Detroit Bankruptcy Update

 

1. Detroit: Detroit Free Press Art museums treat estimated values of their art like state secrets. In fact, major museums such as the Detroit Institute of Arts don’t even know precisely what all of their art is worth.
That is about to change in Detroit.
When officials from the New York-based Christie’s auction house finish formally appraising city-owned works at the DIA this fall, the results will open an unprecedented public window into the market value of thousands of artworks at a top American museum. The enormity of the final tally, which is expected to be in the billions, promises to add urgency to the debate over whether the city should sell art to help pay its bills in municipal bankruptcy.
The Free Press has learned previously undisclosed details of Christie’s contract with the city, including that up to 3,500 works could be appraised. Among those are 300 on view as part of the permanent display, including iconic works by van Gogh, Matisse, Rembrandt, Bruegel and others.
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Christie’s will only appraise works bought directly by the city that are unencumbered by donated funds or other covenants that cloud clear legal title, said Bill Nowling, spokesman for Detroit emergency manager Kevyn Orr. The appraisal will unfold in phases. Officials will start with the art on view before evaluating art in storage with an estimated market value of $50,000 or more and, finally, art in storage presumed to be worth less than $50,000.
Christie’s final report will include itemized appraisals for art worth at least $50,000; an aggregate value will be given for work worth less. Nowling said the contract does not give preferential consideration to Christie’s to handle a sale of art down the road. “That’s a different discussion — if we even get there,” he said.
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A typical formal appraisal considers detailed research into a work’s quality, historical importance, condition, provenance, comparable sales at public auction and typically hush-hush private transactions between dealers and collectors. A spokesman for Christie’s, one of the world’s two leading fine-art auction houses along with Sotheby’s, said that the precise number of works appraised will be decided with input from the DIA. An initial meeting between officials at the DIA and Christie’s isn’t expected until after Labor Day. Final results are due in October or November. The city is paying Christie’s a $200,000 fee.
Determining art's value
Some museum supporters are concerned that the details of the appraisal, which will be made public as part of court filings, could increase public pressure to sell works to help satisfy the city’s creditors. The list of DIA works and their eye-popping values is certain to make headlines far beyond the art world.
“This is like the weighing of souls,” said Maxwell Anderson, director of the Dallas Museum of Art. “This is biblical stuff, not the approximations that insurance companies look for. It’s extremely problematic for all museums, because it alters the public’s perception of artworks from being ciphers of public heritage of transcendent value, to objects for sale to pay other people’s debts.”
Orr hired Christie’s to evaluate DIA art as part of the city’s responsibility in federal court to provide a detailed accounting of all city assets. The possible sale of art has been one of the most controversial aspects of Detroit’s financial crisis.
The big mystery of the unfolding saga is just how much the art is worth. The Free Press consulted art dealers and auction records to estimate the market value of 38 key works at about $2.5 billion, with individual pieces such as Matisse’s “The Window” at $150 million and van Gogh’s “Self Portrait” at $60 million.
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2.DETROIT, MICH.- The Detroit Institute of Arts, steward of a priceless art collection that has been threatened by recent statements by the City of Detroit’s Emergency Manager and creditors, announced today that it will not file an objection to the City’s eligibility for relief under chapter 9 of the Bankruptcy Code. The deadline for objections is today. The DIA cited several reasons for its decision.
The DIA recognizes the City’s severe financial distress and its need for the protection and powers of the bankruptcy court to help in the Emergency Manager’s efforts to rebuild and revitalize Detroit. As it has previously stated, the DIA applauds the Emergency Manager’s efforts, wishes him success and continues to encourage him not to undercut those goals by jeopardizing Detroit’s most important cultural institution and the economic, educational and other significant benefits it brings to the city and the region.
“We support Kevyn Orr’s goal of rebuilding the City through strengthening of the City’s institutions and governance,” said Eugene A. Gargaro, chairman of the DIA board of directors. “We know the museum plays a critical role in anchoring the Midtown neighborhood and the City’s burgeoning arts community, and we stand ready to leverage that role in the rebirth of Detroit. In addition, the DIA is recognized as an important asset of the entire region, as was demonstrated last August when voters in Wayne, Oakland and Macomb counties approved a nationally acclaimed regional millage to support
The DIA reiterated that it has not been involved in any pre-bankruptcy negotiations with the Emergency Manager, one of the bankruptcy eligibility issues identified by the court. The DIA also noted the court’s limited powers in a chapter 9 municipal bankruptcy case, which focus primarily on the adjustment of the City’s debts, not the rationalization of its property, which is the sole responsibility of the Emergency Manager, who remains subject to Michigan law. Michigan Attorney General Bill Schuette has ruled that Michigan law prohibits the sale of the DIA’s collection to pay the City’s creditors.
Finally, the bankruptcy and Detroit’s financial distress should not affect the museum. The museum and the collection are held by Detroit in a trust for the benefit of all of the people of Michigan. They are not City property that can be sold or monetized and should not be involved in the City’s efforts to reach agreement with its creditors. Museum operations are completely independent of the City budget and no City funds are involved in the operation of the museum. Repeated statements that “everything is on the table” and the Emergency Manager’s retention of Christie’s auction house to appraise the DIA collection further complicate and confuse an already complex proceeding.
DIA Director, Graham W.J. Beal, said, “We remain committed to our position that the Detroit Institute of Arts and the City of Detroit hold the DIA’s collection in trust for the public, and we stand by our charge to preserve and protect the cultural heritage of all Michigan residents.”

                       3. Earlier in the summer BLOUIN ArtInfo published the following article on Christies and the Detroit appraisal..
 
museum operations.”
 
multimillion-dollar treasures are worth.

Christie’s Appalling “Vulture” Behavior
When a company goes bankrupt, a certain kind of investor comes out of the woodwork trying to make a killing: if they buy assets at distressed prices, really cheap, they can often wait a few years
and resell at a very big profit. They are called vulture investors.
I’ve been thinking about the term ever since I read the article headlined Detroit’s Creditors Eye Its Art Collection in the July 20 New York Times, which of course is about the people who would like to sell the art collection of the Detroit Institute of Arts so they can collect on money owed to them by the city. I’ve been thinking about it, not just because of Detroit’s creditors, but rather because of Christie’s, the auction house. The article had this passage:
About a month ago, the institute’s officials were contacted by Christie’s auction house, which asked for an inventory of works and asked if appraisers could visit to assess the collection. It is unclear whether such a visit took place and whether it was creditors or someone else who enlisted Christie’s to begin an appraisal. (Mr. Nowling said that the emergency manager’s office did not do so, and Christie’s declined to comment.)
All I can think of is, shame on Christie’s. Sure, business is business, but let’s remember here that it is NOT the Detroit Institute of Arts that has mismanaged the city and led to the bankruptcy. As far as I can tell, the DIA has husbanded it resources very well and acted responsibly over the last several years.
Is Christie’s so hard up that it will take any business, no matter how reprehensible? That’s sad. Of course Christie’s is positioning itself for the sale, should it be ordered. But if I were a collector wanting to sell, I would not patronize Christie’s because of this. I certainly would not go there if I were a museum director. If wanting to buy, yes, I know collectors have to go with whoever has the “material.”
BTW, I applaud the behavior of the Detroit Institute during this crisis. It just keeps going about its business, trying not to get distracted, keeping its head down and not making matters worse. On Monday, I received this in a press release:
The Detroit Institute of Arts (DIA) will examine and digitally photograph 13 full-scale drawings, known as cartoons, created by Diego Rivera in his preparation for painting the DIA’s internationally renowned Detroit Industry murals. The drawings have not been looked at in more than 30 years, and have never been digitally photographed. The project will take place from July 22 to Aug. 2 and is made possible by a grant from Bank of America’s Art Conservation Project. The grant will also fund any necessary conservation work on the delicate drawings.
ETC. Some of us are “liking’ the DIA on Facebook in a show of support. As of now, it has 231,851 fans – versus 223,00 in mid-June.