L.A. County Finally Closes $200M Deal for Troubled Gas Company Tower

After months of distress and speculation, Los Angeles County has finally closed the book on its purchase of the beleaguered 54-story Gas Company Tower in Downtown L.A. 

The county paid $200 million for the 1.3 million-square-foot skyscraper at 555 West Fifth Street, brokerage JLL (JLL) announced — a far cry from its $632 million evaluation in 2021. The deal comes months after Commercial Observer first reported in July the county’s plans to acquire the tower ahead of an August foreclosure auction. 

The Gas Company Tower is the fifth-tallest building in L.A. and one of the skyline’s more identifiable structures. But the previous owner, Brookfield, defaulted on hundreds of millions of dollars in debt tied to the property last year. 

L.A. County initially planned to offer $215 million in cash for the tower, Commercial Observer reported in August, though the county Board of Supervisors voted 4-1 in November to approve the $200 million deal, which also includes pockets of airspace at World Trade Center at 350 South Figueroa Street and 333 South Flower Street. The county now plans to move its operations to the skyscraper from the Civic Center.

“I supported purchasing the Gas Company Tower because it makes the most fiscal and operational sense for both our County enterprise and our taxpayers,” Kathryn Barger, chair of the L.A. County Board of Supervisors, told Commercial Observer via email. “We are acquiring an asset at an incredibly low cost that will appreciate in value.”

Barger said that the deal will ultimately save more than $1 billion, as county operations and workers move out of old and “deficient” buildings elsewhere Downtown.

“Now the hard work begins as we plan the relocation process for the administrative employees who will be working in the new building and embark on an intensive master planning process, which will include extensive opportunities for public input, as we prepare recommendations to the Board of Supervisors about options for maintaining our presence in Grand Park and reimagining our Civic Center buildings for optimal public use,” a spokesperson for L.A. County added.

JLL Capital Markets’ Jeffrey Bramson, Sean Ryan, Tom Hall, Andrew Harper and Will Poulsen represented the County in the deal. 

The tower was 57 percent leased as of earlier this year, though some of its biggest remaining tenants are set to move out within the next couple of years as their leases expire. For its part, the Southern California Gas Company, for which the building is named, in September inked a 198,533-square-foot downsize lease at CIM Group’s CityNational 2Cal tower just a block away from the utility company’s former digs. That deal closed a few months after WeWork ditched 92,000 square feet of space at the tower earlier this year.

Aside from instantly becoming one of the biggest single-asset sales of the year, the deal for the Gas Company Tower is also notable for the fact that, because its buyer is a government entity, it is not subject to L.A.’s Measure ULA tax, which would have imposed an automatic 5.5 percent tax due to its price tag. Further, under its reported brokerage contract for the asset, JLL’s commission was reduced if it sold to the city or the county.

Nick Trombola can be reached at ntrombola@commercialobserver.com.