Investors Eye Joseph Wolf Brewery as new Boutique Hotel in Downtown Stillwater

There is a lot of talk about what downtown Stillwater will look like in five years, and one idea being tossed around is turning the Joseph Wolf Brewery into a “boutique hotel.”

The Stillwater City Council on Tuesday night heard preliminary ideas a group of investors have for the south end of Main Street.

Mark Finneman told the council that he has been retained by investors who are interested in converting four stone buildings into an historic 37-room hotel.

Preliminary bids on the project are coming in at $9.4 million.

Troy Hoekstra, who is also working with investors on the project, said because of the amount of debt involved with the project, there is a need for some sort of help from the city, state and federal governments to make the project happen.

“In this case we’re going to need a little bit of a push to get this thing across the finish line to make it bankable,” he said. “Assuming we have the right kind of signatures to stand behind that kind of debt.”

Then Hoekstra told the council the group is seeking $1.15 million in city subsidies.

Historical construction is more expensive than modern construction, Hoekstra said.

“In this case, this building is at a tipping point, and you could probably take that term very literally,” he said. “In some cases it’s past the tipping point and has caved in.

Hoekstra said if something is not done with this property in the next 18-24 months, “it’s going to be at the point economically where it’s not going to make sense for an investor group,” or will take an enormous amount of public subsidy to make it happen.

“In this case we think we can get this project done,” he said. “This is the front door, the welcome sign to downtown Stillwater, and that is very intriguing to a lot of lenders.”

That is a big number, Stillwater Mayor Ken Harycki said.

“It’s an interesting project, but I think I need more information to evaluate it.”

The request also brings up an issue of fairness to other hotels in the city, Harycki said.

“I want to be careful that we don’t subsidize one group, and there two or three or four other groups are struggling through conventional financing, because that opens the door for the 'what about us' questions,” he said. “We just don’t have enough information, but it’s an interesting concept.”

Ward 1 Council Member Doug Menikheim agreed, saying he needed more information, but a concept like this could be beneficial in the revitalization of downtown Stillwater.

“These things are notoriously risky,” City Attorney Dave Magnuson said. “That’s why bankers would only deal with somebody with 50-percent equity.”

To assess the request, Magnuson said staff will have to know what kind of debt is connected to the property and what private equity is involved.

Historically on larger projects, the city has created a separate redevelopment district and used pay-as-you-go assistance as reimbursement for certain expenses, Magnuson said. The benefit of that is the project must be finished and generating taxes before the city pays any TIF.

“That's one way to look at it, but so far they haven’t submitted a proposal,” he said, “so we don’t have anything to go with.”

In recent years, the city has used TIF to help fund the downtown facade program, assist HAF Group to offset construction costs of the Peaslee Building due to muck ($150,000) and to VistaTek to help with renovation and moving costs ($250,000).

“We haven’t shut the door on these discussions,” Harycki said, “so I encourage you to continue working through the process, and educating us so we can see it and understand it better.”

There are many options for funding, Hoekstra said.

“Don’t see this as us coming here with a great big hand out,” he said. “We have some other ideas on how the TIF could function as more of a loan. There are a lot of creative ways to do this, but that can be taken up later.”

Ward 3 Council member Tom Weidner said he’s happy the council was brought into the project at such an early stage, but some of the details are better developed at a staff level, and brought to the council with a recommendation.

“We are not saying no,” Harycki said. “But it’s going to be a process. You’ve got a long road to go down, because this is serious money.”

“I understand the risks that are inherent here,” Hoekstra said. “We’ll be diligent.”

Forget me Not is not a part of this proposed project.

More details about the project will be discussed during the Aug. 5 Heritage Preservation Commission meeting.

The council took no action on the presentation.