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As businesses close, early effects of Rochester's 20-year plan hit home

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Hanny's liquidation sale
A customer enters Hanny's Men's and Women's Wear on Tuesday, Dec. 9, 2014, in downtown Rochester. After 75 years, the owners will close the men's and women's stores. Owner Tim Berg plans to open a smaller location somewhere in downtown Rochester in 2015.
Alex Kolyer / For MPR News

As year's end approaches, several businesses in downtown Rochester are preparing to close their doors. 

Home to Mayo Clinic, the city is in the early stages of a 20-year plan to transform itself as the Mayo strives to become a global health care destination. Now, some immediate effects of that long-term plan are becoming apparent.

The loss of longtime businesses has prompted questions among locals.

"I want to know, is downtown getting changed and created for outsiders and their enjoyment and their dollars? Or is it for locals to enjoy also?" asked Chris Atwood, who works at a local downtown bank. "I don't know how they're going to find the balance."

One of the immediate business casualties is the beloved Michael's Restaurant. The Pappas family, which has owned the restaurant and its building since 1951, served a clientele ranging from local luminaries to world-famous celebrities, from Sean Connery and Kenny Rogers to Pat Buchanan and Liberace.

Owners of the steakhouse announced recently they'll close on New Year's Eve. That's left several generations of Rochester residents mourning the loss.

For five decades, Rochester Mayor Ardell Brede has celebrated his wedding anniversary there. 

"When my wife and I got married 53 years ago, that's where we went that evening after we got married," he said. "We've celebrated virtually every one of our 53 years of anniversaries there."

"It's like a death in the family," Brede said. "I remember talking to Ed Sullivan there once.  ... It is not just a restaurant. It's a real place."

Tieman family at Michael's
Buddy Adams, left, a server at Michael's, takes a photo of the Tieman family during their lunch Tuesday, Dec. 9, 2014. The Tiemans say they have been coming to Michael's for years and will miss the restaurant.
Alex Kolyer / For MPR News

One of the restaurant's four managing partners, George Pappas, said the restaurant has been swamped with reservations from customers trying to get one last, nostalgic meal there. Pappas says it's been hard to grasp the changes. 

"After working all these years and coming to work every day and then realizing that that's going to change, all of that is going to change, it is surreal," he said. "Everybody's starting to count down, and we anticipate being busy right to the end."

Pappas said that the restaurant will be demolished and that his family will enter into a local partnership to develop the site. He said the family hopes to open another restaurant on the site, but it'll be years before any of that is finalized. 

Around the corner from Michael's, Hanny's Men's and Women's Wear also announced it'll close soon after 75 years at its downtown location. And a nearby Barnes and Noble announced it will shut its retail store Dec. 31.

Hanny's leases space from the Kahler Hospitality Group. Hanny's owner, Tim Berg, said a changing clothing market and rising rent forced the decision. At 11,000 square feet, the space is about three times what the store needs, Berg said.  

"It's just not economical, for the landlord or the tenant," he explained. "We can't generate enough sales per square foot out of that large a space to cover the rent."

Berg said he plans to reopen a smaller retail store somewhere else downtown. He'll keep two small shops in the underground subway open, too. But he speculated that other downtown businesses will have to look for less expensive locations elsewhere in the city. 

No organization formally tracks market rates in Rochester. But local real estate professionals estimate commercial downtown space is rising steadily, currently running from $20 to $30 a square foot. 

Customers at the Rochester Barnes and Noble
Customers peruse the selection at the Barnes and Noble store inside the famous Chateau Theater in downtown Rochester on Tuesday, Dec. 9, 2014. The bookstore will close its doors by the end of the year, and plans for the space are currently unknown.
Alex Kolyer / For MPR News

"It's got to be an affordable thing for the local merchant, and I think that'll open up," he said. "It might not be right in the core." 

Rochester is expected to grow by 32,000 residents over the next 20 years, in part because of the Mayo Clinic's ambitious $6 billion plan to expand its flagship campus. The plan includes $327 million in state aid, largely to fund improvements to public facilities in the city. Planners expect the blocks closest to the Mayo will look drastically different, too. 

The Destination Medical Center Corporation will review a master plan in the coming weeks. The board will then submit the plan to the city of Rochester, triggering a 60-day public comment period before final council consideration in the spring.

Longtime resident Jane Belau said the challenge facing Rochester's leaders is to maintain the city's personality in the midst of major transformation.

"Some of us are old enough that we're not going to see the full product" of the 20-year effort, she said. "But you want the character of the community to stay the same. It may be the third-largest city in the state of Minnesota, but it still has a small community quality about it."