SF suing Academy of Art over real estate empire

One of the Academy of Art University's buildings at 2801 Leavenworth St., the former Cannery building. The university’s conversion of the building to galleries and administrative offices is one of the city’s issues in its lawsuit against the academy. less One of the Academy of Art University's buildings at 2801 Leavenworth St., the former Cannery building. The university’s conversion of the building to galleries and administrative offices is one of the ... more Photo: Jason Henry, Special To The Chronicle Photo: Jason Henry, Special To The Chronicle Image 1 of / 19 Caption Close SF suing Academy of Art over real estate empire 1 / 19 Back to Gallery

After years of finger-pointing, San Francisco City Attorney Dennis Herrera says “enough is enough” and is filing suit against the Academy of Art University, saying the nation’s largest for-profit art school and one of the city’s biggest landlords has illegally converted 22 buildings in amassing a real estate empire.

Citing “deliberate noncompliance ... repeated missed deadlines and recurrent unfulfilled promises,” Herrera said it is time for the university to fall into line with city planning laws.

“In particular, defendants must return the many housing units they unlawfully displaced to San Francisco’s affordable housing stock,” the city attorney said in the suit he plans to file Friday in San Francisco Superior Court.

The lawsuit comes after a decade of bickering between the city, which has imposed hundreds of thousands of dollars in fines against the Academy of Art for alleged planning violations, and the university, which has refused to pay the money.

22 buildings at issue

According to the suit, Academy of Art President Elisa Stephens and her family, acting through subsidiary companies, have bought 22 commercial and residential buildings and “cavalierly” converted them to university use without obtaining the required city authorization. The buildings are among 40 buildings that the university owns in the city, many of them clustered in the South of Market and on Nob Hill.

Six of the buildings cited in Herrera’s complaint were residential structures that the school turned into student housing — “exacerbating the already scarce supply of affordable housing,” the suit says — and an additional three were hotels where students now live.

The real estate-buying spree was one of the main strategies for dealing with a boom in enrollment at the Academy of Art, which went from 5,000 students when Stephens took over in 1992 to a peak of more than 18,000, the suit says. More than a third of the buildings that Herrera cites in the lawsuit would need changes in the city’s planning code to come into compliance — something that would require a vote of the Board of Supervisors.

‘Flouted’ law

“In implementing their real estate scheme for profit,” the suit says, Stephens and her family “have flagrantly ignored and flouted the zoning and planning restrictions applicable to their properties that govern all San Francisco property owners.”

In addition to restoring properties for residential use, the lawsuit calls for administrative and civil penalties against the university that could add up to tens of millions of dollars.

Herrera’s assertion that the Academy of Art is taking affordable housing units off the market is especially explosive, given San Francisco’s out-of-control rental prices. However, just how many of the 252 units in the buildings cited in the lawsuit were actually being used for affordable housing before the academy bought them is likely to be a major issue as the legal case unfolds.

James Brosnahan, an attorney for the Academy of Art, branded Herrera’s lawsuit as “completely premature and unnecessary.” He said the university had spent nine years and $8 million working on an environmental impact report that it must produce before any of the properties can be legalized, and that the document was expected to be done by July 1.

“The idea that a lawsuit would be plunked down in the middle of all this is extremely surprising,” Brosnahan said.

He added that Herrera appeared to have politics on his mind, saying that “the city attorney has taken for himself the functions of the Planning Commission.”

‘Broken promises’

Herrera said there was nothing to prevent the Academy of Art from finishing its environmental report. But, in an interview, he said the city’s long dispute with the academy had been filled with “broken promises and missed deadlines.”

“This is a way to keep everyone’s feet to the fire,” Herrera said.

The university’s questionable real estate conversions have been the subject of years of conflict at City Hall, with Herrera repeatedly raising questions about the Planning Department’s inability or unwillingness to lower the boom on the university for alleged violations.

There have also been behind-the-scenes allegations that the university, which besides being a big landlord is also one of the city’s major employers and civic and charity donors, was getting special treatment.

The Planning Department has denied any pressure coming from City Hall, and instead points to the university’s ability to hire teams of lawyers that succeeded in delaying any action.

Settlement talks

The clock finally began to run out in March, when the Planning Commission and planning Director John Rahaim made it clear that they would not support efforts to amend the rules to allow many of the conversions.

There were also attempts in recent weeks to broker a settlement.

According to sources privy to the negotiations, Stephens had offered to lease at least one of her properties to the city for use as affordable housing — but the two sides apparently couldn’t come to terms.

Brosnahan said that “if the city attorney would get out of the way,” the university is prepared to build its own housing in the future, put money into the city’s affordable-housing fund and, “to the extent it would help, we would be open to converting one of the (university) buildings into affordable housing.”

‘Political ax to grind’

But he said Herrera appears intent on “walking away from all of that,” because he has “some kind of political ax to grind that has nothing to do with the academy.”

That’s not how critics of the university see it. Said Supervisor Aaron Peskin: “This institution has been playing San Francisco for a fool, and the merry-go-round is finally going to stop.”