The Garden Grove Galleria project — which for years has been an unfinished eight-story eyesore in the city’s downtown landscape — is close to having a new developer, according to a letter of intent made public Tuesday night at the Garden Grove City Council meeting.

The letter, which comes after an ultimatum issued last month by the City Council, was submitted by Brooks Street, a Northern California-based developer with offices in Newport Beach.

Representatives from Cathay and the Emlen W. Hoag Foundation, the property owner, told the city council Tuesday that Brooks Street is their top option among three new developers who have submitted letters of intent to continue the project based on the existing steel structure, which they say is still in good shape.

The original Galleria project, otherwise known as Lotus Plaza, began in 2007 and included plans for two stories of retail space and 66 luxury condominium units. It was pitched as a first-of-its kind development that would revitalize the area along Garden Grove Boulevard.

But the project ground to a halt in 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.

Since, the project has been mired in a legal battle between the original developer, Garden Grove Galleria LLC, and Cathay, while the rusted steel skeleton has become a symbol of a failed revitalization effort.

City leaders made it clear last month that they had had enough by vowing to go forward with the demolition of the structure if construction did not resume by July 2014.

Beyond Brooks Street, the city received letters of intent from Banyan Tree and Tri-Millenium Homes. Tri-Millenium submitted an earlier proposal but had disagreements with Hoag over the density of the project and requirements for retail space.

Brooks Street has already begun doing forensic surveys on the site and market studies, although it has yet to make a solid commitment to the project, according to Lisa Kim, Vice President and Senior Counsel at Cathay.

“We’re thinking of breaking ground in the first quarter of next year, and then a two-year [construction] phase, so we’re looking at 2017. That’s our best estimate now,” said Kim.

Ahead of Tuesday’s meeting, Brooks Street submitted a timeline to the city suggesting they would return in June with presentation to the city about their proposal, clean up and assess the site by mid-September, and submit plans for a building permit by the end of the year.

The developer will return in another sixty days to update the City Council on its progress.

Echoing a meeting in late February where they discussed demolishing the Galleria structure, council members were stern with Cathay and Hoag about the need for action on the structure.

“This is awkward that this negotiation is taking place in such a public forum, but you have to understand, this site has been a great source of embarrassment for the city for a number of years, a great source of emotion for residents,” said Councilman Steve Jones.

“At least daily, if not weekly, I get questioned about it. And people perceive its a city failure or a failed redevelopment project,” Jones said.

Still, even though city leaders are facing pressure to get the project moving again, several developers have questioned whether there is the market or appetite for the 40,000 square feet of  retail space required by city zoning code.

Hoag has pointed to other mixed-use projects that have failed in recent times, including the Triangle Square project in Costa Mesa and Kaleidoscope mall in Mission Viejo.

More contentious among council members, however, was the subject of whether to schedule a closed session to discuss the city’s legal options in case the developer failed to follow through.

At their February meeting, Mayor Bao Nguyen sought a motion to schedule a closed session but failed to receive support from council members, who said it was too early to be exploring legal action.

He requested the closed session once again Tuesday evening, this time sparring with councilman Phat Bui.

Bui said that scheduling a closed session after receiving such public assurances from the project’s developers and financiers, would send a bad message to the business community.

“If we schedule the closed session after they made a lot of effort and commitment … [it would be] sending a wrong signal to not only Brooks Street but many other future developers that maybe we’re not serious about doing business in Garden Grove,” Bui said.

Nguyen’s motion passed with a 3-2 vote, with the support of Jones and councilman Kris Beard. Councilman Chris Phan and Bui voted no.

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

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