Contemporary Art Overvalued, Broad Says

Billionaire Eli Broad said contemporary art prices might drop in a similar way to the crash after 1990, when values fell by half.

Mr. Broad spoke in an interview at Art Basel, the world's biggest contemporary art fair, where he bought a Jeff Wall photograph, a street scene framed in a light box, his first major acquisition of the artist. Prices of Wall's art have doubled in the last three years, said Mr. Broad. He declined to say how much he paid.

"Prices at the fair and at auctions for contemporary art are overvalued," said Mr. Broad. "I don't know how long it can keep going on."

Mr. Broad is one of the big U.S. collectors who passed through the Swiss fair, along with Henry Kravis, co-founder of private equity investor Kohlberg Kravis Roberts & Co., and French billionaire Francois Pinault Broad has attended the Swiss fair for 30 years, he said in interviews before and after a press conference.

Mr. Broad, a slight, gray-haired man of 74, compared today's art market with that of 1989. Prices of top contemporary artists declined in the following years as leveraged buyers were sidelined.

"Now we've got U.S. and European hedge funds and Russian oligarchs buying art," Mr. Broad said. "Some of the new buyers are genuine collectors and others are buying because it's the socially acceptable thing to do. Nothing should go up in a straight line, and we're looking at an adjustment like we had in 1989 and 1990."

A drop in prices would please many collectors like himself, whose purchasing costs have risen, he said. "We would be glad."

Jean-Michel Basquiat, whose art at the fair is priced as high as $4 million, is an artist Mr. Broad started buying in 1982 for $5,000 to $25,000. "Now, the insurance is more than we paid for the paintings," he said. Insurance costs for his large collection of Cindy Sherman works, which he first bought for as little as $150, also exceed his acquisition costs, he said.

At the press conference, Mr. Broad said his $60 million gift to the Los Angeles County Museum of Art to build a contemporary art gallery is part of a transformation of the city that will make it into one of the world's top art centers. With $10 million of the money, LACMA purchased Richard Serra's largest sculpture, a twisting work called "Band," Mr. Broad said.

The gallery would make Los Angeles "one of the four major cultural capitals with New York, London, and Paris," Mr. Broad said. The new gallery, added to other spaces, would give the city more square footage for contemporary art than any other, he said.

In the past two years, Mr. Broad, a founder and former chief executive officer of the homebuilder KB Home and insurer SunAmerica Inc., paid $11.8 million for a 1962 Andy Warhol painting of a Campbell's soup can and $23.8 million for a David Smith "Cubi" piece, an auction record for a contemporary sculpture.

Mr. Broad's fortune, valued at $5.8 billion by Forbes magazine, is financing the U.S. arts scene with gifts and loans. Michigan State University just received $26 million from Mr. Broad for a new campus museum.

The Broad Contemporary Art Museum at LACMA is due to open on February 9. Housing works from Mr. Broad's California art foundation, including Warhol, John Baldessari, and Joseph Beuys, it will put more of his art in the public realm, and bring more living artists to the Los Angeles museum.

Asked why so many of his artists were from outside California — a complaint of some Los Angeles dealers — Mr. Broad said about 20% of his collection, including Baldessari and Ed Ruscha, was Californian.

LACMA has raised $188 million in gifts and pledges, including Mr. Broad's 2004 contribution, for phase one of its expansion and to double its endowment, according to its Web site. Michael Govan took over last year as chief executive officer after running the Dia Art Foundation in New York.

On the list of Mr. Broad's recent acquisitions are 570 works by the German artist Beuys, and art by Chris Burden and Franz Ackermann.

The collector's art foundation owns about 1,800 contemporary works, bought in the past 20 years, and adds some 50 works a year, according to the Broad Art Foundation's Web site.

Prices of the top contemporary works have risen 20% since December and have quadrupled in a decade, according to index-maker Art Market Research.

Art Basel organizers expect some 56,000 visitors to spend $500 million on art at 300 galleries through June 17. The next day, London auctioneers start sales valued at as much as $856 million.

Zurich-based UBS AG, Europe's biggest bank by assets, is Art Basel's main backer.