The bank decides to close the San Francisco Art Institute
Despite the dismissal of many professors, the instigation of an exodus of students and the announcement that it will not offer degree programs in fall 2020 or spring 2021, The San Francisco Art Institute has firmly maintained that it is not “closing”.
“The San Francisco Art Institute is not closing its doors,Read a June 30 email from Commissioner Doug Hall to students, faculty, alumni and others. “In early July, a process will be announced to enable community input as we begin the interesting and positive process of restructuring and reorganizing SFAI in the vital place it was and can be again.
That goal became conspicuously more difficult – but not yet impossible – earlier this month when Boston Private & Trust Company moved to foreclose on the jewel of this 150-year-old institution, its Chestnut Street Campus Building, which serves as collateral for a large loan.
The “Notice of Default and Election to Sell Under Deed of TrustWas filed July 8 on behalf of Boston Private by Peak Foreclosure Services, Inc. In a separate document also filed on July 8, Peak Foreclosure Services was inserted as “substitute trustee” for school.
The notice of default lists the sum of the Art Institute’s “overdue payments plus authorized fees and expenses” at $ 19,069,631.48 as of July 2. on 04/01/2020 together ”with the other costs and expenses.
No date of sale of the property can be fixed before three months after the date of July 8 of the formal notice.
Interim COO Mark Kushner and Board Chair Pam Rorke Levy last week insisted with Mission Local that the San Francisco Art Institute not miss any payments. Both admitted, however, that the school had been in “technical failure” for months; his trust deed with Boston Private required certain amounts of cash reserves and other such measures that he had not been able to maintain.
Questions posed today to Kushner and Rorke and Keller’s school lawyer Benvenutti Kim – a San Francisco firm specializing in “corporate bankruptcy, restructuring and crisis management” – have been dismissed. to the following statement:
Like many educational and arts organizations around the world, SFAI has been deeply affected by the COVID-19 pandemic. The pandemic has affected almost every aspect of our operations, and we have had to take painful steps to cut costs and conserve resources. These measures had one goal: to enable SFAI to continue to provide world-class fine arts education in San Francisco, as it has done for more than a century. We are in active discussions with our current lender, as well as with potential sources of additional financing, for the same purpose. We anticipate that these discussions will continue over the summer. We are grateful for the overwhelming support of the community through the current adversity, and hope that SFAI will emerge as an even stronger organization.
The pandemic has been a disaster for educational institutions large and small; the San Francisco Department of Public Health July 7 informed all “higher education institutes” that do not allow face-to-face instruction – a decision with dire educational consequences and cost instructors their jobs.
The San Francisco Art Institute, however, was already facing a crisis on its own – crushing debt on a $ 16 million loan the institute secured in 2016 to fund its ambitious expansion to Fort Mason – and an $ 18 million refinance in 2017.
“One of the main issues the institute faces is debt,” Hall wrote on June 30. “Personally, I was shocked to learn the extent of it. It would be inappropriate at this time to provide many details on the fiscal health of the school as it changes almost daily. ”
On July 1, 2016, the school pledged its “real estate” as collateral to obtain a loan from the Shanghai Commercial Bank. Regents of the University of California are also listed as licensors on these forms. The UC regents served as “remaining trustees”From the school dating from an 1893 agreement between UC and benefactor Edward Searles.
Thanks to this 19th century pact, if the Art Institute ceased to exist, its real estate – and its debt – would revert to the regents of the UC.
Our messages for the regents, asking what their plans would be for the school, were not answered.
The big loan was obtained to finance the school’s expansion into space at Fort Mason. Five years ago, the school’s enrollment exceeded 700, and this move was sold as needed. But the number of students has dropped precipitously since then and is now below 300 – a disaster for a school that is 85% dependent on tuition fees and now struggling with crushing debt and a half-century remaining on its lease in the United States. Waterside.
“The loan was very badly made. We’ve oversized, ”Levy said last week. “With our large number of registrations, the amount we spent on Fort Mason was very justifiable. If the board at the time had people to advise us, we would have known that we were on top of a demographic trend ”- and that enrollment would drop at higher education institutes across the country and would have to continue to rise. to lower.
In a complaint sent earlier this year to state attorney general Xavier Becerra, SEIU 1021, which represents 69 adjunct faculty members who have been fired, accused the school and its administrators of “conflicts of interest, self-acts and breaches of the duties of care and loyalty.
Elizabeth Travelslight, one of 69 dismissed assistant professors and president of the union section, lamented that her colleagues were losing their jobs – “and these were very special jobs at a very special cultural institution”.
She doesn’t know what will come next, or what to expect from the school, the bank, or, quite possibly, the UC Regents.
“UC’s board and regents deal with issues as trustees, not as people doing the actual work this institution is supposed to do,” she said. “What is it to teach? “