CBRE Negotiates Sale Leaseback on Behalf of the State of California
LOS ANGELES – CB Richard Ellis Group, Inc. (CBRE) announced that it has negotiated a $2.33 billion sale leaseback on behalf of the State of California’s Department of General Services for a portfolio that includes 11 state office buildings located in Los Angeles, Oakland Sacramento, San Francisco and Santa Rosa. The transaction is expected to close in the fourth quarter of 2010.
After careful review of 30 portfolio bids, The Department of General Services selected California First, LLC, a partnership led by Hines and Antarctica Capital Real Estate. LLC, as the buyer for the portfolio. Over the next 20 years, the state will lease the offices back from the new owner at predetermined rates, and will no longer maintain, operate, or repair the buildings. All the leases with California First for these assets allow the State to buy back any or all of the buildings at anytime during the 20 year lease term.
“This portfolio was ideally suited to what capital wants in today’s market – secure cash flow with term. The broad international marketing campaign generated a high level of interest as evidenced by more than 300 initial offers. The resulting multiple offer competition generated extremely favorable pricing for the State,” said Kevin Shannon, Vice Chairman for CBRE and the lead broker on the sale leaseback assignment. “The capitalization rate for this sale is similar to peak market levels but the State’s leaseback rents are well below peak market rents. We were able to far exceed the client’s original pricing expectations and nearly double the original estimated proceeds of $660 million after paying off existing encumbrances.”
California First’s all-cash offer will utilize a typical debt and equity ratio with the general partners and investors providing approximately 40% of the purchase price, and a major financial institution is supplying the balance as a loan to the new owners.
CBRE earned the contract for the brokerage services with the state after competing alongside five other companies. Each company was scored in multiple categories including: history of sales over $20 million over the past seven years; sales of at least $7.5 million over the last 10 years; experience of the proposed sales team; the bidder’s proposal for its percentage of sales compensation; and an interview with each bidder’s sales team.
About The Department of General Services
The Department of General Services acts as the business manager for the State of California, with more than 4,000 employees and a budget in excess of $1 billion. DGS helps state government better serve the public by providing services to state agencies including innovative procurement and acquisition solutions, creative real estate management, leasing and design services, environmentally friendly transportation, and architectural oversight and innovative funding for the construction of safe schools.
About CB Richard Ellis
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 29,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.