As markets continue to rise, and the general population starts to feel more confident, so luxury assets that can be enjoyed while they are owned are coming back in vogue
by Jeremy Kahn
Goodwood Revival is a nostalgia- drenched festival held every September on the Earl of March’s estate outside Chichester, England. The event, which memorializes the heyday of Goodwood’s motor circuit, where races were held from 1948 to 1966, draws thousands of classic auto enthusiasts, dressed in period costume, who come to gawk at old race cars and watch them thunder once more around the speedway.
For classic car broker and consultant Simon Kidston, the nostalgia is often personal, even though, at 48, he’s too young to have seen these cars in their prime. Strolling through Goodwood’s paddocks, where cars are displayed and prepped for the track, Kidston gazes at a row of 1960s-era Ferraris with the wistful look of a man who has spied an ex-lover in a crowd. He points to a canary yellow 1965 Ferrari 250 LM. “That was the first valuable car I sold,” he says. “I drove all over London in that car when I was 24.”
Of course, “valuable” back then—in 1992—meant the car was worth $1.8 million. Today, that Ferrari is worth $15 million. And while Ferrari prices have been especially turbocharged, the entire classic auto market has been hotter than the exhaust pipes of a Shelby Daytona after a run on the Bonneville Salt Flats. This year, vintage cars were the best-performing alternative asset class tracked by Bloomberg, returning 13 percent through June 30 and an average of more than 25 percent a year for the past three years, according to London-based Historic Automobile Group International(HAGI). It’s pretty much been that way since the 2008 financial crisis, as investors have piled into the market looking for hard assets with reliable returns. Indexes that track classic car values have recorded double-digit returns every year for seven years.
Kidston has had a pit-row seat for this race toward ever- higher valuations. “He is a key figure in the industry,” says Mick Walsh, editor-in-chief of Classic & Sports Car magazine. “His contacts among collectors with the best cars in the world and his knowledge of the subject are really second to none.”
Now, Kidston says he’s on a mission to bring greater transparency to a market rife with misinformation and shady practices—including dealers who trade the same car among themselves to inflate its value or who try to pass cars off as similar, more valuable models. In November 2014, to give collectors what he says is a better gauge of value than a dealer’s word, Kidston launched the K500, an index compiled from public auction sales data for 500 valuable vintage models. His K500 website also offers a “collectibility rating” and price guidelines. The project is not without its detractors—competing indexes use different methodologies—but Kidston sees the K500 becoming a tool for collectors in much the same way wine critic Robert Parker’s ratings have become essential for oenophiles.
Geneva-based Kidston headed the motoring department at auction house Brooks and then at Bonhams, which Brooks acquired, for almost a decade before striking out on his own in 2006. He frequently judges and serves as compère at two of the world’s premier classic car shows, the Pebble Beach Concours d’Elegance in Carmel, California, and the Concorso d’Eleganza Villa d’Este on the shores of Lake Como in Cernobbio, Italy. And over the past decade, he has brokered sales of some of the most expensive vintage cars, including two 1963 Ferrari 250 GTOs(worth $40 million to $50 million each), a 1937 Mercedes-Benz W125 Grand Prix car ($30 million), three 1964 Ferrari 250 LMs ($16 million apiece), three 1961 Aston Martin DB4GT Zagatos ($12 million each), and three early-1960s Ferrari 250 GT SWB California Spyders ($17 million apiece).
At Goodwood, Kidston—wearing a vintage orange tweed sport coat with brown checkered shirt, matching tie, and Ivy-style driving cap—shows off an encyclopedic knowledge of cars and motor history: Here’s the Ferrari 246 Dino in which Phil Hill won the 1960 Italian Grand Prix; there’s a 1930s Grand Prix Alfa Romeo designed by Enzo Ferrari. He pauses in the paddocks and inhales deeply in an inadvertent homage to Robert Duvall’s character in Apocalypse Now, Lt. Col. Bill Kilgore. “You smell that?” he says. “It’s Castrol motor oil. It is the smell of classic car racing. It may sound weird, but it is quite evocative and quite distinctive.”
#pb#
Kidston was born with Castrol in his veins. His father, an aristocratic British naval officer, was an amateur racer, and his uncle was one of the illustrious Bentley Boys, a group of Jazz Age British sophisticates who won the 24 Hours of Le Mans race four times in a row from 1927 to 1930. Kidston grew up in a household steeped in automotive lore and surrounded by sports cars—“always the latest models,” Kidston says. In 1976, when Kidston was 8, his family left Southover House, their manor house in Dorset, England, to become tax refugees in Tuscany, where they owned a 320-hectare (800-acre) farm. Kidston attended private schools in Italy and Switzerland, becoming fluent in Italian and French—language skills that have helped him win European clients over the years.
Among the car collections Kidston has helped build are those of Jean-Pierre Slavic, a Swiss watch industry tycoon with an unparalleled Ferrari stable, and designer Marc Newson. He has also provided advice to designer Ralph Lauren on his collection. Even in a high-gloss industry, Kidston stands out for his marketing panache: He produces professional-
quality short films, often elegiac or whimsical in tone, to promote Kidston SA or specific cars he’s selling. Some are more self-indulgent. A fan of the 1969 film The Italian Job, he searched out Alpine switchbacks that appeared in the movie and re-created scenes using his own black 1973 Lamborghini Miura in 2009. “It shows we are living the lifestyle, not just selling it,” he says.
Besides the Miura, Kidston’s personal collection includes a McLaren F1 supercar, a Mercedes-Benz 300SL Gullwing, a Porsche 911 Carrera 2.7 RS, a 1992 Bentley Continental, and a 1938 Bugatti Type 57C Cabriolet once owned by his father and which he spent years tracking down. He often enters these in Concours events. And he will sometimes drive in what he calls “picnic races,” the kind of rallies where one is more likely to stop for Champagne than a tire change. (These can be harrowing too: He once drove U.S. collector and venture capitalist Bernard Carl’s 1962 Ferrari 250 GTO—currently considered the world’s most valuable model, worth $40 million to $50 million—in a rally. Terrified of damaging it, Kidston was at first reluctant to take it beyond third gear but soon found himself pushing 7,000 rpm and rocketing through the French countryside, his exact speed indeterminate because the GTO, built for racing, lacks a speedometer. “It was utter bliss,” he says.)
Kidston’s clients admire his passion—and his honesty. “Simon is the kind of guy, when he says something, you can rely on it,” says Detlef Hübner, chairman of German packaging and logistics company Deufol and a self-described “petrol head.” Hübner says he shares Kidston’s sensibilities and perfectionism about restoring cars. “If it is a car from the 1970s, it should drive like a car from the 1970s and not like a new one,” he says.
While Kidston disdains the new breed of collector who he says views cars as simply another alternative asset class rather than something to be driven and enjoyed, he says he was twice tempted, in 2007 and 2011, to launch a classic car fund. Both times he abandoned the idea. He thought—perhaps overcautiously, he now says—that the market was peaking; he’d also concluded classic cars were too illiquid to work in a fund unless investors agreed to long lockup periods that the fund’s returns might not be attractive enough to warrant. Storage, maintenance, and insurance eat into potential profits. And taxes are tricky: In many countries, vintage cars can be sold tax-free, but shares in a fund would be subject to capital gains tax.
Dietrich Hatlapa, a former Barings sales director who in 2007 co-founded HAGI, says he, too, is often approached by groups wanting to start classic car funds, but he has never seen a project get past the marketing stage. Hatlapa is reluctant to publicly criticize competing classic car indexes, like Kidston’s. But he says HAGI’s Top Index—which tracks 28 especially valuable marques—is the only one to use a market cap weighting calculation to adjust for the rarity of a model, meaning the escalation in prices for a Ferrari 250 GTO can’t influence the index more than a more prevalent Porsche 911. He also says that HAGI captures a truer picture of the market because it takes in self-reported private sales data as well as public auction figures. Kidston counters that private sales data are notoriously unreliable. (The producers of a third index, Hagerty’s Blue Chip Index, claim it’s more accurate because it’s based partly on insurance underwriting data.)
#pb#
Whichever index you use, there are signs car collectors may be starting to take their foot off the accelerator: This year, the percentage of cars selling at auction has fallen. Cars with an interesting, important, or even quirky history still sell, says James Knight, who heads the motoring department at Bonhams. But at Bonhams’s auction at this year’s Goodwood Revival, several multi-million-pound Ferraris and Jaguars failed to find buyers. For more run-of-the-mill specimens (“the sort of cars you can buy any weekend”), Knight says, “we are seeing it become more of a buyer’s market.”
Kidston partly blames the auction houses for this state of affairs, saying that they saturate the market by scheduling too many auctions over the same few weeks in September and promise owners unrealistic estimates to win consignments. The quality of the cars on offer suffers as a result, he says. “It undermines the very notion that classic cars are rare and that you should only buy the best,” he says as he sips tea in a leather armchair inside the Driver’s Club at Goodwood, his clipped English accent cutting through the nerve-jangling, 12-cylinder screams coming from outside.
Unlike the many newcomers to the market, Kidston remembers the early 1990s, when vintage car prices collapsed—Ferrari valuations fell as much as 70 percent—and took more than a decade to recover. Such a dramatic implosion is unlikely this time, Kidston says, but it’s foolish to think prices will keep going up. “I’m not a prophet of doom, but you need to be aware of the risks,” he says during another interview, this time in his Geneva office. Located on the fifth floor of an art nouveau building, it’s decorated with vintage racing posters and old photographs. In a small anteroom filled with auction catalogs and car reference books stands a 1981 Ducati 900 “Mike Hailwood Replica” motorbike. “If you buy the best, you are unlikely to regret it, but determining what is really ‘the best’ is key,” he says.
Finding the best is what Kidston does—and he’s ever vigilant for the next deal. Coming out of the Driver’s Club at Goodwood, Kidston waylays an amateur driver he knows—a dealer who specializes in Ferraris and supercars. The man is just off the track and still dressed in a fire-resistant, quilted Nomex race suit, helmet under his arm, sweat beading on his face. Kidston, who has a buyer in mind, presses him gently. “Do you know anyone looking to sell a Carrera GT?” Kidston asks, referring to the supercar that Porsche built from 2004 to 2007 that’s now worth as much as $1 million. “I might. Is he looking for low mileage?” the dealer says. Kidston shoots back, “He’s looking for low price.” They both laugh.
It’s true, classic cars aren’t like financial assets: As Kidston says, a bond can’t send you hurtling down the speedway at 180 miles per hour. But, hey, buying low and selling high never hurt.
Bloomberg Markets
Goodwood Revival is a nostalgia- drenched festival held every September on the Earl of March’s estate outside Chichester, England. The event, which memorializes the heyday of Goodwood’s motor circuit, where races were held from 1948 to 1966, draws thousands of classic auto enthusiasts, dressed in period costume, who come to gawk at old race cars and watch them thunder once more around the speedway.
For classic car broker and consultant Simon Kidston, the nostalgia is often personal, even though, at 48, he’s too young to have seen these cars in their prime. Strolling through Goodwood’s paddocks, where cars are displayed and prepped for the track, Kidston gazes at a row of 1960s-era Ferraris with the wistful look of a man who has spied an ex-lover in a crowd. He points to a canary yellow 1965 Ferrari 250 LM. “That was the first valuable car I sold,” he says. “I drove all over London in that car when I was 24.”
Of course, “valuable” back then—in 1992—meant the car was worth $1.8 million. Today, that Ferrari is worth $15 million. And while Ferrari prices have been especially turbocharged, the entire classic auto market has been hotter than the exhaust pipes of a Shelby Daytona after a run on the Bonneville Salt Flats. This year, vintage cars were the best-performing alternative asset class tracked by Bloomberg, returning 13 percent through June 30 and an average of more than 25 percent a year for the past three years, according to London-based Historic Automobile Group International(HAGI). It’s pretty much been that way since the 2008 financial crisis, as investors have piled into the market looking for hard assets with reliable returns. Indexes that track classic car values have recorded double-digit returns every year for seven years.
Kidston has had a pit-row seat for this race toward ever- higher valuations. “He is a key figure in the industry,” says Mick Walsh, editor-in-chief of Classic & Sports Car magazine. “His contacts among collectors with the best cars in the world and his knowledge of the subject are really second to none.”
Now, Kidston says he’s on a mission to bring greater transparency to a market rife with misinformation and shady practices—including dealers who trade the same car among themselves to inflate its value or who try to pass cars off as similar, more valuable models. In November 2014, to give collectors what he says is a better gauge of value than a dealer’s word, Kidston launched the K500, an index compiled from public auction sales data for 500 valuable vintage models. His K500 website also offers a “collectibility rating” and price guidelines. The project is not without its detractors—competing indexes use different methodologies—but Kidston sees the K500 becoming a tool for collectors in much the same way wine critic Robert Parker’s ratings have become essential for oenophiles.
Geneva-based Kidston headed the motoring department at auction house Brooks and then at Bonhams, which Brooks acquired, for almost a decade before striking out on his own in 2006. He frequently judges and serves as compère at two of the world’s premier classic car shows, the Pebble Beach Concours d’Elegance in Carmel, California, and the Concorso d’Eleganza Villa d’Este on the shores of Lake Como in Cernobbio, Italy. And over the past decade, he has brokered sales of some of the most expensive vintage cars, including two 1963 Ferrari 250 GTOs(worth $40 million to $50 million each), a 1937 Mercedes-Benz W125 Grand Prix car ($30 million), three 1964 Ferrari 250 LMs ($16 million apiece), three 1961 Aston Martin DB4GT Zagatos ($12 million each), and three early-1960s Ferrari 250 GT SWB California Spyders ($17 million apiece).
At Goodwood, Kidston—wearing a vintage orange tweed sport coat with brown checkered shirt, matching tie, and Ivy-style driving cap—shows off an encyclopedic knowledge of cars and motor history: Here’s the Ferrari 246 Dino in which Phil Hill won the 1960 Italian Grand Prix; there’s a 1930s Grand Prix Alfa Romeo designed by Enzo Ferrari. He pauses in the paddocks and inhales deeply in an inadvertent homage to Robert Duvall’s character in Apocalypse Now, Lt. Col. Bill Kilgore. “You smell that?” he says. “It’s Castrol motor oil. It is the smell of classic car racing. It may sound weird, but it is quite evocative and quite distinctive.”
#pb#
Kidston was born with Castrol in his veins. His father, an aristocratic British naval officer, was an amateur racer, and his uncle was one of the illustrious Bentley Boys, a group of Jazz Age British sophisticates who won the 24 Hours of Le Mans race four times in a row from 1927 to 1930. Kidston grew up in a household steeped in automotive lore and surrounded by sports cars—“always the latest models,” Kidston says. In 1976, when Kidston was 8, his family left Southover House, their manor house in Dorset, England, to become tax refugees in Tuscany, where they owned a 320-hectare (800-acre) farm. Kidston attended private schools in Italy and Switzerland, becoming fluent in Italian and French—language skills that have helped him win European clients over the years.
Among the car collections Kidston has helped build are those of Jean-Pierre Slavic, a Swiss watch industry tycoon with an unparalleled Ferrari stable, and designer Marc Newson. He has also provided advice to designer Ralph Lauren on his collection. Even in a high-gloss industry, Kidston stands out for his marketing panache: He produces professional-
quality short films, often elegiac or whimsical in tone, to promote Kidston SA or specific cars he’s selling. Some are more self-indulgent. A fan of the 1969 film The Italian Job, he searched out Alpine switchbacks that appeared in the movie and re-created scenes using his own black 1973 Lamborghini Miura in 2009. “It shows we are living the lifestyle, not just selling it,” he says.
Besides the Miura, Kidston’s personal collection includes a McLaren F1 supercar, a Mercedes-Benz 300SL Gullwing, a Porsche 911 Carrera 2.7 RS, a 1992 Bentley Continental, and a 1938 Bugatti Type 57C Cabriolet once owned by his father and which he spent years tracking down. He often enters these in Concours events. And he will sometimes drive in what he calls “picnic races,” the kind of rallies where one is more likely to stop for Champagne than a tire change. (These can be harrowing too: He once drove U.S. collector and venture capitalist Bernard Carl’s 1962 Ferrari 250 GTO—currently considered the world’s most valuable model, worth $40 million to $50 million—in a rally. Terrified of damaging it, Kidston was at first reluctant to take it beyond third gear but soon found himself pushing 7,000 rpm and rocketing through the French countryside, his exact speed indeterminate because the GTO, built for racing, lacks a speedometer. “It was utter bliss,” he says.)
Kidston’s clients admire his passion—and his honesty. “Simon is the kind of guy, when he says something, you can rely on it,” says Detlef Hübner, chairman of German packaging and logistics company Deufol and a self-described “petrol head.” Hübner says he shares Kidston’s sensibilities and perfectionism about restoring cars. “If it is a car from the 1970s, it should drive like a car from the 1970s and not like a new one,” he says.
While Kidston disdains the new breed of collector who he says views cars as simply another alternative asset class rather than something to be driven and enjoyed, he says he was twice tempted, in 2007 and 2011, to launch a classic car fund. Both times he abandoned the idea. He thought—perhaps overcautiously, he now says—that the market was peaking; he’d also concluded classic cars were too illiquid to work in a fund unless investors agreed to long lockup periods that the fund’s returns might not be attractive enough to warrant. Storage, maintenance, and insurance eat into potential profits. And taxes are tricky: In many countries, vintage cars can be sold tax-free, but shares in a fund would be subject to capital gains tax.
Dietrich Hatlapa, a former Barings sales director who in 2007 co-founded HAGI, says he, too, is often approached by groups wanting to start classic car funds, but he has never seen a project get past the marketing stage. Hatlapa is reluctant to publicly criticize competing classic car indexes, like Kidston’s. But he says HAGI’s Top Index—which tracks 28 especially valuable marques—is the only one to use a market cap weighting calculation to adjust for the rarity of a model, meaning the escalation in prices for a Ferrari 250 GTO can’t influence the index more than a more prevalent Porsche 911. He also says that HAGI captures a truer picture of the market because it takes in self-reported private sales data as well as public auction figures. Kidston counters that private sales data are notoriously unreliable. (The producers of a third index, Hagerty’s Blue Chip Index, claim it’s more accurate because it’s based partly on insurance underwriting data.)
#pb#
Whichever index you use, there are signs car collectors may be starting to take their foot off the accelerator: This year, the percentage of cars selling at auction has fallen. Cars with an interesting, important, or even quirky history still sell, says James Knight, who heads the motoring department at Bonhams. But at Bonhams’s auction at this year’s Goodwood Revival, several multi-million-pound Ferraris and Jaguars failed to find buyers. For more run-of-the-mill specimens (“the sort of cars you can buy any weekend”), Knight says, “we are seeing it become more of a buyer’s market.”
Kidston partly blames the auction houses for this state of affairs, saying that they saturate the market by scheduling too many auctions over the same few weeks in September and promise owners unrealistic estimates to win consignments. The quality of the cars on offer suffers as a result, he says. “It undermines the very notion that classic cars are rare and that you should only buy the best,” he says as he sips tea in a leather armchair inside the Driver’s Club at Goodwood, his clipped English accent cutting through the nerve-jangling, 12-cylinder screams coming from outside.
Unlike the many newcomers to the market, Kidston remembers the early 1990s, when vintage car prices collapsed—Ferrari valuations fell as much as 70 percent—and took more than a decade to recover. Such a dramatic implosion is unlikely this time, Kidston says, but it’s foolish to think prices will keep going up. “I’m not a prophet of doom, but you need to be aware of the risks,” he says during another interview, this time in his Geneva office. Located on the fifth floor of an art nouveau building, it’s decorated with vintage racing posters and old photographs. In a small anteroom filled with auction catalogs and car reference books stands a 1981 Ducati 900 “Mike Hailwood Replica” motorbike. “If you buy the best, you are unlikely to regret it, but determining what is really ‘the best’ is key,” he says.
Finding the best is what Kidston does—and he’s ever vigilant for the next deal. Coming out of the Driver’s Club at Goodwood, Kidston waylays an amateur driver he knows—a dealer who specializes in Ferraris and supercars. The man is just off the track and still dressed in a fire-resistant, quilted Nomex race suit, helmet under his arm, sweat beading on his face. Kidston, who has a buyer in mind, presses him gently. “Do you know anyone looking to sell a Carrera GT?” Kidston asks, referring to the supercar that Porsche built from 2004 to 2007 that’s now worth as much as $1 million. “I might. Is he looking for low mileage?” the dealer says. Kidston shoots back, “He’s looking for low price.” They both laugh.
It’s true, classic cars aren’t like financial assets: As Kidston says, a bond can’t send you hurtling down the speedway at 180 miles per hour. But, hey, buying low and selling high never hurt.
Bloomberg Markets
