Should arts buildings remain in the arts community in the case of bankruptcy? The sale of UArts’ assets may hinge on the answer.

Since the abrupt closure of the University of the Arts in June, there has been a change in the atmosphere on South Broad Street, one the arts community has keenly felt.

And that’s why arts leaders are hoping that UArts' buildings being sold through bankruptcy will maintain their cultural use in the hands of new owners.

“We feel the absence of the students,” said Patricia Wilson Aden, president and CEO of the Greater Philadelphia Cultural Alliance. “We feel the absence of the audiences that came to UArts’ activities. So if we want to not only recapture that but rebound from that, I think it is in the city’s interest to see that we continue to use those spaces for arts and culture.”

» READ MORE: The sale to Curtis of UArts’ Art Alliance building gets court approval

A judge in U.S. bankruptcy court in Wilmington last week approved the sale of the Art Alliance building to the Curtis Institute of Music, ensuring a similar use. It was the first of nine UArts buildings to be sold.

But what will happen with the Arts Bank building on the Avenue of the Arts will hinge on whether Judge Brendan L. Shannon deems that the building should remain an arts asset or go to the highest bidder — Quadro Bay LLC, which offered $2.71 million and plans to use the building for residential and commercial purposes. A hearing originally scheduled for Wednesday has been postponed until Feb. 5.

In a court filing last week, the Pennsylvania Attorney General’s Office, which is responsible for protecting charitable interests in bankruptcy sales, objected to the sale of the 601 S. Broad St. property to Quadro Bay. It argued that Pennsylvania law requires that the donor’s intent and the charitable purposes of the property be considered.

» READ MORE: Curtis outbids Temple for UArts’ building after developer Allan Domb drops out

“If the property is to be diverted, the court must ensure that the new use is as close as possible to the original charitable intent,” the attorney general wrote. “As such, a mechanical application of ‘highest and best offer’ is not appropriate.”

UArts had used the building, formerly home to a bank, as a 238-seat dance and performance hall since 1994. When the William Penn Foundation contributed $6.37 million toward UArts’ acquisition and development of the building in the early 1990s, the foundation cited its desire to see the building be transformed “into a multiuse performing arts space to be used by many of Philadelphia’s nonprofit organizations,” according to the filing.

The Lantern Theater Company bid just $100,000 less than Quadro Bay and should be favored, given its intended use of a performance space more closely matches that of UArts, the attorney general’s office said.

The purchase would extend the string of theaters starting at Locust with the Academy of Music and, moving south, to the Miller Theater, the Wilma, Kimmel Center, Suzanne Roberts Theatre, and, at South Street, a new Lantern at the Arts Bank.

“Lantern’s offer for the purchase of the Arts Bank Building is clearly the highest and best when taking all factors into consideration,” the attorney general argued.

Alan Root, the attorney representing the UArts bankruptcy trustee, declined to comment. In court last week, he said: “The trustee has a fiduciary duty to maximize value for all creditors.”

Typically in bankruptcy liquidation like the one playing out in the UArts case, the top priority is selling assets to get as close as possible to making lenders whole.

Curtis successfully bid $7.6 million for the Art Alliance, and Temple University has bid $18 million for Terra Hall; bids have not shown up in the public court docket on the other six buildings yet. Root said in court last week there are secured claims of approximately $67 million.

» READ MORE: Temple has made an $18 million bid on UArts’ largest building, one of nine for sale

“The basic point that the AG is making is that bankruptcy does not trump state law on charitable assets,” said Larry McMichael, an attorney with Dilworth Paxson LLP, who has represented many bankrupt nonprofits.

“Since the theater being sold is a charitable asset, and since the difference in bids is not that great, the theater should be sold to another charity doing similar work,” he said.

For the Lantern Theater Company, founded in 1994, the acquisition would be a bid to increase audiences — and a bump in stature.

”While the Lantern is well known to theater aficionados, we are tucked away in a part of Center City that does not get as much visibility or foot traffic, and so it’s just a really exciting opportunity for us,” said Lantern executive director Stacy Maria Dutton.

Since its second season, the company has rented St. Stephen’s Theater, at 923 Ludlow St., between Market and Chestnut Streets. That space holds 150 seats. The Arts Bank offers about 240.

» READ MORE: Bids are sought on nine UArts properties

”With a 60% increase in seating and a very affordable ticket price, we have the potential to increase [annual] ticket sales by $450,000,” Dutton said.

That’s substantial for a company with a current budget of $2 million. The Lantern produces a mix of new works and classics — Shakespeare’s Much Ado About Nothing opens in February — and has been looking for new or additional space for about a decade. If it moved, the expansion would echo that of the Arden Theatre Company, which, after starting in the Walnut Street Theatre studio in 1988, operated in St. Stephen’s until buying and renovating a building in Old City in the mid-1990s.

Unlike the Arden, the Lantern’s move to a new home would not require renovations, Dutton said.

”We view this as a fully operational theater,” she said. “It’s fully equipped with dressing rooms, a green room, a beautiful rehearsal studio on the third floor, and a small cabaret space on the main level.”

If the acquisition is successful, the Lantern would finish this season in its current space, move into the Arts Bank over the summer, and hold a grand opening for the 2025-26 season.

The benefits in higher visibility and capacity would pay dividends, Dutton said.

”It’s a virtuous cycle — single ticket sales lead to multiple ticket sales lead to subscriptions lead to donations,” she said. “That’s really been the Lantern’s experience over three decades.”

The $2.61 million purchase price, plus about $56,000 in real estate transfer tax, would be covered by a mix of gifts, pledges, grants, and short-term financing — a package that is already assembled, Dutton said, adding that the theater company would incur no long-term debt.

”There’s a group of donors who not only know and love the Lantern but know and love the Arts Bank and the Avenue of the Arts and view this as a critical cultural asset to remain active and vibrant after the closure of the University of the Arts,” she said.

The Lantern served 23,000 patrons, inclusive of education programs, in the 2023-24 season, and Dutton believes a move to South Broad could increase its draw to as many as 36,000.

David Benjamin De Cristofaro, chair of the UArts Alumni Council and Association, said he also would like to see the building keep its arts use and hopes the judge favors Lantern.

“Residential buildings are better suited for residential use as opposed to a theater,” he said. “The Lantern Theater’s bid on the property makes better sense in terms of what a building like that means to the Avenue of the Arts. … I would encourage the parties involved to explore ways to make that work.”

The head of UArts’ faculty and staff union said the members also support the Lantern theater bid, given how close it is to the one from Quadro Bay, and the union is communicating that to the attorney general.

“Our members have filed a $3 million claim in these bankruptcy proceedings, and we do not believe a difference of just $100,000 is grounds to further endanger working artists in Philadelphia,” said Bradley Philbert, vice president of United Academics Philadelphia.

While City Council President Kenyatta Johnson noted that the matter is up to the judge, he hopes “that a portion of the money from any sale of the buildings be given to former [UArts] students, faculty, and staff, whose lives were disrupted when the university abruptly closed,” said spokesperson Vincent Thompson.