We spent two years searching Detroit for a location for the brewery. Two years. We spent that time touring suitable buildings (although that criteria changed a lot over time) and talking to building owners about long-term leases. We contacted listing agents and also rode our bikes up and down streets marking down addresses and cold-calling owners (by paying to view tax records online). Detroit posed a particular challenge in that many property owners are comfortable continuing to wait for their property to magically increase in value as they’ve done for decades. Frustrations aside, we enjoyed touring spaces and exploring our city. The brick & mortar that we eventually purchased came about with the help of a friend who had become a real estate agent in the time we were looking and with a bit of persistence and luck. Cheers to reasonable people and wonderful neighbors!
The realization that leasing wasn’t ever an option:
When you’re looking for at least 5,000 SF (likely in need of new utilities and major upgrades like a new roof) we found many landlords in Detroit were not willing to make those upgrades or discount rent enough to make it worthwhile for us to undertake. Opening a brewery is not cheap and having rent due on top of a large loan payment was never an option for us. We ended up taking a risk by spending our seed money on the purchase and aimed to use the building and our home as collateral to secure the financing for the build-out. Nothing in the process of securing a location was obvious or straightforward and because we were willing to take our time and learn what we could, we were able to avoid some bad deals. Nothing is certain until the location is secured. The plan shapes the location search and the location crystallizes the plan.
We finally found a perfect building and they’re willing to sell it to us! Let’s sign the paperwork and pop the champagne-beer! … If only it’s ever so simple… We spent around $10,000 on due diligence before the sale closed. This included an inspection, a survey and phase I & phase II environmental studies. Having these actions performed made it possible for us to complete a parcel split (the property was originally part of a larger tax parcel), file the necessary paperwork, and confidently close knowing that there were no hidden environmental nightmares lurking below.
It was easy to see that the roof needed replacing (it rains inside) and the inspection did not identify anything else significant to us. Next we tackled the environmental side of things using some grant money from the city. Often a phase I study (historical research on the property) is all that’s needed. When the property is located in an industrial area that has housed many underground tanks and heavy industry businesses, usually a phase II is triggered by the historical research. Our phase II included a company coming out to bore into the soil at several points on the property to collect samples to be tested. The study revealed some heavy metals in the top soil of our vacant lot adjacent to the building. Everything below a few feet was clay and therefore uncontaminated. We now have to allocate about $10,000 of our construction costs to pay to haul away the contaminated soil to a proper site when the land is graded.
An acquaintance who did not know about environmental studies inadvertently purchased a similar property and later found a buried oil tank. The resulting remediation was likely at lease $50,000 and could go a lot higher. That is a red flag/hefty bargaining chip or a budget breaking hidden cost depending on when it’s discovered. So, whatever you do, do your due diligence!
When using the building as collateral for the business loan, the bank will also require at least a phase I to be performed. We made sure to choose a company that is on the bank’s list of approved vendors.
The pride of ownership:
Pheasants roam the neighborhood that houses our 9,000 SF building and adjacent lot in Islandview. Our confidence in the awesomeness of our location is a driving force that has moved us through the next two+ years of getting organized and getting funded. While we wait for construction to begin we’ve taken pride in the simple things like weeding, mowing, and shoveling our little slice of Detroit. We love our space and can’t wait to share it with the world.