Hofbrauhaus deal with Haertel is dead, may locate elsewhere

A Hofbrauhaus restaurant and beer hall franchise still might open in downtown Milwaukee, but it will not be located in Blue Ribbon Hall at the former Pabst brewery headquarters.

Cincinnati Restaurant Group Inc., which has the Wisconsin license rights for Hofbrauhaus, announced this week that it has ended negotiations with Jim Haertel and his investors, known as Brew City Redevelopment Group LLC, which are the owners of Blue Ribbon Hall.

“We just couldn’t come to terms,” said Andi Udris, president of Cincinnati Restaurant Group.

Haertel and his group own two buildings with the former gift shop, visitor’s center, Blue Ribbon Hall and Pabst corporate offices. They call their buildings Best Place.

The rest of the brewery complex is owned by Zilber Ltd. founder Joseph Zilber, who is redeveloping the complex into a mixed-use urban neighborhood called The Brewery.

Brew City Redevelopment Group and Cincinnati Restaurant Group planned to split the $6 million cost to renovate the buildings and install equipment for the Hofbrauhaus, Haertel said. However, Brew City could not obtain financing for its $3 million share, even though it owned the buildings and had an anchor tenant for 70 percent of the space.

“In the good old days that would have been plenty,” Haertel said. “But the current conditions in the (capital) markets have made it difficult for us to obtain $3 million in financing to do our part to put a Hofbrauhaus in the building.”

Even with the property ownership and an anchor tenant, banks wanted a guarantee for the lease or the loan, Haertel said. Cincinnati Restaurant Group declined to guarantee the lease and Brew City could not get someone to guarantee the loan.

“(Because of the credit crunch) the deal terms had to change,” Udris said. “It’s nobody’s fault.”

Brew City talked to Zilber about providing a loan guarantee, Haertel said. But that never came together and now Haertel expects Cincinnati Restaurant Group to lease space in two of Zilber’s buildings.

“Zilber began to get involved,” he said. “It seemed to help us try to get financing. But in the end they have taken our tenant away to a couple of their buildings. What started out as help, ended up being a replacement.”

Cincinnati Restaurant Group executives say they still want to open a Hofbrauhaus location in Milwaukee and will consider locations in the downtown area, including other buildings at The Brewery.

“We remain extremely confident in the Milwaukee marketplace,” said Cincinnati Restaurant Group chairman Maximilian Erlmeier. “We will continue to explore historic buildings that may be available at The Brewery.”

For a Hofbrauhaus location, Cincinnati Restaurant Group needs 15,000 to 20,000 square feet of indoor space and 3,000 to 5,000 square feet of outdoor space for a beer garden, Urdis said.

Zilber is hoping the Hofbrauhaus will open somewhere in the former Pabst brewery complex.

“We will do everything we can to find them a location that would allow us to bring a quality operation like the Hofbrauhaus to The Brewery,” said Zilber’s assistant, Mike Mervis.

Mervis declined to say which buildings that Cincinnati Restaurant Group is considering at The Brewery. Haertel thinks the Hofbrauhaus will be located in buildings 20 and 21, the former Brew House and Mill House buildings, with an outdoor beer garden on the west side of the buildings.

The Brew House building is the building that contains six historic copper brew kettles.

Oregon, Wis.-based Gorman and Company Inc. has a contract to purchase the Brew House and Mill House buildings from Zilber, who has been selling some of the buildings in the complex to other developers.

“My best guess is Zilber and Gorman gave (Cincinnati Restaurant Group) a deal they could not refuse,” Haertel said. “We had agreed on a rent (with Cincinnati Restaurant Group) and it has never changed because of anything. It’s just business.”

Haertel said he and his investors will slowly build up their use of their buildings, located across Juneau from a newly completed parking structure built by Zilber. Haertel opened a gift shop selling vintage items from the brewery. Best Place is also open for tours and group event rentals. Haertel said he is finalizing conditions for a liquor license and will open a pub in the former visitor’s center area soon.

Eventually a full-scale restaurant and bar may occupy Blue Ribbon Hall, he said.

“We’re going to take it in steps,” Haertel said. “We plan to just keep reinvesting our profits until this entire building is redeveloped, using our own organic growth.”

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