by Randall Smith
July 25, 2014
Many business owners want their offices to reflect good taste, with fine art on the walls. But they must weigh the cost against the vagaries of the marketplace. A few good years, and the millions come rolling in. A few setbacks, and the banks send a crew to pack up the furniture.
For this cold reality comes a new service: art leasing. A business being started by the Durst Organization, the big Manhattan office landlord, and Asher Edelman, a New York art financier, plans to acquire fine art and allow banks, hedge funds and other businesses to lease it for their office walls, a cheaper alternative to buying.
Mr. Edelman said in an interview that the service would offer customers the ability to lease works by well-known artists like Andy Warhol and Frank Stella under leases of five years or longer for annual fees he estimated might be 6 percent to 12 percent of the artworks’ market value. Some of the leases may also include an option to purchase.
While a few such services already exist, the entry into the market of a landlord that owns 13 million square feet of prime office space and a well-known if controversial art connoisseur appears to reflect the current boom in art-market prices and prestige.
“Conceptually, there’s a legitimate need for it,” said Jeff Rabin, co-founder of Artvest Partners, an art and finance advisory firm in New York City. But he noted that its merits would depend on the terms and structure of the leases.
“A lot of tenants are interested in fine art but may not have the time or money to get involved to acquire the art or to finance the art,” said David Neil, chief administrative officer of the leasing and marketing division of the Durst Organization. “We believe this venture will be a tremendous amenity and benefit for tenants not only in our buildings but elsewhere.”