PRIVATE BANKS

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At Citibank’s Private Bank, a group of in-house specialists in the Art Advisory department valuate and even help build art collections. “We look for art that has major market value at auction internationally,” says Suzanne Gyorgy, director of art finance for Citibank. “Primarily we lend against fine art—painting and sculpture—not collectibles.”

The Private Bank of Bank of America is even more conservative, rarely loaning against sculpture, which is harder to sell at auction than paintings, and only against paintings from the most sought-after periods of major artists. “Even certain pieces by Picasso don’t have the worldwide interest level we require,” says Hess. Still, his department has approved “more than a few” art-based loans of $200 million or more, relying on Sotheby’s and Christie’s for appraisals.

If you qualify as a client for either Bank of America or Citibank, you can secure a loan for 50 percent of the value of your collection, as long as it’s worth at least $10 million. The minimum loan at Citibank is $5 million, and individual works must be worth at least $100,000. Bank interest rates are somewhat lower than what the auction houses can offer and are tailored to their clients net worth. Citibank, for example, will lend at prime rates to their wealthiest clients. Getting an art loan at a bank is a lot like taking out a mortgage, with similar paperwork and credit and income checks. “Sotheby’s has the ability to take immediate possession of the art, so they’re less interested in income and more in the value of the art,” Gyrogy says. “We’re interested in a relationship. We want the long-term private banking client.”

Typically, Citibank’s art finance clients are entrepreneurs. “We deal a lot with real estate developers and hedge fund managers who also are art collectors,” says Gyorgy. “They use their art as collateral for loans, then put the funds back into their businesses or other investments. Then there are serious collectors who like to keep their collecting separate from their other businesses by setting up a lien on their art and using it to buy more art.”

Fine Art Capital, started two years ago in Manhattan by Andy Augenblick, an art collector and former co-owner of a real estate investment company, is affiliated with Emigrant Bank but offers lower-minimum, longer-term loans than other banks. Augenblick says the minimum loan is a million dollars, though he has gone as low as $500,00 and as high as $100 million, for up to 20 years. His company employs nine experts in art and/or banking and loans against not only paintings, but drawings, musical instruments, furniture, coins, stamps, jewelry and other collectibles. Rates at Fine Art Capital start at levels similar to Citibank’s but go up according to the length of the loan and the liquidity of the collateral.

Unlike Citibank, Fine Art Capital does not provide advisory services or collections management. “We just lend funds against art and antiques, that’s all we do,” says Augenblick. “For example, a widow from Palm Beach who needs $200,000 a year to support her lifestyle and doesn’t want to burden her children or sell her art and antiques, can borrow against them. When she dies, her executor sells the art to pay off the loan. That way, she gets to enjoy her art while using it to create liquidity.”

INDEPENDENT LENDERS

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Those who lack the means to qualify as private banking clients can turn to independent lending institutions such as Art Capital Group and Art Finance Partners, which offer a variety of art-related loans, often at higher rates. These companies make loans not only against fine art but also collectibles such as furniture, porcelain, silver, rare coins, jewelry and even exotic cars—often without consideration of income.

Art Capital Group, also known as ACG Credit, has been described as a “high-end pawn shop.” Clients can qualify quickly for a loan—even via cell phone an hour before bidding on a painting—but they may have to leave their art in the firm’s 7,000-square-foot Madison Avenue warehouse/showroom. “If you buy a Picasso, go to a private bank and say, ‘Can I borrow $5 million today?’ they will ask to see other assets and try to qualify you as a client,” says CEO Ian Peck. “We will do a credit check and make sure the title for the artwork is clean. If that checks out, we make the loan.”

Peck founded ACG in 1999 after working at Sotheby’s New York, then opening Ian Peck Fine Paintings gallery in 1992. He claims that ACG lends about $200 million a year and controls roughly $700 million worth of fine and decorative art. The firm also provides consulting services and brokers art sales for clients.