Keg and Case Market ownership goes to lender after opening 5 years ago to fanfare

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Early in a mid-November work week, the noontime crowd at the spacious Keg and Case Market consisted of six coffee drinkers completing crossword puzzles or scrolling through their phones and laptops by Five Watt Coffee, one of the market’s first and sole remaining vendors. Five men played fervent games of pinball in the aisles outside Starcade, a retro-video game arcade.

Otherwise, upwards of 22,000 square feet of commercial space that had reopened on St. Paul’s West Seventh Street to much fanfare in September of 2018 had grown silent — a $10 million gamble weighed down by recent loan foreclosures and what critics have dubbed a fundamental mismatch between its food or retail offerings and the surrounding mixed-income neighborhood.

Even longstanding customers have been offput by the market’s lack of international cuisine, affordable, grab-and-go foods or casual gathering space. Its signature brewery, Clutch Brewing Co., will close by the end of December.

“If you compare a space like this to the Midtown Global Market in Minneapolis, the prices for food are higher than you’d expect for an open market,” said Kieran Manzella, a resident of St. Paul’s West Side, who called himself a regular visitor to Five Watt. “The coffee shop’s solid. It’s pretty quiet.”

Reinventing the 168-year-old keg house

Still, developer Craig Cohen, a St. Paul resident, had once sold some 40 retailers and restaurateurs — as well as financial lenders and city officials, and his own father as a loan guarantor — on the prospect of reinventing the 168-year-old Schmidt Brewery’s keg house into an indoor and outdoor marketplace.

In addition to Five Watt, founding vendors like the fine-dining establishment In Bloom, the southern-themed Revival restaurant, Sweet Science ice cream and Clutch Brewing became inaugural tenants, alongside an eclectic mix of artisans and specialty booths such as Forest to Fork, which debuted a commanding tower of mushrooms stretching almost two stories tall.

Cohen also acquired the neighboring Rathskeller building from the West 7th/Fort Road Federation, inheriting with it some $1.3 million in financial obligations to the city through a loan-like arrangement known as tax increment financing. With its distinctive floor made up of more than 30 types of stone, the 1930s-era Rathskeller has become a private event hall run by Mancini’s Char House.

These days, the Keg and Case website highlights six remaining vendors: Sana CBD oils, Soapy Toads handcrafted soaps, Starcade/Bad Penny Pinball, Pimento Jamaican Kitchen, Five Watt Coffee and Clutch Brewing Co. At noon on a recent Monday, only Five Watt was serving customers. Clutch Brewing Co.’s imminent departure has left the viability of the entire market — much like the building’s future ownership — in question.

Cohen declined a phone interview, but issued a written statement on Nov. 16.

“It is with a heavy heart that we announce that MidwestOne Bank has taken over ownership of Keg and Case Market as part of a settlement agreement,” he wrote. “We want to thank our incredible partners at the city and county for their unwavering support as well as everyone who embraced and frequented this special place. We are hopeful the bank will engage a buyer who will enhance Keg and Case Market and keep the vision and mission of creating a festive, community gathering place for West 7th, St. Paul, and the broader community.”

Foreclosure sale expected in 2024

In lieu of foreclosure, the deed for Keg and Case has already been transferred to a private entity associated with lender MidWestOne Bank, lifting the debt burden from Craig Cohen, but not his father, Jeffrey Cohen, who served as guarantor on some $8 million in loans. A foreclosure sale is likely sometime in 2024.

Another investment company, JTS Capital of Waco, Texas, acquired the Rathskeller building at a sheriff’s sale in May, though the purchase is still within its year-long redemption period. JTS is still pursuing litigation against the two Cohens for $1.44 million in outstanding debt.

Vendors have called the turn of events unfortunate.

“I really liked working with Craig,” said Lee Carter, founder of Five Watt Coffee, which has four Twin Cities locations. “I think he was a good, well-meaning guy. I think he gave the market the best effort he could.”

Carter said Five Watt will wait to see how things play out. If new ownership takes over, he’s hoping creating casual social spaces will be a priority.

“I’m happy to ride it out,” said Carter, in mid-November. “I think the spot has potential. It’s definitely not our highest-performing location, but it’s not the worst situation to be in. They had a lot of food vendors come and go. It didn’t really have a food-focused vibe. There’s a lot of retail kiosks. … Maybe it didn’t have enough of one or the other. There’s seating up in the mezzanine where Clutch Brewing is, and seating by Five Watt. Otherwise, there’s not really any space to hang out.”

Market challenges

The pandemic did the market no favors, but early on, some neighborhood residents said they were taken aback by Keg and Case’s limited seating and its dearth of lunch options or grab-and-go food.

Even well before soaring inflation, prices ran high for a mixed-income neighborhood that in 2012 debuted the Schmidt Artist Lofts, 247 units of affordable housing targeted to creative souls, directly next door. Instead of global foods reflective of the city’s changing demographics, patrons found a booth dedicated almost exclusively to canned pickles, and others featuring scented soaps or high-end cheeses.

“The vendors were always expensive and niche,” wrote a former customer on social media this month.

“It’s that everything was so expensive, which isn’t a match for the neighborhood,” wrote another. “The $12 cotton candy vendor was a sign it would never work.”

While reading through a crossword puzzle by the Five Watt counter this month, 77-year-old Sandy Beitsch, a resident of a downtown St. Paul condominium community, called the keg house a “beautiful space” that could benefit from more international cuisine and “a variety of restaurants.” Of those he sampled over the years, “some were good,” he said. “Some were not.”

In Bloom, the fine dining restaurant that opened at Keg and Case in the fall of 2018, had closed by July 2020.

Restaurateur Brian Ingram soon moved an upscale version of a taco-centric restaurant — the Woodfired Cantina — into the former In Bloom space, but it lasted roughly a year.

He said at the time that all involved agreed that market customers needed more room to mill around.

“They need to have more seating,” said Ingram, quoted in the Pioneer Press in December 2021. “The food hall never really had enough places for customers to sit and eat.”

Cohen agreed.

“As the building teaches us what it needs to be, we continue to adapt and accommodate,” said Cohen at the time. “These are challenging times, but we have a really dedicated and passionate team dedicated to supporting our vendors and supporting our community.”

Two legal cases

The decline of Keg and Case as a popular destination was cemented in April, when MidWestOne Bank called in $8.12 million in loans to Craig Cohen, his father Jeffrey Cohen and their various limited liability corporations associated with the market, including Schmidt Keg House Holding, LLC and Keg House Development, Inc. About half the sum was related to a construction loan to cover the cost of both acquiring and reinventing the space.

Also named in the foreclosure proceeding filed in Ramsey County District Court was the city’s Housing and Redevelopment Authority, which had entered the chain of title through its tax increment financing arrangement, known as TIF. Some $1.5 million from the MidWestOne funds had been intended to cover the building’s TIF obligations. The bank is not seeking a monetary claim against the city, but it did seek possession of the property as collateral.

MidWestOne, based in Iowa with a branch in South St. Paul, filed multiple claims of breach of contract and sought to foreclose on the mortgage loan. It also asked the court to appoint a receiver to manage the site and collect rents, a request that officials with knowledge of the matter said was made moot when Craig Cohen voluntarily agreed to give up the deed in lieu of foreclosure. Jeffrey Cohen, as the guarantor on the loans, remains a defendant in the case. The two sides this month selected St. Paul-based Cook Law to mediate the legal dispute in coming months.

In June, a separate lawsuit filed against both Cohens by the JTS Capital Group of Waco, Texas seeks to call in loans JTS had acquired related to the Rathskeller building. Some $3 million was still owed as of early February.

A sheriff’s sale took place on May 11, according to legal documents in the case, and JTS was the winning bidder of the Rathskeller for $1.65 million. The redemption period, however, spans a year. And that still leaves $1.44 million due from the Cohens, who acted as guarantors on the loans, according to the lawsuit filed by JTS Capital 3 LLC. Unless the two sides reach resolution in mediation, a trial would commence around Sept. 16 of next year.

Julia McColley, executive director of the West 7th/Fort Road Federation, said her organization still maintains its offices within the Rathskeller building. The Rathskeller “is still within the redemption period and I know that the owner is searching for a solution, but has not been able to secure funding,” she said. “The future of the building is uncertain.”

Both legal cases are before Ramsey County District Court Judge Laura Nelson. On Nov. 15, an attorney for Craig Cohen declined public comment. Efforts to reach Jeffrey Cohen’s attorney were unsuccessful. On Nov. 16, an attorney representing both MidWestOne and JTS Capital also declined public comment.

Other food halls open or bounce back

In early 2020, the pandemic shuttered Keg and Case for three months.

Still, pointing to what appears to be steady demand at Malcolm Yards, a food hall that opened in the summer of 2021 near Surly Brewing and the Minneapolis/St. Paul border, some have noted that the pandemic alone can’t be blamed for Keg and Case’s demise. Along West Seventh Street, Waldmann Brewery, Bad Weather Brewing and Claddagh Coffee bounced back and continue to draw customers.

Elsewhere, food-centric markets like Midtown Global Market in Minneapolis survived the pandemic — and some, like Malcolm Yards, even opened during the pandemic — buoyed by beer walls or global offerings, such as Latin, Asian and African restaurant booths. At the new Asia Mall in Eden Prairie and the future Pacifica of Burnsville, developers are betting that Asian-themed grocers and food halls will draw crowds.

“Other food halls have learned from Keg & Case,” wrote a former patron on the platform known as X, previously known as Twitter. “We are not Chicago or New York. The size … was too large to maintain without more foot traffic. Smaller food halls like Malcolm Yards, Graze in the North Loop and Eat Street Crossing all are sized right and are in great neighborhoods.”

Minnesota Brewing, the maker of Grain Belt and Pig’s Eye beer, was based at the Schmidt Brewery throughout the 1990s but left in 2002. The Gopher State Ethanol plant, which opened in 2000, closed in 2004 after countless complaints about its odor.

The Jacob Schmidt Brewing Company, which dates back to 1855 when it was dubbed the Cave Brewery, landed on the National Register of Historic Places in October 2018. Custer, of Five Watt, predicted that its historic designation would complicate any efforts to tear the keg house down and start anew.

“I assume it would stay a market if it ends up under new ownership,” he said. “The rules for changing anything, it’s pretty tough.”

McColley, of the Fort Road Federation, called it “critical that both buildings be maintained and preserved. So much love went into the restoration, and we cannot let them return to their vacant state. The entire complex is an important piece of West Seventh’s history.”

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