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TMG Dropped $450M On PG&E's Future Oakland HQ

TMG Partners finalized its purchase of Pacific Gas & Electric Co.'s future Oakland headquarters for $449.8M, Alameda County property records show. 

TMG had been under contract to purchase 300 Lakeside, an approximately 1M SF office complex near Lake Merritt, since at least June, which is when PG&E announced its plans to sell its current San Francisco headquarters and relocate to Oakland. Experts call the deal, which comes out to about $450 per SF, a potential win for both TMG and sellers The Swig Co. and Rockpoint Group.

300 Lakeside Drive

"Swig selling it for more than twice what they recapitalized it at only five years ago and at a time when most employees are working from home is impressive. I also think it helps that the tenant is PG&E," said Erik Murray, managing partner of Oak Investment Funds, an Oakland-based commercial real estate investment company. "Unlike area tech companies who may never bring all their workers back to the office, presumably PG&E will have to maintain more of a physical office presence."

The utility company will also be under a long-term lease agreement for the tower's over 900K rentable SF. Its triple-net lease starts at a base rent of $57 per SF, rising 3% each year of the 35-year life of the lease, which starts at the beginning of 2022. 

Under its agreement, PG&E also has an option to purchase the 28-story building in 2023 for $892M.   

The deal is among the largest to happen in the Bay Area this year. It also comes at a lower price per SF than the recent sale of nearby 180 Grand Ave., a 279K SF office building bought by a subsidiary of AXA Investment Managers last year for $627 per SF.

Swig and Rockpoint will also retain an undisclosed stake in 300 Lakeside, according to an announcement last month by the joint venture. 

Neither the JV nor TMG responded to requests for comment on the terms of the sale.

TMG has said it will make a handful of renovations at the 60-year-old property, including a voluntary seismic upgrade, facade cleaning, and upgrades to the building's fire and life safety systems and mechanical plant. 

The 28-story property was known as Kaiser Center after being developed for Kaiser Industries in 1960. It also includes an adjacent two-story, 130K SF retail and office building at 344 Thomas L. Berkeley Way and a 1,339-stall parking garage. 

Swig, which purchased 300 Lakeside for $200M in 2005, and Rockpoint put the property on the market last November after renovations of their own to the tower's lobby, other common areas and elevators, among other features. The joint venture had also secured development rights to build either two new office towers combining for 1.35M SF, or an 880K SF office tower and 580-unit residential building.

TMG has not said whether it plans to develop the site further. 

PG&E's move will involve consolidating operations at East Bay satellite offices in San Ramon and Concord. It is also looking to sell its longtime San Francisco headquarters complex at 245 Market St. and 77 Beale St., with CBRE marketing the 1.4M SF property on the utility company's behalf.

PG&E emerged from bankruptcy less than three weeks after its announced relocation, agreeing to put $5.4B and stock into a trust to pay wildfire victims. 

"The move will reduce our real estate costs, both short and long term, and we will pass along those significant savings to customers," PG&E Corp. interim CEO Bill Smith said in a statement last month. "We're also excited that the move will bring our employees together in new and better ways that encourage innovation in service to our customers."