Thursday, March 29, 2007

Fine Art Capital

In today's New York Sun business section, Liz Peek has a story on Fine Art Capital, which makes loans against art. Here's how she makes their pitch:

"Andy Augenblick has an 89-year-old client who has, to put it politely, outlived his liquidity. He is not broke exactly, but on the other hand, he has no cash. What he does have is an important painting, valued at many millions of dollars. The client has several choices. He can sell the painting today and live off the proceeds .... Or he can borrow against the painting .... Here's why the decision is an easy one. ... The capital gains tax on art and antiques ... remains at 28%, not 15%. Throw in local taxes, and the 20% commission due an auction house, and the proceeds from selling the painting are sliced in half. ... On the other hand, the client can borrow from Mr. Augenblick's company, Fine Art Capital, and keep the painting, which will find its way into the client's estate. The heirs will pay inheritance taxes, but they would have paid them on the remaining cash proceeds in any case. They avoid the capital gains haircut, since it will have been marked to present value when taken into the estate. They can then sell the picture, incurring only the sales commission."

Here is Fine Art Capital's site. Here is a Financial Times piece from back in October on the "rapidly growing" art-based lending business generally.