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Proper approach makes art pay

WESTERN Australian information technology group ComputerCorp has opted for a different corporate face at its headquarters with a 27-piece art collection valued at around $40,000 gracing the walls of its West Perth offices.

“It makes a nice change from the generic certificates so often seen hanging on office walls,” Computer-Corp managing director Hugh Smith said.

However, the art was not bought on a whim and proper advice was sought before the investment was made – a step more WA companies are prepared to take – according to art industry players.

As experts in the field attest, founding or expanding a corporate collection is rarely as simple as coming across an attractive artwork and charging it to the company account.

Impulse or emotional art purchases can spell disaster for companies, particularly when they have shareholders or investment partners that need to be pleased too.

So how does a company find the right person to select their art?

Gregson Flanagan Fine Art Auctioneers managing director Ian Flanagan said businesses needed to do due diligence when looking for a consultant.

“When the market heats up, a lot of consultants start springing up,” he said.

“Consultants must have knowledge of primary and secondary markets and offer you price justification relative to the market.”

Art-focused associations can be a good place to begin the search for a consultant.

Perth Galleries director, BankWest collection curator, WA Association of Art Galleries treasurer and Sotheby’s WA representative Norah Ohrt suggested speaking to either the WA Association of Art Galleries or the Australian Commercial Galleries Association, to gain general investment advice.

She warned about conflicts that consultants can have, a common concern within the industry.

Ms Ohrt suggested employing two different consultants to work together or getting an independent consultant who does not represent any artists.

The second step in building a corporate collection is to construct a brief to work from that outlines what the company is seeking from the investment.

The Australian Business Arts Foundation state manager Henry Boston said there had been a trend away from indiscriminate to strategic purchasing of corporate collections.

“Companies are asking, how are we going to make this art purchase part of our overall business plan?” he said

Royal Perth Hospital art collection curator and art consultant Paola Anselmi said the constraints had to be clear.

“From the onset you need to identify what your company wants, the company’s objectives for purchasing art, as well as your budgetary restrictions,” she said.

Ms Anselmi suggested making art purchases that complemented the company’s image or vision.

“If you were a mining company, for example, and dealt with rural and indigenous communities, you may want to focus your collection on indigenous works that would create and benefit your image,” she said.

BankWest’s effort to concentrate their collection on WA art was demonstrated in 2000 when it sold 13 of its non-Western Australian paintings for more than $300,000 and reinvested some of the profits into local artworks that were more in tune with the company’s vision.

Mr Flanagan said when deciding on a corporate art collection companies should look for aesthetic value, historical value and an exit strategy.

“From a financial investment perspective, you must look at the liquidity of the product,” he said.

“Aesthetic value versus a financial return is often a double-edged sword.”

Mr Flanagan said artwork should be of high quality to mirror the quality of the company and warned against art that was gratuitous.

He also gave his two golden rules for purchasing corporate art collections.

“Rule one, keep partners’ wives out of it and rule two, don’t let your interior designer decide on the artwork – they base their judgements on colour, not quality,” he said.

Many of WA’s budding corporate collections are not limited to paintings. The City of Joondalup’s collection, for example, also includes drawings, photographs and sculptures.

Mr Flanagan said purchasing sculptures should be done with caution.

“Sculptures and installation art are markets that are very easy to get into, however, 3D pieces are notoriously hard to sell,” he said.

There are several ways a company can leverage a corporate art collection to make it pay including leasing part or all of the collection, loaning it to a gallery, exhibiting it itself, showcasing artworks in company offices or selling artworks in the short or long-term for financial gain.

Ms Ohrt said leasing art out had risks.

“To lease art out is risky because it could get damaged. When you are dealing with shareholders’ money it is best to keep it where you can see it,” she said.

Leasing out a painting, however, is different from loaning it to a gallery. Loaning can have several benefits including making the company appear community orientated and, as Ms Ohrt said, it could improve the providence of the collection.

“Exhibiting work in notable galleries can raise the profile of the artist and the artwork being exhibited,” she said.

“For example, when it comes time to sell you can say this piece of work was in the Queensland Gallery from 1997-2000 and have something to market it with.”

BankWest is currently loaning a portion of its 400-piece corporate collection to the Regional Gallery of Kalgoorlie.

Alternatively, Wesfarmers is leveraging its collection by embarking on a national tour with some of its artwork to increase the profile of the company with clients across Australia.

Showcasing corporate art collections in offices is the most common usage.

For instance, property investment player Wyllie Group’s corporate art collection of 48 artworks, valued at more than $800,000, is strategically positioned in the company’s main buildings.

The amount of time a company should retain an artwork before selling it is relative.

Mr Flanagan offered some tips to help identify an appropriate holding period.

“If a company pays a premium for a painting that is more than the current market value, for reasons such as historical significance, they should not sell until the market catches up with that premium price paid,” he said.

Although WA’s three most sizable corporate art collections – belonging to Australian Capital Equity, Heytesbury and Wesfarmers – may capture the most attention these companies are not alone in their pursuits.

Edith Cowan University has approximately 2,500 artworks valued at about $6 million and the City of Perth has 228 pieces worth an estimated $300,000.

However, just as the benefits of investing in the arts are abundant, so are the risks.

Emerging artists – similar to fledgling companies listed on the stock exchange – have the potential to offer impressive returns as they become established. However, they may never spike.

Conversely, established artists may appear somewhat safer but there are no guarantees that their work has not been overvalued.

The key, the experts say, is not to lose sight that it is an investment and conduct thorough research similar to any other corporate purchase to ensure that the chosen artwork works for the company.

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