Sotheby’s and Pace Gallery are currently negotiating over a deal that would see the auction house make a significant investment in the mega-gallery. While nothing has been inked yet, and the details appear to be very much in flux, a source close to the negotiations told ARTnews that it was not an acquisition, but a “joint venture between Pace and Sotheby’s that will be multifaceted and has many elements. Let’s call it a ‘new model.’”
The news, while potentially momentous, is not entirely unexpected for those in the industry. Rumors have swirled for weeks that Pace has been in talks with Sotheby’s about either a major investment, a merger, or even an outright acquisition.
Such a deal would come at a time when the art market is sluggish. Throughout last year art dealers have spoken about tough market conditions and a shaky financial climate. Pace has a large overhead, sources said. In addition to branches around the world, the gallery has an eight-story, 75,000 square foot headquarters on 25th Street in Chelsea. Opened in late 2019, amid a rapidly growing art market, the building was CEO Marc Glimcher’s vision for Pace’s future.
At the inaugural preview, Glimcher said he foresaw a “communal space for thinking, transcendence, and contemplation” where people could “come and take their time.” But the deal was always going to be a challenge: unlike its mega-gallery peers, Pace does not own the property or the building. The gallery reportedly pays more than $700,000 per month in rent on a 20-year lease to owner Weinberg Properties. That’s around $8.4 million per year, not counting the $18.2 million interior build out and the $80 million cost of the building’s volcanic stone exterior. A Pace spokesperson told ARTnews the reported figures were inaccurate.
(A source familiar with Pace’s finances told ARTnews that costs associated with the Chelsea headquarters account for less than 10 percent of the gallery’s overhead, and was only a five percent increase from the total costs incurred from the gallery’s previous seven-story headquarters on 57th Street.)
Still, other costs to the gallery have come as a result of the building: In 2022, Pace was ordered to pay real estate firm CBRE $6.3 million in damages over its failure to pay owed commissions. Later that year, ARTnews reported that Superblue, the experiential art center largely funded by Pace, had burned through most of its funding and planned projects were being abandoned. Glimcher stepped down from his leadership role at the company in December.
This past October, at Art Basel Paris, the first year the fair was held in the opulent Grand Palais, Pace allegedly pulled out of the fair’s Public Project after their proposal was accepted. According to an adviser with knowledge of the matter, the project was canceled because Pace didn’t have the budget. “It was a really bad look,” the adviser said. (A spokesperson for Pace denied that such a project ever existed.)
But as they say, where there is smoke, there is fire. And there has been a lot of smoke.
“I wouldn’t say Pace is for sale but they certainly have been looking for investors for a long time,” one source familiar with the gallery’s financial situation told ARTnews earlier this week.
While the exact details of the Pace-Sotheby’s deal remain unconfirmed, discussions between the two companies have been occurring on and off since the pandemic, when both concurrently followed their clients to the tony enclaves of East Hampton and Palm Beach. In the Hamptons, Pace and Sotheby’s opened outposts two blocks from each other, while in Palm Beach, they were located—along with Acquavella Galleries—in the posh Royal Poinciana Plaza. The relationship then expanded when Pace and Gagosian made a move on the Macklowe Estate, one source told ARTnews, with Sotheby’s taking the place of Acquavella (the trio hoped to recreate the Glimcher-led coup that saw Pace, Gagosian, and Acquavella outbid both Christie’s and Sotheby’s to secure the Donald Marron estate in 2020).
Sotheby’s has had its share of financial challenges thanks to billionaire owner Patrick Drahi’s aggressive and creative use of debt to fund acquisitions, and the overall market conditions. In January, the house reported a 23 percent drop in consolidated sales in 2024, compared to the previous year and, last June, S&P Global Ratings downgraded Sotheby’s credit rating from B to B- due to falling revenues and rising costs. The auction house had two rounds of layoffs totaling over 150 staffers and closed the year with a very public reversal on its overhauled fee structure, which was in place for just seven months.
The auction house did find a renewed spring in its step after it closed a deal in October for Abu Dhabi’s sovereign wealth fund and investment company, ADQ to invest a much-needed $1 billion life line, $800 million of which was earmarked for paying down the house’s $1.65 billion in debt.
What role the rest of ADQ’s investment could play in the deal with Pace is unknown. While the Pace/Sotheby’s deal, depending on the structure, could have immediate financial benefits for Pace, the case for Sotheby’s hinges on CEO Charles Stewart’s efforts since joining the house in 2019 to find new ways to grow its global brand power and make the business more profitable. So far that’s involved an expanded push into the secondary market for luxury goods, including cars, watches, and wine. Beyond auctions, Stewart has overseen brick-and-mortar expansion that attempts to shift the way Sotheby’s current and potential customers see the brand. Lux retail-oriented spaces in Hong Kong and Paris, complete with restaurants and wine cellars and space for concerts, fashion shows, telegraph that the firm intends to be a destination for every type of collector, rather than just an auction house.
Sources familiar with Stewart say he has entertained the possibility of working with a gallery in the past. A partnership or investment with Pace could give both Pace and Sotheby’s better access to the collectors that fuel their respective businesses. Such a partnership could be seen as a logical next step to the role Noah Horowitz played during his sojourn at the auction house. In 2021 he took on the newly created title of worldwide head of gallery and private dealer services and worked under Brooke Lampley, the house’s global chairman and head of fine art. Both have since left the company, Horowitz to become CEO of Art Basel and Lampley to become a director at Gagosian.
With Pace as a strategic partner Sotheby’s could ramp up revenue from private sales and gain a broader insight into estates coming to market, while Pace collectors could get access to preferred rates with Sotheby’s art lending business Sotheby’s Financial Services.
Then there is the Breuer Building, former home of the Whitney Museum of American Art and, temporarily, the Met and the Frick. Last year, Sotheby’s spent a reported $100 million to secure the Brutalist landmark on Madison Avenue for its new headquarters. As beautiful as it is, insiders have expressed doubts that the space could accommodate a complete viewing of a marquee evening sale, much less offices for the auction house staff. One can imagine that Pace might welcome handing off some space from its Chelsea headquarters for relief on the lease.
Auction houses have acquired galleries in the past, such as Sotheby’s acquiring Noortman in 2006 and Christie’s acquiring Haunch of Venison a year later. Industry insiders expressed skepticism about such arrangements, however: neither of those galleries exist today.
