Landmark Los Angeles federal courthouse slated for quick sale by agency

The federal government is offering real estate investors an unusual opportunity — the chance to buy a historic courthouse and office building in the heart of downtown Los Angeles.

The landmark U.S. Courthouse built in the 1930s on Spring Street near City Hall has been slated for “accelerated disposition” by the General Services Administration as part of a plan to sell off obsolete and underutilized federal properties.

“The GSA is focused on rightsizing the federal real estate portfolio to reduce the burden on the American taxpayer,” the federal agency that manages government buildings says on its website.

The Trump administration has launched a major push to shrink the size of the federal government.

In 2016, a replacement U.S. courthouse opened nearby on First Street. It houses federal courts and federal law-enforcement departments such as the U.S. Marshals Service and the U.S. attorney’s office for the Central District of California.

Occupants of the older Spring Street building include the National Labor Relations Board, Small Business Administration and the U.S. attorney’s office for the Southern District of California, the GSA said. The former federal courtrooms are occupied by the Superior Court of Los Angeles County.

The building comes to market in a down period for commercial property sales downtown. Many office towers lost tenants earlier in the pandemic and have yet to recover. Buildings that have changed hands in the last year have sold for far below the cost to build new structures — the Gas Company Tower office skyscraper was sold to Los Angeles County for $200 million, far below its appraised value of $632 million in 2020.

The GSA didn’t list a price for the courthouse, but commercial property broker Mike Condon Jr. of Cushman & Wakefield estimated that it could sell for about $60 million.

It’s unlikely that institutional buyers would be interested, he said. “Downtown L.A. is not the most favored market for large-scale investments” in properties that need to be redeveloped.

The “thin buyer pool” potentially includes wealthy individuals or family offices willing to wait years for demand for space to return to the market before starting renovations, which could include converting it to apartments, Condon said.

“I think whoever buys it is going to make gobs and gobs of money,” he said. “It’s just a question of when.”

The sale of federal buildings does not necessarily mean federal tenants will need to be relocated, the GSA said. They may lease their space back from the buyer.

The U.S. Courthouse at 312 N. Spring St. was the third federal building constructed in Los Angeles to serve its rapidly growing population in the early 20th century. The 14-story building also housed downtown’s main post office and other federal agencies.

It’s unclear how much of its 750,000 square feet are unoccupied. A GSA representative did not return a request for comment.

The building was designed in Art Moderne style by Gilbert Stanley Underwood, a Los Angeles architect best known for designing National Park lodges including the Ahwahnee Hotel in Yosemite. The courthouse is on the National Register of Historic Places.

Notable cases tried there include Mendez vs. Westminster, which was a precursor to Brown vs. Board of Education, as well as a breach-of-contract suit filed by actress Bette Davis against Warner Bros.

The courthouse is “a key supporting structure in the complex of buildings that constitute our civic center” surrounding the more flamboyant City Hall, said Dan Rosenfeld, a private-sector real estate executive who also has worked in the public sector managing state, county and city properties, particularly in the L.A. Civic Center.

Rosenfeld said he is “not only shocked but extremely dismayed” that the government is rushing to sell it. “This administration is moving so quickly and thoughtlessly,” he said.