Building height fight brews in this historic downtown

An empty lot on one of the most high-profile corners of a historic suburban downtown is once again a focal point in an ongoing tug-of-war between redevelopment and preservation.

Excelsior city officials must soon decide whether to greenlight construction of a mixed-use building that could further elevate the western suburb’s status as an upscale Twin Cities destination. But some critics fear the project will permanently alter the main street’s retro small-town vibe.

The lot has been vacant for 15 years since the demolition of a former Pizza Hut. Earlier development proposals for the site have failed to materialize. A controversial four-story boutique hotel the city approved in 2013 was “ultimately too expensive to build” and never completed, said City Manager Kristi Luger. Last year, city officials rejected another plan for a four-story hotel because of its height.

The 2024 proposition was from Wayzata-based Mithun Cos., which is also helming the 2025 plan. Mithun is currently constructing Wayzata Gateway, a multi-use development with apartments, townhouses and businesses at a busy intersection in that suburb.

In Excelsior, the proposed three-story building with apartment, restaurant and retail space would incorporate part of a neighboring 80-year-old movie theater, closed since COVID-19.

But it would also exceed the two-story height limit in the historic district. That area, including the building’s potential location on Water Street, has been on the National Register of Historic Places since 2021.

The Planning Commission decided in a Monday evening special meeting to recommend approval of the project to the City Council — but only if Mithun adjusts the plan to meet several conditions. That includes lowering the structure’s height in some places and expanding parking. Commissioners outlined those requirements and will finalize the decision at another meeting next week.

The final decision is up to the City Council, which will likely discuss it July 21. The council is not obliged to follow the commission’s recommendation.

Should the City Council approve the development this summer, the building could open in fall 2027, per Mithun Cos. owner Matt Mithun. But whether to welcome the $35-million-to-$40-million complex with 40 or so apartments above restaurant and retail space is a tough decision in a community of 2,400 that’s proud of its quaint architecture.

The city has gentrified in recent years, becoming home to boutiques and trendy restaurants that have attracted day-trippers and affluent new residents. Even beyond downtown, Excelsior’s oldest residential neighborhood is reflecting that change, with large, expensive houses replacing many older, more modest homes. So far this year, the median home sale price in Excelsior is close to $1.2 million, up more than 140% from 10 years ago, according to the St. Paul Area Association of Realtors.

Part of the scrutiny on Mithun’s proposed building and others before it has to do with the visibility of the lot’s location. A building there would face the city’s main drag, at the intersection of Water and Lake streets. It’s across the street from the Commons, a 13-acre park next to Lake Minnetonka, and the Port of Excelsior’s public docks and charter cruises.

Among the conditions from the commission: either reducing the building to two floors or setting its third floor back from lower walls in some areas. The setback, intended to make the structure look more like a two-story building from the street, would include the entire Water Street facade, which is only partly set back in the current proposal.

Some two-story buildings in the historic district are taller than a standard two-story building, Mithun said in an interview, including a 37-foot structure on the next block. Mithun’s planned structure would stand 35 feet, 8 inches on the Water Street side.

The corner of Lake Street and the rear of the building would also need a setback, commissioners decided.

Excelsior’s historic district showcases mostly one-and two-story brick, stucco and stone structures built between the 1880s and 1950. Three-story and taller buildings have been prohibited since 2022.

There are some three-story buildings downtown, built in recent years but outside of the historic district, including Excelsior Shores, an apartment complex on Lake Street next to the proposed building but outside the historic area.

Commission members expressed concern that bending the rules for this project would cause future projects to bend them still further.

Surrounding structures circumscribe the parking area behind the building. But other solutions could include payment of a potentially hefty “parking-impact fee,” providing valet parking or limiting parking to retail use by day and restaurant use by night.

A local ordinance allows projects more design flexibility than usual if the development provides public benefit. Restoring the theater would be this project’s biggest public benefit, Mithun said. The proposed building would encompass the site of the Excelsior Dock Cinema, and construction would demolish part of the theater but preserve its second-story auditorium.

The plan is for St. Paul-based FilmNorth to show movies four days a week there, with the remaining three days available as a venue for community gatherings and presentations. A classic marquee would replace the current flat sign.

Without the project, Mithun said, the theater would be unusable, partly because of water damage. He also said small independent theaters have struggled since the pandemic with competition from streaming services.

The commission decided the plan requires a covenant requiring future owners to keep the theater open.

An outdoor public “porch” with seating facing the lake is one of the local projects that will benefit from the proposal’s $500,000 fund, Mithun said. Others include water main repairs, stormwater treatment, public restrooms, an improved pedestrian crossing to the Port of Excelsior, fireworks and street beautification projects like holiday lights and boulevard tree plantings.

The city has received letters and emails from downtown business owners favoring the proposal, including from the owners of neighboring Excelsior Shores. None of the written messages submitted to the commission late last month opposed it.

“The resounding response to our project has been supportive,” said Mithun, adding response at public meetings held to explain the project have also been largely positive.

Excelsior resident Charles James owned the lot from 1976 until selling it to Mithun in 2023 for $3.5 million. He’s a fan of the proposal and considers the city’s height restrictions “wrong, unconstitutional and unfair.”

Should the development fall through as others have before it, Planning Commissioner JoAnna Hansen warns that the lot could remain empty into the foreseeable future.