Costs at vital harbourside project rise one-third after developer Howard Holdings hit delays in signing deal

A £100m waterfront regeneration scheme in the Olympic host town of Weymouth is running a year late after cost estimates rose by more than one-third.

Developer Howard Holdings is on the verge of signing a development deal with Weymouth & Portland council for the Pavilion regeneration scheme, which was originally priced at £80m with a completion date of 2010.

However, costs have risen to about £107m since councillors selected the developer against its own consultants' advice last August. It was in competition with a £90m scheme put forward by regeneration specialist Urban Catalyst and architect Terry Farrell and Partners.

Weymouth will host the sailing events in 2012 and the council is desperate for the Pavilion scheme to be finished by then.

Martin Jepson, managing director of Howard Holdings UK, said he was currently in talks with stakeholders and was aiming for a completion date of autumn 2011.

Weymouth’s sailing academy where the 2012 Olympic events will be held

Weymouth’s sailing academy where the 2012 Olympic events will be held

The scheme, which will include a new marina, a four-star hotel, a remodelled Pavilion theatre, a ferry port, a car park and 200 flats, is a key element in Weymouth's plans to host the Olympic sailing competition.

Jepson said: "We think our timetable is realistic, and we could even complete before autumn 2011. But whatever happens, we have to be out before the Olympics."

A source at the council said: "Although the Olympic events would not be directly affected by the scheme, clearly you don't want a massive building site in the middle of an esplanade that will be at the centre of the world's attention."

Controversy has also surrounded Howard Holdings' preferred option of refurbishing an existing theatre, rather than demolishing it and building a new one. It is understood that the developer could walk away from the scheme if the council insists on a new 1000-seat theatre.

Ken Dytor, Urban Catalyst's chief executive, said he would be willing to reopen discussions to develop the scheme should negotiations between the council and Howard Holdings fall through.