As a backdrop to the news today about an analysis showing the Detroit Institute of Arts collection is valued at up to $4.6 billion, a figure that could fall to $1.1 billion in actual sales if the art was put on the market, NextChapterDetroit.com brings you a bit of history about why and how the museum’s collection has been part of the bankruptcy case this year.
1-The artwork at the Detroit Institute of Arts is the city’s top asset, according to Detroit’s Disclosure Statement, the document designed to provide information to creditors so they can evaluate the city’s restructuring plans. The artwork, while not precisely valued in the May 5 document, was worth more than city-owned land, Belle Isle and the Detroit-Windsor Tunnel.
2-Prior to Emergency Manager Kevyn Orr filing for bankruptcy, Michigan Attorney General Bill Schuette issued an opinion that the artwork was protected from sale and “is held by the City of Detroit in charitable trust for the people of Michigan, and no piece in the collection may thus be sold, conveyed, or transferred to satisfy City debts or obligations.” His opinion has no force of law in federal bankruptcy court.
3-Bond insurer Syncora, who stands to lose nearly $300 million in the case, is one of the creditors that has been advocating for selling art to cover debts. Here’s what Syncora attorney Stephen Hackney said at an April hearing:
“The art has been a sort of noteworthy, highly publicized part of the case, and from our standpoint, a very important part of the case … The city is proposing to address the issues surrounding the art collection in a way, from our standpoint, that yields far less value.”
4-Bankruptcy Judge Steven Rhodes on April 28 granted Syncora’s request to view communication between Schuette and the DIA that preceded his opinion that the art was protected from sale to pay debt. In issuing his ruling from the bench, Rhodes said:
Plainly, the extent to which the art held by the Detroit Institute of Arts should be taken into account in evaluating whether the city’s plan meets the best-interest test of the bankruptcy code is a substantial issue in the case, one that has not been prejudged or determined by the court at all, and, of course, this ruling should not be construed to suggest one way or another how the court will or may rule on that substantive issue of confirmation.
5-In preparation for trial, the city and the DIA hired Artvest Partners, an art investment firm, to “assess the viability and practicality of selling art or otherwise monetizing the collection,” according to Bill Nowling, spokesperson for Detroit emergency manager Kevyn Orr.
6-The Artvest report disputes some of the findings in another report that was commissioned by some of the city’s creditors.
7-Issued today, the Artvest report cost $112,500. (Its author, Michael Plummer, co-founder of the Artvest firm and a former employee at both Christie’s and Sotheby’s, is scheduled to appear as an expert witness during the city’s bankruptcy trial in August.)
8-The report was issued just days after pensioners and other creditors needed to mail their ballots to meet the Friday deadline of the votes being received. Would this information have changed their minds? We’ll never know. As a related noted: The DIA has pledged to raise $100 million toward pension funding as part of the “grand bargain,” the agreement that also has, among other terms, the state paying $195 million and foundations contributing $366 million toward the pension funds.
Among the Artvest report’s findings:
About two-thirds of the DIA’s collection is in four areas that have “fallen out of favor with collectors and that are underperforming their market peak in 2007”. The are: American Art pre-1950, Old Maser and 19th Century European Paintings, and Impressionist and Modern Art.
If the DIA collection were for sale, “few sales would be to other museums, both because other museums are likely to boycott such sales, as well as because funding constraints limit their participation in the marketplace at today’s price levels.”
If the DIA wanted its art auctioned, Sotheby’s and Christie’s might not participate. Sotheby’s parent company was based in Detroit from 1983 to 2006, and had a number of connections to the DIA. Christie’s “received unusually strong negative feedback from both the museum community and the art industry by merely conducting an appraisal.”
If the city sold art through an auction house outside of Christie’s or Sotheby’s, it could expect to lose 20-40 percent of potential selling prices.
Another issue raised in the report is the authenticity of some of the pieces. The DIA has works that are thought to be Modiglianis but have not been validated by the art worlds’ most trusted sources. And also, according to the report, the authenticity of some of the Old Masters paintings could be challenged during a review of them before a sale.
The iconic Diego Rivera murals would have little value if moved. According to the Artvest report, cutting them off the walls would seriously damage them.
A sale of the art, especially if ordered through a court decision related to settling debt, could result in “formidable legal obstacles and prolonged litigation.” Some of those obstacles, according to the report, are: items would need free and clear title to be sold, and the threat of future litigation could prevent that; it’s likely the Michigan Attorney General would take legal steps to prevent the sale, based on his opinion from last year; the heirs of DIA donors would be likely to “pursue every legal option necessary to stop or delay the sale of any of the art, potentially leading to years of litigation.”
The potential impact of selling the most valuable works would “deprive the museum of its core attraction, drastically reduce attendance and related revenues, drive away potential donors of future gifts and endowments, and in all likelihood, ultimately for the closure of the DIA due to a loss of economic sustainability, resulting in a full liquidation.”
-By WDET’s Sandra Svoboda
@WDETSandra and email@example.com