Burnsville officials had expected to break ground this summer on a high-end apartment project — complete with a gym, yoga studio and pool — one of just two multifamily buildings the City Council has approved since 2004.

Instead, the city and developer have tabled the project as they brace for a court fight with the owners of a nearby strip mall, Nicollet Plaza. Christopher Penwell, a lawyer for the mall, told the City Council that the project has too many units and inadequate parking, violating several agreements and altering the original site plans.

“They’re trying to pack too much on this particular site, and it doesn’t work,” Penwell said.

The City Council unanimously approved changes to the project plans and a related zoning ordinance in April. Nicollet Plaza filed a lawsuit in Dakota County in early May against the city, developer Chase Real Estate and landowner KSH Development seeking to halt the project.

Penwell contends that all parties must approve of any changes to the project because they entered into a legally binding agreement in 2004 when they signed off on earlier project plans — and his client won’t go along with the revisions.

Mayor Elizabeth Kautz said the previous site plans were meant to be flexible and noted that the city has revised such plans for other projects.

“What we’re looking at is you holding the city hostage,” Kautz told Penwell at an April City Council meeting upon learning of the legal action.

State law allows cities to change their ordinances without the consent of property owners, said John Baker, an attorney representing the city.

The city and other defendants say the new project isn’t significantly different from previous plans for condominiums on the same site.

“The project footprint is the same, the height of the building is the same. The only thing that’s different is the mix of units,” Kautz said.

The new four-story apartment building would include about 170 units — mostly one- and two-bedroom apartments — renting for $1,200 to $1,800, said Joe McElwain, development manager for Chase Real Estate. Previous plans called for 131 condos, but the recession nixed that idea.

McElwain said the market has pent-up demand from empty nesters and young professionals for the luxury apartments, who are renting by choice.

“Burnsville hasn’t had that product type yet,” McElwain said. “We’re pretty confident we can capture that.”

The planned apartments, to be combined with 8,000 square feet of commercial space, would only bring more customers to the existing shopping center, McElwain said. He said he’s befuddled by Nicollet Plaza’s resistance.

Parking at Cub?

Burnsville already has 8,622 rental units, said Jenni Faulkner, the city’s community development director. Over the years, various City Councils have said that’s enough.

The city recently eliminated its longtime goal of having 70 percent or more of its housing owner-occupied, a benchmark it approached but didn’t reach, Faulkner said.

The new project would sit on a vacant lot in Burnsville’s “Heart of the City,” an area planned with a vision of dense housing mixed with retail and green space, public transit and on-street parking.

McElwain said there’s ample parking nearby. Each unit would get a spot underground. A courtyard would have 50 more stalls, supplementing a free city parking ramp and street parking. The Orange Line, a bus rapid transit line extending to Lakeville, and a Minnesota Valley Transit Authority bus hub are nearby, which also would relieve parking pressure.

Penwell said at the April City Council meeting that Cub Foods, the anchor tenant in Nicollet Plaza, fears that people will end up parking in its lot. He said he didn’t appreciate the mayor saying that his client was “holding the city hostage.” His client has legitimate concerns, Penwell said.

“We may agree to disagree,” Kautz said. “The courts can take a look at that.”