A $36 million plan by Sherman Associates to redevelop a vacant lot in the Mill District of Minneapolis won approval from city staff, even though another proposal had garnered neighborhood support.

Sherman’s plan is to turn a sliver of city-owned land at 205 Park Av. into a mixed-use project with a 115-unit, six-story apartment and townhouses building. The building will have a restaurant on one end and separate bakery and coffee shop operated by restaurateur Kim Bartmann on the other. There’s also room for a police substation and a dog park.

“I just feel like there’s going to be a lot of momentum and interest within this neighborhood,” Brent Webb, Sherman’s business development associate, said Thursday after a recommendation from city planning staff put the project ahead of a competitor.

The other offer for the site came from Grand Real Estate Advisors, which proposed a $41 million condominium building that would be five or six stories high and also have space for a bakery and restaurant.

One factor that pushed city planners in Sherman’s favor was that the company offered a higher purchase price — around $3.2 million, or $90 per square foot. Grand Real Estate offered $1.5 million, or $43 per square foot, on its five-story concept and $1.9 million on its six-story one.

In the report analysis, city planning staffers favored Sherman’s project because they believed it achieved “more measurable outcomes” in terms of the number of affordable units it proposed. Sherman committed 20 percent of the apartments to be limited to households with no more than 60 percent of the area median income. Grand Real Estate indicated it was still exploring the inclusion of affordable units with City of Lakes Community Land Trust.

Planning staffers also liked Sherman’s retail ideas because they included more space at both street corners and had a firmer commitment from a restaurateur.

Neighborhood leaders leaned a different way. The Downtown Minneapolis Neighborhood Association (DMNA) wrote a letter last month in support of Grand Real Estate.

“I can’t believe they are going against the clear majority wishes of the Mill District residents,” said Joe Tamburino, vice chairman of the association.

The DMNA surveyed around 300 residents and found most supported owner-occupied housing, which is perceived as more stable for the neighborhood, Tamburino said. “There’s a glut of apartments,” he added.

Tamburino also thought Grand’s building was better structurally since it was made of all concrete and would be naturally quieter for residents.

“I have to be honest about being disappointed; we really felt this was an opportunity to provide ownership housing in a less-dense, smaller-scale project,” said Tanya Bell, a partner with Grand Real Estate. “Even more importantly, I am really disappointed given all of the excitement by the neighborhood for the City of Lakes Land Trust units.”

City planning staffers recommended Sherman get first rights to develop the site. With the City Council’s approval, staff will negotiate with Sherman until an agreement is reached and staff can return to the council to authorize a contract.