Last Thursday, I listened to Sotheby’s call presenting their 2024 results—$6 billion in sales, divided between $4.6 billion in auctions and $1.4 billion in private sales—and wondered what I was meant to be taking away. Sotheby’s told us the overall number was down 23 percent from the year before, and that the composition of sales was 63 percent fine art and 37 percent luxury. Again and again, we were told how luxury sales—$2.2 billion in “consolidated sales” this year, above $2 billion for the third year in a row—were driving the company. This point was made even starker when Sotheby’s revealed that fine art sales had fallen 31 percent from 2023 to 2024, while luxury sales had pulled back by only 4 percent. “We’ve been strategically investing in our growth, focusing mainly on diversifying our business,” Sotheby’s new C.F.O., David Kownator, said toward the end of the call, citing the auction house’s acquisition of classic car auctioneer RM Sotheby’s—a relationship that began with a 25 percent stake in the company a decade ago, and the joint purchase, with Realogy Holdings, of 80 percent of Concierge Auctions, which took place a little more than three years ago. But the main strategic move, Kownator said, was “expanding into new markets through our real estate strategy. We now own over $1 billion in real estate assets and our prime locations give us a competitive edge.” Kownator’s remarks were aimed directly at two financial press stories that hit Sotheby’s hard last year. In late August, the Financial Times was given a confidential report for bondholders that said core earnings had fallen 88 percent in the first half of the year, following a 25 percent decline in auction sales. Weeks later, The Wall Street Journal piled on, reporting that the firm was facing a serious cash crunch. On the call, Kownator said that Sotheby’s was “in a strong position, both when it comes to our current performance and our balance sheet. Our gross margins have remained steady and our overall profitability is right in line with what we’ve seen in previous years.” He went on to note that since the Abu Dhabi sovereign wealth fund ADQ invested $1 billion last October, the company’s bonds have been trading up “significantly” as “the bond market has recognized an improvement in our credit profile.” Finally, Kownator took aim at the FT, saying that “disclosures to bondholders only reflect part of our business,” referring to auctions and private sales, and “don’t account for the full scope of the company’s profit”—the two missing elements being Sotheby’s Financial Services (which originated $1.3 billion in loans last year, according to Kownator) and the real estate portfolio. Nevertheless, the bond community believes Sotheby’s faced a serious cash crisis in the third quarter—about the same time as the FT and WSJ reporting—which was resolved only when ADQ’s check cleared. “They almost hit the wall,” a bond jockey told me last week when I checked in after Sotheby’s call.

I was a little surprised to see real estate get so much emphasis on a call that seemed to be directed at rebuilding confidence in the company. But it does help explain a few things. For much of the past year, the art industry—especially the art advisors, collectors, and fiduciaries who place estates at auction—has been focused on the fee structure change that Sotheby’s announced last February. Indeed, the sparse auction offerings last fall made it clear that the new fee arrangement was hampering the company’s ability to compete. As we know, the company did the right thing and reversed course. The fee structure, however, didn’t cause the cash squeeze—though Sotheby’s management is still loath to acknowledge it, and C.E.O. Charlie Stewart insisted in the fall that the ADQ investment was not a lifeline. Sotheby’s financial problems began even before the new fees went into effect. The August report in the FT only covered the company’s performance up until June. At the time, a company representative told me that much of that 88 percent earnings plunge was due to one-time charges related to the real estate expansion and other things. I don’t know the cost of the new Paris headquarters or the Breuer building in Manhattan, but they’re not likely to come anywhere close to $1 billion. The new “maison” in Hong Kong is in a high-traffic luxury mall; it seems unlikely that Sotheby’s owns much of that real estate. We do know that Sotheby’s still owns its current Manhattan headquarters on York Avenue—which it has rented to the Weill Cornell Medical Center, but at rates lower than what Sotheby’s itself was paying—as well as a warehouse location in Queens. On the call, Kownator emphasized that bond reports don’t include revenue from Sotheby’s Financial Services and the real estate portfolio, though it isn’t clear that the latter is a profit center. He closed by name-checking ADQ as a long-term partner, and citing the real estate’s “increasing global footprint,” the strength of their data, and the power of the Sotheby’s brand as drivers of future growth. Anyway, coming back to the intended takeaway from the call: Sotheby’s wants to be seen as a global luxury retailer. This was Patrick Drahi’s goal from the beginning. It appears he was willing to push the company to the brink to continue on that path. Now that Sotheby’s has the high-traffic Hong Kong flagship and the elegant Paris position, and soon a New York landmark in the Breuer building, we’ll see whether real estate can actually have a transformative effect on its future.

I woke up Saturday morning to a WhatsApp message from the columnist John Gapper alerting me to his FT story, which outlines how Stephen Schwarzman is spending some of the $38 billion he’d added to his net worth over the course of the Biden administration. As many of you will remember, the Blackstone C.E.O. had a christening party last summer for Miramar, his updated Newport cottage, which will become a private museum upon his death. The gargantuan piles in Newport are not terribly distinguished as architectural wonders or treasure houses filled with art and antiques. That has made Schwarzman’s efforts to build a museum there—surely aided by teams of experts on loan from the Frick, where he is a significant patron—an easier task. Now, the enthusiastic Trump supporter is turning his attention to something a little harder: restoring Conholt Park, a house in the U.K., where the competition is stiffer. He paid £80 million in 2022 to buy the 17th century 2500-acre estate in Wiltshire. Gapper reports that Schwarzman has spent £25 million on a Sir Joshua Reynolds portrait of Lady Worsley, which had been hanging in Harewood House in West Yorkshire. (The Lascelles family sold because they needed money to keep up the house. A fortuitous call from Christie’s private sales department proved too good to pass up.) At the same time, Schwarzman bought a Thomas Gainsborough portrait of Lady Bate-Dudley, painted in 1787, that had been on loan to the Tate. The sale was brokered by Dickinson, according to Gapper, who wasn’t able to ascertain the price. Schwarzman’s hunt for ancient paintings to assemble his ersatz lineage isn’t over. Gapper reports that several owners of 18th century pictures have been approached. Since the artworks are not meant to leave the United Kingdom, Gapper observes, the dealmaking has been much easier. That’s enough for today. See you all on Tuesday, M