L.A. County’s Board of Supervisors took its first major step Tuesday toward buying Gas Company Tower, one of the most prominent office skyscrapers in downtown Los Angeles.
The looming 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. The building is one of roughly 33 county-owned facilities that engineers say are vulnerable to collapse during a major earthquake.
The supervisors voted 3-1 to let the county’s Chief Executive Office move forward with the purchase, which they said cannot exceed $200 million. The board will need to vote again before the deal is finalized.
Supervisor Janice Hahn voted against the purchase, telling her colleagues she was concerned about the fate of the downtown civic center if the Hall of Administration shut down. The building is named after her father, longtime Supervisor Kenneth Hahn.
“I know there’s a tendency to jump on real estate deals,” she said. “We have to think bigger.”
Supervisor Hilda Solis abstained from the vote, saying she wanted to see “a more comprehensive and practical plan” to address the county’s aging buildings before giving her support. She also noted that the county had already sunk about $25 million into a plan to make the Hall of Administration seismically safe and still had several buildings downtown in need of upgrades, including Men’s Central Jail.
“I want to make sure that we know exactly what we’re getting ourselves into before committing any funding to this purchase,” she said.
The proposed price is a deep discount from the building’s appraised value of $632 million in 2020, underscoring how much downtown office values have fallen in recent years.
After selling last year for $110 million, Union Bank Plaza on Figueroa Street sold again recently for just $80 million, or $114 per square foot, according to real estate data provider CoStar. Another downtown high-rise tower at 777 S. Figueroa St. recently sold for $120 million, or $115 per square foot.
At $200 million, the county would get the Gas Company Tower for about $137 a square foot, still a bargain by historical standards.
“All these prices are a massive discount from only three years ago, when 915 Wilshire Blvd. traded for over $500 a foot,” said real estate broker Kevin Shannon of Newmark, who helped arrange the Union Bank Plaza sale to the Southwest Carpenters Pension Trust. “The world has changed.”
It makes sense for entities like the county and the Carpenters Pension Trust to buy their own buildings because they can lock in their occupancy costs long term, Shannon said.
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 nearly 1.5 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, 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 about $465 million in outstanding loans.
Elevated interest rates have weighed on prices by making it difficult for building owners to refinance debt and pushing them into quick sales or foreclosures. Some downtown L.A. office tenants have left for other local office centers including Century City over concerns that the streets are less safe than before the pandemic.
Southern California Gas Co. said last month it is planning to move from its longtime headquarters in its namesake tower, where it has been a primary tenant since the building was completed, and move a block north to another skyscraper, at 350 S. Grand Ave.
The utility signed a long-term lease for nearly 200,000 square feet on eight floors in the Grand Avenue building on Bunker Hill often known as Two California Plaza, its new landlord said, and is expected to move by spring 2026 after building out the new offices. The Gas Company will also have an office on the ground floor to serve customers.
Other major tenants in the Gas Company Tower include law firm Latham & Watkins and accounting firm Deloitte.
The building is in good condition with “a remaining useful life” of no less than 35 years, according to a recent property condition report prepared for the current owner that was obtained by The Times.
The report also said the tower and parking garage need about $1.3 million to address urgently needed repairs and deferred maintenance. Additional long-term costs to maintain and modernize the properties were estimated at about $48.7 million over 12 years. Projected costs include roof repairs, refurbishing air conditioning systems and updating the elevators.
Seismic engineers are conducting an “in-depth evaluation” of how the building would respond in a major earthquake to determine whether the Gas Company Tower, the fifth-tallest member of the downtown skyline, has vulnerabilities that need to be addressed, an L.A. County spokesperson said last month.
“Those issues are exactly what we are exploring through our due diligence,” the county said in a statement. “Without getting ahead of the work currently underway, one factor is assessing how this building would perform compared to the performance of the Hall of Administration, and the respective costs of each approach.”