Saturday, February 21, 2009

Technocrats for the Arts: a wholly boring but highly informative transcription of the Art Spaces Public Presentation

Commentary from yours truly coming soon...
In the meantime, this is their website

Disclaimer: I did not include the rather lengthy detailed description of the properties or the Q&A. You can look at pictures of completed properties and mockups of projects in development on the website.


Wendy: …How many of you are artists, and I don’t mean just full time working artists, I mean anyone is even who is even an art hobbyist. Who are you? Or a cultural worker? Do any of you have your own studio spaces? Separate from your living? Integrated into the living and then a few separate from…And do any of you make 100 percent of your income from your art? There’s a couple. That’s pretty rare too. We usually find that of all the artists that we survey, that about 10 percent make 100 percent of their income from their art. You’re in a small minority.
Stacey : We’re going to leave the presentation and then turn it over to my able colleague Wendy midway through- to walk you through the last portion of the presentation. Art Space’s mission is simply to create foster and preserve affordable space for artists and arts organizations. The reason that I put it into italics is because I believe that while other developers have come into communities and promised that they can build you artist live work space there’s no guarantee at the back end that they will preserve it for artists and for their families. Art Space has been doing this now for 25 years, we have 23 projects in our portfolio, about 800 units of affordable live work space that we have protected for artists and their families.
We were created in 1979. We were created because in the warehouse district of Minneapolis- if you’re familiar with it- about 25 years ago it wasn’t exactly a place where you wanted to be. But artists like it because there are a lot of warehouses with high ceilings, lots of natural light, freight elevators, wide corridors, and it was affordable, and so we were connecting artists with those landlords, and what happened is that as the artists moved in, so did other entrepreneurs driving up rents and causing the artists to be forced out. So in 1986 we changed the mission of Art Space- tweaked it, I should say, that in addition to protecting artists that way we would become a real estate development company and we would build the buildings ourselves, and keep them in a portfolio. We are a 501 C(3) and own them in perpetuity so that we create some level of permanency of affordability for artists. As I said 800 plus units of public work that are affordable across the US and nearly half a million square feet that we own, operate and manage on behalf of arts-related industry and businesses, generally at reduced rates from market rate in their respective communities, and now looking into international work across the globe, thinking now that China will be our first experience- in Beijing, but Wendy and I were joking today that this is the closest we’ve come to doing something international, being so close to a- being a border town, so we might just call El Paso our first international experience.

At Art Space, we have three services. We have property development and asset management and then consulting. I’m going to lead you through the property development piece first. Property Development is a team at Art Space that actually takes over after Wendy and I at the National Consulting division have done our work. I put them in a little bit backwards because I want to talk a little bit in greater depth about National Consulting. So property development when we’re done with our work we take all of our portfolio that we’ve assembled we take our relationships we’ve created in the community and we hand them off to another division inside Art Space which then comes to this community or any community in the US that we’ve deemed ready to build an Art Space project and they begin the site selection. They begin the acquisition of the site. They create the conversations about putting the financing together. They fill out the loan capacity and tax credit application. They do all of that work and get it ready for certificate of occupancy. When we receive the certificate of occupancy, the Property Development team then hands off the portfolio off to the Asset Management team at Art Space and they assign an asset manager to the property to work locally with the community and with the artists here in the community. We then retain and foster the relationships that we’ve spent four and five years getting to know one another, hopefully getting to like one another at the end of it, and maintain those relationships as long as we have the building in our portfolio. I think that also makes us different than other developers is that we don’t just come and build it and leave- we build it and stay, and that’s the big difference. And then National Consulting which is what Wendy and I are doing today. We were invited here to assess your community. We never impose ourselves on a community. We are always present someplace because we’ve been invited. And I think that that does also make us unique. We don’t speculate because we are a 501 c(3) we don’t have the money to and certainly now that wouldn’t be the best economic time to run off and start speculating on a multi-use development.

What we’ve done this morning is we’ve identified and toured some candidate buildings. I think we’ve looked through eight or nine of them. We were given a list of sixteen potential candidates and then told that there are probably fifteen more at least somewhere in the downtown area. We just took a sampling of- there’s no need or reason for us to select a building today. We’re a long ways out from even having that conversation. It informs us though so we can go back and make the correct kind of judgments about what we think the next steps for El Paso should be. Part of these meetings today was to visit with local artists and some of the finance people in your community. Tomorrow I think we’re meeting with some of the elected officials and doing a wrap-up of our two days. Wendy and I will return to Minneapolis and write a report that will be submitted to the core group that brought us making our recommendations as far as next steps.

So the things that we’re looking for in this two-day assessment are these: Looking for local leadership. These projects don’t happen without elected officials and non-elected officials pushing them and making them a priority. Things just don’t happen unless that is in place. They also don’t happen if there is no available building or site. We can’t go into a community and say “We like that building,” and all of a sudden that building that was $700,000 goes to $7,000,000. Those kinds of things don’t work which is why we are very hush about what properties may or may not be working. Project concept- we’re very happy that the City has undergone a massive planning process and are inserting this as part of the process in the middle to the end of that as opposed to trying to build a plan around us. It just is a better fit, we think. One of the things we don’t have a true assessment of yet is the artist market. We have a gut feeling about what that may or may not be, but there are ways to test that if we do decide to go forward. And then another thing were looking at is the financial capability, not only support for low income housing tax credits but CDBG and home fund dedication but TIFF districts and renaissance zones, empowerment zone moneys- those kinds of things and certainly philanthropy, which includes corporate foundations and private individuals capable of helping us fill the gap at the back end of a project, which typically can tend to be 10 to 15 percent of the total of a project cost. It doesn’t show up very well on my screen. (8:23)

You can see where we’ve been working across the US. The red dots signify the buildings that are up in operation. The majority of our work is obviously in our home state of Minnesota. I think we have eight completed projects there to date. The yellow squares represent projects that are in some phase of pre-development, and that could be just having signed a pre-development agreement to trying to get that certificate of occupancy, and then the blue triangles represent the places where we have touched down most likely it’s Wendy and me or one of the two of us in the communities that you see.
So what do we accept? What are the things that happened, again- they’re there. They should be repeated because I think that they are so important. You have to have the strong community leadership. You have to have a viable artist community. A building is really important, but so is the plan to redevelop an area. It wouldn’t make very much sense to put one of these projects probably on the outskirts of town. It probably wouldn’t benefit very many people at all. We’re looking at how do we fit into the overall plan of the City. We’re really listening to what you and your representatives are telling us. We don’t impose our will on you. We want to work very much with you to get you the desired result that you should have. And then they can be historic buildings but often times- you’ll see in our portfolio that we do historic preservation work as a by-product of what we do, but we also have built new construction and have tried to replicate those warehouse spaces that way.
Some positives about our projects- they are positive cash flow and self-sustaining. They take typically 2 to 5 years from this visit to complete, and the reason they do is because they are fully-financed upon groundbreaking. We operate at about a 98-99 percent lease on our residential portfolio. I won’t lie to you that sometimes the commercial spaces have been a little bit more difficult to lease, particularly in more rural areas. One comes to mind in Furgis Falls, Minnesota. The project is about five years old and the commercial space- about 2500 sqft remains un-leased. But we think that we have a plan for that and so there are some things that don’t always work and that would be one of them. They do often have waiting lists. I know that in Seattle, we have two projects in Seattle and they are lists of about 1000 now on a waiting list to get in the building, and in Buffalo I think the list is about 400 and some and they’ve just stopped taking names. We know that there’s a market for the work that we do. They are owned, operated, and managed by Art Space, and I think most importantly for people- they do pay property taxes, so we’re not draining on your community- we’re actually contributing partners with you all. (11:30)
Our projects are different because they offer larger square footages that most market rates. Just using numbers as example- if a market rate one bedroom in this town is a 1000 sqft ours would probably be somewhere around 1200 to 1250. Because we do accommodate or allow for build out of a studio space or a separate space that can be used by the office for his or her craft. They are flexible floor plans with um- we try to keep the kitchens towards one wall like a galley kitchen- you’ll see some examples of it in some pictures here, and durable finishes. We love concrete floors or wood floors if they’re around. Because artists spill paint. They make messes. That’s the nature of our buildings and our projects and they kinda take on a life of their own, and we encourage that. So durable surfaces (inaudible mumble) well… Lots of natural light when we can get it. If we can’t get it we usually build it into the project. Freight elevators when they’re available, and wide hallways with corridors. And a large common space is always built into every project so that the residents can gather there. We encourage our residents to loosely gather as a condo association- if you will. They have no real power over the building. They have pretty much complete control over the programmatic aspects of their building, so if they want to have an art crawl of the first Thursdays of every month- they determine that- not Art Space. We don’t micromanage the buildings. If they- if there’s a gallery space that’s dedicated for the resident’s of the building, they determine if Joe’s photography exhibit from China gets it the month of February and then Joe is responsible for marketing it and drawing people into that gallery space. So we really allow it to kind of happen organically. They can be linked to transit corridors in Metropolitan areas. They have that unique floor plan. They can establish or preserve a community’s creative culture and identity. They do protect and nurture cottage industries and small business. A Lot of our residents also have jobs elsewhere in the community. The people who live in our buildings- I would say the vast majority of them- do not derive a majority of their income from their art work. They are bike messengers in New York City or pizza delivery people or waiters and waitresses in restaurants trying to do those jobs as little as possible to keep the lights and the heat on so they can spend the majority of their time doing the thing that they love which is their artwork. We provide for population growth and stabilization by rebuilding communities in neighborhoods, and we can serve as a catalyst for economic development through workforce development and other kinds of activities like to that attach themselves to our buildings. We know anecdotally that when we put a project in- other development happens around us within five to ten years you can see complete changes and overhauls to neighborhoods. I witnessed it in Portland, Oregon- a place that I hadn’t been for five years. I was out there in 2002. We had a project out there- nothing was really going on around it- near the train station- if you’re familiar with Portland- near the train station and adjacent to the Pearl District. I went back just now this last April and there were no less than six twenty-five storey high-end condominiums buildings that kind of popped up all around the building that we had created with a lot of salons and spas and galleries and wine bars and restaurants and those kinds of things happening on the street level pedestrian level around our projects. We know that we can take some credit for that and not all the credit, but certainly some credit for providing that.
I always put this slide in because I think this is really important for people to understand the impact of things like the Plaza Theatre and the symphony here in El Paso. It may seem that it’s an ancillary thing to your community, but it really is an important and integral part to it, as it is in every community. And these numbers are produced from a 2005 research done by the Americans for the Arts showing that nearly $170 billion in tax revenues from things like your Symphony like your Opera Company, your non-profit arts sector went back into local governments creating nearly six million jobs. And if you look down there in the last two numbers that $9.1 billion dollars went back to- divided amongst all the state capitols and then back to your local communities. $7.9 almost 8 billion dollars in generated revenues for your communities to spend back on important things for you.
So now I’m going to turn it over to Wendy to talk about how we select artists and determine that piece that will lead us to the end.

Wendy: We definitely feel that there is an artistic pulse here so you should know that we’ve been favorably impressed today that a lot of interesting and good things are happening in El Paso. You have some challenges but you also have some opportunities. We definitely saw both sides of that equation today. We’ll talk about that more at the end and answer your questions. Because most of you are artists you’re going to be interested in- well how do artists qualify to be in our buildings and what’s kind of the process? So there are three different things that artists must do to be in our live-work space. Obviously if you’re leasing gallery space or you’re leasing a coffee shop that doubles as a gallery, it’s a different kind of relationship, but if you’re trying to qualify to be a resident in the building then there are three different things that we look at: the credit check, previous rental history, and then obviously your typical criminal background check.
And then we’re looking and rent and income threshold. So we’re looking at artists- if we’re using low-income housing tax credits, which we typically do for our live-work spaces, then you must be at or below 60% of area median income for in this case it’s El Paso County that determines that income. For a single person in El Paso County that would be $18,300 dollars, approximately- for a single person. Obviously that differs for two people, three people, four people- different sized households will qualify at different income ranges. And then you must be engaged as an artist interms of having a passion for some form of art. We’re not judging on quality of the work. We have a selection committee that interviews each of the individual artists who will live and work in our buildings and it consists of you. So, we’re looking for artists with a diversity of backgrounds, and cultural experiences to actually interview each of the potential artists who will live in the building once they income qualify etcetera. So, why we do that is because we as the outsiders are not necessarily the best judges of who the authentic artists are. We’re not looking at quality again, we’re looking at some kind of body of work and some passion for what they do. It can be a craft, it can be birch bark canoe making, it can be dancing, it can be poetry, it can be anything. I like to use the example of in our Duluth, Minnesota project there are a lot of Ojibwe who originally occupied the building and they did not have a word for art because it was so much a part of their everyday world. So we view art in the same way. It’s a very personal and cultural kind of definition. So we don’t say performing artists out, visual artists in. It’s a culturally specific definition. So again don’t hold onto these numbers too highly because these are estimates and they are based on 2008 and these came from HUD, but because we use a lot of government subsidy programs that means that we have to abide by the rules from those programs. So, for example a one-bedroom live-work space if created today in El Paso- first of all it would be larger than a typical apartment. A typical apartment is 900 sqft, one bedroom is 900 sqft in El Paso, we would be creating 1100 sqft, so that there’s more space to do, have a studio plus you’re living space. And those rents would range from- at the top of the scale- between $352 and $515 dollars a month. So it’s usually well below what the market is for that size and space.

Some of the frequently asked questions is what- how do we finance these projects, and we won’t go into a lot of depth on that, but if you have questions about this we are happy to answer them. We use low-income housing tax credits- this is an example specifically from our Buffalo, New York project- we used community development block grant dollars, which come through either the county or the city depending on the municipality. We use HOME funds, which are specific to the housing portion of the projects. In this case we were able to get a line-item appropriation from Congress through Senator Hilary Rodham Clinton. Former Senator I should say. We also coupled with that support from the private sector, so foundations, corporations, individuals, they all contributed to this project as well. And this first mortgage we always try to keep very, very low so we don’t have a lot of debt on these buildings- they have to cash-flow positively. We’re not going back to the community to ask for additional resources once their up and operating, so there’s not a continued drain. We’re not a new non-profit coming into a community saying we need philanthropic support on an annual basis. No, it’s to get the projects off the ground, but not to maintain them over time. And so that’s another unique aspect of what we do. (22:10)
So how big is a building for 25 units of housing and commercial space? The reason we say 25 is because outside of Minnesota the smallest projects that we ever do are 25, and I think in a Metro area as large as yours you could probably support 50 or 60. That will be something that will need to be tested. It would take us to the next step. So that building dimension or size would be about 40-45,000 square feet, if you’re looking at 25 units plus some non residential space for a mixture of uses. So does an artist at an Art Space project have to be a profitable working artist? Well we already covered that. The majority of our tenants do not make the majority of their income from their art. We hope that over time that the income from the art begins to go up as they are able to be in a stable, sustainable, affordable space. And we have anecdotal information that that is the case. We find that our tenants stay for quite a long period of time. But we don’t know the answer to that in a scientific sort of way. We’re about to research that all across our portfolio because that would be the kind of information that would really be interesting for us and you to know. Stacey you’re the expert on this one. Do you mind?
Stacey: It’s actually really important for the State of Texas because we built a project in Galveston and then another one in Houston and the Texas Housing Finance Agency was interpreting the Federal law- the Federal Housing Law, section 42, which is where the low-income housing tax credit piece comes in- was interpreting that these projects could be in violation of the General Public Use requirement, that is that X person who income qualifies shouldn’t have an threshold put on them that they are also an artist. And then that application was also made, well- if you’re creating police and fire-fighter housing then the person who income qualifies should be able to live in the same place that’s dedicated for the police and firefighter and HUD said we were not in violation but the IRS said that they thought we were. So we went to Congress and changed the law so that it specifically said that we would not be in violation of the general public use requirement if we built projects- on line 21 you can see there that said- for persons involved in artistic and literary activities. So we spelled it out in the law that we can actually create these buildings for persons that are engaged in that artistic or creative endeavor. The law went a little bit further and there are other examples beyond this- it did also protect housing for unwed teen mothers, and for police and the firefighters and for first responders, so all of those groups that were in question were protected under this new law which was a housing stimulus law passed in July and August of this most recent summer. It’s a huge victory.
Wendy: Our project in Pittsburg was being audited by the IRS at about the same time that we were trying to occupy our Houston project so we had to go very much underground with our marketing efforts to make sure that 100% of our units were occupied by artists. At the same time Katrina hit. It was interesting because several- oh I don’t know, I think- six or seven jazz musicians from New Orleans ended up in that building for a temporary period of time as well, so it was an interesting perfect storm of activity that happened at the time we were doing our Houston project. So, we have made it work though. In Seattle for our second project we also couldn’t be discriminatory, if you will toward creating space specifically for artists, but the whole thing is artists find out about these projects way in advance of the general public because they’re interested in this kind of space and so they’re coming to meetings three to four to five years prior to these projects being created, and so they know and they tell their friends and so it goes, and so the artists are always the first to know.
This slide shows you the population change and shift that happened after a 118 units of live-work housing and 15,000 sqft of arts related commercial space were created in downtown St. Paul. The artists were pioneers moving into these giant warehouse buildings that we’ll show you pictures of in a moment, and the population changed exponentially and this neighborhood called Lower Town, as a result of these artists moving into this area. Now across the street there’s a farmer’s market, there’s market-rate condominiums, there’s other space for artists that we didn’t develop, so it really became a catalytic force for a density of activity in the arts that was both created by us and not created by us, but it became known as the sort of artistic center of St. Paul, and it was because these pioneering artists moved into these empty warehouse buildings.
So we did this really crazy things and we do this for kind of kicks and giggles because people think, “Wow, why did you do that?” We still wonder ourselves, but we own and operate this Masonic Temple in downtown Minneapolis that has 17 different performing arts organizations in it. This is not a residential project- this is a project only for performing arts organizations. And that’s what it looks like today, and we picked up this theatre, and it was about two blocks away, we picked it up and the city paid for us to move that theatre because it was sitting on a block that was slated for development that no one would develop with the theatre on the block. And if it was torn down the preservationists were going to sue the city. (28:39) So the city was either faced with being sued for $4-5 million dollars or pay $4.3 million dollars and move the theatre, and they thought well, “who could manage this theatre, do the capital campaign, figure out how to use the space?” Yes, it was done- figured out at a cocktail party. That shouldn’t surprise many of you. So we picked up this theatre that was in pretty rough shape. We could not move the stage house. We moved the main theatre itself. It was the largest building ever to be moved on rubber tires- 5.8 million pounds. It was in the Guinness Book of World Records. Here it goes moving across the street. It took two weeks to move the building two blocks. We would look out our windows and could hardly even perceive the movement itself. And it was in February, 1999, and when we finally moved it to what we hope is its final resting place, we were having a little civic celebration with the mayor and the City Counsel and it’s February in Minnesota, I know that’s hard for you all to imagine, but we tried to crack a bottle of champagne on the side of the building- it would not crack, because it was so cold. We had to hit it against the building about ten times before it would crack. So now that we’ve moved the theatre fifty feet away from the Masonic Temple that we showed you earlier, we’re creating this in-fill space that will be sort of the entry way into this new performing arts center that will serve these non-profit performing arts organizations in the Masonic Temple. So this will be a three building performing arts complex. We don’t typically do this kind of thing, but just to show you the diversity of the kinds of things that we do, depending on the situation. I’m going to go through a few specific profiles of our projects and then we’ll show you some pretty pictures and then we’ll open it up for questions.

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