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Art Law

Recent Developments in Art Litigation and Art Finance

Restituted $39 Million Klimt Painting Sold at Sotheby’s London In June Will Be On Display For A Short Time Next Year

Posted in Art Museums, Art Recovery/Theft, Art Valuation

As recently reported by Artnet, there has been quite a bit of speculation surrounding the buyer’s identity of Austrian artist Gustav Klimt’s painting entitled Portrait of Gertrud Loew-Felsövanyi (1902) sold at Sotheby’s London back in June for $39 million.  Recent credible reports confirm that the buyer is British billionaire businessman Joe Lewis, who came into his fortune by way of foreign exchange market (forex) trading in the early 1990s.  Lewis’ art collection is estimated to be worth around $1 billion and includes works by Picasso, Matisse, Lucian Freud, sculptor Henry Moore, and, of course, Klimt.  Lewis is known to have a preference for Austrian modernism.

According to Artnet, the provenance of the Nazi-looted Klimt painting was determined just recently before the Sotheby’s London auction in which the painting was returned to the subject’s granddaughter.  Shortly thereafter, it was decided by the Felsövanyi family along with the Klimt Foundation to consign the artwork to Sotheby’s and share the profits.

The recent sale of the Klimt artwork has reignited a long debate back in Austria as critics of current restitution practices expressed their concern that “restituted masterpieces all too often disappear from public view as they go to private hands.”  Artnet notes that because public institutions are unable to raise the necessary funds to acquire expensive important artworks, these masterpieces often tend to find their way into either freeports or the art collections of the very affluent.

The painting will be on loan to the Neue Galerie in New York for an exhibition scheduled for next year entitled Women of Vienna’s Golden Age 1900-1918, which will run from September 2016 to January 2017.  The Neue Galerie is a museum dedicated to early twentieth-century German and Austrian art and design.

Although the Klimt painting will be on display for a short time in New York later next year, the Austrian media predicts that the chances of it becoming permanently publicly accessible are “slim.”

Global Art Market On Brink Of A Leverage Boom To Drive Further High-End Art Sales

Posted in Art Finance, Art Intelligence

Skate’s Art Market Notes for July highlight that ultra-high net-worth individuals (UHNWIs) are purchasing more art and the trend is likely to continue.  According to high-level estimates of Skate’s (based on its extensive data mining), only about 11% of global UHNWIs with assets in excess of $100 million are currently invested in art.  These figures demonstrate that there is significant growth in the art ownership penetration ratio among global UHNWIs and a significant growth upside potential remains.

Skate’s hints that with the release of its Global Art Lending Report scheduled for next month, the impressive growth of the art lending business over the past few years will be revealed and a “perfect stage” for significant growth in global art lending will be portrayed based on the following factors:

(1) very low share of art assets leveraged today; (2) historically low interest-rate environment; (3) unparalleled growth in high-end art market liquidity; and (4) quickly expanding availability of stand-alone art lenders.”

Skate’s observes that with the above four factors working in synergy together, the art market is on the brink of a “leverage boom” that should drive further high-end art sales, supporting both supply (e.g., forced liquidation of art collateral) and demand (e.g., availability of leverage for key art purchases) sides.  Skate’s points out that the United States, which is the predominant art market globally (see Exhibit 1), offers the world’s preeminent infrastructure for art lending in view of simple and efficient liens registrations for art assets via a Uniform Commercial Code filing procedure that is “increasingly used in the global art trade to secure pledge over art as loans collateral.”

To access Skate’s latest Art Market Notes for July, including the World’s Largest Art Markets by High-End Art Auction Volumes for 2014 (Exhibit 1), click here.

Long Disputed Painting Reclaimed As An Authentic Rembrandt

Posted in Art Conservation/Restoration, Art Museums, Current Art Exhibits

An intriguing story recently appeared in the International New York Times regarding a long disputed painting that was recently found to be an authentic Rembrandt after all.  The controversial painting was cut down the middle and through its center in the 19th century and was likely to be sold as two Rembrandt paintings.  During the next 40 years or so, the painting was pieced back together with an entirely different canvas and covered with paint to hide the previous separation.

In 1898, the director of the Mauritshuis Royal Picture Gallery (“the Mauritshuis”) in The Hague in the Netherlands displayed the painting in the museum in which it was entitled “Saul and David,” one of Rembrandt’s most significant biblical works.  Decades later in 1969, a leading Rembrandt authority discredited the painting, after which the painting hung for years in the museum by an accompanying label entitled “Rembrandt and/or Studio,” which was in effect a “serious demotion.”

After several years of close examination and meticulous restoration by the museum’s own team of conservators along with support from researchers from various outside institutions (i.e., Delft University of Technology, the National Gallery of Art in Washington, the Netherlands Institute for Art History, and Cornell University), the Mauritshuis has recently “reclaimed the painting as an authentic Rembrandt, saying it was painted in two stages by the master’s own hand, one of hundreds of surviving Rembrandt paintings.”  It is believed that Rembrandt began the work in 1645 and completed it in 1652.

Shortly after revealing its findings early last week, the Mauritshuis opened its summer exhibition entitled “Rembrandt?  The Case of Saul and David.”  The exhibition is focused entirely on this single work, which depicts the “young hero David playing a harp for an elderly King Saul, who is moved by the music and uses a curtain to wipe away his tears.”  According to the museum’s website, the exhibition “shows how, using the latest technology and research methods, fascinating discoveries were made about the creation, the history and the attribution of the painting.”

To see photos of the painting before and after the meticulous restoration and read further on the restoration and attribution process, click here.

 

Auction Houses And Galleries Listing Platforms Face Increasing Competitive Pressure From eBay

Posted in Art Intelligence

This week Skate’s issued its much anticipated Art E-Commerce and Media Report for Summer 2015.  A key finding of Skate’s latest report is that the listing platforms of auction houses and galleries are under growing competitive pressure from eBay as well as the independent digital strategies of their own clients.

As a result of significant efforts made by a number of auction houses on digital marketing, there is a shift in the power balance away from listing platforms to the auctions.

With eBay coming off a strong marketing campaign during this auction season, eBay is poised to gain more traction with the development of its Live Auctions as a sound alternative to listing platforms.  While generously funded by venture capital firms in 2013-2014, listing platforms will be forced to respond quickly or else see their business model become obsolete.

In view of these recent dynamics happening in the art e-commerce and media space, Skate’s expects the following developments summarized below:

  1. Consolidation across all the segments – a series of mergers and acquisitions in art-media and art-listing platforms already this year immediately followed by consolidation in the online art-trading space.
  1. Continued investment by major auction houses in their digital marketing with Sotheby’s just behind Christie’s in terms of digital audience size in Q3 2015.
  1. Response by major galleries to the digital challenge in the same way as major auction houses already did by investing in their own digital strategies.
  1. With eBay pushing into the art-auction listing space and gaining traction, eBay will increase its market share and listing-space dominance further this year in the United States.

It will be interesting to see how these expected developments evolve in the near future.

To access Skate’s  Summer 2015 Art E-Commerce and Media Report, click here.

 

Richard Avedon: Family Affairs at the National Museum of American Jewish History

Posted in Uncategorized

The National Museum of American Jewish History (“NMAJH”) in Philadelphia is featuring a special exhibition titled, Richard Avedon: Family Affairs through August 2, 2015.

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The exhibition features a series of four portrait murals inspired by the revolutionary atmosphere of the 1960s and early 1970s, and a series of 69 portraits, originally published in Rolling Stone magazine on the eve of the 1976 election. The NMAJH will be the only U.S. venue for this exhibition.

Read more about the exhibition here.

Germany’s Clandestine Nazi-Era Art Market

Posted in Art Recovery/Theft

The Wall Street Journal recently reported on a police raid in Germany that focused attention on an art market where collectors and dealers buy and sell works by artists favored by the Nazis. Read the full article here.

In a coordinated raid, German police recently seized nine “lost” Nazi-commissioned sculptures. If the investigation reveals that the works were in fact commissioned by the state and therefore property of the German government, then those from whom the sculptures were seized could face charges. Read more information about the raid here.

The raid shines a light on the black market for Nazi art and paraphernalia, the sale of which is allowed only under limited circumstances in Germany. While tens of thousands of Germans illicitly deal in Nazi paraphernalia, only 30 to 40 people in Germany comprise the Nazi art market.

Nazi art is frowned upon of course because of artworks relationship with fascist regime and most mainstream art galleries and auction houses in Germany avoid displaying and selling Nazi-commissioned artworks.

Picasso Painting Sets Record At $179.4 Million For Artwork Sold At Auction At Christie’s

Posted in Art Valuation

As recently reported by the New York Times, the spring art auction season continues in full swing in New York this time at Christie’s where Pablo Picasso’s 1955 painting entitled “Les Femmes d’Alger (Version ‘O’)” fetched $179.4 million (including fees) at the auction house’s “Looking Forward to the Past” sale of artworks from the 20th century yesterday evening.

According to Christie’s, the winning bid surpassed the auction house’s estimate of $140 million and was the highest on record for an artwork sold at auction.  The previous record setting auction high also occurred at Christie’s and included Francis Bacon’s “Three Studies of Lucian Freud” paid by Elaine Wynn, co-founder of the Wynn casino empire, in November 2013.

Shortly after the winning bid on the Picasso, Alberto Giacometti’s iconic 1947-51 bronze sculpture entitled “L’homme au doigt (Pointing Man)” sold for $141.3 million (including fees), which represented an auction high for any sculpture.

This was the first time that two artworks with estimates of over $120 million each were offered for sale at the same auction.

Van Gogh Painting Fetches $66.3 Million At Sotheby’s Spring Auction

Posted in Art Valuation

Spring art auction season has arrived in New York this month.  Earlier this week a Vincent van Gogh painting from 1888 entitled “L’Allée des Alyscamps” was sold to a private collector from Asia for $66.3 million as reported by the Los Angeles Times.  While the sale of van Gogh’s painting depicting an outdoor scene with people and trees surpassed Sotheby’s estimate of more than $40 million, it did not break the auction record for a van Gogh painting, which was set back in 1990 when the Dutch artist’s “Portrait of Dr. Gachet” fetched $82.5 million.

Sotheby’s auction of Impressionist and Modern Art earlier this week generated a total of $368.3 million in successful bids.

This spring’s art auction season in New York will highlight some other highly coveted works, such as Alberto Giacometti’s sculpture entitled “L’Homme au doigt” (Pointing Man), which will be up for auction at Christie’s on Monday.  The iconic sculpture is estimated to sell for around $130 million.

Royal Battle Over Four Disputed Paintings Simmers in Spain

Posted in Art Museums, Art Recovery/Theft

I recently came across an interesting piece by the New York Times on a “royal battle” of sorts between the renowned Prado and a new royal museum set to open in fall 2016 that can’t quite seem to settle down over in Spain.  The new museum, the Museum of Royal Collections, is demanding that the Prado give up four paintings, two of which are the Prado’s top attractions, namely, Hieronymus Bosch’s “The Garden of Earthly Delights and Rogier van der Weyden’s 15th century depiction of the descent of Christ from the cross.

The Prado’s response to the demand was strong and clear that the new museum would not be receiving the four disputed artworks.

It has been reported that the disputed art works were taken from the royal San Lorenzo de El Escorial monastery and kept for safekeeping with the Prado by government officials nearly 80 years ago during the Spanish Civil War.  The Patrimonio Nacional, the heritage agency that acts as the administrator of all royal holdings (from antiques, artworks to palaces it has lent over the years), however, is insisting that the paintings be returned to it for the new museum.

Understandably, museums throughout Spain are keeping a close eye on the fight over ownership of the four paintings, fearful that pieces with a royal provenance among their collections could be removed next.  Of the about 1,000 works loaned to other museums by the heritage agency, several have already been recalled.  In particular, the agency’s president has signaled an interest in recalling works by such artists as El Greco, Velazquez and Goya out on loan.

Disputes between museums over ownership of art are not exactly new in Spain.  In a past high-profile case back in 2010, the Prado was unsuccessful in its attempt to reclaim Picasso’s “Guernica” from the Reina Sofia Museum in Madrid.

With deep cuts in state subsidies endured by cultural institutions throughout Spain, the heritage agency’s demand for the recall of the paintings is for financial reasons.  The Patrimonio Nacional spent about $178 million in public money on the new museum.  It is hoped that with the addition of some key attractions among its 150,000 works in the royal collection, more visitors will attend.

It appears clear that the disputed artworks belong to the agency’s royal collection as even the Prado lists them as being on “temporary loan.”  Bosch’s work described as an “ambitious symbol-laden tryptich by the Dutch medieval painter,” was acquired by King Philip II and presented to the monastery in 1593, where it hung for 340 years until it was sent to the Prado for restoration in 1933 and then put on loan for safekeeping in 1936.  As for the van der Weyden painting, Maria of Hungary acquired the work and left it to her nephew King Philip II.  The painting was given to the monastery in 1574, where it remained for 362 years until it was sent to the Prado for safekeeping in 1936.

The disputed paintings, however, remain in the Prado’s possession, which has “forcefully pressed an emotional claim” as well as its “trump card” as the most popular museum in Madrid, receiving 2.5 million visitors this past year.

If you are wondering what the royal family thinks of all this, think no more as it has wisely stayed out of the dispute.  The Spanish deputy prime minister has indicated that the dispute is over and that the paintings will stay – even if that is so, it is apparently not evident to the two “bickering institutions.”

In recent weeks, tensions surfaced again as the agency offered previews of its new museum, which is designed to blend in with the architecture of the nearby royal palace.  The latest “skirmish” took place when the Prado attempted to extend the well-received van der Weyden exhibition a month past its scheduled closing of June 28, but its request was refused.  In recent days, a number of government meetings have taken place in an effort to work out a solution, however, the Prado would not compromise.

I intend to follow this intriguing story as I am very interested in how it all turns out between the two institutions.

The Future of 1031 Exchanges: A Continued Tax Break For Art Investors?

Posted in Art Finance

The International New York Times recently reported on a “little-known” provision in the federal tax code, referred to as a “like-kind” or 1031 exchange (named after the section of the tax code that allows it), which has become an increasingly used tactic among high-end art buyers who are seeking to defer or sometimes avoid federal taxes when upgrading their art work to more elite and marketable artist names.

The exchange tactic essentially enables an investor to defer paying 28 percent capital gains tax on sales of art and other collectibles, such as stamps and coins, by applying the profits from one work toward the purchase of a similar one.  Some liken the process to a no-interest loan from the government in which the investor has access to the money saved for a period of time until the asset is sold.  Two strategies that have made the tax break an attractive tool for art investors in estate planning in which they can avoid capital gains taxes include holding the art work bought with money from a previous sale until they pass away or donating it to a museum.

The use of the tax break has significantly grown in response to soaring prices for art and the increasing number of savvy investors, often from the real estate industry or Wall Street, who tend to view paintings and sculptures as “tradable commodities[,]” according to experts.

The Obama administration has taken notice and is seeking to eliminate the tax break for exchanges of art and other collectibles, which has undoubtedly spread alarm throughout the art world.  The current administration’s focus on 1031 exchanges suggests that a sizable amount of tax revenue is at stake.

Opponents of like-kind exchanges assert that such exchanges were initially intended to avoid the penalization of tax payers whose economic position did not change when assets were exchanged.  Opponents view the exchanges as sophisticated “tax dodges” exploited by investors that were never intended to be a tax tool for affluent art buyers.

On the other hand, proponents of the exchanges say the re-channeling of profits into new investments helps the economy with the promotion of growth and job creation.  Specifically, exchanges stimulate activity for art auction houses, art galleries, and their commissions, as well as financial professionals (CPAs, etc.) and art shippers – a lot of people upstream and downstream who are ordinary working people.  Proponents assert that the 1031 exchanges are based on the principle that it is unfair to tax a “paper” gain, if an investor is simply selling an asset and is quickly reinvesting the profits into the same kind of activity.

It is estimated that the elimination of 1031 exchanges could in some situations reduce gross domestic product by about $8 billion annually, according to an Ernst & Young economic study for the Federation of Exchange Accommodators.

The use of the tax break is expected to continue to grow while the art market remains confident and steady, and where buyers purchase art as an investment, not for aesthetic pleasure, according to experts.  It will be interesting to see what the future holds for 1031 exchanges and the use of same by art investors in the next few years.