | Ariel Ramchandani, Mansion Global, 29 May 2017

“City in a city: Brickell City Centre set to transform downtown Miami” | Debora Lima, Miami Herald, 15 May 2016

550 Vanderbilt | COOKFOX

#realestate #luxury #smartluxury #LEED #greentech #Consultatio #Anbau #SwireProperties #RelatedCompanies #COOKFOX #realestatedevelopment #architecture #design #NewYork #Miami #climaterisk #urbanliving

 

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CO2 vibrates, that’s just what it does

The CO2 molecule vibrates. As a matter of fact, it vibrates in three different ways. As it vibrates, it absorbs and emits the radiant heat (energy) of our sun as it reaches our earth, and it does so very well and very efficiently … That’s just what it does.

The CO2 molecule is composed of three atoms: one atom of carbon (C) and two atoms of oxygen (O). Hence CO2, carbon dioxide (“di” refers to “two”).

The carbon and oxygen atoms move around each other and interact with each other at different frequencies. Each different way of moving around constitutes a vibration mode.

In one vibration mode, with the oxygen and carbon atoms interacting at a certain frequency, the CO2 molecule attracts and absorbs the energy (radiant heat) of the sun. Just the way a magnet might attract a paper clip.

As the molecule absorbs the energy of the sun, it switches into another vibration mode, moving faster. In this faster vibration mode, with the carbon and oxygen atoms interacting at another frequency, the energy of the sun is emitted. Think of two magnets, repulsing each other.

This is a very good thing. Without the presence of these little CO2 factories doing their work day in and day out, absorbing and emitting the radiant heat (energy) of our sun, our planet would be a frozen ball of ice.

These little CO2 factories do their work well and efficiently. That’s just what they do. The more of them there are in the atmosphere, the more radiant heat is absorbed and emitted into the air all around all of us.

See:

“What is Infrared?” | Jim Lucas, Live Science, 26 March 2015

“Carbon Dioxide Absorbs and Re-emits Infrared Radiation” | UCAR Center for Science Education

“Molecules Vibrate” | UCAR Center for Science Education

“John Tyndall” | Wikipedia

“Introduction to Structure Determination; Infrared: Introduction” | Prof. Adam Bridgeman, School of Chemistry, The University of Sydney, 2017.

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art storage & protection @ $1+ billion globally

The global art market generated sales of about $65 billion in 2016 according to the TEFAF Art Market Report 2017.

The growing, global network of facilities to store art now generates revenues of over $1 billion a year. Many of these spaces serve multiple objectives – including security, environmental protections, and trade: Sto

  • security
    • video surveillance
    • retinal scanning
  • space | collectors have too much to keep at home
  • protection
    • climate-controlled environments
    • fire-resistant walls
    • air-filtration
    • flood control
    • LEED and BREEAM building certifications
  • investment purchases
  • tax benefits
  • tax-suspended transport to and from galleries | as long as works of art return to storage no duty is payable, even if ownership of the art has changed
  • “1031 exchange” friendly
  • gallery inventory between shows and art fairs
  • storage of art taken by banks as collateral against loans
  • viewing rooms that can be rented on a more permanent basis | in-house, private sales and transfers of ownership
  • passport free access (freeports within airport perimeters)

Simon Hornby, the president of Crozier Fine Arts, estimates that 80% or even more of all the world’s art is in storage at any one time.

The art storage business has doubled in size in eight years and continues to grow.

“Until about ten years ago, Modern and contemporary art collectors were mainly made up of art enthusiasts and amateurs, they had a real passion, spending their money on what they liked; they collected in order to simply enjoy the work in their home environment. Today you have to work with an increasing number of art funds or speculators buying art for investment. Art buying has become accessible to a much larger audience than before and is considered an asset. The result of this is that more work sleeps in warehouses rather than hanging in collectors’ homes.”

Stephane Custot, Waddington Custot Gallery, London

“In the last year, I only physically saw one piece of art that I negotiated. Everything else was bought and sold via jpegs and remained in storage. It was all for investment.”

New York dealer and appraiser

In order to protect the assets, moreover, built environment investment is attempting to keep up with the evolution of demand, including security and environmental protections.

A state-of-the-art storage facility with “foreign trade zone” (FTZ) status (a freeport), ARCIS Fine Art & Collection Care, is under construction on Manhattan’s West 146th Street. Developed by Cayre Equities, the project has taken two years and over $40 million. Executive Director Tom Sapienza and Tom Lay, both formerly with Crozier Fine Arts, were recruited by art collector, real estate developer, and Crozier founder Ken Cayre to manage the project.

The five-story, 110,000 square foot is scheduled to open next month (July 2017).  ARCIS is Latin for “fortress”. The facility is designed and engineered to provide and enhance both environmental and security protections.

With the objective of constructing a museum-quality, sustainable, state-of-the-art secure building, Sapienza and Lay took crash courses in thermal dynamics and consulted with the professional services branch of the Van Gogh Museum in Amsterdam. Works of art will be scanned as they move through the building. State-of-the-art air filters are installed; air will change three to six times an hour.  LEED and BREEAM certifications are to be achieved for the building.

See:

“TEFAF’s 2017 Art Market Report” | Marion Maneker, Art Market Monitor, 6 March 2017

“TEFAF Art Market Report 2017” | Prof. Dr. Rachel A.J. Pownall, TEFAF Chair in Art Markets, The European Fine Art Foundation, March 2017

“Where does all the art go after a fair?” | Georgina Adam, The Art Newspaper, 16 June 2017

“Picasso Finds Possible Digs in Harlem $2.5 Billion Art Port” | Katya Kazakina, Bloomberg, 2 March 2017

“Will New York Get Its Own Freeport for Art? ARCIS Plans a Tax Haven in Harlem” | Eileen Kinsella, Artnet, 2 March 2017

“One of the World’s Greatest Art Collections Hides Behind This Fence” | Graham Bowley & Doreen Carvajal, The New York Times, 28 May 2016

“About Foreign-Trade Zones and Contact Info” | U.S. Customs and Border Protection, U.S. Department of Homeland Security

#realestate #resilience #smartluxury #art #LEED #BREEAM #finance #investments #artcollections #artmarket #VanGoghMuseum #museums

 

 

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climate risk, credit, bonds, & real estate: AAA is AAA? … or, move to high ground

For more than a century, rating companies have published information helping investors gauge the likelihood that companies and governments will be able to pay back the money they borrow. Investors use those ratings to decide which bonds to buy and gauge the risk of their portfolio. For most of that time, the determinants of creditworthiness were fairly constant, including revenue, debt levels and financial management. And municipal defaults are rare: Moody’s reports fewer than 100 defaults by municipal borrowers it rated between 1970 and 2014.

Climate change introduces a new risk, especially for coastal cities, as storms and floods increase in frequency and intensity, threatening to destroy property and push out residents. That, in turn, can reduce economic activity and tax revenue. Rising seas exacerbate those threats and pose new ones, as expensive property along the water becomes more costly to protect — and, in some cases, may get swallowed up by the ocean and disappear from the property-tax rolls entirely.

When asked by Bloomberg, none of the big three bond raters could cite an example of climate risk affecting the rating of a city’s bonds.

This is climate risk: risk to fundamental variables such as economic activity, property values, and tax bases caused by natural factors (such as storms and floods)  that may be exacerbated by our changing climate.

Climate risk has yet to be fully and sytematically incorporated into investigations into municipal creditworthiness.

Will your municipality will be be able to make timely and full payments on its then current debt load after a storm or flood, or repeated storms or floods, negatively influences economic activity?

What happens when the storms or floods are so severe that they “wipe out the taxation ability? I think this is a real risk” observes Bob Buhr, a former vice president at Moody’s who recently retired as a director at Societe Generale SA.

Predictions are imperfect, especially about the future; no one, no algorithm, no model can perfectly predict the future. The pace of climate change remains uncertain. What climate change, and concomitant effects on communities, community tax revenues, and the likelihood of any community being able to pay back bonds “is not a simple calculation.”

To date, the major ratings agencies are not asking questions about the expected effect of climate change on the economic activity and future tax revenues of US municipalities that look to “cheap money” (municipal bonds) to finance government.

Last September, when Hilton Head Island in South Carolina issued bonds that mature over 20 years, Moody’s gave the debt a triple-A rating. In January 2016, all three major bond companies gave triple-A ratings to long-term bonds issued by the city of Virginia Beach, which the U.S. Navy has said faces severe threats from climate change.

Investors, including 117 investors with $19 trillion in assets, say it would be prudent to include “systematic and transparent consideration” of environmental and other factors in order to identify systemic ESG risks in debt capital markets.

In other words, bond buyers should be warned. If storms and floods decrease property values and tax revenues while increasing spending on mitigating infrastructure such as sea walls, storm drains and flood-resistant buildings, pay back to bond buyers may be impacted.

Property owners – both residential and commercial – might take note.

Should your municipality meet a storm or flood that significantly impacts economic activity and the ability to collect tax revenues, it might be stressed and its ability to make scheduled payments on its municipal debt obligations might be impacted.

This will influence the municipality’s credit. If the credit is downgraded, the municipality will have to pay greater interest on its debt. To pay higher interest, it will have to collect more tax revenues. That means greater economic activity and/or higher taxes.

And/or, the municipality might have to reduce services. Municipal services include physical infrastructure (such as roads, bridges, water) and civic benefits such as fire departments and schools.

If such services are reduced, how prepared are you in your private capacity to initiate efforts and implement necessary steps towards the robust resilience (basically the ability to bounce back after a shock  or multiple shocks to the system) and operability of your real estate holdings (residential, commercial, …)?

Do you have the means (financial, intellectual, technical, etc.) and the time to “do it yourself” (e.g., water, energy, transportation)? How do you use your real estate holdings? How long do you expect to own them? What are your expectations of resale value?

Moving to high ground might help manage the risk.

Food for thought.

See:

“Rising Seas May Wipe Out These Jersey Towns, But They’re Still Rated AAA” | Christopher Flavelle, Bloomberg, 25 May 2017

“Credit ratings agencies embrace more systemic consideration of ESG” | PRI, Principles for Responsible Investment, 26 May 2016

#climatechange #climaterisk #creditrisk #risk #finance #municipalfinance #bonds #credit #realestate #resilience #luxury #smartluxury #urbanluxury