Stone Brewing chose Richmond because of Stone’s confidence in its business relationship with city
- March 17, 2015
With St. Patrick’s Day an appropriate backdrop, the chief operating officer of California-based Stone Brewing Co. was in Richmond Tuesday for a presentation to the city’s real estate community on why Stone chose the city from sites in 20 states for its first East Coast brewery, a project that’s expected to revitalize the city’s Greater Fulton area.
Pat Tiernan, Stone’s COO, and Jane Ferrara, COO of economic and community development for the city of Richmond, shared the podium during a meeting of the Greater Richmond Association for Commercial Real Estate that drew nearly 200 people.
Wearing black jeans and a loose, black shirt, Tiernan projected a casual California vibe. After narrowing 350 site proposals for Stone’s brewery down to sites in Richmond, Norfolk, Roanoke, Philadelphia, Charleston, S. C., and Columbus, Ohio, Tiernan said what carried the day for Richmond was Stone’s confidence that it could work with the city on business issues.
“One of the sites got kicked out late in the process because we had a guy show up late to a meeting, asking who we were,” said Tiernan. Such ignorance didn’t sit well with Stone’s executives. Nor did they like it when at another site an official added a $3 million connection fee into the possible deal a week before the negotiations were expected to turn formal. “We agreed as a company that if we experienced anything like that, we were out. … That was not the case here, and that’s one of the reasons why we are here. People here were reaching out to us.”
Tiernan praised the collaboration and cooperation between Ferrara and the city’s economic development team and Virginia’s economic development officials.
”That was very unique relative to the other places,” he said. “That started to weigh on our decision. You weren’t the low-cost option. That wasn’t the primary criteria.”
Instead, it was confidence in the business partnership. “Five years down the line, if a water shed issue arose, who could we work with? Or if there’s a issue with a new road by the bistro or waste water?” Richmond was the kind of place where “you could beat each other up and have a beer at the end of the day,” Tiernan said.
In her comments, Ferrara shared some of the lengths she went to to win the project for Richmond, especially after Richmond lost out to Ashville, N.C., in an earlier site selection competition for a New Belgium brewery. She said she attended an annual convention of 9,000 craft brewers in Denver to learn about the beer industry and while there obtained a 90-minute meeting with one of Stone’s co-founders, Steve Wagner, to convince him to visit Richmond.
Stone Brewing, based in San Diego, is the country’s 9th largest craft brewer. “The more we learned about the company, the more we liked,” Ferrara said, referring to Stone’s commitment to sustainability, philanthropy and the art of brewing.
However, the project has not been without controversy. Other city restaurateurs have challenged the project and the transparency of the process in which the city’s economic development authority is acting as the developer by assembling land, building the production facility and leasing it to Stone.
Stone announced in favor of Richmond back in October, yet details of the lease are yet to revealed. City officials say that’s because they still are in negotiations when it comes to signing a final contract with the builder and the lease with Stone. The brewery expects to pay the city back through rent payments over 25 years.
Ferrara said the project’s estimated total revenues to the city are $25 million over 25 years, including things like real estate, personal property and meal taxes and other fees.
Richmond is kicking in $23 million in public funds (through the use of bonds) to finance the 200,000-square-foot brewery during the first phase of the project. Tiernan said Stone expects to spend about $42.7 million on production equipment. Construction is underway by a local general contractor, Hourigan Construction, with the project expected to be complete in December of this year. Stone plans to begin beer production in July 2016.
The production facility would initially employ 88 people full time while a second phase -- an $8 million restaurant and retail beer garden -- is expected to create about 200 part-time, hospitality jobs.
Ferrara assured the real estate community that the city had done its due diligence on the project. “Not only did the city and the EDA (economic development authority) vet the financials on Stone, they scrubbed those numbers and went through them with a fine-tooth comb. I can tell you with a great deal of confidence that it will be a good deal for the city,” she said.
While some people may not agree with the transaction, “despite what you read, these deals do not happen in secret,” she said. “Everything we did entailed a public meeting. Every document was a public document.”
The brewery is going up at the former home of the Fulton Gasworks, on about 12 acres of publicly owned land in the Richmond’s East End.
Stone’s production at the facility is projected to top 120,000 barrels per year at the onset. The reason the company decided to build a new production facility on the East Coast came down to capacity. With Stone’s rapid growth in the craft beer industry, “We have about a year and half of capacity left,” Tiernan said. With craft beer representing only about 11 percent of the overall $100 billion beer industry, “craft as a whole has a lot of upside,” he said, and there are pressures to get a new facility up and running.
Tiernan said the bistro area, located in the city’s old Intermediate Terminal Building along the James River, would be modeled after the company’s existing Stone World Bistro & Gardens locations.
According to Ferrara, Stone’s bistro property in Escondido, Calif., draws about 600,000 tourists a year, “Can you imagine 600,000 people taking the mecca to Richmond for the beer experience? They won’t go every night to Stone’s Bistro. They will go to other restaurants and learn about the great food scene we have here in Richmond,” she said.
Currently, Virginia has 102 breweries. Ferrara says Stone’s facility is a good fit for Richmond, because it plays to the city’s targeted growth sectors of food and beverage, logistics and distribution and tourism. “The infusion of new investment, the jobs, the company’s sustainable practices. What do you think, is it good for Richmond? From the city’s point of view, the resounding answer is absolutely yes.”