Continued: Economic slump threatens plans for old brewery

The clock is ticking on the latest plan to breathe new life into the old Schmidt Brewery complex in St. Paul, and the economy isn't helping.

A father-son development team that has talked up its $200 million plan to redevelop the 15-acre site with artist lofts and mixed-use housing, retail, office and entertainment has a Tuesday deadline to close on a deal to buy the property.

There will likely be a 30-day extension, but the deadline was extended once, last April. The price has been said to be between $2 million and $10 million.

Property manager Dave Kreitzer, who represents Minnetonka-based owner BHGDN, said he's preparing for the closing but acknowledges a difficult financial climate. "The market is terrible."

Economic uncertainty has cast a shadow on the St. Paul landmark that lies about 2 miles west of downtown. Getting a loan isn't easy in market turmoil, and the proposal is ambitious.

"We're being creative and we're working on it," said Jeffrey Cohen, 59, who with son, Craig, 31, has joined with the West 7th/Fort Road Federation, a community advocacy group, to pursue redeveloping the brewery. Their partnership is called Brewtown. "Financing for speculative real estate is more than a challenge."

City Council Member Dave Thune, who represents the area and backs the project, said, "I'm sweating bullets."

The project

The Cohens have put down about $600,000 in nonrefundable deposits and have developed a site plan.

Should the purchase go through, Brewtown expects to bring on other developers.

Brewtown has lined up one partner, Dominium, to buy the 100,000-square-foot bottling house for about $7 million. The space would be turned into 115 units of affordable housing aimed at artists. Dominium also wants to build 16 rental townhouses. If Brewtown gets the property, Dominium would expect to close on the bottling house next spring, said Mark Moorhouse, project partner with Dominium.

The city Housing and Redevelopment Authority has signed a memorandum of understanding with Dominium signifying a willingness to help find financing for the $47.8 million tab for the housing portion. Tax-increment financing, deferred loans, tax-exempt bonds and tax credits are options for Dominium. Brewtown will seek similar help.

Environmental tests show some asbestos and lead paint in the buildings and minor soil contamination, Cohen said, which will need to be fixed.

The state and the Metropolitan Council have pledged more than $1.5 million in cleanup grants. The city has granted $300,000 in STAR funds, which come from some of the half-cent sales tax, for cleanup.

The Cohens are seeking historic designation to receive preservation tax credits.

The history

Beer was brewed on the site beginning in the mid-1850s.

A group led by businessman Bruce Hendry bought and reopened the brewery in 1991. Beer-making continued until 2002, when Minnesota Brewing Co. closed.

Gopher State Ethanol, which began production in 2000, continued operating at the plant. The only urban ethanol plant in the country, it was the target of a neighborhood lawsuit over its noise and odor. It closed in 2004 and filed for bankruptcy.

Three developers bid on the site in 2005, but fell short of the minimum $7.1 million asking price. Another developer later signed a $6 million purchase agreement, but that fell through.

West Seventh, one of the city's oldest neighborhoods, is used to challenges. Once heavily industrial, it's now attracting new housing and businesses.

Despite mounting foreclosures, the neighborhood is experiencing a boom, said Ed Johnson, executive director of the federation. Along West 7th Street, the city is about to break ground on a new fire station, a clinic and nursing home are under construction, and Mississippi Market is planning a new store.

"People are feeling bullish and proud," Johnson said.

The brewery project appears to have the support of neighbors and some city officials. Jeffrey Cohen, an East Coast native whose deals have been outside Minnesota, acknowledges that other city officials and the local business community have been skeptical.

"A lot of people are watching to see if we can do it," he said.

He has been in the development game for 35 years. In the 1980s his fortunes rose and fell after a $250 million bid to revitalize a down-and-out neighborhood in Washington, failed amid community acrimony and political fallout.

More recently, he has worked on residential and office projects in Maine. One of the projects, a 12-story condo tower in Portland, was scrubbed after a two-year lawsuit in which Cohen prevailed but couldn't find financing. He said he might sell the property in November or December.

Craig Cohen has had success in St. Paul renovating a building on West Seventh that houses a salon and restaurant.

The elder Cohen laments the current economic situation and admits he's not sure what will happen if he doesn't have the money at the deadline.

"We'll cross that bridge when we come to it," he said.

Chris Havens • 651-298-1542