L.A. County to Buy Gas Company Tower in Foreclosure Sale
The $215M price is a 66% discount of the appraised value in 2020.
Los Angeles County has agreed to buy the Gas Company Tower in a foreclosure sale for $215M, pending approval by the county’s Board of Supervisors.
The sale price represents a discount of nearly 66% from the $632M appraised value of the 52-story downtown Los Angeles trophy building in 2020 when it was the crown jewel of Brookfield’s DTLA office portfolio.
The county has submitted a nonbinding letter of interest for the tower, according to a report in the Los Angeles Times. The letter offers to take ownership of the building before a foreclosure auction that is scheduled to take place on August 16.
“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,” county officials said in a statement given to the newspaper.
If the deal closes, it is likely to result in the relocation of county workers and public services out of existing county offices, including the Kenneth Hahn Hall of Administration, built in 1960 and currently the seat of the county government, the report said.
In April 2023, the Gas Company Tower, the headquarters of Southern California Gas Co. located at 555 West 5th Street, was placed in receivership by the Los Angeles Superior Court after CMBS lenders Citi Real Estate Funding and Morgan Stanley filed a lawsuit asking the court to appoint a receiver to pave the way for the sale of the property, in lieu of a bankruptcy proceeding.
In February 2023, Brookfield defaulted on two senior loans backed by the tower totaling $350M in debt. According to court filings, the REIT failed to pay off the loan by the maturity date of Feb. 9, 2023.
Greg Williams of Trident Real Estate Group was appointed receiver and given the authority by the court to “market, advertise, promote and negotiate the sale of the property,” with proceeds from any sale used to pay creditors.
In May, Williams tapped JLL to market the Gas Company Tower. Marketing materials called the 1.4M SF building, which was completed in 1991, “a generational investment opportunity to acquire a trophy asset at an exceptional basis.”
The tower, which was renovated in 2023, currently is more than half leased to tenants including Southern California Gas, Deloitte and law firm Latham & Watkins.