St. Paul's Keg & Case food hall defaults on loans, is repossessed by bank

St. Paul's Keg and Case Market is in foreclosure, five years after the ambitious W. 7th Street food hall opened its doors.

Lender MidWestOne Bank has taken ownership of Keg and Case, according to county real estate records. The Iowa-based bank loaned Keg and Case more than $8 million, of which more than $5 million was outstanding, according to a March 16 default notice.

"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," developer Craig Cohen said in a statement Tuesday. "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 Seventh, St. Paul and the broader community."

MidWestOne in April sued Cohen, his father, Jeffrey Cohen, and associated limited liability corporations. The bank also listed the St. Paul Housing and Redevelopment Authority (HRA), which provided some financing for Keg and Case, as a defendant but did not subject it to a monetary claim.

An attorney for MidWestOne declined to comment.

Keg and Case opened to great fanfare in September 2018 at the historic Schmidt Brewery, boasting about two dozen tenants from restaurants to retail. The $10.4 million project was financed in part with public money, including $3 million in state historic rehabilitation tax credits, $1.5 million in Tax Increment Financing (TIF) and $205,000 in state grants, according to city HRA documents.

In 2019, the HRA loaned Schmidt Keg House Holding LLC an additional $200,000, citing about $500,000 in cost overruns due to "extraordinary" historic rehab and environmental abatement costs and construction delays. The food hall also received a $1.2 million American Rescue Plan Act grant through St. Paul's pandemic-era Tourism Recovery Support Program, according to a city spokeswoman.

The nearby Schmidt Rathskeller, which the city sold to Cohen for $1 in 2017, went into foreclosure earlier this year.

City Council Member Rebecca Noecker, whose ward includes the West Seventh area, said the pandemic was the main contributor to Keg and Case's demise. Like many businesses, it shuttered for months, and in July 2020 lost anchor fine dining restaurant In Bloom.

"The timing of when [Keg and Case] opened, obviously, just right before COVID, could not have been worse timing for that particular kind of business," Noecker said. "It just relies on crowds of people a lot of the time, and that was something that just wasn't possible during the pandemic."

The Keg and Case website now lists just six vendors. One of them, Clutch Brewing Co., announced this month it will close at the end of the year.

State restrictions preventing patrons from carrying alcoholic drinks around the food hall limited the brewery's success, Noecker said.

"I think the code really needs to catch up with these kinds of businesses," she said. "For brick and mortar retail to make it, which is so important for our neighborhoods, we need to have a place that's more than just a place to buy things. It needs to be a place to connect."

After lots of traffic in the first months post-opening, the initial curiosity for Keg and Case seemed to wear off, and many patrons who'd visited once or twice didn't come back, said Lee Carter, owner of tenant Five Watt Coffee.

Carter said Five Watt, which also has three Minneapolis locations, has no imminent plans to leave Keg and Case, but he said he would like to see a reimagined market with more space for patrons to gather.

"It's my hope that a developer, some type of an operator comes in, they get excited about keeping it as a market, and they just think of a new way to make it a destination, make it somewhere where you can hang out when you get your food, your coffee, whatever," he said. "Even when it was busy, it kind of had this mall feel to it."