LUXURY RESEARCH

FERRARI “DAYTONA” AT 50

CLASSIC CAR PERFORMANCE UPDATE

GORDON MASSIE INTERVIEW

LUXURY INVESTMENT INDEX Q2 2018VCCM South Africa 2018 Special Edition

*Stamps, coins and Chinese ceramics to Q4 2017 Source: Knight Frank Research, Art Market Research, HAGI, Wine Owners, Fancy Color Research Foundation, Stanley Gibbons

12 M

ON

THS

5 YE

ARS

10 Y

EAR

S

-32%

182% 289%85%

147%103%50% 103% 125%73%COINSSTAMPS KFLII CARSCHINESE

CERAMICS-4%

COLOUREDDIAMONDS

WATCHES JEWELLERY WINEARTANTIQUE

FURNITURE

-18%

40% 81%22% 40%KFLII CARS

CHINESECERAMICS

-13%

WATCHES WINEART

ANTIQUEFURNITURE

1% 7%0% 5%STAMPS

6%CARS

-2%

CHINESECERAMICS

WATCHESJEWELLERY WINE25%ART

1%

ANTIQUEFURNITURE 4%

COINS

WINE22%

JEWELLERY37%

COINS

KFLII performance by asset class (to Q2 2018*)

9%KFLII

7%STAMPS

7%

COLOUREDDIAMONDS

1%

COLOUREDDIAMONDS

59%

£

££££

££

££

£

£ £

£

£

10-year asset price volatility

Furn

itur

e

Wat

ches

Coi

ns

Sta

mps

KFL

IIJe

wel

lery

Car

s

Chi

nese

cera

mic

s

PC

L

FTS

E 1

00

Col

oure

dD

iam

onds

Gol

d

Win

e

Art

0

5

10

15

20

25

% V

ola

tili

ty

Most volatile

Least volatile

Source: Knight Frank ResearchBased on annual price points

Luxury investment performance versus other asset classes (to Q2 2018)

Inde

x (Q

1 20

08=

100)

JSE all share index PCL* KFLII CARS GOLD

Source: Knight Frank Research*Knight Frank Prime Central London Residential Index

0

100

200

300

400

500

1817161514131211100908

Classic cars have set the pace for the Knight Frank Luxury Investment Index (KFLII), which tracks the performance of 10 luxury asset classes, for much of this decade. Double-digit annual price growth was the norm until the beginning of 2017, according to the HAGI Top Index that we use to track the performance of the finest vehicles.

However, over the past year or so the brakes have been applied to the market, allowing art – including some standout sales by African artists – and wine to overtake and clinch first and second places in KFLII, with 12-month price growth to Q2 2018 of 25% and 7%, respectively.

Despite this, the HAGI Top Index still rose a highly respectable 6% over the same period. Investment-grade Ferraris performed particularly well, accelerating almost 9% on average. This surge was epitomised by the private sale of a 250 GTO for a reported US$70m earlier this year – in all likelihood the most expensive car transaction ever.

Although buyers are prepared to dig deep for the very best and rarest cars, HAGI’s Dietrich Hatlapa reports that the market is generally much more cautious compared with recent years.

“So far this year the index has only risen by 0.17%. A lot of the investors who were buying cars speculatively have left the market. Genuine collectors and enthusiasts who know what they want are back in the driving seat now so I don’t expect price growth to return to the heady levels we saw a few years ago.”

Reflecting this trend – at the time of writing – less than a handful of cars sold at this year’s auction sales had joined the exclusive club of vehicles breaking the US$5m barrier (see graphic on page 4). Aside from a few standout lots, sales have generally been steady, albeit with sell-through rates maintained by an increase in the number of cars offered with no reserve. One car to break the mould was a DB4GT Zagato Le Mans veteran sold by Bonhams this July for just over £10m ($14.3m) – a record for a British-built car auctioned in Europe.

However, the US$5m+ tally could have increased substantially by the time you read this report if some of the pre-sale expectations for the benchmark Monterey auctions that take place from 23 to 25 August are hit. In total, 14 cars had upper estimates of US$5m or more, including six with hopes for the US$10m mark.

The top lot was another Ferrari 250 GTO. With a guide price of US$45m to US$60m, the Berlinetta model, on the rostrum with RM Sotheby’s, was potentially the most expensive car ever to go under the hammer.

Other big hitters included a one-off 1963 Aston Martin DP215, the factory’s last front-engined racer, which RM tagged at US$18m to US$22m. Bonham’s offered a Ferrari 250 GT SWB Lusso estimated at US$9m, while Gooding & Co was hoping fans of classic US machines would pay “in excess” of US$10m for a 1935 Duesenberg SSJ.

Another piece of US motoring history, a Ford GT40 MKII, could have set a marque record if RM achieved its upper estimate of US$12m, while devotees of the Porsche Spyder had seven decade of history to choose from, starting with a 550 model from 1955 (top estimate US$5m) through to a 2015 918 “Weissach” (top estimate US$2m).

This year marks a number of classic car milestones, including the 70th birthdays of Land Rover and Porsche, and the 50th anniversary of the Ferrari 365 GTB/4, better known as the Daytona.

Our cover shot of a Daytona eating up some South African blacktop pays homage to the car that the legendary racing driver Mario Andretti told me was his favourite Ferrari. The graphic on page 4 also gives a guide as to how prices have changed over the past five decades.

Even though the value of classic cars may not be accelerating quite so quickly at the moment, the passion they invoke still makes them arguably the ultimate investment of passion.

Classic car performance remains robustArt retains pole position in the Knight Frank Luxury Investment Index, but the best vehicles are still setting records

LUXURY INVESTMENT INDEX Q2 2018 VCCM SOUTH AFRICA 2018 SPECIAL EDITION

LUXURY INVESTMENT INDEX Q2 2018 VCCM SOUTH AFRICA 2018 SPECIAL EDITION

2 3

I am delighted that once again Knight Frank has been asked to support the VCCM South Africa conference. This special edition of our Luxury Investment Index highlights the performance of classic cars, considered by many to be the ultimate investment of passion.

A good valuation is critical when adding to your car collection and the same applies to property. As well as selling some of Cape Town’s finest residential properties and vineyards, game reserves and commercial property investments, Knight Frank South Africa also values all types of property across this diverse and amazing continent.

If we can help in any way please do get in touch. I hope you enjoy the conference and reading this report.

ANDREW SHIRLEY Editor, The Wealth Report

956 Le Mans winner (1982)

Porsche

$10.1m 250 GTO (1962)

Ferrari$38.1m

4.5 litre Blower Birkin (1929)

Bentley

£7.9m

Mercedes-Benz

£29.5mW 196 GrandPrix (1953)

GT 40 (1968)

Ford£11.0m

AC/Shelby

£13.8mCobra 260 (1962)

Jaguar

£21.8mD-Type (1955)

Aston Martin$22.5mDBR1 (1956)

8C 2900B Lungo Spider

(1939)

Alfa Romeo

$19.8m

McLaren

$15.6mF1 (1995)Type 55 Roadster

(1931)

Bugatti

$10.4m

956 Le Mans winner (1982)

Porsche

$10.1m 250 GTO (1962)

Ferrari$38.1m

4.5 litre Blower Birkin (1929)

Bentley

$7.9m

Mercedes-Benz

$29.5mW 196 GrandPrix (1953)

GT 40 (1968)

Ford$11.0m

AC/Shelby

$13.8mCobra 260 (1962)

Jaguar

$21.8mD-Type (1955)

Aston Martin$22.5mDBR1 (1956)

8C 2900B Lungo Spider

(1939)

Alfa Romeo

$19.8m

McLaren

$15.6mF1 (1995)Type 55 Roadster

(1931)

Bugatti

$10.4m

956 Le Mans winner (1982)

Porsche

$10.1m250 GTO (1962)

Ferrari$38.1m

4.5 litre Blower Birkin (1929)

Bentley

£7.9m

Mercedes-Benz

£29.5mW 196 GrandPrix (1953)

GT 40 (1968)

Ford£11.0m

AC/Shelby

£13.8mCobra 260 (1962)

Jaguar

£21.8mD-Type (1955)

Aston Martin$22.5mDBR1 (1956)

8C 2900B Lungo Spider

(1939)

Alfa Romeo

$19.8m

McLaren

$15.6mF1 (1995)Type 55 Roadster

(1931)

Bugatti

$10.4m

Under the bonnetWith the help of HAGI we look at the nuts and bolts of the classic car market

Chequered flagAll-time top-priced model sold at auction from 10 of the key collectors’ marques*

LUXURY INVESTMENT INDEX Q2 2018 VCCM SOUTH AFRICA 2018 SPECIAL EDITION

4

Podium finishAnnual price change by marque (12 months to June 2018)

PORSCHE MERCEDES-BENZFERRARI

-0.1%+16%

+1.6%

+8.8%

PORSCHE MERCEDES-BENZFERRARI

FERRARIMERCEDES-BENZPORSCHE

MERCEDES-BENZBUGATTIPORSCHEALFA ROMEOMCLAREN

AC/SHELBY

BENTLEYJAGUAR

FORD

ASTON MARTIN

DUESENBERGROLLS ROYCETALBOT LAGODELAHAYEHORCH

OTHERS

41%

59%

111112

2

3

3

4

5 5

7

7

9

FERRARI

OTHERS

OTHERS

5 3 7 5

Top marquesNumber of cars sold at auction for over US$5m*

Endurance raceFive-year price change by era*

Pre-war110%

1980s190%

1970s200%

1990s210 %

1950/60s225%

Modern raresupercars200%

* Based on representative models with sub 1,000 production

*Prices converted to US$ at exchange rate at time of saleSource: HAGI

Source: HAGI

Source: HAGI * rounded example transactions, not averages

Source: HAGI

Source: HAGI *Prices converted to US$ at exchange rate at time of sale

$400,0001958 356 A Speedster

$600,0001973 Carrera 2.7 RS Touring

$3,500,0001955 550 Spyder

$1,100,0001989 type 959

$250,0001992 type 911/964 RS

$800,0002004 Carrera GT

$1,500,0002013 type 918 Spyder

£8,600-£9,400 New

£230,0001990

£20,0001980

£70,0002000

£170,0002010

£550,0002018

£8,600-£9,400 Price when new

£230,0001990

£20,0001980

£70,0002000

£170,0002010

£550,0002018

Fifty years of the DaytonaFerrari 365 GTB/4, “Daytona”: price examples*

© Knight Frank LLP 2018This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.

Compiled and written by:Andrew Shirley The Wealth Report Editor +44 1234 720534 andrew.shirley@knightfrank.com

INDEX SOURCESArt AMR

Chinese ceramics AMR

Antique furniture AMR

Jewellery AMR

Watches AMR

Wine Wine Owners

Classic cars Historic Automobile Group International (HAGI)

Stamps Stanley Gibbons

Coins Stanley Gibbons

Coloured diamonds Fancy Color Research Foundation

Please contact andrew.shirley@knightfrank.com for more details of each index

Contacts and acknowledgements

HAGI www.historicautogroup.com; Stanley Gibbons www.stanleygibbons.com; Wine Owners www.wineowners.com; Fancy Color Research Foundation: www.fcresearch.org; AMR www.artmarketresearch.com. AMR tracks the price movement of art, sculpture, prints and photographs, as well as well as antiques and collectables such as silver, porcelain, carpets, clocks and more.

Front cover: Image courtesy of CAR Magazine

WEALTH REPORT UPDATE LUXURY INVESTMENT INDEX Q2 2018

5

Insurance of passionAndrew Shirley talks luxury investments with an art collector helping to shake up South Africa’s classic car insurance market

I’ve probably written millions of words during my career as a journalist, so it’s always exciting to come across one I’ve never used before and Gordon Massie, the Managing Director of ITOO Artinsure, is happy to oblige.

We’re talking about the reasons why investments of passion, things like art, classic cars and jewellery, evoke such strong emotions, when Gordon casually refers to a phenomenon called synaesthesia.

Not wishing to exhibit my lack of erudition I make a mental note to look it up later, but my face obviously gives the game away. “It’s the production of a sensory reaction by the stimulation of another sense,” he explains. “When you see something it might also trigger your sense of hearing, smell or touch.”

It turns out there are all sorts of synaesthesia. Some people, for example, will see a specific colour when they look at a number. Others will experience a certain taste when they hear a particular word.

For most of us the symptoms are less specific, but nonetheless very real. Gordon tells me about his own experience on a recent trip to Maranello, the home of Ferrari.

“During my time in Italy I was fortunate enough to purchase two vintage photographs. One taken at Monaco showing Collins and Fangio in the 1957 Grand Prix, the other a 1958 image of Collins behind the wheel of a 246 F1 at

Nurburgring talking to Romolo Tavini, the Scuderia Ferrari sport director.

“Both of these images triggered synaesthesia. Once I went beyond the literal, I was hearing the engines, the crowd noise and smelling the fumes and feeling the heat of the track. Because these were hand printed images I felt a direct connection to the photographer and his excitement at having captured the moment.”

Such feelings are probably well known to many of you reading this article. Synaesthesia is a reaction that is common in all collectors, including those who collect vintage and classic cars, claims Gordon, who believes it is a key factor driving the human desire to collect beautiful and interesting things.

There are, of course, other reasons. The commonly used phrase “investments of passion” highlights one of them – the desire to benefit from an object’s increasing value.

“It is rare that when someone asks me about buying a collectable that they don’t push for comment on the investment value,” agrees Gordon. “For the true collector it’s rarely the main motivation, but when values have risen so much, particularly for classic cars, it’s hardly surprising that it’s becoming more of a focus.”

Last year, according to the Knight Frank Wealth Report Attitudes Survey, over 40% of wealthy South Africans increased their allocation to luxury investments. Art, cars

and fine wine were three of the most popular asset classes, says Gordon.

As a passionate contemporary art collector himself, Gordon recognised that the specialist insurance needs of collectors weren’t being addressed in South Africa.

“Standard insurers struggle with the philosophical challenge of dealing with objects that aren’t depreciating in value year-on-year, let alone recognising and accounting for collectors’ synaesthesia and ensuring that their policies and claims processes are mindful of, and harmonious with, the integrity, provenance and history of their collections,” he explains.

Artinsure, for collections of art and other collectables, was Gordon’s first venture, but following the merger of that business with ITOO, run by well-known Ferrari enthusiast and collector Paolo Cavalieri, to form ITOO Artinsure, classic car owners now also have access to a team that understands their passion and motivations.

“ITOO Classics is aimed at the owners of vehicles whose current value has appreciated beyond the original retail price taking into account inflation,” says Gordon.

Generally such vehicles are more than 20 years old, but some high-value modern hyper cars and rare vehicles like the Ferrari 458 Speciale, F12 TDF, the LaFerrari, Porsche GT2/3, Pangani Roadster or McLaren P1 are also covered, he points out. “They fall into that unusual category of cars that don’t lose a large chunk of their value as soon as they are driven out of the showroom, but actually become more valuable.”

Such cars, of course, need to be carefully looked after – you don’t generally take them to a local mechanic to be serviced – and choosing the right insurance policy is no exception. The in-depth knowledge and affinity of Gordon and Paolo for the items they insure is clearly reflected in the specialist valuation and claims handling techniques offered to their customers.

If your rare vehicle is damaged they’ll help find the right specialist to restore it and will even compensate you with a cash settlement for any depreciation in value.

“Provenance and originality are very important factors when it comes to classic car values, so even if your car looks perfect after any damage has been repaired, the fact that you may have had to replace some original

Dream machine – The F40 is ITOO Classics’ Paolo Cavalieri’s favourite classic car

parts, for example, could have an impact on its value,” notes Gordon.

“I think it’s the passion and empathy of our team that many people will find most reassuring; they know they will be dealing with fellow collectors who understand their world,” he adds. “I am passionate about contemporary art, Paolo loves classic cars and ITOO’s Managing Director Justin Naylor is an ardent collector of rare and exclusive wines.”

For more information: Classics@itoo.co.za Personal touch – Gordon Massie’s collection of signed first editions

Continued overleaf…

What item in your collection gives you the most pleasure?GM I have quite an eclectic collection and it really depends on the place and time as to what stirs me. At the moment my deepest passion is for vintage photography with the aim of getting as close to the negative as possible.

PC Motor cars, particularly the classics as they are more natural to drive. My favourite car is the Ferrari F40, the last model approved by Enzo Ferrari. It’s beautiful, an attack on all the senses, extremely robust and reliable, and, wait for it, even comfortable!

JN My wine collection and in particular some bottles of Chateau Petrus, which is a highly collectable French wine that I have recently bought. The problem with collecting wine is that if you open the bottle and enjoy it, then its value is lost completely unlike say art.

What has been your best investment?GM I look at investment as monetary or aesthetic. With collectables it is hard to say the true monetary investment return until you realise the asset and I’m not quite ready to let go…..! I prefer to consider the aesthetic investment and if the right quality work has been acquired the monetary investment will look after itself. From an aesthetic perspective my personal favourites have to be two photographs by Malick Sidibé that I was fortunate enough to secure recently.

PC From an aesthetic investment perspective and for the synaesthesia they generate it has to be the racing cars I have in my collection.

JN Hopefully, I have made two really good investments recently. The Chateau Petrus – as I know its value in the international market is more than I paid – and a very small David Goldblatt photograph. He has recently passed away and judging by recent auction prices I know this has been a good investment. However, the challenge with collectables is the question of whether you will ever actually sell them and I don’t know the answer to this yet in my case.

What is your top tip for somebody looking to start a collection?GM Be patient. Take a year to learn the market and what you want to collect. Once there, work with the top advisers, galleries and auction houses to source the best quality work in your budget and then only buy what you are deeply moved by.

PC Follow your heart, but keep your feet firmly on the ground – understand what you want to buy and why and then keep focused.

JN I am a very new investor in collectables so I am currently asking myself this question. Here are a few suggestions: Do your homework – jumping straight in is not the way to go. Decide if you are a collector or an investor – collectables are often brilliant investments, but you need to be clear in your own head as to why you are collecting. Buy what you love, the whole point to me of building up a collection is that it has to be something that you enjoy.

Passion playThe trio behind ITOO Classics, Gordon Massie, Paolo Cavalieri and Justin Naylor, share their luxury investment passions