UC Regents Buy SF Art Institute’s $19.7 Million Debt, Now Own School – Will SFAI’s Diego Rivera Mural Be Next For Sale?

Faced with the seizure and public sale of the 95-year-old main campus of the San Francisco Institute of Art, University of California regents quietly stepped in in October, bought the 19.7 millions of dollars from the prestigious but troubled art school to a private bank, and will now serve as its owner.

Internal documents say the fate of the school’s famous Diego Rivera mural is uncertain.

A series of documents obtained by Mission Local trace this remarkable chain of events.

In July, Boston Private Bank & Trust Company decided 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 October 13, the date for a public sale on the steps of City Hall was set for November 19.

“The said property is sold for the purpose of paying the obligations secured by the said trust deed, including the costs and expenses of sale,” said the trustee’s notice of sale dated October 13.

“The total amount of the outstanding principal balance, interest thereon, and reasonably estimated costs, expenses and advances … is $19,662,553.90.”

This public sale, scheduled for the steps of the town hall, will never take place. Instead, the UC regents handled things internally.

As recorded in an October 30″Deed in lieu of foreclosure,“Boston Private granted the UC Regents “an absolute surrender of title to the property for just and adequate consideration, being the full satisfaction of all obligations secured by the Indenture” – which would presumably be the 19,662,553 $.90 aforesaid, the “bonds secured by said indenture”, or a figure close thereto.

In another document dated October 30, the regents have been registered as the new trustee holding the school trust deed. And, in another Oct. 30 document — signed by Art Institute Board Chair Pam Rorke Levy and Lauren Friedman, executive director of the UC President’s Office, Capital Asset Strategies — the art school is designated tenant, with the UC Regents serving as landlord.

The lease expires in October 2023, but includes three subsequent one-year extension rights. The tenants have an option to purchase based on the “terms and conditions of the lease”, which Mission Local did not obtain.

This apparent expenditure of nearly $20 million in public funds was undertaken without fanfare by the University of California.

It’s remarkable, but the involvement of the UC regents in this matter was not surprising. Regents served as “remaining trusteesfrom the school dating from an 1893 agreement between UC and SFAI benefactor Edward Searles.

And, as Mission Local noted in July, when Boston Private decided to enter SFAI, “Thank you to this 19th century pact, should the Art Institute cease to exist, its real estate – and its debt – would revert to the Regents of UC.

Calls and emails to UC regents have been returned with automated messages stating that the office is in recess until January 4.

Calls to SFAI’s acting COO Mark Kushner and spokeswoman Nina Sazevich were not returned. Pam Rorke Levy hung up the phone without answering any questions.

The San Francisco Art Institute, like so many colleges and universities, is reeling from the ongoing Covid-19 pandemic. But many of the SFAI’s tax issues predate covid, and were self-induced.

The school’s crippling debt stems from an $16 million loan it secured in 2016 to fund an ambitious expansion at Fort Mason — and an $18 million refinance in 2017.

On July 1, 2016, the school pledged its “real estate” – namely the site at 800 Chestnut St. – for a loan from the Shanghai Commercial Bank.

The Trustee’s Notice of Sale dated October 13, 2020 lists no less than 19 “murals and frescoes” on this property, the star attraction being Diego Rivera’s 1931 mural Realization of a fresco showing the construction of a city.

With the SFAI heavily indebted to the UC Regents, the future of this prized asset is in question.

A Dec. 23 letter to staff and faculty from the school’s vice president and dean of academic affairs Jennifer Rissler said “all options to save SFAI” are on the table.

“A number of people have expressed concern about the Diego Rivera mural,” Rissler wrote.

“Last Thursday, the board received a presentation similar to what the faculty and [staff] received at their monthly public meeting from the Chairman of the Board. The council voted…to continue exploring avenues and offers to endow or sell the mural.

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