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Real Estate Valuation of fine art

The researcher in charge of the project “Fidel Micó Catalogue Raisonné” (FMCR) is pleased to announce relevant findings on the appraisal of 29 paintings included in the research. The generally recognized method of valuation among appraisers at auction houses is mostly based on previous auction records to obtain a something usually named “fair market value” (FMV). This value is the price that someone paid for an artwork, no matter, for instance, mental condition of the buyer. According to this method, the value of an artwork is zero in absence of public auction records, and private sales have not value. But, who was born first? Was it the chicken or the egg? Obviously, the cash flow generated by every artwork from the beginning of the creation process is not being taken into account to obtain the current Fair Market Value (cFMV). This fundamental problem was a critical subject of this investigation (FMCR) because undervaluation and overvaluation of paintings may introduces remarkable distortions in the public recognition of the artist.

If artistic creation, sale, transportation, exhibition, publication, advertising, storage, conservation, insurance, and taxation are taken into account, the discounted cash flow generated by an artwork may be calculated. Therefore, it is easy to calculate the net present value (NPV) of every painting shown in exhibition, included in publications, and reproduced in prints. Cash flows of paintings were calculated from their intrinsic capacity to generate costs and incomes by using the available public data. Cost of purchase at the artist’s studio, transportation, storage, conservation, insurance, advertising, exhibition, and tax were collected from different information sources. Incomes were calculated from data of ticket price at exhibitions, visitors, journals and magazine subscriptions, and print sales. It was interesting to find that the painting “La Maja del Río” (95 x 130 cm, oil on canvas, 2000, Cuban private collector), without action record, has generated a NPV of 90 264 USD. Therefore, the cFMV of this painting is not zero, and it has an evident capacity to generate more income. Other paintings were clearly undervalued during commercialization. The best example is the painting “La cañada” (100 x 150 cm, oil on canvas, 2005, USA private collector). This artwork was recently sold for 8 000 - 10 000 USD at the secondary market, in spite of its NPV is 343 383 USD.

In this statistically significant sample of paintings (n > 25), there are not artworks with public auction records which mean that their value at auction houses is zero, but their individual cash flows between 2000 and 2013 suggest a different point of view. The NPV of seven paintings (24%) was lower than sale price at the artist’s studio, suggesting a success ratio of 76% for this business. The distribution of NPV for the remaining painting was as follow: 48% of paintings have a NPV between 50 000 USD and 60 000 USD, 21% between 70 000 USD and 120 000 USD, and 7% between 220 000 and 350 000 USD.

A sensitivity analysis allowed finding more interesting evidence on the value of artworks painted by Fidel Micó. Assuming the purchase of 20 landscape paintings with sizes attractive for collectors of Latin American art, at current price, and an investment in transportation, exhibition, storage, conservation, insurance, publication, and advertising, the NPV was estimated higher than 300 000 USD. The value of each painting increased by 12-fold, after exhibition, publication, and print sales. The most significant variables, within reasonable ranges, were painting price, and print sales. The number of exhibitions and paintings did not introduce significant changes. Finally, these findings demonstrate that public auction records are not absolute and trustable reference systems to calculate the value of artworks, but instead of that, auction records are just raw data for comparison with rational calculations. Otherwise, in absence of auction records, we would always be asking: who was born first?

The Fidel Micó Catalogue Raisonné (FMCR) should be understood as an applied research project intended to explore the work and life of the painter Fidel Micó in the last 40 years. This project, submitted to Catalogue Raisonné Scholars Association and International Foundation for Art Research, may encourage current owners of Micó’s works (mostly from USA, Mexico, Italy, and Spain) to supply information and images for provenance research and authentication. We also hope that the FMCR shows a good sense of how Micó’s method and practice has been throughout his lifetime working in different formats, and genres.

Rodríguez Nº 14, entre Maboa y Rabí, apto. 1, Rpto. Santos Suárez, Municipio 10 de Octubre, La Habana, Cuba.

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