|By Bob Freund, Post-Bulletin, Rochester, Minn.|
Knight Ridder/Tribune Business News
Jun. 10, 2005 - Developer Gus Chafoulias once again can walk downtown Rochester's skyways knowing he controls the Galleria Mall shopping center, the Radisson Plaza Hotel and the U.S. Bank office building.
That hasn't been the case for more than 21/2 years.
Chafoulias' managers are operating the commercial buildings this morning after Thursday's settlement of a foreclosure suit by New York-based pension giant Teachers Insurance and Annuity Association.
"Our focus has been to regain management, and that has been achieved," said Kevin Molloy, president of the Marquis Hospitality division of Chafoulias Management Co., who will oversee the operations.
Also on Thursday, Teachers and Chafoulias attorneys wiped the legal slate clean by withdrawing both the foreclosure lawsuit and an appeal argued just three weeks ago in St. Paul.
Olmsted District Judge Joseph Wieners, who had presided over the foreclosure case, also dismissed the case and ordered receiver Welsh Cos. of Bloomington, Minn., to hand the keys and building records back to Chafoulias' managers. Welsh and a subcontracted hotel management firm had been running the buildings under a court order.
The foreclosure had begun in November 2002. That was about eight months after the owner, BGD5 Limited Partnership of Rochester, defaulted on monthly payments for the $50 million mortgage that was financing the three buildings. BGD5 is 77 percent controlled by Chafoulias, with several other partners holding minority shares.
Teachers pursued foreclosure through last July, when Wieners ordered the buildings sold at public auction. However, BGD5 took the case to the Minnesota Court of Appeals, where it was heard by a three-judge panel in May. A decision was pending when Thursday's settlement was reached.
Teachers declined to discuss the settlement or its decision to halt litigation.
There also are signs that Chafoulias is mulling over some new possibilities for the city's core. In a written release issued this morning by his property management firm, the developer promised a remake of the two restaurants in the Radisson Plaza Hotel with new concepts and new management by a "successful local operator." Radisson Plaza staff previously operated the hotel's McCormick's and Sabastian's restaurants.
"The restaurants will bring a new level of high energy to our downtown," Chafoulias said in the statement.
The developer also is floating an idea for more downtown shopping, apparently centered on the Galleria. No proposal has been developed, Molloy said, but Chafoulias wants to sound out members of the Rochester Downtown Alliance about an unspecified concept for retailing.
"Gus is very engaged again downtown," Rochester Area Chamber of Commerce President John Wade said at a Thursday meeting of the alliance.
"We look forward to the future of the BGD5 project with a great deal of optimism," Molloy said. "We feel it can be a catalyst in further downtown development."
Staff writer Jeff Pieters contributed to this report.
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