Liquidating Assets When the Asset is an Andy Warhol
May 4, 2013
|Andy Warhol, Portrait of Dolly Parton, from Christie’s May 2012
Post-War and Contemporary Art Morning Session. The
provenance lists that the Andy Warhol Foundation sold it to a
private collector (now known as Chris Schoen).
“Plaintiff desires to repossess and sell the Artwork and is entitled to take possession of the Artwork and any proceeds from the sale of Artwork, possession of which has been wrongfully withheld from Plaintiff by Schoen. Schoen has advised Plaintiff that he will not sell or turnover the remaining Artwork in his possession, custody or control and has failed to turn over the $555,000.00 (net) generated from the May 2012 sale of the Portrait of Dolly Parton…. Schoen’s failure and/or refusal to relinquish control and possession of the Artwork and proceeds therefore is in bad faith, constitutes stubborn litigiousness, and has caused Plaintiff unnecessary trouble and expense thereby entitling Plaintiff to recover its expenses of litigation, including reasonable attorney’s fees and costs pursuant to O.C.G.A § 13-6-11.”
|Hal Barry celebrating the opening of his helipad in Atlanta.|
The use of artwork as collateral is becoming more common—both banks and auction houses have special departments to appraise artwork and special requirements to define artwork as collateral on loan applications. The art as collateral business has boomed with the recent economic downturn. Where individuals seeking a loan would have previously used a house or property as a guarantee, now use artwork. In some cases, artwork can be the only valuable asset remaining.
- High interests rates that can range from 9% to 25%
- Borrowers can only lend 40% of the artwork’s value
- Borrowers must personally guarantee each art loan, which is not the case in mortgages
- The value of art work changes with the seasons and popular taste very quickly- therefore when borrowers default on loans they are forced to sell their artwork at a time when the market may be poor and end up selling them below market value
- Banking practices in this area are unregulated and highly litigious: Marc Porter of Christie’s told The New York Times, “It’s a rough-and-tumble corner of the business.”
“It’s a commonly used fund management tool; if you know a market is going up, and you can get a lending rate that is below that percentage, then you take on leverage [ie: a loan] to make a profit. Unfortunately, you cannot pin down the value of a piece of art as precisely as that of a daily traded commodity, and therefore [borrowing] can prove quite difficult when it comes to managing an art collection.”