Hines’ $800M HQ Buy Moves Forward

245 Market St.

The $800 million sale of PG&E’s San Francisco headquarters to Hines Atlas US LP, a fund affiliated with Hines, has been approved by The California Public Utilities Commission. The Commission also approved PG&E’s request to return roughly $400 million of the net gain to its customers, over a five-year period.

PG&E Corp.’s campus in San Francisco’s South Financial District totals 1.7 million square feet, of which roughly 1.4 million square feet is office space. PG&E will move to its new location in Oakland starting in the first half of 2022, in a continued effort to increase operational efficiency.

The sale, initially announced in May, also includes a leaseback agreement, until PG&E completes its phased move process. The transaction will enable PG&E to benefit from long-term savings, as well as offset future customer rates, according to a prepared statement from Patti Poppe, CEO of PG&E Corp.

Consolidating the footprint

Pacific Gas and Electric Co. set its eyes on the new headquarters in June 2020, in an office tower located at 300 Lakeside in Oakland’s CBD. According to CommercialEdge data, in October 2020, TMG Partners acquired the controlling interest in two properties, including 300 Lakeside, for a total of $449.7 million.

300 Lakeside

Formerly known as Kaiser Center Tower, the 28-story office tower at 300 Lakeside was constructed in 1960. It received an infrastructure renovation in 2004 and an exterior renovation in 2014. The building comprises roughly 910,000 square feet of rentable office space. According to PG&E’s application before the California Public Utilities Commission, the company determined that its new headquarters could accommodate approximately 4,500 of its employees, following further renovations. Additionally, 300 Lakeside received LEED Platinum certification in 2017.

The long-term lease agreement between TMG Partners and PG&E includes the option to purchase the property from its current owner in 2023. In June of last year, TMG announced the deal and stated that it will continue to work on upgrades at the building, including constructing new workspaces compliant with PG&E standards. The future tenant agreed on a lease rate of $57 per square foot, according to the application.

As of December 2019, approximately 3,200 PG&E employees were located at the San Francisco office complex—the company’s home for more than a century. The utility provider stated that it aims to consolidate three other offices into the new Oakland headquarters. These are in Concord and San Ramon, Calif., where PG&E employs an additional 1,300 people.

Office sales ramp up

The property acquired by Hines encompasses one city block, bounded by Main, Market, Mission, and Beale Streets. The campus comprises five buildings, two of which are the main office buildings, of 454,408 square feet (245 Market St./25 Beale St.) and 942,464 square feet (77 Beale St.). The property also includes a 96,389-square-foot auditorium and conference facilities (45 Beale St.) and a 3-story parking structure of 78,000 square feet (50 Main St.).

With this acquisition, Hines adds to the 4.7 million square feet of office space it already owns in the Bay Area and San Francisco-Peninsula markets. Office sales activity has increased in the region. During the first half of the year, sales in California amounted to more than $7.5 billion, an increase of 15 percent compared to 2020 activity. More than half of this amount was generated by office transactions in the Bay Area, which recorded $3.3 billion, and San Francisco, with $1.8 billion.