The City of Los Angeles has resurrected plans to lease a substantial portion of the Gas Company Tower, bringing renewed hope to the distressed 52-story building in Downtown Los Angeles, Commercial Observer reported. The deal, initially set last summer, faced setbacks when bondholders rejected the terms, leading to a significant decline in the tower’s value.
The 15-year lease is for approximately 300,000 square feet at the building, which is located at 555 W 5th St. Additionally, the lease has two five-year extension options, and a substantial tenant improvements plan aimed at transforming the 1.4 million square foot tower into a hub for five city departments. These include Community Investment for Families, the Economic Workforce Development Department, the Housing Department, the Youth Development Department and the Office of Finance, per the report.
The lease, set to commence on Dec. 18, 2024, comes with a lease rate of $4 per square foot per month, with three percent annual increases. This translates to a monthly rent estimated at over $1.2 million and an annual commitment exceeding $14.8 million. The city has budgeted $55.3 million for tenant improvements, including moving expenses, with the landlord contributing $34 million.
The revival of this lease comes as a beacon of hope for the Gas Company Tower, especially considering the current real estate climate in Los Angeles. In October, The Registry reported that bondholders associated with CMBS declined the City’s proposed terms for the lease.
The 54-story tower has faced other challenges in the past as well. The Gas Company Tower’s value plummeted by 57 percent in just two years, from $632 million in 2021 to $270 million in 2023. The tower went into receivership in April 2023 after a Brookfield-managed fund defaulted on $748 million in loans.
