California to Sell 24 Government Buildings for $2.3 Billion

The state announced Monday it is selling 24 government office buildings — including the Ronald Reagan State Building in Los Angeles and the San Francisco Civic Center — to a group of private investors for $2.3 billion.

Ron Diedrich, acting director of the California Department of General Services, announced it selected the offer from California First LLC, a partnership led by a Texas real estate firm and an Orange County private equity firm.

About $1 billion of the sale will be used to pay off bonds on the buildings, leaving more than $1.2 billion to go into the state’s general fund.

“After an extensive review of more than 300 bids that were received, I have determined that this offer presents the best value for the state,” Diedrich said in a statement.

“This sale will allow us to bring in desperately needed revenues and free the state from the ongoing costs and risks of owning real estate.” Gov.Arnold Schwarzenegger and lawmakers included the sale as part of the state budget last week.

The Republican governor said California had received solid offers to sell the 24 buildings on 11 parcels and then rent that space back for 20 years at market rates.

It’s unclear how the current deal will work out for taxpayers over the long run, but there have been concerns.

The Associated Press reported earlier this year that the deal would end up costing the state $5.2 billion in rent over 20 years, perhaps saddling taxpayers with costs beyond whatever the state would net from the sale.

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