A southern Marin County investor has purchased 11.32 acres of commercial property at the junction of Highway 101 and Interstate 580 in San Rafael that once was eyed for a Sutter Health facility.
An affiliate of Tiburon-based Chelsea Pacific Group purchased the collection of real estate, with Marin Square shopping center and surrounding commercial buildings, from the Sacramento-based health care system on Aug. 15, according to public documents. The recorded transaction value was $29.75 million.
The site includes The Circle Industrial Park, Marin Square shopping center and a parcel along Gary Place.
"Sutter Health purchased the property in 2008 and explored several options for the site, but ultimately decided to not pursue redevelopment on that property," said Meg Walker, a spokeswoman for Sutter Health. "We are continually evaluating our locations and services to make sure we can best serve Marin County with high-quality, personalized and accessible care."
Sutter Health bought the triangle-shaped property bounded by Bellam Boulevard, Andersen Drive and the freeways for about $50 million, the Business Journal reported at the time. The health care organization told the Journal that it was considering outpatient services for the site. While that was gearing up, Sutter was winding down its management of Marin General Hospital and said it didn't plan to create another acute care facility.
A few years later, Sutter leased 30,000 square feet in the 4000 Civic Center Drive class A office building in north San Rafael to open a clinic and other medical offices, later expanding to 74,000 square feet.
Real estate experts have told the Business Journal that Sutter's 4000 Civic Center lease and Kaiser Permanente's securing additional large office spaces in San Rafael suggest that health care organizations find it more expedient to lease or buy existing buildings in Marin County than to build them. By contrast, both organizations have built hospitals and medical office buildings in Santa Rosa in recent years.
The buyer of the Marin Square property is getting a "rarity" in central Marin commercial real estate — an assemblage of retail and commercial parcels for development, according to Don LeBuhn, part of The Wald LeBuhn Team of Cushman & Wakefield that marketed it for sale.
“The seller’s ‘blank canvas’ approach resulted in a wide variety of offers addressing the trade area’s shortage of space for office, hotel, retail and automotive users," LeBuhn said in the deal announcement Wednesday.
The shopping center part of the property is zoned "general commercial," which allows for addition of housing and a hotel, but the remainder is zoned "limited industrial/office," which doesn't allow for homes but does permit lodging. Housing in that general-commercial zone is limited to 15-32 units per acre. That analysis was part of a public presentation Sutter and the city made in March as the health organization considered sale of the property.
The city's current 2020 general plan calls for mixed-use buildings, a hotel and traffic-easing improvements to Gary Place to be part of redevelopment of the property, the presentation said.
That approach included allowing below-market leases to expire and limiting the term of the property’s few remaining tenants, said Dan Wald, part of the listing team. He said Chelsea's local experience makes it "well-positioned" for the project.
The buyer, Chelsea Pacific, is a very successful local investor and is well positioned to assess the property’s highest and best use given this wide variety of demand.”