Oct. 1 (Bloomberg) -- In what seemed a cultural coup, Seattle Art Museum officials opened a glistening glass-and- metal-paneled, $86 million addition in January 2007, just months after completing an acclaimed sculpture park.

The arrangement with Washington Mutual Inc. even offered the museum space for future growth along with income to pay down the cost of the extension.

Thus, the museum accepted compromises on the interior and external design of the extension for the sake of rapid expansion. And just when the papers were signed, the subprime beast began eating away at the foundation.

When Washington Mutual collapsed a year ago, the museum lost $5.8 million in annual rent that was supposed to go toward the $65 million debt it incurred on the project.

The story began in 2002 with an agreement to clamp a 16- story box as a museum extension onto a 42-story headquarters that Washington Mutual would build on land owned by and adjacent to the museum. The bank wanted a prominent downtown site and the museum owned just the right parcel.

The extension opened with 100,000 square feet on four levels. The bank agreed to lease the extension’s remaining 240,000 square feet until the museum needed it.

What happened is that the Federal Deposit Insurance Corp. sold the collapsed bank’s assets to JPMorgan Chase & Co., minus some liabilities, such as the lease agreement with the museum.

Chase softened the blow with a $10 million grant to the museum. Thousands of bank personnel got the boot as Chase slashed Seattle-area staffing to about 800 from a peak of 5,000.

New Tenant

So the museum must find a new tenant, raise nearly $6 million annually, or cut deeply. It has already seen its endowment decline. It fired 12 percent of the staff and trimmed the budget by more than $1 million to $25.1 million.

The museum may not be in immediate financial danger, but it will face a monumental distraction for years. Should it have moved ahead with Washington Mutual when it wasn’t ready to grow and was still fundraising for the sculpture park?

“Who wouldn’t do business with a company based locally for over 100 years and worth $32 billion?” said developer Matt Griffin, managing partner of Pine Street Group, a Seattle-based real-estate developer. He helped match the two in the deal and is now trying to help the museum find a new tenant.

The Seattle Art Museum may come out ahead if it finds one quickly, although that’s not easy in today’s market.

Last month, Chase announced the sale of Washington Mutual’s tower to insurance firm Northwestern Mutual Life Insurance, which will move in 900 employees of its Russell Investment Group. The museum said the transaction doesn’t include its floors.

Lasting Damage’

The lure of a “free” addition damaged the museum in a lasting way. Washington Mutual wasn’t interested in creating a deserving setting for the museum; it wanted a generic office building -- a large one -- and persuaded the city to let it build 900,000 square feet on a site that would normally have been capped at 750,000.

The bank didn’t want the museum’s architecture to compete with that of its tower, so the extension has little distinctive identity, even though it is part of the city’s crown-jewel museum and the extension had its own architect (Brad Cloepfil, of Allied Works Architecture Inc. in Portland, Oregon). The extension’s metal- paneled box juts from the bank headquarters’ oversized, tinted- glass blandness (by local architect NBBJ).

In having to align its floors with the lower-ceilinged office floors, the museum ended up with too many cramped levels for its exhibition space. Cloepfil links the museum’s floors with escalators, and interleaves high spaces and intimate ones, but there’s only so much you can do to keep visitors clambering upward and stopping to gaze on the way down.

Vertical Pain

That’s why curators hate vertical museums. And the problem will be exacerbated when the museum takes the rest of its space.

The museum has seen some benefits from the deal. Largely because of the expansion, it “has acquired and been promised more than 1,000 works of art in all collecting areas,” said spokeswoman Nicole Griffin.

Still, even without big bankruptcies, real estate and cultural marriages of convenience too often turn into Faustian bargains.

New York institutions are well-acquainted with the cost of buying culture with square footage. There are the crummy Broadway theaters squashed under eyesore towers. The residential Museum Tower underwrote a 1980s overhaul of the Museum of Modern Art. That work was obliterated 20 years later by the museum’s 2004 expansion, while the tower lives on.

MoMA looks ready to repeat its mistake with a bloated wedge of zoning exploitation conjured by Jean Nouvel. The 1,050-foot hotel and condominium obelisk would be wedged between the museum and a drab corporate tower typical of the 1960s, and it could cast some of Midtown’s most prized and densely built blocks into darkness.

The lesson of the Seattle Art Museum’s debacle is that it’s time to expand cultural institutions another way.

(James S. Russell is Bloomberg’s U.S. architecture critic. The opinions expressed are his own.)

To contact the writer of this column: James S. Russell in New York at jamesrussell@earthlink.net.

Last Updated: October 1, 2009 00:01 EDT