Facing a foreclosure and public sale of San Francisco Art Institute’s 95-year-old main campus, the Regents of the University of California in October quietly stepped in, bought the prestigious but troubled art school’s $19.7 million debt from a private bank, and will now serve as its landlord.
Internal documents indicate that the fate of the school’s famed — and extremely valuable — Diego Rivera mural is uncertain.
A series of documents obtained by Mission Local trace this notable chain of events.
In July, Boston Private Bank & Trust Company moved to foreclose on the 149-year-old art institution, with the earliest possible sale of the main campus at 800 Chestnut St. coming three months later. On Oct. 13, the date for a public sale on the City Hall steps was set for Nov. 19.
“Said property is being sold for the purpose of paying the obligations secured by said Deed of Trust, including fees and expenses of sale,” stated the Oct. 13 Notice of Trustee’s Sale.
“The total amount of the unpaid principal balance, interest thereon, together with reasonably estimated costs, expenses and advances … is $19,662,553.90.”
That public sale, slated for City Hall’s steps, would never take place. Instead, the UC Regents handled things in-house.
As recorded in an Oct. 30 “Deed in Lieu of Foreclosure,” Boston Private granted to the UC Regents “an absolute conveyance of title to the Property for a fair and adequate consideration, being the full satisfaction of all obligations secured by the Deed of Trust” — which would presumably be the aforementioned $19,662,553.90, the “obligations secured by said Deed of Trust,” or a figure near that.
In another Oct. 30 document, the Regents were recorded as the new trustee holding the school’s deed of trust. And, in yet another Oct. 30 document — signed by the Art Institute’s Board of Trustees chair Pam Rorke Levy and Lauren Friedman, the UC Office of the President’s executive director of Capital Asset Strategies — the art school is designated the tenant with the UC Regents serving as the landlord.
The lease expires in October 2023, but includes three subsequent one-year extension rights. The tenants have an option to buy the property based upon “terms and conditions in the lease,” which Mission Local has not obtained.
This apparent expenditure of nearly $20 million in public funds was undertaken without public fanfare by the University of California.
That’s notable, but the UC Regents’ involvement in this matter was not surprising. The Regents have served as “remainder trustees” of the school dating back to an 1893 agreement between UC and SFAI benefactor Edward Searles.
And, as Mission Local noted in July, when Boston Private moved to foreclose on SFAI, “Thanks to this 19th-century pact, if the Art Institute were to cease to be, its real properties — and debt — would fall to the UC Regents.”
Calls and emails to the UC Regents were returned by automated messages stating the office is on cessation until Jan. 4.
Calls to SFAI interim COO Mark Kushner and spokeswoman Nina Sazevich have not been returned. Pam Rorke Levy hung up the phone without answering questions.
San Francisco Art Institute, like so many colleges and universities, is reeling from the ongoing Covid-19 pandemic. But many of SFAI’s fiscal woes predate covid, and were self-induced.
The school’s crushing debt stems from a $16 million loan it secured in 2016 to finance an ambitious expansion into Fort Mason — and an $18 million 2017 refinancing.
On July 1, 2016, the school put up as collateral its “real property” — namely the 800 Chestnut St. site — to obtain a loan from Shanghai Commercial Bank.
The Oct. 13, 2020 Notice of Trustee’s Sale lists no fewer than 19 “Murals and Frescoes” on that property, with the star attraction being Diego Rivera’s 1931 mural Making of a Fresco Showing the Building of a City.
With SFAI heavily in debt to the UC Regents, the future of this valuable asset is in question.
A Dec. 23 letter to staff and faculty from school vice president and dean of academic affairs Jennifer Rissler stated that “all options to save SFAI” are on the table.
“A number of individuals have expressed concern about the Diego Rivera mural,” Rissler wrote.
“Last Thursday, the board received a presentation akin to what the faculty and [staff] received at their monthly open meeting from the Board Chair. The board voted … to continue exploring pathways and offers for endowing or selling the mural.”