After Judge Rhodes of the Bankruptcy Court for the Eastern District of Michigan ruled on December 3, 2013 that the city of Detroit is eligible for Chapter 9 Bankruptcy protection, the city immediately divulged that the report commissioned by the city from Christie’s to appraise the Detroit Institute of Arts (DIA) collection was nearly finished. On the day of the eligibility ruling, Emergency Manager Kevyn Orr and Christie’s announced some tentative conclusions from the report, namely, that the 2,781 works appraised (roughly 5% of the total collection) had a value of approximately $452 million to $866 million. This was considerably lower than many had speculated.
Since that announcement, there have been a handful of important developments related to the battle over the DIA collection. First, the city responded to the earlier creditors’ motion to intervene in the appraisal process exactly as we predicted it would: by pointing out that such a motion was premature by any definition, and on thin ice to begin with since those creditors could never force the sale of the collection. Rather, it is purely a matter of how such a sale or monetization fits into the city’s eventual plan of adjustment for the entire bankruptcy (due to be filed in March), a plan to which all creditors will have ample opportunity to object and comment.
Second, the final Christie’s report itself was completed. Orr’s office itself will apparently make it public later today, but the Detroit Free Press has posted both the letter from Christie’s that covered it (which is the strategic discussion), and the appraisal report itself. Mark Stryker at the Detroit Free Press (who has also written a terrific overview of the history of the relationship between the city and the museum) made a few key observations yesterday from the advance copy:
- Works whose attributions remain unclear were not appraised, e.g., a painting cataloged as by Amedeo Modigliani
- Christie’s concluded that DIA had mistakenly attributed two classical Chinese paintings, and that they were actually worth considerably more than assumed ($700,000-$1.5 million).
- Old Master paintings are the most valuable category of art in the collection, with 55 works valued in total between $222 million and $417 million. Next are Impressionist and Modern Art, valued between $178 million and $339 million.
- Outside of paintings, the most valuable work is a drawing by Michelangelo, “Scheme for the Decoration of the Ceiling of the Sistine Chapel,” valued between $12 million and $20 million.
Christie’s also laid out its conclusions about alternate methods to monetize the collection without selling it. Specifically:
- Use City-Owned Works as Collateral for Loan or Line of Credit.
- dentify a Partner Museum for Long-Term Lease of City-Owned Works of Art.
- Create a “Masterpiece Trust” to be Accessed by Members of a Museum Consortium.
- Sale and Permanent Loan or Deposit back to the Museum.
- Traveling Exhibition of Select Works.
Of these, the “Masterpiece Trust” is the standout as an original idea. As I discussed yesterday with the Detroit Free Press, the existence of the actual report is like moving ahead several moves in a chess game. On the one hand, the creditors’ objection that they were in the dark about timing is now mooted; the report is done. On the other hand, they now have a target, although they will be hard pressed to find anything amiss in what is a meticulous and professional report. Rather, the creditors could object to the amount of art included, suggesting that their motion should be granted to allow a greater proportion of the collection to be appraised and included.
The motion still seems far more of a tactical move to pressure Detroit that one with much chance of success. After the motion was filed, Judge Rhodes made some critical comments about considering the DIA collection as a misguided effort to “sell its way” out of bankruptcy. So it seems a far stretch to think that Rhodes would order DIA to allow another appraisal after having cooperated with the first, when the ultimate purpose would at least implicitly be to sell even more art.
The view here remains that Orr is using all this to orchestrate the much-discussed “grand bargain” under negotiaton, in which collectors and foundations chip in to subsidize the bankruptcy estate with what would have come out of the monetization. He knows that while Rhodes cannot force Detroit to sell the art, he could reject the plan of adjustment if he (Rhodes) doesn’t like the sale of art within it. And Orr knows that if he can get a contribution of half a billion dollars for a promise not to sell the collection, the creditors will be hard pressed to complain about a plan of adjustment that doesn’t include an asset of which they cannot force the sale.
For its part, DIA responded to the report somewhat coyly, stating that it would not comment on it, then proceeding to comment on the monetization proposals. DIA still clearly has its eyes on the ball with regard to ongoing negotiations:
Detroit Institute of Arts Statement on Ideas for Monetizing the Collection
Four of the five alternatives outlined by Christie’s have already been addressed by the DIA in some detail. In most cases, these alternatives will yield a token amount of money, while placing the collection at substantial risk. The only new idea is the “Masterpiece Trust,” and it is completely untested. Further complicating the trust alternative is the lack of specifics and the lack of an economic imperative for participation. With some exceptions, museums generally loan works of art free of charge except for packing and shipping fees. How a “Masterpiece Trust” would be received in the museum community remains to be seen. The DIA remains willing to engage in further discussions and is actively supporting the plan developed by the appointed mediators Chief Judge Gerald Rosen and Eugene Driker. The museum continues to be open to all ideas for assisting in the revitalization of Detroit, provided we are able to ensure the safety of the collection we hold in public trust.
No hearing has yet been set on the creditors’ motion. The bankruptcy court has much other work to do, of course; it could sit on the motion, deny it swiftly, or hold a hearing. But the stage now seems set for the negotiations that may well save the DIA collection, and give the city some kind of boost as it tries to emerge from insolvency. Maybe that has been Orr’s plan all along.