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The owners of Buffalo's newest brew pub finalized a $1.6 million financing package Tuesday designed to strengthen and expand their bustling downtown business.

The last piece of the funding puzzle fell into place when the Pearl Street Grill & Brewery received a $100,000 loan from the city's main development agency, despite lenders labeling the application as "high risk."

The pub opened in November in a century-old brick building at Pearl and Seneca streets that was left vacant when Garcia's Irish Pub closed.

Denver-based Wynkoop Brewing Co., which operates 12 similar brew pubs nationwide, has a 75 percent ownership interest. There are also 16 local investors involved in the pub.

The Buffalo Enterprise Development Corp. approved the seven-year loan, at a fixed interest rate of 8.5 percent, on Tuesday.

Wynkoop Chairman John Hickenlooper said the public-sector financing, while less than 6 percent of the package, was key to securing private loans to acquire the building and erase short-term loans that he said were needed to open the pub.

"Those high-interest loans were putting an abnormal burden on the business, so this financing was critical to our future," the Denver businessman said.

He added that he has reached tentative terms with M&T Bank and the New York Business Development Corp. for $500,000 in loans, with the remaining $1 million in capital to be provided by the private investors.

Hickenlooper said early trends at the restaurant have exceeded projections, with the brew pub averaging about $75,000 in sales each week. He predicted the brisk activity can be maintained.

Lending analysts nonetheless described the application as high risk. Their concerns focused on problems that typically plague start-up businesses, coupled with the "explosive growth pattern" of Wynkoop's brew pubs.

But Richard Velez, the BEDC's chief loan officer, said the owners have refurbished a vacant downtown building and have attracted impressive crowds.

"There's a risk involved, there's no doubt about it. But we think it's the type of calculated risk that we're in the business to take. This business is compatible with the city's plan for developing new entertainment opportunities in that area," Velez said.

William Leahy, chief operating officer for M.J. Ogiony Builders Inc., cast the only dissenting vote on the loan. He noted that Wynkoop recently decided to sell a brew pub in Kentucky and plans to sell another in West Virginia.

"What's to stop them from closing this one, too?" Leahy asked.

He warned that the BEDC could have a tough time recovering its investment if the pub goes belly-up. But Hickenlooper, who has reported a net worth of $3.4 million, said he has signed personal guarantees on the loans.

Brenda McDuffie, executive director of the Buffalo and Erie County Private Industry Council and a member of the BEDC's loan committee, supported the financing. But she pressed to find out how much the brew pub workers are paid.

"Typically, many of the jobs in this industry are below minimum wage because of tips. The wages won't even bring families to the poverty level. We're talking about continuing to create a community of poor people," Ms. McDuffie said.

The loan was approved at a time when BEDC officials are studying a proposed overhaul of lending practices. The changes would put less emphasis on financing such businesses as restaurants and more on manufacturing, trade, medical products and other growth-oriented industries.

In other business, the BEDC also approved a $36,000 loan for a spin-off company recently created by Cohen's Bakery Inc.

The Buffalo company has roots to the late 1800s, when Joseph Cohen came to the United States from Poland and is said to have been the first person to make pumpernickel rye bread in the region.

John Blando and Mark DiDomenico purchased Cohen's in 1994, assuming the bakery's debts and rescuing it from the brink of bankruptcy.

BEDC officials cited the owners' skills in turning the business around. The five-year loan with interest fixed at 8.5 percent will be used to purchase equipment and supplies for J&M Bakery, a subsidiary at 647 Eagle St. that makes bagels and doughnuts. Customers currently order 1,200 dozen doughnuts and 950 dozen bagels weekly.

As the loan was approved without objection, one committee member pointed to a box of doughnuts sitting on the conference table -- from a competitor.

Velez smiled and replied: "We hadn't funded J&M Bakery when we bought the other doughnuts."

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