Plans to build a full-service hotel in Burnsville's Heart of the City have been dealt a setback. Developers are telling the city they are no longer interested in the project.

Last fall the Economic Development Authority approved the sale of the last piece of city-owned land in the redevelopment district to NLD Holdings II LLC, which had proposed a six-story Hilton Garden Inn on the site. NLD had offered to buy the 1.75-acre parcel for $503,600.

The developers recently told the city they are bowing out after conducting a market study that showed low average room rates in the area.

"Due to required minimum return on investment, the lower average daily rates make it less likely for a new moderate or upscale hotel to locate in our local market and be successful," city planners said in a report to the City Council.

NLD had submitted a site plan calling for a hotel with 100 rooms, a restaurant, a fitness center, an indoor pool and conference rooms. Construction was supposed to start this month and be completed by June 2015.

The hotel would have been the first to be built in Burnsville since 1998. Only one of the city's nine hotels — the Best Western Premier Nicollet Inn — is a full-service hotel with a restaurant, according to the Burnsville Convention & Visitors Bureau.

Skip Nienhaus, economic development coordinator, said the city has begun marketing the site again. The preferred uses would be a hotel, an office building or a mixed-use facility, he said.

The site is part of a 6.24-acre parcel formerly occupied by AAA and acquired by the city in 2001 as part of the Heart of the City project.

NLD would have paid more than Dakota County's assessed value of $457,600 for the site but less than the city's appraisal of $865,000. Despite that disparity, city staffers had recommended the deal, noting that a sale would get the property back on the tax rolls.

The site had been on the market for about four years before the deal was struck with NLD; city documents had noted that most inquiries had been for developments that would not be consistent with the Heart of the City zoning standards.

Meanwhile the city is moving ahead with plans to expand the 2008 parking deck next to the former AAA site. It will be enlarged this year by 44 stalls at a cost of $1.4 million.

Tesseract building sold

An entity connected to the Minnetonka-based Minnesota Autism Center recent bought the Eagan building where it operates its school.

The nonprofit center previously leased the 35,800-square-foot school at 3800 Tesseract Place. It paid $2.65 million, according to documents filed with the Minnesota Department of Revenue.

The 26-year-old building originally housed the Tesseract Charter School, which shut down in 2010.

MAC provides therapeutic services to children and youth ages 2 to 21 with autism spectrum disorder. It also has facilities in Woodbury, Mankato, Rochester, Eden Prairie and Fridley.

Send your Dakota County business news to