A notable 40-story office building, known as Union Bank Plaza, located in the heart of downtown Los Angeles, has been acquired for $80 million. This significant real estate transaction involves a substantial 674,731-square-foot office tower, complemented by 27,157 square feet of street-level retail space, situated at the prime address of 445 S. Figueroa St.
The buyer in this deal is Southwest Carpenters Pension Trust, a downtown-based entity. While the $80 million price tag reflects a major real estate investment, it’s crucial to note that Southwest Carpenters Pension Trust purchased Union Bank Plaza at a significantly reduced price compared to its sale just the previous year.
The transaction was expertly brokered by Newmark Group Inc., with a team led by Co-Head of U.S. Capital Markets Kevin Shannon and Vice Chairs Ken White, Rob Hannan, Laura Stumm, and Michael Moll. Additional key members of the Newmark team included Executive Managing Director Bill Bloodgood, Senior Managing Director Chris Benton, and Managing Director Anthony Muhlstein, alongside Co-President of Global Debt & Structured Finance Jonathan Firestone. Newmark represented both the seller, W/B Union Plaza Holdings, an affiliate of Waterbridge Capital, and Washington Capital Management, acting on behalf of the buyer, Southwest Carpenters Pension Trust.
Waterbridge Capital’s affiliate, W/B Union Plaza Holdings, had acquired Union Bank Plaza in March 2023 for $111 million. A pivotal factor in the recent price reduction was the substantial lease termination payout made by Union Bank following its merger with U.S. Bank. Subsequent to the merger, Union Bank relocated its operations to the U.S. Bank Tower, leaving a significant vacancy at Union Bank Plaza.
According to Newmark, Southwest Carpenters Pension Trust intends to occupy a portion of Union Bank Plaza for its own operations and lease out the remaining space. This dual strategy underscores the buyer’s confidence in the long-term value of this downtown Los Angeles property.
Kevin Shannon from Newmark highlighted the mutually beneficial nature of the deal, stating, “This was a win-win transaction for the buyer and seller. The buyer acquired an institutionally renovated office tower at approximately $100 per square foot, factoring in the value of the substantial adjacent development parcel that provides future upside potential. Occupying a significant portion of the building allows the buyer to effectively fix their long-term operating costs. This represents a massive discount compared to both replacement cost and peak pricing, which were approximately $500 per square foot.” Shannon further added, “The seller also achieved a substantial return, considering the significantly reduced cost basis due to the Union Bank lease buyout.”
The downtown Los Angeles office market is currently navigating challenges characterized by high vacancy rates and negative net absorption, a trend largely exacerbated by the pandemic. Data from Jones Lang LaSalle Inc. (JLL) reveals a concerning rise in vacancy rates, from 15.8% in the third quarter of 2019 to 30.3% in the same period this year. The market has also experienced negative absorption of approximately 781,000 square feet year-to-date.
This challenging market environment has led to several downtown Los Angeles properties being sold at discounted prices. Notably, earlier this year, the county agreed to purchase the Gas Company Tower, with the Board of Supervisors setting a maximum price of $200 million. Union Bank Plaza itself was previously slated for a foreclosure auction after Brookfield defaulted on a $465 million loan package tied to the property. Brookfield also defaulted on $319 million in loans at 777 S. Figueroa St., further illustrating the financial pressures in the downtown office market. These instances, along with the sale of Union Bank Plaza, underscore the ongoing adjustments and market corrections within the downtown Los Angeles commercial real estate sector.
