Leveraging the Art, Collateral Matters

Along with the deaccessioning controversies surrounding museums, closed institutions and staffing cuts, another side of the growing financial burden on art institutions and individual artists is increasingly being reflected in surprising forms.  One of these is the practice of using artwork as collateral on loans.

It was recently disclosed in the media that the Metropolitan Opera at Lincoln Center in New York has taken $35 million in loans, using its Marc Chagall murals as collateral.  The paintings are such an integral part of the structure, traditionally and aesthetically, it is disconcerting to think of them as moveable property.  If the Met were to default on the loans, which is apparently unlikely, it is unclear as to what exactly would be the fate of the large scale mural paintings and this raises the spector of a different kind of deaccessioning.  The 30’x36’ paintings, which were installed in 1966, are “The Triumph of Music” (pictured, right) and “The Sources of Music.”  The loan was apparently initiated some years prior.

Perhaps even more surprising because of its potential effect, are the artwork-as-collateral loans agreements reportedly entered into by celebrity photographer Annie Leibovitz.  Leibovitz apparently put up, not just her physical prints, but her copyrights–past and future–as collateral. 

If the agreement is structured so that all copyrights go to the lender upon default, which might be assumed based on the information available, Ms. Leibovitz could face losing virtually all control over images that she creates.  Because copyrights are established automatically upon completion of a work, in the event of default, she may be barred from reproducing her own images immediately upon creation without the permission of the copyright owners. Considering the volume of Leibovitz photographs reproduced in the form of art books, magazines, and other publications, the licensing fees from the copyrights are likely to represent a not insignificant portion of her income. In the event of a default, Leibovitz may face working for little more than the actual fee for  photography services that she provides.

One may wonder what dire circumstances would lead Ms. Leibovitz to risk what is potentially nearly all of her future income to secure a loan.  However, lawsuit filed in New York last year claim that Ms. Leibovitz failed to pay hundreds of thousands of dollars in bills.  PDN provides court documents indicating that one suit, Briese USA v. Leibovitz,  has asserted a total claim for relief of $392,000; and another, JS Reps Corporation v. Leibovitz Studios, claims $386,467 in relief.  Annie Leibovitz has also reportedly borrowed $5 million against her New York apartment.

1980’s artist turned film director Julian Schnabel is another artworld figure that has utilized art based collateral to secure a multi-million dollar loan.  Schnabel put up artwork as collateral on loans to pay for the development of an ornate condominium building in New York that he named Palazzo Chupi.  Initially Schnabel took on an $8 million loan, using the real estate as collateral.  A later loan to pay down the first pledged artwork as collateral.  However, the artworks in question are apparently from his private collection and do not include his own work.

Ms. Leibovitz’ loans, apparently totaling $15.5 million were made through Art Capital.  Mr. Schnabel’s first loan was also with Art Capital and the second was made through Commerce Bank.  Citibank and Bank of America have also been involved in fine art as loan collateral deals.  Sotheby’s and Christies offer artwork collateral structured loans, but reportedly focus more upon bridge loans for works that will be up for auction.

 

The Met Offers Chagalls as Collateral, New York Times

Art Owners Turn Collections Into Collateral, AP/Dallas Morning News

Borrowing with Fine Art as Collateral, NY Sun

Annie Leibovitz Pawns Copyright to Life’s Work to Pay Debts, Telegraph U.K. 

Annie Leibovitz Pawns Rights to All Future Work, Guardian, U.K. 

Lawsuits Claim Annie Leibovitz Owes $778K For Photo Services

Biese USA v. Leibovitz (pdf)  

The Painter and the Pink Palazzo, NY Times 

That Old Master?  It’s at the Pawn Shop, NY Times 

Advertisements

Tags: , , , , ,


%d bloggers like this: