El Paso County building sale plans face a tough market

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Now that El Paso County has decided to move into the old Intel site, the question is what will happen to some of the buildings it owns or leases.

County officials reviewed dozens of options, including the former Macy’s at The Citadel mall, before opting to move into more than 200,000 square feet at the Corporate Ridge Office and Technology campus on Garden of the Gods Road.

An August closing is anticipated, followed by a phased move-in period.

The county believes it will spend about $80 million on the move, including interest payments.

Five buildings — three owned by El Paso County and two that it leases will be vacated in the process.

A small portion of the money might eventually come from the proceeds of those three building sales.

County Administrator Jeff Green said the Health Department facility, a 4.8-acre complex at 301 S. Union Blvd., and two Department of Human Services buildings at 17 N. Spruce St. and 105 N. Spruce St. could fetch up to $6 million.

But with the commercial real estate market remaining soft, that estimate could be high and any sale could take a while.

“We may just close up and winterize the Spruce buildings and wait a couple of years for a better time to sell,” he said.

The Health Department building will most likely sell first. Built in the 1960s, a mechanical system failure last year led to the loss of more than $70,000 in vaccines, and its asbestos remediation would be costly.

“We’ve already had some interest in it, but any buyer probably wouldn’t try to salvage the building — it would be too expensive,” said county spokesman Dave Rose.

In other words, the best bet for any buyer would likely be to raze the building and start fresh.

Which, for a buyer, means paying as little as possible to acquire it.

The two Spruce Street buildings, both built by the Craddock Cos. in the mid-1970s, are a different story, with their own set of challenges.

17 N. Spruce includes 21,000 square feet on two stories. 105 N. Spruce is a 64,600-square-foot office building on four levels. Both have been “rode hard,” with little updating according to Craddock Cos. broker Matt Craddock, who owns adjacent property. As a result, both structures would require major remodels in order to be market-worthy.

“If they’re now worth $80 to $100 per square foot, anyone who buys them will have to invest another $50 to $60 per square foot just to get them ready to lease,” he said.

In other words, the county might disagree, but a savvy buyer could negotiate an acquisition price of as little as $30 a square foot, or about $2.5 million.

Elsewhere, the Sheriff’s Department lease expires in January and the Pikes Peak Workforce Center’s lease of 15,000 square feet ends shortly thereafter.

The Workforce Center building, at 2306 E. Pikes Peak Ave., is owned by California-based Pikes Plaza LLC. The Sheriff’s Department leases its headquarters at 103 W. Costilla St. but may move another function into that space.

Several other county buildings, including operations at 27 E. Vermijo St., Centennial Hall and multiple sheriff’s office facilities, will be used to consolidate existing administrative or criminal justice functions.

Before committing to a lease with Corporate Ridge owner IRG Realty, El Paso County Director of Facilities Monnie Gore reportedly toured nearly 100 different sites and buildings, Green said.

The Olive Real Estate Group’s Stan Kensinger and Jim Dibiase provided county officials a market analysis and their long list of site options.

In a presentation before the Board of Commissioners on June 1, Green said those locations included Macy’s at the Citadel Mall, the Old Rustic Hills, a former Motor City Lithia dealership, the ArrowsWest office and industrial campus and space in the soon-to-be-vacated St. Francis Hospital and Penrose Community Hospital, which is already empty.

Some options for the Health Department were too small. And if they were big enough, the rent would have been too high. Some were in even worse condition than the Health Department’s current location. Other sites were eliminated because they were too far from the city’s center.

In the end, the county selected the former Intel building because was it was largely ready to move into, came with 1,500 parking spaces and a water-treatment building that could be retrofitted for the health department or coroner’s use.

Its location also played a major role in the decision, given that it is central to the majority of area residents.

Based on a study in December, about 8 percent of the county’s clientele arrived at their destination by bus. A large majority — 82 percent — arrived by car. The rest were either dropped off or took some other kind of transportation, Rose said.

In business circles, some questioned whether the county is displacing valuable economic development and office space that might have attracted new jobs to the area.

“The Economic Development Corp. was supportive, although they admitted the opportunity was bittersweet,” Rose said.

Becky Hurley can be reached at 719-329-5235 or becky.hurley@csbj.com. Friend her on Facebook.