The award winning Canadian architect had designed a£290m scheme, incorporating a controversial set of twin towers on the Hove seafront to replace the council’s aging King Alfred sports centre.
The development featured the two towers, described as looking like 'crumpled tin cans', housing 750 flats that were designed to pay for a new sports centre on the site.
But the council has announced that the deadline for the developer Karis to come up with a funder to replace Dutch bank ING has expired. The council also said Karis had not made a formal request to extend the agreement.
According to the council, it has been told by Karis that due to the property slump no investor would make sufficient profit from housing to build the required public sports centre.
The council has said it is now returning to square one to work out how improved sports facilities can be provided and what can be done with the existing building and site.
Mary Mears, leader of Brighton & Hove, said: “We need to work out a way forward. While we’d like much better sports facilities we need to ensure that any development required to pay for them is acceptable in terms of size and appearance.”
“The situation is very much complicated by the current economic downturn. Virtually all major public works these days are dependent on private investment and at the moment that has dried up.
“However, we want to see a refurbished King Alfred leisure centre and we will do everything we can to ensure that happens.”
The council is due to discuss a report about the refurbishment of the King Alfred leisure centre at a cabinet meeting next week.