California puts 11 office buildings up for sale
SACRAMENTO (AP) – California has put the “for sale” sign on 11 state office buildings, including the San Francisco Civic Center and the Ronald Reagan State Building in Los Angeles, as a way to raise cash to shrink the budget deficit.
Los Angeles-based real estate firm CB Richard Ellis released a sales brochure Friday titled the “Golden State Portfolio” as part of its marketing strategy to lure potential buyers. Combined, the buildings have more than 7 million square feet of office space.
State officials are hoping to draw offers worth more than $2 billion.
California and other state and local governments have been eyeing their high-rises, prisons and even capitol buildings to generate fast cash for fiscal relief. Arizona has invited investors to buy bonds secured by landmark state government buildings, while Connecticut plans to bring in $60 million over the next two years from real estate sales.
California’s sale is the largest.
CB Richard Ellis Vice Chairman Kevin Shannon said the sale is a low-risk investment for potential buyers worldwide. Since the state is planning to lease the space back, it gives the new owners a steady stream of income.
“We are confident that the expansive global marketing campaign we’re launching today will attract strong national and international interest in this generational acquisition opportunity,” Shannon said in a statement.
CB Richard Ellis stands to make $1.6 million off a $2 billion sale.
The sale was adopted as part of last year’s budget agreement between Gov. Arnold Schwarzenegger and lawmakers to raise money for the state. California is facing a $20 billion shortfall through the middle of next year.
Potential buyers have until April 14 to make offers.
The state plans to use proceeds of the sale to pay off more than $1 billion in bond debt that was taken out to construct the buildings. The state estimates it will net $660 million and put that into the general treasury.
Some lawmakers fear the state might end up hosting a fireside sale on high-profile properties. They question the wisdom of selling assets that won’t make much of a dent in the state’s budget gap.
“Clearly the real estate market is still depressed,” said Democratic Assemblyman Jose Solorio of Santa Ana. “If we have an office building, I think it might make sense to get offers on that property. But if the bids that come in aren’t reasonable, then we should look real hard before selling them.”
Eric Lamoureux, spokesman for the Department of General Services, said the state will benefit by locking in low lease rates in a depressed market. The state would also be able to avoid having to maintain the buildings.
“The rent rates are considerably less than what we would have paid several years back,” Lamoureux said. “There’s potential savings in the long term.”
Lawmakers will get 30 days to review the sale but the Schwarzenegger administration gets to make the final decision. That means the Legislature may not be able to stop the sale even if the prices are low.