Art investment

Art Index and BlackRoo offer a masterclass in successfully combining art appreciation, investing and community outreach

Sun 03 Apr 22, 8:17am (AEST)
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This article was written in collaboration with Art Index
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Source: Warlimpiringa Tjapaltjarri, Mamultjunkunya, synthetic polymer paint on linen, 152.0 x 200.0 cm

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Key Points

  • The average annual rental return on art over the past 3 years has been 8.3%
  • Art Index is donating 100% of their Indigenous Artwork leasing fees to BlackRoo
  • Quality art is in short supply and buyers are getting younger

In a first of its kind partnership, Sydney based art services firm, Art Index and Australian Indigenous not-for-profit organisation, BlackRoo Community Indigenous Corporation (BCIC) are demonstrating how Indigenous Australian art has the potential to benefit investors/collectors, the broader Indigenous community and corporate Australia alike.

Last year Sacha Clemens, CEO, Art Index approached Steve Fordham, Founder of Blackrock Industries and Chairman of its subsidiary BCIC, with an idea that he envisaged, could be a ‘game changer’ for all the players in Australia’s Indigenous art ecosystem.

The scenario Clemens posed was: what if there was a way to showcase First Nations paintings in corporate workspaces while also generating income for the artwork's owner, and importantly, an ongoing revenue stream in support of Indigenous Australia.

Mixing charity and investment is a fine art

While investing in art is far from new, recent regulatory changes to superannuation legislation, have enabled self-managed super fund (SMSF) members a seat at the art investment table.

Simply put, SMSF members may now own artwork(s) within their [SMSF] fund, provided they tick a few important boxes. Regulation requires that SMSF owned artworks be held in a suitable third-party facility, be fully insured and independently valued. 

These regulations around SMSF’s owning artworks led Clemens to an epiphany.

What if Art Index could act as a conduit between investors looking to generate an income by leasing their artworks to corporate entities? Not only would this allow corporations to benefit from displaying beautiful art on their walls, they would also be incentivised to do so.

Art of this deal

Under a buy-to-lease arrangement, artwork – typically valued between $20,000 and $1m – will be sold by Art Index to an investor, willing to lease their purchase to a corporate, or other entity. Art index has contractually bound rental agreements with their clients at average returns of 6-9% P.A. 

Clemens notes that the average annual rental return over the past 3 years has been 8.3% and that Art Index returns this rental income to the artwork's owner monthly, for the minimum term of between two and four years.

Clemens advises investors that while Australian art was for many years undervalued, last year it experienced the third highest clearance rate, relative to global peers.

With the Australian art market now experiencing stronger underlying support, Clemens believes there’s greater likelihood that investors’ future capital appreciation will add to attractive rental income received over a fixed period.

Click here for more information on using art as an alternative investment.

Everyone wins

Art Index currently has art under management valued at over $30m, including important paintings by the First Mob, a group of Indigenous artists attracting attention from international collectors such as Hollywood comedic actor, Steve Martin, a vocal champion of Australian Aboriginal art for many years.

“That’s such a win-win-win, where it’s beneficial to the corporates that are leasing these artworks, a feel-good factor for the owners of this art, while also allowing us [Art Index] to donate money to such a worthwhile NFP organisation like BCIC,” advised Clemens.

“With the collector base for Australian Indigenous art continuing to broaden, both nationally and internationally, Art Index and BCIC are confident that their joint venture has the ability to support important BCIC initiatives, such as Second Chance for Change (2C4C) well into the future.”

Giving back

Under the Art Index and BCIC joint venture, Art Index is donating all fees they usually earn from leasing Indigenous Artworks to BCIC. Artwork owners will continue to receive the annual yield from the leasing of their artworks as well any capital appreciation in their value.

Since BCIC was launched by Fordham with $20,000 and a little old tipper truck in 2019, the NFP has helped 75 formerly incarcerated Indigenous men secure employment opportunities through BCIC’s “Second Chance for Change” program.

“The issue we’ve had trying to support our initiatives to change people’s lives has always been funding, which is why BCIC’s association with Art Index is so important to us,” explained Fordham. 

“Every time these [art] pieces are leased out to an organisation, not only are they getting a beautiful painting to hang in the foyer - or a chance to share culture - they’re also giving money to an organisation that’s actually going to put it back into those communities.”

RAP initiatives

Art Index is also looking to expand its support of what are called Reconciliation Action Plans (RAPs).

Originally developed by national Christian charity, Mission Australia, RAPs are committed to helping reduce the gap in living standards between Aboriginal and Torres Strait Islander and non-Aboriginal or non-Torres Strait Islander Australians.

Within a corporate context, RAPs are another way businesses can forge relationships with Aboriginal and Torres Strait Islander peoples by helping organisations access Indigenous art.

In an attempt to formalise these efforts, another recently implemented initiative, Raising The Bar, also helps to ensure that a percentage of an organisation’s funds support Indigenous businesses.

All companies can undertake their own RAP, which can be tailored to individual companies’ resources and where they are in their reconciliation journey.

Artist’s represented in the Art Index/BlackRoo Rental Portfolio include the likes of Emily Kame Kngwarreye (1909-1996), Dorothy Napangardi Robinson (1956-2013), Gloria Temarre Petyarre (1942-2021), Ronnie Tjampitjinpa and Warlimpirrnga Tjapaltjarri.

Between 2012-2022 the annualised historical price appreciation for similar works by Ronnie Tjampitjinpa is 17.4%.pa annual compound growth.

Ronnie Tjampitjinpa 120x180 cm Title Tingari Dreaming
Ronnie Tjampitjinpa, Tingari Cycle, synthetic polymer paint on linen, 120.0 x 180.0 cm

 

Quality art is in short supply & buyers are getting younger

Sotheby’s reported that in the past 12 months 47% of bidders were new while the number of new bidders under 40 increased by a whopping 187%.

Interestingly, while there’s a growing cohort buying quality art, there’s a diminishing supply of high-quality artworks with more being acquired by museums and permanent collections.

Just over the next 12 months, 14 new major museums and galleries are set to open in Australia alone worth $2.5bn as reported in the AFR in December 2021.

According to the Australian Art Sales Digest (AASD):

  • 2021 recorded the 3rd highest total auction sales of all time in Australia and the highest clearance rate ever at 76%.

  • Between 2013-2022 the annualised historical price appreciation for similar works by Warlimpirrnga Tjapaltjarri is 24.5%. His clearance rate in 2021 = 100%. Last 3 years = 78%.

  • Between 2012-2022 the annualised historical price appreciation for similar works by Ronnie Tjampitjinpa  Australian Art Sales Digest is 17.4%.

  • Between 2008-2022 the annualised historical price appreciation for similar works by Arthur Streeton is 12.3%. His clearance rate in 2021 = 88%.

  • Between 2000-2022 the annualized historical price appreciation for similar works by Brett Whiteley is 11.1%. His clearance rate for paintings 2019 - 2021 = 90%.

  • Between 2008-2022 the annualized historical price appreciation for similar works by Howard Arkley is 14.7%.

Investors interested in art as an alternative form of investment can reach out to Art Index, an independent source of art research, sales and rental services to the Australian market.

Written By

Market Index Corporate

Market Index helps small-cap ASX listed companies connect with a large audience of Australian investors through clear and concise articles on key developments. All coverage contains factual information only and should not be interpreted as an opinion or financial advice. Consider consulting a qualified financial adviser before making an investment decision.

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