Q: Do You Have A Location Yet?

A:YEEEEEEESSSSSSSSSSSSSSSS!

Ladies and gentlemen, I present the home of PanicAlarmist Brewing: 4055 W. Peterson Ave., Chicago, IL

11,000+ square feet of Chicago industrial goodness. Here's the kicker. Wanna know who had this built and then had their home here from the 1950's up til the 1990's? Go on, guess. Give up? The Siebel Institute of Technology. America's oldest brewing school. I know right?!!!! Yup, this was Siebel's home until they moved down by Goose Island on Clybourn in the 90's. This is a piece of Chicago brewing history and PanicAlarmist fully intends to add to that history!

Here are some photos. Note the outdoor courtyard. Yeah, Panic's courtyard. Oh lordy. So much going on. I'll share more when I can. As always, check out the PanicAlarmist Brewing Facebook page for the latest scoop.

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Cheers!

G

Busy!

Uber quick post. Last week I was approved for my small business loan which is HUGE! More investors on board (and room for a few more). Lease negotiations seem to be complete, contract being written up now. Will be ordering 20 BBL brew house, 40 BBL fermenters, 40 BBL bright tank, 40BBL hot liquor tank and accessories this week. So busy, lots to do in order to close on the loan. I'll go into great detail on loans, leases, and such when time allows.

For the absolute latest news, follow me on Facebook.

The brewery is finally happening!

Cheers,

Gary

Where You At?

Chicago Craft Beer Week is over and what a week it was! My favorite part of the whole week was meeting new Panic Alarmist fans and admirers. I've lost count how many people came up and thanked me (I was wearing my Panic T-shirts all week) for sharing so much and offering wonderful words of encouragement at the four events I attended. My wife, Bridget, who isn't usually a big beer festival fan, accepted that beer events would be a part of our lives from now on and joined me for all of them. She really got to see first hand how much all this work I've done has started to pay off and she's more excited than ever to get this brewery up and running. And as usual, people liked my wife more than they liked me. I'm used to it. This is what I hope to be the home to Panic Brewing. There's lots of space, but the other tenants are either a bit insular, pregnant, or dead.

Let me start with the biggest news thus far: I've found a space I'd like to lease. I like it a lot. It's almost perfect. I say it's "almost" perfect as there are some potential zoning issues I'm trying to hash out with the alderman's office for the location. I want to be able to open a retail store first, and then a tap room down the road. There could be some problems with the current zoning, but like everything else, it will all work out. As much as I'd love to reveal the address, I can't let the cat out of the bag just yet. There's a lot that has to happen before I can sign the lease and it will definitely be several weeks or more before the deal is done, but I REALLY want this space. I'll gladly share the ins and outs of leasing once I have it signed.

Another big deal for me was opening a business checking and credit card account, which I did last week. Yes, it's easy to do (you need to be a registered business entity with your state and get your EIN from the IRS, which is easily done online here), but I had put it off as I thought it might be an additional expense I wasn't ready to take on yet. Turns out, it's pretty cheap and actually free if you maintain a certain balance. An easy task, but it's checked off the list, and that's a good thing.

Now, the big question is, where is Panic Alarmist now in the process? It seems like I'm always saying, "almost ready to fund raise", or "finishing up the legal investment documents". Well, I'm almost ready to fund raise. I'll officially begin once we finally finish up the legal documents. I spent 2 hours on the phone with my attorney last week to go over the damn near final versions of the operating agreement and PPM. We've agreed to have these 100% completed by mid June. Monday, June 17 to be exact. I'm sure I'll have to go through at least a couple more reviews before then, but that is my focus right now. I want this shit done NOW!

I have some final tweaking to the business plan that I will be finishing up over the next two evenings and then that's it. No more business plan changes. Over the past couple of months I've received some new equipment quotes and learned some new info that has allowed me to make some pretty significant changes to my financial analyses ranging from start up costs to ongoing monthly costs. Some changes are required due to how some banks underwrite loans. I'll go into painful detail on bank loans, especially SBA backed ones once I have my loan in place.

Let me go into my business plan process real quick. I finished the plan months ago. Since then I've made numerous revisions both big and small. This is how I operate. When I am learning something new, I iterate over and over until at some point I feel comfortable with the result. I'm not looking for perfection with the business plan, but I'm definitely looking to not commit any egregious errors. Perfect example: there are so many things that could go wrong during the construction process that my costs could be way beyond what I've budgeted. I've tried very hard to mitigate that. But at some point, you have to let it go, roll the dice, and do your best. Most people would've started the dice rolling much sooner than me. That's ok. Everyone is different and I'm very comfortable with how I learn and execute. It's now time to execute.

So here's kinda how the rest of this story unfolds, as I see it:

  1. I get the completed investor documents from my attorney (which is my current primary focus)
  2. I contact all the folks who've expressed interest in investing (there are quite a few), email them the operating agreement, PPM, and some other stuff.
  3. We meet or talk on the phone, I answer any questions investors may have. (more on this when the time comes, which is SOON)
  4. Investors invest, money goes into an escrow account and stays there until a certain funding level is reached
  5. Once a certain funding level is reached, I continue my conversations with the banks I've been dealing with. They see I have investor money and personal investment, they analyze the business plan, they approve, the SBA agrees to guarantee it, loan gets funded. This takes several weeks.
  6. As soon as the loan is funded, I order equipment. Brew house and fermenters require about 6 months to arrive.
  7. Also, as soon as loan is funded, lease is signed. This will take a few weeks of negotiation.
  8. Once lease is signed, contractors allowed to bid, contractors hired, work is completed. How much and what type of work will depend on the space I lease.
  9. On the day the lease is signed, I will submit my paperwork to the TTB (Federal agency in charge of breweries amongst other things). I will have begun completion of this paperwork way before this. TTB approval takes about 2 months. Could be more, could be less.
  10. Once TTB approval is received, I can then start the Illinois state approval process which can take up to 2 months. It would be nice to start this process in parallel with the TTB, but that would make Illinois business friendly.
  11. Construction finishes, equipment is installed, licenses all received, brewing begins.
  12. Beer is brewed, packaged, and sent to a distributor in the Chicago area. I will not be self distributing.
  13. Once operations are smoothed out and cash flow is good, I'll begin the process of opening up a retail store or tap room, depending on zoning and Chicago liquor license bull shit.

So, that's the plan. There are lots of mini tasks in there as well, but this is a good overview of what's involved yet. From the day I get the loan, we're looking at at LEAST 6 months to opening day, most likely 7 or 8. Who knows?

But this I can promise you, it's moving along better now than ever before. It feels very real and there's no stopping.

Last note: My latest batch of Panic Pale Ale is finally in the ballpark of what I'm looking for. There's a lot of tweaking yet to do, I'll be experimenting with some hop schedules, but it's close. Very close.

Cheers,

G

What I've Learned About Commercial Real Estate Leasing

As I understand it, Russia has this old power plant with plenty of clear height. The commute would be a disaster though. Get it? Disaster? Sigh. In the past two weeks I've embarked on two commercial real estate tours with my real estate agent. We'll call him "Nick" because that's his name, but we'll continue to put his name in quotes because that's pretty damn funny. Anyway, "Nick" has thus far arranged for me to tour about 20 different commercial real estate properties which he thought would make suitable facilities for a brewery.

Probably the first criterion for my location is ceiling height. In the commercial real estate biz this is called "clear height" and means the distance from the floor to the bottom of the lowest ceiling support. Ideally I'd like about 16' but I can certainly go shorter, I just don't want to. Shorter clear heights means shorter fermenters which means, in addition to different fermentation characteristics, more square footage required for a given capacity. This is Chicago and like any big city, things are usually cheaper if you build up. I'll be starting with 30 bbl fermenters, but in the not too distant future I'll need 60 bbl fermenters or larger. I've toured a few spaces on the North Side with large clear heights, but the number of choices is surprisingly limited, but that's fine, I'll make do. There are more on the West and South sides, but those are just too far from my home to make them viable.

Other criteria are obviously price, square footage available now (minimum 5000 SF) and ideally additional adjacent square footage for future expansion, distance from my house, TIF/SBIF availability (we'll cover that some other time if applicable), build out costs, etc. If you're not aware, commercial real estate is priced by $/SF/year. So if you're quoted a price of $10/SF, that means you'll pay $10/SF/year, not per month. The first time I saw a quote, I assumed it was per month and damn near cried. That is not the case. Also, the price quoted will be either "net" or "gross". "Net" means the price does not include property tax, maintenance, insurance, etc. "Gross" means all those costs are included in the quote. If you're quoted "net", your real estate agent will find out what the "gross" is. One way or another, you pay for all those things, it's just how it's quoted by the lessor.

One thing I've noticed immediately is that commercial real estate owners (or their real estate agent surrogates) run the gambit from very friendly and helpful, to stubborn, cheap, ass hats. I won't be dealing with the ass hats. I have too much riding on this to put myself at risk of getting a bum deal with someone who doesn't want to spend money to obtain and maintain a good tenant. When I say "cheap", I'm referring to the two main ways that a commercial real estate owner can help a perspective tenant out: tenant improvement funds ("TI") and abatement.

TI is where the owner agrees to pay for some of the build out costs you require. Obvious candidates for a brewery are: installing 230V 3-phase power on the property, concrete work, trench drains installation. The incentives for an owner to do this could be things such as getting a tenant into a space experiencing extended vacancy or poor condition of the property. The upswing for the owner beyond just getting rent for a previously unrentable space is that they can charge you higher rent to pay for the capital outlay. I'd much rather pay for high construction costs with additional rent payable over years rather than use up precious capital. As part of my business plan, and my overal assumption that nothing will go the way I want it to, I'm just assuming that I will receive little to no TI, but this is obviously based on the state of the property. If it's a dump, then I will definitely expect TI, if it's nice and clean, well then we'll negotiate. The good news is that every space I looked at either already had the proper electrical and water supply or the owner was willing to pay for that in some capacity. This makes sense as all the properties are in commercial or manufacturing zones where appropriate infrastructure is essential.

Another way a lessor can help a tenant get up and running is by "abatement". Abatement is simply where the tenant pays no rent during build out, permit processing (a fun subject in Chicago), equipment delivery and installation, etc. Once you sign a lease, the lease actually begins on an agreed upon date, perhaps 4 to 6 months after build out begins. This allows you, the business owner to not pay rent when you have no revenue coming in, and it allows the owner to get a good, long term tenant who doesn't have to use up their precious capital and risk going out of business. Very negotiable and most owners have been very willing to do that. The ones that won't will not be considered. This especially goes for the ass hat owner (whom was not present) and his douchebag real estate agent (about as personable as a sun dried turd) of a large commercial space on the West Side. The conversation went like this:

"Nick": "So is the owner willing to offer abatement?"

Douchebag agent: "Oh no, he's not willing to let someone use the space without paying any rent."

Me with my sarcasm set to "kill": "You mean like all the rent he's collecting now?" (staring over a vast horizon of emptiness)

The space was very large and very empty and had been vacant for many, many months. No renters in sight. Fortunately this turd was an anomaly. Every other agent or owner we met indicated that there was room for TI and/or abatement. That's just smart.

Another interesting facet of commercial real estate leasing that I was aware of but was reminded by lessors' agents over and over is that the owner will be doing a detailed analysis of my business plan and business capitalization. Owners don't want to invest tens of thousands of dollars in TI or abatement only to discover that you are undercapitalized or have a stupid business idea. One interesting location I looked at had been vacated by the tenant in the middle of the night without warning while the lease was still in force. I assume the owner is in the midst of legal action to recover their losses. So there's snaky-ness on both sides it seems.

One other aspect worth mentioning and closely related to the previous point is a security deposit. Lessors might demand a bigger deposit from a start up such as myself. If that's the case, then I'll expect the lessor to release some of that security deposit back to me over time as the business matures and the owner becomes comfortable with my status as a reliable tenant. My business plan assumes a 6 month security deposit as recommended by "Nick".

Side note: I can't tell you how many lessor agents told me something along the lines of, "There's a lot of you brewery guys looking at spaces." My response was, "Yes, I probably know all of them", which is true. Small world, even in Chicago.

There is much, much more to this commercial real estate leasing game than this, but this is just a primer based on what I've learned in the past couple of weeks. It's a whole new world for me and I will tell you it's been a source of stress, but I'll get through it like everything else. As I learn more I'll share. I'll be very glad when a suitable location is found and the lease is signed.

Oh, and I found about five locations that I liked. I didn't LOVE any of them, but all could work fine, just not ideal. I'm not done searching yet and I'm hoping to find a diamond in the rough. I won't be revealing any location information due to the aforementioned note about other breweries looking as well. I'm here to share as much as possible, but some things are best left on the down low until the time is right.

Cheers,

G