As anyone who has offended their friends by playing matchmaker knows, it’s not always easy to find the right people for a partnership. Too often it can go horribly wrong. But it is what Right Capital specialises at when people need art finance.
Launched in 2012, Right Capital act as an intermediary for art financing. They specialise in finding finance for galleries – both for the gallery stock and also arranging traditional bridge loans for works going up at auction.
Paul Ress the founder and managing director, launched the company because there was a shortage of people helping galleries. “We saw a huge demand, because galleries and dealers were finding it almost impossible to get funding. It started out that we would match up galleries and dealers that were looking for finance with investors, and then it turned into a little business from there and just grew.”
The firm typically arranges loans between £1 million ($1.5 million) and £5 million. Ress says that ideal deal would be a loan of around £2.5 million secured by between five and ten pieces by different artists For each loan they use two independent valuations so there is no conflict of interest. The lenders also have the option of specifically requesting a valuation specialist that they may prefer to work with, but Right Capital say that they are already working with the best in the business.
Right Capital are based in London and predominantly working in Europe, due to the high demand. They also work closely with Link Management. Link Management, run by Aude Lemogne and Aymeric Thuault, launched in 2009 and offer art advisory and lending services out of the Luxembourg Freeport. Both Lemogne and Thuault are also directors of Right Capital.
“I think all art lenders tend to follow a set of golden rules, so it’s hard for differentiation.” Says Eleni Markopoulioti the client and business development director at Right Capital.
As a firm they want to create a standard practice that they can apply to all their deals. “Although this is not something that makes us unique, it is something that we want to perfect first,” says Ress: “We are trying to perfect how business should be done in this field by creating a standard framework for this kind of deal.”
But this is not without its own problems.
Right Capital are also aiming to increase the amount of syndicated deals they are doing. But with different deals comes different paper work, making it hard to have a standardized practice for all transactions. “A deal with only one lender will need a different transaction process to a sydnicated deal with multiple lenders,” says Ress. But this doesn’t deter them, instead it drives them forward on the quest to find a way of standardizing across different kinds of deals. “We can really see the benefit of syndication to diversify risk.”
As well as a change in the approach to art lending, Right Capital also want to change the way people see it. “Our aim is to establish art lending as part of the normal course of business.” Says Markopoulioti. “In property you wouldn’t dream of buying a substantial commercial property without a loan. We say why not, instead of having a backer and having to share any profit, take a non-recourse loan. It should just been seen as a normal business tool.” She also says “There can be negativity associated with taking out a loan for art, so it gets kept very hush hush. We are trying to change that.”
She adds “We got into art lending as a medium to long game, with the key being more people understanding why it works. There are so many different options for collectors so why not capitalize on it. A lot of the focus needs to be on educating people about art lending, we are in it for the long haul.”
Right Capital see the lack of standardization as one of their main constraints. With each deal being different, they cannot standardize the legal paperwork which drives transaction costs up. As soon as transaction costs rise it affects the deal and can make some of them uneconomic, forcing them to be choosier about the kind of deals they take on.
They also say selecting the right works is key. “When advising clients we tend to be helping them focus on selecting the appropriate pieces and to help them answer as many questions as possible. We know what the lender will want to ask and want to know, so we help them with this.” Says Markopoulioti. “As we don’t lend off our own balance sheet, but act as an introducing intermediary, it is especially important that we get it right.”
Right Capital say they are always willing to try and at least give it a go for example if a client wants to borrow against sculpture, they will try and help them find a financier. “We don’t just say, if it doesn’t fit we won’t do it” says Markopoulioti. “Unlike some of the pawn shop style lenders out there, we are always conscious of getting the best possible deal for the borrower.” Adds Ress.
Ress is also very proud of the company’s discretion: “If a client comes to us with a work that isn’t suitable for lending, we are able to assist them with selling the item quietly and discreetly, which is something we have been doing more of recently.” Using their extensive network they are able to help clients discretely sell these works without drawing a lot of attention to the sale. This also means that Right Capital often see works well before the big auction houses, as works are brought to them before the individuals have even decided to sell.
Right Capital eventually plan to expand in to financing other tangible assets such as classic cars and collections of valuable jewelry.
Markopoulioti says “We have lengthy criteria for our deals, but the three main points are authenticity, title and valuation. Out of 10 opportunities that are brought to us only one or two meet our criteria. This means we get between 10 and 20 good deals a year. There has definitely been an increase in the last two years, wider coverage has meant more people borrowing against their collection and we think the popularity of art lending will keep on growing.”