For nearly four years, the luxury condominium tower first known as Obsidian has been the subject of packed public hearings, revised plans, legal arguments and more than a few heated exchanges at City Hall.

On Monday, Nov. 2, city commissioners rejected it again.

In a 3–2 vote, the Sarasota City Commission upheld its previous denial of the 18-story, 327-foot-tall development proposed for 1260 North Palm Ave., rejecting a special magistrate's recommendation that the city reverse course and approve the project.

Commissioners Jen Ahearn-Koch and Kathy Kelley Ohlrich voted to reject the recommendation, joined by Mayor Debbie Trice, who cast the deciding vote at her final commission meeting. Commissioners Liz Alpert and Kyle Battie opposed the motion, expressing concern about the financial consequences of another denial.

The decision leaves the project without an approved site plan and raises the prospect of a legal battle that could expose the city to millions of dollars in damages.

"My concern is that by rejecting this, we're opening up the city to multiple millions of dollars in damages," Alpert said during deliberations. "I worry about taking on that financial risk."

But for the present majority, the concern remained much the same as it was when the development first appeared before the city: An unusually tall building on an unusually small piece of property, surrounded on three sides by an existing condominium complex. Ohlrich said the building was out of scale with its surroundings and that compatibility was her main concern.

The proposed development, now called 1260 North Palm Residences, would replace a row of single-story commercial storefronts with 14 luxury condominiums, approximately 6,000 square feet of commercial space and an internal garage with 39 parking spaces.

The property occupies 0.28 acres next to Bay Plaza, a 14-story condominium built in 1982 whose residents have spent years fighting the proposal.

When we first reported on the project in February 2023, the proposed tower didn't yet have a name. What it did have was an ambitious plan: 18 stories, 14 full-floor condominiums and a mere 640 square feet of ground-floor retail space, replacing a collection of storefronts dating to the 1950s.

Developer Matt Kihnke, of MK Equity, had acquired the property through 1260 Palm Properties LLC in January 2022 for approximately $3.79 million from an entity associated with Dr. Mark Kauffman.

Kihnke was no stranger to downtown development. His projects included Sansara on Palm Avenue and The Collection on Second Street.

By May 2023, the proposed tower had a name—Obsidian—and a sales gallery displaying a vision of luxury living, complete with a rooftop pool, private entertaining spaces, a golf simulator and expansive terraces overlooking Sarasota Bay.

Kihnke described the project as the "Rolls Royce of condos." And the height? He attributed it partly to demand for taller ceilings. "Years ago, not everyone wanted 10-14 foot ceilings. Now they do," Kihnke said.

The building's height quickly became one of its most contentious elements. Although the property's Downtown Bayfront zoning permits 18 stories, the code measures height by stories rather than imposing a simple overall height limit. The design also incorporated additional space between floors, known as interstitial space, contributing to a tower taller than its neighbors.

But zoning for 18 stories doesn't automatically guarantee approval of an 18-story building. Sarasota's development standards also require compatibility with neighboring properties. Commissioners argued that the tower's unusual height, its proximity to Bay Plaza and other design elements made it incompatible with its surroundings. The special magistrate disagreed, finding that the building complied with the zoning code and that opponents hadn't provided sufficient evidence to justify rejecting it.

The plans evolved over the following years. The original 2022 submission showed a building reaching approximately 342 feet, while later plans reduced that height to 327 feet.

Ground-floor retail space increased substantially, reaching roughly 3,644 square feet in the 2024 design. The developer also reduced some of the requested zoning adjustments.

City staff approved the revised site plan in October 2024, and the Planning Board subsequently upheld that decision in a 4–1 vote.

But Bay Plaza residents appealed, and in May 2025, commissioners voted 4–1 to overturn the approvals, citing concerns about compatibility, pedestrian access, building scale and the cumulative effect of the requested adjustments.

The developer challenged the denial through Florida's Land Use and Environmental Dispute Resolution Act (FLUEDRA), a process designed to help resolve land-use disagreements before they reach the courts.

A mediated settlement offered more changes, including landscaping, sidewalk improvements, a loading area and a construction staging plan. Commissioners rejected that proposal 4–1 in May 2026.

This week's hearing was the next, and maybe final, stop before litigation.

The Magistrate Sides With the Developer

Following additional proceedings, special magistrate Mark Bentley issued a recommendation on Oct. 19 that was critical of the city's previous decision.

He concluded that commissioners had acted unreasonably and unfairly burdened the property owner by rejecting a project that met the applicable development standards.

The magistrate found that the applicant had provided sufficient evidence supporting its requested adjustments and that opponents had not demonstrated that the project failed the city's zoning criteria. Among those adjustments were reductions in the required amount of retail frontage, the portion of the building façade running parallel to the street, and the depth of usable space on the first two floors.

The developer argued that the adjustments were necessary because of the property's unusually constrained footprint and competing requirements for parking access, utilities, fire safety and pedestrian circulation.

The magistrate agreed, finding that even a smaller multistory development would encounter similar obstacles. He recommended that commissioners rescind their earlier denial and approve the site plan.

But Morgan Bentley, the attorney representing Bay Plaza (and Mark Bentley's cousin), disputed the conclusion that the city's denial left the property without a reasonable economic use.

"It's had an economically viable use for 50 years," he told commissioners. "And you can build here, you just can't build this."

There's also a financial wrinkle to the debate. Property records show that Dr. Mark Kauffman acquired property in a $262,000 transaction in 2004. His company later assembled the North Palm Avenue parcels, which Kihnke's company purchased for $3.79 million in January 2022. The difference in costs helps explain why the two owners might approach the property's economic potential differently.

 Robert Lincoln, the developer's attorney, countered that the aging commercial buildings could not generate sufficient rent to justify substantial reinvestment, particularly given restrictions on improvements to properties in flood-prone areas.

Lincoln also warned commissioners about the consequences of rejecting the recommendation, describing the FLUEDRA process as an alternative to litigation.

The magistrate's findings are not binding, but they could become an important part of any subsequent legal challenge.

A Smaller Tower? Not So Simple

Another major point of disagreement concerned whether the developer had done enough to make the building more compatible with its surroundings. During Monday's hearing, Bay Plaza's representatives presented comparisons showing how the project had changed since its original application.

While the developer had increased retail space and reduced the building's overall height, its basic concept remained: a 327-foot tower containing 14 luxury residences.

Morgan Bentley argued that more could be done, suggesting reductions to the parking podium, driveway width and space between floors. The developer's team disputed those suggestions, maintaining that they overlooked building-code and engineering requirements.

The special magistrate's recommendation retained a proposed two-story living green wall, intended to soften the building's impact on neighboring Bay Plaza, but did not include most of the other concessions offered during mediation. The previously proposed loading space on Palm Avenue had also been removed from the plans. During Monday's hearing, however, the developer's representatives said Kihnke remained willing to accept the earlier concessions if commissioners required them.

To opponents, that hardly amounted to progress.

For the developer, however, the changes already made represented the practical limits of what the site could accommodate. The argument has become a recurring theme throughout the project's history: Is the building too large for the property, or do Sarasota's development rules make it unnecessarily difficult to build on a small downtown parcel?

Residents Make Their Case, Again

Monday's hearing drew another substantial showing of opposition, including roughly 45 opponents wearing red shirts protesting the proposed skyscraper.

Of the 12 people who spoke during public comment, 11 opposed the development and one supported it. Their concerns ranged from construction traffic and access for delivery vehicles to the building's proximity to Bay Plaza and the future character of North Palm Avenue.

Jim Lampl, a Sarasota resident with experience developing commercial properties, offered a colorful assessment.

"This project needs a huge shoehorn because it just doesn't fit," he said.

William Carnes, a professional engineer and longtime Bay Plaza resident, raised concerns about the extensive foundation work that could be required and the potential effects on neighboring buildings. Others questioned whether such a substantial development, containing only 14 residences, offered meaningful benefits to the broader community.

But Jonathan Abrams, a longtime Sarasota resident and real estate professional, urged commissioners to consider the importance of allowing downtown to evolve.

"We can respect Sarasota's past without standing in the way of its future," he said.

A Final Vote, With Millions Potentially at Stake

As commissioners prepared to vote, the disagreement wasn't only about whether the building belonged on Palm Avenue. It was also about what might happen if the city continued to say no.

Alpert questioned whether commissioners had sufficient grounds to reject the project after the magistrate's findings, expressing concern that the city could face significant damages. Battie voiced similar concerns, pointing to the city's financial responsibilities and the possibility of an expensive legal dispute.

Ahearn-Koch and Ohlrich remained unconvinced that the project had adequately addressed the compatibility issues raised in previous hearings. Trice, presiding over her final meeting, acknowledged competing concerns.

She described the surrounding stretch of downtown as a "jewel box" worth protecting, while also recognizing that the city had to consider the potential consequences of litigation for taxpayers beyond Bay Plaza.

Trice raised another concern, too: the process itself.

By the time development proposals reach commissioners, she noted, applicants have often spent years working with city staff, leaving elected officials with limited opportunities to influence the design before being asked to approve or reject it.

Trice suggested the city should explore ways to involve commissioners earlier in that process. When the vote finally came, she sided with Ahearn-Koch and Ohlrich, preserving the city's earlier denial by a single vote.

What Now?

Monday's decision doesn't prohibit redevelopment of the North Palm Avenue property. The owner could propose a different building, pursue another agreement with the city or continue challenging the denial through the courts.

Lincoln had already warned that litigation was likely if the city rejected the magistrate's recommendation, although the potential damages remain to be determined.

For now, the low-rise, single storied commercial buildings remain in place, nearly four years after Kihnke first submitted plans to replace them. And the larger question remains unresolved: In a downtown increasingly defined by luxury towers, how much should the scale and character of an existing street influence what gets built next?

Sarasota's commissioners have answered that question three times when it comes to 1260 North Palm Ave. Whether that answer will withstand a legal challenge is another matter.