July 15, 2025 Breaking News, Latest News, and Videos

Schwarzenegger’s Short-Sighted Building Sale Plan Won’t Die:

It was one of the smartest and also one of the most obvious decisions Gov. Jerry Brown made after his latest term began in early 2011 – canceling the planned sale of 11 choice state office buildings to private investors.

The only problem was that contracts had been signed and commitments made while muscleman actor Arnold Schwarzenegger was still governor, so this classic example of penny-wise, pound-foolish fiscal policy just won’t go away, even though it’s always been an awful deal for the state.

Not surprisingly, lawyers for the private investors who would profit by billions of dollars over 30 years if the deal goes through insist that a contract is a contract, even if it was signed by a governor who has now left office. Schwarzenegger made sure he signed as many papers on the deal as possible before Brown took over, since Brown had expressed great skepticism over the deal while campaigning in 2010.

Now a judge in San Francisco has overruled state attempts to have the investor claims dismissed, so there will likely be years of litigation before the ultimate ownership of the red granite Ronald Reagan State Building in Los Angeles and several choice buildings in San Diego, Sacramento and the San Francisco Civic Center is determined.

This lousy deal originated in late 2009, with Schwarzenegger desperately casting about for stopgap ways to raise some bucks to relieve the state’s chronic budget woes. When the package of buildings went out for bidding in early 2010, at the very bottom of the Great Recession’s real estate crash, even Schwarzenegger’s pet economists predicted a net loss for the state of $2.8 billion over 30 years.

Yes, the sale would have produced about $600 million in immediate money – and if it eventually goes through, it would now generate almost $1 billion because some bonds that would have been paid off by proceeds from the sale have been paid down considerably in the meantime. But long-term losses would be far higher as the state pays rent on the buildings for decades.

The deal also would bring about $16 million in commissions to the firm of Coldwell Banker Richard Ellis, whose executives contributed more than $79,000 over the years to various Schwarzenegger campaign committees.

The sale drew little attention until this column in February 2010 exposed its short-sighted nature. Protests built after that, with a group of former state building officials eventually filing suit to stop the sale.

Their action became moot when Brown nixed the deal shortly after moving back into the governor’s office, unwilling to tolerate the long-term losses. His contention was that Schwarzenegger’s purchase agreement merely began an escrow process, which could be stopped before it was finalized.

The California First partnership that had won the 2010 bidding (its main partners include Irvine-based ACRE LLC and Hines Inc. of Houston, Texas) has never taken possession of any building.

But the partnership won’t give up. “The state negotiated and signed a contract with California First and has no right to back out of the deal,” said one partnership lawyer. “Brown wanted to distance himself from the sale,” said another. “It was a politically motivated decision that left our client with a broken contract.”

Brown explained his canceling the deal differently, saying he sought long-term solutions and not short-term Band-Aids that merely “kick problems down the road.”

The bottom line is that this was one of the worst real estate deals ever negotiated by California officials, who could instead have sold off vacant state properties like a former CalTrans building near San Diego’s Maritime Museum. But that wouldn’t have a provided large enough short-term fix to satisfy Schwarzenegger.

And so, almost 10 years to the day after he won office in the recall election that ousted Gray Davis from the governor’s office, the ghost of his deal lives on, and no one knows if or when it will ever go away.

in Opinion
<>Related Posts

SM.a.r.t.Column: Happy Fourth of July 

July 2, 2025

July 2, 2025

SMart (Santa Monica Architects for a Responsible Tomorrow) hopes you are enjoying a great 3-day weekend as part of your...

SM.a.r.t Column: Cities That Never Shut Up – The Roaring Cost of Urban Noise

June 26, 2025

June 26, 2025

In today’s cities, silence isn’t golden—it’s extinct. From sunrise to insomnia, we’re trapped in a nonstop symphony of shrieking car...

SM.a.r.t Column: Santa Monica Needs to See the Light

June 19, 2025

June 19, 2025

How Santa Monica’s Growing Light Pollution Is Eroding Human Health, Safety, and Sanity There was a time when our coastal...

SM.a.r.t Column: California’s Transit Death Spiral: How Housing Mandates Are Backfiring

June 15, 2025

June 15, 2025

California’s ambitious housing mandates were supposed to solve the affordability crisis. Instead, they’re creating a vicious cycle that’s killing public...

SM.a.r.t. Column: A City Dying by a Thousand Cuts

June 5, 2025

June 5, 2025

Santa Monica, once celebrated for its blend of coastal charm and progressive ideals, is slowly bleeding out — not from...

SM.a.r.t Column: Oops!! What Happened? And What Are You Going to Do About It?

May 29, 2025

May 29, 2025

Our Santa Monica Architects for a Responsible Tomorrow (SMa.r.t) articles have, over the past 12 years, collectively presented a critical...

SM.a.r.t Column: Why Santa Monica Might Need a Desalination Plant, and Maybe Even Nuclear Power

May 22, 2025

May 22, 2025

Santa Monica is known for its ocean views, sunny skies, and strong environmental values. But there’s a challenge on the...

SM.a.r.t Column: SMO (So Many Options) Part 3: “Pie in the Sky”

May 17, 2025

May 17, 2025

SMO: Fantasy, Fact, and the Fog of Wishful ThinkingBy someone who read the fine print Every few months, a headline...

SM.a.r.t. Column: Owner Occupancy Protects Against Corporate Over-Development

May 2, 2025

May 2, 2025

This week SMa.r.t. will have as guest columnist Mark Borenstein. Mark is a long-time Santa Monica resident, a retired attorney,...

Opinion: Declaration of Economic State of Emergency in Malibu & Pacific Palisades: A Direct Result of the Devastating Impact of the Palisades Fire

April 27, 2025

April 27, 2025

Malibu and Pacific Palisades Request Emergency Financial Measures By Ramis Sadrieh, Chairperson, Malibu Pacific Palisades Chamber of Commerce    On behalf...

SM.a.r.t Column: The World’s Happiest Cities

April 27, 2025

April 27, 2025

Almost every year, we see new cities, regions, and countries that make the list(s) of our planet’s happiest and healthiest...

SM.a.r.t Column: A City for Everyone

April 20, 2025

April 20, 2025

Santa Monica dazzles with its ocean views, sunshine, and laid-back charm. But beyond the postcard image lies a more complicated...

SM.a.r.t Column: Part II: Rebuilding Resilient Communities: Policy and Planning After the Fires

April 13, 2025

April 13, 2025

The January 2025 wildfires that devastated Pacific Palisades and Altadena left an indelible mark on Los Angeles County. Beyond the...

SM.a.r.t Column: Innovative Materials for Fire-Resistant Rebuilding After the LA Fires

April 6, 2025

April 6, 2025

In the aftermath of the devastating 2025 Los Angeles wildfires, homeowners face the daunting task of rebuilding their lives and...

Opinion: Supervisor Lindsey P. Horvath Community Column Regarding a More Accountable Homeless Services System

April 3, 2025

April 3, 2025

By Lindsay Horvath, Los Angeles Board of Supervisors This week marks a significant milestone in our fight to end homelessness...