ESCONDIDO -- In a move that offers some reassurance to people concerned about Palomar Pomerado Health's commitment to downtown Escondido, the public hospital district has agreed to buy the Grandesco Building on Grand Avenue.

The public hospital district will pay owner San Diego-based Pacific Ridge Investments LLC $3.6 million for the three-story structure at 456 E. Grand, under a deal approved by the district's Finance Committee this week.

Palomar Pomerado's board of directors will be asked to sign off on the purchase at the board's June 11 meeting. The step is expected to be little more than a formality, though, because the board already authorized the district's chief financial officer to negotiate a purchase agreement.

Palomar Pomerado President and Chief Executive Officer Michael Covert sparked concerns last week that the district might renege on at least part of its commitment, when he said rapidly rising construction costs might force the district to delay some of the renovations.

The purchase deal is significant because the property is one of five that the public hospital district needs to acquire to carry out its plans to renovate Palomar Medical Center and expand it across Valley Boulevard. District officials agreed to carry out the project as part of a memorandum of understanding signed by Palomar Pomerado and the city last year.

Whether the district will hold off on remodeling two patient towers and other parts of the hospital has yet to be decided. However, district spokesman Andy Hoang and Pacific Ridge partner Doug Baker said Thursday that the two sides expect to close escrow on the Grandesco Building by mid-June.

The 12,000-square-foot building is directly across Valley Boulevard from the medical center.

Once the sale is concluded, Hoang said, Palomar Pomerado will renovate the building in preparation for moving its corporate offices there from Carmel Mountain Ranch this fall. Such a move would put the district ahead of schedule when it comes to fulfilling part of the memorandum of understanding.

The document, which the Escondido City Council required before it agreed to let the district build a hospital in the Escondido Research and Technology Center, calls for Palomar Pomerado to remodel and expand Palomar Medical Center. It also requires moving the district's headquarters to the existing hospital within two years of the new building's occupancy, at the latest.

The new hospital has yet to break ground but is scheduled to open in late 2011.

Councilman Sam Abed was among those who said they feared Covert's news meant the district would not fulfill all its promises. On Thursday, Abed said he was happy to hear that Palomar Pomerado's corporate offices might be coming to Escondido sooner than expected.

However, he said he still wants to see the district follow through on plans to build a plaza across Valley Boulevard and erect a new building that would house all the district's corporate and administrative offices.

"All we want from the hospital is to maintain their commitment" to the downtown area, he said.

Councilman Ed Gallo, who did not weigh in on last week's news, said he was somewhat reassured by the latest development.

"It's showing a commitment on their part," he said. "That's what we're looking for -- are they still committed to downtown? By this step, it looks like they are."

Attempts to reach Mayor Lori Holt Pfeiler and Councilwoman Marie Waldron for comment were unsuccessful Thursday.

Valley Boulevard is a short street that links Grand Avenue and Valley Parkway. The City Council has agreed to close the street to accommodate Palomar Medical Center's expansion, if the hospital district can acquire the five properties that line the road.

Palomar Pomerado officials started negotiating with the properties' owners last year.

On Thursday, Baker said that he and his Pacific Ridge partner, Steve Knight, had bought the Grandesco Building about 18 months ago. Both real estate brokers, the two were in the process of converting the structure to office condominiums when they reached agreement on its sale to the hospital district, Baker said.

"Once we realized that the (expansion) project was so close to our project, it just made sense to communicate, to talk about what might make sense going forward," he said about negotiating with Palomar Pomerado.

The Grandesco Building still has several tenants, including acupuncture and massage therapy offices. Baker said Pacific Ridge refrained from giving any of them a long-term lease and offered to help the businesses find sites to move to by the mid-June deadline.

"It's gone very smoothly, really," he said of efforts to move the tenants.

Palomar Medical Center's renovation and expansion is part of a larger plan to increase and improve the hospital district's facilities. The memorandum between the district and the city is designed to ensure that downtown Escondido remains economically strong after the new hospital opens.

Hoang said the deal involving the Grandesco Building shows the district is "staying focused and aggressive" on its expansion efforts.

Contact staff writer Andrea Moss at (760) 739-6654 or amoss@nctimes.com.