Behind this fence lies 1m art treasures

Super rich art buyers park their works in climatecontrolled warehouses such as this one in Geneva.
Super rich art buyers park their works in climatecontrolled warehouses such as this one in Geneva.PHOTO: NEW YORK TIMES

Geneva free port zone stores an estimated 1,000 works by Picasso and old masters

NEW YORK • The drab free port zone near the Geneva city centre, a compound of blocky grey and vanilla warehouses surrounded by train tracks, roads and a barbed- wire fence, looks like the kind of place where beauty goes to die.

But within its walls are more than one million of some of the most exquisite artworks ever made.

Treasures from the glory days of ancient Rome. Museum-quality paintings by old masters. An estimated 1,000 works by Picasso.

As the price of art has skyrocketed - the value of some works has increased 10-fold and more in the last decade - perhaps nothing illustrates the art-as- bullion approach to contemporary collecting habits more than the proliferation of warehouses such as this one, where masterpieces are increasingly being tucked away by owners more interested in seeing them appreciate than hanging on walls.

With their controlled climates, confidential record-keeping and enormous potential for tax savings, free ports have become the parking lot of choice for high-net-worth buyers looking to round out investment portfolios with art.

Mr Evan Beard, who advises clients on art and finance at U.S. Trust, said: "For some collectors, art is being treated as a capital asset. They are becoming more financially savvy and free ports have become a pillar of all of this."

The trend is prompting concerns about the use of these storage spaces for illegal activities. It is also causing worries within the art world about the effect such wholesale storage has on art itself.

"Treating art as a commodity and just hiding it in storage is something that to me is not really moral," said Mr Eli Broad, a major contemporary art collector who last year opened his own Los Angeles museum.

Free ports originated in the 19th century for the temporary storage of goods such as grain, tea and industrial goods.

In the past few decades, however, a handful of them - including Geneva's - have increasingly come to operate as storage lockers for the super rich.

Located in tax-friendly countries and cities, free ports offer savings and security that collectors and dealers find almost irresistible. (Someone who buys a US$50 million, or S$64 million, painting at auction in New York, for example, is staring at a US$4.4 million sales tax bill. Ship it to a free port and the bill disappears, at least until you decide to bring it back to New York.)

Many masterpieces have long lived outside of public view, buried in the basements of museums or tucked away in the private villas of the rich.

But the free ports are drawing more criticism and concern, namely: Are they bad for art? Does the boxing up of millions of valuable works pervert the very essence of what art is supposed to do?

Yes, say many in the art world. "Works of art are created to be viewed," said the president-director of the Louvre, Mr Jean-Luc Martinez, who described free ports as the greatest museums no one can see.

Some see even higher stakes for contemporary works as they can be whisked off, their paint hardly dry, before ever entering the public's consciousness. Storage puts the art "intellectually almost in a coma", said Ms Joanne Heyler, the director of the Broad Museum.

Not everyone agrees, pointing out that there is plenty of art in the world for people to see and that much art was created as private property. "Paintings are not a public good," said Mr David Nash, a New York gallery owner.

Even so, some collectors whose businesses have come to depend on free port storage are a bit sheepish.

"It is a shame," Mr Helly Nahmad, a London dealer whose family is said to store 4,500 works in the Geneva Free Port, told The Art Newspaper in 2011. "It is like a composer making a piece of music and no one listens to it."

So what works are locked away? Because most art is tucked into storage spaces quietly, it is difficult to know what is where at any given moment. But assorted legal disputes, investigations and periodic exhibitions featuring stored works have provided glimpses of specific pieces lost from view.

There are the rare Etruscan sarcophagi discovered in Geneva by Italian police two years ago, found among 45 crates of looted antiquities, some still wrapped in Italian newspapers from the 1970s.

And the US$2-billion collection of the Russian billionaire Dmitry Rybolovlev, which includes a Rothko, a van Gogh, a Renoir, Klimt's Water Serpents II, El Greco's Saint Sebastian, Picasso's Les Noces De Pierrette and Leonardo da Vinci's Christ As Salvator Mundi.

Despite enhanced Swiss efforts to track inventory and ownership, the free ports there remain an opaque preserve (though more transparent these days than counterparts in places such as Singapore), filled with objects whose ownership can be confoundingly convoluted.

Case in point: US$28 million worth of works by Andy Warhol, Jeff Koons, Joan Miro and others now stored in the Geneva Freeport. Equalia, a company registered by Mossack Fonseca (the law firm at the centre of the Panama Papers controversy about how the wealthy conceal their riches), stored the works on behalf of a diamond broker, Erez Daleyot, in 2009.

Once in storage, the art was used as collateral for debts Daleyot owed to a Belgian bank, according to court papers. Now a man named Leon Tempelsman, president of a New York diamond manufacturing company, Lazare Kaplan International, is trying to seize the art as part of a dispute with Daleyot and the bank.

Mr Tempelsman said the free port's embrace of confidentiality made such seizures more complicated. The bank, KBC, said it had kept the art in the free port "out of precaution" and that it could not comment further on a matter involving one of its clients.

Mr David Hiler, president of the Geneva Free Port, said that as a result of an audit, the Swiss were working to address concerns about lack of transparency.

Come September, he said, all storage contracts will require that clients allow additional inspections of any archaeological artefacts they want stored there.

Collectors and dealers choose to store art in the free ports for more pedestrian reasons than tax avoidance. Some simply have no more room in their homes, said Mr Georgina Hepburne Scott, who advises collectors. And in a free port, their property is protected in climate- controlled environments, often under video surveillance and behind fire-resistant walls.

"When it is brought to light, the work is preserved; it's not been hanging above a smoky fireplace," she said.

Some warehouses also have viewing rooms where collectors can review their art and show it to potential buyers.

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on May 31, 2016, with the headline 'Behind this fence lies 1m art treasures'. Print Edition | Subscribe