GlobeSt.com UPDATE: Governor's Action Draws Words of Caution, Praise

SACRAMENTO-Gov. Arnold Schwarzenegger’s executive order last week has generated words of praise and caution from investors, public-private real estate developers and advisors. Along with a thorough review of the management process, the order calls for an accounting of all state-owned assets and the identification of “high-value urban properties” that might be sold to help make up the state’s multi-billion-dollar budget shortfall. The order calls for the state performance review agency to prepare a report and recommendation to the governor by June 30.Selling the real estate is just one alternative, says Darin Buchalter of Ernst & Young Real Estate Advisory Services’ San Francisco office. The state could create public-private joint ventures, or long-term transactions that would maximize returns through participations in profits or any number of options. In so doing, Buchalter says the state should prioritize the assets and options to make sure it is sensitive to the best market timing and gets the maximum value over the short and long term. “That’s a lot more sensible than just automatically going for the obvious, like selling off an aging office building or courthouse,” Buchalter says. “Even with those assets, we should know their highest and best possible uses in order to get the best price or co-development scenario in the market.”Rich Robbins of Wareham Development, a firm that has completed public-private developments with several California cities, also would like to see the joint venture approach. “Although the state has been handicapped in many ways,” says Robbins, “the opening up of some key sites could give us a chance to get sensitive to some of the key growth issues for big job providers–in this case new facilities–especially for the growth industries like technology and life science industries. They could decide, for example, to position some of these assets for joint ventures to create more housing and research facilities. They can also use them to address infrastructure needs like duty-free zones that bring peripheral industries, with still more jobs, community revenues and refurbishments.”Will Thompson, a principal with Thompson