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NEW YORK - Pity the struggling rich who find that their enormous homes no longer have the value necessary to help them raise more cash when they need it suddenly. But for some there is salvation. There are certain institutions out there interested in taking something else as collateral for new loans: art.
You are particularly blessed if you not only collect important art but are the creator of it. Just ask Annie Leibovitz, the portrait photographer whose clients have included Walt Disney and Vanity Fair, but who has apparently hit the financial shoals.
She may be one of the most successful commercial photographers of her time but, during the past several months, Leibovitz has reportedly gone to an institution called Art Capital in Manhattan for loans totalling no less than US$15.5 million ($30.2 million). Whatever outstanding bills she has, they are apparently considerable.
It is the nature of her loan agreement that will get the art world all a'twitter, however. For sure, she began by doing the traditional thing, offering properties as collateral, including her country home in upstate New York as well as town houses in Greenwich Village. But then she was forced to mortgage something else - all the rights to her photographs, those already taken and even those she will take in the future.
The loans-for-art market is not one that is widely known about beyond tight circles. "It's very discreet," Ian Peck, co-owner of Art Capital, told the New York Times. Another prominent New Yorker who has resorted to pawning his artworks is the film director and property developer Julian Schnabel, who has stretched his own resources building a gaudy-pink apartment complex in the West Village known as Palazzo Chupi.
Some art is retaining its value as has been confirmed by this week's lucrative auction in Paris of the Yves Saint Laurent collection. Elsewhere, however, there are fears that sudden dispersals of collections by cash-hungry galleries and museums could depress values in this market also.
For now, though, business is good at Art Capital, which expects to make art-secured loans of about US$120 million this year, compared with US$80 million last year. It has rivals who also report good times.
These institutions are entirely legitimate, but some might call them loan sharks, or glorified pawn shops. Art Capital will make loans of US$500,000 or more at interest rates of between 6 per cent and 16 per cent.
Most important to remember is this: default on your payments and those precious masterpieces will no longer belong to you.
Reporting Leibovitz's dealings with Art Capital, the New York Times quotes loan documents filed at the City Register's Office saying that she had signed over "copyrights ... photographic negatives ... contract rights" existing or to be created in the future, to secure loans first of US$5 million last autumn and then a second US$10.5 million tranche in December.
The news of her dealings appeared to confirm rumours that Leibovitz was on the financial ropes.
Recent stresses for the photographer have included huge costs associated with an elaborate studio in Chelsea, Manhattan, that she has since relinquished, and the death of her former partner, Susan Sontag, and the responsibilities of raising her children.
She has also had to deal with lawsuits filed against her by a lighting company and stylist for about US$700,000.
- INDEPENDENT
