Art Finance: A Crucial Player in the Asset Market
There are a multitude of factors why the current art finance model isn’t ideal—Amelia Hunton, Managing Director, OMNIA Asset Solutions
OMNIA Global brings innovation to the art finance sector with their art finance division, called OMNIA Asset Solutions, launched to help collectors, institutions and corporations generate an income form their luxury assets. OMNIA Asset Solutions have positioned themselves as an alternative finance service to traditional art loans.
The company has been operating within the art finance sector for the past 18 months, officially launching their dedicated art finance division in July based in London. Arts & Collections recently spoke with Daniel Hansen, CEO of OMNIA Global, and Amelia Hunton, Managing Director of OMNIA Asset Solutions, about the concept and their goals for art and finance.
Arts & Collections: Why art finance?
Daniel Hansen: Our strength has always been as a provider for alternative financing, with our footprint in Private Equity investments in SMEs, Yachts and Aviation. We saw art finance as an under-served market, which offered a significant long-term business opportunity for us. With our in-house art and finance expertise, this business makes sense for our clients and us.
A&C: Why are your clients looking for art finance?
Amelia Hunton: There are many drivers for why you would pursue securitisation of your assets. We have found our clients were looking for liquidity, to invest in other asset classes, for an alternative to selling, to avoid capital gains tax, and for alternative terms whereby they weren’t required to guarantee the loan personally or though their business.
They all share the desire to release capital tied-up in their art or assets, which is notably difficult to do without having to sell, and which can be time-consuming and costly taking into consideration transactional commission, tax and market volatility.
A&C: What makes your product different to other art finance services?
DH: Collections are becoming a bigger part of the combined wealth of our clients, but they don’t accumulate cash flow. We have structured a solution, which allows clients to use their assets as the base of a cash flow.
AH: We offer a solution where they don’t have to sell the artwork, instead they pledge the artwork in return for an agreed annual income over five years. We securitise the assets with a non-recourse guarantee, this means in the event of default we can sell the art to recover our money but have no further recourse to other assets of the asset pledger.
A&C: How does it work?
AH: OMNIA Asset Solutions securitises art to underpin the operation of OMNIA Bonds II, which raises funds secured by high value assets. A typical accepted asset will be valued at £1 million upwards and leveraged at up to 50 percent. If the Bonds have raised £100 million capital, it is underpinned by the securitised asset portfolio valued in excess of £200 million.
OMNIA global is a company that has had strong success in the alternative financing market. It started in private equity, investing in small, privately held companies and floating them on the public domain. They were looking at their clients and at what other opportunities other market sectors provided them. And they had a lot of their clients—especially on the super yacht and aviation side—asking whether they were going to be doing an alternative financing solution for art.
The art finance sector, historically, was either funded by banks or art finance advisories where it has been traditional art loans. And their terms have been usually quite tight and they have taken personal guarantees or business guarantees against the loans so in the event of a default on payment, or a default on terms, which could be storage or access, in addition to selling the artwork, if it doesn't make up the financial loan requirement that they took out, the course for reimbursement goes beyond that physical asset they can then go after their other personal assets or their business for instance.
So a lot of clients in this space are keen to be moving away from the model of a personal guarantee or the guarantee against their personal businesses. So what OMNIA wanted to do in the art finance space was to create an entirely new product.
For more information, visit omniaassetsolutions.com