WisBusiness: $317M brewery restoration could spur Milwaukee’s growth

By Brian E. Clark

MILWAUKEE – In the late 1800s, this city was hopping with breweries.

One of the biggest was Pabst, which remained a dominant player for nearly a century, making hundreds of millions of barrels of beer from its sprawling headquarters east of what is now Interstate 43. By the time Pabst shut down in 1996, many of its buildings were crumbling and the sprawling brewery was just a shell of its former self. Pabst is now made by Miller on a contract basis.

A group of developers, led by WisPark LLC, a division of the Wisconsin Energy Corp., is working to restore some of the buildings on the 22-acre site and turn it into an entertainment, retail and residential complex.

Jerry Franke, president of WisPark, says that when first heard of the redevelopment plans, he could only shake his head. But he soon became an enthusiastic promoter, from both a business standpoint and what he says it can do to enhance Milwaukee.

"This will make the city a more attractive place to visit and live and grow the city’s economy," he said.

The $317 million project, called PabstCity, sits just west of downtown on one of the tallest hills in the city and covers roughly seven blocks. It borders the Park East Freeway, which was torn down three years ago and is now an area slated for redevelopment.

The project, backers say, will create a much-needed gateway to both the city’s near west and near north neighborhoods, and to the downtown’s Park East corridor.

PabstCity would total 1.1 million square feet of new and renovated buildings. It would include 249 housing units — selling for about $200,000 each — and 488,000 square feet of retail and entertainment space, including a 16-screen movie theater, a House of Blues and Sega Gameworks. It also would have 257,000 square feet of office space and 3,800 parking stalls in three structures and on-street spaces.

If successful, promoters say the PabstCity and Park East projects could also have a positive spillover effect on neighboring areas.

And while the development is not without some controversy, it has garnered support for turning what is now an eyesore into an entertainment center that this city of 600,000 is lacking.

The project also would create 1,000 construction jobs and 1,100 new retail and restaurant positions, backers say. The Milwaukee Area Technical College has a campus next to the site and students could work and do internships at PabstCity, Franke said. Minority-run businesses also would be encouraged to open there, he said.

If all goes smoothly, the development could open as early as the third quarter of 2007.

Historic preservationists complain, however, that the developers do not plan to save as many century-old buildings – some of which have turrets, battlements and other Gothic touches – as they would like.

And others question the wisdom of creating a TIF (tax incremental financing) district that would give the project $39 million to pay for street and infrastructure improvements.

The money would be repaid through PabstCity’s property tax revenue over 20 years. A decision on the TIF district could be made by the city’s Common Council in the next few months.

Franke said when he was first approached by developer and beer enthusiast Jim Haertel about the site, "I couldn’t run away fast enough."

But the project grew on Franke, especially after he spoke with John Ferchill. Ferchill is head of the Ferchill Group and has worked on other successful urban redevelopment projects. The third major participant in the project is Terremark Partners of Atlanta; Haertel retains a 5 percent share. Ferchill shared his vision for the site and told Franke about conservation easements and tax credits that could help make the project fly financially.

After more hurried research, the partners bought the brewery site in 2002 for $9.7 million from the Kalmanovitz Charitable Trust of Mill Valley, Ca. Investor Paul Kalmanovitz purchased Pabst in the mid-1980s and, detractors say, ran it into the ground.

"They basically kept the place together with binder twine," Franke said.

Franke said "location, location and location" convinced him that the project could be successful. The site is near the Bradley Center and the Midwest Airlines Center.

In addition, he said Milwaukee is being discovered as a "hip" place to live in the Midwest and can support an entertainment district. Moreover, developers say, between $300 and $500 million annually in shopping and entertainment dollars will flow south to Chicago this year from the Milwaukee area. PabstCity, they hope, will recapture some of that money.

"When we were looking at this, the city was taking down the Park East freeway," Franke said. "It looked like good things were happening and we thought this was something we could do that would make Milwaukee a better, more attractive place.

"Author Richard Florida has written about what’s needed to get a ‘creative class’ to live in an area," Franke said. "Pabst City will be attractive to recent college grads and the condominiums we hope to build here will appeal to young professionals."

Initial plans for the project elated history buffs who were pleased that WisPark and its partners planned to save 23 of the 29 buildings.

But after two years and $2 million worth of engineering and architectural studies, the developers announced that they would only keep about a third of the original buildings.

At a recent meeting with the city’s Historic Preservation Commission, Dan McCarthy, Wispark’s director of urban development, presented a slide show that outlined the effects of two decades of neglect. The presentation to the advisory panel detailed deteriorating brickwork, collapsing roofs and stairways, caved-in walls and floors, rusting ironwork, crumbling timbers, cracked foundations and more.

The result, he said, was "imminent and dangerous hazards."

Other buildings had no windows and would be difficult to use, Franke said. But most important, restoring them would be three times as expensive as building new structures and would make the project too expensive to work.

"At first, we were going to try to save 70 percent of the space," Franke said. "Now, we are down to about 50 percent because some of the buildings we’re saving are quite big. We think 50 percent is a lot."

Franke also said the developers would find a use for the big arched Pabst sign that straddles a street between two buildings that will come down. In addition, a castle-like structure in the center of the complex – owned by Haertel – may become a Haufbrau House and beer museum.

Sandy Ackerman, chairwoman of the city’s preservation commission and executive director of Historic Milwaukee, said she was disappointed with WisPark’s plans.

"We wish they could save more, like they originally proposed," she said. "From a historical and architectural standpoint, the original proposal was much better."

Ackerman said she was especially disappointed the brewery’s landmark chimney will come down, as well a Gothic former church on the site.

But Ackerman acknowledged that her commission does not examine the financial side of historical preservation.

"We don’t examine that," she said. "And the developers say it would cost a lot more to rehabilitate those old buildings than to start from new."

Virginia Carlson, an associate professor of urban planning at UW-Milwaukee said the city should look closely at how many net jobs will be created by PabstCity before it creates the TIF district and gives the developers a $39 million grant.

"If those jobs are just going to replace 1,100 existing positions, it might not be such a good proposition," she said.

"It’s a question of how you grow an economy," she mused. "You need to bring in outside dollars. Could be PabstCity will do that. If they say $400 million in entertainment dollars are flowing to Chicago, I’d think they’ll need to capture a quarter of that to make this a good investment for the city."

Franke said he and his colleagues are doing everything they can to convince council members and the mayor that the TIF district is a good idea.

Currently, he said the brewery property is paying $250,000 a year in property taxes to the city.

"That is comical for 20 acres next to downtown," he said. "With the TIF and this development, it will generate between $2.5 million and $3 million in property taxes.

"Without the TIF, the site will remain an attractive nuisance with vandalism and security problems," he said.

"We think PabstCity would be very good for Milwaukee," he said. " Leaving that area in a blighted condition would not."