Fickle art market hurts Delaware Art Museum sales

Citing a sluggish art market, Delaware Art Museum leaders now expect to raise only $19.8 million by selling three works of art.

That amount is enough to retire the museum's construction debt from a 2005 facilities expansion. But it's not enough to replenish the museum's endowment, or reserve fund, which helps a nonprofit institution weather economic downturns.

Facing an October deadline from creditors, the museum board voted last spring to sell up to four artworks in its 12,500-piece collection to raise $30 million to repay the construction debt and replenish the endowment, which had been depleted for years to cover operational expenses. After exhausting fundraising efforts, officials said the museum was in danger of shutting down.

At the time, leaders said they hoped to raise the entire $30 million from the sales of three artworks, and would only select a fourth if necessary.

"The chances (of that) have been diminished," museum CEO Mike Miller said recently, citing last month's disappointing hammer price of $4.25 million for William Holman Hunt's "Isabella and the Pot of Basil." The 1868 painting was the first one sold by the museum.

"I feel reasonably confident that we're going to retire the construction debt based on the three (works)," he said. "If we go to a fourth, it would be to repay the endowment."

While the museum is no longer in immediate danger of shuttering, Miller acknowledged, a healthy endowment is key to its long-term stability.

If the sales of three works raise enough money to cover just the construction debt, the board would have to rely on proceeds from the fourth work alone to increase the $25 million endowment, he said. And that's not likely to meet their original goal of funneling more than $10 million into the endowment.

Alternatively, if the museum can't raise enough money to repay the construction debt, the institution would have to ask its bank Wells Fargo to temporarily extend its debt repayment terms in exchange for a much higher interest rate, Miller said. The board could also approve selling even more art or launching another major fundraising campaign.

"If we're short, we'll still be able to move forward," Miller said. "It's just walking a tighter rope than we would hope."

Museum officials have consistently declined to release the names of the other works for sale, explaining it could damage their market value. Both Winslow Homer's "Milking Time" and Alexander Calder's "Black Crescent" mobile have disappeared from the galleries and online catalog, leading some arts experts to speculate they are next in line.

Miller did confirm that Christie's is now shopping two museum works to private buyers. He declined to say whether the museum had any offers. Neither one has been sold, he said.

If they do sell, the works are more likely to be displayed on a private collector's walls or stored in a vault than remain in public view. No other museum has expressed interest in buying the works, Miller said, after two professional museum organizations sanctioned the Delaware museum for selling art to pay its bills.

One day after the "Isabella" sale, the Delaware museum lost its accreditation and its ability to receive loaned works from many museums nationwide. Since that time, two museums, which Miller declined to name, have canceled plans to borrow works from Delaware for their exhibitions.

Meanwhile, leaders at the state Division of the Arts, the museum's largest government funder, say they will continue to support the institution. The state is expected to release Monday its list of grant recipients for the coming fiscal year.

Market woes

A cornerstone of the museum's acclaimed pre-Raphaelite collection, "Isabella" was estimated to sell for as much as $13.4 million at a Christie's auction in London last month. In the end, it sold for $4.25 million – a record for a Holman Hunt sold at auction – but less than half of the lowest estimate given by Christie's experts.

The buyer's name was not disclosed to the museum, Miller said. Christie's officials declined to release it.

Art experts have questioned why the museum set its reserve price for "Isabella" – the minimum amount it would accept – so low.

"I would recommend that institutions set a reserve closer to the estimate given them," said Alasdair Nichol, vice chairman and head of fine art at Freeman's, a Philadelphia-based auctioneer and appraiser. "This protects the organization, or consignor, from selling works for less than they would like."

Miller responded that the British Victorian art market weakened significantly in the months preceding the auction, forcing the museum to lower its reserve.

Nichols didn't want to speculate on what a buyer would pay for "Black Crescent" or "Milking Time." Both are considered "trophy pieces," he wrote in an email.

Calder is a "blue chip artist" and his work is highly prized right now, Nichols said. Calder mobiles produced around the same time period as "Black Crescent" can fetch $4.6 million to $10.4 million, according to previous auction records. His "Poisson Volant (Flying Fish)" sculpture sold for nearly $26 million in May.

The highest-grossing Homer watercolor, "The Red Canoe," sold for $4.8 million at auction in 1999.

"Homer is such a major figure, one would hope that a significant work such as this would transcend current market trends," Nichols said.

The Delaware museum isn't the only institution relying on the risky art market to help it stay afloat. Bankruptcy creditors are pushing the Detroit Institute of Arts to sell its collection to pay off some of the city's debt.

Earlier estimates valued the collection at $4.6 billion, but a recent report by New York-based Artvest Partners LLC estimated that the more than 60,000 pieces would fetch a quarter or less of that number.

Investment advisers noted that an immediate liquidation of the museum would flood the market. While postwar and contemporary art remain strong (Christie's posted record-breaking sales during the first six months of this year), other sectors like European Modern Art, Impressionism and Post-Impressionism and European Old Masters have declined in value since 2011, the report found.

In May, much-touted "Pandora" by another pre-Raphaelite master, Dante Gabriel Rossetti, didn't sell at a Sotheby's auction, after it was estimated to bring between 5 million and 7 million pounds.

Miller compared the uncertainty of the art market to that of the used car business.

"The market depends on how many people that day or week are interested in a specific painting," he said. "If you sell the right painting out there, you're going to get the price."

Contact Margie Fishman at (302) 324-2882 or mfishman@delawareonline.com.