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10/26/20
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TMG Partners has completed its acquisition of 300 Lakeside, a 975k sf office building in Oakland. Concurrent with the purchase, TMG entered into a long-term lease with Pacific Gas and Electric Company (PG&E) to relocate the utility’s headquarters into 600k sf at the 300 Lakeside building from their existing downtown San Francisco headquarters location. The lease includes a purchase option for PG&E to acquire the property from TMG Partners in 2023 at a price said to be near $900 mil.
The sellers, a joint venture of The Swig Company and Rockpoint Group, will also be investors in the TMG ownership entity. The price was not given out.
“We recognized that 300 Lakeside could provide an opportunity for PG&E to optimize its footprint, phase into the new space in a compact timeline in a location that is easily accessible to a majority of their headquarters employees, and the transaction is structured to provide PG&E the flexibility to elect whether to own or lease their completed headquarters,” said Matt Field, President of TMG Partners. “This was a very complicated transaction executed in a time of unprecedented economic disruption involving a headquarters lease and purchase option, a complex joint venture with the seller, a significant scope of building renovation, and a large-scale financing.”
The 300 Lakeside property, a signature building on Oakland’s skyline, was originally developed as the headquarters for Kaiser Industries in 1960 and was designed by noted architecture firm Welton Beckett Associates. TMG will undertake significant renovations to the 300 Lakeside building, including a seismic upgrade, façade cleaning, and significant upgrades to the mechanical plant and the building’s fire and life safety systems. This work will complete the total renovation of the property following improvements completed by the seller, including elevator modernization, new lobby and common areas, and a conference center. Gensler is the project architect, MKA is the structural engineer, and Plant Construction is the general contractor.
The property also includes a 1,339-stall parking garage with a rooftop landscaped garden and approximately 130k sf of retail and office space in a two-story building at 344 Thomas L. Berkeley Way that are not part of the PG&E transaction; together they are entitled for 1.4 msf of office and/or residential development.
TMG will continue owning and managing the garage and Thomas L. Berkeley Way properties. After completing the buildout of 300 Lakeside for PG&E, TMG will finalize the development plans for the new buildings and market the development properties for lease.
“The transaction provides benefits to the greater Bay Area Region,” said TMG Partners Chairman & CEO Michael Covarrubias. “As Oakland gains a new company with PG&E occupying the former 1960s-era Kaiser corporate headquarters building, significant annual property, payroll, and other tax revenue will be added to the City of Oakland. When PG&E’s existing headquarters is sold and occupied by another company, the City of San Francisco will realize significant additional annual property tax and commercial rents tax revenue as PG&E has been an owner-occupant of the property since the construction of the buildings fifty and one-hundred-fifteen years ago, respectively. San Francisco will thus also receive other increases in tax revenues from the sale and re-tenanting of the property.”
Eastdil Secured represented the seller in the sales process and represented the buyer in arranging financing which is being led by KKR.
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