Brookfield’s Gas Company Tower in receivership sees almost 60% value cut

Brookfield’s Gas Company Tower, a 52-story building in Downtown L.A. in receivership, has a new appraised value — and it’s a steep cut from its last one. 

The 1.4 million-square-foot tower at 555 West 5th Street was recently valued at $270 million, a 57 percent cut from when it was appraised at $632 million in 2021, according to data from Trepp and Morningstar Credit. That valuation comes in at about $192 per square foot. 

Consultants, researchers and industry experts have predicted L.A. would see a drop in office values, given lackluster leasing, the prevalence of remote work, the city’s new transfer tax on commercial sales and other factors putting downward pressure on the market. Boston Consulting Group estimated losses of up to 55 percent. 

The Gas Company Tower’s new valuation has become another example of this coming to fruition — and one of the steepest appraisal cuts Downtown L.A. has seen yet. This year, appraisers cut the value of Callahan Capital Property’s PacMutual building at 523 West 6th Street by about 20 percent compared to its 2021 valuation. 

The new appraised value also comes out to less than the debt on the building. Brookfield held $465 million loans on the tower — a $350 million commercial mortgage-backed securities loan plus $115 million in mezzanine loans. 

Brookfield defaulted on the senior loan tied to the tower in February, prompting the CMBS lenders on the property to ask a court to place the property into a receivership. 

Gregg Williams of Trident Real Estate Group was chosen as the receiver and has the authority to “market, advertise, promote and negotiate the sale of the property,” according to a court filing.

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With a receivership, the court-appointed third-party is tasked with recovering as much value for the debt holders as possible. In the case of the Gas Company Tower, that means leasing. 

The building may have one bright spot on the horizon. The L.A. County Housing Department is in talks to take 13 floors (about 300,000 square feet), according to a source familiar with the matter, though no deal has been signed yet.