The Museum of American Folk Art plans to sell its midtown Manhattan building to the Museum of Modern Art for $31.2 million and use the sale proceeds to pay down outstanding tax-exempt bonds that are in forbearance.
The Folk Art Museum had $29.9 million of bonds outstanding as of June 30, 2009, according to the institution’s latest annual financial statement.
“The institution anticipates that the proceeds of the sale of the property will be sufficient to effect the defeasance of the bonds which remain outstanding as of the closing of the sale and their retirement in full thereafter, all as permitted by the resolutions, agreements and other documents governing the bonds,” according to an event notice posted Monday on the Municipal Securities Rulemaking Board’s electronic database.
The property sale is set for July 1, which is also the next payment date on the bonds.
Since July 2009, bond holders have been paid with debt service reserve funds. The Folk Art Museum and bond insurer ACA Financial Guarantee Corp. entered into a forbearance agreement on Aug. 19. That agreement ends June 30.
In addition, ACA funneled $853,425 into the debt service fund in order to meet a Jan. 1 interest payment to investors.
“The constant burden of servicing and paying down this debt imperils the institution and distracts the museum’s board and staff from our pursuit of programmatic excellence,” Folk Art Museum president Laura Parsons wrote in a May 10 announcement posted on the institution’s website.
The institution’s board of trustees approved the property sale on May 10. The museum, which first opened in 1963, plans to operate from its Lincoln Square location.
The Trust for Cultural Resources of the City of New York sold $31.86 million of tax-exempt revenue bonds in 2000 on behalf of the Folk Art Museum. The proceeds helped finance construction of the institution’s 30,000 square-foot, eight-story building on 53rd Street in midtown Manhattan, just steps away from MOMA.
MOMA has yet to announce if it will purchase the neighboring building on 53rd Street solely with operating and reserve funds, or if it plans to issue municipal debt to help finance the property sale.
“We are not providing detailed information on the financial aspects of the building, except to say that we have the financial resources to cover the costs of the acquisition,” MOMA spokeswoman Margaret Doyle wrote in an e-mail.
ACA spokesman Whit Clay declined to comment on plan to defease the bonds.
