After educating myself a bit more on the goings-on of Berry-Hill Galleries on my own Upper East Side of Manhattan, I came to two distinct but not mutually-exclusive conclusions: one, that to open a fine art gallery seems about as fiscally savvy as opening a restaurant in the Meat Packing district and two, that there is, and furthermore must, be a distinction between the “collector” and the “buyer.” The aspiring buddha in me tells me that the difference lies in the individual’s intention – the root of his or her pull towards the acquisition. While I’ve often found myself mulling over the issue of collector versus buyer, the case of hedgie John Paulson recently pulling a little bail-out of a private art gallery gave me new meat to chew (but don’t eat gross red meat or pork, dear readers, it’s just a saying I made up). For a private individual to lend his, ahem, resources to a cultural institution is of course far from unheard of, but the last little clause in Mr. Paulson’s assumed contract of sorts really got me thinking. I’m referring to the legality that, having now purchased Berry-Hill Galleries’ debt and bringing them back into the black, Mr. Paulson will find himself the proud owner of an entire inventory if the gallery can’t keep their figures straight and find themselves defaulting on the loan once again. What, I wondered, would this make Mr. Paulson – an extremely wealthy though under-the-radar-flying fellow (think not of Stevie Cohen) who has apparently never before elected to spend his earnings on a work of art, let alone jet off to Basel for a weekend of luxury good-hoarding? If the gallery defaults, would the entity which Mr. Paulson owns – now the proud owner of who knows how many works of art – make him a collector? Or is he an “art owner” by default? What do you think truly makes a collector in earnest? In my opinion, it is the individual’s intention. It seems Mr. Paulson does not intend to amass a collection of art upon the financial failings of a gallery, or else he would probably be buying art work himself already. But, then again, he didn’t become a billionaire financier by mis-underestimating the power of the Plan B. I’m sure this man is quite used to reading ahead a line or two, and has weathered enough deals to know that the grace of an angel investor, or savior, can only go so far. Perhaps that is exactly, actually, what makes him the ultimate collector? I’ll be intrigued to see what happens to both the gallery and to Mr. Paulson. Take a look at Stephanie Cash’s recent article from Art in America entitled “Paulson Hedges Bet on Berry-Hill” and let us know your predictions…
Billionaire hedge fund manager John Paulson has bailed out the beleaguered Berry-Hill Galleries by assuming the security interest of its creditor, American Capital Financial Services, according to two sources with knowledge of the arrangement. He is now a creditor of the Upper East Side gallery, which specializes in 18th–20th-century American art, modern European paintings and old master works. The gallery filed for bankruptcy in 2005 and emerged from bankruptcy protection in 2007.
Once it assumed the debt from ACFS, Paulson Credit Opportunities agreed to dismiss the suit against Berry-Hill Galleries, according to court documents filed on Apr. 15, 2011. The agreement stipulates that each party cover its own legal expenses.
Paulson’s attorney, David Parker of Kleinberg, Kaplan, Wolff & Cohen, told A.i.A that he “only did the paperwork” and declined to comment further.
Reached by phone, Paul Niehaus, Berry-Hill’s lawyer, said, “Berry-Hill is open, doing business and having shows.” Clarifying rumors that have been circulating in American art circles, he asserted that “Paulson purchased the note; he did not acquire the gallery.” Asked about the financial status of the gallery, Niehaus said, “no one is pursuing us for outstanding debt.”
Last year, when the gallery’s $9.5-million loan from American Capital Financial Services, a private equity and hedge fund, came due, it couldn’t make the payment. On Mar. 30, 2010, after discovering that the gallery had secretly sold 223 works it had put up for collateral, ACFS was granted an order of seizure and removed numerous works from the gallery. Proceeds from that covert sale, court papers say, were not used to make good on the loan payments.
Berry-Hill Galleries, established in New York some seven decades ago, traces its lineage to the 17th-century Berry Gallery of London. Since 2003, Berry-Hill has been entangled in a web of legal and financial troubles, which led to a split between the two cousins who ran the business, Frederick Hill and James Berry Hill. Frederick Hill left the gallery and, in 2009, launched Collisart, a private art advisory service and dealership, with his daughter Daisy Hill Sanders. James Berry Hill remains at the helm of Berry-Hill Galleries, with his son, David Hill, as president.
What does all this mean? Niehaus declined to comment on the details of the agreement. Paulson is now a lender to the gallery, whose holdings, according to a 20-page inventory filed with the court, includes works by such major artists as Milton Avery, Frank Benson, George Bellows, Frederic Edwin Church, Laszlo Moholy-Nagy, Howard Hodgkin and Patrick Caulfield. Should the galley default again, Paulson could claim its inventory.
top image: Milton Avery, “From Ball Mountain” 1943, courtesey Berry-Hill Galleries