Southern California developer cites reasons to close deal to buy Chanate Road property in Santa Rosa

A quarter of the way through a 60-day review period, a Southern California developer is not backing away from its offer to buy a vast tract of land in northeast Santa Rosa that county officials have struggled to sell for the past five years.

In his first public comments since reaching an agreement last month to acquire the property, an owner of Newport Beach development firm Village Partners said the 72-acre parcel off Chanate Road is a “special piece of property.” The firm is so optimistic about the site’s potential that it raised its initial bid for the aging county property by $1.3 million in hopes of blowing away competitors, said Michael Morris, a Village Partners’ principal.

“I am excited about it because it’s complicated and it’s a redevelopment site,” Morris said. “It’s been developed before. I think that, in itself, makes it a more sustainable development.”

The parties are still two months away from the proposed Dec. 31 deadline to complete the deal, and Village Partners must go through the city of Santa Rosa for approval of any development of the property.

The property, home to a county hospital for 150 years before it was shuttered, has been targeted for much of the past decade to bolster the county’s housing stock. But the presence of more than a dozen dilapidated buildings, lawsuits from neighbors and questions about the Rogers Creek fault line that cuts through the area have combined to derail deals with three potential buyers since 2016.

Village Partners is the latest potential buyer, securing approval from the county Board of Supervisors with a $7.8 million bid. That offer, submitted Oct. 7, topped the second-highest bidder by nearly $1.3 million and was a sharp increase from Village Partners’ initial $6.55 million bid submitted Sept. 29, according to county documents.

The company, said county General Services Director Caroline Judy, had “to prove they do have the financial bandwidth to purchase the property.”

Sonoma County spokesman Paul Gullixson said the bids were blind, meaning potential buyers didn’t know what others had offered, but the companies were allowed to make a “best and final offer.”

Morris, who has 30 years of development experience, chalked up his company’s increased bid to the county’s real estate brokers doing what they were paid to do, but also to his group “feeling more bullish after digging into” the property.

“The site has great potential to become a place that contributes to the city's economic success, provides sorely needed housing, and still honors its unique history,” he said. “Chanate is a complicated property and needs a strong versatile team to develop creative solutions for its challenges.”

Morris said the property was different from other development sites the group is now working on in Southern California, but he noted that’s what makes it exciting.

“One of our partners has been on the property a couple of times,” Morris said. “We know what we’re getting into. It’s not a simple, flat piece of property.”

Village Partners put down a $250,000 deposit, which it can recover if it decides to walk away from the deal. However, if the company decides to proceed, it will owe the county another $250,000, according to bid terms provided by the county.

If the Newport Beach firm goes through with the acquisition, the Chanate Road campus would join four other proposed or potential projects the 4-year-old development company touts in Southern California. The Village at Montclair is the furthest along, east of Los Angeles in San Bernardino County.

Despite plans for 370,000 square feet of new residential and commercial space, including 360 housing units, the Village at Montclair’s 6.3-acre footprint is a fraction of the size of the Chanate Road property.

Morris acknowledged the Santa Rosa campus is large enough to feature several developers.

“I don’t think there’s going to be one specific developer for the entire property,” he said, adding that the property could be home to a variety of uses, from residential to commercial and business.

Village Partners, he said, specializes in entitlements and land planning, or “setting the table for the ultimate development.”

The group is also good at outreach, Morris said, and would plan an aggressive engagement strategy to begin in 2021.

“We think we’re good at that. We think it’s important to do that, to find community support,” he said. “Otherwise, you’re always running uphill. It’s a community benefit when it gets developed.”

That outreach hasn’t started yet, and Morris said the development group has a lot of work to do before that begins.

As eager as Village Partners may be to begin that work, excitement among Sonoma County officials might be even greater. The county has spent millions on security as the property became a haven for looters and squatters after Sutter Health vacated the land in late 2014.

County supervisors agreed to sell the property in 2017 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.

In the meantime, negotiations with two other potential buyers have fallen through, opening the door to Village Partners, which emerged as the latest preferred buyer in a strict, as-is land sale. Unlike the original scuttled deal with Gallaher, any discussion of future development this time will be worked out between Village Partners and Santa Rosa.

Morris, though, was ready to lay out an overarching vision for the property in the interview.

“(The goal is to) come up with an innovative development plan that the community will support,” he said. “A sustainable redevelopment plan. We think it’s a special piece of property. It deserves a lot of thought to figure out the right mix of uses and the right plan.”

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