After more than two years of negotiation between Southwark Council and developer Lend Lease, leader Cllr Nick Stanton is "cautiously optimistic" that a deal can be done by the end of 2009.
In June Cllr Stanton had told the SE1 website that he was "reasonably confident" that the parties would be close to a substantive deal by 1 July.
At the end of July no deal had been reached and the council instead entered a new exclusivity agreement with Lend Lease to continue to work towards a final deal for the comprehensive regeneration of the Elephant & Castle Shopping Centre and Heygate Estate sites.
"I am cautiously optimistic about the chances of reaching a development agreement with Lend Lease by the end of the year," Cllr Nick Stanton told members of the cross-party Overview and Scrutiny Committee at the town hall on Monday night.
"I've said before that if Lend Lease were going to walk away from this they would have walked away by now. They clearly have walked away from a number of propositions where they felt that the numbers weren't stacking up for them.
"They are still very interested in the Elephant & Castle. They are talking with us and we have been doing some financial modelling work with them. I'm told that that's gone very well."
Asked by committee chair Cllr Fiona Colley about the involvement of Transport for London, Cllr Stanton replied: "I think there's still a basic problem about how much TfL are entitled to take from the whole project towards the cost of the Northern line underground station...
"Someone in the GLA will have to take a view about ... how the cake gets cut up."
Cllr Stanton was also quizzed about the council's plans to appoint a permanent director of major projects to replace Stephen McDonald who resigned in July. The post of director of neighbourhoods and regeneration has also been filled on an interim basis by Richard Rawes since the departure of Paul Evans.
"I think we'll wait and see what happens with Lend Lease," said Cllr Stanton. "We will want to take a view about what happens with the Lend Lease negotiations.
"Clearly the skill set for someone to needing to monitor the Lend Lease agreement would be different to someone who is having to revisit the entire Elephant & Castle regeneration because there hasn't been a deal with Lend Lease."