(Bloomberg)—PG&E Corp. has reached a deal to sell its San Francisco headquarters to real estate joint venture Hines Atlas for $800 million, part of the utility giant’s move to cut costs after it emerged from bankruptcy last year.
PG&E, which plans to move to Oakland next year, needs approval from state regulators to sell the iconic 1.7 million-square-foot (158,000-square-meter) complex, which includes 77 Beale Street and 245 Market Street, according to a statement Monday.
The sale comes as office markets around the globe have been battered by the coronavirus pandemic. One broker estimated in 2019 that PG&E’s headquarters could bring in more than $1 billion. The utility giant is one of the most high-profile companies to leave San Francisco for Oakland, a less expensive city located just across San Francisco Bay.
PG&E intends to distribute about $400 million from its gain on the sale to customers over five years to offset bill increases as it invests in safety and operational improvements. In an added benefit, most PG&E workers will have shorter commutes to their new office, the company said.
The company filed for bankruptcy in early 2019 after collapsing under liabilities from wildfires sparked by its equipment. Though the company exited Chapter 11 last year, it remains burdened by about $42 billion of debt, raising concerns about its financial durability and ability to make the investments required to fire-proof its grid.
Hines is one of the biggest private real estate investors and managers in the world, according to its website. Hines Atlas is a joint venture between Hines and another investor, a Hines spokesperson said. He declined to name the other investor.
Remote work has kept employees home, emptying office buildings and prompting companies to put their space on the market as subleases. San Francisco’s overall office vacancy rate in the first quarter shattered the previous record high hit during the dot-com bust at the turn of the century, according to CBRE Group Inc. That’s pushed rent down and weighed on the value of buildings.
--With assistance from Craig Giammona.
© 2021 Bloomberg L.P.