Negotiations broke down for a 56-story downtown hotel touted as a linchpin in the success of the $4.2 billion L.A. Live sports-and-entertainment complex, despite a $250-million public financing package, the Daily News of Los Angeles reported.

Century City-based Apollo Real Estate Advisors, which was expected to provide about $60 million for the 1,100-room Hilton hotel, pulled out of the talks, according to City Councilwoman Jan Perry, the paper said.

The deal involving Apollo and co-developer Wolff Urban Development appeared strained for months as hotel construction costs soared to more than $500 million, and the city offered no further concessions. Apollo Real Estate Advisors was said to be floating changes to the hotel’s design in an effort to bring down costs. Some speculated that AEG may have resisted and the breach in negotiations was an attempt by one, or both, parties to force more favorable terms, the Daily News said.

Billionaire Philip Anschutz owner of AEG, which owns the Staples Center and is investing $1 billion in the complex under development and company president Timothy Leiweke now are reported to be looking for new equity partners.

In addition to agreeing to forgo as much as $270 million in room-tax revenues from the hotel over 25 years, the Community Redevelopment Agency agreed to a $16 million below-market loan, and the city has authorized $4 million in fee waivers.

Critics question whether such a public investment in a hotel is warranted.