E-Malt.com News article: USA: The financing assistance for the redevelopment of the former Pabst brewery received approval

The proposed $29 million in city financing assistance for redevelopment of the former Pabst brewery received qualified support November 21 from Milwaukee Comptroller W. Martin Morics, Milwaukee Journal Sentinel published November 22.

The report by Morics, the city's chief financial watchdog, could help boost prospects for the Pabst funding plan, which will be reviewed by the Common Council's Zoning, Neighborhoods and Development Committee. The financing package requires council approval.

Real estate investor Joseph Zilber, who bought the Pabst property in August, has conceptual plans to create housing, offices, a hotel and other uses. The brewery has been largely vacant since Pabst closed the facility 10 years ago.

The financing plans calls for the city to borrow $29 million to help transform the former brewery. The funds would help pay for demolition, environmental cleanup, and construction of new streets, sewers and other public improvements.

Those city funds, along with $12.5 million in interest charges, would be paid off by the development's property taxes within an estimated 21 years, according to the Department of City Development.

Zilber, chairman of Zilber Ltd., intends to sell large portions of the Pabst site to various developers and might develop some properties on his own.

Morics, in his report, said because the project lacks "firm, substantial construction commitments," his staff couldn't determine "the likely success" of the proposed city financing package.

However, while the financing package has substantial city risk, "significant and growing risks exist should the city do nothing as the site degrades further," Morics wrote. He also said the proposal has important provisions to reduce the city's risk on the Pabst project.

"Understanding these risks, if your committee is comfortable accepting these risks and moving forward with this project, we would have no objection to your proceeding," Morics wrote to zoning committee members.

The report also raises concerns that developers that buy portions of the Pabst site from Zilber might seek additional financing help from the city.

However, Morics also said the proposal has safeguards to limit appeals for additional subsidies, including a requirement that buyers of Pabst parcels agree not to seek city funds for at least five years. Parcel sales of more than $2 million cannot occur unless the city development commissioner certifies that the prospective buyer has a feasible plan.

Finally, the report says the chances are "extremely small" of fully developing the Pabst site with an amount less than the proposed $29 million in city funds. Even with the city assistance, Zilber can expect a "modest" 4.1% to 6.4% internal rate of return on his investment, Morics wrote.


22 November, 2006