PITTSBURGH—The Allegheny Valley Railroad Co. has sued Pittsburgh's Urban Redevelopment Authority to stop plans to lease the city's landmark produce terminal in the Strip District to a developer, which plans to tear down part of the structure as part of a riverfront development.

The railroad contends the proposed development by the Buncher Co. violates a 1981 agreement the railroad struck when the URA bought the blocks-long terminal. The railroad serves produce wholesalers in the terminal and the deal allegedly requires the URA to make "its best efforts" to continue using the building for the wholesalers or another "rail-oriented use."

The authority has issued a statement saying the lawsuit is without merit.

URA officials have said the wholesalers will have to move to make room for restaurants, offices and showroom spaces.