Aug. 6 (Bloomberg) -- Christie’s International Plc will appraise the collection of the Detroit Institute of Arts, which may be worth at least $2.5 billion, in response to creditors demanding a valuation of the insolvent city’s assets.
While the city, which entered the largest U.S. municipal bankruptcy on July 18, has no plan to sell the museum’s art, the assessment is “an integral part of the restructuring process” to deal with $11.5 billion in unsecured debt and improve services, Emergency Manager Kevyn Orr said in a statement.
“The city must know the current value of all its assets, including the city-owned collection at the DIA,” Orr said yesterday. Christie’s also will advise Detroit on “non-sale alternatives” for the art, which includes works by Vincent Van Gogh and Pieter Bruegel the Elder.
The possibility that some of the 128-year-old art museum’s collection of 60,000 items might be sold to pay creditors arose in May when Orr told the institute it may be vulnerable in a bankruptcy. While the institute is run by an independent, nonprofit organization, the city owns the property and much of the art. The fate of the works may be decided by U.S. Bankruptcy Judge Steven Rhodes, who is handling the Detroit case.
“Our goal is to preserve the value of all the city’s assets and make sure they are rationalized in a way that value can be returned to its citizens and, in certain cases, enjoyed by the Detroit metro area’s residents for many years to come,” Orr said.
Art experts have expressed alarm over the effect on the global art market from a mass sale of the Detroit museum’s collection, which includes Van Gogh’s “Portrait of Postman Roulin,” “The Wedding Dance” by Bruegel and “Madonna and Child” by Giovanni Bellini -- each of which may fetch more than $150 million.
Among the museum’s renowned masterpieces is Diego Rivera’s 27-panel fresco “Detroit Industry,” which surrounds a garden court and is a tribute to workers in the city during the 1930s.
A selected 38 of the museum’s masterpieces are worth at least $2.5 billion, according to art dealers asked to assess them in May by the Detroit Free Press newspaper.
“We understand that a valuation of all the city’s assets (extending well beyond the art) is one of many steps that will be necessary for the legal system to reach a conclusion about the best long-term solution for the citizens of Detroit,” the company’s Christie’s Appraisals unit said in a statement.
The auction house based in New York will be paid $200,000 for the assessment, according to a person with knowledge of the contract and who asked not to be identified in discussing the fee without authorization. Neither the city nor Christie’s would comment further on the appraisal, which is expected to be completed in the next few months, according to Orr.
The emergency manager has hired other consultants to appraise municipal assets such as real estate, parking garages, the Detroit-Windsor tunnel and the city-owned airport. They will also advise Detroit on ways to create value from the assets without transferring ownership, Orr said.
The notion of a fire sale of Detroit’s art ignited public outcry and prompted Michigan Attorney General Bill Schuette to issue a ruling that the collection is held by a public trust and can’t be sold to satisfy creditors. However, Schuette’s ruling may have no influence in bankruptcy court.
Under Chapter 9 of the U.S. Bankruptcy Code, the city isn’t required to seek court approval to sell assets. Creditors would have to ask for permission from the judge overseeing the bankruptcy to challenge any proposed sales.
A property tax levied in the three counties surrounding Detroit generates $23 million for the institute, which covers three-fourths of its operating budget, according to the museum.
The institution will cooperate with the appraisal, though there is no reason for it, the museum said in a statement.
“The attorney general has made clear that the art is held in charitable trust and cannot be sold as part of a bankruptcy proceeding,” according to the museum. “We applaud the EM’s focus on rebuilding the city, but would point out that he undercuts that core goal by jeopardizing Detroit’s most important cultural institution.”
An art sale also would jeopardize the local tax and would violate the trust of donors and supporters, the institute said.
The museum hasn’t appraised all of its art because it has never anticipated selling it, said Annmarie Erickson, chief operating officer of the institute.
“We don’t view it as a salable asset,” she said by telephone. The museum has retained Richard Levin of the New York law firm Cravath Swaine & Moore LLP to represent it before the bankruptcy court, Erickson said.
She said Orr has said publicly he doesn’t want to sell the art collection, and added, “We believe that is the case.”
The case is City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
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