Medical Office Complex Set for Southeast’s Gateway Center

An unusual partnership of developers and doctors broke ground Wednesday for the first new medical building in Southeast San Diego in 15 years--a $5.5-million complex of doctors’ offices, laboratories and a pharmacy in the Gateway Center East redevelopment area.

Supporters expressed hope that the project, to be completed by next spring, would help improve and modernize medical services in the predominantly black community and perhaps attract new doctors to the long-underserved area.

They also noted that the Gateway Medical Center represents the first project nurtured by the Southeast Economic Development Corp. that has at least partial minority ownership.

“I think it will increase the medical base in the community,” Tom Sullivan of Starboard Development Corp. predicted. “But I think it’s also going to be a way in which doctors that have a patient population in Southeast will better serve that population.”

The center, near the intersection of Interstate 15 and California 94, will consist of a three-story building with 40,000 square feet of space. It is to include a medical clinic, a pharmacy, doctors’ offices, and radiology and clinical laboratories.

Officials said it will be the first new medical building built since the early 1970s in the community--an area that has only one other large complex of medical offices and a ratio of physicians to patients far lower than do other parts of the city.

“What I’m hoping is that the building will bring in new physicians to the area,” said Dr. Richard Butcher, a physician in Southeast and president-elect of the San Diego County Medical Society.

“If we could attract and get a new obstetrician to come into town and occupy the building, or a dermatologist in the area is needed, those are the kinds of people that would, I believe, be very helpful,” Butcher said.

However, he said the area is “a heavy Medi-Cal area”--that is, it has a high percentage of patients receiving state medical insurance. He said the state’s low reimbursement rates discourage doctors from moving into the area to serve MediCal patients.

The medical center project was encouraged by SEDC, the agency charged with spearheading redevelopment in Southeast San Diego. SEDC made available the 2.2 acres valued at $850,000 in return for a share of the project’s profits.

According to Sullivan, Starboard wanted to build an office building on the site. But SEDC officials introduced the developers to Dr. Charlie Johnson, a prominent Southeast San Diego physician who was interested in building a smaller medical office building there.

Merging of Interests

“They asked us to merge our interests,” Sullivan said. “As we researched it further, we found a tremendous need for this type of facility.”

The only other large medical office building in Southeast San Diego is the Southeast Medical Center on Euclid Avenue. Butcher said the other physicians practicing in the area are scattered about the community in individual offices.

Under the arrangement with SEDC, Starboard and a group headed by Johnson are partners with SEDC in the medical center project. Eventually, Starboard will offer to sell its portion of the project to Johnson’s group and it will become the full owner.

In the meantime, SEDC is receiving a $200,000 down payment on the land, said Justin McCarthy, SEDC’s redevelopment manager. In return, it is to receive a 9% guaranteed annual return on its investment and 30% of the lease revenue after debt service and operating costs.

When the project is sold, SEDC is to receive 30% of the proceeds on the sale.

“I think it’s a fairly creative financing vehicle between a public agency and a private group,” McCarthy said. Steve Harding, SEDC’s vice president, said the arrangement enabled the agency to encourage the project to get off the ground.

Core Group of Tenants

Harding said the Gateway Medical Center, currently 28% minority-owned, represents the first such project arranged by the agency since it started developing projects two years ago. The agency has facilitated construction of 500,000 square feet of space.

Sullivan said Johnson and a dozen other doctors who will serve as a core group of tenants have already agreed to lease 53% of the space. He said the rest of the space will go to specialists receiving referrals from that core group of internists.

Although new medical office buildings are often built next to hospitals, Sullivan said the complex is equidistant from San Diego Physicians & Surgeons Hospital and Paradise Valley Hospital. He said public buses currently serve the redevelopment area and that his group is urging that the route be extended to run through the business park to the new center.