So you now realize that Farjao’s strategy of collectively buying big ticket artworks is a safe and cost-effective method for getting into the historically exclusive art market. This is good.
But it doesn’t end there. Farjao could also be a useful tool for existing artworks owners. Don’t scratch your head—read on.
Placing an artwork in a Farjao is easy, and the owner is then able to reversibly sell a portion of the shares of that Farjao in order to get short or long term financing, without needing to service the debt. This is also good.
With a traditional loan on an artwork, an owner runs the risk of being foreclosed on and losing everything at some point if he/she cannot service the debt. This is not good. In fact, it’s very bad.
A second important feature is that when the time comes to sell, the artwork owner can sell the shares through Farjao at a much lower transaction fee (through an auction house or dealer, the seller will pay from 20 to 30%), therefore increasing profits. This is good, as well.
The new owner simply takes over the ownership of the shares of that particular Farajo instead of taking over the title of the artwork itself. It’s not magic—it’s how Farjao was conceived and constructed.
We see a bright day in the
future when every high-priced artwork in the world will have a FJ number, a de facto identification and/or security number.
This is part of a greater strategy to stabilize the extremely whimsical and fickle nature of the art market, making fine art
a mature asset class investment.
But you’ll have to wait until my next blog for that insight.