State sells 2 LA office buildings to tighten budget gap

The State of California listed 17 buildings for sale statewide last month; two are in Los Angeles. Commercial real estate brokerage firm CB Richard Ellis has been contracted with the representation of these buildings, estimated to total $2b in value. The only two buildings for sale in Southern California are located Downtown - the Ronald Reagan building and the Junipero Serra building. The State hopes to raise about $660m from the sales toward its staggering budget deficit of $21b.

The state will engage in what is known as a sale-leaseback, where it will automatically enter into a 20 year lease agreement with whoever buys the properties. This is an ideal situation for a buyer because it guarantees a favorable occupancy rate, which in the case of the LA buildings, is 100%. The Ronald Reagan State Building, which was built in 1990, is considered to be one of the largest and best-equipped Class A office buildings in Los Angeles. It is located on 3rd St. between Spring and Main Sts. The smaller Junipero Serra building on the corner of 4th St. and Broadway, is a historic building completed in 1914.

The 17 building listing is the largest real estate portfolio on the market, and is a bold move for the State of California, desperate to shorten its hopelessly deep budget deficit. Gov. Arnold Schwarzanegger made headlines last year when he proposed the possible sale of large state-owned properties like San Quentin prison in Northern California and the Los Angeles Memorial Coliseum. While that controversial proposition never materialized, the 150 acre Orange County Fairgrounds will also be marketed for sale.