A long-awaited downtown project of condos, specialty shops and high-end offices is no closer to seeing construction begin, and the clock is ticking on the contract.

A long-awaited downtown project of condos, specialty shops and high-end offices is no closer to seeing construction begin, and the clock is ticking on the contract.

Portland developer Terry Cook has requested that the Sept. 1 deadline to extend the development agreement with the Medford Urban Renewal Agency for the Bella Vita project be put off indefinitely until the real estate market improves. But MURA on Friday told him no.

MURA Director Jackie Rodgers wrote in a letter to Cook Development that the agency could give him until mid-October to decide if the project would proceed.

"In order to preserve the possibility of this project going forward, MURA is willing, subject to your written request received by MURA on or before September 1, 2007, to extend the 60-day notice period of termination for up to an additional 45 days," she wrote.

The $25 million Bella Vita project, situated between Main and Eighth streets and Fir Street and Evergreen Way, calls for three six-story buildings consisting of about 58 residential units, 48,800 square feet of office space and 19,000 square feet of commercial space. If built as planned, it would horseshoe around an existing parking structure.

Cook said though he has had significant interest from future tenants, he's had no luck finding a lender because of the downturn in the real estate market.

In his Aug. 9 letter to MURA, Cook said Medford has been in a declining real estate market for the past 23 months, after peaking in October 2005. Inventory of residential real estate has increased by 50 percent, time on the market has increased from 52 to 91 days for sales and prices have declined 5 to 10 percent, he wrote.

"Nationally, mortgage backed credit lending has been significantly curtailed due to the well-publicized failures in the subprime markets which have impacted all real estate lending," he wrote.

"These factors along with construction prices that remain abnormally high in the Medford market prohibit construction until conditions improve," he wrote.

Cook, who had not yet received the letter from MURA, said in a telephone interview Friday that an extension of two months would likely not be enough to make a difference.

"It's clearly not going to be, in my mind, months (until the market improves)," he said.

However, Cook said, he's not ready to drop the contract.

"We're looking at redesigning the project to make it smaller," said Cook. "We're looking at everything to make it work."

Dan Thorndike, MURAs attorney, said the project is still moving forward.

"Both sides seem to be interested in renegotiating," he said.

Don Burt, former MURA director and project consultant, said he remains optimistic that a residential/commercial project will be built on that site.

"From Day 1 in 1988 that was supposed to be a mixed-use project," he said.

The Bella Vita plan was unveiled in 2005 with enthusiasm by MURA and Cook, but delays, including a complaint filed with the state over prevailing wages, pushed it back by more than a year. By then, the real estate market had gone flat.

Cook has accused MURA of withholding information regarding the prevailing wage rate issue, which the agency encountered on a previous unsuccessful project.

But MURA says it's gone by the book.

"MURA strongly contests your assertion that we deliberately or inadvertently failed to provide information regarding the potential prevailing wage application," Rodgers wrote in her letter to Cook. She wrote that he had been told about the possible need for compliance and that, as the developer, the responsibility rested with him.

"Any increases in costs or time delays were not caused or exacerbated due to the actions or inactions of MURA, and it is disingenuous to suggest otherwise," she wrote.

Reach reporter Meg Landers at 776-4481 or e-mail mlanders@mailtribune.com.