Monday, 26 January 2015

A Look at Freeports and Other Art Storage Facilities

Jessica Tasman-Jones('Hidden Treasure: A look into the world of freeports', Campden Wealth 23 January, 2015) takes a look inside the free port storage places. Here there are huge quantities of art works stored under high security, and carefully controlled humidity and temperature.
Those that have been to a freeport describe them as something straight out of a Mission Impossible or James Bond film. Within one freeport, several logistics companies will act as operators. At Le Freeport Luxembourg there are six; some specialising in fine art, others in precious metals, and one even focusing on data storage. A client to such a facility would be met by multiple layers of security; think bolted doors one after the other, fingerprint recognition technology, and cameras at all angles. Only then would they reach their prized collectibles. 
Besides the controlled and secure environment the freeport offers, the main purpose of the facilities is that they offer tax advantages – suspension of value-added tax (VAT) and customs duty. 
The art and antiques market reached €47.4 billion in 2013, and that’s just the transactions that take place in the light of day, at the likes of Sotheby’s or Gagosian. Many sales go unrecorded, between private collectors, for example, or behind freeports’ vaulted doors. Freeports are known for their discretion and the total value of collectibles stored in them worldwide is not known, but European Fine Art Fair’s 2013 annual report (the TEFAF report), cited an estimate that globally there was $100 billion in storage in these facilities. 
Until recently, since the 1970s, Switzerland had been the only major player but with the recent openings of the Singapore Freeport and Le Freeport Luxembourg, as well as the Beijing Freeport of Culture, which opened late last year, there has been a sudden proliferation of the facilities.
This could be partly due to the changing motivations for buying collectibles. Last year, the third annual Art  and Finance report, released by Deloitte and art market analysis firm ArtTactic, revealed 76% of buyers are now acquiring art and collectibles with an investment view, compared to 53% in 2012. If they keep their investment in a freeport, they could save “pre-financing” upwards of 25% in VAT and customs taxes, depending on where the piece is bought. [...] Freeports aren’t meant to circumnavigate capital gains taxes, but the TEFAF report says in practice an object could change hands multiple times behind a freeport’s vaulted doors and authorities would be none the wiser. 
The article also looks at other art storage facilities and the benefits and drawbacks of keeping collections there (there is also some interesting discussion of loans from artworks in store for occasional public display).

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