Excelsior's much-anticipated hotel, grocery store still on hold

Two of the biggest projects in Excelsior — a much-anticipated boutique hotel and a grocery store — have been delayed for months after they were expected to get the green light.

Both projects haven't been able to start construction yet. Last week, the City Council approved a six-month extension for the developer of a grocery store because the company is struggling to find a tenant. And the hotel may finally get its final vote soon now that plans have been submitted to the city.

For years, residents have been awaiting both projects. The hotel would be the first one on Lake Minnetonka in decades and the grocery would be the first one since the mid-1980s, when Red Owl left Excelsior, a one-square-mile city with 2,400 residents.

"Both of these properties are the bookends for our town," City Manager Kristi Luger said. "People want to know what's going on … [but] we don't want to rush into anything."

The former car dealership, Mason Motors, closed in 2012, and the City Council approved site and building plans, expecting to approve the grocery store application that year, followed by construction. But Minnetonka-based Oppidan Investment said Trader Joe's backed out of a commitment to be in the space because of the relatively small market area, small space and high cost of a lease.

Since then, Oppidan told the city, it's pursued numerous other grocery operators, but the concerns are the same.

"We've talked to every grocery store in the United States," developer Jay Moore said in an interview. "We're committed to making this happen."

One reason for believing they'll finally be successful, Moore said, is that Trader Joe's is re-exploring opening a store in Minneapolis. Plus, there's a shifting grocery market from the large warehouse-style stores to the smaller stores like Wayzata's new Lunds and Byerly's Kitchen, which is a third the size of a conventional grocery store and focuses more on prepared foods and a large restaurant with wine and beer.

"That's our hope and desire — a concept like that," Moore said of Wayzata's store.

Finding a tenant isn't just stalling the grocery store, but also redevelopment of a second multitenant building next door. The city's initial approval of the project required Oppidan to have a grocery tenant in place before work can begin on the second building. However, the developer was able to develop nearby 470 Water St. into a strip mall that houses four businesses now.

That development has sparked a debate in the city about blocking franchise businesses in order to preserve the historic character of the town's quaint main street with its small boutiques and restaurants.

Residents like Linda Putnam, who's lived in Excelsior for 35 years and is a former planning commission member, agrees with preserving the historic character. But she said she also sees new development — from a brewery that's expanding to new restaurants — as exciting for the Lake Minnetonka community. The grocery store, she added, would be in walking distance for residents and the hotel could host events and guests.

Yards from the lake shoreline, work on the hotel has stood still on the grassy vacant site. Construction of the four-story hotel was initially expected to start in spring 2013, but then final approval was pushed back.

Neil Weber, the architect behind the hotel, said via e-mail that documents for the final plan approval have been submitted to the city.

That vote could come in June. The 40,000-square-foot hotel would be the first one on Lake Minnetonka since 1964, reminiscent of the early 1880s, when dozens of hotels dotted the shoreline and drew tourists to the lake and its legendary amusement parks.

The project has drawn some criticism, with some residents questioning its success or that it was approved so the city would get tax-increment financing, which could exceed $1 million toward port and water-treatment upgrades.

The city's Heritage Preservation Commission voted to block the project, citing its size and scale. But the City Council overturned the decision last spring, saying that the hotel will boost tourism and revenue and be a landmark on Lake Minnetonka.