CHOMP was ready to buy Sand City’s foreclosed Design Center, but the hospital says it recently dropped its offer due to the city’s use restrictions. “The building was designed with pretty specific uses in mind,” says CHOMP spokeswoman Brenda Moore, “and the city is still hoping that’s how it is used.”

CHOMP managers wanted to buy the four-story building and move their billing and business departments into its second floor; the top two floors would have remained apartments. “We would no longer be paying rent [for our offices] and we would have rental income,” Moore says.

The first floor would have stayed true to the city’s original vision of high-end design showrooms, but the second floor’s plan for construction-related offices would have changed.

After city officials resisted modifying the building’s use permit to suit CHOMP, the hospital pulled out of escrow in the second week of September. Moore declined to say how much CHOMP offered; the property is listed at $9.2 million.

Mayor David Pendergrass says the city doesn’t want to diverge from developer Al Saroyan’s intent to make the building the city’s mixed-use centerpiece. “Mr. Saroyan had the property and he failed [to develop it], so we still maintain the development and disposition agreement,” Pendergrass says. “The use permit still goes with the land there.”

Pendergrass adds that the building was meant for showrooms, not a pharmacy or medical equipment rentals. Moore says CHOMP wasn’t planning to include any medical uses.

In May, First National Bank of Central California foreclosed on the Design Center, LLC and took possession of the property. The developer owed the bank $23.6 million. The Design Center’s demise was seen as another casualty of the recession, real estate downturn and construction industry contraction.

The building has received about six offers, says John Mahoney, the Monterey-based commercial real estate broker selling the property. “We are working our way through those [offers] trying to find the right match for the seller and the city and the buyer,” he says.

Mahoney says he will submit an application to change the first and second floor uses to make them general retail and office uses, respectively. “I know if we get broader definitions it will be easier to explain to people,” he says.

Mahoney adds that no other buyers backed away because of the buiding’s use restrictions and that the change he is seeking is not driven by CHOMP.

It’s unclear whether the Sand City Council will go along with Mahoney’s proposal. Pendergrass seems committed to the original plan; council members Craig Hubler and Jerry Blackwelder both declined to comment because they live within 500 feet of the Design Center, invoking a conflict-of-interest policy that leads the small town council to draw straws to reach a quorum on some items.

Councilman Todd Kruper says he wants to bring vibrancy into the development, which now has two hollow floors. “I’m really convinced and supportive of bringing in retail that is high-end,” Kruper says, adding that he would be open to looking at new uses.

Councilwoman Mary Ann Carbone says until a proposal comes to City Council it’s hard to say what her position is. “We’d like to see it get occupied,” she says.