Investor group asks court to force state building sale

SacBee: Capitol Alert ^ | 3/11/11 | Kevin Yamamura

[SmithL]

Gov. Jerry Brown pulled the plug last month on selling 11 state office properties to raise $1.2 billion in cash, but the investor group in line to buy the buildings has fired back this week with a lawsuit asking for the deal to proceed.

California First LP announced today that it filed a lawsuit in Los Angeles Superior Court asserting that the state failed to meet its contractual obligations when Brown halted the building sale. The group said that California, under Gov. Arnold Schwarzenegger, had committed to sell the buildings and was required to follow through. It is asking for the sale to proceed and for the state to pay damages.

"Like any other person or entity, the State of California has to live up to the contracts it enters," said Stuart Liner, an attorney with Liner, Grode, Stein, which is representing California First, in a statement. "The State negotiated and signed a contract with California First and has no right to back out of the deal. California First met its obligations every step of the way and we intend to compel the State to live up to their end of the contract."

[Milhous]

Contracts entered into fraudulently may be cancelled.

[Brad from Tennessee]

I would imagine there are some state parks and some other public lands with prime real estate value in California.

[truth_seeker]

“Contracts entered into fraudulently may be cancelled.”

And the fraud is? It is not easy to prove fraud in a written real estate contract.

It is essentially a sale-leaseback arrangement.

The state owns real estate free and clear. They agree to sell it for X dollars now, and the state agrees to lease all or part of the building space at agreed rental amounts, for a term, etc.

The parties to such a deal in California are deemed to be sophisticated (unlike buyers/sellers of 1 to 4 units residential).

The parties perform due diligence.

Without knowing anything more, I say the buyer prevails.

[muawiyah]

ANY contract entered into by a state or the federal government may be disposed of quite Constitutionally ~ provided, of course, that "just compensation" is made.

The investment group spent money organizing to buy those buildings ~ and may well have set aside other more lucrative ventures to help out the state. The judge will award them a fee to compensate them for their trouble. The state will retain ownership of the buildings.

[Milhous]

Some investment groups engage in lucrative ventures to help themselves to public property paid for by all the little taxpayers out there.

[muawiyah]

The sale/lease-back arrangement has always been very common in USPS. It's a way of staying in business while balancing costs with cash on hand.

There are investors who count on it ~ although not common when it comes to USPS' 100 largest buildings, the other 28,000 buildings can be public or private and you can't tell the difference by looking at them.