£80m mixed-use project to replace Alsop’s ‘Cloud’ in time for Liverpool’s reign as European City of Culture.

Architect Broadway Malyan is to design Liverpool’s Fourth Grace in Liverpool, Building can reveal. The building will replace Will Alsop’s “Cloud”, which was rejected by the council in July last year.

The £80m mixed-use project for Neptune Developments and Countryside Properties will include 370 residential units, 6500 m2 of leisure and 10,000 m2 of office space. It will also include enclosed public realm areas and open space around a canal basin.

Designs are being drawn up and will be submitted for planning in February.

A source close to the project said: “The design is absolutely fantastic. It will be a flagship design for the architect.”

But other insiders said Broadway Malyan had to tread a fine line with its plans. The practice had to produce a design innovative enough to follow Alsop but uncontentious enough to avoid being held up in the planning system.

The scheme has to be ready by 2008, when Liverpool becomes the European Capital of Culture.

The development will share the Mann Island site with the Museum of Liverpool, designed by architect 3XN. This building, in the shape of an X, was criticised by Cabe’s design review panel on the grounds that it did not fit in with its surroundings.

Alsop’s Cloud was rejected over fears of how much it would cost to build. After several redesigns the funders behind the project – Liverpool council, the North West Development Agency and Museums Liverpool – feared the scheme would lose its £37m European Objective One funding.

After that decision, Neptune and Countryside threatened to sue the NWDA for the £5m that it said it had spent on the scrapped scheme. The two developers also claimed that they had a binding agreement with the NWDA that gave them an option to buy the site in the event of the project being abandoned.

They eventually received £1.4m, as well as £1.5m in the form of a deduction from the purchase price of the land.

Alsop last week announced fresh plans to make his mark on Liverpool with a building described as the city’s “third cathedral”.

The architect is in talks with the chief executive of the Liverpool Biennial, a contemporary visual arts festival that takes place every two years, to build a structure for the 2008 festival.

He is working with artist Bruce McLean, to build a structure 20 m2 in area and 12 m high. It is not yet known if it will be permanent.

Next year’s biennial runs from 16 September to 26 November.