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A hotel planned for 431 Meeting St. was approved in February, but developers will comply with the city's recently adopted hotel rules as part of a settlement with the Historic Charleston Foundation. File/Staff

A legal challenge to a large hotel in downtown Charleston is being settled, with the developer agreeing to bring the project more in line with new city rules and contribute money to affordable housing.

Historic Charleston Foundation filed an appeal in state court over the approval in February of a 252-room lodging proposed for 431 Meeting St. 

"The intent was to get them to conform to the spirit of the new regulations," said Winslow Hastie, president of the preservation group.  

Historic Charleston said this weekend that it's dismissing its appeal after reaching an agreement with the developer. 

Under the terms, the hotel, which was approved for 252 rooms, will not exceed a cap of 250 units.

The developer, OMS Charleston LLC, has also agreed to open a full-service, onsite restaurant that will be enclosed, separately named and advertised to the public and the hotel's guests, according to the settlement terms

But one of the "biggest wins for the city," Hastie said, is the affordable-housing fee, which is now a requirement under the city's new  ordinance. The developer, Charlotte-based OMS Charleston, has agreed to pay $5.10 per square foot.

That goes beyond what the rules call for. In this case, the fee will be based on the square footage of the entire structure, rather the square footage of the guest rooms.

Hastie estimated that will generate at least $1 million. 

The funds will be paid directly to the Charleston Redevelopment Corp. and go to the Palmetto Community Land Trust, which Historic Charleston helped establish. A goal of the trust, which acquired its first piece of real estate in July, is to create affordable homes and keep them affordable permanently. 

The settlement also includes details about architectural expectations for the hotel. The developer has agreed to make improvements "consistent with the standards expected for a four-star or better hotel."

Historic Charleston filed its appeal in state court in May, after its request that the Board of Zoning Appeals reconsider its approval of the project was rejected.

The property initially was intended to be a permanent home for the Charleston School of Law, which later determined the land didn't meet its needs.

The site is still under the ownership of the law school, according to Charleston County land records. A sales contract has been pending.

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The lot has been listed for $12.5 million since late last year. Law school president Ed Bell has said the proceeds from the deal will be used to buy a different downtown property where the school can build a new facility.

The OMS Charleston project became a focal point in the city's discussions about hotel development this year, partly because of the number of guest rooms — the hotel would be among the largest on the peninsula — and its proximity to several existing lodgings. 

Historic Charleston had argued that, even under the previous rules, the zoning board shouldn't have approved the project. 

"It kind of became a rallying point," Hastie said Monday. "All of sudden, it was a conversation that people were having all over the city."

Hastie was one 11 members of a task force that was organized in May to update the city's hotel development ordinance. One of the changes gives more authority to the Board of Zoning Appeals, which grants special exceptions for hotels.

A version of the rules has been in effect since May. City Council formally adopted the final version earlier this month.

Reach Emily Williams at 843-937-5553. Follow her on Twitter @emilye_williams.

Emily Williams is a business reporter at The Post and Courier, covering tourism and employment. She also writes the Business Headlines newsletter, which is published twice a week. Before moving to Charleston, her byline appeared in The Boston Globe.