Plans for a 40-story condo tower, a new tallest building in Minneapolis outside of downtown, moved closer to fruition after the Minnesota Court of Appeals affirmed a lower court's ruling that sided with the developer.

Minneapolis-based Alatus wants to build the tower at 200 Central Av. SE. just across the Mississippi River from downtown and within the St. Anthony Falls Historic District, where height limits exist.

City officials went along with the tower proposal, but the Neighbors for East Bank Livability (NEBL) filed a variety of challenges, including one to the city's approval of a conditional-use permit and variance for the Alatus project.

A Hennepin County District Court judge granted a summary judgment to the city but the neighbors appealed. In the latest ruling, the state appeals court decided the lower-court ruling was neither unreasonable nor arbitrary.

Erich Wunderlich, a resident of the Marcy Holmes neighborhood and a member of the neighborhood association's development and land-use committee, said the NEBL is disappointed by the decision and is considering an appeal to the Minnesota Supreme Court.

"We're still extremely confident in the case. We still think we have strong argument," he said.

Map: Proposed 40-story condo tower Map: Proposed 40-story condo tower

The Heritage Preservation Commission (HPC) has said that a Tudor-style brick building on the site wasn't a contributing structure to the historic district, paving the way for its demolition in October.

Most recently, that building housed the Washburn-McReavy Funeral Home, and before that housed for many years the St. Anthony Commercial Club. The NEBL relied on the Minnesota Environmental Rights Act to challenge the HPC's decision, saying the building had been eligible for listing on the National Register of Historic Places.

Chris Osmundson, development director for Alatus, said that he didn't have an updated timeline for the project.

"We're very excited about the position of the appeals court," he said. "And we're moving forward immediately with the project."

There are only a handful of new condo projects underway in the Twin Cities metro, leaving buyers with a few options. Pricing for 200 Central hasn't been finalized, but the project will target move-up buyers.

The dispute is just one of several clashes over high-density development in the Twin Cities over the past couple years. From the inner city to outer-ring suburbs, several housing developments have been scuttled, delayed or downsized over community concerns that they are too tall, too dense for their neighborhoods.

Those concerns clash with market forces. Facing a shortage of inexpensive housing in the Twin Cities, housing developers are under pressure to increase production.

"I think the conversation has changed over the past six to eight months locally and nationally," Wunderlich said. "We're very disappointed about the precedent this sets."