A $28 million Warhol. A $35 million Basquiat. A $70 million Twombly.
Hedge-fund manager Daniel Sundheim has acquired all these works — and more — while wielding one of the most powerful tools in finance: leverage.
Time was, art aficionados rarely talked openly about borrowing money against their paintings to build collections, make investments or just pay the bills.
But Sundheim, 42, is part of a new breed of collectors who are eagerly pledging artworks in exchange for lines of credit and, in the process, leveraging the $67 billion art market as never before.
In a few short years, Sundheim has emerged as a major trophy hunter, gaining entry to the board of the Museum of Modern Art alongside New York’s elite. As he built his collection, he pledged the top works against a credit line from JPMorgan Chase & Co., according to regulatory filings with the New York Department of State.
As of April, his collateral pool included 29 artworks, valued at an estimated $300 million based mainly on public prices paid, according to Beverly Schreiber Jacoby, president of BSJ Fine Art, a New York-based consulting firm with 30 years of experience with borrowers and lenders.
Like corporations and consumers, many top-end art collectors have been borrowing like crazy given this era’s ultra-low interest rates. Art-secured loans have jumped 40% since 2016, to at least $21 billion globally, according to Art & Finance Report 2019 by Deloitte.
Sundheim is hardly the only Wall Streeter to get in on the action. Money managers Steve Cohen and Michael Steinhardt also have pledged art as collateral against cheap credit lines, according to the regulatory filings.
“The collector base tends to come from credit-savvy, market-driven industries: private equity, hedge funds, tech, big data,” said Evan Beard, art-services executive at Bank of America Corp. “They built their companies using debt, and now they apply the same methodology to building art collections.”
Art bankers are happy to oblige. Often these specialists are part of broader wealth-management teams that target the very rich. Banks use the client’s total assets to determine the credit line and typically lend as much as 50% of the collateral value. They also allow billionaires to keep their art and offer 1% interest loans to a select few. For the rest, boutique lenders offer quicker turnaround and charge higher rates.