PGE has struck a deal to sell its San Francisco headquarters complex in an $800 million deal, the utility said Monday, a key milestone in its move to relocate its head offices to downtown Oakland.
Hines Atlas US, an affiliate of a real estate development and investment firm, is the buyer of the property.
The utility had previously leased an office tower in downtown Oakland that’s perched on the shores of Lake Merritt for its future headquarters.
“PGE remains on track for a phased move into its new headquarters at 300 Lakeside Drive in Oakland, beginning in the first half of 2022,” the utility said in a prepared release.
The transaction marks another high-profile corporate exodus from San Francisco.
PGE is seeking approval for the property sale in San Francisco from the state Public Utilities Commission.
CBRE, a commercial real estate firm, advised PGE in its efforts to sell its headquarters hub in San Francisco.
The PGE office complex in San Francisco consists of 77 Beale St., 25 Beale St., 215 Market St., 245 Market St., and 45 Beale St., a filing with the Securities and Exchange Commission shows.
“We are working hard every day to make fundamental changes at PGE and become the utility our customers expect and deserve,” Patti Poppe, PGE’s chief executive officer, said in a prepared release.
The company intends to return to its ratepayers any profits harvested from the sale of the headquarters complex, PGE said.
Hines has agreed to deposit $20 million into an escrow fund to cover any shortcomings by Hines, the SEC documents show.
The San Francisco headquarters transaction could be terminated if the PUC doesn’t approve the proposed sale by the final day of 2021, according to a purchase agreement document filed with the SEC.
In downtown Oakland, PGE also has reached a deal to purchase the 300 Lakeside office tower as a way to create a long-term presence in the East Bay’s largest city.
“We’re so excited to deepen our ties to the wonderful Oakland community,” Poppe said.
The downtown Oakland transaction initially is a lease of the office tower with an option for PGE to eventually purchase the landmark highrise.
“PGE intends to use the Lakeside Building as its new company headquarters, where it can consolidate approximately 4,500 employees currently located in San Francisco and at least two satellite offices in the East Bay,” PGE stated in Bankruptcy Court records. The East Bay sites are in Concord and San Ramon.
Renovations at the 300 Lakeside tower in Oakland are slated to start in 2022.
“It is currently anticipated 3,200 employees will be relocated to the Lakeside Building by early 2023, approximately 600 employees in 2025, with the balance of the space to be made available for an additional 600 employees beginning in 2026,” the bankruptcy files stated.
Since the early 2000s, PGE has mulled the future of its San Francisco office buildings, executives stated in federal court records for the company’s bankruptcy case.
“Many of the utility’s (headquarters office complex) employees commute to San Francisco from the East Bay area, where the cost of living is far more affordable than in downtown San Francisco,” PGE said in a court filing.
Plus, the San Francisco headquarters complex has become steadily more expensive to operate.
In September 2018, PGE tasked real estate developer TMG Partners with finding an East Bay site for the future headquarters, bankruptcy papers show. Bishop Ranch in San Ramon and part of the Concord Naval Weapons Station were top candidates, but nothing came of those prospects by mid-2019.
PGE pondered selling 77 Beale St. and moving workers into 245 Market St., or the reverse. But 245 Market was deemed too small, and 77 Beale was too large.
Then came a break. In November 2019, realty firms Swig Co. and Rockpoint Group put on the block the 300 Lakeside Drive tower along with an adjacent mixed-use office building and a big parking garage.
TMG raced to make Swig and Rockpoint an offer.
“The utility quickly investigated and determined that the Lakeside Building would provide significantly greater economic benefits” than retaining a San Francisco headquarters, the court papers stated.
All of that ultimately led to PGE’s deal for a lease and purchase option at the 300 Lakeside office tower.
PGE hopes it can use the corporate relocation to help the company reinvent itself after a decade of disasters from 2010 through 2020, including a fatal gas explosion in San Bruno in 2010 as well as a string of deadly wildfires.
PGE believes Oakland’s increasing cachet as a corporate and jobs magnet dovetails with the utility’s fresh strategy.
“As an economic and innovation hub for California, Oakland is the perfect place for PGE to call our hometown,” Poppe said.