The Los Angeles County Board of Supervisors on Wednesday authorized the county’s buy of the Fuel Firm Tower, considered one of downtown L.A.’s most distinguished skyscrapers, paving the way in which for the switch of 1000’s of staff and public providers out of the town’s civic heart.
With a 4-1 vote, the supervisors gave county officers the ultimate inexperienced mild to maneuver forward with shopping for the tower for $200 million.
The approval came to visit vehement objections from Supervisor Janice Hahn, who warned that the acquisition would sound the dying knell for downtown’s civic coronary heart and shunt the county’s workforce to a “souless” workplace tower on Bunker Hill.
“None of you listed below are going to persuade me that this can be a good thought,” Hahn mentioned earlier than casting her vote in opposition to the acquisition with a “hell no.”
County staff are at the moment primarily based contained in the Kenneth Hahn Corridor of Administration, a 1960 constructing named after Hahn’s father, a longtime county supervisor.
The constructing is considered one of a number of county-owned properties thought of weak to break down in a significant earthquake. Officers have estimated that it’ll price lots of of thousands and thousands to improve the buildings, making a brand new, presumably safer skyscraper an interesting different to some on the board.
“If we all know this constructing isn’t seismically secure, then we now have an obligation and a duty to take motion,” Supervisor Holly Mitchell mentioned from the room inside Hahn Corridor the place the board holds its weekly conferences.
County Chief Govt Fesia Davenport, whose workplace spearheaded the sale, promised the acquisition “will save the county lots of of thousands and thousands of {dollars}” in contrast with the price of upgrading the Corridor of Administration and different county buildings.
No supervisors have toured the constructing themselves, in accordance with a county spokesperson, although a number of of their workers members have visited.
The 52-story tower at 555 W. fifth St. was broadly thought of one of many metropolis’s most prestigious workplace buildings when it was accomplished in 1991. It has practically 1.5 million sq. ft of house on a 1.4-acre website on the base of Bunker Hill.
The value is a deep low cost from the constructing’s appraised worth of $632 million in 2020, underscoring how a lot downtown workplace values have fallen in recent times.
At $200 million, the county would get the Fuel Firm Tower for about $137 a sq. foot, a discount by historic requirements. The county additionally agreed to pay as a lot as an extra $5 million in closing prices on the transaction.
“This chance is not going to final endlessly,” Davenport warned, including that the county might finance the acquisition partly from cash put aside for capital tasks.
Hahn mentioned the transaction was akin to “robbing Peter to pay Paul.”
“The cash getting used to pay for this buy is being stolen from the funds that had been meant to maintain this constructing alive,” she mentioned from Hahn Corridor.
Richard Keating, the architect who designed the Fuel Firm Tower to enchantment to company America, mentioned it is sensible for a public entity to take possession now.
“We’re taking a look at a decline in want for traditional workplace use, which means attorneys, architects and accountants are doing issues otherwise” for the reason that pandemic, Keating mentioned. “Metropolis and county staff are nonetheless exhausting at work of their workplace areas, however they’re drained, outdated, typically decrepit and oftentimes now not as much as code when it comes to earthquake” security necessities.
“It’s an ideal time to make the most of a few of these kind of empty workplace buildings.”
Transferring lots of of county staff into the Fuel Firm Tower additionally stands to carry outlets, eating places and different companies within the close by blocks by Pershing Sq., he mentioned. “I feel it’s transfer all the way in which round.”
In recent times, the downtown workplace market has turned in opposition to landlords as many tenants decreased their workplace footprint in response to the COVID-19 pandemic, when it grew to become extra frequent for workers to work remotely.
Final 12 months, the proprietor of the Fuel Firm Tower, an affiliate of Brookfield Asset Administration, defaulted on its debt, and the property was put in receivership, wherein a court-appointed consultant took custody of the constructing to assist collectors get better funds they lent to Brookfield. The constructing has about $465 million in excellent loans.
Different main tenants within the Fuel Firm Tower embrace legislation agency Latham & Watkins and accounting agency Deloitte. The county will assume the tenant leases as landlord.
When the Fuel Firm Tower is formally owned by the county, will probably be faraway from the tax rolls. The constructing’s property tax invoice final 12 months was greater than $7.1 million, in accordance with actual property information supplier CoStar.
Tenants would, nevertheless, be required to contribute to the tax rolls by an unspecified quantity by way of a “possessory curiosity tax” that may be levied on non-public corporations leasing public buildings. Tenants in privately owned workplace buildings additionally generally pay a share of the owner’s property taxes.
The constructing is in good situation with “a remaining helpful life” of at least 35 years, in accordance with a current property situation report ready for the present proprietor that was obtained by The Occasions.
The report additionally mentioned the tower and the World Commerce Heart storage at 333 S. Flower St. included within the deal require about $1.3 million to deal with urgently wanted repairs and deferred upkeep. Extra long-term prices to keep up and modernize the properties had been estimated at about $48.7 million over 12 years. Projected prices embrace roof repairs, refurbishing air-con techniques and updating the elevators.
The county at the moment occupies about 16.5 million sq. ft of workplace house for 38 departments, which includes 6.9 million sq. ft of leased workplace house and 9.6 million sq. ft of owned workplace house, Davenport mentioned in a memo to the board recommending the acquisition of the Fuel Firm Tower.
The county spends about $195 million per 12 months on the leased workplace house, and the property it owns “is in poor situation and outdated,” Davenport mentioned. Almost half of it’s greater than 50 years outdated.
By transferring workers from each leased workplace house and getting older buildings in poor situation, the county avoids paying lease and the “important” prices of seismic retrofits and different wanted renovations to outdated buildings equivalent to getting older air-con, plumbing and electrical techniques, the chief government’s memo mentioned. Funds earmarked for seismic retrofits and different renovations of outdated buildings will probably be included within the fee for the Fuel Firm Tower.
The county inspected the constructing and can purchase it “as-is,” Davenport mentioned. The Division of Public Works reviewed a seismic report for the tower and agreed with its findings. A county spokesperson mentioned the findings will stay confidential till the deal closes.
If the county elects to finish a seismic retrofit and different enhancements to the Fuel Firm Tower, it will possibly understand a future return on its funding by promoting the constructing when the market recovers, Davenport mentioned.
Southern California Fuel Co. mentioned in September that it’s planning to maneuver from its longtime headquarters in its namesake tower, the place it has been a main tenant for the reason that constructing was accomplished, to a different skyscraper a block north at 350 S. Grand Ave.
The utility signed a long-term lease for practically 200,000 sq. ft on eight flooring within the Grand Avenue constructing on Bunker Hill usually referred to as Two California Plaza, its new landlord mentioned, and is predicted to maneuver by spring 2026 after constructing out the brand new places of work. SoCalGas can even have an workplace on the bottom flooring to serve prospects.
