Andy Rappaport and Anita Durst discuss the need for affordable studio spaces for artists.

If you’re an artist, chances are that you want to live and work in a big city where there’s usually an established art community, museums and galleries as well as well-heeled clients. But big cities also come with high rents, which few artists can afford.

Two organizations are solving this problem by offering free or subsidized spaces for artists through the repurposing of commercial real estate locations: Andy Rappaport, co-founder of the Minnesota Street Project in San Francisco and Anita Durst, founder and artistic director of Chashama, a nonprofit that persuades real estate owners to donate their unused spaces month-to-month. Chashama [pronounced sha-SHAH-mah] means “to have vision” in Farsi, an Iranian language. Durst, a scion of the family that runs The Durst Organization, a prominent New York City-based real estate firm, says she now has more offers of donated space than she needs.

Rappaport and Durst discuss their support for artists and the genesis of their ventures on the Knowledge at Wharton show, which airs on Wharton Business Radio on SiriusXM channel 111, as part of a content collaboration with Orangenius, a firm that helps artists develop business skills.

An edited transcript of the conversation follows.

Knowledge at Wharton: Anita, how did Chashama get started?

Anita Durst: I worked with Reza Abdoh. He was an avant-garde theater director. He taught me about the power of creativity. When he died of AIDS in ’97, I wanted other people to feel that power of creativity that he taught me. The way he would get theater spaces for his shows was to get people to donate space to him. I took that model of getting property owners to donate space, and used it, instead of only for my own work, for other people’s work as well.

Knowledge at Wharton: These locations are in and around New York and in New Jersey?

Durst: Yes. We have 23 locations. They are donated to us on a month-to-month letter of agreement. We’ve had some spaces for over 12 years.

Knowledge at Wharton: What’s the reaction of these artists when you’re able to work with them, and obviously provide something that helps them out immeasurably?

Durst: The artists are very grateful and thankful because we are able to give it to them at a reduced rate, or for free. For workspace, it’s about a dollar a square foot. For all our presentations, the artists get the space for free. We do about 150 shows a year.

Knowledge at Wharton: Andy, how did Minnesota Street Project get started?

Andy Rappaport: It got started as a response to the extremely rapid rise in rents and property values in San Francisco that accompanied the most recent tech boom. My wife and I are avid art collectors, and have been around the arts community in San Francisco for quite some time. And we were seeing our friends, who are artists and gallerists and people that work and run non-profits, rethinking whether they could afford to stay in the Bay Area. They were all contemplating leaving the Bay Area, or giving up their practices, or their work, or what’s been keeping them going. We realized somebody needed to step in and do something.

“The artists are very grateful and thankful because we are able to give it to them at a reduced rate, or for free.” –Anita Durst

Most of the real estate that had been used by artists and arts organizations in San Francisco could be re-purposed to tech offices, or in some cases, housing, which was driving values up three, four, five, in some cases, 10 times what artists had been paying. [However,] there is industrial real estate in San Francisco that can’t be used for Class A offices, and can’t, at least now, be converted into residential uses. But the problem is that those facilities are not configured to be very useful, or very safe for artists and arts organizations.

We decided to acquire some of those properties, and use our balance sheet to convert them into safe, productive, habitable workspaces, and commercial gallery spaces. We offer those at rents that would allow us to break even operationally, but not make the returns that real estate developers typically make in the city. [That model] allows us to charge rents that are anywhere between 20% and 30% of market [rates].

Knowledge at Wharton: In San Francisco, the cost of real estate has skyrocketed in the last few years.

Rappaport: That’s exactly right. If you look at the rental market for artist studios, for example, the typical artist’s studio is a space where one or maybe two people work. You want as much space as possible, and relatively few people, which is exactly the opposite of tech offices. Tech offices [have] a lot of very expensive people who occupy very little space. I was a tech investor for decades. When you look at the amount of money that tech companies can afford to pay for space, given the fact that they need relatively little per high-priced employee, there’s just no way that anyone but a tech company, or the commercial entities that serve them, can afford to compete for that space.

Knowledge at Wharton: I read that you are reinvesting in the art community the money that you and your wife, who co-founded this, get in rent.

Rappaport: That’s right. One problem we needed to address was how to provide space that will work immediately for artists and arts organizations. We also wanted to build something that is provably sustainable, so that people can decide to re-commit to the Bay Area. In order to accomplish that, we had to create a model that was financially self-sustaining, and we set our operation up as a for-profit. That for-profit has an umbrella that covers not only the subsidized rental spaces that we provide, but also some positive cash flow that bring financial balance.

Knowledge at Wharton: What advice do you give young artists as they are starting to move forward with this process, Anita? It’s got to be a challenge for many of them. They’re thinking about their art work, and not necessarily about the business elements involved this process.

Durst: The business aspect is what I tell [the artists] to start thinking about. They are focused on their creative process. We try to hold workshops where they’re able to learn about writing the artist statement, how to do contracts, etc.

“What looks like a crazy idea today can be absolutely mainstream and embraced by everyone tomorrow.” –Andy Rappaport

Knowledge at Wharton: Andy, is that similar to what you see in San Francisco?

Rappaport: Well, sure. Most people don’t realize that artists are running small businesses, and to survive, they need to be supported and skilled in a wide range of things. When we built our project, [we tried to] create self-supporting community. We did this partly [because] the community was atomizing all over the city, and people were grabbing space where they could find it.

One effect was it was hard to find the arts in San Francisco. But another effect was that artists and the entities that support them weren’t cohabitating, and weren’t able to see each other and support one another. We have 120,000 square feet over a block and a half, completely occupied by people and entities in the arts. Way beyond what we ever imagined, they’ve formed a self-organizing community, where they’re supporting one another. We have young artists who are learning from the successes and mistakes of more experienced artists in the program.

Knowledge at Wharton: Anita, have you seen that with what you have done, in terms of artists communicating?

Durst: Yes, absolutely. When you create a space, and you put a group of artists together, they form networks, help each other, introduce each other to their own networks, and share ideas.

Knowledge at Wharton: Your family has a long tradition in the New York City real estate market. There was an element of your family in this project. Take us into that a little bit.

Durst: They are real estate developers in New York City. [If they had] an empty building, I would ask if I could use it. At one point, we had six buildings on 42nd Street, which is now the Bank of America tower. When we had to leave, we would ask other property owners for space. It is much easier than you would think to get space in New York. The spaces that come to us are mostly from word-of-mouth. Property owners contact us, and then we go and utilize these spaces. We actually have too many property owners asking us to use space at the moment.

Knowledge at Wharton: How far out are you signing contracts for these properties?

Durst: It’s a letter of agreement, and we ask for three months, and then go month-to-month. It is open-ended. We’ve had some spaces for up to 12 years.

Knowledge at Wharton: What is the response of the property owners when you ask for space for artists to do their work?

Durst: They’re very positive. When you have an empty space, it causes negative energy. But when you have something there, it causes positive energy. It beautifies the neighborhood. It increases traffic. It increases economic growth within the neighborhood. The property owner sees that. We have a long list of artists, and we are [starting] to get a long list of properties, as well.

Knowledge at Wharton: Andy, you’re a venture capitalist by profession. How much has that played into developing your property?

Rappaport: It gave us the means to do this in the first place. The intent of this project was to give something back to a community that’s been very good to us, beyond any of our expectations. Second, it trained me to take risks, and to bet on ideas that often are not yet in the mainstream, but could be. We’ve been asked many times, “How come you did this? How come it was you who did this? Weren’t there other people who wanted to do similar things?”

“One problem we needed to address was how to provide space that will work immediately for artists and arts organizations.” –Andy Rappaport

The interesting thing is, now there are [more since] we’ve shown that the model we embraced worked, and there are some terrific civic benefits to it. But when we started out, it was a totally crazy idea. What I learned as a venture capitalist is what looks like a crazy idea today can be absolutely mainstream and embraced by everyone tomorrow. My training as a venture capitalist and Deborah’s training as the spouse of a venture capitalist, encouraged us to embrace risk, as opposed to shy away from it.

Knowledge at Wharton: With your Minnesota Street Project, how often are you doing showings of these artists?

Rappaport: We have several aspects to our program. One is a studios building, which houses 40 artists and is used by a number of other artists as well. It’s across the street from a building we refurbished that houses 10 commercial art galleries, and arts-related non-profits, several rotating spaces, etc.

While there’s no formal relationship between the artists in the artist studio, and the galleries and rotating spaces in the gallery building, there’s a huge amount of cross-fertilization. Some of the artists in the studios building are represented by the galleries in the galleries building. Some of the artists’ [works] in the studios building have been curated into shows that have gone into our rotating spaces. We’ve rented those rotating spaces to galleries who represent some of our other artists.

We’ll have the first open studios in the studios building in October. That’s organized completely by the artists in that building.

Knowledge at Wharton: Anita, how does that play out with you in New York City?

Durst: We’re about to have our open studios as well on Oct. 15 and 16. We’ve had many of those before. We are at the Brooklyn Army Terminal, where about 1,500 people came through the studios last year.

Knowledge at Wharton: Andy, some of the real estate, going back 60 or 70 years, were important components to a city’s economy, such as old navy yards. They may have been dormant for quite some time, but a lot of these properties are finding great use now, because of people like you, Anita, and different business elements.

Rappaport: That’s right. But the challenge in San Francisco is making it sustainable. The pressure for development, especially for housing and class A office [space] is extraordinary. Property owners and other stakeholders in the city, and San Francisco, are working collaboratively to try to and figure it out. I’m not yet 100% certain that it’s been figured out, but what we and others are doing, we hope, is a step on that path.

Knowledge at Wharton: Anita, is that similar, or different, to what you see in New York?

Durst: There’s a lot of retail space that’s available in most cities, and in most towns. We’re trying to step in and utilize those unused spaces temporarily, while we are figuring out how to get the mom-and-pop shops back into those spaces.

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