Red Panda Property Group director Andrew McCullagh said he had gone into negotiations in good faith, and the public had given the reUNION District project tacit approval.

"We put in a plan that was lower than the other two controversial ones, and we split the project up so it didn't get bogged down in the quagmire," Mr McCullagh said.

"We advertised stage one, that went through and not one representation was given. Then we put stage two up thinking we might get a few objections here. We did not get one representation.

"You've got the Gorge Hotel bogged down in six years of quagmire, you had the Fragrance Group bogged down, and ours got through."

Stage one of the project included 13 residential apartments and multiple hospitality venues in the heritage-listed former TasTAFE building and was approved in November 2023.

Stage two, which was set to be a 139-room hotel complete with a restaurant and rooftop bar, did not share the same fate.

The sticking point was two towers - one 10-storey and one eight storeys high - which were shorter in height but would sit taller in the Launceston skyline than the nearby Gorge Hotel due to the site's elevation.

Original designs were 13 storeys high, but Mr McCullagh said he had reduced the height to comply with council advice.

Council officers said,even at the reduced height, the towers would be an "abrupt interface" with the nearby Queen Victoria Museum and Art Gallery.

They would also overshadow the Launceston Cenotaph, particularly at 11am on Anzac Day - the impact of which Mr McCullagh claimed was overstated.

This led to council planners recommending councillors reject the proposal at their meeting on March 21, as it would be incompatible with the surrounding area.

"Overall, the proposed development is too high when considering its location and topography," they said.

"Its visual impact when viewed from Royal Park and Paterson Street is not considered to be compatible with the streetscape, and its overshadowing of a public place, and in particular the Launceston Cenotaph is not compatible with the existing established development of the area."

The development was removed from the agenda ahead of the council meeting as the developer and council went back to the negotiating table over the towers' height.

Mr McCullagh said he was confident any appeals to a tribunal would be successful due to the lack of public objections and the single issue found by council planners.

He said an internationally-acclaimed hotel operator had signed on to the proposal, but the fast-developing quagmire had made them twitchy, and could lead to the project becoming unviable.

"As it stands it would take several rooms out of the equation," Mr McCullagh said.

"They (the hotel operator) have financial models and it's enough to muck those up."