August 25th, 2010 | 
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Peter Mullin, owner of the world’s largest private collections of classic French automobiles, sits in a 1939 57C Aravis Bugatti at his Mullin Automotive Museum in Oxnard, California on June 25, 2010. Photographer: Charlie Nucci/Bloomberg Markets via Bloomberg
A 1939 57C Aravis Bugatti sits at the Mullin Automotive Museum in Oxnard, California on June 25, 2010. Photographer: Charlie Nucci/Bloomberg Markets via Bloomberg
Peter Mullin, owner of one of theworld’s largest private collections of classic Frenchautomobiles, points to a 1935 Hispano-Suiza J12 Cabrioletsitting among 60 other cars in his museum in SouthernCalifornia.
“This is the finest car ever made,” Mullin says. “At 100miles an hour, you couldn’t even tell the engine was on.”
The collector is just warming up at his Oxnard-based MullinAutomotive Museum, which was designed to evoke a 1930s art decoauto salon in Paris. He caresses the swooping fender of a red-and-black 1938 Bugatti Type 57C Atalante coupe, designed by thecompany founder’s son, Jean Bugatti, Bloomberg Markets magazinereports in its October issue.
“I love all the French cars, but Bugatti is my favoriteamong favorites,” Mullin says. “It’s the ultimate car inengineering, design, performance.”
The museum’s creme de la creme spins on a pedestal in themiddle of the 46,800-square-foot (4,300-square-meter) building.In may, an anonymous buyer paid more than $30 million for this1936 Bugatti Type 57SC Atlantic, a silver-blue coupe with araised spine that runs the length of the car. Mullin declined tocomment on media reports that he was the buyer.
It’s the highest price ever paid for a car, topping the oldrecord by about $2 million. the same Bugatti sold in 1971 for$59,000.
Mullin belongs to a small club of about 100 collectorsworldwide with the money to buy the most expensive classics,Geneva-based classic car adviser and broker Simon Kidston says.
Rich collectors are an eclectic lot, from comedian Jerry Seinfeld, who collects Porsches and who appeared in a 30-minutecable program extolling the brand; to Jim Glickenhaus, a WallStreet investor who covets Ferraris; to U.K. television andradio host Chris Evans, who paid $10.9 million in 2008 for a1961 Ferrari 250 GT SWB California Spyder once owned byHollywood actor James Coburn.
A semi-retired founder of a Los Angeles executive-benefits-consulting and asset-management firm, Mullin, 69, began buyingvintage cars in 1981. He now has 140.
“It starts with an interest, turns to passion, thenmigrates to obsession,” says the chairman of Portland, Oregon-based M Financial Group.
Collectors are pumping money into the classic-car marketlike never before, driving up prices for the world’s most famousmodels of Bugattis, Ferraris, Mercedes-Benzes and Rolls-Royces.Enthusiasts are bewitched by their curvaceous bodies;handcrafted leather stitching; racing prowess, with 200-plus-horsepower engines; famous owners; and even their possibleinvestment value.
Today, with the stock market in the doldrums, investorsseeking hard assets are turning to vintage cars — often formore than $1 million, says Keith Martin, publisher of Sports CarMarket magazine in Portland.
“At the moment, important cars are making crazy money,” hesays. “Baby boomers still have all the money. Half of them aresaying, ‘I always wanted a Ferrari SWB.’”
Mullin’s love affair with French cars began the moment hefirst saw one in 1980. a photographer used Mullin’s PaulWilliams-designed colonial home as a backdrop for a photo of a1948 Delahaye 135 MS for a vintage-car calendar. the Delahaye –with its fenders shaped like long teardrops and chrome grille,headlights and rope-thin bumper — changed Mullin’s life.
“It was the most gorgeous piece of art, sculpture,engineering and performance I had ever seen,” Mullin says. “Iknew virtually nothing about French cars, but I was stunned.”And hooked. One year later, he bought his first classic, a 1948Talbot Lago T26 Record. He later took up racing, most recentlycompeting in the Rolex Monterey Motorsports Reunion in Salinas,California, in August.
Bugattis, along with Ferraris and Mercedes-Benzes, are themost coveted of the collectibles, based on auction prices. Nowmade by Volkswagen AG, Bugattis were originally manufacturedmore than a century ago by Italian engineer Ettore Bugatti inMolsheim, France. He pushed innovations, such as the use oflightweight magnesium and aerodynamics, in his handcrafted cars.
The Bugatti 57SC Atlantic at Mullin’s museum is, for themoment, the world’s most valuable car because only three weremade, and only two of them are known to still be intact. Theother one is owned by fashion designer Ralph Lauren, whodisplayed some of his Bugattis, Jaguars and Porsches at Boston’sMuseum of Fine Arts in 2005.
Collectors who buy vintage cars for money, not just forlove, face many risks in making a profit. In the opaque andilliquid classics market, they struggle with everything fromdetermining a fair price and finding a buyer to ensuring aseller isn’t passing off a heavily repaired model as anoriginal, says Glickenhaus, general partner at New Yorkinvestment firm Glickenhaus & co., which manages $1.3 billion.
Consider the price swings for Ferrari 250 GTE four seatersfrom the early 1960s. In 1990, the cars were selling for as muchas $250,000, up from $30,000 to $40,000 three years earlier,publisher Martin says. the price swooned to as low as $50,000before recovering to $100,000 in the past few years.
“There is a huge business in buying and selling classiccars, and these guys will tell you whatever you want to hear,”says Glickenhaus, whose collection includes seven Ferraris. “Tothe average person, it is not a good investment.”
Cars Outperformed Stocks
Collectible cars have outperformed stocks, at least in thepast four years, according to the Hagerty’s Cars that Matter“Blue Chip” Index, compiled by auto appraiser David Kinney ofGreat Falls, Virginia. the index, which contains the estimatedvalues of 25 of the most popular collectible autos, increasedmore than 61 percent from September 2006, when it started, tothe end of July.
That compares with a 16 percent loss in the Standard &Poor’s 500 Index. the 1958 Ferrari 250 GT California Spyder LWBgained 131 percent in that period to an estimated value of $3.3million, according to the HCTM index.
Glickenhaus’s zeal for cars dates back to his childhood inthe 1950s, inspired by the “See the USA in your Chevrolet”jingle that glamorized the open road. as a teenager, he wasalready ogling Ferraris. In 1967, he told his father, Seth, whofounded Glickenhaus & co., to buy an $8,000 Ferrari 330 LMBbecause it was the perfect vehicle to be driven to school in.
Jim says Seth, now 96 years old and still working as thesenior partner at the firm, has been skeptical of his devotionto cars ever since.
“Today, that car is worth $12 million,” says Glickenhaus,who had a short-lived Hollywood career producing movies such as“Frankenhooker”, about a monster made from parts of prostitutes.“Every time I point it out to him, he says anything you boughtin 1967 would go up.”
Jim Glickenhaus, 60, became legendary among collectors forrebuilding a new $1.1 million Ferrari Enzo because he said thedesign of the brand, owned by Fiat SpA, had deteriorated. Theinvestor spent another $3.2 million to strip down the car and,with the help of Italian firm Pininfarina SpA, remake it withabout 200 new custom parts, including a carbon-fiber body andseats designed to fit Glickenhaus’s shape.
Glickenhaus unveiled his more ferocious-looking Ferrari in2006 at the Concours d’Elegance car show at Pebble Beach golfcourse, which hosted the 2010 U.S. Open. Videos were posted onYouTube of Glickenhaus standing by his creation as a drapecovering it is removed in front of a large crowd.
Building a Racing Version
He also renamed the car the Ferrari P4/5 in honor of thecompany’s famous P4 race cars from 1967. He’s now building aracing version of the car.
“Initially, the idea was so outlandish that someone wouldtake the ultimate Ferrari and deconstruct it,” Glickenhaus says.“Everyone was sure this would be a disaster. It would not amazeme if, in 50 years, the P4/5 goes for $100 million.”
The Tonight show host Jay Leno, who enjoys cruising thestreets of Los Angeles in one of his 110 vintage cars and 90motorcycles, is steadily adding to his inventory. It nowoccupies three former airplane hangars, one of which includescar lifts for repairs. Rather than buying vehicles in mintcondition, Leno says he likes to take on broken-down classicsand restore them.
He has a 1967 Lamborghini Miura P400 once owned by croonerDean Martin’s son, Dino. a friend of Leno’s who figured the carwould cost more to fix than it was worth all but gave it to theentertainer in the early 1980s. Leno spent several thousanddollars to repair it and says similar Lamborghinis recently soldfor $600,000 to $700,000.
Counterweight to Hollywood
Collecting provides Leno, 60, a counterweight to theuncertainty of being an entertainer in Hollywood, where poorratings can doom a career.
“When you work in show business, everything is subjective,”says Leno from his office on the NBC studio lot in Burbank,California. “But when you take something broken and fix it, noone can deny you didn’t make it run. no one can claim it’s notrunning.”
Leno says luck as much as savvy account for his occasionalpaper profit as a collector. In 1999, he bought a 1994 McLarenF1 sports car for $800,000, the most he’d ever paid at the timefor an auto in his collection. He saw a similar car sell atauction last year for $4.3 million.
“That’s a pretty good investment for 10 years,” says Leno,who according to the Hollywood Reporter earns about $20 milliona year. But he doesn’t plan on reaping that profit anytime soon.“I never sell,” he says. “God no. I don’t want to. I enjoy eachone.”
At a Barrett-Jackson Auction co. event in June, collectorstrade cars in a carnival-like atmosphere. during the auction atthe OC Fair & Event Center in Costa Mesa, California, so-calledring men dressed in sports jackets holler and wave their armsamong the audience of bidders, trying to whip up a frenzy. Womenin short skirts hand out drinks on trays as a procession ofChevys, Fords and Pontiacs crosses the stage.
A 1970 Plymouth Road Runner that appeared in “The Fast andthe Furious” movies goes for $187,000.
The auction site is Barrett-Jackson’s fourth and newestlocation, a sign of the expanding market for classic musclecars. some 58,000 people attended the three-day event, which wasbroadcast live on News Corp.’s Speed Channel cable network.
‘Parking their Money’
“We’re seeing more and more people who want the car theywanted as a kid,” says Steve Davis, Barrett-Jackson’s president,en route to his customary spot on the podium behind theauctioneer. “Now, because their portfolios have been impacted,they’re parking their money in something that has value and thatthey can also touch.”
Gooding & co. auctions are more sedate affairs catering towealthy collectors. at the Pebble Beach Concours d’Eleganceshow, Gooding’s auctions are held under white tents andchandeliers. they feature polished and restored Rolls-Royces andDuesenbergs, displayed in thick, glossy catalogs with lengthyhistories on each offering.
David Gooding, who managed auto auctions at Christie’sInternational before starting his company in 2003, expects tosell as much as $150 million in cars this year, up from $25million in his first year.
“More of my new clients are saying they want a car they candrive instead of a painting on the wall,” says Gooding, whoseSanta Monica, California-based company handled the private saleof the $30 million Bugatti 57SC. “We really wanted to beselective and take the best of the best.”
Pricing is Hard
The challenge for collectors is determining the value ofclassic cars in a market where pricing is hard to find. AsDietrich Hatlapa in London built a small collection, including a1973 Porsche 911 Carrera RS 2.7 and a 1960 Porsche RS 60 Spyderracer, he was struck by the large amounts of money that buyerswere paying for classics without having market data to supportthe prices.
“People are paying millions of dollars for a car, while atthe same time there is still a seriously opaque market,” saysHatlapa, who starting buying vintage sports cars for the fun ofdriving them on a track or the open road.
Hatlapa, who had been a managing director at BaringSecurities and head of an equity sales team at Macquarie BankLtd., wanted to use his experience to bring more transparency tothe classic car market. So, in 2008, he founded HistoricAutomobile Group International. He and a few fellow collectorsbegan by gathering price data from private sales, dealers andauctions.
Emerging-Market Indexes
“We started out as enthusiasts who wanted to find out whatactually happened, not really with a business idea, but more toshed some light on an area we’re interested in,” Hatlapa says.Today, HAGI has a proprietary database of about 100,000transactions.
Hatlapa, 46, also worked with Bruce Johnson, another formerBaring Securities executive, to produce four car indexes,including a total market index that measures the worth of 18,000collectible cars with a total value of about $8.2 billion.
Johnson, 63, now an independent hedge fund consultant inSan Francisco, was Baring’s head of global research andthe creator of some of the earliest emerging-market indexes forChina, Colombia, India and Poland beginning in 1992. Johnsonsays that just as the Baring indexes helped provide aperformance barometer for previously opaque emerging countries,the auto indexes will help fuel growth in that market.
“We want to create some of the initial infrastructure foran investors’ market,” he says.
Unearthing a Gem
The HAGI top Index, which tracks Mercedes-Benzes, Ferraris,Porsches and other popular collector cars, was down about 1.7percent this year through July compared with a 1.2 percentdecline in the S&P 500.
With limited pricing data, collectors sometimes hunt fordilapidated cars, hoping to unearth a forgotten gem. In 2002,Glickenhaus, the fund company executive, says he bought a 1967Ferrari 330 P3/4 chassis and boxes of its parts from an owner inLondon, paying a total of about $1 million for the car and itsrestoration.
Glickenhaus says he then investigated the car’s history andwas thrilled to find that he had bought the famous chassisbelonging to a long-lost car that won the 1967 24 Hours ofDaytona race. He values the legendary Ferrari at as much as $6million.
“I like the story of finding things in the garbage,” hesays.
Million Franc Delahaye
In deciding how much he’ll pay, Mullin, the museum owner,places a premium on the car’s famous history. a few years ago,he picked up the Million Franc Prize 1937 Delahaye Type 145Grand Prix. that year, the French government offered a millionfrancs to any French-made auto that broke the 1934 speed recordset by an Italian Alfa Romeo. the Delahaye took the prize.
And in January, Mullin paid more than $368,000 for a veryrusty Bugatti after it was lifted from Lake Maggiore on theSwiss-Italian border. After the car’s owner failed to paycustoms fees, it was pushed into the lake in 1936 by Swissofficials. For decades, collectors mused about the underwaterBugatti and wondered whether the story was true until diversactually found it in 1967 and retrieved it last year.
“Think about it as art, not as a car,” Mullin says. “It’slike finding a great piece of Greek sculpture at the bottom ofthe ocean. except Bugatti started this art and nature finishedit off.” Rather than restoring it, Mullin displays the Bugattiwith all of its blemishes under spotlights in his museum.
Mullin, Glickenhaus and other collectors flocked to thePebble Beach car show in August, where Gooding auctioned 106cars for $64.6 million. After the event, Mullin joined a seven-day road rally of more than 80 Bugattis.
They headed north over the Golden Gate Bridge and thensouth down the Pacific Coast Highway to Big Sur and the HearstCastle before arriving at Mullin’s museum. There, on Aug. 21, hehosted a reception for the collectors to celebrate the 50thanniversary of the American Bugatti Club.
For Mullin, driving and admiring his French cars is thesweetest return of all.
To contact the reporter on this story:Seth Lubove in Los Angeles at slubove@bloomberg.net
Bugattis Sell for ‘Crazy Money’ as Classic Cars Beat S&P 500
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