ARTWORK BACKGROUND REPORT - Skate's Art Market Research

The es=mate set by Chris=e’s for the March 31, 2010 sale of The Sick Child I is the highest ever
for this peer group, which means that purchasing within this es=mate range slightly increases
the likelihood of a nega=ve return on investment in the event of a resale. This risk remains
minimal, however, as all of the sales in the above peer group have sold either comfortably in the
middle of the es=mate range or well above the high es=mates assigned by the auc=on houses.
A strong investment case also comes from the fact that all of the works in the peer group found
buyers at auc=on (i.e., none of the works was “bought in” by the auc=on houses).
Poten=al buyers should note the large price gap for works in The Sick Child I’s peer group, which
can in part be explained by differences in the quality of the lithographs sold. In 1894, Munch
produced his first works in this medium, so it was a completely new field for him. Chris=e’s sale
catalogue notes the superior quality of the edi=on profiled in this report.
Part of the reason for the large price gap is invariably =ed to the irra=onal premium paid at the
=me of purchase. The average work in the peer group (including the repeat sale) sold for
$272,339, which is on the low end of Chris=e’s es=mate range for this sale.
Edvard Munch’s repeat sales show that his works can be a reasonable bet as an investment
target. Although there has been only one repeat sale among Munch’s most valuable works (Girls
on a Bridge), its effec=ve rate of return was a solid 11.57%. Its sale during the summer of 2008 -­‐
just before the global financial crisis got underway and before the art market shiTed decidedly
away from Contemporary art toward Impressionist and Modern art -­‐ confirms Munch’s strength
and low level of price vola=lity. The resale in the sick child peer group occurred on September
20, 2007 -­‐ i.e., at the very height of boom in the market for Contemporary art. This result only
provides further confirma=on of Munch’s price stability.
The Sick Child I is a lithograph and cannot be directly compared with a pain=ng such as Girls on a
Bridge. However, both artworks are superior in quality and capture the most famous themes of
Munch’s art. There is a high probability, therefore, that his iconic status might boost the
irra=onal premium paid in the event of the work’s repeat sale at auc=on.
12. Approach to Art Valua>on
Report 3-­‐EM-­‐001
Client 0030
March 30, 2010
Skate’s approach to art valua=on is based on the applica=on of Skate’s Art Asset Pricing Model
(AAPM), which defines a valua=on range for an artwork based on the valua=on range of
comparable artworks (i.e., a peer group). An adjustment is made using a provenance factor (i.e.,
a discount rate that varies between 0 and 1 and captures all the risks per=nent to the art asset,
including authen=city, =tle and transport restric=ons) and irra=onal premium reflec=ng personal
affec=on of a poten=al buyer and the individual artwork.
We have not es=mated an irra=onal premium that can be added to this artwork (i.e., an es=mate
on how much a buyer may be willing to pay beyond the fair value), which can drama=cally affect
an artwork’s final selling price. We believe, however, that the auc=on’s suggested pricing range
for the artwork does imply that a buyer may be willing to pay an irra=onal premium amoun=ng
to 20% more than the price levels of comparable artworks (i.e., the peer group discussed above).
Skate’s, LLC, Copyright ©2010 13