Nov. 27–A highly anticipated hotel plan that spent five years earning city approval has been scrapped because no developer wants to invest in the ambitiously detailed design.

Landowner Gretchen Stroscher Thomson now plans to build a shopping center and restaurant on the 3-acre property on Ortega Highway, just east of Mission San Juan Capistrano.

“It is disappointing, because we worked long and hard to bring a hotel to San Juan,” she said. “It just wasn’t meant to be.”

Stroscher Thomson said the proposed shopping center will likely include a specialty grocery store and other shops aimed at bringing local residents and visitors downtown.

“It will benefit the community,” she said.

Stroscher Thomson’s choice to abandon the 124-room Plaza Banderas plan is a major blow to the city’s push to revitalize the downtown area. A hotel is a central part of the Historic Town Center Master Plan approved by the City Council last year. It’s a revenue and tourism draw for a city that competes with seaside resorts in neighboring Dana Point.

Mayor John Taylor said he’s disappointed no developers would take on the project but said he’s confident Stroscher Thomson’s new plan will fit with the city’s historic charm and bode well with the neighboring Mission.

“She’ll do a beautiful job and be mindful of the fact that it’s a gateway to our city,” Taylor said.

The city isn’t out of hotel options: Urban Village Development of Irvine still wants to build a hotel and 33 town homes on land behind the Egan House, once owned by movie producer Steve Oedekerk. That proposal is awaiting an environmental analysis through City Hall and must be approved by the City Council.

Josh Host, principal of Urban Village, said an analyst told him the city could support two downtown hotels.

The disappearance of Plaza Banderas “certainly would point to a more successful hotel for Josh,” Taylor said.

Host said his plan had a hotel developer already lined up.

“We look forward to breaking ground next year,” Host said.

Stoscher Thomson’s family has owned the land where Plaza Banderas was to be built since 1887. She began talking to community members about a building a hotel there in 2006. The city held public forums and community workshops that gave residents and business owners opportunities to suggest design changes.

The City Council approved the project in October 2010. A dispute over who should pay how much for a new water pipeline on Ortega ended last year with the city calling for whoever builds the hotel to contribute $300,000. Developers also had no room to change the design of the hotel. The City Council’s approval included stringent plans that detailed every aspect of design.

It was enough to deter every interested developer.

“We had every major hotel salivating over that spot,” Stroscher Thomson. “And one by one…they came to the conclusion that it just didn’t fit in their financial performance.”

Stroscher Thomson, who is partners with her two children in the development company Stroscher G3, LLC, is working with Joe Goveia of Goveia Commercial Real Estate in Dana Point on the new shopping center plan. It has not yet been submitted to the city.

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Contact the writer: [email protected] or (949) 492-5122. Twitter: @meghanncuniff.