REAL ESTATE NEWS

Southern California Gas Co., which has been the anchor tenant at its namesake Gas Company Tower in downtown Los Angeles since the building was delivered in 1991, is relocating to a skyscraper a block away.

The utility known as SoCalGas has inked a lease for 200K SF spread across eight floors at Two California Plaza, located at 350 South Grand Avenue in the Bunker Hill neighborhood.

The gas company is planning to move out of its headquarters tower, located at 555 West 5th Street, by spring 2026 after building out its new offices, which will include space on the ground floor of the Grand Avenue tower to serve customers, the Los Angeles Times reported.

The new lease—the largest office deal this year in Los Angeles—represents about two-thirds of the space the utility currently occupies at the Gas Company Tower, where its lease expires at the end of 2026.

Two California Plaza, a 52-story tower that opened in 1992, is the headquarters of City National Bank, which has its name affixed to the top of the building. The lease agreement with SoCalGas includes naming rights, so the gas company's name will replace City National, the building's owner, CIM Group, told the Times.

Los Angeles County agreed last month to buy the Gas Company Tower in a foreclosure sale for $215M, pending approval by the county's Board of Supervisors. The county submitted a nonbinding letter of interest for the tower shortly before a foreclosure auction that was scheduled to take place on August 16.

The sale price represents a discount of nearly 66% from the $632M appraised value of the 52-story downtown Los Angeles trophy building in 2020 when it was the crown jewel of Brookfield's DTLA office portfolio.

"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 evaluating the possibility of acquiring property in the Civic Center area, such as the Gas Company Tower," county officials said in a statement.

If the deal closes, it is likely to result in the relocation of county workers and public services out of existing county offices, including the Kenneth Hahn Hall of Administration, built in 1960 and currently the seat of the county government.

In April 2023, the Gas Company Tower was placed in receivership by the Los Angeles Superior Court after CMBS lenders Citi Real Estate Funding and Morgan Stanley filed a lawsuit asking the court to appoint a receiver to pave the way for the sale of the property, in lieu of a bankruptcy proceeding.

In February 2023, Brookfield defaulted on two senior loans backed by the tower totaling $350M in debt. According to court filings, the REIT failed to pay off the loan by the maturity date of Feb. 9, 2023.

Greg Williams of Trident Real Estate Group was appointed receiver and given the authority by the court to "market, advertise, promote and negotiate the sale of the property," with proceeds from any sale used to pay creditors.

In May, Williams tapped JLL to market the Gas Company Tower. Marketing materials called the 1.4M SF building "a generational investment opportunity to acquire a trophy asset at an exceptional basis."

The tower, which was renovated in 2023, currently is more than half leased to tenants including SoCalGas, Deloitte and law firm Latham & Watkins.

Source: GlobeSt/ALM