:The delusional $650 million price estimate for the structurally complicated construction, built in concrete to the specifications of a maniac for architectural detail, may climb to $1 billion. LACMA may eventually have to sell the Rembrandts to save itself.
HOW SHREWD IS THAT?
LACMA is already the most heavily indebted museum in the U.S., and it’s taking on an additional $300 million in bond debt, and that’s not even counting the hundreds of millions the museum will need for the half dozen combined gallery-storage satellites that it is proposing (basically insincere inducements to supervisors and councilmen who think satellites will magically land in their districts without their footing the bill). The museum is overextended, and it barely survived the last recession with its credit rating intact, losing the May Company building and its 360,000 square feet in the process.
The museum’s bond rating is already low, and it cannot afford it to drop (any lowering of the Museum’s bond rating will increase its debt payments). Yet, LACMA’s recent past provides a sobering warning: During the last recession, fundraising collapsed, from an average of $139 million annually to $39 million. LACMA’s creditors threated to raise the interest on in its staggering $383 million debt, incurred during its early 2000s building spree. Unable to balance its books, the Museum cut a deal leasing the 360,000 square foot building May Co. building to the Academy of Motion Picture Arts and Sciences for 7-1/2 cents per square foot. The Museum had to scrap its plans to convert the May Co. into more gallery and office space and a children’s museum because it was then perilously close to defaulting on its loans. The Academy paid $36.1 million up front to LAMCA for the century-plus lease, getting a primo location for its own new museum (a new subway, thrown into the bargain for free) at less than 2% of the going rate. “The idea was not to haggle, not to make an issue of money; whatever was fair was fair,” LACMA’s chief said at the time. Thus did the county’s taxpayers subsidize the Motion Picture Academy while squandering an invaluable holding. Why should we now fork over hundreds of millions more when the Museum’s only remaining collateral will be its paintings and sculptures?
See Also:LACMA's Billion Dollar Debt - Commentary by Greg Goldin - LINK