DANVERS - The Board of Appeals last night denied developer Michael Demerjian the permit he needed to build 71 condominiums off Route 114.

Demerjian wants to build on 10 acres at the former site of Natalie's restaurant and the Rio Grande Caf…. He was seeking a comprehensive permit required under Chapter 40B, a state law that lets developers bypass most local zoning regulations if they set aside a portion of their project for affordable housing.

"I don't have a problem with affordable housing, but I'd like the town to plan it instead of having it come this way," Chairman Robert Cignetti said before the board voted, 3-2, against the development.

The vote drew grateful applause from an outspoken contingent of neighbors opposed to the proposed development. Neighbors said it was too dense and that it would add too many cars to an already busy road, boost school class sizes and put a strain on the town's water system.

"I'm concerned with public safety," board member Meike Olin said. "I cannot vote for this project."

She worried about the development adding cars to a dangerous road and the increased possibility of a fatal accident.

"If I said yes to something I should have said no to, I would feel personally responsible for that death," Olin said before the vote. "Route 114 is a nightmare."

Last night was the second time the appeals board has rejected Demerjian's permit application. The board also denied him a permit last year, saying that more than 10 percent of the town's housing stock was already considered affordable. If a town surpasses that 10 percent threshold, it has more leeway to reject or control so-called 40B development.

But Demerjian appealed to the state Housing Appeals Committee, which overturned the board's decision. The committee said the town hadn't reached the 10 percent mark when the Appeals Board denied Demerjian a permit. The state had yet to approve and count affordable units being built as part of the redevelopment of the former Danvers State Hospital, the committee found.

The three board members who voted against the development last night - Cignetti, Olin and Robert Pariseau - are hoping the state Supreme Court will eventually affirm their opposition. The court is considering a case involving the town of Canton that could strip the Housing Appeals Committee of its jurisdiction if a city or town reaches the 10 percent mark. Danvers is at 10.4 percent.

Demerjian and his lawyer, Dennis McKenna, declined to comment after the vote. They could choose to appeal last night's outcome.

While acknowledging the development's drawbacks, board member Becky Kilborn said the upside was that it provided 18 families a place to live in Danvers at a reasonable price. The 18 affordable units would each cost $157,700.

Kilborn and Scott Vandewalle supported giving Demerjian a permit. Vandewalle said the development did not "imperil" the neighborhood.

"I don't see grounds to deny it based on the fact that I just don't like it," Vandewalle said.

Before the vote, an independent financial analyst questioned the profitability of Demerjian's development. He estimated the profit would be 7.7 percent of the total cost of the development.

"They would have a hard time getting financing with this level of profitability," analyst Mike Jacobs said.

Demerjian's is one of two major developments proposed for Route 114 near Middleton. North Shore Active Adult Group LLC has a plan for 291 condos and townhouses for buyers age 55 and older.

Neighbors last night argued that the detrimental impact of Demerjian's proposal outweighed any potential legal costs the town could incur by denying the permit and going through an appeal process.

"We need to deny this," neighbor Eleanor Ross said, "and take our chances from there."

The proposal

11 buildings

71 condominiums

18 affordable units

$157,700: price of affordable condos

$299,000 to $436,000: price of market-rate condos