The Douglas County School District has completed its course in distressed office real estate.
On Thursday, the district purchased the 140,000-square-foot Meridian One office building at 9785 Maroon Circle for $6 million, or about $43 per square foot.
The property is just 16% leased and has been in receivership since December 2023 after seller Felton Properties Inc. defaulted on its loan. The Oregon-based real estate investment firm bought the building in 2014 for $12.8 million, according to public records.
The sale amounts to a 53% discount for the school district.
“Real estate for office space is at an all-time low right now. … We have an opportunity to purchase at that all-time low,” school district superintendent Erin Kane said at a June meeting discussing the sale.
The county is consolidating its administrative staff, which is currently working out of nine different locations, Kane added at the meeting. Its current headquarters in downtown Castle Rock is four times smaller than Meridian One, used to be Douglas County High School and “hasn’t been maintained in any sort of way.”
The district intends to spend $23 million rehabbing the property, which is expected to be offset from the sale of its other properties around the county, according to Kane.
The building was the first to be constructed in the Meridian International Business Center, back in 1984, according to the school districtap broker, Rick Egitto. Ryan Stout at Cushman & Wakefield was the broker for the seller.
“They wanted some good visibility, and that location just to the east of I-25 on the north side of Lincoln Avenue provided that,” Egitto said.
The county plans to install a new roof, redo the parking lot and upgrade its HVAC and other mechanical systems, according to Egitto.
“We looked at several buildings, but they settled on this one pretty quickly,” he added.
Egitto, who runs his own real estate brokerage and advisory firm, CRE Solutions, got the assignment at the beginning of the year. The 66-year-old Colorado real estate veteran said “it didn’t feel weird,” seeing a building he remembers being top of the market sell for pennies on the dollar.
“Tenants weren’t as interested in this building because the systems were older and work needed to be done to it. But when you get a user like Douglas County School District … if they like the location, they’ll buy the building and then they’ll upgrade the building,” he said.
Meridian One has sold five times prior in its 42-year history, public records show. The first came one year after it was completed, selling for $12.7 million. Its highest valuation came in 2006, when it fetched $14 million in a sale.
The Douglas County Schools deal is the lowest of all those valuations.
“I have lived through the resolution trust cycle, the tech wreck in 2001, then the great financial crisis from 2008 to 2012 to Covid, and now we’re in return to work. In between those portions of the cycle, the marketap always been extremely good,” Egitto said.
“Itap a cyclical business, and right now, Denver’s in a down market.”
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