The Aon Center building, left, in Los Angeles. - Photographer: Armando Arorizo/Bloomberg
LOS ANGELES: Aon Centre, the third-tallest tower in Los Angeles, has sold for US$147.8mil – about 45% less than its last purchase price in 2014 – as office values continue to suffer from high vacancies and financing costs.
The sale is the largest office deal this year in downtown Los Angeles, which has been among the hardest-hit US office markets since the pandemic, as remote work becomes more popular and escalating interest rates drive down values, wiping out owners’ equity.
“With a new low basis and a well-capitalised owner, Aon Centre will be competitively positioned to attract and retain tenants who desire a well-amenitised skyline tower in the heart of downtown Los Angeles,” Sean Fulp, a Colliers broker representing the buyers, said in a statement.
The buyers are a group comprising of Carolwood LP, a Los Angeles-based investment firm, Daniel Abrams and Adam Tischer, who was also a broker with Fulp in the sale.
The seller, San Francisco-based Shorenstein, was represented by Kevin Shannon of Newmark Group Inc.
Almost 30% of downtown LA office space was available for lease or sublease in the third quarter, brokerage Savills reported.
Many tenants and investors are turned off by the neighbourhood’s tough commutes and high homeless population.
Rents downtown were 40% lower than in more-desirable areas, such as Century City, where the availability rate was 16%, according to Savills.
An affiliate of Brookfield Corp, downtown’s one-time largest landlord, defaulted on three office towers in the area this year.
An added blow for sellers was a voter-approved 5.5% transfer tax on real estate transactions greater than US$10mil that took effect April 1.
Office prices nationwide have fallen 35% from a peak in the first quarter of 2022. —Bloomberg
