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Luxembourg opens art freeport to lure super-rich
LUXEMBOURG: Private banking hub Luxembourg sought to lure more wealthy investors on Wednesday by opening a high-security center designed to look like a jewel box, where collectors can store and trade valuables without paying customs or sales tax.
Studded with stones and surrounded by walls and barbed wire, the Luxembourg Freeport has four bullion chambers guarded with 50cm-thick metal doors, and four other chilled rooms designed to hold 700,000 bottles of fine wine, said staff.
Officials there said it was the latest in a small but growing number of similar centers across the world tapping into interest in high-value objects – furniture, paintings and other treasures – from high-end investors.
“The 2008 crisis created a real demand for physical assets. People realized banks could go down and take their money with them. That meant demand for the likes of gold, but also art,” said Tony Reynard, chairman of another freeport in Singapore whose main owner is also the principal investor in Luxembourg.
The super-rich can fly in their objects, view them and trade them inside the freeport’s walls without incurring customs or sales tax – charges as high as 27 percent in parts of Eastern Europe.
TREASURES “IN TRANSIT”
The collectibles get that status because they are technically in transit. In Luxembourg, the center’s back doors open onto the main airport. The objects only become liable when they leave that bubble and enter Luxembourg or another country.
Luxembourg and Singapore’s majority owner is Yves Bouvier, a Swiss businessman with an art storage and shipping service already operating in Geneva, a city which set up its first freeport in 1854.
“We had to move on to Luxembourg because Geneva was full. With Luxembourg we have an airport that can handle cargo. In Geneva you have to move everything by road,” he told Reuters.
Reynard said there were plans to set up a similar operation in Dubai and, possibly, Shanghai – both home to large number of potential affluent clients, keen to have their treasures stored securely and confidentially in exchange for a fee.
The international art market increased by 8 percent last year to 47.4 billion euros ($61.3 billion), close to its 2007 peak, according to the TEFAF Art Market Report.
“There are a lot more transactions in the art market and it has become far more global, with increasing numbers of collectors in Russia, the Middle East and China,” said Clare McAndrew, who prepares the report and heads research firm Arts Economics.
The spread of the freeports is also seen as a help for insurers who have the headache of covering all those valuables.
“By having additional freeport locations you spread the risk and so satisfy more demand,” said Filippo Guerrini-Maraldi, head of fine art at insurance at broker RK Harrison.
He said industry limits stopped insurers covering more than $2 billion worth of art at one site and estimated the value of items in Geneva’s vaults could already be five to 10 times that amount.
There are about 160 rooms and eight private showrooms off the main lobby for artworks in the Luxembourg center’s 22,000 square meters – about the size of three soccer fields.
All incoming containers were screened for firearms, narcotics and other illicit goods, said Luxembourg Freeport’s managing director David Arendt.
Not everyone at the opening was a fan. “I have looked into it, but the costs are sizeable,” said a major local collector who, like many others in his field, preferred to remain anonymous. “I prefer to have my art on display.” – Reuters
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