The Soap Factory, 514 2nd Street SE, has always gotten by without a lot of money, but with a deficit amounting in the millions and a deadline looming midyear, the board of directors behind the iconic East Side art locale has put out a plea for help. Assorted problems with the building have caught up with them, and after struggling to find funding to pay for renovations and failing to make a mortgage deal to pay the contractor’s bill, Soap Factory leaders decided to turn to the public for a hard push to meet their goal: $1.2 million within the next five months.
So how did this happen? The last the public heard from the Soap Factory was a little over a year ago, and the plan was to put affordable housing in the upper levels of the building while maintaining the studios downstairs. Then, plans changed and there was the idea of putting a restaurant into the building instead. Either way, the building needed to be renovated in order to be brought up to code; this is where the troubles started.
Rosemary Williams and Roy Close, the Soap Factory’s vice president and chairman of the board respectively, got in front of a crowd of ex-board members, artist tenants, and Minneapolis art community activists to explain the situation the evening of Jan. 7. The plan to turn the Soap Factory into a commercial space fell through after they hired construction company RJM to renovate the building. The investor behind the project pulled out of the deal, leaving the organization with a pile of construction bills.
“Today, I think back to the decision to go on with construction and I think, ‘Was that foolhardy? Was it brave?’ But at any rate, it was done,” said Close.
Programming at the 130-year-old soap manufacturing plant- turned-experimental-artist-hub had already been limited due to the turbulence with the renovation. Income was tight, and they were turned down for a mortgage intended to keep things moving. RJM was amicable, and even took on the Soap Factory’s $2.5 million debt, but good intentions only went so far. The construction company forced a sheriff’s sale of the Soap Factory to OSP LLC, an Edina-based asset and wealth management company for $1.2 million just before the New Year to make up their losses. The “Soap’s” board of directors still has control of the property, but they have been given roughly five months from the time this story publishes (six months from the sale itself) to repay the $1.2 million. As for the rest? Well, it’s one step at a time.
“RJM construction has been a very generous partner, and I just want to explain that because, even though they did do the sheriff’s sale on this debt, they stepped in, in order to try to help save us and save our relationship to the building. . .They stepped in and purchased a mortgage on the building with an investor who felt the need to step out of the relationship, and saved the building from going to sheriff’s sale back in September,” explained Williams. The breaking point came after another mortgage was turned down in November.. “That is the point where RJM said, ‘Well, we have to pay our subcontractors for the work that has been done, and we need to put up some of this debt.’”
RJM sold the mortgage at cost, meaning they didn’t make any money from the sheriff’s sale, according to Williams. The board of directors gets to maintain control of the building, and have a window of time to begin paying back the debts they’ve incurred. They had a glimmer of hope in a mortgage offer from a bank with a generous repayment plan, but it fell through on the day of the press conference.
“[The bank is] uncomfortable with the fact that there’s a history of foreclosure on the building,” said Williams. “We’re at an impasse, but it’s not necessarily the end of the story.”
Williams and Close weighed their options for the gathered crowd. The idea of selling the building and making a deal to stay in it as a tenant was bandied about, as well as trying to find a business partner with more resources.
Mayor Jacob Frey spoke briefly on potential options the city could offer in terms of aid, but he wasn’t able to offer much in the way of concrete action, as the city’s budget is already decided for the year, and he can’t produce a grant out of thin air. There are certain arts programs the city has, but they don’t have the push to handle the amount of money or time frame the Soap Factory is facing. He said philanthropic options are probably the best bet at this point.
“I understand there’s probably a whole lot of frustration in the room, and I’m frustrated myself. When we broke ground, what must have been a year or year and a half ago now, on the Soap Factory [renovations], there was a sense of optimism in the air,” said Frey. He knew that the sense of optimism surrounding the Soap Factory has risen and fallen quite a few times over the previous years, and hoped that the current setback may provide opportunities depending on the deal struck. “We’re going to have to do some serious fundraising.”
Frey did promise that his office and the City Council would do everything they can to make sure the Soap Factory will continue to exist in its current form, or that it stays true to its legacy rather than just replacing the crumbling brick building with another condo high-rise.
According to Close, the Soap Factory’s total debt is $2.5 million. RJM owns the building. After the initial $1.2 million sheriff’s sale debt is paid off, the Soap Factory would have a longer period of time to pay back the remaining debt. If the board cannot come up with the amount due in time, the debts owed to the contractors will still have to be paid, and the Soap Factory will lose the building. Currently, all Soap Factory staff is furloughed, and programming has been completely suspended while the scramble to come up with money is addressed.
“I think that we’re all looking for transparency,” said a former board member in the crowd to Close and Williams. A lot of confused and frustrated community members echoed her sentiments. “There has been zero communication, so I think it would be awesome if we just sort of put it out here. This is a community that is highly invested in many ways.”
Williams explained, “When things went from ‘Oh, this is gonna happen’ to ‘Oh, this might be going south,’ there was an impulse, definitely, among us to try to control the message to a certain extent because we were concerned about banks getting skittish if there was [negative] press. We were concerned about bad energy sending things in the wrong direction. In hindsight… I wish we had made different decisions. We were trying to protect an entity we saw as really vulnerable, and in retrospect, we really should have reached out to the community sooner and kept everybody in the loop. I just personally want to apologize for that decision.”
There is a light at the end of this dark tunnel. The amount of community support for the Soap has been overwhelming, and attendees of the conference discussed many fundraising options. A GoFundMe campaign has already raised roughly $250,000. Williams and Close also said that there are two new investors interested in purchasing the building outright; one is interested in keeping the Soap Factory as a tenant, and one is not. Many community members voiced concern at the risk of being pushed out of the rapidly gentrifying area by partnering with outside entities with their own interests and agendas. One audience member compiled a list of options that were discussed over the course of the two-hour meeting.
Many questions were asked on Jan. 7, and very few of them were answered. There is just too much in the air right now to formulate any concrete plan. Many feel the Soap Factory is more than just a building on the corner of 2nd Street, and some community members recognized the fact that some mistakes have been made over the course of the past year, and this six-month window will be a test to see if the program changes.
Former board member Sarah Schultz said, “The building has always been a seductive albatross. We can’t quite seem to quit it, can we? What are we saving? Are we saving a building, is this a building development project? Or are we saving a community? Are we saving a space for experimental practice? What are we trying to build and save?” She continued, “I’m super disappointed to hear that a year ago you knew those studios were out of the equation and it was becoming a commercial space, and you didn’t say anything. That was the big premise of being sold on this model, that it was going to be a vibrant, mixed-use space that was going to be able to support itself, that we as artists and other creative people were going to create an economy where we could actually do something to sustain ourselves. And that fell out of the equation a year ago and you moved ahead without telling the community…If we’re going to move forward together, it would be helpful to know what are we saving, programmatically, artistically, what are we building together here that’s more than just that building?”
The Soap Factory board will take a couple of weeks to consider the answer to that question and many others brought up during the meeting. A second town hall will be announced to lay out a more solid plan taking into consideration the Jan. 7 discussions.
Below: Metal fencing used to be draped with art pieces that represented construction signage. Street level windows were boarded up during renovations. Crumbling exterior brick. An aerial view of the Soap Factory and other old industrial buildings, with new housing rising up around the art space.