Los Angeles County agrees to buy downtown skyscraper

The county of Los Angeles has tentatively agreed to buy the Gas Company Tower, a prominent office skyscraper in downtown Los Angeles, for $215 million in a foreclosure sale.

The price is a deep discount from its appraised value of $632 million in 2020, underscoring how much downtown office values have fallen in recent years.

The Board of Supervisors must still approve the deal, which county real estate officials quietly but aggressively negotiated.

If completed, the purchase could move workers and public services out of existing county offices, including the well-known Kenneth Hahn Hall of Administration, which dates to 1960, according to multiple people familiar with the transaction who requested they not be named in order to discuss the confidential negotiations.

The county has begun the due diligence process of examining the property for possible structural problems or other issues before finalizing the transaction, which could take two to three months to complete, the sources said.

In a statement to The Times, the county said that it had submitted a nonbinding “letter of interest” for the tower.

“Because we are seeing once-in-a-generation price reductions for commercial real estate in the downtown area, as responsible stewards of public funds, the County is doing its due diligence and evaluating the possibility of acquiring property in the Civic Center area, such as the Gas Company Tower,” the statement said.

The Gas Company Tower represents “a generational investment opportunity to acquire a trophy asset at an exceptional basis,” Andrew Harper, a broker with the real estate firm JLL, said in May when JLL was hired to market the property.

JLL declined to comment Tuesday on the pending sale. The 52-story tower at 555 W. 5th St. was widely considered one of the city’s most prestigious office buildings when it was completed in 1991.

It has about 1.4 million square feet of space on a 1.4-acre site at the base of Bunker Hill.

In recent years the downtown office market has turned against landlords as many tenants reduced their office footprint in response to the COVID-19 pandemic, when it became more common for employees to work remotely.

Last year, the owner of the Gas Company Tower, an affiliate of Brookfield Asset Management Ltd., defaulted on its debt and the property was put in receivership, in which a court-appointed representative took custody of the building to help creditors recover funds they lent to Brookfield.

The building has roughly $465 million in outstanding loans.

Ref: Los Angeles County agrees to buy downtown skyscraper (Los Angeles Times)