State office buildings fetch top bid of more than $2.2 billion


California officials received a top bid of more than $2.2 billion from a consortium of three investment companies to buy 24 state office buildings, The Times has learned.

The state put the offices on the market in February. It tentatively plans to sell the structures, including the Ronald Reagan State Building in downtown Los Angeles, and then lease them back from the new owners for at least 20 years.

State representatives and private brokers representing the state in the auction refused to identify the top bidder because the process is not complete and the state may back out of the sale. People who know about the deal but weren’t authorized to speak, however, said the top bid came from three firms: Hines, Antarctica Capital and Spyglass Realty Partners.

State officials hoped at the outset of the sale that the portfolio would garner $2 billion and let the state net about $660 million for the strapped general fund.

Gov. Arnold Schwarzenegger and the Legislature approved the plan to sell the buildings in 2009. Some former state officials and building commissioners objected, though, saying that the plan was shortsighted and that the state would be better off financially in the long run if it owned rather than rented its buildings.

A team led by Department of General Services Acting Director Ron Diedrich is analyzing whether a sale-leaseback of the properties is in the best interests of the state, department spokesman Eric Lamoureux said Friday.

“We have narrowed it down to one bidder and we are going ahead with analysis,” he said. “Until we finish that assessment we haven’t finalized anything.” He declined to identify the bidders.

There is no deadline for the analysis to be completed, Lamoureux said.

More than 300 investors made offers on some or all of the portfolio of 24 buildings on 11 sites in Los Angeles, San Francisco, Sacramento, Oakland and Santa Rosa. The Junipero Serra building, a former Broadway department store building built in downtown Los Angeles in 1914, is also part of the portfolio.

Property values dropped during the recession but large risk-averse investors are scouring the market for buildings in good locations with stable tenants that can be expected to reliably produce rental income for years to come, according to real estate experts.

Hines, a Houston-based developer, is expected to manage the state properties if the portfolio sale is completed. Antarctica Capital, which has offices in New York and Irvine, and Spyglass Realty of Irvine make investments on behalf of clients such as pension funds and institutions.