Part 2 of 2

Derrick Cartwright was director of the San Diego Museum of Art less than four years ago when he read a New York Times headline about the Seattle Art Museum's new Olympic Sculpture Park and its planned downtown expansion, projects costing a combined $170 million. The headline, “Where Money’s No Object, Space Is No Problem,” expressed the optimism of the time, before the nation's banking crisis, and while the stock market was still rising higher and higher.

Cartwright brought the article to his museum’s next board meeting, plopping it down on the table and announcing, “Now that’s what we should be doing.” The growth he witnessed from afar drew him to accept the top job in Seattle a few years later, with the expansion complete and the museum's financial challenges already apparent.

To raise all that money for both the sculpture park and the downtown expansion, and to make sure the park’s operating expenses would be paid without having to charge a fee for admission to the grounds, the museum solicited 10,000 donations totaling more than $200 million, an average of more than $20,000 per donation and the largest capital campaign ever mounted by a Seattle institution. At the heart of the campaign was its grand expansion at First Avenue and University Street, made possible well ahead of schedule because of a financial partnership with Washington Mutual bank.

“There’s a door that opens and you have to go through it,” said Maggie Walker, president of SAM’s board of trustees. “There are some risks, but you don’t have a choice, because those windows and doors don’t open that often.”

The original downtown museum, designed by architect Robert Venturi, was conceived during the 1980s, although even then the museum’s trustees had the foresight to purchase the entire block the museum stood on, knowing it might someday want to expand even further. Seattle’s cultural and economic leap of the 1990s began just as the museum opened in 1991. The building was less than 10 years old when, in 1999, its trustees realized it was too small for SAM'S aspirations and voted to expand again.

Trustees estimated the museum would need an additional 300,000 square feet over the next 20 years, a tripling of its size. SAM was already committed to the construction of the sculpture park; a physical expansion of the downtown building was still an abstraction that was decades off. Then, a few years later, the hometown bank known as "WaMu" made the museum an offer it felt it could not refuse.

The bank wanted to erect its new headquarters on the block the museum owned, bordered by First and Second avenues and Union and University streets. (The legal owner of the block was actually the Museum Development Authority, a public/private partnership with its own board of directors.) By sharing the block with WaMu, and agreeing to become part of a new bank tower, SAM was able to build its own dream home 20 years ahead of schedule.

The partnership also meant SAM had to give up any hope of someday residing in a freestanding structure like the Frank Gehry-designed Guggenheim Museum Bilbao in Spain, a tradeoff trustees considered seriously. (The unique arrangement is similar to that of the Museum of Modern Art in New York, which sold its air rights above the museum so a developer could build a condominium tower; the proceeds helped fund MOMA’s expansion in the 1980s.)

WaMu paid SAM and the Museum Development Authority (MDA) $18 million for the bank's portion of the block, so it could build its 42-story tower. WaMu also agreed to pay the MDA $9.7 million for a parking garage the group owned across the street. Adjoining the base of the tower was the shorter, 16-story museum building. The bank building and the museum building shared a wall but were given separate entrances, WaMu’s on Second Avenue, SAM’s on First.

SAM owned the first 12 floors of the museum building, WaMu the top four. SAM’s share of the museum building cost $78 million (about one quarter of the cost of the entire project) but gave SAM all the room it needed for the foreseeable future. The museum used proceeds from the land sale, $28 million, to pay its share of the new building. It financed the rest, more than $50 million, with bonds that it would pay off using rental income from WaMu, which agreed to lease eight of SAM’s 12 floors until the museum saw fit to take them over. The bond payments of $4 million a year would be more than covered by the $5 million SAM expected to receive each year in rent from WaMu.

It was as if SAM got most of its new building for free. With more space, the museum could raise more funds. Promise of a bigger, more spectacular museum is what motivates wealthy benefactors to give away their money. It was a bulletproof deal that considered just about every contingency — except a full-on collapse of WaMu. That seemed inconceivable at the time. It was the city’s largest employer and had assets worth almost $300 billion.

“We considered its sale or transfer but not its seizure by the FDIC," the Federal Deposit Insurance Corporation, Cartwright said.

Those years suggested a city in full bloom. A new symphony hall went up in 2002; the Rem Koolhaas-designed Seattle Central Library was completed in 2004. The value of real estate was climbing. The stock market was hitting new highs, raising the values of local companies like Costco, Boeing, Amazon, and, of course, WaMu, which began moving into its new 42-story headquarters in 2006.

The larger SAM officially opened in 2007. The addition of the four new floors — Picasso is now staged on the fourth floor — expanded the museum from 150,000 square feet to 268,000. The earliest it planned to move any higher than the fourth floor was 2016, when it had the option of taking back one or all the remaining floors.

WaMu collapsed in the fall of 2008, the largest bank failure in American history. It was seized and sold to JP Morgan Chase for $1.9 billion. Its lease agreement with SAM was dissolved, although the new company continued to occupy the museum’s upper floors until the middle of 2009. The new owners were not required to honor WaMu’s lease, but as a gesture Chase agreed to contribute $9.5 million over five years to help offset the loss of rental income, a sum that covered only half of the yearly, $4 million bond payments.

Late last year, SAM received some good news when Nordstrom agreed to lease six of the eight floors Chase left empty. While neither Nordstrom nor SAM would disclose details of the new lease, Nordstrom spokesman Colin Johnson implied his company intends to get comfortable in the space (for Nordstrom corporate employees) and stay awhile. "We think the space offers a longer term solution for us to be a bit less spread out across different buildings," he said, "while also giving us flexibility to grow."

SAM's own plans to move into that space sometime after 2016 are up in the air, dependent on factors it cannot completely control, including local philanthropic trends and the health of the museum's endowment. Museum officials are in the planning stages of their next fundraising drive, saying only that they intend to aggressively raise funds in the coming year.