Fate of struggling brewery undecided after loss of downtown Tucson home

Borderlands Brewing Co.’s board of directors has been scrambling since the company learned in late April that it would have to leave its flagship location by summer’s end.

But the company’s woes started long before it faced losing the downtown Tucson presence founders Michael Mallozzi and Myles Stone established in 2011 when they started brewing beer in the historic produce warehouse at 119 E. Toole Ave.

The brewery has been on a month-to-month lease there for at least a year, and while they have had casual conversations about a longer-term arrangement, there were no serious moves to make that happen, according to the landlord, Peach Properties.

The brewery also is saddled with a mountain of debt, including $392,834 in outstanding loans owed to members of its Board of Directors and $132,007 in so-called “bridge loans” its shareholders and board members kicked in when the company couldn’t make ends meet, according to documents provided by shareholders.

Board member Drew Palmer provided the financial data to shareholders during a meeting in mid-April, about a week before Peach Properties notified Borderlands that Live Nation was bringing its Punch Line Comedy Club to the Toole Avenue building. The move also impacts Playformance, which holds camps for kids at the building. Peach Properties told both companies they could stay through the summer.

Palmer, in the shareholders meeting, said Borderlands also owed $146,330 to the Small Business Administration and another $79,170 to the Arizona Department of Revenue. When reached by phone Thursday for additional information, Palmer hung up and did not return a follow-up call.

Meanwhile, the company stopped making its own beer last September when it let go its head brewer and brewing staff. It has since outsourced its brewing to MotoSonora Brewery in Tucson and Scottsdale’s State 48 Brewery, Borderlands CEO and President Es Teran confirmed.

MotoSonora CEO Jeremy DeConcinci last week said his microbrewery at 1015 S. Park Ave. has not brewed any Borderlands beers in two months. The brewery has no contract with Borderlands but is available to brew when needed, he said.

Borderlands still has its equipment at the former Voltron Brewing Company, 330 S. Toole Ave., which was a joint venture between Borderlands and Fire Truck Brewing, which closed the last of its four locations and bowed out of the Tucson craft beer market in late January. The two companies joined forces in 2018 to share brewing space and a taproom.

When it shuttered, Fire Truck sold its equipment to a group that includes Empire Pizza co-owner David Furmanski, who took over the lease on the 8,750-square-foot industrial space. Lucas Hoeferkamp in late December took over the taproom, which he said he plans to rename Arizona Beer Farm. Hoeferkamp has operated the 20-tap bar since 2023, when Fire Truck and Borderlands were still brewing at the facility.

The nine-year-old Crooked Tooth Brewing Co., 228 E. Sixth St., is expected to brew with the old Fire Truck equipment as early as late May, Crooked Tooth officials said.

When contacted for comment, Teran on Thursday said Borderlands is “still evaluating (its) path forward, and I’m not in a position to go into details or provide a full statement yet.”

Borderlands was the first tenant of 119 E. Toole soon after Peach Properties acquired the property, said Peach owner Ron Schwabe.

Mallozzi and Stone “were brewing in their garage and we ... basically just put them in there for nothing, pretty much, and incubated them,” Schwabe said.

At the time, Tucson’s craft beer industry was in its infancy, led by the old guard Barrio Brewing, which had been around since 1991, and Nimbus Brewing, which came around five years later in 1996. Schwabe said he looked at Borderlands and saw a serious brewery in the making.

Back to homepage

Subscriber Login

Keep reading with a digital access subscription.

Subscribe now

The company in early 2011 set up its brewing operations in the back of the warehouse and established a taproom in the front. Schwabe said they planted trees and created an inviting courtyard to complement the taproom, which opened in late December.

In the months leading up to the opening, Mallozzi and Stone raised $250,000 in start-up capital by selling shares of the brewery for $1.25 a share. The price doubled by 2013, when the company set out to raise $420,000 for large capacity brewing equipment, according to a Borderlands business plan provided to investors in 2012.

That document stipulated that investors would be paid dividends beginning in 2012. Mallozzi and Stone had the majority of the shares at 150,000 apiece, according to the business plan.

That document also outlined production goals, including that by Year 3, the company would command .03% of the state’s beer market by producing 1,650 barrels.

It took the company a few years to reach that capacity, although by 2014, it had started canning the popular Noche Dulce Moonlight Vanilla Porter. In 2018, the brewery inched close to the 1,650 barrel goal when it landed on the Colorado-based Brewers Association list of America’s Top 50 Fastest Growing Breweries; Borderlands came in ninth after reaching an annual production of 1,511 barrels.

By the following year, both Mallozzi and Stone left the company and its board of directors took over operations, hiring Teran as CEO and president in summer 2019.

Under Teran’s leadership, Borderlands opened two new brewery locations — Borderlands Sam Hughes at 2500 E. Sixth St. in January 2023 and Borderlands North at 5605 E. River Road last November.

Borderlands Sam Hughes started out as a collaboration between the brewery and Tucson celebrity chef Maria Mazon (Boca by Chef Maria Mazon), but 10 months after opening, Mazon pulled out, citing on social media that she needed to focus on her restaurant and her family.

In March 2024, Teran opened the agave-centric Sonoran Moonshine Company restaurant on the ground floor of the VFW Lofts at 124 E. Broadway. The restaurant received a $380,537 construction grant from downtown redevelopment agency Rio Nuevo, which at the same time bought Borderlands a food truck that it set up outside the brewery.

Initially Sonoran Moonshine was billed as part of Borderlands including in a March 8, 2024, Borderlands Facebook post. But Teran last week insisted it was unrelated.

“I apologize if it sounded like it was part of Borderlands; it’s not part of Borderlands,” he said, although he said the project was started by people involved in the brewery.

Sonoran Moonshine’s Arizona Corporation Commission filing from August 2022 listed Teran and Borderlands board members Drew Palmer and Pablo Padilla among the principals in the restaurant.

As Teran was expanding Borderlands’ footprint, the company was drowning in debt, according to an email Palmer sent to shareholders on Oct. 28, 2023, on behalf of the board.

The board at that time reported liabilities topping $1.1 million and said the company was considering relocating its brewing operations from Voltron.

Teran, in an interview days after learning Borderlands would have to move, said one of the options the company had been exploring was signing a long-term lease at 119 E. Toole and moving the brewing equipment back to the downtown location.

The 2023 email also appealed for shareholders to either become more vested in Borderlands — the company was looking for investors with at least $50,000 in capital, the letter stated — or divest their shares at 12 cents apiece. Shareholders had spent between $1.50 and $2.50 a share depending on when they bought in and many said they owned thousands of shares.

A number of shareholders took Borderlands up on its offer. As of last week, many of them had still not be paid.

The Star reached out to several shareholders for comment. None would speak on the record, saying they feared retribution following reports that Rio Nuevo and Peach Properties received death threats after news broke that Borderlands would have to move.