The Los Angeles County Board of Supervisors on Wednesday approved the county’s purchase of the Gas Company Tower, one of downtown Los Angeles’ most prominent skyscrapers, paving the way for the transfer of thousands of workers and public services outside the city’s civic center.
With a 4-1 vote, supervisors gave county officials the green light to move forward with the $200 million purchase of the tower.
The approval came over the vehement objections of Supervisor Janice Hahn, who warned the purchase would spell the end of downtown’s civic heart and move the county’s workforce to a “soulless” office tower » at Bunker Hill.
“None of you here are going to convince me that this is a good idea,” Hahn said, before voting against the purchase with a resounding “no.”
County employees are currently based inside the Kenneth Hahn Hall of Administration, a 1960 building named after Hahn’s father, a longtime county supervisor.
The building is one of several county-owned properties considered vulnerable to collapse during a major earthquake. Officials estimated it would cost hundreds of millions to upgrade the buildings and make a new one, probably safer skyscrapers an attractive alternative to some on the board.
“If we know this building is not safe from earthquakes, then we have an obligation and a responsibility to take action,” Supervisor Holly Mitchell said from the room in Hahn Hall where the board administration holds weekly meetings.
County Executive Fesia Davenport, whose office spearheaded the sale, promised the purchase “will save the county hundreds of millions of dollars” over the cost of upgrading the Hall of Administration and other county buildings.
No supervisor has visited the building itself, according to a county spokesperson, although several members of their staff have visited it.
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 foot of the Bunker. Hill.
The price represents a steep reduction from the building’s 2020 appraised value of $632 million, underscoring how much downtown office values have fallen in recent years.
At $200 million, the county would get the Gas Company tower for about $137 per square foot, still a bargain by historical standards. The county also agreed to pay up to an additional $5 million in closing costs on the transaction.
“This opportunity won’t last forever,” Davenport cautioned, adding that the county could finance the purchase, in part, with money set aside for capital projects.
Hahn said the transaction amounted to “robbing Peter to pay Paul.”
“The money used to pay for this purchase was stolen from funds intended to keep this building alive,” she said from Hahn Hall.
Richard Keating, the architect who designed the Gas Company Tower to attract American business, said it makes sense for a public entity to take ownership now.
“We’re seeing a decrease in the need for standard office use, which means lawyers, architects and accountants are doing things differently” since the pandemic, Keating said. “City and county employees still work hard in their offices, but they are tired, old, sometimes decrepit and often no longer meet earthquake safety standards.”
“It’s a great time to take advantage of some of these more or less empty office buildings.”
Moving hundreds of county employees into the Gas Company tower would also lift stores, restaurants and other businesses in nearby blocks of Pershing Square, he said. “I think it’s a good decision on all counts.”
In recent years, the downtown office market has turned against landlords as many tenants reduced their office footprints in response to the COVID-19 pandemic, when it became more common to employees to work remotely.
Last year, the owner of the gas company tower, a subsidiary of Brookfield Asset Management, defaulted on its debt and the property was placed in receivership, under which a court-appointed representative took custody of the building to help creditors recover the funds that ‘they had loaned to Brookfield. The building has about $465 million in outstanding loans.
Other major tenants in the Gas Company Tower include the law firm Latham & Watkins and the accounting firm Deloitte. The county will assume existing tenants’ leases as landlord.
When the gas company tower is officially owned by the county, it will be removed from the tax rolls. Last year, the building’s property tax bill totaled more than $7.1 million, according to real estate data provider CoStar.
Tenants would, however, be required to contribute an unspecified amount to the tax roll through a “forfeitable interest tax” that could be levied on private companies renting public buildings. Tenants of private office buildings also typically pay a share of the landlord’s property taxes.
The building is in good condition with “a remaining useful life” of at least 35 years, according to a recent property condition report prepared for the current owner and obtained by The Times.
The report also said the World Trade Center tower and garage at 333 S. Flower St. included in the deal require about $1.3 million to complete urgent repairs and deferred maintenance. Additional long-term costs to maintain and upgrade the properties were estimated at approximately $48.7 million over 12 years. Projected costs include roof repairs, refurbishing air conditioning systems and updating elevators.
The county currently occupies approximately 16.5 million square feet of office space for 38 departments, including 6.9 million square feet of leased office space and 9.6 million square feet of owned office space , Davenport said in a memo to the board of directors recommending the purchase of the tower from the gas company.
The county spends about $195 million a year on rented office space and the property it owns “is in disrepair and old,” Davenport said. Almost half are over 50 years old.
By moving staff from rented offices and aging buildings in disrepair, the county avoids paying rent and the “significant” costs of seismic retrofits and other renovations needed in older buildings, such as aging air conditioning systems, plumbing and electricity, said the general manager. the memo said. Funds for seismic retrofit and other renovations of old buildings will be included in the payment for the gas company’s tower.
The county has inspected the building and will purchase it “as is,” Davenport said. The Department of Public Works reviewed a seismic report regarding the tower and accepted its findings. A county spokesperson said the findings will remain confidential until the deal is finalized.
If the county chooses to complete a seismic retrofit and other improvements to the Gas Company Tower, the county can realize a future return on investment by selling the building when the market recovers, Davenport said.
Southern California Gas Company. said in September that it plans to move from its longtime headquarters in its namesake tower, where it has been the main tenant since the building’s completion, to another high-rise a block north, at 350 S. Grand Ave.
The utility has signed a long-term lease for nearly 200,000 square feet on eight floors in the Grand Avenue building in Bunker Hill, often known as Two California Plaza, its new owner said, and is expected to move from here spring 2026 after the construction of the new offices. . Compagnie Gazière will also have an office on the ground floor to serve customers.
