After 18 months on the market, the U.S. Bank Tower at 633 W. Fifth Street, Downtown, has been sold.
When news broke last year that the tower would be sold, experts projected it could be sold for $700 million. OUE Ltd. has agreed to sell the U.S. Bank Tower to Silverstein Properties for $430 million. This is a 34% decrease from the $650 million valuation OUE declared in its annual report last year. However, it’s still an increase from the $367.5 million that in 2013 OUE reportedly paid.
The deal is set to close in September, and Silverstein Properties has made a $10 million deposit. Closing may be extended by one month in exchange for an additional $5 million deposit.
Since 2013, the U.S. Bank Tower has been owned by OUE Ltd., a Singaporean and diversified real estate owner, developer and operator group, with a real estate portfolio located in prime locations in Asia and the United States.
“The sale will enable OUE Ltd. to streamline its asset ownership in a period when the longer-term outlook of the U.S. property market may not be favorable,” OUE said in a statement.
Furthermore, “Due to the measures implemented by state governments in the U.S. in response to the COVID-19 pandemic, the tenants in the property have reduced, or temporarily closed down, their operations, and the rental income from the property has been correspondingly affected,” OUE said.
Silverstein Properties is a family-held, full-service real estate development, investment and management firm based in New York City, with 40 million square feet in its portfolio, founded by developer Larry Silverstein. The company has been looking to expand in the West.
“This is a unique opportunity to manage a trophy asset in a dynamic market. This is our first investment in Los Angeles, and we are looking at a number of other opportunities in the city and elsewhere on the West Coast,” said Jeff Grasso, senior vice president and head of acquisitions at Silverstein Properties.
Silverstein Properties has residential buildings and hotels but is best known for having developed the One World Trade Center for the Port Authority of New York and New Jersey. The buildings replaced the World Trade Center and other structures destroyed in the September 11, 2001, terrorist attacks.
The U.S. Bank Tower, also known as the Library Tower and First Interstate World Center, opened in 1989 and stands at 73 stories on Bunker Hill. It is one of the most prominent buildings on the Los Angeles skyline and is one of the tallest structures west of the Mississippi River. It has office space, restaurants, and an observation deck on the 70th story with a glass slide. U.S. Bank Tower workers have to take as many as three elevators to get to their offices, starting from the six-level underground garage.
This sale is happening at a challenging time for the office property market. Most offices are being sparsely used as tenants are working from home to avoid exposure to the coronavirus. It is unclear when or if they will want to return.
The average office vacancy in Downtown Los Angeles’ central business district was 13% in the second quarter. At the same time, the overall vacancy rate of 12.8% was lower than in the second quarter last year, and monthly asking rental rates held steady at about $3.87 per square foot for Class A space, according American commercial real estate services and investment firm CBRE.
The U.S. Bank Tower has more than 1.4 million square feet, and about 22% of that is not leased to tenants, according to real estate data provider CoStar.
The sale also reflects a push in recent years by foreign and domestic investors to purchase properties in the Los Angeles region because they view it as economically diversified and buoyed by the robust media, entertainment and technology sectors.