An Update to the Community from the Board of Directors

This week we publicly announced the news that the Board of Directors of the Soap Factory has voted to move forward with a proposed deal to transfer ownership of the iconic building it has occupied since 1995 to RJM Construction in lieu of payment of $3.8 million owed to them. The building will then be sold to a third party which will finish the necessary upgrades that were begun under our leadership, and develop the space as commercial office space. An additional $100,000 in operational debts owed by the Soap Factory will be covered by proceeds from the sale, and the organization will be given a 6000 square foot space in the basement of the building rent-free for two years after construction is completed at the end of Summer 2019.

We understand that many people in the community want to understand what has happened to bring us to this place. The building is beloved by the artist community in the Twin Cities for its raw open space that has fostered freedom and creativity for almost twenty-five years. The organization has been dedicated to facilitating experimental art outside the demands and expectations of the commercial art world, and we believe it has been and still is essential to the vibrancy of the spirit of Minneapolis and its artists. We have been engaged in a challenging process for the last three years, attempting to bring the organization to a place of greater financial stability and sustainability. Ultimately, we have failed to achieve our goals, but we hope in this statement to contextualize the struggle we’ve engaged in for those in the community who would like to understand what has happened from our perspective.

As many of you know, the Soap Factory as an organization was thrown into crisis in 2016 when it lost some critical foundation funding after the departure of its long-time director while grappling with the fallout from decades of under-investment in the maintenance of its building. In meetings with the community, a clear mandate was communicated: save the building, and use it to provide critical resources to artists: studio space to make work through affordable artist studios, funding to facilitate that work, and exhibition space. The Soap Factory launched an ambitious plan to secure financing to do the necessary upgrades on the building to bring the building up to code, and to renovate it to develop a residency program, affordable artist studios, and maintain a large exhibition space on the main floor. This plan involved a bridge loan from an investor who planned to open a restaurant in the building, and tax credits to access over $2 million to help pay for construction.

The plan was a creative one, but it turned out there were too many assumptions made. First, the value of the tax credits dropped after changes to the tax code in 2017. The bank then declined to finance the mortgage so we re-worked the building plan, sacrificing affordable artist studios for income-generating commercial space on the second and third floors. But for a number of reasons including a stalled construction project, we could not secure tenants to reassure the bank that this would provide income. Our restaurant investor became impatient as our timeline was extended, and he pulled out of the deal, putting his mortgage to us up for sheriff’s sale. Just before the sale in September 2018, RJM Construction stepped in and purchased the mortgage from them to buy us more time to complete a deal to stay in the building. They also provided a significant guarantee to the bank to help us bridge the gap in financing. In November 2018, however, our bank declined to offer us a mortgage a second time. At this point RJM, needing to pay its subcontractors for work already completed, decided to put the note they had bought from our restaurant investor up for sheriff’s sale. This well-publicized sale on December 18, 2018, gave us 6 months to pay off the $1.2 million mortgage or lose title to the property.

And yet we still had hope: a second bank had expressed interest in financing the project before the sheriff’s sale, and we believed that we could close on financing, redeem the mortgage, and complete the project. But with the publicity from the sheriff’s sale and the foreclosure on the property, they backed away from the deal.

In the end, we came away from our attempts to make this project work $3.8 million in debt. Approximately $2.5 million is to RJM Construction for work already completed on the project. The remainder is the restaurant investor’s mortgage which was bought by another investor, but that RJM plans to redeem before the six months are up, and other design and construction related bills. We have other debts, including an additional $100,000 in operational debt, and had to furlough staff in Summer 2018 because we had run out of money.

Throughout this process, we were fueled by hope, by a vision of a sustainable Soap Factory that would be a supporter of artists in the midst of a gentrifying neighborhood and city, and by the mandate given us by the community. Unfortunately, in the eyes of the banks, our numbers didn’t add up.

We also made mistakes. Running from crisis to crisis, we did the best we could with the information at hand, but hindsight has provided us better perspective in some instances. But one of the organization’s biggest mistakes was to begin construction before our financing was secured. This increased our indebtedness to an insurmountable level.

The Board’s decision last week to agree to sign the title over to RJM so that they can sell the building to a developer who will complete renovations was not made lightly. We know there are members of the community who are disappointed that we did not put it on the market ourselves to see if we could find a better deal. But with almost $4 million in debt, the risk involved in that scenario given our short timeline was too high. The deal we have just accepted in principle offers us the chance to get ourselves from negative $3.8 million to zero, with two years in a rent-free space in order to plan and rebuild. For a board that was investigating the possibilities of declaring bankruptcy and dissolving the organization, this is a great outcome.

Before the Soap Factory was the Soap Factory, it was No Name Exhibitions, an ambitious project with no budget started by two artists, Jim Tittle and Laurie Muir, who built it from nothing in 1988. As we pause and take stock of where we are after a very difficult few years, we find ourselves thinking of Jim and Laurie, starting at zero and creating something with real impact for the community. The spirit and audacity of No Name Exhibitions is at the heart of the Soap Factory. We as a board are ready to work to see the organization live on and do something new and essential for the community. It will not be what we had hoped to make happen in our renovation of 514 2nd Street SE, it will be something new.

We mourn the loss of the Soap Factory as it has been for thirty years, but we are also preparing ourselves to develop a new vision to tap into the art in our community that matters now, and will matter in the future.

The Soap Factory Goes to Sweden

The Soap Factory Goes to Sweden

Earlier this month, The Soap Factory team went abroad to visit our new partners in Tranås, Sweden; Colm Ó Ciarnáin and Emma Wood from Kultivera and representatives from Nya Smaland Project and regional arts Council, Mike Bode, Jörgen Lindvall, and Jonatan Habib Engqvist. In the month of August The Soap Factory will be sending four Minnesota artists to participate in Kultivera’s residency program. During our visit we had the opportunity to not only see where the residents will be staying and working but the opportunity to visit several of the rich cultural institutions in the Smaland region which the artists-in-residence will have access to for inspiration, research, and possible collaborations.

Read More