Sotheby’s secured loan portfolio totaled $700 million during the first quarter, up 53 percent from the year-earlier period. The company has used a mix of debt and cash to finance the secured loans, returning 11 percent on equity during the 12 months ended March 31, according to the filing.
Record Balances
Until 2014, Sotheby’s used its cash flow to primarily finance loans on art. Since then it has set up a separate capital structure using borrowed funds.
“The increased borrowings under our credit facility are driven by the record level of loan portfolio balances,” Jan Prasens, managing director of Sotheby’s Financial Services, said in phone interview. “Art lending is a growing business for Sotheby’s.”
According to 2014 report by Deloitte/ArtTactic, 48 percent of 90 major art collectors surveyed said they would be interested in using their art collection as collateral for a loan, up from 41 percent in 2012.
Christie’s, a private company owned by billionaire Francois Pinault, reports sales twice a year but not profit. Sotheby’s position as a publicly traded company has been “long considered a strategic disadvantage” because its missteps are reported, Skate’s, a New York-based art market researcher, said in a report.
“This can also be a strategic advantage as far as access to low cost capital is concerned,” according to the report.