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Allentown’s NIZ authority approves financing for Grand Plaza, Neuweiler redevelopment projects

March 5, 2020

Originally published by Andrew Wagaman at mcall.com.

By Kristen Harrison / THE MORNING CALL

For the first time in more than two years, the authority overseeing Allentown’s Neighborhood Improvement Zone has approved project financing for developers not named Reilly or Jaindl.

The NIZ development authority board of directors on Wednesday approved Somera Road Inc.’s $21 million funding plan for renovations of the Grand Plaza (formerly PPL Plaza) office building in the 800 block of Hamilton Street.

The board also OK’d Brewers Hill Development Group’s $1.9 million financing plan to begin redeveloping the Neuweiler Brewery on Front Street.

Excluding those of J.B. Reilly’s City Center Investment Corp. or the Jaindl family’s Waterfront Development Co., the projects were the first ANIZDA has reviewed since it approved financing for the ongoing redevelopment of the Americus Hotel in early 2018.

Somera plans to transform a first-floor space into a food hall and make almost $15 million in renovations to roughly 250,000 square feet of office space once primarily occupied by PPL’s power supply subsidiary, eventually spun off as Talen Energy.

While it has not yet secured any tenants, firm founder and Managing Director Ian Ross said the award-winning building has “stood the test of time” and is an “incredible asset that will make a great home for many companies.”

The New York commercial real estate investment firm will also redesign the outdoor plaza to include more landscaping, seating and dining opportunities. Ross envisions the plaza serving as a place where downtown residents and workers can congregate during all seasons.

Somera hopes to complete the food hall, lobby makeover and outdoor improvements by June 13, when the Blues, Brews and Barbecue festival will again put its main stage on the plaza at 835 W. Hamilton St.

Since it first approached the ANIZDA board’s project committee in January, Somera switched lenders and reevaluated its project cost. What was previously a $17.5 million project is now an almost $23.5 million venture financed through a 10-year term loan with Thorofare Capital, a Los Angeles commercial real estate lender.

Somera estimates the project will create 137 construction jobs and more than 1,000 office and retail jobs over the next five years, by which time it hopes the building will be fully leased. Serfass Construction Co. will lead construction.

The 6,000-square-foot food hall, dubbed will&co., is expected to feature six interior dining options, including a coffee shop and a full-service bar. An outdoor kiosk separate from the container bar will also offer a permanent vendor.

Somera’s application for NIZ funding comes as it continues to challenge the special taxing district in Commonwealth Court. In May, it took up the previous owner’s lawsuit claiming the tax subsidies offered to developers of new office buildings in the zone constituted a “de facto taking of the property for which just compensation must be paid.”

Without considerable government intervention, the Plaza owner argues, Talen wouldn’t have been able to leave the Plaza and secure rent 30% cheaper a few blocks away in City Center’s Tower 6 building in 2018.

Oral arguments will be heard March 19.

Down on the riverfront, Brewers Hill plans to convert a former bottling shop into a three-story, 42,000-square-foot office building over the next 18 months, with occupancy beginning in early 2022. Brewers Hill managing partners Josh Wood and Alex Friedman will move their other business, Ruckus Marketing, into the upper two floors. Tenants for the first floor have not been secured.

Brewers Hill won the right to redevelop the North Front Street property in late 2012 and bought it for $1.7 million in March 2014 from the Allentown Commercial & Industrial Development Authority. That equity was included in the $6.2 million estimated cost of the project’s first phase.

The firm is working with QNB Bank on a two-year term loan with repayment beginning in 2022. It will finance the remainder of the bottling shop renovation by tapping $2 million in Pennsylvania Redevelopment Assistance Capital Program grant funding obtained more than a decade ago for riverfront revitalization. The developers also have a private $2.45 million loan through QNB.

A rendering of the former Neuweiler Brewery bottling shop being redeveloped into an 42,000-square-foot office building by Brewers Hill Development Group. (Rendering by Brick City Reconstruction/Courtesy of Brewers Hill Development Group)

Brewers Hill projects 100-150 employees will work full time in the building following completion.

The 4.25-acre North Front Street complex, completed in 1913, is on the National Register of Historical Places. Neuweiler’s roughly 200,000-square-foot brewery closed in 1968, and the site has remained vacant since.

Wood and Friedman hope to tackle the more ambitious redevelopment of the Neuweiler brewhouse within two years of completing the bottling shop project. They also continue to pursue city zoning approval to convert a 6,400-square-foot storage building into a taproom with some brewing operations.

The NIZ has spurred more than $1 billion in new and planned development downtown by allowing most of the state taxes generated in the 128-acre zone — including those on income, sales and use, malt beverage and liquor, and cigarettes — to go toward construction debt. The ANIZDA board reviews financing applications for development projects within the zone.

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