Former restaurant building will be razed in downtown Rochester

ROCHESTER – After sitting empty for more than a decade, the former Michaels restaurant building downtown will soon face the wrecking ball — though questions remain about what comes after the dust settles.

The demolition, expected to take about a month, comes amid concerns the property has deteriorated to the point that it poses safety concerns to first responders. Property owner Andy Chafoulias said the issue arose last year when the city’s fire and police chiefs approached him with reports of trespassers on the site.

“It’s become a very dangerous building,” Chafoulias said. “I wouldn’t allow my employees in there. The police chief wouldn’t allow his [officers] in there, and the fire chief would not allow the fire department in there.”

The razing of the building marks the latest chapter for the prominent downtown site, which has sat dormant since Michaels closed in late 2014 after a 63-year run as one of the city’s most celebrated restaurants.

In 2017, at the height of the Destination Medical Center (DMC) boom, Chafoulias' Titan Development and Investments presented plans to build a 30-story residential tower and 16-story hotel at the site. Those plans never materialized, in part due to the city’s decision to maintain an adjacent parking ramp that would have been necessary to the development, Chafoulias said.

Five years later, Titan bought out its would-be development partner on the site, Chicago-based Harbor Bay, for $5 million with the hopes of advancing a project. However, plans once again stalled due to rising interest rates and disagreements between Chafoulias and a third developer that owns the smallest of the five adjoining parcels on the property.

Titan has since scaled down plans for the site, with the latest proposal calling for a 14-story, mixed-use development that would center on housing — potentially for students at the University of Minnesota Rochester. (Titan and the university most recently worked together to convert the former DoubleTree hotel into student housing.)

To move the project forward, Titan has entered into a two-year exclusive negotiating period with the city to determine a potential incentive package. Chafoulias said any deal would need to include a parking agreement to lease or buy spaces in the nearby ramp and a skyway connection across Broadway to the Titan-owned Hilton hotel.

“I’m in no rush,” Chafoulias said. “I want to do something that’s great, that’s transformational, that we can all be proud of … and it would be good for the DMC to show there’s some really exciting stuff happening downtown.”

What Chafoulias said he no longer needs is a deal with the owner of the fifth parcel belonging to HRE Holdings. The parcel consists of a 2,500-square-foot building behind a stairwell for the parking ramp. HRE, led by Barb and Tom Hexum, also own the nearby surface parking area — although the city owns the air rights above it.

Chafoulias said he has offered to buy the property from the Hexums, but they have declined. He said Titan’s latest plans for the site call for building around the parcel, which for years has remained dormant.

Neither Tom nor Barb Hexum could be reached for comment. Barb Hexum is a member of the Pappas family, who owned and managed Michaels restaurant until its closing.

Chafoulias declined to say how much in public assistance Titan would be seeking to bring a development on the site to fruition.

Options on the table include tax increment financing, DMC funding and assistance with a skyway, though Josh Johnsen, the city’s strategic initiatives director, cautioned that discussions on terms of a deal remain in the preliminary phases.

“At this stage, no specific development terms or pro formas have been reviewed to assess potential project gaps,” said Johnsen, noting any incentives would be directly tied to the public benefits of the development.

Chafoulias, whose family has been involved in developing downtown for decades, said that what comes of the discussions with the city and DMC will ultimately determine the scope and timeline of a potential development.

“If I don’t get the support that we’re looking for, I will be honest, the project’s going to get smaller,” he said.