Wrapped in scaffolding and cloaked with plastic sheeting, Kieran’s Irish Pub in downtown Minneapolis is losing business.

The restaurant is now suing the landlord and the developers of Block E, where it has been since March 2010, for disruptions caused by the $50 million renovation of the building.

“We’ve stuck here through thick and thin of Block E,” said Peter Killen, owner of Kieran’s. “Now we feel like the stepchild.”

Killen says they’ve tried to cooperate with the project team but have received no relief from the sawdust piles and Styrofoam particles impacting its customers, or the drop in customer traffic caused by the storefront being obstructed. With sales down 27 percent last month compared to a year ago, Killen says the lawsuit, filed Monday, is his last resort to combat the damage to the business.

“They’ve moved our front door so now our customers have to walk through a construction zone to find us,” Killen said. “Talk about a fiscal cliff, we’re living it.”

The lawsuit lists the defendants as landlord Camelot LLC of Plymouth, Alatus LLC of Minneapolis, which controls Camelot, and Provident Real Estate Ventures of Plymouth.

The restaurant sought relief from the developers for months, but Killen says nothing has been offered that would counteract the loss.

Kieran’s is asking for $50,000 in damages, an injunction to relieve the restaurant from the physical inhibitors to its business and interest on the $150,000 in utility billing costs it says it has been overcharged.

Phillip Jaffe, principal and chief executive of Provident speaking on behalf of Camelot, said the firms complied with the lease terms related to building renovations.

“Kieran’s is a very successful concept and we are disappointed they have chosen this route to resolve their concerns. We realize that the renovation of the building is disruptive in the short-term but confident that it will benefit Kieran’s and the city in the long term,” Jaffe said via an e-mail.

It is not uncommon to see a lawsuit when there is this kind of significant impact on a business, but it will come down to the factual evidence, says Beat Steiner, chair of The American College of Real Estate Lawyers and a practicing attorney in Colorado.

“If there were no written modifications to the lease, then [the tenant] has a right to expect the premises they had before,” Steiner said. “And if there are changes, then the landlord has to make some accommodations. Normally, landlord and tenant will find a reasonable solution without going to litigation.”

Kieran’s opened in 1994 and moved to Block E in 2010 after signing a 10-year lease agreement with the site’s previous owner. Alatus bought the building -- bordered by Hennepin Avenue, 1st Av., N. 6th St. and N. 7th St. -- that same year.

After an unsuccessful attempt to bring a casino to the property, the developer found a use for the troubled site that the community has rallied behind: A sports medicine clinic, practice facility and office complex for Mayo Clinic, the Minnesota Timberwolves and Minnesota Lynx. The building is being renamed Mayo Clinic Square.

“At the end of the day, the renovation should significantly enhance their business,” Jaffe said.

Kieran’s owner and managers say they are excited about the project but say the economic hit they are experiencing now is the issue. Some customers get up and walk out due to the construction-related noise. “The other day, a wind gust came and picked a pile of sawdust up that then fell on the plates of a some guests,” said Craig Wait, Kieran’s manager.

“We are reasonable people and understand it’s an old building that may need renovations,” Killen said. “But this is not what we signed up for. They certainly sugarcoated the extent of the construction.”

He said the restaurant may need to lay off employees because of the drop in business.

 Kristen Leigh Painter • 612-673-4767