Health Minister Tony Ryall says the old Napier hospital site which has remained virtually unused since the hospital closed in 1997 has been sold.
He says it has been bought by the Todd Property Group for an undisclosed sum.
Mr Ryall says the Crown Health Financing Agency, which managed the sale, has returned close to $9 million to Hawke's Bay District Health Board since it took over the whole site in 2003.
He says proceeds from the sale will help build a $20 million mental health unit in Hastings.
In a related deal, the Todd group has sold the Ngunguru sandspit to the Department of Conservation.
The sandspit is 80 hectares, north of Whangarei. It has been subject to disputes between developers and conservationists.
There were cheers and tears when Conservation Minister Kate Wilkinson made the announcement at a meeting in Ngunguru on Thursday.
She said the 80-hectare spit was a jewel in New Zealand's conservation crown and would now be protected in perpetuity. She was embraced by a tearful kuia afterwards.
The deal will net the Crown $5 million.