Brewery Wants Out Of Recycling Center Lease Before Rent Comes Due

EVANSTON, IL — A brewery who leased the city's former recycling center asked to pull out of the deal signed nearly more than a year ago before having to pay any rent. Smylie Brothers Brewing Company last month asked Evanston to agree to cancel the lease to the publicly-owned building at James Park before city staff learned, through a social media post, that the brewers had decided to operate out of a facility in Chicago.

In a memo to aldermen presented ahead of Monday's Evanston City Council Meeting, city administrators recommended terminating the lease even though the brewery has wrongly suggested its inability to raise funds allows it to pull out of the deal.

Smylie Brothers leased the former Evanston Recycling Center at 2222 Oakton Street in 2016 following more than a year of proposals and negotiations. Other proposals included a youth basketball program and a fitness center, but the beer-makers were chosen as the best fit, as they offered a chance to help a local business expand.

The lease took effect Jan. 1, 2017 and was due to last for 10 years. The deal included a four-month inspection period in which the brewery could withdraw, as well 18 rent-free months before paying $13,645 every month thereafter.

As recently as last March, the company claimed it would have a taproom overlooking its production facility, a small kitchen and a large beer garden, none of which materialized. The business continues to operate at 1615 Oak Ave. in downtown Evanston.

In a letter dated April 10 of 2018, Smylie Brothers founder, CEO Mike Smylie, asked City Manager Wally Bobkiewicz to pull out of the lease:

After much time and expense dedicate to and [sic] adaptive reuse of the former Recycling Center, Smylie Brothers is unable to raise sufficient funding to complete the project as planned. We ask to opt out of the lease based on the mutual termination language found in section 2(b). The City of Evanston is a terrific partner and Smylie Brothers Greatly [sic] appreciates all the effort it took on their [sic] part to launch this complex project. We look forward to working together on future projects and a continued friendship

In fact, the section to which Smylie points does not contain any such "mutual termination language." Instead, it provides for a four-month inspection period. If the tenant "does not deliver a written notice" terminating the lease before the end of the period, the tenant is "deemed to have waived this inspection contingency " and its rights to object to the condition of the site.

Representatives of the brewery did not respond to repeated interview requests Thursday. ("I have no comment," CEO Mike Smylie said Friday evening.)

The memo pointed to an April 26 social media post made by one of the brewery's accounts announcing it had acquired another facility – the site of the defunct Aquanaut Brewing Company at 5435 N Wolcott Ave. – and started up production there.

"We put a lot of time and effort into trying to make it happen, but unfortunately it's not looking great for that project," it responded to a query about whether it still planned to operate in the taxpayer-owned building. "Believe us, nobody wanted it to come together more than we did."

CEO Smylie told staff that he hoped to have the new facility in Lincoln Square and the Evanston site operational at the same time, but in the fall of 2017 the planned financial partner for the 2222 Oakton Street project backed out, according to the memo. The Chicago site was already set up as a brewery and did not require extensive investment to become operational.

Smylie said he spent "significant time and money in a failed attempt to find a new partner," according to staff's memo. He said his proposal to convert the site to a brewery was "beyond Smylie Brothers Brewing Company's financial abilities."

There are various other interested parties in the "high desirable" property, according to the memo to council members from City Manager Wally Bobkiewicz, Assistant City Manager Erika Storlie and Economic Development Manager Paul Zalmezak.

Proposals include a leased restaurant and event space for Peckish Pig or co-working fitness center from Active Applications, LLC, or a plan from Clark Street/First Ascent Climbing & Fitness to purchase the building outright for use as an exercise center with yoga classes and a rock climbing law.

City staff said those groups have shown unsolicited interest. If aldermen showed an interest in asking for new proposals, it would be likely that "several more interested parties who are unaware of the current circumstances of the property."

The Evanston City Council will consider what to do at its May 14 meeting. Options presented by staff include:

• Deny the request and make Smylie Brothers stick with the agreed lease terms.
• Demolish the property.
• Start a new request for proposals that lays out guidelines for the site's preferred use.
• Start a new request for proposals to sell the property.
• List the property for sale under current zoning and use regulations.
• Let the city reuse it. (The building has been used in the past for storing boats, winter equipment and materials for the public works department, and police have recently asked to temporarily store vehicles it is holding pending asset seizure proceedings with the Cook County State's Attorney, according to the memo.)

Even though Smylie was incorrect to suggest there was some kind of "mutual termination language" in the lease, staff said it would be in the best interested of Evanston to grant the businesses' request to pull out of the deal because it has "no intention of completing the project, as evidenced by the acquisition of the Aquanaut space" in order for another productive use of the property to be found.

If the City Council accept the staff recommendation to let Smylie Brothers out of the contract, it would represent the second collapse of an long-discussed agreement to lease city-owned property in two months. In April, alderman rejected final approval of a proposal to lease the Harley Clarke mansion to a nonprofit group and declined to reconsider the matter.

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