A key project for transforming downtown Federal Way will wait a little longer to reach that first big milestone.

The closing date for the purchase and sale agreement between the city and ARCADD Inc. for the former AMC Theatre site has been pushed back to April.

ARCADD, which put forth an ambitious design known as the Crystal Palace or Crystal Way project, says it’s financing is in no trouble, but that some paperwork was taking longer than expected, thus the need for the extension.

The project, slated for a 4.1-acre vacant parking lot on 20th Avenue South near the Federal Way Transit Center, is expected to include about 500 residential units, 12,000 square feet of office and retail space; 50,000 square feet of recreation, cinema, restaurant and entertainment space; and 75,000 square feet of the “crystal palace” space. It will feature an underground parking structure and public open space.

Before ARCADD entered the picture last summer, a proposed three-skyscraper deal for the site had fizzled due to a developer’s inability to secure financing to buy the property.

Patrick Doherty, economic development director for the city, updated the council Jan. 3 on the latest project’s status, saying that it appears all is a go for the initial stages, except for this slight delay.

“Equity financing for the project, over $300 million has been approved. The paperwork between the financiers and ARCADD is still in the process, with resolution and availability of the funds seen as imminent,” Doherty said.

Outside of that, Doherty said this slight delay would push back another “closing date” deadline to April 2, which would help accommodate ARCADD’s need to provide an independent appraisal of the AMC site’s value. According to Doherty, the city has already completed that part of their due diligence. On Jan. 27, the contract will be executed and will include the earnest money deposit of $150,000.

Dr. Hisham Ashkouri, lead architect for ARCADD, made a day trip to Federal Way from his Boston-based offices on Jan. 3. He shared some details of the project and its financing.

“The money is coming from a private trust, it’s not public money,” Ashkouri reminded the council. “The money has been approved and funded. We’re waiting for the paperwork to clear so we can get the funds issued to us.”

Ashkouri said work is proceeding on the project while ARCADD waits for the money to be released. He presented a new concept sketch of the project’s exterior, along with a more detailed interior sketch.

Deputy Mayor Jim Ferrell asked Doherty to review the remaining steps needed, and also if transparency will continue to be a part of the process, especially in regards to funding.

Doherty referenced the aforementioned appraisal of the site, and also that an environmental review is needed of the site. He said as of now, the city is limited in its ability to know who the main financiers for ARCADD are, but he doesn’t expect that to be an issue going forward.

“We have also asked for due diligence on the side of finance. The main financier is aware of the need to divulge more about the source of the money, and the financiers indicated that’s not a problem. I think, once the paperwork has all been signed, then from their perspective, it’s all publicly disclosable,” Doherty said.

As the project goes through these tedious and time-consuming first steps, councilmember Linda Kochmar asked for both Doherty and Ashkouri to share the type of impact this project will potentially have for Federal Way.

“I think, what we’ve been expecting for a long time, is a catalyst project, a transformative project in our city center. That would be sufficient in size and scope to engender regular interest by other investors in our city center,” Doherty said.

Ashkouri feels the project would be “trend-setting,” a theme he touched on previously when his firm made its first presentation to the council in the spring.

“What you are doing is establishing a trend. If you develop that site, you will see that people will take initiative all around the site, and that’s what we’re looking for. It’s a catalyst. This what this project will bring you,” he said.