PG&E Exercises Option to Buy Oakland HQ Tower for $892M

Pacific Gas & Electric (PG&E) is exercising an option to buy its Lake Merritt headquarters tower in Oakland, which as originally written in 2020 stipulated a purchase price $892M, or $980 per square foot.

The company said it wouldn’t specify the price of the 910K SF tower until the deal closes; an SEC filing indicated the $892M stipulated in the 2020 option was “subject to certain adjustments,” the San Francisco Business Times reported.

San Francisco-based TMG Partners acquired the property, previously Kaiser’s corporate HQ, at 300 Lakeside Drive for $450M in 2020. The property at 300 Lakeside includes a 100K SF office and retail building and a parking garage as well as the 29-story tower.

PS&G committed to a 35-year lease for the tower—the largest lease ever signed in the Bay Area—with an option to buy. The utility moved into the tower last year from San Francisco, which had been its home for nearly a century, the Business Times reported.

In February, TMG subdivided 300 Lakeside and created a separate legal parcel encompassing the office tower.

According to the report, a TMG affiliate filed an easement and operating agreement with Oakland last month indicating that TMG will retain the parcel containing the smaller building and parking garage for future redevelopment.

PG&E’s relocation involves 4,500 employees. According to the utility’s plans, 3,200 employees have moved into the Lakeside tower, with another 600 workers scheduled to move in by 2025. The move to Oakland was part of a series of cost-cutting moves the utility undertook as part of a 2019 bankruptcy restructuring.

The company listed its 1.5M SF, two-building HQ complex at 245 Market and 77 Beale, with an asking price of $800M. The utility said at the time it intended to return to its ratepayers any profits from the sale of the San Francisco HQ complex.

In September 2021, Hines and the National Pension Service of Korea (NPS) closed on an $800M purchase of PG&E’s San Francisco HQ part of a $2.5-billion portfolio of office and apartment properties the partners planned to develop in San Francisco.

The deal with Hines and NPS originally went to contract in May 2021 but did not close until it received approval from California’s Public Utilities Commission in September.

Hines and NPS filed preliminary plans repair existing facades and modernize building systems at the 18-story complex at 215-245 Market Street, according to the proposal. The partners also planned to wrap the 35-story, 1M SF tower at 77 Beale Street with a glistening crystalline skin.