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Miffed Investors Sue State over Building Sale

The California Public Utilities Commission Building is included in a controversial plan for the state of California to sell 11 office complexes to a group of private investors, then lease the space for 20 years
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The California Public Utilities Commission Building is included in a controversial plan for the state of California to sell 11 office complexes to a group of private investors, then lease the space for 20 years
 
The mysterious consortium goes to court after Gov. Brown nixes deal to sell 11 buildings

The controversial deal to sell state office buildings is headed to court.

Late Thursday, attorneys for the would-be buyers, California First, filed suit in a state court in Los Angeles, trying to get the court to force the state to go ahead with the deal. "A deal is a deal," California First says in the suit. No further information about the identity of the California First partners appears in the legal filing, and the group's attorney did not immediately return a call requesting comment. The group also appears to be paving the way to sue the state for damages if the sale does not go through.

In the final days of his administration, former California Gov. Arnold Schwazenegger fought hard in the courts for clearance to sell 11 premier state office complexes, including the Civic Center and state Public Utilities Commission buildings in San Francisco, to the mysterious consortium of private investors.

The deal would have netted the state $1.2 billion after debt on the state office buildings was paid off. But then the state would lease the space back from California First, paying market-rate rents. The nonpartisan Legislative Analyst's Office estimated that the deal would cost California taxpayers an extra $6 billion over time. 

Adding to the controversy was the cloaked nature of the California First equity partners, a shifting consortium that at times included political heavyweights such as Henry Cisneros, who eventually disavowed involvement with the group. The lobbying firm of Fabian Nunez, the former Assembly speaker who was one of Schwazenegger's most reliable political allies, registered as representing the group.

But Gov. Jerry Brown announced February 9 that the state would not proceed with the sale.

"This suit is frivolous and wholly without merit. We are confident we will prevail when the facts surrounding California First's actions under the PSA are brought out in court," said Eric Lamoureux, acting deputy director of the state Department of General Services, said via email.

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