\n\tSotheby\u2019s and Pace<\/a> Gallery are currently negotiating over a deal that would see the auction house make a significant investment in the mega-gallery. While nothing has been inked yet, and the details appear to be very much in flux, a source close to the negotiations told ARTnews<\/em> that it was not an acquisition, but a \u201cjoint venture between Pace and Sotheby\u2019s that will be multifaceted and has many elements. Let\u2019s call it a \u2018new model.’\u201d<\/p>\n \n\tThe news, while potentially momentous, is not entirely unexpected for those in the industry. Rumors have swirled for weeks that Pace has been in talks with Sotheby\u2019s about either a major investment, a merger, or even an outright acquisition.\u00a0<\/p>\n \t\tRelated Articles<\/p>\n<\/h2>\n \t\t\t\t\t\t \n\tSuch a deal would come at a time when the art market is sluggish. Throughout last year art dealers have spoken about tough market conditions<\/a> and a shaky financial climate. Pace has a large overhead, sources said. In addition to branches around the world, the gallery has an eight-story, 75,000 square foot headquarters on 25th Street in Chelsea. Opened in late 2019, amid a rapidly growing art market, the building was CEO Marc Glimcher<\/a>\u2019s vision for Pace\u2019s future<\/a>.<\/p>\n \n\tAt the inaugural preview, Glimcher said he foresaw<\/a> a \u201ccommunal space for thinking, transcendence, and contemplation\u201d where people could \u201ccome and take their time.\u201d But the deal was always going to be a challenge: unlike its mega-gallery peers, Pace does not own the property or the <\/a>building. The gallery reportedly pays<\/a> more than $700,000 per month in rent on a 20-year lease to owner Weinberg Properties. That\u2019s around $8.4 million per year, not counting the $18.2 million interior build out and the $80 million cost of the building\u2019s volcanic stone exterior. A Pace spokesperson told ARTnews<\/em> the reported figures were inaccurate.<\/p>\n \n\t(A source familiar with Pace\u2019s finances told ARTnews<\/em> that costs associated with the Chelsea headquarters account for less than 10 percent of the gallery\u2019s overhead, and was only a five percent increase from the total costs incurred from the gallery\u2019s previous seven-story headquarters on 57th Street.)<\/p>\n \n\tStill, other costs to the gallery have come as a result of the building: In 2022, Pace was ordered<\/a> to pay real estate firm CBRE $6.3 million in damages over its failure to pay owed commissions. Later that year, ARTnews<\/em> reported that Superblue, the experiential art center largely funded by Pace, had burned through most of its funding<\/a> and planned projects were being abandoned. Glimcher stepped down from his leadership role at the company in December.\u00a0<\/p>\n \n\tThis past October, at Art Basel Paris, the first year the fair was held in the opulent Grand Palais, Pace allegedly pulled out of the fair\u2019s Public Project after their proposal was accepted. According to an adviser with knowledge of the matter, the project was canceled because Pace didn\u2019t have the budget. \u201cIt was a really bad look,\u201d the adviser said. (A spokesperson for Pace denied that such a project ever existed.)<\/p>\n \n\tBut as they say, where there is smoke, there is fire. And there has been a lot of smoke.<\/p>\n \n\t\u201cI wouldn\u2019t say Pace is for sale but they certainly have been looking for investors for a long time,\u201d one source familiar with the gallery\u2019s financial situation told ARTnews<\/em> earlier this week.\u00a0<\/p>\n \n\tWhile the exact details of the Pace-Sotheby\u2019s deal remain unconfirmed, discussions between the two companies have been occurring on and off since the pandemic, when both concurrently followed their clients to the tony enclaves of East Hampton and Palm Beach. In the Hamptons, Pace and Sotheby\u2019s opened outposts two blocks from each other, while in Palm Beach, they were located\u2014along with Acquavella Galleries\u2014in the posh Royal Poinciana Plaza<\/a>. The relationship then expanded when Pace and Gagosian made a move on the Macklowe Estate, one source told ARTnews,<\/em> with Sotheby\u2019s taking the place of Acquavella (the trio hoped to recreate the Glimcher-led coup<\/a> that saw Pace, Gagosian, and Acquavella outbid both Christie\u2019s and Sotheby\u2019s to secure the Donald Marron estate in 2020).<\/p>\n \n\tSotheby\u2019s has had its share<\/a> of financial challenges thanks to billionaire owner Patrick Drahi\u2019s aggressive and creative use of debt to fund acquisitions, and the overall market conditions. In January, the house reported a 23 percent drop<\/a> in consolidated sales in 2024, compared to the previous year and, last June, S&P Global Ratings downgraded Sotheby\u2019s credit rating from B to B- due to falling revenues and rising costs. The auction house had two rounds of layoffs totaling over 150 staffers and closed the year with a very public reversal<\/a> on its overhauled fee structure, which was in place for just seven months.<\/p>\n \n\tThe auction house did find a renewed spring in its step after it closed a deal <\/a>in October for Abu Dhabi\u2019s sovereign wealth fund and investment company, ADQ, to invest a much-needed $1 billion life line, $800 million of which was earmarked for paying down the house\u2019s $1.65 billion in debt.\u00a0<\/p>\n \n\tWhat role the rest of ADQ\u2019s investment could play in the deal with Pace is unknown. While the Pace-Sotheby\u2019s deal, depending on the structure, could have immediate financial benefits for Pace, the case for Sotheby\u2019s hinges on CEO Charles Stewart<\/a>\u2019s efforts since joining the house in 2019 to find new ways to grow its global brand power and make the business more profitable<\/a>.\u00a0So far that\u2019s involved an expanded push into the secondary market for luxury goods, including cars, watches, and wine. Beyond auctions, Stewart has overseen brick-and-mortar expansion that attempts to shift the way Sotheby\u2019s current and potential customers see the brand. Lux retail-oriented spaces in Hong Kong and Paris, complete with restaurants and wine cellars and space for concerts, fashion shows, telegraph that the firm intends to be a destination for every type of collector, rather than just an auction house.<\/p>\n \n\tSources familiar with Stewart say he has entertained the possibility of working with a gallery in the past. A partnership or investment with Pace could give both Pace and Sotheby\u2019s better access to the collectors that fuel their respective businesses. Such a partnership could be seen as a logical next step to the role Noah Horowitz played during his sojourn at the auction house<\/a>. In 2021 he took on the newly created title of worldwide head of gallery and private dealer services and worked under Brooke Lampley, the house\u2019s global chairman and head of fine art. Both have since left the company, Horowitz to become CEO of Art Basel and Lampley to become a director at Gagosian.<\/p>\n \n\tWith Pace as a strategic partner Sotheby\u2019s could ramp up revenue from private sales and gain a broader insight into estates coming to market, while Pace collectors could get access to preferred rates with Sotheby\u2019s art lending business Sotheby\u2019s Financial Services.<\/p>\n \n\tThen there is the Breuer Building, former home of the Whitney Museum of American Art and, temporarily, the Met and the Frick. Last year, Sotheby\u2019s spent a reported $100 million to secure the Brutalist landmark on Madison Avenue for its new headquarters. As beautiful as it is, insiders have expressed doubts that the space could accommodate a complete viewing of a marquee evening sale, much less offices for the auction house staff. One can imagine that Pace might welcome handing off some space from its Chelsea headquarters for relief on the lease.<\/p>\n \n\tAuction houses have acquired galleries in the past, such as Sotheby\u2019s acquiring Noortman<\/a> in 2006 and Christie\u2019s acquiring Haunch of Venison<\/a> a year later. Industry insiders expressed skepticism about such arrangements, however: neither of those galleries exist today.<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":" Sotheby\u2019s and Pace Gallery are currently negotiating over a deal that would see the auction house make a significant investment in the mega-gallery. While nothing has been inked yet, and the details appear to be very much in flux, a source close to the negotiations told ARTnews that it was not an acquisition, but a […]<\/p>\n","protected":false},"author":1,"featured_media":135461,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[100],"tags":[1885,58293,13170,13842,58294,11209,18874,9512,34993,11119],"dealstore":[],"offerexpiration":[],"class_list":["post-135460","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-art","tag-art","tag-charles-stewart","tag-era","tag-gallery","tag-marc-glimcher","tag-market","tag-pace","tag-signal","tag-sothebys","tag-talks"],"yoast_head":"\n\n
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