SACRAMENTO-California’s Department of General Services haschosen a partnership led by Houston-based Hines and AntarcticaCapital Real Estate LLC as the buyer for an 11-property,7.3-million-square foot portfolio of state office buildings that ithas been marketing as a sale-leaseback since earlythis year. The winning offer of $2.33 billion was oneof more than 300 bids and will generate more than $1.2 billion forthe state general fund as well as $1.09 billion to pay off bonds onthe buildings.

The all-cash offer will be financed with “a typical debt andequity ratio with the general partners and investors providingapproximately 40% of the purchase price, and a major financialinstitution supplying the balance as a loan to the new owners,”according to a prepared statement by the state. The state willlease back the buildings from the Hines-Antarctica partnership,which is called California First, over the next 20 years. All ofthe leases allow the state to buy back any or all of the buildingsat any time during the 20-year term.

The portfolio was marketed on behalf of the Department ofGeneral Services by a CB Richard Ellis team headed by Kevin Shannonin the South Bay office of CBRE in Torrance. Shannon notes that the$2.33 billion sales price far exceeds the $660 million originallyestimated. “Far from a fire sale, this was a stiff, multiple-offercompetition that generated favorable pricing for the state,”Shannon said. Ron Diedrich, acting director of the Department ofGeneral Services, said that the sale “will allow us to bring indesperately needed revenues and free the state from the ongoingcosts and risks of owning real estate.”