June 6, 2025 Breaking News, Latest News, and Videos

Arnold Schwarzenegger’s Real Estate Deal Haunts California:

When producers named a post-apocalyptic television series “The Walking Dead,” they probably had no idea that title also would come to describe one of the worst moves Arnold Schwarzenegger made in his seven years as California’s most amateurish governor ever.

That was his deal to sell 11 choice state office buildings to private investors for about $2.3 billion ($600 million in immediate cash), which he planned to use as a stopgap to throw into California’s then-chronic budget gap. Never mind that even his own pet economists predicted a net loss of $2.8 billion over 30 years from this deal.

Jerry Brown thought he cancelled this big mistake almost immediately after taking over in 2011 for his third term as governor. But somehow the deal threatens to survive; at the very least, it still haunts the state.

The sale of buildings in Sacramento, San Francisco, Los Angeles and San Diego is not exactly a ghost, largely because a San Francisco judge decided about a year ago that the potential buyers’ claim their deal was done before Brown could quash it deserves a full court trial. That trial will probably open within the next month.

The essential claim of the buyers, a partnership called California First that’s headed by the Irvine-based ACRE LLC and Hines Inc. of Houston, Texas, is that a contract is a contract. California First won an auction staged under Schwarzenegger, but has yet to take possession of any building.

The fact these companies are still pursuing the deal four years after Brown tried to end it is pretty good evidence they had figured to reap healthy profits from the steady stream of rents Schwarzenegger committed the state to pay for at least 30 years after the deal was done. They also planned to fire most union maintenance workers now employed in the buildings.

Schwarzenegger tried hard to sign as many papers on the deal as possible before leaving office, since Brown had expressed great skepticism about the sale while campaigning in 2010.

Brown knew the deal stunk, and tried to exploit a contractual loophole to keep the buildings in state hands. His claim then remains the contention of the state Department of General Services today: Because a ruling in a lawsuit that aimed to stop the sale forced the buyers to miss a deadline, the deal was never really done.

A department spokesman told a reporter this fall that “The lawsuit is a misguided attempt to resurrect a long-defunct contract.” But California First maintains it had at least an implied contract that still should apply. And it’s for sure that Schwarzenegger wanted to sell.

This deal, of course, was as short-sighted as the $15 billion in budget-balancing bonds Schwarzenegger pushed through 10 years ago, bonds which the state may pay off next year with a final $1.6 billion installment.

So no one now can be sure who will ultimately own the red granite Ronald Reagan State Building in Los Angeles, the Public Utilities Commission and state Supreme Court buildings in San Francisco and the Department of Justice building in Sacramento, to name a few landmarks involved.

Rooting hard for the deal to be consummated is the firm of Coldwell Banker Richard Ellis, whose executives contributed more than $79,000 over the years to various Schwarzenegger campaign committees. CBRE stands to get $16 million in commissions if this happens, a pretty nice return on its political investment.

The sale drew little attention until this column in February 2010 exposed its short-sighted nature. Protests built after that.

But California First never gave up even after Brown acted. One partnership lawyer called Brown’s cancellation “a politically motivated decision that left our client with a broken contract.”

Brown explained his move differently, saying he sought long-term budget 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. But it may yet be revived.

Which means that almost four years after the consistently inept Schwarzenegger left office, one of his mistakes threatens to burden the state he still professes to love for many decades into the future.

in Opinion
<>Related Posts

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...

SM.a.r.t Column: Bring Back The Music 2.0

March 23, 2025

March 23, 2025

This is an update of the article appearing in the SM Mirror on Feb 1, 2025 On January 28th, 2025,...

Letter to the Editor: Close the Fairview Library??

March 17, 2025

March 17, 2025

By the Santa Monica Public Library Board, Judith Meister, Chair, Dana Newman, Vice Chair Antonio Spears, Boardmember Daniel Cody, Board Member...

SM.a.r.t Column: Fire Safety in Los Angeles: Reimagining an Age of Megafires

March 16, 2025

March 16, 2025

Los Angeles stands at a critical juncture in its relationship with fire. It is true that climate change intensified vegetations...

Santa Monica Civic Auditorium: The Cultural Icon Santa Monica Needs

March 9, 2025

March 9, 2025

Santa Monica is a city of innovation, creativity, and world-class attractions, yet it lacks a central cultural destination that reflects...