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renting the Building.1 Under the terms of the lease agreement,
petitioner is to pay the University a total of $105,600 per year.
The Building contains 35,200 square feet of floor space. The
rent charged thus equals $3 per square foot, an amount
substantially below the Building’s fair market rental value of
$10-$12 per square foot. The lease agreement states "that all
works of art, furniture, fixtures, and other items of personal
property located on or in the Leased Premises" are owned by the
University and are being lent to petitioner free of charge for
the 3-year term of the lease. The artwork initially to be
displayed by petitioner consists exclusively of artwork on loan
from the University, but petitioner over time intends to acquire
additional artwork to display.
In addition, the lease agreement states that the University
is responsible for the payment of taxes and repair and utility
costs as well as for the maintenance of personal injury and
property damage liability insurance relating to the Building.
Petitioner, however, must provide routine maintenance and care
for all artwork it borrows. To the extent that petitioner’s
employees perform any restoration services on artwork owned by
1The lease agreement provides that petitioner “shall have
the option to extend the term of this Lease for additional terms
of three (3) years each at a rental rate to be determined after
consideration of all of the facts and circumstances at the time
of renewal.” The original 3-year term ended on Dec. 31, 1995.
The administrative record does not indicate whether the lease
agreement has been extended.
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Last modified: May 25, 2011