The Edinburgh-based entrepreneur has spoken out ahead of a key meeting about the site, which houses seven listed historic buildings and includes extensive parkland.
The City of Edinburgh council will tomorrow consider a proposal that will involve building six new blocks on the site as part of a plan to create 145 new homes.
The plan has been developed by a group that includes the Sundial Properties and Mountgrange businesses and Edinburgh's Napier University, which used the site for teaching. It is the third submitted by the Craighouse Partnership since 2011, amid fierce opposition.
Mr Frankel and Andrew Richards, founder of the Codeplay software firm, have joined with objectors who claim the proposed development will damage a site that is a magnet for local families.
They have developed a plan to attract businesses like hotel and wedding firms onto the site to help meet the costs of preserving the old buildings without having to build new homes.
"They are going to carve up one of Edinburgh's most spectacular locations and achieve nothing more than some one-time value for investors," claimed Mr Frankel, who lives close to the site.
The outcome of the row will be studied by developers and their opponents across the country.
Mr Frankel and Mr Richards object that Craighouse Partnership is seeking clearance for the development on the grounds the new build element is essential to allow the preservation of the listed buildings on the site.
Such 'enabling' developments may be allowed to be built on land that would not normally be considered for new housing schemes.
Supporting the application, surveyors acting for Craighouse Partnership wrote: "The public benefit of securing the future of the Category A listed buildings and the wider site, through the enabling development proposed, decisively outweighs the disbenefits of breaching other policies."
However, Mr Frankel said: "It's not the only way to save the listed buildings at all."
He and Mr Richards belong to a group that believes it could find profitable uses for most of the historic buildings on the site. Mr Richards said firms such as wedding specialists and catering businesses have shown keen interest in using the buildings, which could also provide homes for community ventures. The costs of any conversion work could be met by selling some of the smaller buildings for turning into homes.
The group aims to raise around £5m from private investors and a bank to fund the purchase of the site. It is expected that members of the community would be able to buy shares. Mr Richards said talks with a bank are going well.
A spokesman for the Craighouse Partnership said: "There is absolutely no doubt that this scheme is Enabling Development." He added: "Sadly, redevelopment of the listed buildings alone is not remotely viable due to the significant maintenance and refurbishment costs along with the infrastructure costs of servicing the site."
City council planning staff have recommended permission be granted subject to conditions.