The #100 million regeneration of a prime Birmingham city centre site off Great Charles Street has fallen through.
Developers HBG Properties pulled out of the deal on the eve of signing contracts with the city council.
The unexpected twist came as a shock to the council, which only six weeks ago highlighted the sale of the derelict site as an example of booming land values and growing private sector confidence in Birmingham.
Labour critics said the latest development raised questions about the business community's faith in the ruling Tory-Lib Dem administration and a Chamber of Commerce official said it should act as a "wake-up call" to the city.
Council leaders now face re-marketing the troublesome site, which has for years defied all redevelopment attempts and was once earmarked for Birmingham's new coach station. It is occupied at the moment by surface-level car parks.
H BG offered to pay #23 million for the site, making it the most expensive piece of land sold by the local authority.
The company announced plans to build a mixed-use scheme including offices, housing, car parking and a new footbridge linking the Jewellery Quarter with the city centre.
HBG Properties confirmed it would no longer be going ahead with the scheme after a board decision by its owners Royal BAM Group, a #5 billion construction company listed on the Dutch Stock Exchange.
Ken Hardeman, the Birmingham cabinet member for regeneration, insisted last night that the withdrawal of HBG would not be a major problem and said a number of other developers were keen to step in.
Coun Hardeman (Con Brandwood) added: "A marketing exercise earlier this year produced an excellent response from the development industry. HBG were to be appointed as developer but had to withdraw at the point of signing contracts when their international board overturned their national board's approval of the scheme.
"We are obviously disappointed that HBG did not deliver what they offered.
"But it is not a major problem because we have so many interested parties waiting in the wings. I am confident we will secure the quality scheme this site deserves because of its superb location in the city centre and being close to the Jewellery Quarter. A decision on a new developer is expected in September."
Coun Hardeman confirmed that the successful bidder would be expected to build an improved pedestrian foot-bridge across Great Charles Street, making it easier to walk to and from the Jewellery Quarter and the city centre.
A spokesman for HBG Properties said: "The company regrets any embarrassment caused by this decision, but emphasises that its withdrawal from this particular scheme was covered by certain conditions contained in the original bid.
"These conditions are confidential. This situation does not in any way limit HBG Properties' continued commitment to, and investment in, the Midlands generally or Birmingham specifically."
Labour's regeneration spokesman Coun Tahir Ali (Nechells) said he feared the Great Charles Street site was destined to remain derelict, adding: "This all comes back to whether the business community has full confidence in the council's ruling administration."
And Jerry Blackett, policy director at the Birmingham Chamber of Commerce, said: "You could say this is a wakeup call as inward investors become ever more demanding about the cities they seek to put their money in."