The developer of Seattle's tallest residential tower and its general contractor are parting ways. Developer R. C. Hedreen Co. and Skanska USA Building...

The developer of Seattle’s tallest residential tower and its general contractor are parting ways.

Developer R.C. Hedreen Co. and Skanska USA Building said Friday they were unable to come to terms on a “proposed contract revision” for the second phase of construction at Olive 8, a 39-story hotel and condominium project set to rise downtown.

The first phase, which includes construction of an underground parking garage, began in March 2006 and is still expected to be completed by Skanska in March.

But in an unusual move, both companies said they have no plans to work together on the second phase.

Skanska Senior Vice President Bruce Holms, who has been supervising construction at Olive 8, described their disagreement as “philosophical. We decided it would probably be best for both parties just to move on.” David Thyer, president of R.C. Hedreen, said he is close to naming a new general contractor and promised no delays in the construction schedule. Olive 8 is scheduled to open by the end of 2008 at Olive Way and Eighth Avenue with 231 condos and a 346-room Hyatt hotel.

Thyer downplayed the possibility of any fallout from the upcoming change in general contractor, saying neither the Hyatt hotel company nor R.C. Hedreen’s lenders is concerned.

More than 175 condos at Olive 8 have been sold at prices ranging from $400,000 to $2.5 million.

“This is simply a change in the entity that oversees construction,” Thyer said. “There will be no visible signs of change.”

Matthew Gardner, a Seattle real-estate economist, said the change could cause some potential buyers to look at other residential towers under construction downtown. But, Gardner added, if construction stays on schedule, “I really think there will be little to no fallout.”

Holms also downplayed the possibility of any fallout for Skanska. “No one’s going to be laid off,” he said. “And we have other projects we will be pursuing.”

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com