The capital of media arts is becoming a center for fine arts. Galleries seem to be popping up everywhere from downtown Los Angeles to Venice to West Hollywood. And that’s been boosted by a white-hot global art market, which just saw a Picasso sell for a record $179 million.
“L.A. has really exploded on the whole art scene,” said Alex Popovich, a wealth adviser at J.P. Morgan Private Bank in Century City. “I think that if you ask most people, it’s become almost ground zero for contemporary art collectors and artists themselves.”
And where there are valuable assets, there almost always are financial instruments to help people unlock that value.
Bankers and wealth managers often have clients who have accumulated substantial art collections and, for a variety of reasons, might want to squeeze some liquidity out of those assets. And L.A.’s wealthiest are no exception.
“We do a lot of lending against artwork and we see a lot more interest in it,” Popovich said.
Suzanne Gyorgy, head of Citi Art Advisory in New York, part of Citi Private Bank, said she’s noticed that a growing number of big collectors are taking advantage of the opportunity. She pointed out that under U.S. law you can borrow against an Old Master without having to take it off the wall – keeping friends and family none the wiser.
“Many more people are now aware that you can get an art loan and get liquidity out of your art,” she said.
Gyorgy said Citi’s art loans typically have terms of one to three years, but are easily renewable. She said rates vary – and take into account a borrower’s other liquid assets – but are priced based on Libor plus a spread. Citi does its art valuation in house, which keeps everything confidential.
Art doesn’t exactly have intrinsic value – nor can it be sold for parts – so lenders tend to be pretty conservative as far as the terms on which they’ll lend against it. Popovich said loans typically cap at about 30 percent or 40 percent of the value of a piece of art or a collection.
While Gyorgy has come across collectors who have a disproportionate amount of their wealth in art and want to access more cash without selling pieces, she said there are also opportunistic borrowers. She mentioned hedge fund managers, who feel like they can get higher returns investing in their funds than the interest they have to pay borrowing against their art, and take out art loans accordingly.
“They’re frankly doing an arbitrage,” she said.
Energizing Business
Downtown L.A.’s City National Bank is looking to give some local entrepreneurs a little extra boost.
On June 1, the bank announced that it will provide up to $350 million in small-business loans, targeted at companies run by women, ethnic minority and LGBT executives that supply three of California’s biggest utilities: Southern California Gas Co., Southern California Edison and San Diego Gas & Electric. In addition to the loans, City National and the utilities will team up to provide workshops and other educational services.
The initiative is part of the bank’s five-year, $11 billion Community Reinvestment Act commitment. Chief Executive Russell Goldsmith said the bank’s impending sale to Royal Bank of Canada, which has more than $875 billion in assets, made it possible for $32 billion-asset City National to meaningfully step up its community contributions.
“It’s a significant increase we could do because of the merger that’s pending,” he said.
Goldsmith said the idea for the program came from various conversations he had with the utilities’ bosses.
“We realized that we all shared a common objective,” he said. “We want to foster minority-owned businesses, women-owned businesses. Together we could do something that we could not do separately.”
He also believes that the initiative, which provides financing to companies that have a built-in customer – in this case, one of the utilities – could be a blueprint for similar programs in the future. Having that stable source of revenue on the other end helps reduce some of the risk of lending to smaller companies.
“It’s a model that we’re all very excited about, and (it) really gained acceptance and enthusiasm among all three companies very rapidly,” he said. “We’re determined to see that those dollars are spent and lent wisely.”
C-Suite News
West L.A. investment bank B. Riley & Co., a subsidiary of B. Riley Financial Inc., has acquired technology-focused investment bank J. Moore Partners of San Francisco. … Pacific Commerce Bank in Little Tokyo has promoted Gail Jensen-Bigknife to chief credit officer. The bank’s current chief credit officer, Gary Weitner, will become chief credit administrator, a position that allows him to spend more time with his family in Arizona.
Staff reporter Matt Pressberg can be reached at [email protected] or (323) 549-5225, ext. 230.
