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Wednesday, May 22, 2024

UC purchases San Francisco Art Institute’s debt for $19.7 million, preventing foreclosure

UC Regents are now the new trustees of the SFAI

This month, the University of California announced its purchase of the San Francisco Art Institute’s (SFAI) debt for approximately $19.7 million. According to UC spokesperson Stett Holbrook, the SFAI was originally purchased by the UC in 1924 with proceeds from a property donation by Edward Searles, who was a prominent benefactor of the university at the time.

“The University of California has a 97-year history of support for the San Francisco Art Institute (SFAI) and its artistic mission,” Holbrook said via email. “In spite of the dire financial challenges the UC faces due to COVID-19, the University has stepped in to help SFAI and save it from foreclosure.”

Holbrook explained that the University of California owned SFAI’s property in trust until 2010, facilitating loans and supporting the growth of the school, though the two institutions remain unaffiliated academically. The trust and property were then transferred to the institute so that they could benefit from the land’s property value. 

The UC “retained a ‘contingent remainder interest,’” in the property, Holbrook said. The terms of the agreement also stipulated that if SFAI stopped operating as an art school or used its property for purposes other than fine arts instruction, the property would revert to the UC Regents. 

In recent years, the institute struggled with declining enrollment due to living costs in San Francisco and the rising costs of higher education. It was also affected by the economic downturn in 2020

This prompted the Boston Private & Trust Company to move on the institute’s foreclosure in July 2020. A public sale of the institute, however, was precluded by the reversion of the property to the UC Regents in the following months. The Regents will now function as the new trustees of the art school. 

“The Board of Trustees of [SFIA] have a fiduciary responsibility […] to secure the school’s future so that we can continue our mission to provide our students with a rigorous education in the fine arts,” said Pam Rorke Levy, the chair of the board of trustees at the institute, via email. 

The institute will still accept undergraduate and graduate applications in 2021, and the UC’s purchase of its property will have no bearing on its curriculum.

A return to financial stability could be helped by contributions from major donors, by the sale of artworks from the institute’s collection or by endowing the art college’s famed Diego Rivera mural, Levy said. She stressed that no decisions had been made to that effect yet, particularly regarding the mural, which has been the source of much attention in the art community. 

According to Mark Kushner, the interim chief operating officer at the SFAI, the institute anticipates purchasing the property back in six years so that it can continue to operate indefinitely. 

“The lease of Chestnut Street Campus goes through October 2026 so SFAI has a total of six years to repurchase […] the property from UC in the amount of the original debt, $19 million, plus interest and minus lease payments,” Kushner said via email. 
Written by:Rebecca Bihn-Wallacecampus@theaggie.org


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