JPMorgan Chase not assuming WaMu lease with SAM

JPMorgan Chase and the Seattle Art Museum announced today the bank will not be assuming Washington Mutual's lease for about 240,000 square feet of office space it rents from the museum in downtown Seattle.

That means the museum will have to find a new tenant to help it pay for the $5.8 million a year that it owes on the space. WaMu had been paying that amount in rent to SAM.

Helping somewhat will be a $10 million grant JPMorgan Chase is giving SAM, to be paid out at $2 million a year over the next five years.

The museum will be using all of that money to pay for the debt and expenses on the space.

But that still leaves SAM with a $3.8 million annual shortfall — a sizeable amount of money for an institution whose annual budget is $26.4 million.

"We're extremely grateful for this grant. It will help us meet, in part, the financial obligations on the space," said SAM spokeswoman Cara Egan. But "there definitely is a gap.... We need a tenant in there as soon as possible."

Egan acknowledged the current commercial real estate market is "a challenge right now. But we're optimistic. It's a great location, competitively priced."

The bank and museum said they will be working together to identify possible tenants for the space.

The museum's expanded downtown home, opened in 2007, was part of a joint development with WaMu. The museum leased eight floors of the 16-story building to WaMu.

JPMorgan Chase essentially purchased WaMu last fall, and in December said it was cutting about 80 percent of the Seattle work force at WaMu.

Later that month, the bank notified landlords it would pull out of all the downtown office space rented by WaMu by the end of March. The bank did not, at the time, say what it planned to do with the space WaMu was leasing from the museum.

The museum had a change-of-control provision saying that, essentially, if another bank or corporation were to acquire or merge with WaMu, it would take over the lease with SAM, Egan said.

But because WaMu was seized by the Federal Deposit Insurance Corp. (FDIC), and JPMorgan Chase purchased WaMu from the FDIC, Chase had the option not to assume any of WaMu's current leases, under its agreement with the FDIC.

"This was a unique situation," Egan said.

Today's announcement about the lease comes at an especially challenging time for SAM.

Though membership is high and individual contributions are holding steady, its endowment is down 27 percent and corporate support is also down, Egan said.

The museum has cut about 5 percent of its staff over the past year through attrition, layoffs and restructuring and it has a hiring freeze.

"We're doing everything we can to contain our costs," Egan said.