Sotheby’s Class Exec Insights: Hong Kong’s Rent Increase, Salaries and G&A Rising
Hong Kong’s Rent Increase
Eric Hollowaty – Stephens Inc.: Just a quick one for Bill Sheridan. Bill the $1 million rent increase in the quarter for the new Hong Kong expansion, is that a reasonable run rate to assume on a going forward basis or might it be a little bit more that given when that part of the facility came on line?
William S. Sheridan – EVP and CFO: No, that’s a reasonable run rate on a quarterly basis Eric.
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Eric Hollowaty – Stephens Inc.: Question for either of you, I was wondering, if you have any thoughts on the perspective impact on the high end auction market should U.S. policymakers chose not address several of the major tax and other issues that we are facing here at the end of this calendar year, would love to know your thoughts on that?
William F. Ruprecht – President, CEO and Director: I am the foolhardy one who is going to offer any comment on the macro issues associated with U.S. monetary policy, fiscal discipline, legislative impasse, presidential elections, European dysfunction and anything else you would like to throw into the pot, including Chinese potential slowdowns. I will in the first instance credentialize myself by saying I have absolutely no basis to be able to opine confidently about the aggregate impact of those issues. Having said that, history suggests that in periods of printed money, in periods where traditional assets are often increasingly frightening for people, hard assets and works of art tend to become relevant. Historically, in inflationary periods, that’s tended to be quite good for the art market. If there is a lot of dislocation in the world, people of great wealth often turn to their art as a way of securing liquidity. So, I guess, I am among those who would indeed say, the world is full of some relatively hard deadlines coming out, whether it’s Greece or the United States within the next 6 to 12 months. Even if the government can’t figure these things out, I suspect the markets will force governments to the table to make some rational decisions. Overall, while the paranoid are the ones that tend to survive and we’re pretty good at that. I’m pretty confident about our future in almost any environment right now.
Salaries and G&A Rising
George Sutton – Craig-Hallum: So, relative to the last statement you made in the prepared comments, Bill, you mentioned salaries and related costs and G&A both were obviously rising in an environment where you’re seeing down year-over-year revenues is that a dynamic that we should expect to continue into Q2, I’m just wondering how long some of these projects expenses might last?
William S. Sheridan – EVP and CFO: Salaries overall, we’re not hiring a lot of people except in our key markets, principally China. So, I think you’ll see that leveling off. We can’t give too much color on that. Employee benefits and other costs like that are somewhat hard to predict. Incentive comp is a good thing because it means our business and profitability are growing. G&A, the professional fees, we continue to invest in our growth markets, we think that’s important and overall a 5% expense increase we think is very manageable for new business.
George Sutton – Craig-Hallum: Relative to private treaty, obviously very hard area for us to be predict and I am – I will guess it’s probably a hard area for you to predict. Is there any way to give us some clarity on how much you plan to grow that business? You mentioned it is a strategic focus, so I am wondering if you could give us some sense in terms of staffing or some way we can try to measure the growth of that business.
William S. Sheridan – EVP and CFO: George I can’t do the math in my head, but four or five years ago this was in general terms $10 million or $15 million. In 2011, it was $70 million thereabouts in terms of revenues, and we got our first quarter which is up 85% on the prior period. I think if you look at the global art market, you’re not looking at the auction business as a constraining factor. You are looking at the auction business and you are looking at the gallery business. So, you’ve got a sort of a base of activity which by typical counts has been somewhere in the neighborhood of $40 billion a year or thereabouts as a global markup place. So, if you look at that, the idea of continuing to find some traction there is not a bad aspiration. It is uncertain, it is chunky, it stays that way. We’ve not taken on a bunch of cost in this area that’s material. We’ve really grown organically. As we gain expertise, gain confidence, gain leverage in the marketplace. We’re selling things privately. I’d say we’ll continue to figure out how hard you can press the accelerator there. I don’t want to cannibalize the auction business, I think both channels are relevant, we worry about both. We don’t want to do one with the exclusion of the other, but one plus one seems to be three in our experience to date. As I said, we are optimistic and proud of the work we have been able to do today.
George Sutton – Craig-Hallum: I appreciate that. Lastly in the post conferences relative to your large pieces that sold in last couple of weeks. You referenced, specifically with the large pieces, good breadth of demand, North America, South America, Europe, China, can you give us a sense of whether that extends further down the price curve or are you seeing that breadth of demand across the price curve at these auctions?
William F. Ruprecht – President, CEO and Director: This is totally anecdotal, because I don’t – we haven’t done in the last two weeks a geographic price band diversity analysis, though we could do one in, I’ll guess about three hours given the sophistication of our information systems these days. I think the short answer is very, very diverse. In this call in the past I’ve said, we believe that wealth creation is the biggest trigger to demand in our business and we see wealth creation all over the world and that leads to demand from all over the world which is a huge driver to why we believe it’s so important for us to continue the development of tablet based delivery systems that allow people to look at our catalogs, our videos, our pre-sale and post sales narratives, 24 hours a day, seven days a week all over the damn world.