The City of Los Angeles thought it had dibs on the troubled Gas Company Tower, and cut a deal for a 308,000-square foot lease. Now L.A. County wants to buy the building for up to $210 million.
Six months after the city proposed a lease agreement for the 52-story skyscraper at 555 West Fifth Street, along comes the county with a pending offer to take ownership of it before an Aug. 16 foreclosure auction, the Commercial Observer reported, citing unidentified sources.
The auction comes more than a year after New York-based Brookfield Properties defaulted on at least $450 million in loans tied to the 1.4 million-square-foot building, as higher interest rates jacked up payments while leasing ebbed.
A receiver, Gregg Williams at Trident Real Estate, was appointed for the building last year. In March, Williams asked the court to release $47 million in funding to help secure a 15-year lease for five city departments.
Now the county wants to throw a wrench into plans by Mayor Karen Bass and city officials to fill a quarter of the building with city workers. Without the lease, the occupancy of the building would be 24 percent.
The county aims to offer between $200 million and $210 million, or $150 per square foot tops, an unidentified source told the Observer. Another source estimated a pending offer of $150 million, or $107 per square foot.
The county told the Observer that officials started looking at the property as they conducted a seismic retrofit.
“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 exploring alternatives to costly seismic retrofitting, including the possibility of acquiring property in the Civic Center area,” an unidentified spokesperson said in a email.
It’s unclear if the county released a request for proposal, and no public hearings have been held regarding the potential purchase.
JLL is marketing the property for sale, and materials shared with the Observer show the county has tapped Savills to help with the acquisition. JLL signed a deal that includes a “success fee” of 0.5 percent if it trades for between $150 million and $194.99 million, and 0.8 percent if it sells for more.
But JLL’s commission would be reduced if it sells to the city or the county, according to the agreement.
South Korea-based Meritz Investment Management, one of the mezzanine lenders on the Gas Company Tower, has also expressed interest in buying the property.
If no bids are received by the auction date, the commercial mortgage-backed securities bondholders, via Morgan Stanley and Citi, could take over the property at auction through a credit bid, and sell it afterward.
— Dana Bartholomew
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