Derrick Cartwright, Seattle Art Museum’s new director, inheritor of its expansion-related financial problems
The story of the Seattle Art Museum’s expansion-related financial shortfalls—largely the result of the collapse of Washington Mutual Bank (WaMu), its development partner in the mixed-use building project—keeps getting worse.
On Aug. 30, the museum filed a 27-page petition in Kings County Superior Court, requesting approval of a plan to make a 10-year loan to itself from its own endowment. The loan, not to exceed $10 million, would help SAM meet its obligations to pay, as rent, debt service for bonds issued by the city’s Museum Development Authority.
The revenue from WaMu’s lease on eight floors above SAM had previously been counted upon to pay the more than $4 million a year in debt service for the expansion bonds. JPMorgan Chase, which acquired WaMu in 2008, declined to honor the defunct bank’s lease, but instead offered the museum a $10-million grant, to be paid over five years.
Because “SAM always respects its donors’ intentions” (in the words of its court petition), its loan to itself will be drawn from the portion of the $96-million endowment that is designated for general operations (i.e., not for acquisitions or other specific purposes). As of June 30, SAM’s general operating endowment amounted to about $32 million. A $10-million loan would therefore represent a draw-down of nearly one-third of those general operating funds.
This in an already challenging fiscal year for all museums, when financial shortfalls have resulted in SAM’s 7% reduction in staff, a plan to close the museum’s three buildings for two weeks beginning Jan. 31, and a 10% reduction in some administrators’ pay. Director Derrick Cartwright “has planned for a still larger reduction to his own executive compensation next year,” according to the announcement of these cutbacks.
Vanessa Ho of the Seattle Post-Intelligencer reports [via] that Nordstrom, the department store, now leases six of the eight floors directly above SAM, “but the rent will
not cover the museum’s debt. And fundraising has been slow.” (A new fundraising campaign is planned.) In the Comments section attached to her story, Ho reports that the top four floors of SAM’s 16-story building, which had been owned by WaMu, are now owned by Northwestern Mutual Life, whose Russel Investments will move this fall into the former WaMu Center—the 42-story office tower that was built behind SAM’s 2007 expansion, as part of the development project.
I had previously written that this debacle, conceived and implemented under the museum’s previous director, Mimi Gates, might inspire “second thoughts in the museum world about teaming up with commercial entities for future expansions.”
Here’s some more food for second thoughts: In New York we now have the example of the Museum of Modern Art’s planned westward expansion on land that it sold for $125 million to real estate developer Hines. MoMA’s growth has now been stalled by the financially driven delay in the construction of a controversial Jean Nouvel-designed mixed-use tower. That 1,025-foot-high skyscraper was to provide, at its base, room for MoMA’s hoped-for expansion. There’s been no word yet on if or when this project will proceed.