Towne Mall Galleria redevelopment may be put on hold

City Manager Paul Lolli asks council to cancel $16 million agreement to buy property.

The future of the Towne Mall Galleria will remain uncertain if Middletown City Council approves the city withdrawing its offer to purchase the East End property.

Council will be asked to ratify the city manager’s cancellation of the purchase agreement for the 45-year-old mall, according to the agenda for Tuesday’s meeting, the Journal-News has learned.

In August, council unanimously approved the city spending $1 million of the total $16 million price tag with Towne Mall Galleria, LLC and God’s Love is Eternal, LLC for the site located just off I-75 near the Ohio 122 exit.

That’s when the city entered into a purchase agreement for the portion of the mall site that is commonly known as the former Sears, Elder-Beerman and the main center section of the mall, according to the city. It did not include the section where the Burlington/Gabe’s stores are located.

But after “conducting extensive due diligence efforts” and examining the final financing costs for the redevelopment of the properties, the city concluded that acquiring the properties at the previously agreed to price was “not feasible,” according to the staff report.

Under the terms of the agreement, the city was afforded a 90-day period before any deposited earnest monies became non-refundable.

City Manager Paul Lolli said he didn’t want to comment to the Journal-News until after he presented the motion item to council members Tuesday, said Missy Knight, the city’s communications manager.

But council member Rodney Muterspaw said the city couldn’t afford to “hand over a blank check” to George Ragheb, the California-based owner of the mall. Muterspaw said the city is considering moving its extensive plans for the mall to a different location in Warren County.

Originally, Jim Palenick, a former Middletown city manager, pushed for the city to purchase the mall and spend millions converting the property into a sports and entertainment complex with retail, hotels, bars and restaurants and residential uses.

Palenick said he envisioned an ice hockey arena on the site because it would complement and not compete with Spooky Nook, the mega sports facility in Hamilton.

Muterspaw told the Journal-News that parts of that plan may still be possible. Just not at the mall location.

“The project is the project,” he said. “But there is another option. We want to do it right. We have to be smart with the money. We can’t give it away.”

If the city had made the $1 million payment, council would have needed to approve the remaining $15 million of the purchase prior to the closing expected to be in June 2023.

Those funds would have come out of the General Fund with a long-term plan of reimbursing the fund through TIF debt proceeds at a later date as the development of the project came to fruition, Lolli has said.

If the city backs out of the Towne Mall deal, it will be interesting to see what that does to Middletown’s relationship with Warren County. At one time, Mayor Nicole Condrey called the support from Warren County leaders “incredibly strong.”

Martin Russell, deputy county administrator and executive director of the Warren County Port Authority, said the county is interested in turning the mall area into “a new modern destination point” that creates job and tax growth.

For that to happen, the mall must be “significantly refreshed,” Martin has told the Journal-News.

Warren County has committed $3.5 million to the project, secured $1 million in demolition grants from the state and in January commissioners approved about $73,000 in American Rescue Plan Act funding toward a feasibility and marketing study to determine the size and scope of the project.

Lolli has said the redevelopment of the Towne Mall could be “one of the best things to happen to Middletown in a long, long time.”

City staff had recommended spending $3.75 million in ARPA funds on the mall redevelopment.

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