That "dining" area is barely big enough for a 4 person table and that assuming that plan has everything to a perfect scale and that the renters are going to have that kind of table.

They have a lot of unique loan products including a 30 year commercial note.

This is a unique area where there is an advantage to all size rentals.

I also know lenders who change the terms at the closing table. 

When respect is no longer being served, leave the table.

Maybe, if it was adjacent to a commercial zone and all the residential neighbors had to have a coffee shop and would support you till the end and the city wanted to bring in that specific type of business and the lot was so unique that it had to be there.

Finally, were there any issues that were unique to this type of conversion?

Though there's a tenant in the 2nd floor apartment, it's all under the table, so there's no paper trail to show a bank.

This person can negotiate on your behalf, draft the agreement of sale, and get you to the settlement table.

Once you understand that, then you will have a better understanding of the type of investor you need to bring to the table.