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Another major construction project in Connecticut seems to have fallen victim to the credit squeeze.  The town of Preston has ended negotiations with the company hoping to develop the old Norwich State Hospital site.  

The site has a troubled history, after the breakdown of a deal to develop a movie studio complex there.  This July, the town of Preston said it had picked Northland Investments to build a luxury resort on the 400 acre riverside parcel.  But Wednesday evening the town broke off talks with Northland, saying the developer has made significant financial changes to the initial agreement.  Northland spokesman Chuck Coursey says some changes were inevitable, given the current economic climate.

"In the face of the worst financial crisis both in the financial markets and the real estate markets that this country’s seen since the 1930s, Northland was still prepared to go ahead with the deal.  We have the resources, more importantly we have the commitment to continue down the road.  Unfortunately the advisory committee didn’t recognize the drastic change in the world from where we were just a few weeks ago.  I mean all folks have to do is look across the Thames River at the Mohegan Sun to see that deals all over the country that were once very secure are now dead or either stalled, but we believe this didn’t have to happen in Preston."

Preston says it will terminate the agreement permanently on October 17th.  Until then, the town says it’s up to Northland to restart negotiations.  The news is the second recent blow to the area, after the Mohegan Sun casino suspended construction of its $700 million expansion program.