The Oak Park Mall deal is dead unless mall ownership grants an extension for negotiations to continue between the Austin Port Authority and several key tenants at the property.

The port authority overnighted a notice Tuesday to terminate the purchase agreement for the city to buy the property, according to a statement issued by City Attorney Craig Byram at a Tuesday night port authority meeting.

The port authority reached a general purchase agreement with mall owners Oak Park Ltd. Partnership Oct. 9, 2014, to buy the site for $3.3 million and for Hy-Vee to build a 60,000- to 90,000-square-foot grocery store at the site.

However, the purchase agreement had several contingencies that needed to be met before the Austin Port Authority would get locked into the redevelopment deal with Hy-Vee and other parties. At issue was the lease agreements with Younkers, CineMagic 7 and Anytime Fitness. The port authority was also unable to reach an amended occupancy agreement with Shopko, which owns its own building. That agreement controls the configuration of the Shopko site and the mall, along with use of the parking lot.

“Unfortunately with a great deal of diligence and hard work we’ve been unsuccessful in securing any of those contracts,” Byram said. “We’ve not been able to negotiate acceptable lease agreements with Younkers, the cinema, the workout center or the occupancy agreement with Shopko.”

Simply put: The port authority wasn’t able to secure the legal agreements to move ahead with its plans to demolish the mall property from Younkers to Shopko in order to build the new Hy-Vee. Largely because one of the agreements in question stipulated that the property needed to remain a mall.

“We can’t buy the mall for the purpose of tearing it down without those amendments being in place,” Byram said. “We’re not going to sort that out after we get title. We had to have that sorted out before.”

Byram said there was too much risk for the city to move forward right now.

“Had we not terminated the contract, we would have been locked into buying this property without any agreements with the existing tenants, which would have created a substantial amount of risk for the port authority,” Byram said. “The port authority from the beginning has not been open to assuming the mall’s risk.”

The deadline for clearing the contingencies was last Friday, which gave the port authority five days to give notice that it didn’t wish to proceed with closing the agreement. It overnighted notice Tuesday morning, and it should reach mall ownership Wednesday.

“On behalf of the port authority and everyone else involved, we’re disappointed that the project’s at this stage or [has] come to this possible end,” Byram said.

Deal not completely dead

The deal could still move forward. The port authority asked Oak Park Mall Ltd. Partnership for an extension to continue negotiations, which it was unwilling to grant. However, city officials were willing to restart negotiations if an extension was granted.

“They’ve worked so hard on this,” Mayor Tom Stiehm told the Austin City Council Tuesday night. “It’s really hard to see it get to this point where it could fall through.”

It’s entirely possible the mall owners could restart the purchase agreement. The city and mall owners previously took two weeks to resolve a similar deadline issue involving when mall tenants needed to vacate the property.

If an extension is granted, negations could resume immediately. The city and Hy-Vee would still be open with moving forward.

“All indications from Hy-Vee are that they’re still on board with this project,” Byram said.

Austin Hy-Vee General Manager Todd Hepler said he hadn’t heard from corporate officials as of Wednesday morning but was confident the company would still work to improve the Austin store.

“We just want everybody to know, no matter what happens, the people of Austin will still get a new store, whether it’s at the mall or in its current location,” he said.

For now, the city is at a wait-and-see point, and it’s up to mall ownership to make the next move.

“The ball’s in their court. … If they never talk to us again, then the project’s dead,” Byram said. “If they contact us, then we’ll have some discussions about whether there’d be terms that can bring it back to life or not.”

For now, the mall remains the property of Oak Park Mall Ltd. Partnership — or Chicago-based Martin Graff of M H Graff & Associates Inc. and Martin Goldman of M J Goldman & Co. Ltd., the companies behind the mall.

The property is left largely empty after most tenants’ leases were terminated as part of the purchase agreement.

Byram said there was no way mall tenants could have stayed during negotiations, as that was one of the contingencies of the deal.

“It’s certainly a disappointing outcome,” Byram said.

According to officials at the Mower County Auditor-Treasurer’s office, Oak Park Mall owes more than $142,000 on the mall property. However, the unpaid property taxes had nothing to do with tripping up the deal, according to Byram. The unpaid taxes would have been addressed as part of the purchase agreement.

The $3 million grant from the Hormel Foundation is currently in the port authority’s hands, and Finance Director Tom Dankert said it would be returned to the foundation if negotiations don’t resume. From a financial perspective, the city should be reimbursed for its investment to date. Dankert estimated the port authority has about $125,000 invested into the project, but it will recoup through the foundation funds.

However, Dankert said the city has invested thousands of staff hours into the deal.

“We had no options because of the risk,” Dankert told the council. “We spent hundreds, if not thousands of hours over the past six months on this.”