Following on the heels of a decision by Arizona to pursue sale-leasebacks for a number of its properties that it values at more than $1 billion, including its State Capitol Executive Tower, California is now making a similar move.
According to a request for proposals dated last Friday, California's Department of General Services is seeking out commercial real estate brokerage and investment banking firms that have experience in advising on and brokering large-scale investment property sales and sale-leasebacks for government and/or corporate clients. Proposals are due by October 30 and a contract is expected to be awarded at the end of the year.
On the block for sale-leasebacks are 11 California-owned properties that the state preliminarily estimates have a market value of nearly $1.98 billion. Based on that, the state estimates its sale proceeds could total more than $661 million.
The properties consist primarily of office buildings that combined have almost 5.66 million square feet of usable office space and are located in the state capital of Sacramento as well as Los Angeles, Oakland, San Francisco and Santa Rosa. Among the largest of the properties are the five-building, 1.1-million-square-foot Capitol Area East End Complex and the almost 1.53-million-square-foot Franchise Tax Board Complex, both in Sacramento, and the approximately 676,000-square-foot Earl Warren/Hiram Johnson Civic Center in San Francisco.
California clearly has its budgetary woes, but it still has an investment grade rating. According to information on the California State Treasurer's website, the state has a long-term general obligation bond rating of BBB from Fitch Ratings, Baa1 from Moody's Investors Services and A from Standard & Poor's.
"I think it's pretty straightforward—any time there's a budget shortfall, whether you're a government entity or a corporate entity, if there's owned real estate, it's a pretty easy way to raise capital," Jeffrey Thomas, Seattle, WA-based senior vice president in CB Richard Ellis' net-leased properties group, tells GlobeSt.com.
Thomas says large fund or REIT investors as well as sizable high-net-worth private investors are attracted to government properties, with the general theory being that with a government behind the lease, the properties are as close to risk-free as a real estate investment can get. "I'm definitely hearing from more investors who want to target that kind of property," he says.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
