Delaware Art Museum to sell 4 works for $30 million to retire crushing debt load

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The Board of Trustees of the Delaware Art Museum has decided to sell up to four works of art from the museum’s 12,500-object permanent collection.

The funds generated from the sale, projected to be $30 million, will repay the balance of the museum’s $19.8 million bond debt and replenish the museum’s endowment, the museum stated in a press release. The museum did not identify the artwork to be sold. The pieces at right are among the best-known works at the museum.

The sales process will begin immediately, and the sale will be completed in the next six months. No works of art acquired through gift will be part of the sale. Not identifying the works led to a guessing game on which four treasures at the museum would generate the $30 million.

“After detailed analysis, heavy scrutiny and the exhaustion of every reasonable alternative to relieve our bond debt, the trustees had two agonizing choices in front of them—to either sell works of art, or to close our doors,” said Mike Miller, CEO at the Delaware Art Museum. “While today’s decision is certainly hard to bear, the closure of this 100-year-old museum would be, by comparison, unbearable.”

The trustees pursued all reasonable options, such as refinancing the bond debt, fund-raising and regional alliances, a release stated. Refinancing strategies included using investment banks to explore public and private alternatives. The trustees also sought the guidance of the Association of Art Museum Directors and the American Alliance of Museums.

No options worked, leading trustees to consider the last resort of selling works from the collection, according to the release.

The decision touched off a controversy in the tradition-laden art museum world. A New York Times blog post had the director of the Philadelphia Museum of Art and president of the group representing museum directors questioning whether the all options had been exhausted. The Delaware Art Museum has been without a director since the departure of Danielle Rice last summer. Miller is a retired DuPont Co. executive.

The museum’s debt stems from a troubled renovation and expansion of its Kentmere Parkway building that did little to raise the profile of the institution.

Located in a quiet residential area of Wilmington, the board and management was unable or unwilling to make a dramatic architectural statement with the expanded museum. The project also went against the standard practice of raising most of the money prior to construction.

The project that nearly doubled the size of the museum also sharply increased utility and other costs at the site.Tax-exempt bonds were issued in 2003 and nominally due in a lump sum in 2037.

Stiffer banking regulations, coming out there banking crisis, resulted in tightened credit standards, which caused the museum to default on performance covenants and effectively accelerated the repayment terms on the bonds, according to a release.

At the same time, the museum experienced a decline in its endowment as a result of stock market performance, forcing trustees to slash staff and funding for exhibitions. The museum operates with 50 percent of its former staff, according to some reports.

The financial troubles also limited efforts to market the museum. 2012, 100th anniversary came and went without the types of celebrations that normally come with such milestones.

Another factor were corporate cutbacks at long-time benefactors, such as Hercules, now Ashland and Bank of America, which did not focus on the arts to the extent of its predecessor, MBNA.

Those cutbacks had been underway when the museum expansion was announced in the early 2000s and led to concern in some quarters at the time about the wisdom of the project.

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