Mossgreen - Austrailian Auction to Close

Mark Bench of Borro reminded me about the sad case of Mossgreen, an Australian auction house burdened with debt is now set to close. They tried to restructure to keep the house active and in business but failed to come to terms. According to the article Mossgreen has about $10 million in debts.  Although now mentioned in the article, Mark had an interesting comment about payments to consignors.

The Antiques Trade Gazeette reports
Australia’s Mossgreen auction house and art gallery to close if buyer cannot be found
Australian auction house Mossgreen is to be wound down by administrators after joint founder Paul Sumner was unable to restructure the firm.

Australian auction firm Mossgreen went into administration on December 21 2017.
Administrators at BDO said it will begin the process of an orderly wind-down of the business but it will also consider a sale of the firm and is seeking expressions of interest from potential buyers.

Around 400 people and businesses are owed money by the Australian auction house and gallery firm, set up by Sumner and Amanda Swanson in 2004, after it went into administration in December 2017. It has assets of about Aus$3m (£1.7m) and debts of Aus$12m (£7m).

The firm’s primary investor, businessman Jack Gringlas, is thought to be the biggest creditor.

All vendors who have consigned goods to Mossgreen for sale will be contacted and arrangements made for the return of their possessions.

Sumner said a proposed investment plan had not worked out.

He told ATG: “This is personally and professionally devastating to me and my wife because of the effect it is having on staff, creditors and clients.

“We have never traded insolvent and we had an agreed plan following voluntary administration that, due to changing circumstances beyond my control, did not come to fruition.”

Sumner added: “While I have been made redundant, I am continuing to work without pay to ensure that vendors have property returned and creditors are looked after as best as possible.”

BDO said the closure of the business is “extremely disappointing to all parties affected by it. BDO will be working with staff, vendors, creditors and other stakeholders to ensure that the impacts of closure are minimised.”
Source: Antiques Trade Gazette


Graffiti and the Visual Artists Rights Act

The Washington Post has an interesting article on a recent court ruling in favor of Graffiti artists, Visual Artist Rights and real property owners.

An interesting situation, and well worth reading.

The Washington Post reports
From the elevated 7-train, millions of people passing through Long Island City, Queens, could spot the massive warehouses. Five stories high, the buildings took up most of a city block. But that’s not the only reason the complex was hard to miss.

Its bright yellow walls were covered with hundreds of graffiti murals: colorful bubble letters, fantastical creatures, mesmerizing portraits and tributes to legendary musicians. Known as 5Pointz, it was a graffiti mecca. Aerosol artists would travel from around the world to use its walls as canvasses — legally. Busloads of tourists or students on field trips would frequent 5Pointz on a daily basis. It was used as a backdrop for movies and music videos, weddings and concerts.

5Pointz transformed dilapidated warehouses and a previously crime-infested neighborhood into a renowned cultural landmark — the country’s “largest collection of exterior aerosol art,” as a court document noted.

Virtually overnight, nearly all of it was destroyed. Under the cloak of night in 2013, the building’s owners instructed a team to blanket the murals with white paint. The warehouses would be torn down a year later to make way for high-rise luxury residences.

Artist Akiko Miyakami said that when she saw her artwork mutilated under a layer of white paint, according to a court document, she felt as though she “was raped.”

On Monday, a federal judge in Brooklyn awarded $6.75 million in damages to 21 artists whose work at 5Pointz was obliterated.

The judge’s ruling came after a milestone three-week trial in November in U.S. District Court in Brooklyn. The case marked the first time a court has been asked to determine whether graffiti — with its ephemeral nature — should be considered art protected under federal law, according to a court opinion. It weighed a property owner’s rights against the rights of visual artists — in a city where the powerful real estate and art worlds are constantly at odds.

A jury found in November that 36 of the plaintiffs’ 40 works of art at 5Pointz should be protected under the Visual Artists Rights Act, deciding that the murals had achieved “recognized stature.”

The jury’s decision served as a recommendation for the federal judge presiding the case, Frederic Block, who delivered his decision Monday. Block ruled that an additional nine works of art should be protected by law, bringing the total to 45.

He awarded the artists the maximum damages possible, saying the building’s owner, Gerald Wolkoff, “willfully” ruined the artwork and showed no remorse for his “recalcitrant behavior.”

“He was bent on doing it his way, and just as he ignored the artists’ rights he also ignored the many efforts the Court painstakingly made to try to have him responsively answer the questions posed to him,” Block wrote in his impassioned opinion. “Wolkoff has been singularly unrepentant.”

More than a decade before the artists and their landlord were at odds, the two parties enjoyed a thriving partnership. In the 1990s, Wolkoff rented studios in the warehouse complex to local artists. He also began allowing graffiti artists to spray paint on the building walls. But there was not much order or control over the quality of the work — until one tenant, Jonathan Cohen, took charge.

Cohen, a local artist known as Meres One, became the unpaid curator of what would become 5Pointz. Cohen organized a creative system in which aerosol artists would compete for prominent placement on the walls, according to court documents.

He divided up the space into two areas: Short-term walls, which catered to beginner artists and would be painted over on a rotating basis; and long-term walls, which were permanent.

Wolkoff gave Cohen and hundreds of other artists free rein to paint whatever they pleased, with only three exceptions: no religion, politics or sex. Artists from all backgrounds poured in from all over the world.

“5Pointz was an egalitarian place,” Block wrote. “Some artists came from highly prestigious art schools; others were selftaught. Some were fixtures in elite, traditional art circles; others were simply dedicated to street and community art.”

Images of some of their works, Block added, “reflect striking technical and artistic mastery and vision worthy of display in prominent museums if not on the walls of 5Pointz.”

When the artists got wind of the landlord’s plans to replace the warehouses with high-rise luxury condos, they began a campaign to try to save 5Pointz. Cohen filed an application with the City Landmark Preservation Commission to preserve the site but was rejected because the artistic work was too recent. He also tried to raise money to buy the property, but its value soon skyrocketed to more than $200 million.

Even Banksy, a reclusive and famed British street artist, made a plea during a trip to New York in 2013. “Save 5Pointz,” he wrote.

As a final resort, Cohen tried to prevent the imminent demolition by seeking a preliminary injunction against Wolkoff under the Visual Artists Rights Act. The court denied the plaintiffs’ application for preliminary injunction but said an opinion would come within eight days.

“Rather than wait for the Court’s opinion,” Block wrote, “Wolkoff destroyed almost all of the plaintiffs’ paintings by whitewashing them during that eight-day interim.”

The landlord and his lawyer have contended that the artists knew for years that the buildings would ultimately be demolished. Wolkoff argued that even the artists would destroy artwork by constantly rotating thousands of short-term murals, according to court documents.

But Block said Wolkoff should have put off demolishing the properties for at least 10 months, when he had all his permits. The judge said Wolkoff’s “precipitous conduct . . . was an act of pure pique and revenge for the nerve of the plaintiffs to sue to attempt to prevent the destruction of their art.”

He criticized the abrupt way in which Wolkoff whitewashed the murals. If he had at least given the artists a warning, they could have “easily rescued” some of the paintings, Block said.

“The sloppy, half-hearted nature of the whitewashing left the works easily visible under thin layers of cheap, white paint, reminding the plaintiffs on a daily basis what had happened,” Block said.

“The shame of it all is that since 5Pointz was a prominent tourist attraction the public would undoubtedly have thronged to say its goodbyes during those 10 months and gaze at the formidable works of aerosol art for the last time,” Block concluded. “It would have been a wonderful tribute for the artists that they richly deserved.”
Source: The Washington Post


ISA Conference: Working with High-Net Worth Clients, their Collections and their Insurance Carriers

Todd Sigety, Assets 2017
In addition to my joint presentation with Cindy Charleston Rosenberg about Readily Apparent Identity Disclaimers at the ISA Annual Conference in Pasadena, CA (Assets 2018 March 9-12) I also have the honor of moderating a break-out session on Sunday afternoon titled The Intersection of Appraising and Wealth Management: Working with High-Net Worth Clients, their Collections and their Insurance Carriers

I have the pleasure of moderating the presentation of two special Assets 2018 guests from AIG Insurance Private Client Group, Danna Kay, AIG Director Western Zone, Art Collection Management, Los Angeles, California and Barbara Chamberlain, AIG Director, Art Collection Management, Miami, Florida.

I was scheduled to be on a panel with Barbara Chamberlin at the Domestic Estate Management Association (DEMA) conference in Florida in September, but due to hurricane Irma, the conference was cancelled. I am excited about this second opportunity to discuss with Barbara and Danna about appraisers working with insurance companies and their high net worth and ultra high net worth individuals when insuring important collections.

The discussion topics with include

  • Properly prepared appraisal reports for high value objects
  • For high value object appraisal do the insurance underwriters and reps look for included comps
  • How to approach private client representatives
  • How the AIG Private Client Group operates beyond insurance
  • Appraisal updates and market fluctuations
  • Dealing with private sales and lack of transparency
  • Confidentiality
  • Damage claims
  • and more
As you can see from some of our discussion topics and planning, this will be a program of interest to many appraisers, and particularly for those who value high dollar objects or who are seeking to do more private client, HNWI/UHNWI type of assignments.

Please come to the International Society of Appraisers Annual Conference, Assets 2018 and join us for this interesting discussion on Sunday afternoon 2:25 to 3:40 pm, break-out session C. For the full program and information on registration, travel and special events, click HERE.

From the ISA Assets 2018 conference program

The Intersection of Appraising and Wealth Management: Working with High-Net Worth Clients, their Collections and their Insurance Carriers

This session focuses on the holistic approach required for the collaboration and scope of services, solutions and expertise required for HNWI clients, from archiving to collection management, from insurance to claims.

Todd Sigety, ISA CAPP
WSA Appraisals, The Appraisers Workshops, Alexandria, Virginia

Danna Kay
AIG Director Western Zone, Art Collection Management, Los Angeles, California

Barbara Chamberlain
AIG Director, Art Collection Management, Miami, Florida


Another Block Chain Application

The Art Newspaper is reporting on a new tech firm called Codex which will use blockchain technology to track fine art purchases and provenance. One of the ways to populate the provenance for the application is through auction sales. Codex has partnered with Auction Mobility and Liveauctioneers, and now has 5,000 houses partnered for the project.

The Art Newspaper reports
The blockchain technology that powers cryptocurrencies such as Bitcoin has been much discussed for its potential to record copyright and provenance for works of art. Codex, a company co-founded by Mark Lurie, Jess Houlgrave and John Forrest, aims to launch a provenance-based protocol this year, creating a decentralised, blockchain-backed title registry for the art market.

Because price depends on provenance, such a digital ledger would, its backers say, guard the ownership history—and therefore value—of works of art. “A collector could prove their Jackson Pollock is the same one previously purchased from a reputable auction house, even if the item changed hands several times in between,” says Lurie, Codex’s chief executive. “The amazing thing about blockchain technology is that it does not require any of the owners to disclose their identity. That is the key to making a title registry palatable.”

Using a native token, BidDex, the Codex will record “whatever information collectors want to store”, which could include photographs, appraisals, past sale results and other documentation. “Critically, what is never necessary is personally identifiable information, though we expect reputable intermediaries to store theirs,” Lurie says.

According to Lurie, capturing auction sales is the “best way to quickly populate the registry and gain adoption”, so he has partnered with a consortium of 5,000 auction houses that sell through Liveauctioneers. com or via custom online platforms by Auction Mobility. These platforms will begin by implementing Codex’s title-escrow application, dubbed Biddable, which will allow buyers to register and bid in auctions instantly and privately using cryptocurrency.

“In the long term, we expect the ability to prove provenance to dramatically increase confidence in authentic items, and thus in their value,” Lurie says. “We also expect it to decrease the costs associated with researching authenticity, making the market more trustworthy and efficient.”
Source: The Art Newspaper


2018 Art Market

Fellow appraiser  Xiliary Twil sent me an interesting article from Barron's on a bullish outlook for the art market for 2018. Wealth created from the stock market, even with the recent volatility is good for the art market, but there are some negatives as well, such as changes in the tax code and limitations on 1031 like kind exchanges.

Barron's reports
The factors that drove life back into the art market last year should continue to sustain prices into 2018, and induce collectors to sell treasured works, despite bumps in the road created by volatile stock markets this past week and a quietly made change to the U.S. federal tax code that could affect big-ticket deals.

Global wealth generated by strengthening economies in China and the Eurozone as well as the U.S., helped fuel a booming art market in 2017, leading to a 25% gain in auction sales and eye-popping prices, most notably the $450.3 million price paid for Leonardo da Vinci’s Salvator Mundi, reportedly by Saudi Crown Prince Mohammed bin Salman. Last week Christie’s reported total 2017 results, including private and online sales, of $6.6 billion, a 26% increase from the previous year; Sotheby’s has yet to report total sales, but its auction results were up 13.1% last year to $4.7 billion.

While global stock market volatility this week may give some collectors pause, many have benefited from strength in financial markets over recent years, particularly in the U.S., and have shown a willingness to deploy their disposable income into art.

“The wealth effect is a huge driver” of the art market, says Evan Beard, National Art Services Executive at U.S. Trust.

Collectors who are entrepreneurs will likely get another financial boost this year from more favorable tax treatment provided by the new U.S. law for passthrough entities, such as the partnerships and S corporations that many entrepreneurs utilize. “Tax reform is a big, big boon to them,” Beard says.

But a less-publicized tweak to the tax code could slow big-ticket sales. Many collectors used a provision originally created for real estate, known as a 1031 “like-kind” exchange, to sell expensive works of art. That’s because the tax code allowed collectors who owned art as an investment, not just for personal use, to sell a work and defer capital gains taxes and associated income taxes if they subsequently bought a similar work, also as an investment, says Micaela Saviano, Deloitte Tax’s art and finance practice leader.

Although the exchange was originally created for real estate investors, a “couple of enterprising real estate developers applied to this to art,” Beard says. But the new law “limits the ability to execute like-kind exchanges to real property (like real estate), which does not include tangible property such as art,” Saviano says.

Given this like-kind exchange of art was a “real driver” of many big-ticket transactions, “the elimination...is sand in the gears of these mega transactions,” Beard says. “It will be interesting to see if that slows things down.”

Collectors who own top-tier works, and don’t need to sell, often feel they are better off keeping a percentage of their wealth in art, says Suzanne Gyorgy, global head, art advisory & finance at Citi Private Bank. The U.S. administration’s “decision to remove the use of 1031 like-kind exchanges for art in the new tax plan could further limit the supply of top-quality works coming to auction.”

Of course, an optimistic outlook for the art market has already spurred collectors to bring high quality works to auction this year. Sotheby’s, for instance, is offering a monumental oil-on-canvas painting by Pablo Picasso, Le Matador, at its Feb. 28 evening auction of Impressionist and modern art, for an estimated price between $19.5 million and $25 million.

Most notable is Christie’s May sale of the collection of David and Peggy Rockefeller, featuring seminal works by Pablo Picasso, Claude Monet, and Georgia O’Keeffe, among many others, as well as furniture and decorative arts from America, Europe and Asia. The collection is estimated to sell for more than $500 million, with the proceeds going to charities the couple supported during their lifetime.
Source: Barron's


Oakland, CA and a "Percent for Art"

The Observer recently posted a rather interesting article on an Oakland, CA statute which requires large scale office developments to have publicly accessible works of art. If not, then a fee is to be paid to the Oakland City arts agency.

A building association brought suit against the city, and a judge in most cased has ruled against the builders.  The article also notes that at least 12 other municipalities in California have similar statutes.  If you are an appraiser or art advisory in California, there could be some opportunities to pursue for interesting assignments.

The Observer reports
A U.S. district court in San Francisco turned back a challenge from a Bay Area Building Industry Association to Oakland’s recently enacted amendment to its “Percent for Art” statute that requires large-scale real estate developments in the city to include publicly accessible works of art or pay a fee to the municipal arts agency. The February 5 ruling by Judge Vince Chhabria accepted a motion by Oakland City Attorney Barbara Parker to dismiss the association’s lawsuit to stop the implementation of the city’s 2015 requirement that developers of both commercial and residential properties include artwork on their sites.

That statute compels developers of commercial projects to spend one percent of their budgets on public artworks, or one half of one percent in the case of residential projects, or else pay a corresponding sum to the city for its arts programs. The law was introduced back in 2014 by council member Libby Schaaf, who shortly afterwards was elected mayor.

Because of the law, the Building Industry Association brought a lawsuit in 2015 against the city of Oakland on constitutional grounds, claiming that the municipal law violated both the First Amendment to the U.S. constitution, by requiring speech in the form of purchasing works of art, and the “takings clause” of the Fifth Amendment, which limits a public entity’s ability to take control of private property for public use.

Judge Chhabria turned aside the Fifth Amendment objection, claiming that the U.S. Supreme Court has interpreted the “takings clause” as applying only when government officials sought to require something of a real estate developer regarding a specific individual property rather than a broad class of properties. He did not call the association’s claim meritless, but stated that resolution of this issue “should be in the Supreme Court, not the Northern District of California.”

The judge had less patience for the First Amendment objection to Oakland’s law, claiming that the ordinance is not “automatically invalid simply because it involves some degree of compelled speech. Plenty of laws involve a degree of compelled speech, and only some of those trigger heightened judicial scrutiny.” According to a statement released by the association in 2015, at the time that this expansion of the city’s 28 year-old public art law was enacted, “the First Amendment’s free-speech guarantees include the right not to give voice to someone else’s message.” However, Judge Chhabria ruled that “the ordinance does not require a developer to express any specific viewpoint, because developers can purchase and display art that they choose.”

The requirement to include publicly accessible artwork in a residential or commercial project, or provide an equivalent amount of money to the city for its art programs, the judge claimed, has the positive goal of “improving the aesthetics within the city and bolstering real property values.”

The ruling noted that Oakland “is one of at least twelve cities in California that have ordinances requiring developers to display or fund art as a condition of project approval.” Among other municipalities in California requiring real estate developers to include artwork in their projects are Beverly Hills, Culver City, Los Angeles, Pomona, San Diego, San Francisco, Santa Monica and West Hollywood. The cities of Mountain View, California, Portland, Oregon and Seattle, Washington stipulate the installation of public artworks when certain zoning variances are granted.
Source: The Observer


Heritage Auctions Leading in Online Sales

Heritage Auctions is reporting $815 million in sales for 2017, the third year of record sales for the auction house. As the press release points out, Heritage is leading in online sales with 53.7% of sales, $438.3 million, originating from online purchases. Heritage as over 1 million online potential bidders, and is growing at a rate of 5,000 new registered bidding members per month.

Heritage Auction reports
DALLAS, Texas (Jan. 30, 2018) — Online sales at Heritage Auctions (HA.com) surged to an industry-leading $438,298,484 in 2017, marking the first time more than half of the firm's total annual sales were transacted through the internet. The total represents 53.7 percent of the firm's $815 million in total sales.

The 2017 total marks the third straight year of record results for the firm, again ranking No. 1 in the auction industry as a whole. The total is a 26 percent increase over the previous record of $348,107,079 in 2016. The 2016 annual Hiscox Online Art Trade Report cited Heritage as surpassing all other auction houses in online sales.

"Heritage continues to see clients routinely purchase six- and seven-figure works of art and collectibles through the internet and on HA.com," said Jim Halperin, Co-Founder of Heritage Auctions. "Without exception, no other auction house in the world is doing this much business online."

Key departments driving online growth include Sports Collectibles, which logged more than $100 million in total annual sales. Sales of Vintage Comic Books and Comic Art hit a record $44.3 million in 2017, including more than $10.8 million from Weekly Internet Comics Auctions.

Online bidders set several world records and made seven-figure purchases, ranging from the $1.6 million sale of Tough Call – a world record for a Norman Rockwell study – and a $2 million bid for Jackie Robinson's 1947 Brooklyn Dodgers rookie jersey.

A newly launched mobile app offers one-touch mobile bidding and barcode scanning of professionally graded rare coins and comic books from the hobby's leading services.

"We are always seeking new ways to streamline the buyer-seller relationship," Halperin said. "As a result, bidders are showing their confidence in digital to acquire some of the most valuable lots auctioned in 2017."

Late last year, the firm surpassed 1 million online bidder members who use its platform to buy and sell fine art, jewelry, luxury real estate, fine wines, intellectual property and collectibles including rare coins, comic books and sports and entertainment memorabilia. The firm now adds new clients at a rate of about 5,000 a month.
Source: Heritage Auctions