An eye for the buy
st1\:*{behavior:url(#ieooui) } /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; mso-ascii- mso-ascii-theme- mso-fareast- mso-fareast-theme- mso-hansi- mso-hansi-theme- mso-bidi- mso-bidi-theme-} Dr. Marc J. Straus has a cognoscente”™s eye and a collector”™s passion for contemporary art. He has too a skilled investor”™s prescient knack for buying the works of artists whom other players in what the retired oncologist calls the “rarefied world” of contemporary art have not yet discovered or come to esteem.
He and his wife, academic theologian Livia Straus, have helped launch the careers and boost the incomes of numerous young artists by bringing their work to the attention of major galleries and dealers in New YorkEurope. And the collection of contemporary art with which they live in their Chappaqua home, for which the couple has been named among the top 100 American collectors by Art & Antiques Magazine, through the boom-and-bust cycles in the fickle art market has yielded them an impressive return on investment. and
“There”™s never a time that we didn”™t far exceed the equity market” on returns, said the 65-year-old collector, an oft-published cancer researcher and former chief of oncology at Boston University Medical Center who founded Access Medical Group, a 36-physician multispecialty practice based in White Plains, and the former MDX Med-Care Inc., a New Windsor company that managed about 200 physician practices in metropolitan New York. “The worst I”™ve ever done in a five-year period, I had an 8 percent return. But it”™s been well over 50 percent annual rate of return for some five-year periods.”
Now his discerning eye and market savvy are in demand from collectors, auction houses and financial firms. He advises major international banks and wealthy novice and potential investors on the art and business of buying art. Addressing groups of 50 to 70 private banking clients, he speaks of strategies to optimize their returns on investments whose appeal has grown with the growth of accumulated individual wealth and as equity holdings in stocks and real estate have grown more risky.
“More people are turning to it with large amounts of money,” Straus said. “Almost without fail, all these successful hedge fund owners are buying expensive art, like Steve Cohen.”
Cohen, the founder of S.A.C. Capital Advisors L.L.C., a $14 billion, 800-employee hedge fund in Stamford, Conn., “has been buying into the market now for several years” and paying top prices for what Straus calls “A-plus pieces” by art-world stars such as Jeff Koons and Britain”™s Damien Hirst. The hedge fund manager in 2004 paid $8 million for Hirst”™s 13-foot tiger shark suspended in an aquarium tank of formaldehyde, a 22-ton piece installed in Cohen”™s commodious Greenwich, Conn., home.
The market for art
The investors who take in Straus”™s PowerPoint presentations or engage him in conversation about “the art thing” are looking to diversify assets worth hundreds of millions of dollars, he said. In the current markets for stocks and bonds and real estate, “These are people who know better and don”™t want to keep so much of their money in equities. Everybody is looking to have their money somewhere else. Everybody”™s afraid. They don”™t know where to put it right now.”
“Some of them were starting to dabble” in the art market, Straus said. “These are very accomplished people who simply don”™t know how to do it. I tell them it”™s different. It has a value that their stocks don”™t. It”™s coming into their life. It”™s coming into their homes.      Â
“When I”™m talking to the investment community and the market is raging like this, I tell them the one rule I live by: you have to buy the best piece the artist has done. That”™s the single most important rule,” he said last week at the Hudson Valley Center for Contemporary Art, the 4-year-old museum in Peekskill that the Straus family founded and initially funded and which Livia Straus heads as president.
The nonprofit museum”™s 12,500-square-foot white-paneled space occupies a former retail warehouse on Main Street, a cinderblock building with 24-foot-high ceilings purchased by the Strauses at an undisclosed price after a two-year property search. They were drawn to Peekskill, he said, as a poor and multicultural Westchester County community that might benefit from the museum”™s educational programs for students and influx of visitors to its exhibitions of international artists and where tax incentives for commercial landlords and affordable rents have brought to the river city the largest concentration of artists”™ studios north of New York City.
“Knowing what the best work is, is difficult,” said Straus, who this day was overseeing the installation of a museum show featuring 30 artists from 13 countries working in natural materials. “Getting access to it is even more difficult. The key is gaining access to the A-plus works.”
Traveling the art world
In more than 40 years of collecting and international travel, the Strauses have secured that access among artists and dealers. And while their collection includes high-priced works of reigning art-world celebrities such as Koons, Hirst and sculptor Louise Bourgeois, they often have blazed trails to the studios of unknown and emerging artists.
“Our position in the art world in part is we”™re very focused on people before they have a career and buying their pieces and trying to bring them to the attention of the art world ”“ and it”™s worked,” Straus said. On that global mission, the couple will visit from 500 to 1,000 studios in a year. “It”™s maybe on an average 500 studio visits to find one artist we think is good,” he said.
The Brooklyn-born physician”™s passion for collecting began in early youth, when, tapping the mint-condition holdings of his friends”™ fathers, he amassed a “world-class” collection of baseball cards from the early 1900s. He was 15 when his mother, enacting her role in what was a grievous rite of passage for many card-trading American boys raised in the ”˜50s and ”˜60s, tossed out his collection. It would be worth $50 million today, Straus said.
As a college freshman, Straus began collecting English Toby mugs that are “very valuable today,” he said. As a newly married medical student at SUNY Downstate Medical Center, he already was collecting art, working a sales job in the city on weekends “to pay for these dopey paintings I was buying.” The Strauses were at the time among the few collectors of contemporary art.
In 1970, Straus bought an Ellsworth Kelly painting for which he paid twice his medical intern”™s salary ”“ “a few thousand dollars,” he said. Kelly had not sold a piece in three years. The painting, which remains in the Straus collection, now is worth “millions and millions of dollars,” he said.
For collectors, “The next most important thing is to buy what you love,” he said. “To buy something that people tell you has great potential and you don”™t like it is a great mistake.”
Straus told of a wealthy Westchester family who “went around with me” in the rarefied art precincts of New York City. They were welcomed at the studio of John Newsom, where Straus”™s neighbor was drawn to a painting with skeleton heads ”“ not the usual art to hang on the wall of a newly decorated Westchester home.
“To his enormous credit, he did it,” Straus said of the art buyer. “His decorator will probably have heart failure. I loved working with them because they had the guts to buy something they loved.”
For new collectors, “Live with what you buy, because living with it is going to train your eye,” Straus further advised. Let that piece cohabit there with lesser works of art. “Greatness speaks volumes. That lesser piece, it”™s going to run it out of your house.”Â
“Never overpay,” he said, laying down a rule not always kept in the current contemporary art market. “Never get seduced by all the talk.”
Gauging the market
The investors whom he meets are not likely to be seduced. “No matter how much money they have, they don”™t want to write a million-dollar check” for the work of a much-hyped artist, he said. “They”™ve learned too much and they”™re too cautious to write checks when they”™re not comfortable with it.”
The best available data suggests that buying art priced over $1 million has the lowest return, Straus noted. One can do as well or better buying the far lower-priced pieces of new artists with talent. “We have done very well even in the under-$5,000 category,” he said.
“It”™s always a little more expensive than you would like and it”™s always a little risky. Any time you buy an artist at the beginning, you”™re taking a risk.
“I always find there are sweet spots, opportunities. There are artists that are making work so good” but priced at one-fifth to one-10th of its true value, he said.
Straus told of a Goldman Sachs partner who passed on an opportunity to buy a $150,000 painting by an artist esteemed by the Strauses. One year later, a painting of like quality by the same artist sold at auction for $900,000, he said.
“Not always, but usually, quality rules” in the art market, he said. “The market is more discriminating now. People know a lot more. Even for some of the hotter artists, there”™s a real filtering based on quality, which I like.”
The Strauses have seen and weathered the highs and lows of the contemporary art market, from the hot ”™80s, fueled by “rampant speculation” on the works of unproven artists and heavy Japanese investment, to the first half of the ”˜90s, when “you couldn”™t give away these pieces. You could buy a Warhol for $50,000 or $100,000 that”™s now worth $60 million,” he said.
Since 1995, the market “has been on this crazy upward trajectory,” Straus said. But American buyers have been a minority at the latest auction sales. American collectors “are not buying the $30-million-plus pieces any more. And they”™re starting to sell those,” he said. With the dollar having plunged against the euro, “For Americans, things look extremely expensive to us.”
“This is now a market with 20 times the depth compared to 1990, and the Russians are buying like crazy,” Straus said. “The market is very skewed because there”™s a lot of trophy-hunting.”
He has seen signs of “softness” in that overinflated market. “It is already happening and it”™s going to get worse,” he predicted. Â Â Â Â Â
Even for this collector, prescience has its limits. “I never saw those prices coming,” Straus confessed.