Deal to remake Oak Park Mall in Austin moves forward after year

A deal to redevelop the Oak Park Mall in Austin, Minn., is moving forward after a turbulent year of negotiations that stalled and stopped.

After sitting in some of the negotiations, "there was no way I thought this thing was going to get finished," Mayor Tom Stiehm told the council. "It's just amazing that it did."

In October, the Austin Port Authority unanimously approved a $2.9 million deal to buy the troubled mall and turn it over to Iowa-based Hy-Vee, which has plans to build a 60,000- to 90,000-square foot grocery store there. The City Council then gave a development subsidy for the project its OK.

The city expects to close on the sale the week of Nov. 9. "Less than a minute later," the city will sign a deal to sell the land to Hy-Vee, said Tom Dankert, the city's director of administrative services. Work could begin days later.

Stiehm said that since becoming mayor, the No. 1 thing people have complained about is the mall and its beat-up parking lot.

"And believe me, people have complained about a lot of things," he added, according to video of the council meeting.

Hy-Vee sees "good growth potential" in Austin and was thinking about renovating its existing building, said Todd Hepler, store manager. But it's cheaper to build a new store, he said.

Customers are excited to have bigger, better-designed new facility, Hepler said. "Plus, they're excited to just finally get some answers.

"They're excited that we're going to be moving forward and taking care of the mall."

The city had first announced the deal a year ago. But negotiating the terms and adjusting tenants' leases proved tricky. In February, the port authority terminated a purchase agreement for the property. In May, the city announced that negotiations had fallen apart: "Six months of intensive negotiations … have finally reached an impasse."

But by late October, all parties had signed on.

The city is using a $3.5 million grant from the Hormel Foundation to purchase the property. Hy-Vee will get "nearly all" of the land, Port Authority attorney Craig Byram said by e-mail. The Port Authority will keep two lots for future development and will also gain the old Hy-Vee property once that store is demolished.

"Having that area as a 'pad-ready' development site gives the Port Authority unlimited flexibility for considering future development options," Byram said.

At its Oct. 20 meeting, the City Council approved a $1.6 million escrow fund for tax increment financing for the project's demolition costs. The Minnesota Department of Employment and Economic Development grant of $375,000 will go toward that work.

"It will take 26 years, but you'll get it paid back," Dankert said of the tax increment financing, a tool that allows anticipated local government tax revenue to pay for development costs.

A redesigned, smaller mall will house the movie theater and AnyTime Fitness. The Younkers will stay, becoming a stand-alone store. A renters rebate will help fund work on Younkers, a remodel that will including bringing its shoe department in from what's now a separate store.

Assuming thing go smoothly, Younkers will "start our remodel in the spring — March or April," said Christine M. Hojnacki, spokeswoman for Younkers' parent company, the Bon-Ton Stores.

Jenna Ross • 612-673-7168