Kevin O’Leary Invests in Modern Art to Diversify and to Profit

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Kevin O’Leary invests in modern art to diversify and to profit, but he is far from alone in focusing on pieces he and his wife truly enjoy in the hopes visual appeal is followed by the desired appreciation.

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The goal for a modern or pop art investor is to buy items that will appreciate, while also enjoying the creations personally. O’Leary, a billionaire panelist on the “Shark Tank” television program in which he and other wealthy investors are pitched by entrepreneurs to fund the expansion of their businesses, enjoys collecting items he loves such as the best guitars, watches, wines and art that could be sold profitably later if he chooses.

“I have a pretty good art collection, but it is curated by my wife,” O’Leary told me when I met with him for an interview at the Palms Casino Resort as he shared wine and sushi with a small table of guests at the hotel’s Shark Bar, featuring a view of artist’s Damien Hirst’s nearly 60-foot headless bronze sculpture “Demon with Bowl.” The dramatic piece was part of an extravagant 2017 exhibition at collector François Pinault’s Palazzo Grassi museum in Venice, Italy.

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“Demon With Bowl” by Damien Hirst; Photo credit: Paul Dykewicz

The Palms Casino Resort’s impressive art collection also includes Andy Warhol paintings, among many other contemporary artists. O’Leary offered his praise and expressed admiration for the hotel incurring the effort and expense to display the works.

“I’ve got a lot of stuff,” said O’Leary, who added it is a “real pain” to own it due to “crazy” insurance restrictions about how it can be displayed, the lighting that must be used to preserve the art work and other costly requirements.

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Paul Dykewicz interviews “Mr. Wonderful” Kevin O’Leary at the Palms Casino Resort in Las Vegas; Photo credit: John Phillips

O’Leary Invests in Modern Art Such as a Warhol Print of Mick Jagger

Even though O’Leary, nicknamed “Mr. Wonderful,” said his wife loves Warhol’s art, it also is a “fully priced asset.”

One special Warhol print that O’Leary said he owns is a one-of-a-kind image of rock star Mick Jagger’s face in 1975. Warhol’s 10-print portfolio of Mick Jagger’s face in 1975 included an 11^th print that O’Leary told me he owns.

“To make 10, he built a compilation to shoot to make the 10,” O’Leary said. “I own the compilation.”

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O’Leary said he liked Warhol’s special print of Jagger and bought it in a “crazy negotiation” years ago.

O’Leary Invests in Modern Art with ‘Crazy Negotiations’

“I love those crazy moments where you are doing crazy negotiations,” O’Leary said.

“You walk away five times,” O’Leary recalled. “I said, ‘If I walk away an 11^th time, I’m not buying this and I’m the only buyer you’ve got. I’m ready to pay cash tomorrow.’ I went to the can and my cell phone rang.”

The seller called to accept O’Leary’s offer and the deal was sealed. As much as O’Leary appreciates Warhol’s print of Jagger, he said “art is a terrible asset” due to headaches such as shipping and providing ultraviolet ray protection.

Jon Gray, general manager of the Palms Casino Resort, told O’Leary and me that he and his colleagues took special measures to protect the Warhol prints displayed there, including one in its steakhouse, and one of the late legendary singer and actor Elvis Presley that Is on display on the main level as people enter the property.

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O’Leary Invests in Modern Art and Measures to Preserve It

In Las Vegas, where extravagance aimed at attracting buzz for casino guests and visitors is the norm, the Palms completed a full $690 million makeover in June 2019 and now offers arguably the most extensive art collection of any hotel in the world.

O’Leary spoke admiringly of various art pieces at the Palms, including a 1999 creation of British artist Damien Hirst called The Unknown (Explored, Explained, Exploded), featuring the head, body and tail of a shark in three sections. The work from Hirst’s Natural History series consists of a 13-foot-long tiger shark that is divided into three parts, each section suspended in a formaldehyde solution within a steel tank that measures more than two meters in height.

Hirst’s three-part shark is used as an attention-grabbing centerpiece of the Palms’ casino floor and is positioned in the middle of the venue’s center bar. The walls surrounding Hirst’s shark sculpture are adorned with 16 new spot paintings from Hirst’s “Pharmaceutical” series, which were created especially for the bar. Customers can sip crafted cocktails and contemplate the artwork of Hirst, who also designed the bar’s logo, napkins and cocktail stir sticks.

O’Leary the Investing ‘Shark’ Wants to Invest in a Damien Hirst ‘Shark’

“I should own the shark because I am a shark,” O’Leary told his other guests and me.

As far as investment value, O’Leary estimated the owners of the Palms could make 2,000 percent on the sale of the pieces they have on display.

Some of the pieces are owned by the hotel, while many others are on loan, Gray said. Much of the artwork on display at the Palms is available for sale, Gray added.

“The hotel is dripping with art,” O’Leary said. “The suite we were in today just blew me away.”

That 9,000-square-foot suite is the most expensive hotel room in the world. It is a two-story penthouse decorated with Hirst’s artwork that is called the Empathy Suite. The price to stay for one night is upward of $100,000.

The Palms also has three Warhol works on display, as well as many pieces from artist Jean-Michel Basquiat.

O’Leary said the Palms has large enough surface space and a willingness to display big art installations.

O’Leary Invests in Modern Art but One Buyer Paid $90 Million for a Portrait

Christie’s auctioned the portrait of an Artist (Pool with Two Figures) by David Hockney, on November 15, 2018, for $90 million, making it the most expensive artwork sold by a living artist, according to London-based valuations firm Knight Frank.

For art lovers seeking to buy pieces that could appreciate more than the stock market, Leon Benrimon, director of Modern & Contemporary Art, of Dallas-based Heritage Auctions, said, “The general rule of thumb is to buy what you love because art is not supposed to be looked at as an investment. People in general want you to fall in love with the artist, the work and the concept.”

However, art can become an investment with certain artists and genres that can appreciate more than the S&P 500 and other indices, Benrimon told me in a phone interview. Such buyers need to choose wisely, he added.

“If you don’t pick the right ones, you’ll be the one left with it on your wall looking at it every day,” Benrimon said.

Instagram May Signal Modern Art with Potential to Appreciate

One client of Heritage Auctions tracks the modern artists and genres that receive the most attention on Instagram to make decisions about what to buy that offers the best potential to appreciate, said Benrimon, who is based in Beverly Hills, California.

“Investment value is certainly present and on people’s minds,” Benrimon told me.

“Buyers should beware not to become overconfident based on “initial hype or influx in value,” Benrimon said. “The question is: will it last?” he added.

If the artist remains alive, a key question is whether he or she will adapt to the trend of the times to build upon current popularity, Benrimon said.

An example of an artist who stayed relevant throughout his career is Spanish-born Pablo Picasso, who became one of the most influential creators of art in the first half of the 20^th century, Benrimon told me. Picasso started with his Blue and Rose periods, when painting in a singular color was an important idea in art history. Then, Picasso entered into the cubist works movement by divesting the form and the figure from the canvas, Benrimon said.

Appreciation is Rising for Certain Urban, Street and Graffiti Art

The category of Urban, Street and Graffiti art has been “robust” by rising in value during recent years, Benrimon said.

In fact, demand for Urban, Street and Graffiti art grew five-fold in just the last two years at Heritage Auctions.

The first auction of Urban, Street and Graffiti art held by Heritage Auctions generated $270,000 for the sale of 270 lots. It averaged $1,000 per object and marked the only auction of that genre of art in 2017.

The most recent auction of Urban, Street and Graffiti art totaled eight times that amount to reach $2.7 million for 600 lots, quadrupling the average lot value to $4,000 per object, Benrimon said.

This year, Heritage Auctions is scheduled to hold four auctions of Urban Art in addition to its weekly Wednesday Prints and Multiples Auctions, which frequently feature Urban Art.

“The growth has been staggering,” Benrimon said.

Hotels Increasingly Are Becoming Venues to Display Modern Art

“As luxury goods and products continue to evolve and change, hotels have to up their game,” Benrimon said.

For example, W Hotels puts high-value paintings in lobbies and guest rooms. Gramercy Park Hotel is another that features modern art in a $210 million renovation led by high-profile hotelier Ian Schrager.

By purchasing works by blue-chip artists, it raises the “needle” on valuations through buying supply and boosting demand, said Benrimon, who called it a “win, win.”

When Lehman Brothers filed for bankruptcy, its art collection turned out to be one of the most profitable parts of its business, Benrimon said.

A small sector of modern art buyers pursues the creations of emerging artists.

“It is like the Wild West,” said Benrimon, who added “a lot of luck is involved” in purchasing art from emerging artists in hopes the pieces may soar in price.

‘Blue-Chip’ Art Pretty Much Has Seen Its Ascent

So-called “blue-chip” art “by definition pretty much had its great rise already,” Benrimon said.

For example, the Warhol market has been “stagnant” for the last few years, Benrimon said.

“The older the artist, the longer ago the big rise happened,” Benrimon said. “For a dead artist, most of the works are already in the market. The greatest potential for appreciation is in mid-career artists.”

For art collectors who also consider themselves investors, trying to anticipate where that market will go is the challenge, Benrimon said.

For artists in their 40s and 50s or those who recently died, the “jury still is out” about the ultimate value of their work, Benrimon said. For certain artists, a “big rise” in value still may occur, he added.

O’Leary Invests in Modern Art by Warhol But Gilliam Outperformed

A recent example of soaring valuation occurred with Sam Gilliam, a practitioner of the Washington Color School that features a tertiary color movement from a group of artists in the Washington, D.C., area, who developed the abstract art form in the 1950s-60s. His work achieved a 10-times jump in value after a few respected art galleries showed his creations and several museums announced exhibitions of his pieces, Benrimon said.

Those high-profile acknowledgements of the caliber of Gilliam’s work boosted its worth “pretty quickly,” Benrimon said.

Gilliam’s art zoomed in price. Artworks that sold for $10,000-$15,000 each rocketed to $100,000-$150,000 “almost overnight,” Benrimon said.

Art Gallery’s Representation Boosts Value of Gilliam’s Creations

In late July 2019, New York’s Pace Gallery, regarded as one of the top five galleries for contemporary art, announced it would start representing Gilliam and therefore become the primary place to sell his works. In such an arrangement, a gallery would coordinate a catalogue raisonné to provide a comprehensive, annotated listing of all the known works by an artist either in a medium or all media, Benrimon said.

The gallery also would collaborate with museums to show the artist’s creations. Galleries further provide a “marketing apparatus” for the artist, who then can focus on his work, Benrimon added.

Modern Artist Joan Mitchell’s Pieces Sell in Million-Dollar Range

Another example of how the artwork of a particular artist can appreciate is the case of Joan Mitchell, an American abstract expressionist painter and print maker, Benrimon said. The market for her work had been stable for many years with pieces of her strongest art selling in the $1-million range, he added.

Then, major gallery David Zwirner announced on May 2, 2018, it would become the exclusive representative of the Joan Mitchell Foundation. Five months later on October 2, 2018, a Post War and Contemporary Art auction featured Joan Mitchell’s Untitled (Pastel) drawing from 1991 and sold for $1,212,500, more than doubling pre-sale estimates of $400,000-$600,000.

JOAN MITCHELL (American, 1926-1992), Petit Matin, 1982, Oil on canvas sold for $262,900.00 by Heritage Auctions.

Major Gallery Representation Can Lift an Artist

“If you are looking for value in the art world, the middle market is where the sweet spot will be,” Benrimon said.

Benrimon advised, “Find an artist you like.”

For the most part, works of many of those artists just grow in value about 10% but once in a while one will have the price of his or her work rise 10 times what it traded for previously, he added.

New-York-based money manager Hilary Kramer, whose clients have included a few of the world’s wealthiest households, said allocating 6-10 percent of someone’s net worth to an art collection or other tangible assets is enough to diversify a portfolio outside traditional investments.

Art Collecting Could Be an Investor’s ‘Trophy’ Portfolio

“Call this your ‘trophy’ portfolio,” said Kramer, who has been described by the Financial Times as a “one-woman financial investment powerhouse.”

“If you want to invest more of your money in these markets to make a profit on resale, you’re really more of a speculator or a dealer, using your eye for what’s valuable to flip paintings for a better return,” said Kramer, who heads the Value Authority, GameChangers, Turbo Trader, High Octane Trader and Inner Circle advisory services. “That’s all right if you have that eye.

“Over the long haul, fine art basically performs like a bond, appreciating about 2 percent a year and often spending years or even whole decades underwater. And here I’m talking more about artists with perennial appeal, the Rembrandts, Vermeers and Van Goghs where generations of people with money have known the names and coveted the prestige of owning the original. Unless you find a Caravaggio in your attic, it takes a lot of money to play in that pool.”

On the other hand, contemporary art lets anyone become a collector who has some extra money, Kramer said. A savvy speculator may discover the next Jasper Johns or a Cindy Sherman photo that will be worth $4 million one day, Kramer added.

“Because the current value is so low and the future value can theoretically be huge, you can make a lot of money here,” Kramer said. “Remember the couple who built a $20 million art collection on a $23,000 postal clerk’s salary? They bought what were then unknown pieces, often from the artists themselves. You don’t need $170 million to buy a Caravaggio today. You just need to be in a place where you can help the Caravaggio of tomorrow pay the rent.”

O’Leary Invests in Modern Art but Marvels at the Palms’ Collection

The extensive art collection of the Palms Casino Resort includes newly commissioned pieces by top contemporary artists such as Adam Parker Smith, Jason REVOK, Eric Haze, Scott Hove, Felipe Pantone, James Jean and Timothy Curtis. Other artists whose work is on display there include Dustin Yellin, Takashi Murakami and KAWS.

O’Leary told me he was impressed with the wide range of street, modern and blue-chip art visible in the newly remodeled Palms Casino Resort.

For both investors and collectors, aficionados of modern art are finding opportunities to acquire pieces that may provide personal enjoyment and the potential for appreciation. As O’Leary told me, buying and preserving modern art poses challenges. But it also gives those who appreciate the work a chance to dream of one day seeing the value of certain creations rise to levels that would rival a hot growth stock.

Publisher’s Note: Special thanks goes to Mark Skousen for inviting Kevin O’Leary of “Shark Tank” to speak at this year’s FreedomFest in Las Vegas. StockInvestor.com and Eagle Financial Publications were premier partners at July’s FreedomFest event. Mark founded FreedomFest in 2007 to bring together the best and the brightest thought influencers from around the world to talk, strategize, socialize and celebrate liberty. With this year’s impressive attendance of 1,920 people, the three-day festival continues to live up to its billing as “the world’s largest gathering of free minds.” You can learn more about FreedomFest by clicking here to reach the official website.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz.