The fate of the historic home of the Penn Brewery, Pittsburgh's first and largest craft beer maker, appears sealed this week as the owners prepare to leave the 19th-century structure with its custom brewhouse and restaurant for new quarters somewhere in Pittsburgh.
The last batch of Penn beer was being brewed there this week, while beer production starts at a contract brewery in Wilkes-Barre. Most of the brewery staff has been told it will be laid off by year's end. The restaurant is to close at the end of February when its lease expires.
But on Tuesday, founder Tom Pastorius, who is still a minority partner in the operation, vowed to find a new owner that would keep the brewery in place.
"I spent 22 years of my life in this building, and I'm sick at the thought of losing it," said Mr. Pastorius. "I'm actively looking for a buyer for either the building, the brewery or both."
Mr. Pastorius retired from full participation in brewery operations this year after selling majority interest to Birchmere Capital in 2003.
Penn's new president and CEO, Len Caric, said yesterday he sympathized with Mr. Pastorius but is moving ahead to find a new location for both the restaurant and brewery.
"It's done. We have to leave," Mr. Caric had said during a interview in the restaurant on Friday, just before the ceremonial tapping of this year's St. Nikolaus Bock.
He was confirming a Nov. 23 Post-Gazette story in which he said a 360 percent rent increase by landlords E&O Partners forced the company to abandon the building. E&O Partners, which owns the restaurant and brewery space as well as the adjacent Brewery Innovation Center office complex, could not be reached for comment.
DLB Management Inc., the general partner of E&O Partners, is headed by David J. Malone, president and CEO of Gateway Financial. Other partners in DLB are Lou Molnar and Bill Burrell.
Mr. Pastorius explained what he believed were the reasons for the rent increase.
"E&O decided to increase the square footage that the company's responsible for. It more than doubled the space from 13,000 square feet to 28,000 by including the outdoor beer garden and loading dock. It also tacked on a bunch of other operating expenses for the entire building on the company's rent."
As Penn hunts in the city for a new location for the restaurant and brewery, the company has contracted to brew its beer, using the same recipes and ingredients, at the Lion Brewery in Wilkes-Barre (maker of Stegmeier and other brews).
"The No. 1 thing is to keep the quality of the beer," Mr. Caric said.
At this year's Great American Beer Festival, Penn won two medals: a gold for Kaiser Pils and a bronze for Oktoberfest.
Maintaining both the quality and unique taste of Penn's beers will be difficult, say brewmasters Bill Covaleski of Victory Brewing in Downingtown and Chris Trogner of Troegs Brewing Co. in Harrisburg.
"Penn Brewery has a real identity in its beers, and it's just not in their best interests to contract it out," said Mr. Covaleski. "I've always admired Tom Pastorius and his beer, and I'm sad to see this happen."
Mr. Trogner believes "a contract brewery can most likely replicate the taste of a craft beer, but not the emotional connection for the people who are followers of a brewery like Penn."
In fact, Mr. Caric said, Penn already had planned to have the Lion brew all of its flagship brew, Penn Pilsner, because the North Side facility's total production -- about 11,000 barrels a year -- was near capacity and it wanted to free up more room for other brews and to experiment with new products.
Mr. Caric acknowledged that it will be "tough" to find a site with the same kind of Pittsburgh history found in the brick E&O brewery that opened in 1848 and is on the National Register of Historic Sites.
But moving started to look good, Mr. Caric said, because of the "liabilities" of the current site, which has no room for expansion and is isolated. He said the company has a real estate agent looking for a new site in a city neighborhood with a busy retail and restaurant scene. That would increase walk-in business, he said, rather than forcing customers to make the "commitment" to drive to the base of Troy Hill.
"We really want to take this opportunity to find a place where we can do better," Mr. Caric said.
The CEO, who previously ran McKnight Cylinder, a company that recertified propane tanks, wasn't the only person rocked by the rent impasse. Brewing manager Andrew Rich was told that he and his two assistants are out of a job by the end of the year.
Mr. Caric said that eight of 10 brewery employees will be laid off, a move he described as "heart-wrenching." The 30-some restaurant employees could work right up to Feb. 28 or even beyond, as Penn's lease gives it an additional 90 days. Mr. Caric said of the employees, "As I know things, I will tell them."
The North Side has been abuzz with the news that it might lose a true Pittsburgh destination. Mark Fatla, executive director of the Northside Leadership Conference, wrote in an e-mail, "No topic has generated as many phone calls, e-mails or chat-line comments in my 2 1/2 years [here] as the potential closing of Penn Brewery."
His group's loan fund subsidiary, Northside Community Development Fund, has offered to help both landlord and tenant, "preferably to encourage both parties to come to agreement to keep Penn Brewery in the current location. That would be the ideal solution from a community perspective."
Otherwise, Mr. Fatla said, they'll help the landlord find a new tenant, perhaps another brewery or restaurant, and help Penn Brewery find an alternative space.
As Mr. Fatla points out, this private business negotiation comes in a "difficult economic climate." The region this year has seen the closing of three brewing operations -- John Harvard's Brew House in Wilkins, Hereford & Hops in Cranberry and the Johnstown Brewing Co. -- as well as Marzoni's Brick Oven and Brewing in Hampton (which served beer brewed at another location).
Mr. Caric said yesterday that there have been no more discussions with E&O Partners. "There's no budging from the landlord that I can see. So we're moving."
Moving Penn Brewery won't be easy. Once the beer that already has been brewed is bottled, Mr. Caric said his company would remove the tanks and equipment, some of which will have to be dismantled to be removed -- to either be sold (for reuse or scrap) or stored until Penn builds another brewery.
Mr. Pastorius had steadily increased the amount of brewing and bottling equipment, including locally fabricated fermenters and storage tanks since installing a custom-made German brewery in 1990. He said it was a "multimillion dollar investment.
"The Penn Brewery has become an icon in this city. It provided a lot of happiness to a lot a people," he added.
Mr. Caric said that doesn't have to change: "We're committed to being in Pittsburgh with a restaurant and brewpub and brewing beer. Now we have to work out all the nitty-gritty details."