Oct. 11 (Bloomberg) -- Billionaire Eli Broad bought Jeff Koons's sculpture, ``Cracked Egg (Blue),'' for about $3.5 million from Gagosian's new West End gallery, starting a week of art sales in London.

Broad, whose California art foundation owns about 1,300 contemporary works, began his Koons collection in the 1980s, and has expanded it ever since. He spoke to Bloomberg at Brown's Hotel before taking a cab to the Frieze Art Fair in Regent's Park, which opens to VIPs today for private views.

``Unfortunately, we're paying more for Koons than we did in the 1980s,'' said Broad, 73, a slight, gray-haired man in a suit. ``But if you're a collector, you buy a work when you find it. We don't pause when prices rise. The only thing that happens is our insurance bills go up.''

Broad, among the largest contemporary collectors, helped found Los Angeles's Museum of Contemporary Art, is financing a new modern-art wing at the Los Angeles County Museum of Art and is underwriting a new production of Wagner's ``Ring'' cycle at Los Angeles Opera.

Art prices aren't likely to keep rising, after tripling in 10 years, he said.

``I don't think the market can keep going up,'' he said. ``In the U.S., we see real estate not going up -- houses are selling at lower prices. You can't have anything going up 10 percent to 20 percent to 30 percent indefinitely.''

U.S. artist Koons, along with Cindy Sherman and the U.K.'s Damien Hirst, are among the great artists who emerged in the 1990s, he said.

Museum Storage

Asked whether his collection would wind up in a museum, Broad said it would be divided and doled out to institutions that needed the specific works. The risk of donating an entire collection to a single museum was that much of it might wind up in storage, he said.

``Where it goes will depend on who needs what. We don't want them in storage.'' Giving a clue as to possible beneficiaries, Broad reeled off a number of boards he sits on, including MOCA. LACMA would be loaned more than 100 works, he said.

Koons would be an exception to the breakup of the art holdings, he said: ``We would like to keep Koons together. We have his basketballs, his bunny and one of his `Celebration' works.'' The cracked egg, in blue stainless steel, with the severed top beside the larger piece, is one of five, he said. ``There's one left. It will cost more when it's sold,'' he said.

Broad, a founder and former chief executive officer of the homebuilder KB Home and insurer SunAmerica Inc., paid $11.8 million in May for a 1962 Andy Warhol painting of a Campbell's soup can and $23.8 million last November for a David Smith ``Cubi'' sculpture, the highest price ever paid for a contemporary artwork sold at auction.

Leaving London

He'll depart London on Thursday, perhaps leaving some bids at the auction houses, he said, declining to name works he might buy. His trip to Frieze would enable him to see large numbers of works from international dealers in a short time, he said.

``We didn't come with the intention of buying anything specific there,'' he said.

Frieze, with sales last year of almost $57 million, is part of a week of museum and gallery shows of contemporary art, plus some $147 million of auctions. The fair is open to the public from tomorrow through Oct. 15.

To contact the reporter on this story: Linda Sandler in London at lsandler@bloomberg.net.

Last Updated: October 11, 2006 08:18 EDT