ALAMEDA, Calif. — A state appellate court has at least temporarily halted California's sale of 11 state-owned buildings to private investors.
The deal was slated to close Wednesday, but will now be delayed until at least Dec. 29 after the appeals court granted a temporary stay.
The state cut a deal to sell the 11 buildings to a consortium of investors led by privately owned real estate firm Hines and private-equity firm Antarctica Capital Real Estate for $2.33 billion, in a deal that is to generate about $1.2 billion toward closing this year's state budget gap.
The state would then lease back the buildings for at least 20 years. The sale would result in the redemption or defeasance of about $1 billion of outstanding tax-exempt bonds that financed the buildings.
Critics say it is a short-sighted transaction that will cost California more in the long run than it gains in the short term. The Legislative Analyst's Office estimated that over the 20-year lease, the state will pay about $646 million more in present-value terms than if it held onto ownership of the buildings.
Opponents filed suit in state court, arguing among other things that the sale process illegally bypassed the Judicial Council of California, which has, according to the suit, statutory authority over appellate court facilities such as those housed in two of the buildings to be sold.
Charlotte Woolard, a Superior Court judge in San Francisco, Friday denied a request for an injunction to block the sale, but the state appellate court reversed course late Monday.
"It's very good news for our side; we would suggest that it's very good news for the taxpayers of California as well," said Anne Marie Murphy, an attorney for the plaintiffs, two former members of the Los Angeles State Building Authority who were removed from their positions by Gov. Arnold Schwarzenegger after they announced their opposition to the building sale.
The stay was granted late Monday, Murphy said, after the state Supreme Court ordered the appeal be transferred to the San Jose-based Sixth Appellate District, because the First Appellate District in San Francisco is housed in one of the buildings that would be sold.
Supporters of the building sale have until Dec. 27 to file an objection to the stay. The opponents of the sale have until Dec. 29 to respond to them.
The 11 properties include centrally located buildings in Los Angeles, San Francisco, and Oakland, and a mix of central and suburban Sacramento locations, with tenants that include the California Public Utilities Commission and the Sacramento headquarters of the attorney general.
Schwarzenegger first proposed the sale and lease-back in May 2009. The Legislature authorized the process to go forward that July.
Some lawmakers subsequently criticized the proposal, but the plan was affirmed again when legislators adopted the fiscal 2011 budget.
According to an analysis prepared by the LAO in April, eight of the buildings are encumbered by lease-revenue bond debt that must be retired upon sale of the buildings to private investors.