Why Wait Till The Paint Is Dry?

Auction house Phillips de Pury's focus on ultracontemporary art is starting to pay off

It's early evening in Manhattan's Chelsea gallery district, and a cluster of young professionals cuts a sharp image against the white walls inside a converted warehouse. Beside them, a row of beautiful people sit before windows with sweeping views of the Hudson River. All eyes are on the wiry man presiding over the room, beads of sweat forming on his forehead. "All right, last chance then," Simon de Pury calls out in his French accent, closing the deal for Huggable Atomic Mushroom, a one-foot high, white pillow shaped like a nuclear explosion. "Sold! For $2,000 only," he proclaims with a knock of the gavel, gently rebuking the crowd for its parsimony.

The chairman of Phillips de Pury & Co., he is sometimes called the Mick Jagger of the auction world. Where rivals Christie's International and Sotheby's project an image of elite, traditional, Anglophilic good taste, de Pury strives for the youthful, edgy, and controversial. Where the two major houses consider most art produced over the past few years unproven, Phillips de Pury is proud to specialize in hot-off-the-easel work. And where Christie's and Sotheby's (BID ) have long cultivated the old-money social establishment, de Pury seeks out young hedge fund millionaires and other rookie collectors. Its hip aesthetic is evident everywhere, from the nude Mario Testino fashion photos in the reception area to an advisory board that includes former Sex Pistols manager Malcolm McLaren and designer Marc Jacobs.

Like the real Mick Jagger, de Pury is nothing if not a shrewd businessman. The ultracontemporary works that he specializes in are the most rapidly appreciating objects in the art market. Now, the much larger Christie's and Sotheby's are playing catch-up, selling works by young artists such as Barnaby Furnas, jazzing up their catalogs, and holding special auctions for new work. Phillips de Pury's ascendency is all the more impressive because it was widely given up for dead a few years ago -- until de Pury engineered a turnaround worthy of a B-school case study. "He's done an extraordinary job...tapping into the energy in the market right now," says veteran New York art consultant Kim Heirston, whose clients include Kate Spade and Tom Clancy.

Of course, the contemporary art bubble could pop -- and there are those who wonder whether Phillips would burst with it. Marc Porter, president of Christie's America, which auctions everything from wine to books to ancient art to vintage cars, says: "I'd rather [have] our business model than theirs."

De Pury is unperturbed. As the fall auction season approaches, the company is headed for a second straight profitable year, after many years of losses. And de Pury has lined up a long list of trophy properties to sell. "Our results speak for themselves," he says, flanked in his wall-less office by nine giant metallic globes by Richard Armleder, a contorted Ron Arad steel chair, and a row of white vases decorated with images of Chairman Mao. The atmosphere, like the airy gallery space, is chic, fun, and slightly rebellious.

That sensibility has been carefully calibrated by de Pury, 55. After serving as chairman of Sotheby's in Europe for 11 years and managing the celebrated Thyssen-Bornemisza collection in Madrid, de Pury was well known in the art world. In 2000, LVMH Moet Hennessy chief Bernard Arnault, who had just bought Phillips, recruited de Pury, hoping his star power, connections, and the addition of his name would enable the second-tier, 210-year-old London firm to become a global rival to the major houses.

After three years of wooing sellers with inflated guarantees, Phillips (then called Phillips, de Pury & Luxembourg) was running up debts. By 2004, cumulative losses, says Phillips' managing director Brook Hazelton, eventually reached $400 million. As the red ink gushed, in 2002, LVMH drastically reduced its stake in the business to 27.5% from 72.5%. "We lost our most powerful partners; I was on my own without LVMH behind me," de Pury says.

UNORTHODOX MOVES

Survival would mean bold steps. In early 2003, at de Pury's direction, Phillips pulled out of the competitive Impressionist and modern art auction markets, relocated from an haute Midtown Manhattan location to a cheaper one downtown, and later reformatted its catalogs to look more like fashion magazines -- all unorthodox moves for a major auction house. De Pury also decided to focus on four categories: contemporary art, design, jewelry, and photography. "We had to set ourselves completely apart," he says, sitting on a steel picnic bench/bookshelf in the office he furnished. "People said we were crazy at the time, but it's the smartest thing we've ever done."

In fact, de Pury hit some of the hottest precincts of the art world. Over the past five years, contemporary art has appreciated at a compound annual rate of 17.69%, according to Jainping Mei and Michael Moses, two professors at New York University's Stern School of Business who publish an index of art performance. By comparison, Impressionist works and Old Masters have appreciated 7.73% and 3.13%, respectively. "Collecting Old Masters just seems a little [stodgy] for some of our younger generation," says Moses. Photography has done best of all, rising 25% to 30% for each of the past five years, estimates Stephen Perloff, editor of Photo Review and Photograph Collector.

Overall, Phillips' sales are still dwarfed by Sotheby's and Christie's. It eked out a modest profit ("in the single-digit millions," according to Hazelton) on sales of $103.2 million in 2005, while Christie's global sales totaled $3.2 billion, followed by Sotheby's at $2.7 billion. Christie's does not disclose profits, but Sotheby's earned $63.2 million last year.

But Phillips is developing an edge in so-called wet paint art -- work so new the paint is still drying on the canvas. In the closely watched spring contemporary evening auctions in New York, for example, it beat the two big houses for work produced in the 21st century, selling $6.6 million worth of such art, compared with $1.4 million at Sotheby's and $4.7 million at Christie's. Phillips also may have the lead in a vague but critical metric: buzz. The latest, most controversial work is skyrocketing in value for a reason: It appeals to the bold-faced names and Wall Street dynamos who are the next generation of collectors.

De Pury has adeptly catered to a new set of first-time buyers, upwardly mobile twenty- and thirtysomethings who will spend $600 on Prada shoes but have yet to step into the auction world. For this audience, Phillips launched a new "bargain sale" series in September called Saturday@Phillips. The series features pop music, coffee, and bagels, de Pury says, and items selling from $500 to $20,000. "We want to take the fear away," he says, "[to] encourage people to see how pleasurable auctions can be."

By Moira Herbst

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