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Santa Rosa has given a developer more time to complete the purchase of the long-vacant former AT&T building downtown.

The city's redevelopment agency had hoped to complete the $1.9 million sale of the building — which the agency purchased for $3 million in 2007 — to developer Hugh Futrell by year's end.

Futrell and his partners hope to transform the empty five-story concrete eyesore into a 10-story glass-clad mixed-use tower dubbed Museum on the Square. It's the city's highest profile, highest priority downtown development project.

But some thorny planning issues put the project behind schedule last year, requiring a second six-month escrow extension, which was granted Dec. 20. The sale agreement now gives Futrell until June 29 to complete the transaction.

Futrell says he probably won't need that much time. He and his partners — who have invested $1 million in the project to date — now expect to complete the purchase and move forward with construction by the end of April.

"We would not be making this kind of investment in the asset if we were not still seeing a green light for the project," Futrell said.

Redevelopment agency officials say they are comfortable granting the extension because Futrell is making significant progress toward his goals.

Design drawings are complete and under review by the city, and Futrell has pre-leased 75 percent of the commercial office space planned for the building, said city redevelopment specialist Frank Kasimov.

"Those are substantial steps. He has made a very large investment in making this a reality," Kasimov said.

The project ran into its first setback in 2010, when the city took months to decide whether to allow future tenants to drive through the city transit mall to access the building's parking. The city ultimately agreed to grant the access, and the change forced a minor redesign.

Then early last year software maker Metier Ltd. backed out of the project after initially agreeing to lease at least one floor of the building.

Futrell has since found a replacement tenant, which he declined to name, citing a confidentiality agreement with the firm. The other tenant remains TLCD Architecture, a partner in the project.

The two companies plan to occupy three of the four commercial floors.

Having 75 percent of the commercial space pre-leased puts the project on firm footing to secure the required funding, Futrell said. The project has been estimated at $23 million.

One key hurdle remains: Securing new market tax credits for the project, which would entitle lenders to receive credits against their income taxes. The federal government offers the credits to encourage investment in low-income communities.

The remaining hurdle would be to secure the construction and permanent loans for the project, Futrell said.

Much work remains, but Futrell said the project has reached a critical phase.

"We're at the point now where discussions become agreements and favorable indications become documents," Futrell said.

The abolition of redevelopment agencies in the state, which seems likely given last week's state Supreme Court ruling, shouldn't pose a threat to the project because the deal is a "pre-existing contract" that has to be honored, Kasimov said.

"It's a very transformative and exciting project for our downtown and our city," Kasimov said.

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