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Art of collection guarantees real estate development

ART COLLECTION GUARANTEES REAL ESTATE DEVELOPMENT

1st February 2015

High-profile international art fairs such as Art Basel attract the world’s wealthy and provide a platform where investors meet. Often, art collectors are also real estate developers.

Master developer Martin Z. Margulies came to Miami in the 1960s when as he says, “anything would have been an opportunity.” He started small by building single-family houses, then turned to multi-family and eventually big projects like the three towers and hotel on Grove Isle in the 1980s and the Grand Bay Towers on Key Biscayne in the 1990s – both on the waterfront in Miami.

When the hard times of 2007-8 hit South Florida and Miami especially hard, Margulies says he began to think it might be time to start planning the next big project, sensing “the end of a cycle.” So he tried to borrow USD 80 million to build his next project but was turned away because the bankers weren’t ready for risk in residential real estate.

Never one to take no for answer, Margulies asked for a personal loan and offered collateral: a part of his art collection valued at USD 160 million, following the general rule of 200 percent value to loan. The result is the Bellini at Williams Island in Aventura City, north of Miami within Miami-Dade County, the first condominium to break ground in South Florida after the crash.

The Bellini – completed in May – offers 70 units of 3-4 bedrooms with wrap-around balconies ranging from USD 1.5-4.5 million. At 75 Margulies prides himself on not relying on buyers’ deposits to finance construction and takes a hands on approach with everything at the Bellini from art to architecture.  He donated an 11-ft steel circular sculpture called Daimaru IV 1976 by Michael Todd to stand in front of the Bellini.

During a special showing of the Bellini to leading real estate brokers and board members of the Williams Island Property Owners Association, Margulies treated them to an exhibition of art from his private collection. “This event truly fused Martin Margulies’ two passions, art and development,” said Patrick O’Connell, Senior Vice President, EWM real estate.

The art that he has been collecting since the 1980s became available to the public in 1999 when the Margulies Collection at the Warehouse opened in the Wynwood district of Miami, like Al Quoz in Dubai a former industrial area of small factories. They used to sew dresses in the first warehouse he purchased. To that was added a second warehouse and then a purpose-built third, everything joined up to form 45,000 square feet of exhibition space.

The collection focuses on installations, video, and sculpture from after World War II to the present. It attracts visitors year round and school groups as part of the community education programme. The visitors multiply during Art Basel Miami in early December when Miami’s private museums become additional destinations for art lovers.

Obviously enjoying himself, Margulies fielded questions about the collection while greeting a stream of people – some of whom he knew, others at the Warehouse for the first time. Some took his picture in front of favourite works like a gold foil collage by Vietnamese artist Tam Van Tran.

Art Basel began in Miami in 2002, an offshoot of Art Basel, a mainstay on the European modern and contemporary art scene since 1970. At the 13th Art Basel Miami this year, a series of satellite exhibitions around the city complemented the main event.

Art Basel Miami (ABM) takes place in the Miami Beach Convention Centre with 267 galleries from 31 countries and attracted 73,000 visitors this year from Europe, Asia, and the Americas. Some of them were collectors looking to buy and representatives of major museums networking with potential future donors. The majority seemed to be art lovers of all ages speaking a number of languages.

At the booth of the Helly Nahmad Gallery from London, three paintings by Jean Dubuffet priced in the USD 2 million range drew visitors. One had already been sold during the collectors’ preview.

Hammer Galleries from New York featured four paintings by Chagall (in the USD 1.5-2.5 million range) and Picasso’s Le Peintre that sold in 1968 for USD 10 million. It is worth much more today.

Collecting paintings by modern masters isn’t for every investor’s budget cautions Hammer’s President and Director Howard Shaw. “Although many banks are lending against art collections,” he said, “people should remember that art is an illiquid asset.” Prices go down as well as up, and when a collector tries to sell a work of art, he might have to let it go for much less than he paid.

Installation artist Marina Abramovic was at ABM at the Fondation Beyeler exhibit with an example of her “immaterial” art: a series of cots with bright blankets where people were invited to rest with headphones to cancel noise. Abramovic was probably the most active artist in Miami. She also had installations at Design Miami, Young Arts, and the Design District. “Technology is great but also a dangerous thing,” said Abramovic. “We have to claim time for ourselves.”

Major collectors like Margulies regularly check out the offerings at ABM. “I like to see if I can find one work or two,” he explained, although it wasn’t clear whether he would buy any this year.

For many others the satellite fairs offer less expensive options. Design Miami celebrated its 10th year in a white tent across a shared parking lot from ABM. From 16 galleries in 2004, Design Miami now has 35 with 11 of the original 16 participating.

Star architects Zaha Hadid and Jeanne Gang organised installations at Design Miami, Gang for the first time with Swarovski, Hadid again after winning the first Designer of the Future award ten years ago.  In 2014 architect and artist Peter Marino was recognised as Design Visionary because “he has shaped the conversation of private and public design.”

Laffanour – Galerie Downtown – Paris has been exhibiting in Miami’s Design District since 2006 and at international fairs since 2002. Gallery Director Helain Serre explained that 30 percent of sales are in Paris while 70 percent come as a result of major design expositions in Mexico City, Maastricht, Dubai, Shanghai, and New York. A client may see an item first in one city and buy it later in another or directly from Laffanour headquarters in Paris.

ABM, Design Miami, and some smaller expos are on the barrier island called Miami Beach. On the mainland most of the big fairs take place including Art Miami, Context, and Miami Project. A highlight at Miami Project was the series of sculptured horses by Deborah Butterfield at the Greg Kucera Gallery booth.

Reminiscent of the horse puppets in the play and film War Horse, the horses Butterfield designs are individual. She is from Montana and manages to create personality out of unyielding materials like wood and metal to portray specific horses she knows. The six works shown were selling for USD 125-250,000, according to size.

Following Art Basel Miami the international art community goes on to the next big event. After adding Miami in 2002, Art Basel went east to Hong Kong in 2012 providing a year-round calendar: Hong Kong in March; Basel in June; Miami in December. Those are the three biggest international events for modern and contemporary art, but Abu Dhabi, Dubai, Shanghai are already destinations for art from the Middle East and Asia.

With the opening of the Saadiyat Island Louvre and Guggenheim Museums in the next few years, non-European art should gain exposure. At ABM this year there was one gallery from Beirut and one from Cape Town. That was it for beyond Europe and the Americas. The world of art investors like the world of real estate has room for expansion.