HERCULES -- The city will pay $75,000 to settle a threatened lawsuit with a housing developer over a tract once owned by Wal-Mart.

The 17¼-acre, city-owned, so-called Parcel C midway between San Pablo Avenue and San Pablo Bay had been under an $8.75 million contract of sale signed in 2012 with Concord-based DeNova Homes, which wanted to build 350 high-end apartments or condos there.

Snags ensued, some related to administrative delays caused by state legislation addressing the disposition of former redevelopment agency properties, officials said. Earlier this year, DeNova's feasibility period, tantamount to a deadline to commit nonrefundable funds to the deal, expired.

On June 25, City Attorney Patrick Tang announced that the council had given direction in May to discuss a sale of Parcel C to developer Lewis Homes, also known as Lewis Holding and Lewis Land Developers.

Meanwhile, DeNova and the city disagreed over who should absorb some of the expenses of the aborted deal. Tang announced this week that the council had authorized settling the dispute for $75,000.

The parting of ways was amicable, City Manager Steve Duran said.

The city, meanwhile, is close to a deal with Lewis, Duran said Friday.

Wal-Mart once wanted to build a store on Parcel C with more than 140,000 square feet, later scaled down to 99,000 square feet. In 2006, the city invoked eminent domain to force Wal-Mart to sell it the property, but in 2007, a judge struck down the move on technical grounds. In 2009, Wal-Mart sold the property to the city anyway, for $13.85 million.

City officials say the site recently generated considerable interest on the part of residential developers but little or none from brokers and developers of retail and commercial space. The city put up Parcel C as collateral, pursuant to a 2012 court settlement, for a debt to its bond insurer, Ambac Assurance, that stood at $6.5 million at last count.

Contact Tom Lochner at 510-262-2760 or tlochner@bayareanewsgroup.com. Follow him at Twitter.com/tomlochner.