Simon Property Group’s proposed 47-story Copley Place tower is on hold, the latest victim of an economic crunch that has already toppled several would-be additions to Boston’s skyline.

“They’ve asked for additional time,” said Boston Redevelopment Authority Director John Palmieri. “[Simon CEO] David Simon has told the mayor they think it’s a very important investment for them, and they love the site.” However, Palmieri said, Simon had halted permitting review of its tower while it takes stock of a highly volatile and uncertain economic outlook.

“The economy is preventing them from being as aggressive as they’d like. I don’t know the timeline. They’re obviously committed to the site. We’ll see how the economy plays out over the next couple quarters. It’s a priority – they made that clear. With any luck, it’ll only be a few months.”

As Banker & Tradesman first reported last week, a community advisory committee meeting with the tower’s developers was recently and abruptly canceled, said state Rep. Byron Rushing, D-Boston. The BRA e-mailed a note to committee members that said Simon needed more time to work on its draft project impact report “and to allow the economy to improve.”

“I’d describe this as being on hold, based on what the BRA has said to us,” Rushing said. He added that the timeline the BRA gave Back Bay politicians – allowing the economy to “improve” – could mean that the project is stalled indefinitely.

“I assume they’re talking about five years from now,” he said. “Have we even bottomed out yet? If they used their words advisedly, I’m not sure when this will get started again… We were supposed to meet, it was postponed, and there’s no definite date [to resume].”

Resisting Residential

Simon, the nation’s largest mall operator, first floated plans to top their Copley Place mall with a tower in 2006. In March 2008, they filed a proposal with the BRA detailing plans for 300 luxury condominium units and 114,000 square feet of new retail, including a significant expansion to Neiman Marcus.

However, new residential construction has been virtually impossible to finance since the global credit system froze up this past fall. Developer John Hynes recently removed the residential portion of his stalled Filene’s redevelopment because he believed it was keeping him from plugging a hole in his financing.

The obstacles go beyond financing. The market for new luxury condominiums in Boston has been cooling rapidly. PrimeTime Communities recently reported that new condos in the city were selling at a pace of 1.2 per month in 2008. Two new towers, the Clarendon and 45 Province, will bring 242 more units online this year; both are said to be attracting less than stellar pre-sales activity. In such an environment, 300 new units may represent an unacceptable risk for Simon’s board.

The mall operator has, thus far, weathered the recession better than its REIT peers. Last month, it posted a 22-percent jump in fourth-quarter income, to $152.3 million. Funds from operations for the fiscal year increased 9.8 percent, to $1.85 billion.

Simon’s Stock Options

Even so, Simon sees a brutal year ahead for retailers, and is conserving cash accordingly. It recently announced plans to pay 90 percent of its dividend in stock as a way to conserve cash. Its stock has dropped by more than $60 per share since the beginning of September.

Twice in the past nine months, David Simon has said mall operators will have very little leeway for new construction for much of the next decade. Last April, during Simon’s first-quarter earnings call, he said, in part, “I do think we could have a decade of little retail development.”

This past January, during his Q4 2008 earnings call, he reiterated that position.

“As I said a year ago, I don’t think anybody believed me, the new development business is dead for a decade,” Simon said. “Maybe it’s eight years, maybe it’s not really completely dead. Maybe I’m overdramatizing it for effect, but the odds are that there’s going to be very, very little new stuff for quite some time…”

Simon made those comments in the context of saying that his malls will be insulated from new competition for much of the next decade. However, it now appears he may have been more prescient than he intended.

“They are committed to the project. They’ve made it clear to us,” Palmieri said. “We’d like to give them the chance to study their own fiscal wherewithal, and then come back and move the process forward and get it vetted.”

Simon officials did not return calls for comment.