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Investing_4.jpg

With auction houses breaking records year after year, investors are starting to think an art piece or two might just pull an investment portfolio – never mind a room – together. But how safe a bet is it?

Last spring, as befits the tallest building in Vancouver, One Wall Centre hosted a record-setting auction featuring the highest prices ever paid for art in Canada. It was no fluke. Heffel Fine Art Auction House was simply breaking the record for total sales it had set six months earlier. A ­single Group of Seven painting, estimated to fetch somewhere between $800,000 and $1.2 million, shattered expectations and sold for $2.85 ­million. Two Tom Thomson sketches went for more than $1 million each. On November 23, one of the most famous Canadian paintings went up for sale, again by Vancouver-based Heffel, this time in the heart of Toronto’s tony Yorkville, the wood-panelled and brass-trimmed Park Hyatt. By the time this article goes to print, there will be a new owner of Tom Thomson’s Northern Lights (right). The tension, the tuxedoes and the heady sound of banging gavels will be over; an investor – and presumably lover – of fine art will have boosted his or her portfolio. Significantly. Plenty of tire-kickers, art lovers and serious buyers inspected the painting when it previewed in Montreal, Ottawa and Vancouver. Seeing the real thing after years of posters, Internet catalogues and art plate books would have been a shock. The Thomson painting is not big – about the same size as this magazine page – but its colours leap and dance just like the aurora borealis it depicts. Thomson made five different attempts to capture the night-sky phenomenon while working intermittently as a guide and forest ranger in Algonquin Provincial Park. This last try came a year before his mysterious and myth-building death in 1917. On the shores of Canoe Lake, Thomson created a masterpiece. He had hit his stride as a painter, a patron now bankrolling his northern visits. Thomson had left a commercial engraving house in Toronto, where many future Group of Seven artists worked, to stay in the woods that inspired him. The notion that our wilderness defines us as Canadians, something we take for granted today, can be traced to this man and, in some part, to that night. His output was cut short by his early death, a topic that can overshadow his work. Many find it hard to believe an expert woodsman such as Thomson could have fallen out of his canoe, and theories including murder, suicide and scandal are still debated. There is no mystery regarding his legacy. Three of Thomson’s Northern Lights sketches are in public galleries and will never be for sale. Vancouver’s Heffel Auction House sold a lesser-known version in 2006 for $675,000, but this is the one everybody knows. And wants. By the time you read this, a roomful of millionaires will have banged heads over this iconic piece of Canadiana. They won’t have all come to Toronto either – some will have sent representatives in their stead, old-style twisty-cord Bakelite phones up to their ears and jumpy looks in their eyes. How do you slap a dollar value on famous paintings? What is a piece of art like Tom Thomson’s Northern Lights worth, and how much does that have to do with the price that’s paid? The cash being spent on works such as these, and their sharp increases in value, are making people who like to follow the money as much as art draw up their own ideas about pencilling in profit. Even if the Group of Seven, Emily Carr or Andy Warhol make you yawn, it is hard to ignore the eye-popping amounts that are being paid for a few splashes of paint on canvas. Every time Heffel holds an auction, it breaks another Canadian financial record. These giddy heights are making insiders nervous, but there is no reason to think the bubble is about to burst. Experts say this trend follows the worldwide art market.   Buying art you love not only feels good, but can also be a smart investment. Can be. There are two kinds of art buyers, with a blurring in the middle: people who love art and people who invest in art. If you don’t know which one you are, you are already in trouble. Some expert advice can help, and, as in any market, the more you know, the better. When cosmetics tycoon Ronald Lauder paid US$135 million last June for a portrait by Gustav Klimt, auction house giant Christie’s Inc. put the astounding price down to competitive interest from emerging markets such as Russia, China and, to a lesser extent, India. Robert Heffel, who owns the Vancouver-based auction house with his brother David, says when it comes to analyzing a strong art market, you have to consider the current economic climate. Clearly, a boom economy helps. “It makes investors confident,” he says. More liquidity means more collectors chasing fewer paintings.   Big public galleries are always looking to add to their collections, and many of them enjoy large purchasing funds built by generous donors. This puts more buyers in the field, and with more buyers come the spiralling prices paid for a once-in-a-lifetime opportunity to own a great work of art. Northern Lights had not been for sale in 70 years. Art is not always hot. Veteran investors still recall the bad days of the dot-com crash. Entire art movements, with individual pieces going for hundreds of thousands of dollars a few months earlier, suddenly fell out of favour, and pieces could not be sold for any amount. This hurt art prices and the art market’s reputation in a way that makes some wary today. Doug Rowat, senior equity specialist with HSBC, cautions investors about playing the art market. “It’s an alternative investment,” he says. “It shouldn’t be more than five or 10 per cent of your portfolio.” He warns enthusiasts about to dive in to ask themselves how much they really know about art. As recently as 2000 to 2003, Rowat notes, prices paid for Impressionist paintings fell sharply, though they’ve since recovered. Rowat points out that, in a balanced portfolio, some investors will seek hedges against stocks and other more traditional investments going down. Many people buy uranium, gold and wheat shares for the same reason. The problem, he says, is that worldwide art prices appear to be quite closely linked to S&P performance. There’s “about a 75-per-cent correlation,” he says. Not such a great hedge. Jan Ballard is the former executive director of the Vancouver Buschlen Mowatt gallery, which specializes in contemporary and international art. She advises new investors to stick to the well-known artists. “If the artist does not have work in the MoMA [Museum of Modern Art in New York] or the National Gallery [of Canada in Ottawa], it is not fair to categorize them as ‘big time.’ Only these artists can be considered safe investments,” she says. “Their artwork will always appreciate, in any economy. And with the arrival of more money, supply and demand can raise prices quickly.” Ballard cautions that if there are no great pieces available, prices can get out of whack. “Work that cannot be considered great can get expensive.” It’s also important to stick with reputable dealers, she adds, advising collectors to search out a referral through the Art Dealers Association of Canada. The umbrella group includes 90 Canadian galleries, tries to foster Canadian art at home and abroad and keeps a dialogue going between government and business.   Ballard also cautions against thinking of any living artist or regional artist as a secure investment. High prices for that kind of work are a definite risk. “Don’t be drawn in,” she warns. These kind of bid-up bubbles, she says, will be the first to pop. Aware that most people will find the kind of art she considers a safe investment out of reach (not everyone has $400,000 to spend), Ballard mentions one-off monoprints of museumed pieces that can be bought for as little as $3,500. That’s a much smarter investment than betting on a regional artist who might one day make it big. In any talk about art and value, it is hard to avoid clumsy comparisons. Robert Heffel, who spends summers at Lake of the Woods in Northwestern Ontario, says good art is like cottage property – always expensive. It was never cheap, even if it does escalate out of reach over time.   Ballard compares art pieces to hockey players, pointing out that Gordie Howe is a much better bet than Sidney Crosby because he has already scored all those goals. Sidney might one day prove to be an even better player. The message: keep your eye on benchmarks, not potentials. The most intriguing observation she makes about Vancouver and its present art market explains why it is Heffel, and not Toronto’s Sotheby’s office, leading the charge. And it doesn’t have to do with our country’s wealth moving west. It is more about Vancouver coming of age and reaching maturity. This is visible not only in the sophistication of the buyers she meets coming into Buschlen Mowatt. It’s an ethic she says the whole city is beginning to embrace. “People in Vancouver travel, and they see how much art is a part of cities in Europe,” Ballard says. The desire to enrich the city with art has been happening in both public and private collections. It is a refining of tastes, she says. Part of that is having good galleries, and a good gallery, Ballard says, should challenge its patrons, not simply play to their desires. A confident collector base is important, but it takes more. Institutions such as the Vancouver Art Gallery are bringing in important shows. Small galleries such as Presentation House Gallery in North Vancouver add considerably to the Lower Mainland’s art awareness. Sarah Milroy, columnist for the Globe and Mail, not only gives even weight to shows in Vancouver but regularly goes out of her way to unearth happenings and trends here.   Thomson’s Northern Lights was estimated to sell somewhere between $750,000 and $950,000. Last spring the high prices paid for two Thomson sketches made the unofficial dean of Canadian art experts, Vancouver-based Anthony Westbridge, cringe. The two small pieces had both been estimated to sell between $300,000 and $400,000, but bidding jumped past the million-dollar mark in both cases. Westbridge, publisher of the Westbridge Art Market Report, described those chasing the two Thomsons as “silly bidders” in a May 24, 2007, Globe and Mail article, but praised the auction’s $2-million-plus sales, both by Group of Seven painter Lawren Harris, as “great compositions.” It could be that sketches by Thomson are just that: fieldwork that was to be taken back to a studio and worked up into a major canvas. And because they are sketches, Westbridge believes they shouldn’t be valued as highly. He further denigrated buyers’ decisions with this arch comment: “I’m not sure why they got that kind of money. People are still driven by names in Canada.” Northern Lights is a sketch too, the paint thrown onto a panel while the artist was seized with creative inspiration, in this case flowing from the wilderness sky on a cold night. Expert opinion counts for little these days. And it speaks well of the Heffels’ open-handedness that the Globe article containing Westbridge’s testy barbs is available to read on their webpage. People want this painting. It is known well past the rarefied world of art. The Tragically Hip wrote a song about it being made. Thomson died so young that in many cases these sketches are all we have. It was painted while Canadian soldiers lay dying in the mud under artillery barrage in the First World War and, like that conflict, it is part of how we as Canadians define ourselves. It’s hard to put a price on that.