Former Brewery Converted to Housing in Partnership with Employer, City

By Caitlin Jones & A. J. Johnson
March 31, 2009 5 min read

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Tax Credit Advisor, January 2009: An historic former brewery building in La Crosse, WI (pop. 50,000) has been converted into mixed-income apartments in a cooperative venture with the city and a major local employer, a regional medical center.

The project, the Historic Gund Brewery Lofts, was developed by Gorman & Company, Inc., a Madison, WI area firm that specializes in historic preservation, affordable housing, and niche projects that typically solve an identified problem or meet a specific need of the local community.

Opened in late summer 2007, Gund Brewery Lofts exhibits multiple different development traits, including historic preservation, adaptive re-use, infill, and workforce and employer-assisted housing.

Rich Local History

The former Gund Brewery building, a 58,000-square-foot structure that once served as a bottling plant, was built in 1903 and symbolizes a rich local tradition. According to one report, the city of La Crosse has had 15 different breweries during its history, peaking in 1900 with eight. John Gund, a German immigrant, established the John Gund Brewing Company in 1880. By 1897, after various expansions, the brewer was shipping beer throughout six states. A fire in 1897 destroyed the original brewery, but the owners rebuilt. At the turn of the century, “Gund’s Peerless” beer was famous worldwide and won several awards. But the enactment of Prohibition in 1919 signaled the beginning of the end for the company. The brewery was forced to shut down, briefly re-opened to produce low-alcohol “war beer,” was hit by a brewery workers’ strike in 1920, and was finally closed for good in 1920 by complete Prohibition.

The property and buildings were eventually acquired by the Sara Lee Corporation (now part of Monsanto Company). In April 2003, Monsanto/Sara Lee donated the five-acre property, including the three-story red brick bottling plant building, to Gundersen Lutheran Medical Center. One of the region’s largest employers, with 2,500 employees, the medical center is operated by the Gundersen Lutheran health system, a comprehensive nonprofit healthcare network with facilities throughout Wisconsin that employ 6,300 people.

In a cooperative venture, Gorman & Company collaborated with officials of the city and Gundersen Lutheran Medical Center to redevelop the bottling plant building into mixed-income apartments, both to meet the city’s desire for additional affordable housing, and the medical center’s desire to recycle the building to productive use and create additional, affordable housing convenient to its employees. Gund Brewery Lofts is on the medical campus itself, and close to several other major regional employers as well.

Developer Tom Capp, chief operating officer of Gorman & Company, told the Tax Credit Advisor in a recent interview that the medical center contributed most of the value of the land and building for the project. Their idea “was to have a new housing choice,” he said. Renovation of the building began in October 2006.

Multi-Faceted Development

Historic Gund Brewery Lofts, totaling 122,525 square feet, contains 86 “workforce” loft apartments, including 41 created within the original historic building and another 45 in a new addition built by the developer. Capp said the addition was vital for economic viability.

The apartments range from 600-square-foot efficiencies all the way up to 1,300-square-foot three bedrooms. Sixty-eight apartments are low-income housing tax credit (LIHTC) units; the remaining 18 are market-rate units with rents set below local conventional rents. Average monthly rents range from $518 for efficiencies up to $857 for three-bedroom units.

Apartment features include exposed brick and timber, in-unit washers and dryers, and underground and surface parking. Amenities include a small movie theater, community room, exercise facility, storage lockers, business center, and other features.

The development utilized sustainable and green building practices and features. These included recycling of materials during construction; installation of a solar hot water system, low-e windows, and Energy Star appliances; above-code insulation; use of native landscaping in storm water retainage areas; and the replacement of a parking lot with green space.

Funding Sources

The $12.4 million project utilized multiple sources.

Seventy-four percent of the total funding, or $9.2 million, came from equity generated by the sale of federal low-income housing and historic rehabilitation tax credits to syndicator Alliant Capital, Ltd., of Woodland Hills, CA.

Other sources included: a conventional first mortgage of $3,070,000; deferred developer fee of $94,877; and state brownfield grant of $78,000. Wisconsin’s Blight Elimination and Brownfield Redevelopment Grant program provides grants to municipalities, local development corporations, and private-sector organizations to help fund the assessment, remediation, and return of contaminated lands to productive use.

Construction, bridge, permanent, and mezzanine financing were provided by US Bank.

Capp said the medical center will retain long-term control of the property, with the right to buy the entire project at the end of the 15-year LIHTC compliance period.

Employer Tie-In

In addition to returning its building to productive use, Capp said the medical center benefited from the project by getting another tool for recruiting and retaining employees – a nearby source of affordable housing. The development also has enabled the medical center to reduce its need for on campus parking and reduced transportation costs for the employees who live there while reducing local traffic.

Capp said the medical center coordinated closely with his firm in helping to market the property initially to its employees, and continues to do so today. He said his firm offers suggestions to the medical center on how to effectively market the property internally to its employees.

According to Capp, only some of the project’s units are occupied by employees of the medical center. Among these, he noted, are a maintenance person and the assistant director of surgery.

Capp said occupancy in Historic Gund Brewery Lofts isn’t restricted to employees of the medical center, nor is preference given to them. He said occupancy is open to anyone. This is important, since the LIHTC program prohibits use of the credit for projects restricted to employees of a particular employer. In addition, doing so would violate federal fair housing laws.

Capp said, however, that the project’s location and the coordinated marketing with the medical center has resulted in a “flood” of applications from medical center employees wishing to live in the development.