Los Angeles County's plan to buy the Gas Company Tower for $200 million is moving ahead in what would be one of the Downtown market's largest office deals this year.
Approval of a notice on the county's intent to purchase the building for an amount "not to exceed $200 million" is up for consideration at next week's Board of Supervisors meeting, according to the agenda. The notice is the next step in the purchase of the property and follows several closed-door negotiating sessions.
The purchase would include the Gas Company Tower at 555 West Fifth Street, which totals 1.4 million square feet across 52 stories, in addition to the World Trade Center parking garage with roughly 1,200 spaces at 335 South Flower Street.
The Los Angeles County Board of Supervisors is expected to hear public comments and move forward on formalizing its purchase in November.
The high-rise was placed in receivership last April after Brookfield Asset Management defaulted on debt tied to the building, amid an environment of heightened interest rates and a slowdown in leasing activity. KeyBank National Association has since taken over the building as special servicer, according to a CoStar report.
Data from Trepp indicates the building was recently appraised at $214.5 million, reflecting a more than a 60 percent drop from its 2021 valuation.
JLL was tapped in May to market the building to prospective buyers and said, at that time, the building was 57 percent leased.
Since then, the building's namesake tenant, Southern California Gas Company, confirmed last month it will move to space less than a block away at City National 2Cal.
The long-term lease, Downtown's largest so far this year, is for nearly 200,000 square feet at the CIM Group-owned highrise at 350 South Grand Avenue.
Law firm Shepard Mullin inked nearly 120,000 square feet late last year at 2Cal.
Downtown's office market faces a number of headwinds with its overall second-quarter vacancy rate at 31.5 percent, according to a CBRE report.
The Bunker Hill neighborhood, where the Gas Company Tower is located, had a vacancy rate of 26.1 percent with average asking rents of $4.02 in the second quarter, according to CBRE.