The Los Angeles County Board of Supervisors on Wednesday approved the county’s purchase of the Gas Company Tower, one of the most famous skyscrapers in downtown Los Angeles, and will provide thousands of workers and public services to the city’s citizens. This paved the way for the center to be relocated.
By a 4-1 vote, supervisors gave county officials the final green light to move forward with the $200 million purchase of the tower.
The approval came over strong opposition from Superintendent Janice Hahn. He warned that the purchase would sound the death knell for downtown’s civic core and force county employees into Bunker Hill’s “soulless” office towers.
“I don’t think any of you here are going to convince me that this is a good idea,” Hahn said, emphasizing “absolutely no” and voting against the deal. I cast it.
County employees are currently based in the Kenneth Hahn Administration Hall, a 1960 building named after Hahn’s father, a longtime county supervisor.
The building is one of several county-owned properties considered at risk of collapse in a major earthquake. Officials estimate that renovating the building would cost hundreds of millions of dollars, and a new, presumably safer, skyscraper would be an attractive alternative to some on the commission. .
“If we know this building is not seismically safe, we have an obligation and a responsibility to take action,” Supervisor Holly Mitchell said at Hahn Hall, where the board meets weekly. He spoke from his inner room.
County Executive Fethia Davenport, whose office led the sale, said the purchase “will save the county hundreds of millions of dollars” compared to the cost of renovating the administrative building and other county buildings. I promised.
A county spokesperson said the supervisors themselves did not tour the building, although several staff members visited.
The 52-story tower at 555 W. 5th St. was widely considered one of the city’s most prominent office buildings when it was completed in 1991. It has nearly 1.5 million square feet of space on 1.4 acres at the base of the bunker. hill.
The price is a steep discount from the building’s 2020 assessed value of $632 million, highlighting how downtown office values have fallen in recent years.
For $200 million, the county will acquire the gas company’s 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.
“This opportunity is not going to last forever,” Davenport cautioned, adding that the county could potentially finance the purchase from some of the funds set aside for capital projects.
Hahn said the deal was like “extorting payments from Peter to Paul.”
“The money that is being used to pay for this purchase is being stolen from the funds that are meant to keep this building afloat,” she said at Hearn Hall.
Architect Richard Keating, who designed the gas company tower to appeal to American companies, said it made sense for a public entity to take ownership now.
“Since the pandemic, we’ve seen a decline in the need for standard office uses, which means lawyers, architects and accountants are doing things differently,” Keating said. “City and county employees are still working hard in their offices, but they are tired, older, sometimes dilapidated, and often do not meet seismic codes.” Not meeting safety requirements. .
“Now is the perfect time to take advantage of office buildings that are more or less empty.”
Relocating hundreds of county employees to the gas company tower will also revitalize stores, restaurants and other businesses on the block near Pershing Square, he said. “I think it’s a good move overall.”
In recent years, the downtown office market has turned against landlords due to the coronavirus pandemic, which has caused many tenants to downsize their office space as remote work has become more common for employees.
Last year, the owner of the gas company tower, an affiliate of Brookfield Asset Management, defaulted on its debts and the property was placed into receivership, with a court-appointed agent to help creditors recover the money lent them. kept the building. Brookfield. The building has a loan balance of approximately $465 million.
Other major tenants at the gas company tower include law firm Latham & Watkins and accounting firm Deloitte. The county would lease the existing tenant as the landlord.
Once a gas company tower is officially owned by the county, it will be removed from the tax rolls. The building’s property tax bill last year was more than $7.1 million, according to real estate data provider Coster.
However, tenants are required to contribute an unspecified amount to the tax bill through a “ownership interest tax” levied on private companies that rent out public buildings. Tenants of privately owned office buildings also typically pay a portion of their landlord’s property taxes.
A recent property condition report prepared for the current owners and obtained by The Times said the building was in good condition and had a “remaining useful life” of more than 35 years.
The report also said the towers included in the contract and the World Trade Center garage at 333 South Flower Street require about $1.3 million to address urgently needed repairs and deferred maintenance. Ta. Additional long-term costs to maintain and modernize the property are estimated to be approximately $48.7 million over 12 years. Expected costs include roof repairs, air conditioning system renovations and elevator upgrades.
The county currently occupies approximately 16.5 million square feet of office space for its 38 departments, including 6.9 million square feet of leased office space and 9.6 million square feet of owned office space, Davenport said. said in a memo to the board recommending the purchase. company tower.
The county spends about $195 million a year on rented office space, and the properties it owns are “in poor condition and old,” Davenport said. Almost half of them are over 50 years old.
By moving staff out of both leased office space and aging buildings in poor condition, the county will be able to pay rent and make repairs to older buildings, such as aging air conditioning, plumbing and electrical systems, as well as seismic retrofits. It avoids “significant” costs for other necessary renovations, the chief executive said. said Memo. Funds earmarked for seismic retrofits and other upgrades to older buildings are included in the gas company tower payments.
The county will inspect the building and purchase it “as is,” Davenport said. The Ministry of Public Works reviewed the tower’s seismic report and agreed with its findings. A county spokesperson said the findings will remain confidential until an agreement is finalized.
If the county chooses to complete seismic retrofits and other improvements to the gas company tower, the county could realize future investment returns by selling the building when the market recovers, Davenport said.
In September, Southern California Gas Co. will move from its longtime headquarters in the tower of the same name, where it has been the main tenant since the building’s completion, to another skyscraper one block north at 350 S. Grand Avenue. announced that it was a plan.
The utility company has signed a long-term lease for approximately 200,000 square feet over eight stories in Bunker Hill’s Grand Avenue building, known as Two California Plaza, and will build new offices in the spring of 2026, according to its new landlord. He said he plans to move by. The gas company will also have offices on the ground floor to serve customers.
