Without the capital to start construction within the required timeframe and cover certain costs, the museum is in default of its lease with the city, which owns the commercial space. The museum has been leasing the unoccupied space, located steps from the Museum of Modern Art and other museums in the Yerba Buena Arts District, since 2015. The contract granted the museum future use of the site for 66 years for $1, and is renewable for another 33 years.
The total cost of the museum's planned project has been valued at between $38 million and $60 million. At least $11 million is needed to complete the first phase, which would target the first two floors for a lobby and pop-up gallery.
But according to communications between the nonprofit and the city obtained by the Chronicle, the museum, as of last week, had not secured even a fraction of that amount. It now stands to lose its lease at 706 Mission, potentially in as soon as two months, unless it manages to cure the default.
"The city reserves the right to exercise any and all of its remedies under the Lease, including … the right to terminate the Lease on written notice," Andrico Penick, director of the city's Real Estate Division, said in a letter sent Wednesday notifying Andy Kluger, chairman of the museum's board, of the default.
![Potential investors toured the Mexican Museum's proposed downtown San Francisco location in 2024. The spot, at the base of a condo tower, remains unoccupied.]()
After a city audit last year raised concerns over its ability to finish its downtown project, the museum was given the June 14 deadline to raise roughly $4.5 million from private donors. If successful, it would retain access to some $6.6 million worth of unspent city funds, which were promised to support construction at 706 Mission back in 2010.
The 10-year grant agreement, which was managed by the city's former Redevelopment Agency, now the Office of Community Infrastructure and Investment, or OCII, was for $10.6 million. It had already been extended prior to its expiration this month.
Had the museum secured at least $2.3 million by June 14, it could have requested another six-months to continue fundraising without losing the public funding, so long as it was meeting its lease obligations, records show.
Victor Marquez, the museum's longtime general counsel, told the Chronicle in December that fundraising was on track — the museum had over $16 million in pledges, he said.
But, on June 13, Marquez wrote to OCII Director Thor Kaslofsky requesting more time, and admitted that the museum had no funds secured yet.
"While the Museum does in fact have bonafide commitments that exceed ($5 million), it will not, however, have them on hand 'available for expenditure' on June 14, 2025, as mandated by the Grant Agreement," he said in a letter, and suggested that the museum was entitled to a 60-day cure period to secure the funds.
In his response on Wednesday, Kaslofsky rejected the notion of a cure period, but said that OCII would not reallocate the remaining grant funds for at least 60 days, indicating that the museum still has a shot at claiming the city dollars.
Kaslofsky's letter coincided with the Real Estate Division's default notice, which warned the museum that it now faces a lease termination, and that it has until Aug. 18 to address alleged breaches.
The letter stated that the museum must provide required financial reports, like its budget and tax statements, to the city. Penick, that department's director, said the reports had been outstanding since 2018. The museum must also provide proof of insurance coverage for the 706 Mission space and pay over $600,000 in outstanding operation and maintenance costs.
The lease required the museum to finish tenant improvements within 24 months of receiving the keys to its space, which the city said occurred in July 2023.
Penick told the museum that it now has two months to complete the project's first phase — a near impossible timeline, given that the museum has yet to submit construction plans to the city or secure required permits, which can take months.
And, without the required capital, the nonprofit won't be able to start the work.
"The city reasonably anticipates that (the museum) will fail to meet this lease obligation, and therefore, the city is giving notice of this anticipatory breach and the opportunity to cure," Penick said in his letter.
Marquez, Kaslofsky and Penick declined the Chronicle's requests for comment on the recent developments.
The Chronicle reached out to members of the museum's board, including Kluger, in recent weeks, but heard back only from board secretary Xochitl Castañeda, a longtime UC Berkeley professor, who confirmed that she is no longer involved. Per the city's audit, the museum had six staff members in 2023. It is unclear whether that number has changed.
The lease default is the latest turn for an institution that has had surprising political influence in the city, despite essentially existing only on paper for much of the past decade and having long faced transparency and accountability accusations.
"The reality is that the previous mayor didn't want to upset the apple cart while she was running for reelection," said former downtown Supervisor Aaron Peskin, who called for the city audit of the museum's fundraising efforts last year. "This organization does not have the capacity, it has repeatedly failed to perform and it's time for the city to move on."
With a contentious election year in the rearview mirror and a new mayor focused on oversight of the city's spending on nonprofits, the museum's support in City Hall appears to be waning.
"Our administration will always stand up for our Mexican community, and we are working to find a way to celebrate their heritage in San Francisco. We are currently giving museum project leaders an opportunity to provide information regarding the status of their grant and lease," said Charles Lutvak, spokesperson for Mayor Daniel Lurie.
Should the city terminate the museum's lease at 706 Mission, it could then begin to search for a new tenant.
"At the same time, we must begin having conversations with other leaders in the community to ensure we uplift this community and put this collection on display for the entire city," Lutvak said.
Supervisor Myrna Melgar said that she believes it is "fair to look at the plan and assess whether or not they have met their requirements" about the museum project.
"We have plenty of other museums in town who have a proven track record of being able to both raise the money and have a collection that is viewable by the public," Melgar said. "The issue has always been: They're not Mexican."
Former Mission District Supervisor David Campos called the museum project's unraveling "a sad reality" at a time when Latino and immigrant communities across the country are facing intense scrutiny and targeted actions by aggressive federal immigration policies.
"Latinos are under attack in this country, and Latino culture should be highlighted," he said, adding that he did all he could while in office between 2008 and 2016 to support the museum and push its downtown project forward. "Public money comes at a cost, and that cost is accountability and transparency," Campos said. "That's what we set up for the museum to do its part, but obviously it failed to do that."
Emails obtained by the Chronicle through a public records request show that the museum's most recent fundraising campaign likely stalled out when another nonprofit that had agreed to lend its expertise exited the partnership.
The museum outsourced management of its operations last year to Mission Neighborhood Centers Inc., or MNC. Serving as the museum's fiscal agent and fundraiser, MNC agreed to oversee construction of the downtown space and to launch a capital campaign and grant-writing program to bolster its finances.
In March, MNC CEO Richard Ybarra sent an email to city stakeholders notifying them that the partnership had ended. He said the groups had been negotiating regarding their collaboration since summer 2024 but were "unable to reach an agreement that would be acceptable to both parties."
Ybarra confirmed when contacted in April that MNC "broke off talks" with the museum, but he declined to comment on what led to the breakdown.
A fundraising plan submitted to OCII by Ybarra in May 2024 detailed how MNC planned to raise $37 million for the museum in 24 months, through separate campaigns in the U.S. and in Mexico.
It also listed three pledges from potential donors that the museum had received: $5 million from Mexican businessman Mauricio Sulaimán for a "second floor Sculpture Gallery"; $100,000 from Marquez, the museum's attorney, and UC Berkeley professor Matteo Garbelotto that would go toward the museum's gift store; and a $500,000 pledge made in 2023 by Nur Hausawi, who said she manages the wealth of a Saudi American family living in the Bay Area.
The latter pledge represented yet another curious twist in the museum's fundraising saga: Hausawi, also known as Robin Lee Allen, told the Chronicle last year that her employers are donors for art and culture causes in the region. But the pledge, which the Chronicle reviewed, was made by Hausawi using her life insurance policy. It could only be cashed out if the museum raised $5 million on its own.
Build a mex museum IN mEXICO--the REAL mexico. South of the Rio Grande.
ReplyDelete--GRA