A lawsuit could halt construction on a proposed luxury condominium tower in the St. Anthony Falls Historic District.

A group called Neighbors for East Bank Livability spent recent months raising money to bring a suit against Alatus for its proposed 42-story tower on Central Avenue and 2nd Street Southeast.

Although the Minneapolis Heritage Preservation Commission denied Alatus permission to break ground last spring, another city commission overrode the request.

According to a Tuesday press release from NEBL, the city approved a conditional-use permit to let Alatus build the projected 42-story building instead of the four stories originally proposed.

Residents of the Marcy-Holmes and Nicollet Island-East Bank neighborhoods formed NEBL to file the lawsuit, said NEBL President and Marcy-Holmes Resident Erich Wunderlich.

Wunderlich said after the Marcy Holmes Neighborhood Association approved the project, many homeowners worried about how such a tall tower might impact the neighborhood.

The percentage of homeowners compared to renters in the area is already low, and he said residents are concerned about preserving the historic district.

“I think that it’s very clear on the Marcy-Holmes website and homepage that we value our history,” Wunderlich said. “But you wouldn’t know that by its recent actions.”

Marcy-Holmes and Nicollet Island-East Bank residents worry that more luxury apartment buildings like the Alatus tower could hurt the neighborhood’s character, displacing affordable housing with expensive rental units and high-rise buildings, Wunderlich said.

He said the trend isn’t unique to the Minneapolis area, pointing to similar pushback against tall Alatus buildings in Rochester and Arden Hills.

“The housing stock is being purchased by national and international real estate [companies] that are raising rent,” Wunderlich said. “That is what’s happening in the market, and a lot of these developments are fueling that direction.”

But despite their opposition to the project, he said NEBL doesn’t oppose all development.

“This is not a group intent at stopping reasonable development in their neighborhood,” NEBL’s attorney William C. Griffith said in the release. “Rather, this is a diverse group of thoughtful residents intent on persuading the City to follow its own rules to bring about reasonable and sustainable development that is respectful of the historic neighborhood in which it is proposed.”

Wunderlich said the Alatus tower is too tall compared to other buildings in the area.

Alatus Development Director Chris Osmudson said the city and MHNA approved the proposed height, and the company hopes to move forward with the project.

Osmudson said the proposed building is tall but is “by no means precedent-setting” in terms of tall buildings nearby.

“This is presenting a pretty material delay to the project and its actual start date,” he said of NEBL’s complaint.

Osmudson said the company has a demolition contract and capital employees, and it planned to begin construction the same day NEBL filed the complaint.

“We are going to let the complaint run its course,” he said. “We’ve received every entitlement approval we need from the City of Minneapolis to date, and as soon as this complaint is heard or settled … we’ll be moving forward.”

The first court hearing for the case is set for Dec. 16.