To the many dancers and arts supporters who have contacted us:

Thank you for your messages concerning Dancers' Group Studio Theater.  As the new owners of the building, we were also very disappointed to learn this week that Dancers' Group plans to leave their current location.  We have worked very hard over the last three months to create a situation in which Dancers' Group could remain in their current space.

We realize that the email sent by Dancers' Group today regarding a "400% rent increase" has upset a lot of people.  We have received email and phone messages from people who are sad and concerned, as well as people who have informed us that we are "evil", "inhuman", and "dot-com millionaires", among other things.

Just to set the record straight:  Pomegranate is a small architecture and real estate business which operates out of our Mission district home.  We are strong supporters of the arts and non-profits (serving on the Board of a Bay Area non-profit, plus contributing our time, money, and pro bono architecture services), and one of us dances with a local troupe.  As one of our initial projects, we purchased a building, with the help of investors and a commercial lender, whose primary tenant (Dancers' Group) occupied the space on a month to month tenancy at rents well below market rates.  We were fully aware of Dancers' Group's situation when we decided to purchase the Property, and we recognized early on that we would be faced with a difficult balance between making the project economically feasible and accommodating the existing arts use.

Beginning well before we closed the transaction to buy the building, we tried to come up with alternatives which would allow Dancers' Group to stay.  Because we supported Dancers' Group's mission, recognized their long history in the city, and appreciated their presence in the neighborhood, we offered them a chance that most developers would not-- a chance to help them to stay in their current location at below market rents.  Beginning in March, we encouraged Dancers' Group to submit a proposal for their continued occupancy in their space.  We secured permission from the former owner for us to start negotiations with Dancers' Group prior to our purchasing the building in May, as we suspected that an arts organization would need extra time for negotiations or fundraising.  We told Dancers' Group that we would be open to below market rate rents, tiered rent increases to allow them time to line up sufficient funding, and consolidation of their space into a more efficient and affordable configuration.  Despite our repeated requests, Dancers' Group failed to make a proposal to us, so we put one together for them in May.  When they contacted the media about the possible loss of their space rather than working with us to strike a deal, we continued to try to propose terms that might work for them.  Frankly, Dancers' Group's lack of initiative in working out a solution with us was bewildering.  In the end, Dancers' Group did not feel they could put together a realistic proposal within any of the parameters we proposed, and chose not to continue negotiations.  We can only interpret today's email message from Dancers' Group as their final decision not to stay in the building.

We understand that non-profits like Dancers' Group have important missions and limited resources, and that rent does not seem like the best use of an organization's funds.  However, Dancers' Groups rents reflect prices of 20 years ago, and not prices of today.  Believe it or not, a "400% rent increase" to Dancers' Group's current rent would result in rent which is only half the market value of that space.  They currently pay 48¢ per square foot per month, and we have received unsolicited offers from people who want to rent the space for $4 per square foot per month (the open market may well call for more).  We offered it to Dancers' Group for $2.50 per square foot, an amount that reflected our honest assessment of the building costs (this building needs substantial repairs and renovations), as well as what our lender and investors would accept.

We have done all we can to help Dancers' Group stay in their current location.  We are not out to get the highest rents possible, but rather to foster and support the arts, dance, and small business in our neighborhood-- and this is what we will do with the building after Dancers' Group has gone.  There are dozens of dot-com companies out there who would be thrilled to rent this space at double the rate we offered to Dancers' Group.  But our mission with this project is to create a space which supports a community of artists, small businesses, and non-profits, not an economy booming out of control.

We worry that Dancers' Group has chosen not to continue negotiating with us to stay in their existing space, as we have not seen any space available in the city at the price they currently pay.  We had hoped that with some time and some creativity, we could work out a solution with Dancers' Group.  We are saddened that this didn't happen.  Since we began speaking with Dancers' Group in March, we consistently told them that, whatever the result of long-term lease negotiations, we would nevertheless honor their request to remain in the space through the end of their currently-scheduled performances in August.  Despite the negative reaction we have received from today's email from Dancers' Group, we will not rescind our offer to allow them to remain for the rest of their summer schedule at their current rent.  We hope that Dancers' Group succeeds in finding new space elsewhere on terms they can accept.

We trust our response gives you a fuller understanding of the situation.  If you have any questions, feel free to contact us.

Sincerely,

Pomegranate Design & Development