Posted on 11/11/2010 2:55:27 PM PST by calcowgirl
The plan to sell California state office buildings contained in this year's budget will cost taxpayers $1.4 billion over 35 years, the nonpartisan legislative analyst said Wednesday.
The analysis released this week says the state will pay an effective interest rate of 10.2 percent to lease back the parcels, which include 24 separate buildings, from the new owner. That is about double what the state pays on existing bonds used to build its offices.
"There are long-run costs and short-term benefits," said Mark Whitaker, who wrote the 12-page analysis for the Joint Legislative Budget Committee. "It's going to cost a lot more in the long run. Then again, it helps us get through the current year and our budget problem now."
The proposal to sell state assets, including the Ronald Reagan building in Los Angeles and the San Francisco Civic Center, has been promoted by Gov. Arnold Schwarzenegger and won approval in the Legislature.
The Department of General Services announced last month it will sell the properties for $2.3 billion to California First LLC, a partnership led by a Texas real estate firm and a private equity firm based in Irvine. That will generate more than $1.2 billion in the current fiscal year for the state's general fund.
About $1 billion from the sale will be used to pay off bonds on the office buildings.
Department of General Services spokesman Eric Lamoureux said the long-term trade-off was needed to avoid tax increases or deeper cuts to services in the state's current budget.
"The whole purpose behind the sale was to generate immediate revenue to help shrink the state deficit," he said. "We will have accomplished that."
(Excerpt) Read more at businessweek.com ...
Anything that reduces the amount of property that is government owned and increases the amount that is privately owned is a step in the right direction.
Agreed. However, people keep voting for corrupt, foul imbeciles who have quite predictably gotten us into a mess!
For sure somebody is getting rich off this scheme, and it ain’t the CA taxpayer!
Open, boldface corruption! IMHO
Strikes me that they are trying to put off the end game as long as possible.
This article is incorrect.
Hines and partners have not actually bought this portfolio. They have simply been selected as CA's preferred buyer. They still have to enter into a contract, put up a deposit, and then close.
That will not happen. Hines is putting in almost no capital (they want the management contract), and the partners will not be able to raise the equity needed... likely, the partners / investors will require a change in deal terms, and CA's voters and legislature should be watching for that closely.
This will be a huge embarrassment for all involved.
Kickin' the can down the road. Hallmark of CA politics.
Here is the LAO report. Their report assumes the deal is closed by the end of December.
http://www.lao.ca.gov/reports/2010/infr/sale_leaseback/sale_leaseback_110910.pdf
Toward the end, they go through a discussion of how DGS supposedly performed all sorts of due diligence to ensure the buyers “could meet the bid price with minimal risk.” So much for that. (It also talks about how DGS was exempt from following the normal process and operating with transparency.) I’ll be glad when the “Sunshine Governor” is out of office, despite the fact the new guy is probably worse.
Based on these criteria, California First LLC would have scored well given that it relies on 40 percent private equity and 60 percent financing from JP Morgan.
However, there's no explanation if the sources reflect Hines, who won't provide a dime, or Antartica.
Is the LAO also playing ostrich? Their analysis is, after all, limited to long term effects if the deal goes as planned.
All liberal treatises have a common profile; they're based on a big lie. In this case, the ability of private enterprise to produce the cash without significant concessions from the taxpayers.
Can’t you hear them now?
“
Ooops... maybe we picked the wrong guys... but we’ve gone through this long process, we can’t do it over... If we just give them X, Y, and Z, we can close the deal without going through the public embarrassment. “
I hope a bright light continues to shine on this slimy deal.
No, that Robert Mapplethorpe's estate probably sold it for a handsome price.
Would like to know the principles in CA First, LLC...
The sheer number of rather graphic scenarios that come to mind...
Amerigomag, it's all your fault. I was having such a nice day too.
From the article in my post #6 above:
Antarctica Capital Real Estate is a private equity firm led by Rich Mayo of Spyglass Realty Partners and Chandra Patel of Antarctica Capital headquartered in Irvine and New York.
Thanks!
Me too. Here's an interesting tidbit. I think the principle "investors" may be in Mexico - only in a virtual sense, of course:
California selects buyer for 11 state properties
(snip)
Diedrich said the department recommended California First LLC based on the buyer's financial capabilities and the terms of its offer. The consortium is led by Hines, a privately owned real estate firm headquartered in Houston, and Antarctic Capital Real Estate LLC an international private equity firm.
Antarctica Capital Real Estate was listed as a venture between California real estate veteran Rich Mayo of Spyglass Realty Partners and Chandra Patel of Antarctica Capital, which is headquartered in Irvine.
Rich Mayo has over 25 years experience in the real estate industry and has been personally responsible for nearly $5 billion in real estate transactions, including nearly 20 million square feet of commercial office properties. He also has extensive experience in retail, hospitality and multi-family investments and developments.
In January 2007 he joined Cabi Developers, a U.S. affiliate of GICSA, one of the largest and most prestigious real estate development and investment companies in Mexico. He was responsible for the acquisition and execution of investment and development opportunities in the Western United States, and was personally responsible for the acquisition of 58 office buildings in southern California totaling 4.6 million square feet and valued in excess of $1.5 billion.
Prior to joining Cabi, Rich was the leader of O’Donnell/Atkins’ Los Angeles office, focused on the firm’s infill and development opportunities brokerage activities, as well as expanding its commercial, industrial and retail pursuits.
Rich was a Principal of The Staubach Company where he directed the portfolio-based real estate services provided to several major corporations, and brokered numerous landmark transactions for the following clients (partial list): Citigroup, Charles Schwab & Co., Gores Technology Group, Fair, Isaac & Co., Nissan, Wells Fargo Bank, City National Bank, VeriFone and Experian. Rich was honored as a Top Producer in each of his six years at Staubach.
Rich was Vice President, Senior Real Estate Manager of Citigroup, one of the largest banking and financial services conglomerates in the world. At Citigroup, Rich managed a 5.5 million square foot corporate-owned and leased real estate portfolio located in the western and mid-western United States and British Columbia. Additionally, he handled international acquisitions and investment projects in Australia, Thailand and Mexico.
As an appointee of former Governor Pete Wilson, Rich was responsible for overseeing the privatization of the State of California’s 35 million square foot real estate portfolio. He directed all surplus land dispositions, leasing, acquisition, planning, construction and asset management activities.
Rich was a co-founder of Barrington Advisory Group and Gavin Associates, comprehensive real estate development, finance, marketing and management consulting firms specializing in securing entitlements and project management for large land developers and institutional property owners.
Earlier in his career, Rich was a Principal of Griffin/Related Properties, a subsidiary of The Related Companies, a $4 billion real estate development and investment company headquartered in New York. He was responsible for several large-scale, mixed use master planned developments in California valued in excess of $500 million.
Rich has a bachelor’s degree in Economics and Political Science from Occidental College, and pursued graduate studies at Oxford University, UCLA, and Claremont Graduate School.
Got it. "Infill" is straight ICLEI-speak. IOW he was one of the "investors" buy up properties from redevelopment agencies who steal it from long-time property-owners anticipating an investment return with the promise of "fair market value" depressed by the threat of the taking.
Can you imagine the property taxes the tenets (us) will be paying as part of the lease? On the other hand some cities will be the recipients of those new taxes...
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.