The boarded-up, graffiti-covered former Olga”s Kitchen at the corner of South State and Washington streets is slated to get a makeover and a new identity.

A proposal for an eight-story retail and residential building to replace the vacant one-story structure at 205 South State Street was approved Monday by the Ann Arbor City Council, 7-4. The proposal passed although the planning commission voted not to recommend the project.

According to the proposal, the current building will be leveled to make way for the new eight-story complex. The first floor will be used for retail, and the other seven floors will be divided into 42 apartments.

Proponents of the plan said the development will help meet housing demands and add to the downtown environment. Critics argued the building”s height will detract from the atmosphere of State Street and dwarf other buildings in a corridor dominated by two- and three-story shops.

Mayor Pro Tem Jean Carlburg (D-Ward III) said some local merchants and community members expressed concerns that the large building would disrupt the pedestrian feeling of State Street. Carlburg said she was also skeptical at the developer”s insistence that the building needed to be eight stories tall.

Howard Frehsee, the building”s owner the development is consistent with the city”s goals and the proposed height is necessary to cover the expense of construction.

“Had we only been able to build six stories, this project would have crashed and burned,” he said.

Frehsee said he understands the benefits of preserving State Street but there are other factors to take into account.

“Times have changed,” he said. “There”s only so much land in Ann Arbor.”

Building up is one way to combat urban sprawl, he said.

This is not the first tall building to grace the skies of downtown Ann Arbor, Frehsee said, citing the 15-story Campus Inn at 615 E. Huron Street and the 26-story Tower Plaza at 555 William Street.

Doug Cowherd, co-chair of the Huron Valley Group, the local chapter of the Sierra Club, opposed the proposed development.

“It would be grotesquely out of scale with the surrounding area,” he said. Cowherd said he was also reluctant to believe the building would add to the area, saying a large development would make it less attractive. Instead of drawing people to the area, the project could have the opposite effect and repel possible residents, adding to the problem of sprawl, not preventing it.

Frehsee countered that argument, saying the development will add character to the area. He said he plans to construct a modern, eye-catching building in place of the current eye sore.

“Our project is going to take away a lot of the blight,” he said. “We think it”s really going to improve the streetscape dramatically.”

Margaret Leary, vice chair of the planning commission, acknowledged the development has its drawbacks but said it is legally viable and also has benefits.

“A development that provides as much housin as this one will is important,” she said.

Leary added the building”s proximity to downtown Ann Arbor provides a central location for its residents, making it possible for them to live within walking distance of their jobs. Besides the plan”s potential for cutting down on the use of cars, Leary said the development could bolster retail and entertainment in the area as well.

This plan to combine retail and housing is only one of a crop of similar proposals near campus to gain the city council”s approval in recent months, Leary said. Mixed-use developments are sprouting up with increasing popularity in other urban areas as well, she added. They provide for economically healthy cities and place housing, office space and retail shops next door to each other.

Frehsee declined to estimate how much the project will cost or when construction could begin. “We”re going to move full speed ahead,” he said.

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