More on California’s Massive Sale-Leaseback Deal

On Monday, the state of California approved a $2.3 billion sale-leaseback deal for 24 state office buildings, including the Ronald Reagan State Building in Los Angeles and the San Francisco Civic Center.

October 12, 2010
Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user prayitno

On Monday, the state of California approved a $2.3 billion sale-leaseback deal for 24 state office buildings, including the Ronald Reagan State Building in Los Angeles and the San Francisco Civic Center. The buyer of the 7.3 million-square-foot portfolio is a consortium is led by Houston-based Hines and Orange County-based Antarctic Capital Real Estate L.L.C., a venture formed by Rich Mayor of Spyglass Realty Partners and Chandra Patel of Antarctica Capital.

The buyers are operating under the name California First L.L.C., but an equally good name might be California Needs the Dough. About $1 billion of the sale price will go toward paying off bonds associated with the buildings, while the balance will go into the state’s general fund, which has been a mite short of funding in recent years.

The plan now is for the state to lease back the space it currently occupies in the properties for 20 years. Will it actually cost the state money in the long run? Maybe, according to the nonpartisan legislative analyst’s office in Sacramento, estimating an additional cost of $1.5 billion over 35 years. But the state needs money now, and 35 years might as well be 35 centuries in political terms, so the deal was done.

Goldman Sachs Foreclosures Halted for Now

Goldman Sachs, whose mortgage-serving business is call Litton Loan Servicing, is the latest financial heavyweight to knock off residential foreclosures for the time being. On Monday, a spokeswoman for Litton said in an e-mailed statement to the press that “Litton Loan Servicing has suspended foreclosure proceedings in certain cases while it completes a review of its procedures.”

What next? An increasing chorus of mayors, state AGs, governors, Congressmen and other politicos across the country are calling for a full-stop moratorium on foreclosures everywhere. Plenty of other observers say such a move would bung up the housing markets even worse than they already are.

But would a complete residential foreclosure moratorium really be “catastrophic”? Beyond that catastrophe that’s already enveloped the housing market for a few years, that is?

That’s the opinion of Tim Ryan, president and CEO of the Securities Industry and Financial Association, a lobbyist for the securities industry. “It must be recognized that the mortgage market, investors and the health of the economy are all inter-related,” he said in a statement on Monday. “Investors in the housing market–including American workers with pension funds, 401k plans, and mutual funds–would unjustly suffer losses in their savings from these actions.”

Economists Revise Growth Estimate from Tepid to Lousy

The National Association for Business Economics revised its forecast for U.S. economic growth in 2010 to 2.6 percent on Monday. In the spring, the same group–46 forecasters all together–projected 3.2 percent for the year.

They also projected 2.6 percent growth in 2011. Better than another recession, but not much. But they also warned about federal red ink: “NABE panelists continue to characterize excessive federal indebtedness as their single greatest concern going forward, even exceeding worries about high unemployment,” the group’s survey said.

Wall Street was on track for a positive day on the quasi-holiday on Monday, but took a dive toward the end of trading. The indices barely stayed positive: the Dow Jones Industrial Average was up 3.63 points, or 0.03 percent, while the S&P 500 and Nasdaq advanced a minuscule 0.01 percent and 0.02 percent, respectively.