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Freeports: Warehouses Filled With Art the Public Never Gets to See

Freeports
The Geneva Freeport building in Geneva, Switzerland, houses a secret stash of some of the world's greatest artworks. Wikimedia Commons (CC By-SA 4.0)

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Delaware Freeport founder and president Fritz Dietl won't identify any of the artistic treasures stored inside the nondescript, flat-roofed building that he operates not far from the Interstate 95 in Newark, Delaware, except to say that the 36,000 square feet (3,344 square meters) of storage space contains a wide assortment of paintings, sculptures and other objects ranging from ancient to modern. "If you can call it art, it's in my warehouse," he explains.

Dietl, a native of Austria, is careful not to reveal too much detail about the facility, which he describes as "less art museum and more fortress." His clientele — which includes art collectors and upscale investors, as well as galleries, artists and institutions — are paying for safe, discreet storage. That means a high degree of physical and cybersecurity, as well as a carefully monitored interior environment that strives to maintain a temperature of 70 degrees F (21 degrees C) with 50 percent relative humidity, which scientists and art conservators have determined is ideal for preserving artwork. Even the loading dock is heated and cooled with precision.

The warehouse has what Dietl calls "museum-like conditions," except even better. "When you have thousands of people walking into a museum, the climate becomes very unstable quickly, especially on a rainy day," he explains. "You have spikes in humidity and temperature. In our environment, obviously, we don't have any people just walking in."

To the contrary, when clients want to look at their work, they're ushered into a special lounge with a climate-controlled viewing room. Their art, which is tracked digitally with barcodes and a secure database, is retrieved and displayed for them to see.

Besides art preservation, Delaware Freeport has other advantages for art investors. Unlike New York or California, Delaware has no sales tax, and it's located in a federally designated Foreign-Trade Zone (FTZ), so that purchasers of Chinese art and antiquities or British and German lithographs and art photos don't have to pay the tariffs imposed by the Trump administration. That is, as long as the artworks don't leave the freeport.

Delaware Freeport is just one of many such high-security repositories scattered across the globe, in far-flung locales from Switzerland to Singapore. Much of the world's valuable art isn't on display in museums, or on the mansion walls of wealthy collectors. Instead, it's kept out of view in nondescript storage facilities located in special trade zones, where the owners of paintings and sculptures can avoid having to pay taxes and import duties — and, if they wish, shield themselves from unwanted attention as well.

In some ways, "Freeports are the equivalent of the Swiss bank account," explains John Zarobell. He's a former museum curator who's now a professor and chair of international studies at the University of San Francisco, and author of this February 2020 YaleGlobal Online article on freeports.

Some freeport users are "people who simply don't others to know they have these assets," Zarobell explains. "If they showed it off in their apartments, someone might way, 'Isn't that a Picasso on the wall? How did you get $50 million?"

The concept of freeports dates back to the 1800s, when they were developed as a way to delay the expense of paying duties and taxes on stockpiles of imported wares, until the goods actually had a profitable use, Zarobell explains.

"The idea was, you have a good you can't take to market right now for some reason," Zarobell says. "And so you store it in a place where it will hold its value, but you won't get taxed on it, right now. So when they take it out of the freeport, it gets taxed."

In recent years, though, freeports have come to play an increasingly important role in the burgeoning business of buying, selling and investing in high-value works of art. The Geneva Free Ports reportedly contains more than a million artworks — several times more than the collection of the Louvre in Paris, the world's most visited museum. BBC arts editor Will Gompertz has described the facility as "the greatest art collection no one can see." Its inventory has contained works by artists ranging from Leonardo da Vinci, El Greco and Renoir to Andy Warhol, as The New York Times reported in 2016.

Freeports
Modigliani's "Seated Man with a Cane," once allegedly looted by the Nazis, had been stored in a freeport in Geneva.
Wikimedia Commons

But the Geneva facility also has endured controversies. In the past, for example, it was used to conduct trafficking in archaeological treasures, including Phoenician, Etruscan and Roman objects, according to a 2016 presentation by facility executives. That same year, a Swiss prosecutor seized a Modigliani painting, which has been the subject of an ongoing legal dispute in the U.S., involving an allegation that it was stolen by the Nazis from a Jewish art dealer in 1944. Swiss officials now carefully scrutinize the art that goes in and out of the facility, according to Zarobell.

Zarobell says that freeports across the world may contain many works of art that have vanished from public view, and whose whereabouts are unknown. "There are a lot of things that just disappear, right," he says. "And we don't know how many were destroyed in World War II, or might actually be sitting in a freeport."

At Delaware Freeport, Dietl says there isn't any mystery about the inventory, as far as the government is concerned. "Anything in my Foreign Trade Zone is recorded by U.S. Customs," he explains, adding that officials will follow up as well. "They come into the warehouse and make sure those items are still there, and haven't been removed."

He's also careful about whom he does business with. "If there was somebody really shifty trying to come into my warehouse, I wouldn't let him in," he says. "We do due diligence on who our clients are. I know my clients. They're legit people."

The demand for freeports has been driven in part by the evolution of art into an alternative investment vehicle. (As this article in The Balance notes, art can function as a hedge against factors that affect stock market investments.) But Dietl says that most art investors are drawn in by their interest in art and artists, rather than by financial strategizing. "I don't know a single art collector and investor who doesn't have a passion for art," he explains.

Freeports fill another useful function, he says. Once people begin collecting art, "at some point you run out of space on walls," he says. "You need to store some of it."

Additionally, storage in a freeport protects artworks from fading in the sunlight that streams in a nearby window, or being accidentally damaged by children, pets or cleaning ladies, Dietl notes. A freeport, he says, is the place to turn "if you want to keep something that's really, really valuable really, really safe."

There is one major downside, in that you have to go to the freeport to admire your acquisition. "The disadvantage is that you don't see it on your wall," Dietl concedes.

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