Detroit Institute of Arts Collection Valued at Up to $4.6 Billion

The first formal appraisal of the ' entire collection of more than sixty thousand works puts its value at between $2.8 billion and $4.6 billion, potentially complicating Detroit's bankruptcy proceedings, the reports.

Commissioned by the City of Detroit and DIA, the (112 pages, PDF) from art investment firm Artvest Partners estimates that if the city-owned collection were to be liquidated to raise cash, it would bring in between $1.1 billion and $1.8 billion. The lower numbers reflect conditions in the global art market, including a softening of prices in some categories; the impact of the influx of thousands of works onto the market; and various calculations related to whether works from the collection are sold quickly over a few months or slowly over years. The expectation of legal challenges that could block sales of the art and keep the case tied up in court for years also are likely to depress prices, the report notes, and if litigation prevents large portions of the collection from being sold, the low-end projection could fall to $850 million. "An immediate liquidation of the art collection will result in selling the DIA collection at a fraction of its fair market value," the  report states.

An earlier assessment by Christie's Appraisals valued the 2,800 artworks bought directly with city funds — which, from a legal perspective, would be easier to sell than works donated to the institute or purchased with other funds — at between $454 million and $867 million but did not consider the logistical or legal realities of selling the art.

The Artvest report likely will be the linchpin in the city's arguments at trial next month against its largest creditors, who are pushing for a forced sale of the art. U.S. Bankruptcy Judge Steven Rhodes will decide whether Detroit emergency manager Kevyn Orr's restructuring plan — which includes the so-called "grand bargain" that would direct $816 million in foundation, state, and DIA-raised funds into shoring up pensions for retired city employees while transferring ownership of DIA to a nonprofit and keeping its collection intact — is fair and equitable to all creditors, as well as whether the revenue and expense projections in the plan make sense for the city. "The report makes it abundantly clear that selling art to settle debt will not generate the kind of revenue the city's creditors claim it will," Bill Nowling, Orr's spokesperson, said in a statement.

Major creditors such as Syncora and the Financial Guaranty Insurance Co. have argued that the "grand bargain" unfairly favors city employees and are likely to point to Artvest's high-end estimate of $4.6 billion as evidence that Orr's plan lowballs the value that could be unlocked if the collection were sold.

For their part, city workers and retirees will cast ballots this week on Orr's plan — which includes cuts to their pensions — amid an atmosphere akin to an all-out election campaign, the reports. As part of an orchestrated drive, city and state officials and some union and retiree leaders have argued that the plan limits cuts to retirees'  benefits and will accelerate the city's emergence from bankruptcy. On the other side of the debate, a less organized group has pooled its limited funds for a series of radio and television ads calling on former and current city workers to vote no on the plan. The plan can be advanced to Rhodes for a final determination as long as at least one class of creditors — but not necessarily the workers and retirees — votes yes.

However, even in the event that Rhodes refuses to okay the plan at trial or pensioners vote it down, the city "has no plans to sell art even if the grand bargain falls apart," Nowling said.

"The grand bargain is dedicated solely to the pensioners, and it's a sure thing," said DIA chief operating officer Annmarie Erickson. "This report projects how difficult an actual sale of art would be, how long it would take, and how uncertain the outcome is."

Mark Stryker. "." Detroit Free Press 07/09/2014. Michael H. Hodges. "." Detroit News 07/09/2014. Monica Davey, Steven Yaccino. "." New York Times 07/09/2014.