Nordstrom has pulled out of the CityNorth retail development in Phoenix.

This story first appeared in the May 11, 2009 issue of WWD. Subscribe Today.

The Seattle-based luxury department store chain was announced as an anchor tenant for CityNorth’s second phase in August 2006, and was to occupy a two-story, 144,000-square-foot store.

However, CityNorth, like other projects in the recession, has hit roadblocks as developers struggle to find financing in a tight credit market.

“It is off because our letter of intent expired and the developer had milestone dates they had to meet, and they didn’t do that,” said Nordstrom spokeswoman Brooke White, who did not specify what deadlines were missed.

The retailer first disclosed the decision to Phoenix city officials two weeks ago.

The mixed-use development, a partnership between Klutznick Co. and Related Cos., was planned for 5.5 million square feet on 144 acres. The first portion launched in November, but the second phase — originally scheduled to open this upcoming November — was put off for a year, then placed on hold altogether because of financing troubles.

CityNorth’s agreement with the city of Phoenix is being contested in a court battle with other area property owners, who allege the deal violates the state constitution. The agreement, which requires the opening of 1.2 million square feet of sales-tax-generating retail space, calls for the city to return 50 percent of sales taxes for more than 11 years or until the total reaches $97.4 million.

In the economic downturn, “retailers are cutting back wherever possible, and developers cannot move forward on projects until the credit markets recover and financing is available,” Klutznick said in a statement. “Nevertheless, Nordstrom has indicated that they will revisit the opportunity when the project timeline is reestablished.”