Healthcare: Medical building in foreclosure could be sold
By JENNIFER HUFFMAN Register Business Writer
One of Napa’s largest medical office buildings is in foreclosure, with an unpaid balance of $18 million.
1100 Trancas Street, owned by the Napa Medical Building Investors, is in its final stages of default. According to a notice of trustee sale, the property is scheduled to be sold on the courthouse steps on May 24.
Dick Schultze, a developer and investor from Sonoma County, is the majority owner of a group of eight partners in Napa Medical Building Investors.
“We overpaid and over-improved the property,” said Schultze. The partners bought the 53,000-square-foot building in 2007 for $17.5 million. After the purchase, the group added $2 million worth of improvements and expanded parking to 260 spaces.
The recession, a 20 percent vacancy rate and fewer doctors moving to Napa led to the default, Schultze said. While legal documents noted an unpaid balance of $18.8 million, Shultze said he believes the unpaid balance on the loan is closer to $15.8 million.
1100 Trancas is mainly home to doctors and medical businesses including the Napa Women’s Health Care Center, Harvest Pediatrics, and the Queen of the Valley Medical Center’s WorkHealth. For many years the building was painted pink, earning it the nickname “The Pink Palace.”
In recent years, a number of tenants, such as Napa Valley Ortho-paedics, have left the building to buy their own properties or lease elsewhere, Schultze said. “The rental market is terrible. We’ve had to drop our rates by 50 cents a square foot.”
Schultze said he’s currently leasing space for $2.50 to $2.85 a square foot, including taxes, maintenance and insurance. “We just have had no one looking for space.”
The default has been a “nightmare” for Schultze. “This is the first time in 30 years I’ve lost a property. I’m not one that doesn’t pay my bills.”
In an effort to stop the foreclosure, Schultze may have found a buyer for the building. While he could not identify the potential new owner, “We have a letter of intent,” he said. “I want to sell it to someone who can take advantage of it, and this buyer can.”
Next-door neighbor Queen of the Valley Medical Center might seem a logical buyer for the building. Jaime Penaherrera, director of marketing and communications at the Queen, said the hospital is aware that the property is for sale.
“Under the right circumstances we will certainly look at it, but it’s a bit to soon to talk about it,” Penaherrera said.
