Art afloat

Art afloat

David and Lee Ann Lester retired to Bonita Springs after building one of the world's most successful fine-art fairs in Palm Beach. But they couldn't stay away, even as the economy has taken a turn for the worse.

ENTREPRENEURS by Jean Gruss | Editor/Lee-Collier

David Lester ticks off the list of buyers who fueled the recent art boom: Russian oil tycoons, Middle Eastern sheiks and Asian exporters.

With the oil bust and the consumer-led slowdown, don't expect any of these folks to be snapping up million-dollar artworks anytime soon.

In the midst of this shakeout, David Lester and his wife Lee Ann Lester have bought back the premiere fine-art event they created in 1997: the Palm Beach International Fine Art Fair.

What were they thinking?

Sellers of luxury goods may want to consider the Lesters' strategy in light of the recession. The entrepreneurial couple is finding creative ways to bring together dealers and buyers in what many consider to be the toughest retailing climate in decades.

For starters, it sounds like the Lesters got a deal they couldn't refuse. Although they declined to reveal the terms, they repurchased the Palm Beach fair in late July for substantially less than the $18 million they sold it for in 2001. Smiling broadly, David Lester says: "The terms were very agreeable to all parties."

The Lesters' Bonita Springs-based company, Expoships, can now cross-market the Palm Beach event with the nautical endeavor called SeaFair, a $30-million yacht designed as a floating art gallery that ferries dealers from one port to another.

But with so many foreign buyers out of the picture, who's left? "The solid collectors are left," David Lester says. "They're highly knowledgeable, committed, they know prices and what they're looking for."

Museums and individual collectors who have retained their wealth and now seek bargains are likely buyers, he says. More than 800 buyers are scheduled to descend on Palm Beach from Feb. 4 to 8 for the second-largest art and antique event in the country after Art Basel in Miami.

Meanwhile, dealers who rent space at the Palm Beach fine-art fair and aboard SeaFair, are looking for creative ways to reach new and existing customers. While the ship brings dealers to varied markets from Jacksonville to Annapolis, Md. to Greenwich, Conn., the Lesters have tweaked the Palm Beach fair by shortening its duration and packing it with special events such as a super-exclusive black-tie dinner at Donald Trump's Mar-a-Lago estate.

There's no doubt the recession is at hand, but the Lesters say the dealers who exhibit are acutely aware of this. "Right now, it's all about top quality and favorable pricing," David Lester says. "Everyone has to find a new way to do business."

Rough sailing out of retirement

When the Lesters retired after selling the Palm Beach fair, they found what so many other entrepreneurs and go-getters find: They got bored. "We didn't like retirement," David Lester says. "As a couple, we respond to challenges."

That's a bit of an understatement. As their boredom grew in retirement, they got the idea to build a huge yacht that would be a floating fair, anchoring from one town to another and bringing dealers to untapped areas.

The launch of SeaFair was delayed by almost a year as the ship builder filed for bankruptcy before the yacht was completed. The Lesters had to scrap their itinerary for much of 2007 as subsequent technical problems such as malfunctioning elevators kept the ship in port. All that added $10 million to the overall cost of the ship. Initially the ship was financed through CAT Financial Services Corp, the financing arm of equipment giant Caterpillar, and the Lesters later refinanced with Bank of America.

"We did not respond well to retirement, but we didn't anticipate the challenges," David Lester says, looking back.

SeaFair is no pleasure boat. The $40-million yacht has four decks and 28 galleries totaling 12,000 square feet and it can carry 600 passengers and 150 crewmembers. There's a restaurant, a champagne-and-caviar lounge and an open-air sky deck.

The Lesters say that despite the false starts, the ship has been profitable since it launched in September 2007. The ship's first night in Greenwich, Conn., raised $400,000 for a local charity and a Dutch painting sold for $2 million.

Despite the initial success, the Lesters have started offering a choice of terms to anxious dealers. Dealers can rent space for $14 per square foot and pay 5% to 12% of sales or they can pay $40 to $60 per square foot without splitting sales. Before, dealers did not have the choice to split a percentage of sales.

The mix of art will be different too as times have changed. Million-dollar jewelry pieces will be replaced by less-extravagant ones costing $20,000 or less, for example.

Now that the Lesters own the Palm Beach fair, they can entice more dealers to the ship. For example, Lester says he was able to persuade the luxury jeweler Graff to exhibit on the ship after it signed up to exhibit in Palm Beach. "It's a relatively integrated business," he says.

What's more, the ship is versatile. It was designed to host parties and it can be chartered for non-art events. For example, SeaFair will be docked in Tampa during the Super Bowl and will host private events on the ship.

Back to Palm Beach

The repercussions of Bernard Madoff not withstanding, Palm Beach isn't the same town the Lesters left when they sold the fine arts fair in 2001. Still, the area is now a well-established destination for affluent people from all over the world who seek fine art.

"The art market is not universal," David Lester says. For example, contemporary-art prices have fallen because it was one of the areas with the most speculation. Lester remembers when an $11,000 painting sold for $11.5 million during the boom.

By contrast, the 19th Century masters are holding up relatively well. Major works by Monet and Renoir hold their value through good times and bad.

Still, the Palm Beach fair will last six days, half as many as in previous years. But it will be packed with events. The Lesters have rented Donald Trump's Mar-a-Lago estate to host a black-tie dealer gala, for example. The event is designed to reach "affluent, bored people who are looking for a cultural experience," Lester says.

In addition, there will be lectures, cocktail parties and "high tea" every afternoon. Van Cleef & Arpels, the famous French jewelry company, will host the opening night "vernissage" and the Flagler Museum will be the site for the museum-director tribute on the final night.

The Palm Beach fine-arts fair has the advantage that it's been running for 12 years. More than 80 exhibitors will take over 100,000 square feet at the convention center, each paying between $30,000 to $60,000 for a booth.

The Lesters are banking on that track record. "Shows that old don't tend to go away," Lester says. "For us, we have a very long-term horizon."

REVIEW SUMMARY

Company. Expoships

Industry. Fine-art fairs

Key. Top quality and favorable pricing are the keys selling luxury goods today.