COMMERCIAL REAL ESTATE: Medtronic Selling Fountaingrove Land

SANTA ROSA – Heart-device maker Medtronic Inc. has put 40 acres of prime land in the Fountaingrove area of northeast Santa Rosa on the market to raise research-and-development dollars for investment in its fast-growing Santa Rosa-based vascular business unit.

The sale of the land, considered surplus by Medtronic, could raise from several million to tens of millions, real estate experts said.

Experts said the land is attractive because it's one of the largest undeveloped properties in the high-end Fountaingrove residential and commercial area and includes ruins of the historic late 19th-century Fountain Grove commune winery. However, the experts said it could be a complex venture for a prospective buyer.

The land went on the market four weeks ago for the first time since Medtronic's predecessor, Arterial Vascular Engineering, acquired it in 1998, according to Sean Heaton, one of the listing real estate brokers with Cushman & Wakefield in San Rafael.

Medtronic has not set an asking price and wants to sell all the half-dozen parcels together.

How much Medtronic can get for the surplus Fountaingrove land depends on whether the company is willing to wait for a prospective buyer to obtain development entitlements from the City of Santa Rosa, according to experts familiar with the property.

Although the property technically is zoned retail, the city designated the land for business-park-type development in its general plan update around the time AVE bought it, according to city planner Joel Galbraith. The city would like the property developed with a mixture of uses, including housing and retail, including reconstructing the winery building, he added.

Paul Schwartz, an Orion Partners agent who studied uses for the property and vied for the listing, said one configuration he worked out for the property, considering ridgetop and hillside housing restrictions, included 27 acres for multifamily housing, nine acres for offices and four acres for retail.

"Given the need for a general plan amendment, rezoning and a tentative map, which can take 12 to 18 months, it's difficult to determine the value of the property," he said.

In 1998, AVE acquired the land to add to 30 adjacent acres on which is already had two buildings and room for a third. The company announced plans to restore the historic winery and convert it to an employee recreational facility with a deli, meeting rooms and a day-care center and was looking to build production buildings on the property.

That plan was shelved after Minnesota-based Medtronic acquired AVE for $4.1 billion in 1998 and shifted production to other plants.

However, Medtronic Vascular hardly is abandoning its presence in Santa Rosa, according to spokesman Scott Papillon.

"The land is considered a nonstrategic asset, and we want to turn it into a valuable working asset by using the proceeds to develop products in Santa Rosa," he said.

Medronic Vascular's current and approved facilities in Santa Rosa should suit projected local growth well for the next five years, Mr. Papillon said.

The company has 200,000 square feet in two office buildings at its Fountaingrove campus at 3576 Unocal Place and has approvals to build a 137,000-square-foot research-and-development building there. It has leased a warehouse and two 62,000-square-foot office buildings near Charles M. Schulz–Sonoma County Airport and is currently occupying one of those office buildings.

"We're committed to Santa Rosa," Mr. Papillon said. "Santa Rosa is one of our technology centers of excellence, and we plan to remain here for many years in that capacity."

He said it is possible the property could be sold by the end of this year, but he wouldn't confirm real estate industry speculation that is a goal. He said the company would not sell the property unless it received an offer above an undisclosed price.