Penn Brewing brass hope to find new home

Nov 28, 2008 (The Pittsburgh Tribune-Review - McClatchy-Tribune Information Services via COMTEX) -- GBTS | Quote | Chart | News | PowerRating -- Trouble is brewing at Penn Brewing in the North Side.

The historic E&O Brewery renovated two decades ago in Troy Hill for Penn Brewing with a combination of taxpayer grants, low interest loans and private capital might dry up because of a lease dispute.

The new owners of Penn Brewing, which makes craft beers and operates a German-style pub, say they cannot afford to pay the new rent sought by E&O Partners. The ownership group, which started life as a public-private partnership, renovated the abandoned 1848 facility in the late 1980s for brewer Tom Pastorius of Sewickley.

A spokesman for Penn Brewing said the partnership wants to increase the rent by 360 percent.

David J. Malone, president and CEO of Gateway Financial, is the president of DLB Management Inc., the general partner of E&O Partners. He calls the brewery a "labor of love."

"This project has been very, very difficult. We completed it in the late 1980s and we've yet to make a penny profit in all that time. We had to restructure the debt, we had to put more cash in it. ... It's nice the brewery has been there all that time, but we can't keep subsidizing the private sector," said Malone, who also serves as chairman of the Pittsburgh Chamber of Commerce.

Pastorius launched Pennsylvania's first craft brewery and brew pub with an array of gleaming copper vats amid the old brick, exposed beams and polished maple tables. Today, the brewery's roster of beer is an established Pittsburgh brand and the brewpub continues to serve up brats and beer.

When Birchmere Capital bought a controlling interest in Penn Brewing from Pastorius five years ago, the principals of the Pittsburgh-based private equity fund hoped to continue operations on the slopes of Troy Hill.

Those assumptions changed when Len Caric, who was named Penn Brewing President and CEO in July, went to negotiate a new lease.

"I was surprised. It was shocking. We had no indication anything like this would happen," Caric said.

So, the company is making plans to have its beer produced at least temporarily in Wilkes Barre while looking for a new Pittsburgh home after its lease expires in February.

"We've talked with the Urban Redevelopment Authority and a number of real estate agents have contacted us. They're all anxious to help us," Caric said.

"This is a Pittsburgh tradition. It's a Pittsburgh brand. We're optimistic and confident we'll land where we need to land and stay here," he said.

Malone said he was surprised to read of Penn Brewing's search for a new location in the newspaper.

"We gave them an offer. They thought it was too high," Malone said, adding the company declined to disclose its financial statements as conditions to continue negotiations.

"We certainly wish them well. It's a Pittsburgh institution and we'd like to see it survive and prosper."

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