TLP: Budget Squeeze Turns States Into CRE Pimps
AP via The Washington Post:
State and local governments are grappling with budget shortfalls and some are eyeing their office high-rises, prisons and even capitol buildings as assets to be sold or mortgaged for some fiscal relief.So, what's the calculus here? State governments are so hard up that they've become $3 whores? Or worse, that they're standing on the corner looking hot. You know, the CFM heels, fishnets all the way up to a rocking miniskirt, all the rest. And they can't trick it out for anything close to what it's worth.
In recent weeks, Arizona invited investors to buy bonds secured by several landmark state government buildings. Connecticut, also facing budget woes, has made plans to bring in $60 million over the next two years from real estate sales. But California, with a gaping $20 billion budget gap projected through June next year, has the most ambitious sell-off plan yet. This month, the state will begin marketing nearly 9 million square feet of office space it values at around $2 billion.
The sales come at a time when the commercial property market is coming off its worst year in decades. Prices are down 40 percent from their peak in 2007 and are expected to fall further this year. That bodes well for investors looking for a good deal, but not for state coffers.
Now, think for a minute about who owns those a$$ets and you'll figure out who's really getting screwed.