Costliest Painting May Be Resold

The crumbling fortunes of Australian industrialist Alan Bond have forced him to consider selling Vincent van Gogh’s “Irises,” the world’s most expensive painting, and persuaded Sotheby’s auction house to alter a controversial loan policy used to finance the purchase of the Impressionist landscape.

Sotheby’s New York sold the painting to Bond on Nov. 11, 1987, for $53.9 million, the highest price ever paid for a work of art. The sale was a watershed event in the booming art market of the 1980s, which saw art price records set and shattered at a staggering rate.

But after the sale of “Irises,” Sotheby’s disclosed that it had loaned Bond $27 million to buy the painting, a practice similar to the decade’s highly leveraged buying of whole corporations that, in the art world, was widely criticized for creating artificial or inflated prices.

The auction house has defended its policy and Bond’s ability to pay off the loan. At the time of the sale, Bond was a very rich man. His Bond Corp. Holdings Ltd. controlled assets of television stations, retail stores, minerals and breweries.

But his fortune soon took a dive. Rumors began to circulate that he couldn’t pay off the loan and that he would have to sell “Irises.” When it was later revealed that the painting was no longer in Bond’s possession but locked away in a secret vault, rumors began to resemble fact.

Sotheby’s on Thursday said Bond was considering “unsolicited inquiries” about buying the painting but denied that he was actively seeking buyers. “He may not sell the painting at all. He may pay off the loan in another way,” said Michael Ainslie, president of Sotheby’s Holdings Inc., the parent of the auction house.

In the wake of criticism, however, Sotheby’s has altered its loan policy, Ainslie said. The auction house will no longer accept as collateral artworks that its clients intend to buy. Sotheby’s has accepted purchases as collateral in a total of six sales of more than $1 million during the past three years, he said.

In making the change, Ainslie said, “We are responding to a perception, albeit a misperception, that affects the credibility of the art market. But we will continue our financial services because they are valued and important to our clients.”

Collectors, dealers and museum officials have hailed the news as a positive move that may cool an art market that has heated up to a boil during the past three years. They also say that the change in policy is a first step toward clearing up business practices that are confusing if not downright shady.

“I think this is a corrective measure that is needed and necessary,” said Richard Koshalek, director of the Los Angeles Museum of Contemporary Art.

“Whatever we can do to take credit out of the art market is constructive,” said Los Angeles collector Eli Broad. “Responsible institutions should not loan money for the purpose of buying art.”

New York dealer Richard L. Feigen agreed: “It was a responsible move. Anything that clears up public confusion about the art market is very positive.”

Feigen said that the auction house needs to take the additional steps of cutting out loans and guarantees to sellers, as well as the practice of placing in-house bids to bring properties up to the reserve price, that is, the lowest price that the seller will accept.

He said such reforms had been attempted in the past but rejected because “they would take the drama out of the auction house.” Feigen, a premiere dealer in Old Master art, objected to that notion. “If I want drama, I’ll go to the theater,” he said.

The only other policy change that Sotheby’s has made concerns its practice of guaranteeing a sales total of selected collections, Ainslie said. In the past auction catalogues have indicated such guarantees by stating that “Sotheby’s may have an interest in this sale” and these notices have only been printed in catalogues for sales in New York, where the law requires such disclosures.

In the future, Ainslie said, all catalogues for such sales will “explicitly state” the guarantees without disclosing the dollar amount. Such guarantees are always equal to or lower than the low estimate for the sale, he said.

Ainslie said the “Irises” situation is unlikely to have any negative impact on this spring’s upcoming round of art auctions.

Speculation about the current market value of “Irises” ranges from $30 million to $60 million.

Bond had no background in art but plunged into the market when he had money to spend and acquired a taste for Van Gogh. He was reportedly the underbidder for two other Van Goghs--”Sunflowers” which sold for $39.9 million in March, 1987, and “The Bridge at Trinquetaille,” which fetched $20.2 million three months later.

When “Irises” came up for sale in November, 1987, Bond was determined to get it, so he arranged for a loan of half the purchase price from Sotheby’s. He bought the painting anonymously by telephone but revealed his identity a year later.

Sotheby’s promptly paid the seller, John Whitney Payson, and initially denied problems with the “Irises” deal. Later, however, the auction house acknowledged that the loan had been renegotiated.

Last May, Sotheby’s sold another painting owned by Bond, Eduoard Manet’s “La Promenade.” Sotheby’s president Diana D. Brooks said at the time that the $14.85 million sale of the Manet covered “a significant part” of the debt. The auction house has repeatedly declined to state how much of its loan to Bond remains to be paid.

Van Gogh painted “Irises” in 1889, the year before he took his own life. The painting depicts a corner of the untended garden at the asylum of St. Paul de Mausole in St. Remy de Provence, where the troubled artist had committed himself. The painting remained in France in private collections until 1937, when the Seligman Gallery in New York bought it.

“Irises” changed hands twice in New York in the next 10 years. Philanthropist and collector Joan Whitney Payson bought it in 1947 for $80,000 and hung in her New York home. At her death in 1975, the painting passed to her son, John Whitney Payson, who subsequently put it on long term loan at Westbrook College in Portland, Me.

As art prices rose, Payson decided that the painting was too valuable to keep and insure, so he put it up for auction. He gave $6 million of the proceeds to the college and another $6 million to a family foundation that supports Maine charities.

The sale of “Irises” was probably the most widely publicized auction in history. The startling price was often cited as proof that the stock market crash on Oct. 19, 1987, had little if any effect on the art market.

During the 26 months since the landmark auction, art prices have risen across the board, but Impressionist paintings still command the highest prices, and no sale has topped “Irises.”

Sotheby’s auction last May of Pablo Picasso’s “Au Lapin Agile,” a tavern scene, also from the Payson collection, was expected to bring as much or more than “Irises,” but it sold for just $40.7 million. It was a Picasso record, but in a climate of extremely high expectations, the sale was perceived as a disappointment and an indication that there might be a limit to the price of art.