SAN FRANCISCO, CA--(Marketwire - September 9, 2010) - Citing California's projected 2010-2011 budget deficit of over $20 billion, QueensFort Capital Corporation today detailed the shortfall California taxpayers and state employees would have to bear if a proposed deal to sell 11 commercial office buildings owned by the State goes through for a proposed $2 billion, instead of QueensFort's proposed $3.25 billion offer.
"Clearly it is in the best interests of California taxpayers, the Legislature and Governor Schwarzenegger to reconsider the proposed acceptance of a woefully underbid offer of $2 billion when a competing offer would bring in twice as much cash to the state treasury," said Arthur J. Halleran, Jr., chairman of QueensFort Capital Corporation. "After settling outstanding bond debt obligations, the State of California would receive over $2 billion in cash, as well as $400 million in reduced rent in the first five years of our offer."
The additional sale proceeds of $2 billion could rescue a large number of state programs slated for cuts under the Governor's proposed budget including programs aimed at providing health services to the elderly, poor and disabled, as well as badly needed education programs and environmental protection initiatives, Halleran said.
"Before finalizing this deal, we would urge Governor Schwarzenegger and the Legislative leadership, including Senator Darrell Steinberg, Senator Dennis Hollingsworth, Assemblyman John Pérez and Assemblyman Martin Garrick to learn all the facts about the potential surplus they are passing over and the reduced costs associated with financing a proposal such as ours," Halleran added.
QueensFort Capital was one of a small number of interests submitting bids in response to the Department of General Services request for bids to acquire 11 commercial office buildings representing 7.3 million square feet of space.
"What is even more surprising during this entire process was the insistence by the State of a gross lease arrangement which cannot be financed solely in the private financial markets and would allow operational control of the properties to revert to the new owners and jeopardize the service and maintenance jobs of hundreds of state employees currently working in those buildings," Halleran said. "Even though we offered $3 billion in cash, our bid was declined on the basis of lease conditions that we know cannot be financed without additional costs to taxpayers."
QueensFort's bid would deliver:
- Over $3 billion in cash of up‐front sale proceeds before the end of this year forestalling the need for the State to issue IOUs;
- Approximately $900 million more than Dept. of General Services' initial offering bid request;
- An additional $250 million payable over three years (subject to government approvals) of supplemental funding resulting from financing options;
- Approximately $1.15 billion of Incremental Purchase Price Proceeds;
- Bondable Lease Structure ensuring timely financing in the private sector and allowing the State of California to retain operational control of the buildings and their maintenance and service contracts with current state employees;
- Average annual rent savings of more than $80 million per year (2010 ‐ 2015) vs. State of California's Proposed Gross Lease Structure for a total of $400 million.
QueensFort also pointed out the bidding process involved the Dept. of General Services sending out bid requests to over 300 prospective bidders, while only receiving some two dozen bids, an indicator of the difficulties involved in this type of sale leaseback transaction. Also, unlike other state contracts, no comprehensive publicly-reviewable Request for Proposals guidelines were ever issued, nor were there any requirements for bidding firms to demonstrate competency in sale leasebacks, an unconventional and complicated form of financing rarely successfully completed by a state government in the U.S.
"This type of deal is a form of financing, not an operational real estate transaction, and is extremely sophisticated with only a handful of firms who can do it, one of which is ours since we have completed hundreds of these transactions for the premier companies in the U.S. and public entities such as utilities," Halleran said. "The complex nature of these transactions has made us the go-to firm nationwide in getting the financing done in a timely and cost-efficient manner even when -- as in the case of California -- the seller has a distressed credit rating that could threaten its financing."
QueensFort Capital Corporation
Florida-based QueensFort Capital Corporation is an investment concern with extensive experience in structured sale-leaseback transactions and invests in commercial, residential, resort and restaurant real estate projects throughout the United States.
A listing of the buildings proposed for sale can be found at:
http://www.batchgeo.com/map/?i=cbb3d560965f24dfc5b67e9ec4efa1a1
Video interviews are also available through Skype.
Contact Information:
Contact:
James Lee
The Lee Strategy Group, Inc.
T: 310.229.5771
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