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Newport Beach developer seeking to buy Sonoma County’s Chanate Road property quiet about development plans

The Southern California company at the center of Sonoma County’s latest effort to sell its former hospital site along Chanate Road specializes in multipurpose development, and brings a group of real estate heavy hitters with a track record of major builds.

Sonoma County supervisors on Oct. 13 selected Newport Beach-based Village Partners’ $7.8 million bid to buy the county’s 72-acre Chanate Road property, setting in motion a 60-day period to review the details. Barring unforeseen circumstances, both sides have circled Dec. 31 as the date to close the deal for the property to finally change ownership.

However, for a county that has faltered amid negotiations to offload the property to three previous potential buyers, the deal seems far from done, especially, some local leaders said, given Village Partners’ unfamiliarity with the problematic property.

This costly site to maintain in northeast Santa Rosa largely has been abandoned and one that county leaders have sought to sell for housing development. Only the county coroner’s office, its health laboratory and a nonprofit bird rescue remain operating there.

Since its 2016 launch, Village Partners has promised a host of vibrant, mixed-use projects in Southern California, but it has yet to break ground anywhere.

“This is a new group, and they’ve never built anything,” said Sonoma County Supervisor Shirlee Zane, whose district includes the Chanate Road property and who has been a longtime champion of selling the land for housing. “If we end up at the end of December and the deal falls through, we’re screwed. Who’s going to want to buy this property?”

Village Partners may be new, but the company boasts top leaders with decades of experience at high-profile, nationwide real estate development firms.

Before launching Village Partners, Principal J. Donald Henry was vice president of development and acquisitions for Related Companies, a major private real estate firm with more than $60 billion in developments, predominantly houses and condominiums.

Michael Morris, another principal with Village Partners, has 30 years of experience, including work for LNR Property Corporation, which has offices nationwide.

Several attempts by The Press Democrat to reach Henry and Morris, including numerous phone calls and emails, were not successful.

Bill Witte, chairman and CEO of Related California, the state branch of Related Companies, vouched for Henry’s bona fides when it comes to land acquisition, a role Henry held in the early 2000s with Related.

But Witte said it’s likely Village Partners, which he described as a boutique firm, would have to bring in another group to help with Santa Rosa development of the entire 72 acres, a parcel six times larger than any the company has worked with to date.

In selecting the relatively new firm, the county could set the property down a path toward development of a variety of homes and apartments, as well as business and commercial uses.

Led by Henry, a California real estate developer who has completed projects adjacent to Hollywood & Vine and luxury apartments in Los Angeles and Santa Monica, Village Partners was formed.

The company touts four mixed-use development projects spanning Los Angeles, Orange and San Bernadino counties, all with the “village” moniker. But The Village at Montclair, The South Village at Claremont, The Village at Redlands and the Village at La Floresta in Brea are all just concepts at this point. And the company has submitted no development plans for the only property the company apparently owns — the languishing Redlands Mall, which the company bought last year — city planner Ivan Flores confirmed.

The Village at Montclair faces a Nov. 2 city council vote there before work could begin on plans to build 370,000 square feet of new residential and commercial space, including 360 units on 6.3 acres, Montclair city manager Ed Starr said.

None of its proposed projects is larger than 12.2 acres, a fraction of the size of the Chanate Road campus.

Even if Village Partners goes forward with buying the property, which has served as a community and county hospital for 150 years, Zane said the company’s lack of results to date is concerning.

“We’re going to have money in our pocket, but there’s not going to be anything built for some time,” Zane said.

County leaders were obligated to select the highest bidder in otherwise equal bids, a factor that pushed aside five other potential buyers, none of which came close to matching Village Partners’ offer.

If the company decides to bolt, the county will keep its $500,000 deposit. But county leaders then would be forced to find a path forward in the wake of another round of failure.

Sonoma County has for years struggled to sell the Chanate site, which became a haven for squatters and looters after Sutter Health’s late-2014 move to its new Santa Rosa Hospital site.

Supervisors in 2017 agreed to sell the property to local developer Bill Gallaher, whose company, Oakmont Senior Living, promised to develop as many as 867 housing units and pay up to $12.5 million.

But a lawsuit filed by Chanate Road neighbors that was centered on environmental concerns derailed the project, and supervisors voted to move in a different direction in late 2018.

Negotiations with two other potential buyers fell through in 2019, and Gallaher, who came back last year with a $9 million offer, also walked away from a potential deal in a public show of frustration.

Village Partners emerged as the latest preferred buyer by county leaders after a broker the county hired contacted 23,000 potential investors. Eighty mulled bids and seven submitted offers, according to county documents. Gallaher, again, submitted an offer, this time for $4.2 million. Curt Johansen and Keith Christopherson put in a joint bid of $4.9 million; Bruce Codding of Paulin Investors offered $5 million; and Irvine-based real estate firm City Ventures went as high as $6.5 million.

Along with its $7.8 million offer, Village Partners agreed to allow the county to lease its public health lab for $1 a year for the next two years, and rent the coroner’s office and morgue for three years at the same rate.

Supervisors celebrated the recent tentative sales agreement, which they voted unanimously to accept two weeks ago, as it offered the opportunity to get out from under a property that has become a sinkhole for county cash.

For the past half decade, the county has seen maintenance and security costs soar, reaching as high as $768,000 in 2018-19, as officials sought to combat vandalism and protect against fire on the property, which is home to 20 mostly abandoned buildings.

The damage — and costs — had gotten so bad that by late 2019 supervisors agreed to spend $10.8 million to demolish 13 of the most decrepit buildings on the Chanate property. But that work never was completed.

Zane said she worries about Village Partners’ commitment to securing the property going forward, but said if the sale goes through, it’s no longer the county’s problem.

“The accountability, in the end, will be with the city of Santa Rosa in terms of what they demand from the property owner,” Zane said.

Ken Howe, who lives near the property, said the Newport Beach development company has not yet reached out to nearby residents. He said neighbors’ No. 1 concern is how the transition will be handled.

“Say at the stroke of midnight on the 31st of December, it’s their property. If security bails out, within days, that property’s going to be inundated,” Howe said, referring to homeless residents. “It just won’t be a good thing for the city, not just for the neighbors.”

A major concern of Zane’s is that Village Partners will seek to pay less once it gathers more information about the county-owned property, which not only sits atop the Rogers Creek fault, but also features a slew of asbestos-ridden buildings that have proven to be a sticking point in past negotiations.

Howe also expressed concerns the developer would back out of the deal after more research. But county officials say each bidding agency was given full access to disclosure documents, and the people behind Village Partners, including Henry, the principal, have lengthy resumes in real estate development.

Caroline Judy, Sonoma County’s director of general services, said all companies were afforded the same opportunities, including drone footage of the property. County records indicated Village Partners did download documents the county made available, Judy said, noting the group also visited the site in early October.

Judy, who is the third general services director to helm the pending sale of the Chanate property, said residents should give the latest process a chance.

“These are California-savvy buyers,” Judy said. “They now have the opportunity to do their due diligence. We need to give them the courtesy of the time to do that.”

You can reach Staff Writer Tyler Silvy at 707-526-8667 or tyler.silvy@pressdemocrat.com.

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