While it may be a drop in the local housing shortage bucket, Sonoma Valley Hospital’s decision to sell its empty “south lot” on the corner of MacArthur Street and Fourth Street West is likely to result in two dozen new homes hitting the market a few years out.
Earlier this summer, the Sonoma Valley Health Care District board voted to sell its 2.83 acre so-called “south lot” – and last week the board voted to ?accept a proposal submitted by Concord-based DeNova Builders. The term sheet for the proposal indicates a purchase price that will range from $3 million to $4 million, depending on how many housing units DeNova can build on the lot.
In August of 2016, the Sonoma Valley Health Care District purchased 4.1 acres of land at that intersection for $2 million thanks to a loan from a private party – a loan which comes due in August 2018.
After the sale to DeNova is settled, the hospital will keep the acre of the property that is currently used as overflow parking for hospital staff, while pocketing $3 million to $4 million for the 2.83 remaining acres of unused land.
Sonoma Valley Health Care District board chair Jane Hirsch says she’s more than satisfied with the deal.
“I believe we came up with the best financial offer for the hospital,” said Hirsch.
When the district put out its request for proposals last spring, three proposals came from developers who proposed various forms of housing for the site. A fourth proposal, meanwhile, recommended the district retain ownership of the parcel and that it contain a mix of rental units, open space and meeting space.
In August, the board decided to move forward with a more thorough review of two proposals – those submitted by DeNova Homes and Caymus Builders. The board formed an ad hoc committee, led by board members Sharon Nevins and Joshua Rymer, who began negotiations with these two developers, along with hospital administration and a real estate attorney.
Simon Blattner, a member of the Sonoma Valley Hospital Foundation board, investigated an option to create a not-for-profit workforce housing project in Sonoma and he had thought that the south lot would be an ideal location but, according to Hirsch, the board recently received a letter from Blattner from saying that unfortunately the lot was determined not to be feasible for that purpose.
The district, however, still had two solid final proposals to consider, said Hirsch, and after review and vetting by the board’s ad hoc committee, DeNova Builders was selected.
Hirsh said that DeNova was selected because its proposal offered “better overall financial parameters.” A term sheet with the proposals from each builder was made available at the Sept. 7 public board meeting.
The DeNova proposal called for 20 to 24 housing units (and compensation to the hospital per unit it could build) for a total of $3.3 million to $3.9 million. Four or five of the units (or 20 percent), would be affordable, as mandated by the City of Sonoma. Its proposal also includes a profit-participation plan for the hospital.
The Caymus proposal was a flat $3 million offer for the land, with 17 housing units to be built. Its proposal included 20 affordable rental units.
Ed Routhier, general partner of Caymus, was disappointed by the hospital’s choice of DeNova, and surprised that Caymus was not given a chance to negotiate a counter offer.
“Our offer was cash in hand in 45 days, and DeNova’s is a contingent offer that it has a year to walk from or renegotiate,” said Routhier.
“My expectation, seeing large developers doing what they need to lock up properties in the past, is that the DeNova offer will fall apart or the hospital will be forced to renegotiate,” said Routhier. He said that he expects the neighbors will object to the number of units being “packed” on such a small parcel.
“I would be pleased for the hospital if DeNova actually comes through on their offer,” he said. “The hospital team deserves this to be an easy and beneficial win, so they can concentrate on running the hospital without a year of real estate distraction.” He has told the hospital that Caymus is happy to be their backup offer.
The website of Concord-based DeNova (denovahomes.com) describes the company as one of the Bay Area’s most respected builders, with a portfolio of real estate projects range from small infill communities to multi-million dollar master plans. Locally, it has a 30-unit apartment development on West Spain Street – Norrbom family property recently approved for subdivision – undergoing environmental review, and the company is finishing work on a large housing development in Petaluma, called Brody Ranch.
Hirsch said that DeNova will partner with the Housing Land Trust of Sonoma County for its affordable units and will work with it to offer a preference to hospital employees.
Hirsch said that the deal was proceeding quickly and that the next stages of the sale had been turned over to hospital CEO Kelly Mather, who has already begun working with DeNova on next steps.
“DeNova gave a better offer, financially,” said Mather. “It is an outstanding company and we have no doubt that the outcome of this decision is best for the hospital.”
Contact Lorna at lorna.sheridan@sonomanews.com.
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