Once an ambitious vision for a high-end, mixed-use retail and residential project,  the eight-story, rusted steel skeleton of the Garden Grove Galleria project now towers, unfinished, over the city’s stumpy suburban skyline.

At their Tuesday night meeting, city council members told the landowner and project financier they have thirty days to find a viable developer to continue the project, before they decide whether to demolish the 90-foot structure that has been stalled by financing and legal disputes since 2009.

Otherwise known as Lotus Plaza, the Galleria project included plans for two stories of retail space and 66 luxury condominium units, and was pitched as a first-of-its kind development that would revitalize the area along Garden Grove Boulevard.

Construction on the private project began in 2007, but had ceased completely by July 2009, when Cathay General Bancorp, the bank financing the project, refused to pay the developer’s construction costs, citing a decline in the property’s value during the economic downturn.

Amidst a legal battle between the project’s original developer and Cathay, the bank has since struggled to find a replacement developer.

In July 2013, the city issued a notice for the demolition and removal of the structure if construction did not resume within a year.

Now with that deadline passed, representatives of the nonprofit Emlen W. Hoag Foundation, which owns the three-acre property, and Cathay asked the council Tuesday to extend the deadline to the end of this year.

“We have not been closer at any point in time than we are today,” said William Grant, president of the board of the Hoag Foundation, a Garden Grove-based nonprofit. “We talked about a 12-31-15, drop-dead date, with plans moving forward, changes in the timeline, trying to get the project underway.”

Late last year, the parties came close to sealing a deal with Tri-Millenium Homes to pick up where the original developer left off, but the proposal was ultimately rejected by Hoag in December.

While city leaders, particularly the newly elected Mayor Bao Nguyen and council member Phat Bui, are eager to find a quick solution — either demolition, or commencing construction with the existing structure — Hoag has questioned whether there would be a market or appetite for the original high-rise, mixed-use project.

In a letter to the city, Hoag advised that a lack of demand for retail space in the current market makes the original plans unviable.

“…It will be extremely challenging for retail uses to be successful on the Property as part of a mixed-use development. This is because consumers in Orange County have consistently demonstrated an aversion to patronizing retail establishment [sic] where the consumer must park in a parking garage,” the letter reads.

The letter cited other mixed-use projects with parking garages, such as Triangle Square project in Costa Mesa and the Kaleidoscope mall in Mission Viejo, as retail failures.

It also noted that developers of the Platinum Triangle in Anaheim have scaled back the office and retail components of the project.

Lisa Kim, senior vice president and general counsel for Cathay Bank, told the council Tuesday that, while the bank has attempted to work with the current structure, many prospective developers are wary of the project’s retail requirements.

Current city zoning codes require at least 40,000 square feet of retail space for mixed-use projects.

Nguyen was the only member of the council who said he wouldn’t support a high-density housing project on the site, given both the project’s location, and the additional time it would take to approve new project plans.

“My concern here is that if it’s not the original, it’d have to come to council and enter a very long process,” said Nguyen. “And I’ll be very clear, I don’t think that having high density housing or all housing on that site is a good thing, considering the location.”

Even if the project found a new developer who would work with the existing structure, it would take at least a year for the city to approve the site plans, conduct public hearings and issue building permits before the project could commence construction, according to Community Development Director Susan Emery.

If a prospective developer wants to request amendments to the zoning code for mixed-use developments, that would add at least six months to the timeline, Emery said.

Demolishing the structure and clearing the site for a new project could take two to three months, among other delays.

“If they pick something that looks dramatically different, it could require some extensive review, even an [environmental impact report], and that process could take approximately a year,” Emery said.

Nguyen sought a motion to schedule a closed session to discuss the city’s legal options, but failed to receive support from council members, who said exploring legal action was unnecessary.

Bui, meanwhile, took a hard line, telling Kim and Grant that they need to return with evidence that a new developer will follow through with the development.

“I don’t know if you sense the urgency, but we’ve been waiting for nine and a half years…we have been through this roller coaster many times,” said Bui. “I would like to ask you to come back and convince us and show us that you have a developer…and a timeline the city can work with. But I will not grant an extension over and over again.”

Councilman Steve Jones said he did not want the city to take a “heavy-handed approach” and issue ultimatums.

“So lest we forget that the Hoag Foundation is a wonderful, local nonprofit…to remind everyone, we’re kind of all in this together. There’s no city tax dollars in this, this was not a Redevelopment Agency project. This was a private market failure of a project that happened in a downturn,” Jones said.

Contact Thy Vo at thyanhvo@gmail.com or follow her on Twitter, @thyanhvo.

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