Jim Haertel and Paul Bertling hope to tap into a huge development opportunity at Pabst
It is a massive redevelopment project by anyone’s standards. More than 21 acres, with 1.6 million square feet of space under roof in 25 buildings.
Milwaukee’s Department of City Development has identified the former Pabst Brewing Co. complex for multi-use redevelopment.
And it will take a multi-use approach to make the development work.
It will also take financiers willing to take on a risky but potentially rewarding project with some unique challenges.
One of those challenges is working around restrictions imposed by the Historic District designation of the property – restrictions that could block uses that would generate cashflow and thus make the overall project financially feasible.
But at the same time, the historic designation may also make it easier for the new owners to secure tax credits to defray the cost of some rehab work necessary to preserve and make the structures usable.
Pushing the site through the adaptive reuse process will require a serious chunk of change and a Herculean effort.
Yet an unlikely duo has stepped forward and expressed willingness to tackle the job. Real estate developer Jim Haertel and advertising agency principal Paul Bertling of Creative Suite and Tighe have been raising private investment money and cultivating bankers in an attempt to realize their vision for the site.
Haertel said the duo is talking to a number of banks regarding financing, including Firstar/US Bank, New York-based Empire Equity, as well as Lincoln State Bank and Associated Bank, each of which would bring in M&I Bank as a partner.
Haertel was vague on what percentage of the loan amount would have to be in-hand from lessors and buyers in order to secure financing.
"We certainly need in the area of 50% to 75% in presales or preleasing to show the bank we can carry the debt," Haertel said. "The difficulty now is getting people to commit."
The scope of the project and the amount of presales are significant, given the size of the job relative to what Haertel and Bertling have done in the past.
Haertel seems capable of getting the deal to go based on his own psychological certainty and vision alone. Talking about the project, he becomes as animated as a kid before Christmas, and even has his heart set on a penthouse atop the massive grain elevator as a condo for his family. But he stressed that the duo was actively looking for a development partner to come in and either purchase some buildings outright or make other arrangements to spread out the load.
"This is much larger than anything I had done prior," Haertel said. "The largest projects I had done personally pale in comparison to this. Our group is looking for development partners to help us close the deal. But I have worked with Fortune 500 companies with relocations and have helped others with projects this size."
Haertel added that his firm’s preference would be to hold onto majority ownership of the buildings that would be leased rather than sold outright.
While he could not name names, Haertel said he was in talks with private and government entities.
"We are having some talks in closed sessions with a number of governmental and education-related organizations," Haertel said. "We need to finalize who our development partners might be and who exactly is buying what building by mid-June. Then we will close. We are going to get things wrapped up in mid-June and close in early September."
One thing is for sure: with the only letters of intent in hand being from small users including brewer Randy Sprecher and the Milwaukee Museum of Beer and Brewing, there is some urgency to get some other contracts signed soon in order to meet Haertel’s timeline.
"Redevelopment will start the day after closing," Haertel said. "Some items like Blue Ribbon Hall will be available very quickly. But I would bet that roughly one third of the development – nine buildings – would be redeveloped in the first year or two. Another nine buildings are probably more in the three- to five-year range. And then a lot depends on the market. If it is real hot, the other nine buildings will follow very closely. But if the economy is down or people just aren’t looking for space, it could be 10 years."
Pabst Park?
While details on where the nut necessary for closing is coming from are sketchy, one opportunity is crystal clear.
"Parking is one of the biggest issues in that immediate area," Haertel said. "We are lucky to have a lot of surface parking that could be converted to a structure. We also have a number of the old buildings that could have parking on the lower levels. There are a lot of governmental units – the county, Milwaukee Public Schools, Milwaukee Area Technical College, the police department, the sheriff’s department; a lot of them need parking. We sometimes are teased that while we are calling it BrewCity District, maybe we should call it Pabst Park."
The property is on the northwest end of the city’s downtown, between Highland Avenue, Winnebago Street, Eighth Street and 11th Street. Milwaukee County government facilities are to its immediate south. MATC facilities are to its south and east. A Milwaukee Public Schools facility is on the southwest corner of the property. And to the north and west is freeway – I-43 and what will remain of the Highway 145 downtown section after a portion of that highway is razed.
As much as 25% of the required dollar amount to initiate construction could come from parking revenues, according to Haertel.
Demand for parking will be heightened by the planned removal of the Park East Freeway. (See related story in this section.) In fact, that infrastructure project was one catalyst that got Haertel thinking about the Pabst property.
"The Park East Freeway coming down is going to exacerbate the situation because there are a lot of spaces underneath that spur," Haertel said. "Actually, it (the Park Freeway) was the genesis of the idea. When I heard that the Park East was coming down, I was looking for opportunities underneath. But I am less interested in building new things on raw land; I am more interested in rehabilitation. Then I looked over and saw the Pabst facilities and started thinking about them."
Parking can be an elegant way to make environmentally challenged sites usable by simply capping with concrete or asphalt, but environmental problems on the Pabst property are minimal. While the property is an industrial site, beer manufacturing involves only organic ingredients – so remediation necessary on the site is minimal.
"Graef, Anhalt Schloemer did an environmental assessment; but beer is food and it is a straightforward process." Haertel said. "The biggest issues we have are asbestos which has not yet been abated and lead paint which has not yet been abated. And then there are some minor underground storage tanks. We are looking at about $2 million in environmental cleanup. Pabst has agreed to take about $1 million out of the purchase price to help pay for that."
April 26, 2002 Small Business Times, Milwaukee
