TMG Partners gets $172M green loan on Oakland PG&E headquarters

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including honors for “Best Mixed Use,”
“Best Office,” and “Best Historic Rehabilitation”.

August 18, 2023
The Real Deal
TMG Partners gets $172M green loan on Oakland PG&E headquarters

San Francisco-based TMG Partners has secured $172 million in Commercial Property Assessed Clean Energy financing for the Oakland tower it is selling to PG&E for close to $900 million in 2025. 

The funding for green improvements at 300 Lakeside Drive was financed by Bay Area-based GreenRock Capital and Cleveland-based KeyBanc Capital Markets. It is the largest C-PACE loan to date on an office property in the country, according to the lenders. 

And the loan is the second-largest U.S. C-PACE deal across all property types after the recent $256 million financing at The Four Seasons Residences in San Francisco. PACE funding can pay for environmental upgrades and construction, both planned and recently completed; in both recent deals, the financing went to environmental improvements for the properties that had already taken place.

Unlike a traditional loan, which is connected to the borrower, PACE financing is repaid over the years via a tax lien attached to the property itself and therefore typically stays with the property in the event of a sale. 

The new financing on 300 Lakeside is especially interesting because TMG entered into an agreement with PG&E in 2020 for a lease-buy deal on the 29-story, 910,000-square-foot Lake Merritt office tower. That deal was exercisable in 2023 and PG&E recently announced it will purchase its Oakland headquarters for close to $900 million, but will not close on the transaction until 2025. 

As TMG is the current owner, it will receive the proceeds of the newly financed loan. It would appear that in 2025 PG&E would be responsible for taking over the lien payments on the property taxes over the 20-year term, though the GreenRock Capital’s representative could not confirm that.

The financing covers upgrades to the 1961 building, originally developed as the headquarters for Kaiser Industries, that includes “a full HVAC system overhaul, envelope sealing to enhance energy efficiency, water conservation measures to reduce water consumption, and a complete seismic retrofit, ensuring the building’s resilience and safety,” according to a press release on the deal.

Chris Robbins, managing principal of GreenRock Capital, said in the release that C-PACE financing is a “form of capital that is fast becoming mainstream in commercial real estate” and Matt Field, president of TMG, said that the financing “provides a long-term source of sustainability capital for this asset.”  

Through an agreement with TMG Partners, PG&E has already taken occupancy of the Oakland building, which is now the home office for about 7,000 of its 26,000 workers, according to an update on the utility company’s website at the end of July. 

PG&E sold its previous San Francisco headquarters building and is consolidating its four major Bay Area office locations to one, a 50 percent reduction in space. The $800 million sale of its San Francisco building to Hines and the National Pension Service of Korea is expected to return about $400 million to customers over a five-year period, according to the utility company, adding that the California Public Utilities Commission had concluded that buying the Oakland building is more cost-effective than leasing. 

“Moving the closing date for the purchase to 2025 allows PG&E to continue to focus on prioritizing investments in natural gas and electric system safety and reliability and adding grid capacity to support growing customer needs,” according to the utility.

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