Guest Editor


Guest Editor

    The $450mn paid for the recently sold painting of Leonardo da Vinci, which went on public display at its permanent home in Louvre

Letter from Editor in Chief
Letter from the Editor



The $450mn paid for the recently sold painting of Leonardo da Vinci, which went on public display at its permanent home in Louvre Abu Dhabi on 21st December 2017, continues to generate global interest.  The subsequent disclosure that the buyer is none other than an oil-rich, Middle Eastern country, has added fuel to the fire. The resultant reviews have ranged from amazement at just the hefty figure itself, to taking a dig at possible market manipulations in auctions, to humanity based comparisons (how many lives could have been saved with this money), to religiously motivated comparisons (Palestine vs Mundi) to the ‘oil rich’ Arab driven puns (‘easy come, easy go’).


There is a near (or full) consensus that the price paid for the painting does not make any economic (or any other) sense.


I beg to differ.


As absurd as it may sound, the recently record breaking sale of Leonardo Da Vinci’s painting ‘Salvator Mundi’ makes perfect sense.


Let me explain why.


Any purchase we make inherently serves two purposes – qualitative (pleasure) and quantitative (economic value). All our actions are either for pleasure only, or value only or for a combination of the two.  Eating in a restaurant or watching theatre is purely qualitative (there is no storage of economic value). Depositing your savings in a bank on the other hand is purely a quantitative exercise (storage of economic value). And then there are things in the middle.


A number of our purchases are driven by both factors. Normally, the smaller the ticket size the higher the proportion of qualitative factors, like buying clothes, etc. As the ticket size goes up, the proportion of qualitative variables in decision making goes down. You may love a particular car, but you will still (hopefully!) look at its operating costs, resale value etc before deciding on which car to choose. But our non-economic factors still play a role. In the purchase of your first house, though it should be purely a quants based decision (will the economic value go up in future), part of the decision making is qualitative too (how much we ‘love’ the house). And for this qualitative side, we are willing to compromise on pure quants based decision making.


Art is at the extreme abstract end of this tussle between qualitative and quantitative mix.


In popular belief, art is still mostly seen as a form of creativity and expression, truly abstract in nature and without any economic drivers behind it. Partly that is true and is influenced by headline grabbing news of some rich person buying a very expensive Picasso or a Monet or a Kooning and putting it in storage, never to be seen again. How does that make sense? It mostly doesn’t.


At the same time, we choose to ‘ignore’ the entire Museum ‘industry’ when millions of us go and visit museums around the world every year. The Louvre in Paris alone receives more than seven million visitors every year at ten euros a pop. You do the maths!


Let’s come back to Salvator Mundi and Abu Dhabi.


It is public knowledge that Abu Dhabi is developing the biggest ‘art destination’ in its part of the hemisphere at its ‘Al Saadiyat’ island. This will include amongst other things, a ‘Louvre Museum’ containing over 900 works of art and managed by the Louvre staff. Abu-Dhabi is reportedly paying close to US$1.2 billion over 30 years to Louvre for the arrangement.


The facilities were opened with great fanfare in November 2017 but the view on its success was still mixed and the whole initiative was seen as a very large and high risk bet on attracting visitors. Yes it will be geographically more accessible to a very large pool of population, but it was not a ‘must see’.


I would consider myself as an ardent follower of art and even I was not in a ‘rush’ to go and visit this museum. Yes it had 900 works (including 300 from French institutions including the Louvre) but so what. Louvre has over 35,000 works of art and I can go and see them at the Louvre. Compare this to Qatar’s Islamic Art Museum which is a ‘must see’ as it has the best publicly displayed collection of Islamic Art anywhere in the world.


So Qatar had the ‘hook’: the best Islamic Art Museum.


Abu Dhabi had no hook; until they bought Salvator Mundi


The speed with which Salvator Mundi has become one of the most famous and recognisable paintings in the world (thanks to technology too), Al-Saadiyat has become a ‘must visit’ art and tourist destination.


‘Ok, that makes sense. But isn’t paying $450mn too much for only this reason’, would be the next logical question.


So let’s do some simple maths.


The benefit to a city (or a country) of displaying such a painting is both economic as well as qualitative (soft image). Let’s forget about the soft image and focus on hard numbers.


The economic benefits will be direct as well as indirect to Abu Dhabi.


The direct benefit will be driven by the number of visitors the painting will attract every year and the ticket charged by the museum. Abu Dhabi had 4.4 million visitors (who checked into a hotel) in 2016. They expect the number to go to eight million by 2020 (and likely to be around 15 million by 2025-27).


Half of the people who visit Paris go to the Louvre. So it is safe to assume that at least half of the people who visit Abu Dhabi will visit the museum. Although, it is most likely that, the proportion in Abu Dhabi will be much higher as Al-Saadiyat will be the main attraction unlike Paris which has numerous other attractions. But nonetheless, we are looking at four million to eight million visitors every year between 2020-2027.


On top, there are numerous visitors who don’t check into hotels but rather arrange day trips from nearby cities, especially from Dubai which gets 15 million visitors every year.


Also, Abu Dhabi airport receives 15 million passengers every year (most of them in transit). With the ‘hook’ in place, some proportion of that would be converted into staying over for a day or two in the city to visit the museum.


So we can expect between 4-6 million foreign visitors to the museum by 2020 and 8-10 million by 2025-27.


The ticket (at AED60 per person) revenue alone from the visits will be more than $80 million by 2020 and around $150mn by 2025-27.


So even assuming that the total project costs to be north of $2bn (arrangement with Louvre, Mundi’s cost, construction costs), the return to the government will be mid-to-high single digits (net of operating costs) within the first 5-10 year from Museum revenues alone.


If the above numbers have surprised you and made you sit up, read this: the indirect revenue impact of this initiative will be even bigger.


When Governments decide on projects, they not only look at the direct profitability of the projects but also their indirect impact on the economy as a whole (how the projects will stimulate the rest of the economy).


Each visitor to Abu Dhabi on average spends 2.7 nights in the city (2016) and average spent by an ‘art visitor’ will be in the range of at least $150-200 per day. So an incremental 5 million visitors spending on average two nights in Abu Dhabi will potentially add $1-2bn to Abu Dhabi’s economy by 2020 (3-6% of GDP) and more than $3-4bn by 2025.


So for Abu Dhabi, it makes perfect sense! This is driven by pure economics, no emotion, no ‘free petro dollars’ at work!


No wonder Qatar was the other main bidder. They would have done the same homework and would have known that the acquisition of Mundi along with the Museum of Islamic Art would have cemented their position in the art world and provided strong ‘hooks’ against Al-Sasdiyat.


And if you are still wondering about Mundi’s price, compare it to the other Leonardo – ‘Mona Lisa’. A price of $450mn for Mundi looks like a bargain given that the Mona Lisa was insured for $100mn in 1962. Taking inflation into account, that value today will be around $800mn!


How many purchases do you know of which start giving you 10% return within a few years, add 3-5% to your annual top line, make your city a global destination and is a globally recognised store of value? Very very few, I’ll say.


Well done Abu Dhabi! If only I had the money, I would have bid more aggressively, beaten you. If only!




Ali Naqvi is Executive Chairman of Global Markets at APAC Credit Suisses; Owner of Islamabad United and Co-Founder of the AAN Collection.