Scottsdale has severed ties with a developer whose partially built downtown condominium project was pitched as a catalyst for revitalizing the area and creating a new arts district, the Tribune has learned.

Click on graphic for a complete Loloma Arts District phases map

Main Street Plaza was planned to include 250 condos built over four phases, but only the first phase’s 33 condos and lofts have been completed, and a lack of financing has prevented future development.

The deal was structured to allow the developer to buy city-owned land for future phases as long as certain timelines were met, which the city says has not occurred.

“At this point, the agreement has expired,” said acting City Manager John Little, who in an April 3 letter told Alan Ferris of Arts District Development that the developer had to agree to new conditions by April 8 or there would be no further extensions.

However, Ferris said that although he did not agree to the city’s

conditions, the agreement is not off and that he plans to continue to move forward with the project.

“At this point, our agreement is in force, and we have the absolute intention of working our way to the full and final development of the entire neighborhood as envisioned,” Ferris said.

Ferris wrote back April 8 asking for a four- to six-week extension to allow both sides to “come to the table” to renegotiate areas of concern. Ferris said the current housing and credit crisis has led to the need to seek extensions.

The redevelopment agreement approved by the City Council in March 2002 was seen by the city as a revitalization tool that would bring high-end condominiums to downtown while creating a pedestrian-friendly arts district with new galleries, shops and a museum alongside the Scottsdale Artists’ School and Loloma transit center.

In the past few years, a number of condo projects have been built or are planned in downtown Scottsdale.

Main Street Plaza’s first 33 condos and lofts opened southeast of Main Street and Goldwater Boulevard in 2006. Stores also opened off Main Street. To date, the city has contributed $4.7 million toward a parking garage and plaza and alley improvements.

Three other condo and townhouse phases were planned. The next residential phase, which is now selling, was expected to include 64 new residences, including two townhouses, on nearly two acres south of Second Street on what today is a parking lot. Condos were planned to replace the Stagebrush Theater, which under this proposal would have been razed. Meanwhile, land is set aside for a museum that is now envisioned to be the Museum of the West.

The City Council met April 1 and April 8 in closed session to seek legal advice on the issue. No public hearings have been scheduled.

In December, the council voted to confirm the city manager’s extension of the closing date. At that time, former economic vitality manager David Roderique said the city expected the developer would close with the city for Phase Two by the end of January.

But that never happened and Ferris could not meet any other extensions.

“The deal is off,” Councilman Bob Littlefield said.

“He missed his deadline, he had his chance and his option has expired. It’s time for us to move on.”

Little’s April 3 letter said the city would grant another extension only if the developer waived all potential future rights to the Museum of the West land on the northwest corner of First Street and Marshall Way.

“Because there was so much positive community support and energy for the cultural parcel for the Western museum, we wanted to make sure that the city’s interest was protected on that parcel,” Little said.

The council has not determined the city’s next step.

“I think the majority would like to work with them, but I’m not sure what position we are in to work with them right now,” Councilman Jim Lane said.

Scottsdale Mayor Mary Manross, who has long touted the project as a sign of downtown’s resurgence and the only current member of the council who voted on the agreement, declined to comment on the matter.