California First, LLC Selected by State in Sale-Leaseback of State Office Buildings as Part of Final Budget

Market Premium Offer Exceeds Anticipated "Net" State Proceeds

Oct 11, 2010, 18:47 ET from California First, LLC

IRVINE, Calif., Oct. 11 /PRNewswire/ -- California First, LLC, a consortium led by Hines and international private equity firm Antarctica Capital Real Estate (ACRE), announced today that it has been selected as the winning bidder by the State of California to purchase and leaseback eleven (11) of the State's office buildings following a comprehensive yearlong process.  The decision was made public as a part of the final State budget discussions.

"California First, LLC is pleased and proud to have been selected to be the steward of a number of the State's assets," said Colin Shepherd, Hines Senior Vice President.  "Our purchase price represents fair market value and exceeds the State's initial anticipation of net proceeds.  We look forward to working with the State to finalize any details that need to be addressed."

The California Legislature in July 2009 authorized the State's Department of General Services (DGS) to proceed with a process to select an investor or group of investors to sell and leaseback 11 of its office buildings in order to raise revenues to help offset a multi-billion budget shortfall.  More than a year later, DGS recommended California First's proposal over the more than 300 bids received.

"California First's proposal was based on exceeding anticipated proceeds, certainty of closing, and delivering first class management of California's assets," said Chandra Patel, Managing Director of Antarctica Capital Real Estate.  "We assembled a consortium that will deliver on our promise to the State."

As a part of its proposal, California First offered a market-premium price of $2.33 billion, far exceeding initial State projections by more than a half-billion dollars, and permits the State to reduce its bond indebtedness of over $1 billion after paying off existing bonds.  California First's proposal also allows the State to re-purchase the properties through a right of first refusal.

"The Governor's office has shown considerable foresight in proposing a sale-leaseback solution that not only helps address the State's fiscal crisis but does so in a manner that is not a short-term fix," added Rich Mayo, a Managing Director of ACRE.  "With this solution the State actually improves its finances rather than increasing its debt load. It is a win-win solution."

The portfolio purchased by California First's consortium of institutional investors will be professionally managed by Hines, a national and internationally renowned real estate firm and is the current landlord of more than 1 million square feet of the State of California's leases.

Hines is a privately owned real estate firm involved in real estate investment, development and property management worldwide. The firm's historical and current portfolio of projects that are underway, completed, acquired and managed for third parties includes 1,119 properties representing more than 457 million square feet of office, residential, mixed-use, industrial, hotel, medical and sports facilities, as well as large, master-planned communities and land developments. With offices in 100 cities in 17 countries, and controlled assets valued at approximately $23 billion, Hines is one of the largest real estate organizations in the world.

The eleven buildings that comprise the transaction include:

Public Utilities Commission Building
505 Van Ness Avenue
San Francisco

San Francisco Civic Center
350 McAllister Avenue &
455 Golden Gate Avenue
San Francisco

Elihu Harris Building
1515 Clay Street

Judge Rattigan Building
50 D Street
Santa Rosa

Junipero Serra State Building
320 West 4th Street
Los Angeles

Ronald Regan State Building
300 South Spring Street
Los Angeles

Attorney General Building
1300 I Street

Capital Area East End Complex
1430 N Street; 1500, 1501, 1615 and 1616 Capital Avenue

Department of Justice Building
4949 Broadway

Franchise Tax Board Complex
9645 Butterfield Way

3650 Schriever Avenue
Rancho Cordova

SOURCE California First, LLC