December 11, 2009
As economic pressures mount, the The State of California has retained CB Richard Ellis to sell off 17 of our buildings. The portfolio represents around 8 million square feet. The buildings include the Elihu M Harris building in Oakland, the Earl Warren building in San Francisco, and the PUC building in San Francisco. I’m sure the five other companies competing for the contract to sell the buildings felt this was going to be a pony show since Diane Feinstein’s husband is the chairman of CBRE. Feinstein also received a lot of flack over CBRE being given the FDIC contract as well.
The government expects to reap some 2 billion dollars from the sale. 11 of the buildings are already being marketed by CBRE. Attachment below.
Though selling real estate is not mutually exclusive of raising additional funds through bond sales, the sale is a worrisome signal. Who knows what this portfolio will trade at, but for argument’s sake lets say 6% capitalization rate, with escalations thrown in there as well. The fact that the state is opting to sell off real estate as opposed to issue bonds which would likely yield much less than 6% is pretty darn interesting to say the least. Given that the state needs these buildings to function, and a default of its obligations could conceivably put even that at risk, it seems that the government should just opt to issue more paper rather than sell off the taxpayer’s property in these dire times.
This is clearly good for CBRE, but terrible for the taxpayer. If you agree, contact your representatives.
- Arizona Looking To Sell State Buildings
- S&P Cuts California Bond Ratings
- JP Morgan Looking to Unload 7M SF of Office Properties
- 20,000 California State Jobs At Risk
- CBRE Selling State of California Buildings For .08% Fee