By Sharon Nichols
Image Provided; Courtesy Peter Aaron/Esto
Manhattanites have always welcomed fine art with open arms, considering it a necessary element in attracting higher-paying tenants and setting the quality of their establishment apart from others. But due to financial strains, many landlords are currently leasing art instead of owning it outright. Art and real estate entrepreneur Barbara Koz Paley, has recognized this trend. As CEO of Art Assets, LLC, a national art advisory firm which merges art and culture for businesses, from small companies to multinational corporations, which she founded in 1992; and a partner at Atlantic Assets Group, which specializes in commercial and residential real estate development for Brooklyn’s creative class; Paley established ArtLease, a service that procures fine art pieces for big-name business offices and commercial clients such as Morgan Stanley, in 2005. Between the three organizations, she is managing to continue doing business despite the recession—by taking rather artful advantage of the changing economy.
“I generally handle client relations and anything to do with financial matters and vision,” Paley explains. “Every once in a while, I’ll visit with the manager and say, ‘We’ve been doing this a very long time, maybe the market’s changed and we should look to a different way of presenting art in the lobby.’ In one interaction, we decided that we’d change the art every 18 months instead of every three years, and that we’d help them give a party in which the artist would be invited.”
It’s vital to Paley that Art Assets clients relate with her company as well as with the art in their spaces. “Setting up protocol, that’s what I’m good at—envisioning, finding clients, and keeping check on them.”
In the face of the recession, setting up protocol has become crucial. This past year, four clients notified Art Assets that they could not afford to renew their art leases. “One client thought they might declare bankruptcy, and they didn’t want us caught in it,” Paley says. “Another said he would be giving back some buildings and didn’t want to have art in his space while he was doing that. Another space which we’d done a four-year art installation for was being sold and they didn’t want to have art while they were going through the financial machinations. In the other case, a client asked that their three-year lease be cut down to two. So, that was a harbinger.”
However, at the same time, a former Art Assets client, PricewaterhouseCoopers, for whom Paley had helped select and supply art for 25 floors at the corporation’s 300 Madison Avenue offices, returned. “They hired us for the four new floors,” says Paley, “so that mitigated the cancellation of the contracts. That was great luck.”
Cost had not been a top factor when Art Assets worked with PricewaterhouseCoopers in 2004, but this year, economy mattered at least as much as the art.
“I came in with my team to talk about their expansion,” Paley recalls. “We discussed what they wanted, and they knew to the penny how much they’d paid for us on an art basis, on a square-foot basis, everything. They wanted to carry on the same themes at the same price, realizing the price of art might be more expensive.”
In a series of meetings, Paley and representatives from PricewaterhouseCoopers chose art that was affordable, and even searched the company’s other offices’ storage spaces to see if there was anything they could bring over. Six months later, the project was completed—on price and on time.
When Paley’s former client Shorenstein Realty bought 850 Third Avenue, Art Assets was hired to do a rotating art exhibit. “We are working either with new clients or ones we’ve worked with in the past who felt shut out by the high prices,” she says. “They are now back because they see more realism in prices and they have larger pools of capital.”
Thanks to Art Assets’17-year success, Paley felt confident about partnering up with a real estate company due to her long-time career in that field—she bought her first building in Soho in 1970. Atlantic Assets, which was founded in 2005, is a real estate investment development company that obtains urban properties that are in need of cultivation along with re-tenanting, particularly PricewaterhouseCoopers mixed-use properties which integrate retail usage. Paley is an active committee member of Urban Land Institute (ULI), a nonprofit, educational, and research organization which focuses on the use of land in order to enhance the environment, and her company targets areas like downtown Brooklyn and Crown Heights.
“It was clear to me that there was an opportunity for the kinds of projects that we do for our clients, and that I should invest in real estate,” says Paley. “I was looking for retail streets that were connecting, because, to me, Brooklyn was wildly ‘under-stored’ and there were beautiful buildings that could be saved. We could do infill projects right around transits and design them for the new creative community, often in the art side and business side.”
Paley created Atlantic Avenue art community from eight three-story buildings Art Assets bought on Atlantic Avenue in Flatbush at an intersection where there are 13 subways with 45 million people passing through daily.
“They’re sweet little buildings with a beautiful jungle in the back and the original storefront from the turn of the 20th century,” she says. “We painted the buildings red, green, yellow, and blue, then took those colors and used them for mix-and-match with mouldings and trim, so the buildings have a distinctive look. We renovated them and brought them back to market, getting new tenants while keeping our existing ones. Our whole theory was that if we used art in the empty storefronts and in the spaces, we would create a brand for ourselves that would communicate to the creative community that we wanted them as tenants. And we found that we were able to get higher-than-market rent and a very high-quality, creative tenant.”
Over the past three years, Art Assets has placed 16 art installations in Atlantic Gardens and held art-related events there, including a party for the Brooklyn Philharmonic.
The merging of her real estate and art businesses seemed like a natural coalescence to Paley, one in which creative ideas can flip back and forth, and everything one business considers might benefit the other. It’s turned out to be a wise strategy to battle the economic crunch.
“I see things picking up, absolutely,” she says. “For Art Assets, I think we’re going to be wickedly busy in 2010. We’re being contacted by so many clients and we’re already busy with several projects. My work with ULI gives me a terrific vista to go after everybody who has new money, who’s buying, who’s not, and many of those new people on the marketplace are potential clients.”
According to Paley, one of her biggest obstacles is staffing. She’s determined to maintain high-quality employees by shuffling responsibilities or replacing individuals to keep perspectives fresh. Another is collecting owed funds from clients, a skill obtained by learning tricks of the trade from financial institutions that Art Assets has taken on as clients in the past.
“We go on their financial system for awhile, then we notch up our own system,” says Paley. “We want to be at the leading edge of whatever’s going on, to be the best at it. I have to constantly be aware and curious about what other people are doing and how we can make it apply to us. As a little company, I always want to have the best people, the best process, and it’s our big clients who help us get those systems in place and make us more efficient.”
What bright spots are in the future for Paley? She mentions upcoming projects that she can’t yet describe beyond “very prestigious,” and talks of the expansion of Atlantic Assets. “We’re going to buy more deeply discounted property and do the same things we’ve done with the others,” she says. “We also bought a 43-unit property in Crown Heights, renovating 19 in the first year and now we’ve renovated the rest and increased cash flow significantly. We changed it from being an old, dopey building to one that’s smart and attractive to the creative community while keeping our existing tenants happy.”
Paley is also developing an international focus for her work as an active member of several boards of directors at Harvard University, as well as helping start Harvard’s Real Estate Academic Initiative, which offers grants to support real estate and urban development research by Harvard faculty and students. And through ULI, she is bringing in scholarship funds to run the organizations.
“I think the brand that we’ve brought to the table is very desirable today, and it will bring in more business,” Paley says. “The future looks very diverse and very opportunistic. Hand me a bowl of lemons and I’ve got the best lemonade stand in the country. I like setting very grandiose goals and exceeding them.”
