Seattle Art Museum’s Faustian Bargain

Seven years ago, the trustees of the Seattle Art Museum were approached by Matt Griffin, a developer working for Washington Mutual.  After months of negotiations, the museum agreed to a deal that would allow the bank to build a shiny new office tower as well as help the museum finance a four-floor expansion at no cost to taxpayers.  

Seattle Art Museum and WaMu Center. Photo via flickr.com/photos/chuck_taylor.

Seattle Art Museum and WaMu Center. Photo via flickr.com/photos/chuck_taylor.

Seattle Times article from April 2007 offers an ominous explanation of the arrangement:

This was a business deal, not an act of charity.

WaMu got to build its 42-floor office tower on a prime parcel of downtown land without competing against other buyers. The bank estimates it will save $15 million a year in rent by consolidating most of its 5,000 Seattle employees in the WaMu Center.

There were other advantages, too. By pairing with the museum, WaMu received special city zoning changes to boost the size of its office tower. The bank will rent an additional eight floors of space from SAM for up to 25 years with no annual rent increases.

At the time, SAM’s trustees said they were “thrilled with the deal, which allowed the museum to expand much sooner than they’d ever thought possible.”  The expanded museum opened in early 2007 to rave reviews.  

The honeymoon ended last September, when the United States Office of Thrift Supervision seized WaMu in what is now the largest bank failure in American history.  Today the museum announced that JPMorgan Chase, the company that purchased WaMu’s banking subsidiaries, does not intend to pay the $5.8 million in annual gross income SAM was receiving from WaMu. (Jen Graves and  Regina Hackett have the full scoop.)  On the bright side, JPMorgan Chase is providing a one-time grant of $10 million to the beleaguered museum, a move that Regina calls a “silver lining for its dark cloud.”

Even though JP Morgan Chase wasn’t contractually obligated to pay anything at all, the bank has agreed to give the Seattle Art Museum $10 million spread out over five years. […]

SAM officials said last September that a change-of-control provision in Seattle Art Museum’s lease agreement with WaMu protected the museum in case the bank was sold. Turns out that agreement meant nothing in the event of a belly-up bank failure.

When all is said and done, it seems that what may have once looked like a too-good-to-be-true offer from a greedy financial institution turned out to be, well, too good to be true.  In an ironic twist of fate, SAM has hired Matthew J. Griffin to help find a tenant for the space he once sold them on.

(At least the Seattle Art Museum is in good hands…I hear Matt Griffin’s a smooth talker!)

~ by emilypothast on January 22, 2009.

4 Responses to “Seattle Art Museum’s Faustian Bargain”

  1. […] Jen Graves’ article, Regina Hackett’s coverage, this thinly-veiled real-estate ad, and blog commentary. […]

  2. Keep in mind that the SAM is a local icon and an important landmark. I highly doubt, despite the near term suffering, that serious long-term damage will be done to SAM. In the long run, this will be a minor set back.

  3. Thank you for your comment. I hope you’re right, but with museums like LACMA and Brandeis’s Rose Art Museum now deaccessioning works just to keep the doors open, it’s not hard to imagine how financial missteps like this one could combine with unfavorable economic conditions to have a disastrous effect on the long term solvency of an institution.

  4. Emilypothas,

    Yes, in this climate, a misstep could be financially fatal – this is true for anyone. But like a term I loathe “too big to fail” I think there is truth in the stance that the SAM is too iconic to fail. The city would be embroiled in a PR nightmare should the museum fall into really hard financial times, and the last thing a city so dependent on tourism dollars needs is to see a public landmark go under.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: