ST. PETERSBURG — The redevelopment of a prime block in downtown St. Petersburg has taken a major step forward.

Ending a long-running dispute, First States Investors has transferred its part of the 400 block of Central Avenue to members of the Pheil family in a $10 million transaction, newly recorded deeds show. Family members, who own the rest of the block, can now proceed with the sale of the entire two-acre site to New York's Red Apple Group for what could be one of the priciest transactions ever for a downtown parcel.

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In addition to the $10 million, First States spent an estimated $2 million to demolish a garage and two old buildings, whose aluminum grillwork gave them a cheese-grater like appearance. The trust also paid to landscape and fence the now-vacant block.

The Pheil family, descendants of a St. Petersburg mayor who originally developed the block, had little incentive to sell until recently because they were assured of substantial income from land leases that didn't expire until 2058. First States, a California real estate investment trust, got stuck with the leases when it took over hundreds of properties, including those in St. Petersburg, after foreclosing on a loan.

As downtown's real estate market heated up, both sides saw advantages in settling their dispute. Early last year, they reached an agreement that culminated with what Jeff Waldvogel, chief financial officer of First States' parent company, called an "historic transaction'' in which First States gave the Pheils its land and paid them $10 million to get out of its land leases.

"This paves the way for an exciting new development in the heart of St. Pete," he said Tuesday. "Having an entire city block sit vacant in the heart of such a thriving, growing city was not good for anyone."

The Pheils are now expected to sell the entire block to New York's Red Apple Group, which has had the site under contract since last summer. The head of Red Apple, billionaire John Catsimatidis, has announced tentative plans for a tower with shops, offices, residences and possibly a hotel.

In 2014, South Florida's Kolter group paid entrepreneur Bill Edwards $17.25 million for a city block a few blocks to the east in what is thought to be the priciest transaction to date for a site awaiting redevelopment. That is where Kolter is now building ONE St. Petersburg, a 41-story condo tower and adjacent Hyatt hotel.

Since that transaction nearly three years ago, downtown's popularity has grown and the 400 block of Central is arguably the largest, most valuable property left for redevelopment. The contract price has not been disclosed, but speculation months ago pegged it at more than $15 million.

"I have no concept of what it could close for but it would certainly be a prime block,'' said Pat Calhoon, a commercial real estate agent. "Certainly, things are going up and there are only so many city blocks that could even be purchased any more if they were available.''

The 400 block of Central is not as close to the water as the ONE St. Petersburg site, though higher-level condos in Red Apple's proposed tower could still have bay views.

Susan Taylor Martin can be contacted at smartin@tampabay.com or (727) 893-8642. Follow @susanskate