The most recently envisioned new Guggenheim Museum, a Jean Nouvel-designed project for Rio de Janeiro, is partly underwater--an apt metaphor for a museum empire that's been drowning in deficits. No sooner had he acceded in December to demands by his board chairman and chief financial supporter, insurance magnate Peter B. Lewis, to adopt a bare-bones 2003 budget marked by prudent fiscal conservatism, than Thomas Krens, director of the Solomon R. Guggenheim Foundation, was packing his well-traveled bags for Rio de Janeiro to promote yet another ambitious satellite plan. The $250-million construction cost for the proposed project was more than twice the figure mentioned by Rio's mayor to Brazilian journalists in New York in November. Some $30 million to $60 million of this proposed budget would be used to improve the site and to create a concrete-injected perimeter, keeping water out of a structure that would descend about 26 feet below sea level, on a pier jutting into Guanabara Bay.
Krens also revealed in a wide-ranging interview with this reporter that he hoped to charge Rio $40 million for the Guggenheim's imprimatur, which includes access to its expertise and collections. That amount is twice what the Basque government paid for the naming rights on its acclaimed five-year-old, $10O-million Frank Gehry-designed tourist magnet in Bilbao, Spain. Before receiving a full explanation of its costs, many Rio politicians and residents were already expressing strong misgivings about the project.
Unique features of Nouvel's design include an outdoor tropical rain forest and a subterranean entrance lobby, offering underwater views of a reflecting pool through a glass ceiling. A 167-foot-high cylindrical tower would house special exhibition galleries, topped by a restaurant. In November, the Guggenheim presented to officials in Rio a detailed $2-million feasibility study, financed by the city. At this writing, Krens was hoping for a go-ahead from Rio by mid-January, followed by approval from the Guggenheim's board at its Jan. 23 meeting. By the time this article is published, the project could be approved, scrapped or still under consideration.
"Developing the Guggenheim into a Global Brand" is the title of a lecture Krens offers to groups intrigued by his audacious museum-management style, often hailed in the past as "visionary." It has also been one of Krens's chief preoccupations during his 14-year reign as director of the Guggenheim Foundation. Whatever the final verdict on Krens's approach to museum management, his legacy will include important architectural and artistic commissions. Among them are Frank Gehry's Guggenheim Bilbao, Rem Koolhaas's Guggenheim Las Vegas and adjacent Guggenheim Hermitage, and video artist Bill Viola's profoundly moving magnum opus, Going Forth by Day, recently on view in New York. Krens has significantly expanded the Guggenheim's collection, partly with the help of funds from its international branches. He has greatly broadened the scope of and the audience for exhibitions, and forged alliances with the State Hermitage Museum in St. Petersburg as well as the Kunsthistorisches Museum in Vienna, to exchange art and staff and to develop museum construction projects.
But the "global brand" that Krens is now brandishing in Rio has become tarnished by the Guggenheim's recent setbacks. And unlike Bilbao in the pre-Guggenheim years, Rio is already a major tourist destination, so the drawing power of the Guggenheim's cachet may be limited.
Even Krens candidly acknowledges that he's got to start doing things "the old-fashioned way." The museum's "number one priority," he said, will now be "the building of the board and the endowment." Speaking in mid-November, Krens vowed that the Guggenheim Foundation--umbrella organization for the flagship Frank Lloyd Wright-designed New York museum and its outposts in Venice, Bilbao, Berlin and Las Vegas--would balance its budgets for 2002 and 2003. That goal received an important assist from Lewis, who announced at the December meeting of the Guggenheim's board that he would give the foundation $12 million by the end of that month, adding to his previous $50 million in gifts to the museum since 1995. Krens said the money would be used to wipe out last year's deficit, pay debt service on bonds, eliminate outstanding bills and provide funds toward this year's operating expenses.
Krensian Economics
The Lewis largesse is the latest in a series of rescues for a museum that has periodically been desperate for its next financial fix. The Guggenheim's former board president, Ronald Perelman, for whom the Guggenheim's rotunda is now named, accelerated payment of his $20-million pledge ($10 million in 1994 and an additional $10 million in `95) to help make ends meet in the late 1990s. Perelman left the board in 1999. Some $30 million that Lewis had originally intended for the endowment wound up paying the bills and debt service instead in 2000. Fashion designer Giorgio Armani's pledge, reported to have been about $15 million, looked to many observers, despite Guggenheim denials, like a quid pro quo for transforming the New York Guggenheim, and later the Guggenheim Bilbao, into Armani showrooms in 2000 and 2001.
Big financial infusions are an integral part of Krens's "Global Guggenheim" strategy. Aside from Bilbao's $20-million fee and the hoped-for $40 million from Rio, about $400 million was expected to be added to the endowment through a $950-million capital campaign for the proposed gargantuan Gehry-designed Guggenheim on the waterfront in Lower Manhattan. In 2000, the Giuliani administration officially designated the Guggenheim for the development of four East River piers, and offered $35 million in land and $32.8 million in funds for the 572,000-square-foot downtown facility. But in the last days of 2002, the Guggenheim withdrew its proposal, after Lewis publicly indicated that little money had been raised for the project and he didn't see "any opportunity for it to happen."
In a phone interview before the proposal was withdrawn, Lewis said that his offer of $250 million toward the project would have been payable after all the rest of the funding was in place, "assuming I [could] afford it." In a written statement issued on Dec. 30, Krens said, "Given the current situation, the Guggenheim project has to be re-thought, perhaps on a more modest level." Lewis commented that the project might eventually be realized "on another scale and perhaps at another place ... in years to come." Judith Cox, the Guggenheim's deputy director, said in a phone interview that her institution "would be very interested in being considered somewhere in the Lower Manhattan redevelopment plans," but added that there had been no specific discussions about this.
The Guggenheim Bilbao, which, despite gradually declining attendance, remains both a popular and a financial success, may be asked to contribute more to the Guggenheim Foundation's coffers in the future. It already reimburses the Guggenheim Foundation for programming costs and staff time, as would the proposed museum in Rio, but Krens wants to "look at the programming costs for all of the Guggenheim museums from a fresh perspective and allocate those costs equitably among the institutions." He intends to reassess "how to quantify the [foundation's] benefit to Bilbao," with an eye to increasing Bilbao's payments to New York. "One of the benefits for us is the economy of scale," he observed. "When we do an exhibition in both locations, we can distribute the development costs."
In two recent phone interviews, however, the Bilbao museum's director, Juan Ignacio Vidarte, said that he had heard nothing about any plans to increase Bilbao's payments to New York. He noted that his institution had actually decreased its reliance on New York over the years, by developing its own professional expertise and credibility. The recent Manolo Valdes survey was "fully developed in Bilbao," said Vidarte, adding that his museum was organizing its own 2003 show of works by Alexander Calder, which will travel to the Reina Sofia in Madrid, and an exhibition of contemporary art from the collection of Eli Broad. Still, New York curators and staff remain strongly involved in developing both shows.
Vidarte, who directed the Rio feasibility study, acknowledged that the Guggenheim Foundation's troubles could mean less benefit to his institution from New York. In particular, he predicted that the Guggenheim network would, in the near future, have less ability to mount very ambitious, large-scale exhibitions. He added, though, that the Bilbao museum's operational and financial autonomy would shield it from significant impact. "Our financial situation," he said, "is very healthy." He noted that the Guggenheim Bilbao is now "76 percent self-supporting," through income and private donations, with only 24 percent of its funds coming from the Basque government. According to Krens, original plans had called for a 47-percent subsidy, "which at the time was regarded as wildly optimistic, because most Spanish institutions were getting 85 to 90 percent of their funding" from the government.
The Unbalanced Balance Sheet
Krens would not disclose the amount of the Guggenheim Foundation's 2002 deficit, which was erased by Lewis's recent emergency donation. In 2001, though, the foundation was $6.7 million in the red, on a budget of $57.71 million. This is $1.5 million more than the shortfall of New York's much better endowed Metropolitan Museum of Art, which had a $228.8million budget for the year ending June 30, 2002. The Guggenheim Foundation's austerity budget for 2003 is $24 million, less than half its 2001 budget.
Surprisingly, the Guggenheim's actual deficit and expense figures are not clearly set forth in the 2001 financial statement, which is notable for its lack of transparency. To make sense of the foundation's complex accounts, a lengthy tutorial from Marc Steglitz, deputy director for finance and operations, was helpful. He explained that the Guggenheim's actual 2001 deficit of $6.7 million was substantially less than what appears on the balance sheet. This is because the balance sheet includes, but does not separately identify, both expenses and income from the Guggenheim's two new facilities in Las Vegas. The $5.6-million losses in Vegas in 2001, although included in the Guggenheim's financial statement, were not actually absorbed by the Guggenheim. They were instead paid by the Venetian Resort-Hotel-Casino where the museums are housed.
Opening in October 2001, the Guggenheim Las Vegas and Guggenheim Hermitage museums finished the year ending Dec. 31, 2001, with $8.6 million in start-up expenses and $3 million in income, resulting in the $5.6 million loss. The foundation's financial statements include these Las Vegas figures, Steglitz explained, because both museums are operated by wholly owned subsidiaries of the foundation. However, these subsidiaries are structured as limited liability corporations (LLCs), shielding the Guggenheim from losses. Operations in Bilbao and Berlin are not included in the foundation's financial statement, because those museums are neither owned nor funded by the foundation.
According to Cox, the foundation's endowment, expected to reach $42 million by the end of 2002, ought to be at least $100 million to adequately support programs and staff and to stop the dependence on emergency bailouts from donors. But at the end of 2001, the endowment was only $38.9 million, depleted from the 1998 high of $55.6 million. A depressed stock market accounts for part of this shrinkage. The endowment also took a $10.48-million hit in 2000, when the foundation decided to use endowment money to prepay principal on some of the high-interest (7.2-percent) bonds that had provided funds for the New York museum's 1992 expansion. Some $26.3 million in principal on floating-rate bonds for the expansion is still outstanding.
Art Sales as a Stopgap
In 2001, the endowment would have dwindled to only $28.9 million, were it not for the infusion of $10.1 million that had been earmarked exclusively for art purchases--mostly proceeds from sales of works from the collection a couple of years earlier. The Guggenheim netted $10.01 million from art sales in 1999 and $4.55 million in 2000. No art was sold in 2001 or 2002, Guggenheim officials said. The deaccessioned works, they explained, were sold privately to collectors, not at public auction. Stung by criticism of their 1990 auction sales of three important paintings by Kandinsky, Modigliani and Chagall, Guggenheim officials refused to provide a list of the recent discards, but described them as "minor and redundant" or "not [of] museum quality." Indeed, "These particular works were rarely, if ever, exhibited." (They were, however, held in trust for the public, which has an interest in knowing what works enter or leave public collections.)
The $10.1 million now designated as an "art endowment" can provide only income, rather than the entire lump sum, toward acquisitions. Under the ethical guidelines (not legally binding) of the Association of Art Museum Directors, "funds (principal and interest) received from the disposal of any deaccessioned work of art must be used only [emphasis added] for the acquisitions of works of art." But the Guggenheim's reclassified funds for art purchases perform a second function: they have enabled the museum to keep its endowment above the $35-million level required under the terms of a letter of credit collateralizing the bonds for the museum's expansion. Those bonds were issued in 1990 by the Trust for Cultural Resources of the City of New York, a New York State public-benefit corporation and government agency. While Cox acknowledged that the art funds performed this double duty, she emphasized that when the art was sold, that second purpose had not been envisioned.
This is not the first time that the Guggenheim has put art-acquisition monies to a second use. In 1995, the museum gave itself a loan of $2 million from art-purchase funds, which it intended to repay by the end of 1996, according to its then deputy director for finance and administration, Robert Gebbie. When asked about this recently, museum officials said that the loan had been repaid.
Persistent questions about whether the Guggenheim's collection could be endangered in the event of default on the bonds are best answered by the language in the bond prospectus itself. Unlike the written provisions governing bonds more recently issued by the Trust for Cultural Resources for the Museum of Modern Art's current expansion, the Guggenheim's prospectus does not specifically prohibit the liquidation of art for repayment of the bonds. MOMA's prospectus flatly stipulates that "none of the Collections ... shall be made available" to creditors "to satisfy the obligations of the Museum under the Loan Agreement." The Guggenheim's prospectus, however, in a section titled, "Limitations on Availability of Assets," appears to leave the door open to art liquidation, noting that "certain [emphasis added] works in the Foundation's collection are subject to express sale prohibitions or other restrictions pursuant to the applicable gift instruments or purchase contracts." The Guggenheim, at this writing, is in compliance with its agreements with the Trust, according to the Trust's attorney, David Elliott.
Decline of Empire?
Financial difficulties tell only part of the story of the retrenchment of the Guggenheim empire. With the exception of Bilbao, the Krens-generated Guggenheims have suffered reversals. The Guggenheim SoHo folded a year ago, primarily for lack of audience, according to Krens. "As I looked at SoHo," he said, "I understood that it wasn't powerful enough to attract its own constituency. In other words, its audience was going to linger around 200,000 [annually]. It was not going to be able to create its own separate identity and endowment, because it probably wasn't big enough." To succeed, he reasoned, it would have needed enough space to present "five or six attractions," rather than two or three concurrent shows.
The Deutsche Guggenheim Berlin, on the other hand, has steadily and significantly increased its attendance, from 83,347 in 1998, its first full year of operation, to 126,057 in 2001. But Deutsche Bank, which funds the Deutsche Guggenheim, recently posted big losses and intends to cut back its signature art-commissioning program over the next five years, reducing the number of new works it sponsors from eight to five. Among its previous commissions, ranging in cost from $250,000 to $3 million, have been works by Jeff Koons, Gerhard Richter, James Rosenquist, Rachel Whiteread and Bill Viola. Some of the slack may be taken up by commissions funded by the New York-based Bohen Foundation, whose president, Frederick Henry, is also a member of the Guggenheim's board. At this writing, Deutsche Bank was negotiating its second five-year agreement with the Guggenheim.
In cyberspace, three outside investors--Pequot Private Equity, Softbank Venture Capital and GE Equity--lavished $20 million on Guggenheim.com, launched in 2001 but now offline. It was to have provided cultural content, news, travel information and "a wide range of e-commerce," according to its press announcement. "Guggenheim.com didn't cost us a penny," Krens observed. "It cost the venture capitalists. So, life is complicated." The site was shut down because "the ongoing server fees were in excess of a million dollars annually and there wasn't the cash to do that.... The venture capitalists were trying to put together a second round of funding," when the 9/11 attack occurred, making the outlook for e-commerce even less promising.
Though open only a bit longer than a year, the Guggenheim's Las Vegas branches may turn out to be a bad bet, moneywise. The Guggenheim Las Vegas and the Guggenheim Hermitage were expected to ring up annual multimillion-dollar jackpots for the museums in New York and St. Petersburg. Instead, they have merely broken even (start-up costs excluded), except for some loan fees for the State Hermitage Museum.
"Certainly, in retrospect, our expectations [for Las Vegas] were unrealistic," Krens conceded, noting that revenues had been projected at two to three times the approximately $10 million earned in 2002, before deducting the cost of programming and advertising. Daily attendance, projected at 5,000, hovered around 1,750 at the end of last year.
"The only thing I can think of is that Las Vegas requires a much more sophisticated approach to advertising," Krens said, noting that the substantial admission price--$15 for one facility, $25 for both--could also have depressed attendance. "On the other hand, look at the other things going on around town--I mean, Cirque du Soleil at $100 [actually $88] a ticket.... We're all puzzled, including the Venetian people."
But Barbara Bloemink, former managing director of the Las Vegas Guggenheims, thinks the explanation is simple: "People don't go to Las Vegas for art," she declared. "They go for gambling and entertainment." Now curatorial director of the Cooper-Hewitt, National Design Museum in New York, Bloemink predicted that future attendance figures for the Las Vegas Guggenheims could evince "a continual and slow build."
The Venetian anted up $30 million in construction costs, the aforementioned $8.6 million in start-up costs and additional money for exhibition design. In return, it was to have received rental payments from the Guggenheim Hermitage and a share of the proceeds from the Guggenheim Las Vegas. But because the disappointing attendance yielded insufficient revenues, the Venetian has received thus far only the rent. Still, Krens maintains that "they're getting a great deal back. We add a certain style and attraction. The Venetian is quite clearly committed to the project without any return whatsoever, because it just makes a big difference for them. They would like this to pay off, but they're not unhappy about what we've done."
When asked for his perspective, Robert Goldstein, president of the Venetian, dispatched a brief written statement asserting his company's pride in its association with the Guggenheim. "The feedback from our guests and visitors has been overwhelmingly positive," he wrote. "We look forward to continued growth and future cultural endeavors that will please and delight our patrons."
The cavernous Guggenheim Las Vegas went dark for at least three or four months with the close of its inaugural show, "The Art of the Motorcycle," on Jan. 5. It is to reopen when a backer is found for a show from the Guggenheim's permanent collection. The smaller Guggenheim Hermitage, billed as a jewel box for classic treasures from both museums, will go a more populist route later this year, trotting out a much-traveled herd of Norman Rockwells from the eponymous museum in Stockbridge, Mass. Undismayed by the prospect of Rockwell replacing Titian and van Dyck, Mikhail Piotrovski, director of the august Hermitage, noted, "It was planned from the beginning that we would organize exhibitions from other museums as well as from our own collections." Other shows planned for that space include "American Pop Icons" and "The Pursuit of Pleasure," limning such Vegas-style preoccupations as food, music and gambling.
The "Pleasure" array will be the second Las Vegas presentation to feature works from not only the Guggenheim and Hermitage museums but also the Kunsthistorisches Museum in Vienna, which two years ago joined the others in a tripartite alliance. The three institutions also plan to cooperate on reconstruction plans for the Vienna museum and on the refurbishment of the 450,000-square-foot General Staff Building in St. Petersburg, across Palace Square from the Hermitage. Piotrovski said that funds for the project, which has been many years in discussion, are expected to come from "a World Bank loan, Russian government grants, money raised by the Hermitage both in Russia and abroad, and the Hermitage-Guggenheim Foundation." That New York based foundation was formed last year to finance the museums' joint projects.
The sole Guggenheim branch that predates Krens's tenure, the Peggy Guggenheim Collection in Venice, is set on expansion: It intends to open new galleries this May, on property contiguous to its current headquarters on the Grand Canal--the Palazzo Venier dei Leoni, Peggy Guggenheim's former home, which was donated to the Guggenheim Foundation in 1979. Plans announced more than three years ago to create a Guggenheim Museum Venice of Contemporary Art at the Punta della Dogana, a 17th-century former customs house, are on hold. The Peggy Guggenheim also has plans under way to organize exhibitions in Lugano, Modena, Palermo and Udine based on the collections of the Guggenheim Foundation.
Coping in New York
Back at home base, the byword is not expansion but contraction. Attendance in Manhattan has fallen 20 percent since 9/11 and the staff has been reduced by 43 percent. The museum has shortened its weekly schedule by 9 1/4 hours and cut the number of exhibitions presented there. Financial exigencies recently caused the museum to focus on "the extraordinary accomplishments of the permanent collection," said Krens, alluding to "Moving Pictures," the well-received recent presentation of the museum's own contemporary photographs, film and video. "In the beginning, I was a little skeptical about whether a permanent-collection-based contemporary multimedia show would work," he admitted. "I learned that there is an audience for that kind of work. It's basically a younger crowd," said the 56-year-old director.
New York exhibitions for 2003 are fewer in number than in prior years, and all had to be substantially funded before getting a place on the schedule. One eagerly anticipated show slated to open this month, postponed from last year, is "Matthew Barney: The Cremaster Cycle" [Feb. 21-June 11]. Last year the Guggenheim was supposed to have been the inaugural venue for Barney but--partly due to the lengthy extension caused by the 9/11 disruptions of the museum's "Brazil: Body & Soul"--New York is now the third stop, after Cologne and Paris. "At first Matthew was not happy about it," Krens acknowledged, "but, as it turns out, I think he adjusted and profited from the idea, because he had more time to plan the New York installation."
Another postponed show to open in New York later this year, after a stint at the Deutsche Guggenheim, is "Kasimir Malevich: Suprematism" [May 22-Sept. 7]. On view now [to May 4] are a film installation and a sculptural installation by French artist Pierre Huyghe, winner of the museum's 2002 Hugo Boss Prize. A much-anticipated James Rosenquist show now has firm dates as well [Oct. 23, 2003-Jan. 18, 2004]. Rescheduled from this year to next is an exploration of the pivotal role that Italian Futurism played in modernism, "Boccioni's Materia: A Futurist Masterpiece and the Parisian Avant-Garde" [Feb. 6-May 9, 2004].
Recouping in Rio?
A seeming throwback to the Guggenheim's ebullient, expansionist past, the buoyantly imaginative Brazilian project could be quashed or curtailed by recent negative developments not only in New York but also in Rio. Possibly imperiling the Brazilian project is that country's shaky economy. Its currency, the real, lost about one-third of its value against the dollar during 2002, and inflation was in double digits. Part of what the Wall Street Journal called a "market panic" in Brazil was caused by the election in October of the country's first avowedly left-wing president, Luiz Inacio Lula da Silva. According to Vidarte, the museum project cannot proceed until all sides feel confident that government and private sources in Brazil can fund not only the construction but also both an annual operating budget of about $25 million and an acquisitions budget. The projected government subsidy is about 40 to 50 percent of the annual budget, Vidarte said.
Social conditions in Rio may also pose problems. The New York Times recently described the alarming level of violence there, where "gangs can shut down the entire city." But as he already demonstrated in Spain's volatile Basque region, Krens has a high tolerance for risk. During the planning phase for Bilbao, the region's sometimes violent Basque separatists sent Krens a letter "saying they didn't think it was an appropriate thing for the Guggenheim to come to Bilbao," he recounted recently. What's more, the American ambassador to Spain had warned Krens that "raw intelligence reports" indicated that "the project could be targeted." Krens continued, "Clearly the risks were reflected in the attack that took place the week of the opening, when a guard was killed. But ... in the years since then, there has been a complete change in attitude. Somehow, the separatist organizations have seen this as an extension of Basque pride."
In Rio, he deliberately chose an unglamorous site, adjacent to the business district, "where the older buildings are," rather than another available site, which he described as "luscious," between Ipanema and Copacabana beaches. "It struck me that beach front property is not exactly where you see the social mission of the institution.... I see it as a kind of catalyst for urban redevelopment, as it was in Bilbao."
If it prevails, Nouvel's 240,000-square-foot museum, a bit smaller than Bilbao, would include four separate exhibition components: a skylit contemporary art space; eight galleries for masterworks from the Guggenheim, and possibly also from the Hermitage and Kunsthistorisches museums; a large multimedia center with performance spaces, theaters and smaller viewing rooms for videos; and the tower for special exhibitions. Seven site-specific commissions would be installed throughout the complex. The rain forest, with Brazilian flora and fauna, would be built over some of the gallery spaces; it would feature a 100-foot waterfall, walking paths and suspension bridges. Outside the museum would be boardwalks and marinas, as well as a wall screening off the museum from a nearby highway.
Krens hopes to open an exhibition in Rio in the first half of 2003 presenting information and models for the project. If Rio decides that the $250-million project is too costly, "the budget could go down to $120 million, but the project would have to be redesigned," Krens said. He noted that "Bilbao was originally projected as a 350,000-square-foot building and it was built at 286,000." The cost was thereby reduced by about 20 percent.
However things turn out, "we've produced an exquisite concept for a museum in South America and we've been compensated for that," said Krens, noting that the $2-million feasibility study included a 15-percent fee for the Guggenheim. "If it doesn't happen," he said, "it wouldn't be the first time I didn't get what I wanted." He said that he is still "approached constantly" by foreign representatives seeking to clone new Guggenheims. Vidarte recently told the Bilbao newspaper El Correo that the Guggenheim was "in the preliminary phase" of a feasibility study for a new $200-million Guggenheim in Taichung, a city in Taiwan. An architect has not yet been selected.
Although resigned to curtailing his own wish list for now, Krens still credits his brashly enterprising approach with having given the Guggenheim a higher profile in the museum world. "The strategy was to build our programming strength, our collection and our international presence, so that those ideas would be the drivers for the institution," he said. "I think we did a lot of that.... But you have to learn from your experience and, right now, we are committed to an absolutely efficient operation."
Krens has indeed raised the Guggenheim Museum's profile worldwide. Whether he will now lower his grandiose expectations and constrain his expansionist impulses to adapt to hard times remains to be seen.
Lee Rosenbaum is a contributing editor of Art in America and writes frequently on the arts for a wide variety of publications.
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