UArts is unlikely to merge with Temple after negotiations soured with a major donor

More than two months of negotiations between Temple University and the shuttered University of the Arts on a potential merger or acquisition appear to be headed for an end without a deal in place, multiple sources said this week.

The Hamilton Family Charitable Trust, which has contributed about half of UArts’ $62 million endowment, is not in favor of that money going to Temple as part of the deal, which largely appears to be sinking it, according to the sources who had knowledge of the negotiations but were not authorized to speak. Temple did not want to have to engage in a protracted legal battle with a charitable trust.

It’s unclear what will happen next with the 150-year-old arts institution that abruptly closed on June 7, claiming it had run out of money and leaving hundreds of students scrambling to re-enroll elsewhere. Bankruptcy is likely.

» READ MORE: Temple University is exploring a potential merger to save University of the Arts, chairman says

“In the end, Temple made a responsible and fair offer but we were just unable to come to an agreement or reach a solution that was in the best interest of Temple, our students and most importantly our mission,” said Ken Kaiser, Temple’s senior vice president and chief operating officer.

The university notified its campus community Thursday afternoon.

“The university will not be moving forward with a transaction at this time,” university leaders said.

Kaiser declined to share details about the offer or comment on Hamilton Trust’s concerns.

S. Matthews V. Hamilton Jr., a member of the board of directors of the Hamilton Trust, declined to provide details of the trust’s position regarding the fate of the UArts endowment.

But he did say his family was concerned about it. The trust was founded by Dorrance “Dodo” Hill Hamilton, a longtime benefactor of the university who died in 2017.

» READ MORE: The University of the Arts is closing June 7, its president says

”It was my mother’s interest to make the University of the Arts a major school, and since things went south, we’re looking after her interests,” he said.

Asked whether there was still a possibility that a deal between UArts and Temple could be struck, he said: ”Yes, that’s why the lawyers are talking.”

However, in a letter to the UArts board, the family seemed more resolute. Francis J. Mirabello, a trustee of the Hamilton Family Charitable Trust, said the family had discussed the proposal to transfer the endowment to Temple and “have made it absolutely clear” to both UArts lawyers and John A. Fry, who will become Temple’s president Nov. 1, “that they will actively oppose any such transfer.”

“We have retained counsel with instructions to do everything possible to prevent a transfer of the Hamilton Endowment Fund to Temple,” Mirabello wrote in the letter obtained by the Inquirer. “They firmly believe that Mrs. Hamilton, who never made a gift to Temple during her lifetime, would not have been in favor of such a transfer.”

They want the endowment fund transferred to the Hamilton Charitable Trust Education Fund, which was founded with the purpose of supporting educational activities in the Philadelphia region, he wrote.

Judson Aaron, chair of the UArts board, did not return a call for comment.

Temple first announced it was exploring a potential merger with UArts just a few days after the school announced its closure.

“I’m working with their chair to see if we can put this genie back in the bottle,” Mitchell L. Morgan, Temple’s board chair and founder and chairman of Morgan Properties, said at the time. “Can we somehow figure out some type of potential merger? If it’s a win-win, we are interested.”

Kaiser said the short timeframe and all the parties involved, including bond holders, foundations, faculty, students, trustees, accrediting bodies, and city and state officials, made it difficult to finalize a deal.

» READ MORE: Tracking where UArts students have landed

He said Temple was interested in getting a portion of the endowment, given that the university has enrolled more than 330 former UArts students this fall, more than any other school, according to an Inquirer survey of colleges that were designated as teach out partners. (Others with big numbers include Moore College of Art & Design, Drexel and Bennington College. UArts dance program was moved to Bennington.)

“At a minimum, we should get that piece,” Kaiser said.

Some of the UArts buildings needed significant repairs, but that was not a deterrent, he said.

“It was nothing we couldn’t handle,” he said.

The university, he said, spent significant staff time over the summer and hired external experts to try to negotiate a deal, Kaiser said.

“We are a state related institution,” said Gregory N. Mandel, Temple’s provost. “We are very careful about our commitment to the public good, which is part of the reason we explored it. We have to make sure anything we would consider in this space would not harm and would be beneficial to Temple and our students and our community. That includes being careful with our resources.”

Officials with the United Academics of Philadelphia, the union representing UArts faculty and staff, said in a statement they hoped the end to the merger talks “will provide [the] UArts Board Chair ... with the time and clarity to meet his legal obligation to negotiate severance with our union. UArts Faculty and Staff Union members, along with the UArts community as a whole, continue to mourn the loss of this historic institution and deserve long-overdue answers, accountability, and contract adherence from the UArts Trustees whose actions precipitated this catastrophe.”

Frank Machos, a UArts alum who’s now part of the UArts Joint Committee, a group of graduates and parents hoping to preserve the university in some form, was surprised by the news, but said “the alumni are still committed to preserving the legacy of the institution and exploring paths forward to a future for University of The Arts as an active institution.” Machos works as executive director of the Philadelphia School District’s Office of Arts & Creative Learning.

David Benjamin De Cristofaro, co-chair of the UArts Alumni Association and a member of the Joint Committee, said hope remains, despite the closure and apparent end to the Temple merger possibility.

”There are a couple of paths towards the university living on,” De Cristofaro said in a statement. “One possibility is a re-imagined version several years down the road, while another would be a merger or acquisition by an institution with the overhead to take on whatever the outstanding issues are, financial or otherwise. One of the things our joint committee is examining are similar market cases and viable examples of institutions for that type of scenario.”

It’s a disappointment that no answers have been forthcoming on the financial crisis that ultimately crushed UArts, De Cristofaro said, and “that a major local university with the overhead, resources, and track record of acquiring similar institutions backed away after such public interest beckons the question even further. It’s time for an answer, our community deserves one.”

Though it’s now unlikely UArts will become a part of Temple, UArts students certainly have. During convocation last week, Mandel gave a special shout-out to them.

Temple has also made programmatic and housing changes to help the students adapt.

The school fast-tracked a new undergraduate degree, a bachelor’s in fine arts in illustration and emerging media. More than 30 UArts students have started in that program this fall. For some specialties, Temple hired UArts faculty to help their school adapt. For instance, Temple has a very traditional classic jazz program, while UArts’ was more focused on commercial and pop music.

The university also has designated two floors of Johnson and Hardwick residence halls for a cohort of more than 50 former UArts students to live together and hired two former UArts resident assistants, one to live with the cohort and another to live in a separate area with performing and cinematic arts students.