Anheuser-Busch uses 10-Barrel Brewing to invade East Village

Macro-swill-making wolf in sheep’s clothing

East Village aerial photo
  • East Village aerial photo
  • Image by Andy Boyd and Chris Brake

Taking on Budman

Taking on Budman

The San Diego Brewers Guild and its members triggered a hearing of the Downtown Community Planning Council in February in order to voice opposition to a brewpub proposed for East Village. Oregon-based 10 Barrel Brewing Co. has plans to convert a warehouse at the corner of 15th and E Street into a multimillion-dollar brewery and restaurant.

The guild sought to inform the city that in December 2014, 10 Barrel was purchased by multinational beer conglomerate AB InBev, better known as the parent company of Anheuser-Busch, which owns 25 percent of the world beer market. AB InBev, headquartered in Belgium, is currently under investigation by the Department of Justice for using its money and influence to crowd independent craft beer out of bars and shops, and the guild sees 10 Barrel’s arrival as an attempt to further this agenda while also co-opting the San Diego craft-beer brand.

Mike Sardina

Mike Sardina

Brewers Guild president Mike Sardina wrote in an email to council chair Pat Stark, “It brings AB InBev into the San Diego market under the guise of a craft/local brewery… and leverage[s] its resources and size as a corporation to compete against and ultimately harm the true local brewers.”

A handful of beer-industry professionals and associates followed up with emails in support of Sardina’s, so Stark put the 10 Barrel application on the council’s February 17th agenda.

Cofounder Garrett Wales represented 10 Barrel at the meeting. He pitched the brewpub as a “family friendly” business that will bring 80 to 100 jobs to East Village. He said his company has a track record of integrating with local brewing communities, including a recent expansion to Oregon’s chief brewing hub. “Portland is another fiercely independent loyal city to their local brands,” he said, “and we’ve still been embraced.”

San Diego Brewers Guild president emeritus Kevin Hopkins disputed the idea that that will happen here. “We do not want a wolf in sheep’s clothing,” he said. Speaking on behalf of its 85 brewery members, Hopkins cried up craft beer’s value to the local economy.

“It represents 600 million dollars of economic impact,” he said. “We’re going to hit a billion dollars into this community from San Diego breweries by 2020. That’s important.” He added that San Diego beer has developed an international reputation that has proven a boon to the city. “There’s people flying in here from all over to visit San Diego. It’s a destination.”

In response, Wales agreed that this reputation, and the “the quality of the product” is exactly what attracted 10 Barrel to San Diego. “We’re not trying to fool anyone,” he said after the meeting, suggesting that quality beer will be enough to thrive in this market. “The consumer will vote with their wallet, and that’s all that we ask.”

10 Barrel architectural rendering

10 Barrel architectural rendering

There seemed to be no stopping the brewpub at this meeting. The 10 Barrel site is zoned for brewing, and the only approval up for consideration was a Neighborhood Use Permit to build an expanded outdoor patio and extend its late-night hours — boring, wonky stuff at best. Nevertheless, as the guild’s only recourse for a public hearing it became the staging ground for public arguments for and against the brewpub’s presence in East Village.

Anyone attending the meeting could request two minutes to address the council. Beer blogger and podcaster Brian Beagle stood to implore the council, “Please do not give a corporation that already has the advantage of economies of scale an easy path into our local economy.” Otherwise, only Hopkins and a handful of emails advocated for what recent count has at 120 San Diego County beer companies.

Showing up to speak on behalf of 10 Barrel were no fewer than eight people, several of them with real-estate interests in East Village. Also in support was a representative of city-owned development corporation Civic San Diego, and another of downtown lobbying firm Downtown San Diego Partnership. It quickly became apparent that these interests were not speaking up for 10 Barrel’s sake but advocating for a much larger project that has little to do with craft beer at all and everything to do with property this brewpub sits on.

Behind the deal

1501 E Street

1501 E Street

10 Barrel’s project will remodel an old warehouse property at 1501 E Street. As of July 2015, it is owned by real estate investment and development firm HP Investors, which paid $1.5 million to buy it from a family that had owned it for decades. HP Investors is headed up by Harki Parekh, who has been involved in commercial real estate in San Diego over the past four decades.

HP managing partner Sumeet Parekh — Harki’s son — attended the February meeting but did not address the council. Citing good business practices, Parekh has declined to name specifics about the 10 Barrel lease. However, he said, “Generically, most tenants sign ten-year leases.”

10 Barrel will not be the first brewing tenant in the HP portfolio — it also owns the University Avenue building where North Park Beer Co. is due to open this spring. In this case, Parekh added that his firm hadn’t been specifically looking for a brewery to take over its East Village property, and hadn’t necessarily been looking for a San Diego–owned business either. “The broker put it out on the market — that’s what he kind of does, tries to solicit tenants from around the city, country, whatever.”

Brokering the lease for 10 Barrel was the work of Urban Strategies Group. Its founder Michael Burton showed up to the council meeting with three cohorts in tow, each of whom deferred his time to Burton, accruing him an eight-minute allotment instead of two. Burton attested that the property had been well publicized and that no San Diego breweries had expressed an interest. “This property was taken to market,” he said, “was publically marketed to the masses. And we received one letter of intent from a brewery.”

Speaking through a public-relations representative, Burton declined to comment on whether he in fact approached any local brewers, and he declined to give details on how he marketed the building. However, during his address to the council he characterized this segment of East Village as a “very blighted neighborhood” and called marketing the area to prospective tenants “challenging.”

He told the committee that the 10 Barrel use of this property “will be the domino in catapulting a safer and transformative redevelopment project,” in the neighborhood. He added, “We’re dealing with numerous other tenants right now that are so ecstatic about this use, that they are following, and we will be announcing other users coming to this trade area immediately thereafter.”

The redevelopment project Burton referred to is another client of Urban Strategies called Makers Quarter.

SILO in Makers Quarter

753 15th Street, East Village

Makers Quarter

HP Investors happens to be a partner in L2HP, better known as Makers Quarter, an urban redevelopment group with an ambitious plan to turn five city blocks surrounding the 10 Barrel site into a planned, mixed-use neighborhood. Rounding out the partnership is another local real estate developer, Lankford & Associates, and Hensel Phelps, a national construction company headquartered in Arizona.

SILO at Makers Quarter

SILO at Makers Quarter

Makers Quarter grew out of the vision of the Navarra family. Most of the acreage within those five East Village blocks (plus one other) are owned by the Navarras — specifically, the children of Jim Navarra, who started Jerome’s Furniture there in the 1950s. Although the 10 Barrel property is not one of those owned by his family, Jerome “Jerry” Navarra — the furniture chain’s namesake — also spoke in favor of it at the Downtown Community Planning Council meeting. He explained that his family has been trying to redevelop their properties since moving the furniture operation out of downtown in the early 2000s.

“My sister and I started more than ten years ago trying to keep the six blocks that we had together as a potential neighborhood development,” Navarra said. “There are better than 500 apartments ready to go,” he added, “but we have not been successful with offices. So in order to steal some of these jobs from Sorrento Valley, we need a good neighborhood with amenities…and this building would be a part of that puzzle.”

In other words, transforming a boxy, mostly unused warehouse into the well-funded, slickly designed restaurant 10 Barrel has proposed creates a showpiece Makers Quarter can use to attract office tenants; particularly, the sort of businesses that will attract millennial urban professionals.

To the general public, Makers Quarter is best known as the location of SILO, an outdoor events space featuring rotating murals and events curated by a local street artists. This is by design. According to the Mission + Vision copy on its website, “Makers Quarter’s reputation as a cultural hub will continue to attract the talented millennial workforce that is required to sustain and strengthen San Diego’s innovation economy.”

Urban Planner Stacey Pennington — daughter of Lankford & Associates president Rob Lankford — has been overseeing the development of Makers Quarter since its inception in 2011. Her vision includes a walkable neighborhood of office and residential buildings with retail storefronts, interspersed by public-use open spaces. Phase one of the development plan was to, as she puts it, “activate the community.”

By activate, she means getting people to interact with unused spaces to create a sense of community engagement. So, back in 2013, Makers Quarter cleared an undeveloped Navarra lot at 15th and F streets and created SILO. It sponsored art shows and a series of large, rotating murals that add color and visibility.

The Makers Quarter partnership enlisted an event-services agency to manage the venue, which has hosted live performances, corporate events, beer festivals, and, ironically, the brewers’ guild’s job fair.

Across the street from SILO, Makers Quarter negotiated for a nonprofit called Humane Smarts to take over a Navarra-owned parking lot and install Smarts Farm. Smarts filled the lot with raised planters and offered community garden plots and educational programs for children. East Village residents and neighborhood restaurants began growing vegetables there. The urban farm added another attraction to sustainability-minded millennials.

However, both SILO and Smarts Farms have been interim tenants in the Makers Quarter master plan. Both projects will be moved out over the next several months as construction begins on the real work of Makers Quarter.

The first office building construction project is due to begin this spring, on the Smarts Farms site. That’s on what Makers Quarter calls Block D — the plot immediately south of the 10 Barrel property. It comprises a tiny fraction of the office space eventually slated for the area — only six stories and 50,000 square feet out of a planned 1,000,000.

Ground will be broken on two large apartment complexes in Makers Quarter this spring and summer, but Pennington stresses that the Makers Quarter vision won’t work without an office component. “Downtown needs to be a central business district that’s strong enough to help sustain the growth of the region — not a sleepy just-another-neighborhood,” she says.

Even for a relatively small office building such as the one being built on Block D, construction generally doesn’t start until businesses have signed on to occupy the space. “Typically for mixed-use office buildings,” Pennington says, “you can’t get it financed unless it’s 50 percent pre-leased.” However, she would not confirm that the building, currently under proposal with Civic San Diego, had yet achieved 50 percent pre-tenancy. A February 17 real-estate listing for Block D advertised the full allotment of 50,000 square feet as still available for lease.

Which brings us back to the notion a brewpub is just the thing, the “domino” that will knock everything else into place and give innovative companies looking for a new office hub the courage to land in this sector of East Village. “When they’re making a business decision to locate their employees and their offices in an environment,” Pennington explains, “they want to be able to look around and see thriving businesses and options, variety.”

What about Monkey Paw?

The words “options” and “variety” arose in response to a question about Monkey Paw, the award-winning, locally owned brewpub that’s already been operating a block from the 10 Barrel site since 2011. For better or worse, this is the San Diego craft-brewing company most immediately affected by AB InBev entering the local market.

Scot Blair

Scot Blair

A longtime champion of craft beer in San Diego, Monkey Paw owner Scot Blair has been vocally critical of the developers inviting what he calls “macro swill” into the community. He rails at the argument 10 Barrel will anchor community development. “If all of these millennial tech and residential folks are waiting in droves,” he asks, “why wouldn’t they be ahead of the game and get in at the bottom level?”

Blair says he chose this location five years ago, “Because I thought the area was in need of revitalization. I felt if I could go down there in ‘tent alley’ and show people this area could have respectable business, others would see value and that it could be a cool section of downtown. Not the littered T&A and cookie-cutter Disneyland Gaslamp.”

Monkey Paw

Monkey Paw

Part of Blair’s rancor arises from Makers Quarter’s use of Monkey Paw in its marketing, where it’s included as a neighborhood example of the “Maker Spirit” that frames the project’s brand, which pledges to “Establish, enhance, and promote San Diego’s core culture.”

He decries real-estate interests that “promote that area as ‘Makers Quarter’ but then line their pockets and seek out giant brewing companies to move into a community they purportedly care so much about.”

At least one of Monkey Paw’s neighbors echoes the sentiment. Craig Siegan, who owns property immediately adjacent to 10 Barrel on E Street, says, “You have Monkey Paw and these other guys [Mission Brewery, Half Door Brewing Co.] who are pretty close. Do you really need to set up shop right there? It’s like a Walmart moving in and capitalizing a market they never developed.”

Foregone conclusion

Other neighbors express objections to 10 Barrel that don’t involve the craft-beer-versus-big beer debate: the noise the outdoor construction and extended hours would bring to their neighborhood. Property owner Mark Lamson voiced his concerns at the council meeting — one of the only speakers to explicitly address the neighborhood-use permit being considered.

Another was a young man named Daniel Reeves, representing Downtown San Diego Partnership, the local lobbying group whose boardmembers happen to include Sumeet Parekh, Michael Burton, Rob Lankford, Stacey Pennington, and Makers Quarter’s office real-estate broker Matt Carlson, of global firm CBRE. Jerry Navarra’s son Mark is on the advisory list. The Downtown Partnership did not comment on whose behalf it was advocating 10 Barrel. Reeves simply delivered this message to the council: “I know you all know that land-use decisions cannot be made based on who the underlying ownership is. I hope you take that into consideration and approve.”

They did. 17-1.

With or without the lobbying push, the land issue would have passed. Two- and three-generation San Diego family businesses have a stake on Makers Quarter and, as they showed at the meeting, a lot of people want to see its investment stimulate the economy — enough that they were willing to sit through 90 minutes of planning-council agenda before 10 Barrel’s vote came up.

The list of Downtown Partnership boardmembers includes 110 names, including executives of Walmart, AT&T, the San Diego Padres, and a handful of banks. Downtown Community Planning Committee chair Pat Stark is listed as an advisory board member. So is someone from the mayor’s office. But there’s not anybody from the San Diego Brewers Guild.

In a promotional video for Makers Quarter, mayor Kevin Faulconer makes a cameo, cheerfully imploring prospective tenants to “Come to Makers Quarter to see for yourself why it’s one of the best places for innovators, artists, makers, and entrepreneurs to live, work, play, and create.”

Garrett Wales did not respond to requests for an exact amount of money 10 Barrel is spending to become one of those makers. But during his statement to the council, he counted it a “multimillion-dollar investment into the neighborhood.” The local brewers’ guild contends this money is actually an investment by AB InBev to capture a share of its countywide, $600-million-a-year impact. For now, the city has sided with the neighborhood, and it’s not difficult to see why. The most recent estimate given to the Union-Tribune has U-T’s billion valuation: the potential value of Makers Quarter approaching a billion dollars. And only one brewery in town can claim to be worth that.

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To fulfill its truth-in-advertising obligation, the giant neon sign out front of "10 Barrel" needs to read "BUDWEISER" in large letters.

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