What will happen with Michaels site in downtown Rochester?

Sep. 14—ROCHESTER — The saga of the iconic Michaels restaurant site has had many twists, turns and feuds in the past 10 years. Despite grand visions, plywood now covers the space where Michaels’ imported bronze doors once stood open for diners. As the buildings decay, the plan forward is still vague today.

The blighted site at South Broadway and Center Street came up this week at the Rochester City Council when an early version of a development plan was unveiled. The plan features a 14-story building with retail and office space connecting to adjacent the Galleria at University Square Mall as well as nine floors of student housing plus a skyway connection to the Hilton hotel across Broadway.

The Chafoulias family’s Titan Development & Investments created the development plan as BGD5 Development LLC. Titan also owns the Galleria and the Hilton hotel. However, Titan doesn’t own all of the parcels that made up the Michaels restaurant, which occupied five connected buildings.

PRE Holdings, which stands for Pappas Real Estate, owns the building at 9 Broadway on the north end of the property as well as the surface parking lot under the city’s parking ramp. That mixed ownership is one of the reasons that this complex site has been unchanged for so long.

Titan, led by Andy Chafoulias, asked the city for a two-year “Exclusive Negotiating Rights Agreement” for the development to be built on its four pieces of the property. The request caused some confusion among the council members, who clarified that the agreement did not give the city any access or rights that it doesn’t already have in regard to the property.

“This is kind of off for me. He doesn’t need exclusive rights. He already owns it exclusively,” said Council Member Patrick Keane. “This site has sat for dilapidating for years and now that we are starting Unbound we have this new thing to consider when we have all of this priority work for the next two years.”

Deputy City Administrator Cindy Steinhauser responded that the agreement would help the development to move forward.

“I think this helps us and helps the developer about the seriousness of our expectations of the timing on how we like to see this project advance,” she said. “It is an effective tool to keep us marching forward toward a development agreement as opposed to something where neither party has a clock ticking in terms of interest,” she said. “We could continue (without the agreement), but I think it sends a good signal to us and the developer that we are continuing in a more formal way.”

The agreement opens a door for working with the city in the future on parking, on the skyway and receiving support such as tax breaks or financial assistance from the city and the Destination Medical Center board.

Council Member Norman Wahl echoed Keane’s confusion, though he did support the agreement.

In the end, the City Council, acting as the city’s economic development authority voted 5-2 to approve the agreement with Keane and Molly Dennis voting against it.

The agreement does not include any reference to PRE Holdings. When Council Member Shaun Palmer asked if any neighbors had been consulted about the agreement, City Administrator Alison Zelms said no.

“That’s a private matter. They are not part of this,” she said.

Tom Hexum, a commercial Realtor who represents the Pappas family, declined to comment about the City Council’s decision to approve the agreement with Titan.

Discussion of the high-profile site spurred council members to muse about what they would like to see in a future development there.

“I was super excited when I saw this. Throughout my whole term this has been a potential project,” said Council President Brooke Carlson. “If there could be a grocery store … if there could be childcare … these are the kind of things that I would be excited about.”

When asked outside of the meeting if the city had talked to any other developers about that area, Strategic Initiatives Director Josh Johnsen acknowledged that it had. He said the conversations occurred more than a year ago.

“There was a developer that was showing some interest,” he said, adding the developer seemed mainly to be looking into the early steps of assembling property downtown. “The city hasn’t received or seen any proposals. The only active development negotiation that we’ve been working on for the former Michaels site is with Titan.”

Despite Steinhauser’s reference to the ticking clock, there was no timeline provided for the demolition or development of the site at the council meeting. When asked outside of the meeting about timing, Titan Director of PR & Marketing Michelle Milde said that the plans are still fluid.

“We really can’t give any formal commitment for the timeline for demolition or other things of that sort. In regards to Titan’s overall hopes for the project, it’s really what it always has been. That’s for Titan to continue to be an active participant in the enhancement of downtown Rochester to create a whole experience for our visitors and our locals,” she said.

This saga started with an ending on New Year’s Eve.

Michaels, a beloved downtown Rochester fixture for 63 years, closed its massive doors for the final time on Dec. 31, 2014, which ended its run as Med City’s signature restaurant on South Broadway.

The closing was a traumatic one for the Pappas Family, who had run the classic restaurant since November 1951.

“It’s a tough thing. My head is pounding … I can’t sleep, none of us can … wondering if it’s the right thing,” said Michael Pappas, one of four managing partners at Michaels restaurant, soon after the plans to close were announced. He added he and his uncle Charles Pappas always thought they would “stay here until they dragged us out.”

In November 2014, Pappas said he believed his family’s decision to enter a joint venture with the Chafoulias family’s Titan Development & Investments was a “great opportunity to be part of Destination Medical Center “

The development, at that stage, was described as a joint venture owned 50-50 by the Chafoulias and Pappas families. Under the name of 15 South Broadway LLC, the joint venture group bought four parcels from the Pappas family for $1.4 million on Jan. 6, 2015. PRE Holdings separately took ownership of its parcel at 9 Broadway.

The original plan was to expand the adjacent Galleria Mall and build two floors of retail on the site with the tower rising above it with a skyway crossing Broadway to Titan’s planned development then-called Broadway at Center which later became the luxury Hilton hotel. A new version of Michaels restaurant was part of that original plan.

Pappas said in November 2014 that he was hopeful that a new Michaels restaurant with dining on two levels and a deck overlooking the city would open on more or less the same site within 18 months as part of the Titan project.

That didn’t happen. The only area restaurant still owned and operated by the Pappas family is Pappy’s Place in northwest Rochester.

The joint venture between the two families aspect of the project changed when Titan brought in Illinois-based Harbor Bay Real Estate Advisors led by the Bell family. Harbor Bay paid $5.5 million to the Chafoulias/Pappas joint venture in August 2016. That was almost four times the 15 South Broadway LLC group paid for the four parcels in 2015.

The question was raised about the decision to sell the buildings to an outside developer.

“There are many family members on each side and they felt it was a very fair price and preferred selling to developing the site,” wrote Sheila Thoma, then-spokeswoman for the Chafoulias family in the wake of the sale.

No member of the Pappas family were available for comment at the time.

I n 2017, “high-level concept” plans for building a 30-story tower on the site surfaced. Titan was then listed as a co-developer with Harbor Bay.

“The concept, to date, involves a 30-story residential tower, with 255 residential units, a 16-story hotel, with 153 rooms and 61,452 net feet of retail, attached to the existing Shops at University Square,” wrote then-city administrator Stevan Kvenvold in a memo to Destination Medical Center Corp. Board members and city staff. “If the proposed project is to proceed, the current West Center Street parking ramp would need to be removed.”

In 2021, Andy Chafoulias said in an interview that he was still committed to doing business in Rochester and developing in the downtown area as his father did. He speculated that there’s room for an urban grocery store and maybe a pharmacy downtown.

“Before the pandemic, we had a vibrant, incredible downtown. It is my personal mission to see this become vibrant again. And that’s why I’ve invested millions of dollars,” he said in 2021. “I don’t think things are moving as fast as they should be, because we don’t have time to sit and think. We don’t have time for more studies.”

Meanwhile, there was no change on the site. Harbor Bay pulled out of the project in 2022. Titan’s BGD5 Development purchased Harbor Bay’s four lots for $5 million on Feb. 1, 2022.

Chafoulias described the change as a “reshuffling.”

“We (Titan and Harbor Bay) get along great. I’m probably just a little more bullish on Rochester than many others are,” he said in 2022. “I call it kind of reshuffling the deck and doing what’s good for the partnership and for us as friends. The Bells have other projects that they’re working on in different parts of the country. I said, ‘You know what, this is our home base. I’ll buy you out.”

In 2022, Titan filed for permits to demolish the four buildings — 11, 13, 15 and 17 Broadway S. Titan later filed for a permit to also demolish the fifth building — 9 Broadway, which is owned by PRE Holdings.

Hexum explained at that time that the demolition permit was given the green light with the expectation that Titan would sign a contract to address insurance and liabilities concerning the demolition. Hexum said that didn’t happen.

T he Pappas family eventually decided to block the demolition of its part of the property. After a discussion of the situation, a letter signed by Don, George and Jim Pappas was sent to Titan.

“The group of owners reviewed your proposal. The consensus was to not continue with the demolition currently. The property owners would like an agreement with you to purchase the entire property,” stated the letter. “PRE feels unification of the two properties serves the Heart of the City theme and scale more appropriately. The demolition will need to be done at the buyer’s discretion and timeline of such a project.”

Other than some demolition work and the renovation of the PRE Holdings building, the site has been quiet in the past two years. As the 10th anniversary of the closing of Michaels looms, the questions about when the buildings will be demolished, what will be built there remain and what will be the legacy of the historic restaurant.