Hines-Led JV Plans $2.5B Revamp Of Former PG&E Campus
Downtown San Francisco's imminent death has long been a popular prediction, and the coronavirus pandemic offered plenty of scenes of an empty urban core — no office workers, no food trucks, no tourists. But Hines and the National Pension Service of Korea aren't convinced.
The joint venture plans to invest $2.5B-plus to redevelop the former Pacific Gas and Electric Co. campus encompassing more than a city block in downtown San Francisco’s Financial District, Hines announced Tuesday. The companies plan to deliver what they call the largest deal along Market Street in the past decade, complete with two office projects totaling 1.6M SF, a more than 600-unit multifamily complex, ground-floor retail and about 1.5 acres of open space.
“This is a great time to invest in San Francisco because it’s going to take us three, four years to build all of this, and so, while we’re mopping up the impact of the pandemic, [it] couldn’t be a better time to do some construction and planning,” Hines Senior Managing Director Paul Paradis told Bisnow.
The 600K SF office complex at 215 and 245 Market St., the historic PG&E headquarters, was built in the early 1900s. The JV plans to transform the interior of that building while retaining its historic lobby and façade, which Paradis called a treasure.
“It’s a beautiful building with fabulous terra cotta accents and details, so we’ll retain the beauty of that historic asset while turning it into a completely modern office building,” Paradis said.
But the plan for the 34-story, 1M SF 77 Beale St. — which is to be renamed 200 Market St., capitalizing on Market Street’s emergence as a regional artery — is more comprehensive. Paradis said Hines will essentially replace it with a brand-new office tower, preserving some of the foundation but otherwise creating a new structure designed by Pickard Chilton. Pickard Chilton didn’t respond to a request for comment Tuesday afternoon.
The developers haven’t begun marketing or pre-leasing, Paradis said, but a plan to brand the redevelopment with a new name is in the works. The historic PG&E HQ should attract smaller and midsized tenants while the larger building will be attractive to bigger, more established tenants with its floor plates of roughly 29K SF of column-free space, Paradis said.
The 600-unit apartment tower, which Paradis said will be designed by Foster + Partners and stand more than 800 feet tall, will rise on the other side of the block at 50 Main St., which is home now to a parking garage.
Paradis said the final portion of the project, nearly 1.5 acres of open space joining the three buildings, became an option as the developers and architects designed the buildings and eliminated the PG&E-specific structures that aren’t reusable.
“That will be the glue that ties together the three buildings, but it will also be a tremendous new amenity for San Francisco, almost an acre and a half of brand-new open space that we never imagined we could have provided in the middle of the city,” Paradis said, adding that the developers are in the final stages of selecting a landscape architect to design the space.
Ground-floor retail is planned for all three of the buildings and potentially some smaller structures in the open space, Paradis said.
“This project embodies NPS and Hines’ belief that long-term investments in proven locations, supported by innovation and new technology, will capture sustained demand and create outsized value,” Head of the Real Estate Investment Division at NPS Scott Kim said in a statement announcing the planned redevelopment.
The historic headquarters complex should deliver in around three years, 200 Mission in about four years, and the new residential tower shortly thereafter, Paradis said. He declined to disclose how the $2.5B total was divided among the four projects.
Hines agreed to buy the former PG&E headquarters in May, a little less than a year after PG&E announced plans to sell the campus and relocate across the bay to 300 Lakeside Drive in Oakland, which TMG Partners purchased in fall 2020 for $450M. PG&E made the sale and relocation as part of a cost-saving plan to distribute between $390M and $420M to customers over five years, offsetting energy rate hikes.
The redevelopment won't be the first collaboration between Hines and NPS. The pair announced a $1.5B equity joint venture late last year that was designed to develop infill projects in a variety of asset classes worldwide.