The Day That Changed Watch Collectingby
On an unseasonably warm December afternoon 10 years ago tomorrow, everyone who was anyone in the obsessive world of watch collecting—formally known as horology—packed Sotheby's seventh-floor, wood-paneled auction gallery in New York. The group of collectors gathered there from around the globe as well as by telephone included the seasoned, the novice, and the merely curious. And they were all present for a single purpose: the "Masterpieces of the Time Museum," an unprecedented dispersal of 81 lots that included some of the most significant timepieces ever crafted. When the hammer fell, though, it was the sale's centerpiece, Lot 7, that made history. An 18-karat gold pocket watch crafted in 1933 by the famed Swiss watchmaker Patek Philippe for New York banker Henry Graves Jr., fetched an astonishing price of $11,002,500. An anonymous collector won the fevered bidding, pushing the watch's price to more than double its presale estimate and shattering all world records. Ten years later, its record price has yet to be broken. And the sale helped touch off a race among a new generation of collectors. The Graves SupercomplicationKnown as the Graves Supercomplication, the unique timepiece possessed 24 complications—or mechanical features in addition to timekeeping—including a different chronological function for each hour of the day, a chart of the nighttime sky over New York City complete with the magnitudes of the stars and the Milky Way, and a minute repeater that played the same melody heard in London's Big Ben. The storied watch was the most ingeniously complicated mechanical watch ever created and required five years to design and build. Off the market for 66 years, it was also the ultimate prize in a 30-year collecting duel between Graves and the American automaker James Ward Packard, who spent a good part of the early 20th century attempting to acquire the most extraordinary timepiece with the greatest possible number of complications ever made. Both men wanted the best—and for that they chose Patek Philippe. "The Supercomplication changed the market," says Daryn Schnipper, director of Worldwide Watches at Sotheby's (BID) who oversaw the auction. "Back then, if a watch sold for $100,000 it was something. This set up the market for where it has gone in the past 10 years. Now it is not surprising to see a watch sell for $2 million or $3 million." By the time the Supercomplication surfaced at Sotheby's, it had become one of the most coveted timepieces in history. And in the decade since it was auctioned off, the vintage mechanical watch market has been propelled into the same league of luxury collecting once reserved for Old Masters' paintings, fine wine, and jewelry. Following the auction, the victorious bidder—who still owns the watch but whose identity has never been revealed—agreed to display the Supercomplication at the Patek Philippe Museum in Geneva. Recession-Proof Vintage MarketHistorically, such timepieces were prized objects of status and luxury. Over time, ownership has shifted from royalty and aristocracy, to wealthy industrialists and businessmen, to serious collectors with deep pockets. More recently, newly minted moguls and speculative buyers have joined the ranks of horological collectors. While America remains a strong market, the top buyers' demographic has broadened to include Asia, the Middle East, and Russia. A year ago, as the economic downturn took hold, the watch market—like the art market—suddenly cratered. Sales of luxury items like Swiss watches that can start at $1,000 and quickly move exponentially higher, began to slip. According to the Federation of the Swiss Watch Industry, although 2008 saw record sales of $16.7 billion, an increase of 6.7%, Swiss watch exports declined in the fourth quarter after 19 consecutive quarters of growth. However, the auction market for vintage mechanical timepieces has held fairly strong. Aurel Bacs, the co-head of the Geneva watch department for auctioneer Christie's International, says that initially there was a fear that the financial crisis would force a number of collectors to sell off, driving prices down in the auction market. "The opposite happened," he says. "There is greater demand than supply." When brokerage Lehman Brothers collapsed, many clients thought presale auction estimates would drop. Instead, Bacs says, top quality pieces maintained their prices or went up, while those of poorer quality fell. As the stock market now makes a comeback, despite continued economic woes, auction sales are racking up some impressive numbers. Last month, the auction house Antiquorum sold a yellow gold Patek Philippe Calibre 89 pocket watch in Geneva for more than $5 million. In 1989, Patek Philippe created a limited set of four Calibre 89s in platinum, yellow, pink, and white gold to commemorate the house's 150th anniversary. Aided by computer technology, Patek Philippe was able to create the piece with 33 complications, breaking its own 56-year record—and surpassing the legendary Supercomplication. Indeed, at the close of this fall's auction season, important houses such as Sotheby's and Christie's reported strong sales. In November, Christie's "Important Watches Sale" in Geneva brought in $18.9 million—twice its presale low estimate with a sell-through of 94% of its lots. That same month, Sotheby's reported that its sale of two collections of pocket watches and watches that included pieces by Patek Philippe, Rolex, and Vacheron & Constantin (CFR.F), "soared over estimate." The sale brought in more than $5 million, with 80.9% of the lots sold. "You'd never know there was a recession in terms of the watch world," says Sotheby's Schnipper. Patek Philippe Leads at AuctionsOne rationale for the spike is the shift from the stock market to hard assets, with vintage watches being viewed as having durable value. Of course, among collectors watches have another unique value proposition. "The watch market is comparable to the stock market, but you don't buy stock because you are passionate about it," says Christie's Bacs. "You buy it as an investment to do well financially. You buy a watch because you like it. When it is less valuable, then you are just less inclined to sell it unless you have to." Through the years, Patek Philippe pieces have commanded the highest prices at auction, and that remains the case in the current economic climate. Last month in Geneva, Christie's sold a collection of 10 vintage Patek Philippe wristwatches dating from 1938 to 1982 and totaling $5.7 million—twice the amount of their presale estimate. The only privately held, family-owned Swiss watchmaker in Geneva, Patek Philippe limits its production to just 40,000 pieces a year. It has earned its reputation for impeccable quality and for making innovative and complicated watches with timeless designs, built to remain fashionable for 110 years. As the firm's famous ad campaign states: "You don't own a Patek Philippe, you take care of it for generations." According to Larry Pettinelli, the president of Patek Philippe USA, recessions often separate the new luxury from the old. "I've been through three downturns in 21 years," he says. "Today 'luxury item' is too broad a term. We tend to do best in downturns. Patek customers are discerning; these are not impulse buys." Says Pettinelli: "The auction price is the unbiased market price. We have no control over that. What has always held up is our value and [the auctions] help validate new sales." If this past auction season is any indication, vintage watches will remain highly prized. Says Bacs: "Our worst enemy is when someone is no longer interested and people say they no longer desire watches." Check out our slide show for a look at the watches and clocks that have commanded the highest prices at auction during the past decade.