The Gallery at Fulton Street, usually called the Albee Square Mall, has been sold for approximately $125 million and appears headed for the wrecking ball.

Sources say Thor Equities reached an agreement yesterday to sell its lease, which has 70 years remaining, to Acadia Realty Trust and its development partner P/A Associates, headed by Paul Travis and Aaron Malinsky. They are likely to tear down the downtown Brooklyn mall to take advantage of a 2004 rezoning to build a much larger mixed-use project.

The land underneath the mall is owned by the city, which will get a cut of the sale price.

Whatever is built to replace the mall will have to be approved by the Bloomberg administration even if the project complies with the existing zoning.

Thor purchased the low-scale retail complex and an adjacent three-level parking garage for a reported $25 million in 2001, made some renovations and gave it a more elegant name. But when offers for the property last year surged past $100 million, it became clear that its future would involve more than a face-lift.

The new zoning allows for 1.4 million square feet of construction, including residential units and office space towering over ground-level commercial establishments. A hotel has also been contemplated.

The principal of Thor Equities, Brooklyn resident Joe Sitt, at one time envisioned building a 60-story edifice at the Flatbush Avenue end of the property, but lately has been focusing on a grandiose plan to build a ritzy amusement park and apartments in Coney Island, near his home.

The Gallery at Fulton Street, as well as other stores along the Fulton Street, do a brisk business but mainly for low-end merchandise.

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