The building that houses the Art Institute of Pittsburgh has been sold, but the school isn’t going anywhere — for now.
Chicago developer M&J Wilkow completed its purchase of the nine-story building on the Boulevard of the Allies this week, paying about $9.9 million.
In conjunction with the sale, the Art Institute has signed a lease to remain in the Downtown building for the next three years, said Martin Sweeney, vice president of asset management for M&J Wilkow. But there are no guarantees beyond that point, prompting the developer to already start exploring other options for the property, including loft offices or apartments and perhaps even a hotel.
If the Art Institute, whose parent company Education Management Corp. is facing financial woes and lawsuits, wants to stay beyond three years, “that’s something we would look at favorably,” Mr. Sweeney said.
The decision, though, ultimately would rest with the developer.
“They don’t have a right to stay. It would be up to us to decide if we wanted to keep them. That would be a function of what our options are. If they wanted to stay and pay rent and occupy the full building, that would be an attractive option,” he said.
At the same time, Mr. Sweeney said that the developer must plan for life without the school. In that vein, it is working with the Strada architectural firm to determine possible reuses.
With its high ceilings and large windows, the building appears to be best suited for loft offices or apartments, Mr. Sweeney said. It also could house as many as 200 hotel rooms.
“It’s good to have options in life, and that’s one of the things we really like about this investment. After three years, we’re really going to have a lot of options,” he said.
In marketing the building for sale on behalf of EDMC, the Jones Lang LaSalle real estate firm stated that the school would consider a leaseback term of up to two years with an option for a third.
At the time, EDMC was promising to guarantee the lease, which included a $1.9 million base rent in the first year and an annual 2-percent increase. Mr. Sweeney said the final deal ended up being for a full three years at slightly lower rental terms. Nonetheless, with the rent it is receiving, M&J Wilkow will recoup more than half of its investment in the building in three years, he noted.
Mark Belko: firstname.lastname@example.org or 412-263-1262.