The marathon Foss Waterway hotel project, which was originally proposed in 2003, was granted yet another extension and the developer says it has to be reinvented.

Now construction has been put off to May 20, 2009, more than six years, three extensions and multiple blueprint changes since the initial proposal. Under the new extension, the project needs to “optimize economic returns through needed redesign all within the context of an envelope that has existing permits and approvals.”

The Foss Waterway Development Authority granted the extension at a meeting Thursday evening.

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Developer Robert Thurston wrote in a memo before the meeting that “we need to re-think our development model. The capital markets remain in disarray.”

The authority set Thursday’s deadline in May so Thurston could examine market changes and court lenders, but an additional nine months for study was deemed “prudent and desirable,” according to an agenda item. The economy and market are so bad that it is hard for Thurston to get lenders to return his phone calls, he said.

Also, the authority wants to address perceived risk of a hotel plan, including the Russell Co. decision, a Weyerhauser consolidation and unsold retail space at The Esplanade.

Thurston, the owner of Seattle’s Inn at the Market, took over the project after the initial developer dropped out. His original plan for the site, which sits between The Esplanade and Thea’s Landing on Dock Street, included a hotel and restaurants. That plan changed to two dozen condominiums atop the hotel. The plan changed yet again after to fewer condos and more hotel rooms after a drop in the condominium market.

“The whole thing has to be revisited,” Thurston said. “We don’t think we have any iron-clad solutions, but hopefully we’re going to get it done.”

Now he is looking at fewer hotel rooms and office space.

Thurston’s consultant Andy Olson told the board that the hotel market is volatile, especially in today’s economy. A project needs a solid plan to have a chance at success, and though he did not see any fatal flaws in the proposal, the challenge is with the market.

“One of the things about the hotel market is that people propose developments to preclude other hotel developments,” Olson said at the meeting. “It isn’t over built, it’s over proposed.”

Thurston is under an obligation to the authority to develop the site. If the development is not approved, the authority’s other option would be to repurchase the property before the deadline.

“As we get into the middle of next year we’ve got to see if this project’s going to fly,” Meyer said.

Meyer wrote that the authority wants the development to compliment others in the area. The authority, when granting the extension, said the project’s design is “extremely desirable.”

“The scale and relationship to the adjacent sites provides the diversity we need between the two large buildings (Thea’s Landing & The Esplanade),” the board wrote.

As part of the extension, the authority is asking for monthly status reports and a financial commitment within seven months.