Hines, which is projecting the dawning of “a new era of recovery and opportunity” in global commercial real estate in 2025, just made a big bet on a recovery in downtown San Francisco.
The Houston-based developer and its partner, the National Pension Service of Korea (NPS), have paid off a $500M loan backed by a 1.7M SF property that was PSG&E’s former headquarters in San Francisco.
Hines and NPS struck a deal with lenders Goldman Sachs, Blackstone and Virginia-based Pentagon Federal Credit Union to pay off the loan, which recently came due, the San Francisco Business Times reported.
Hines and NPS paid more than $800M in 2021 to buy the PG&E complex, which spans an entire city block in the Financial District. Known as the “Atlas Block,” the property includes a 1M SF office tower at 77 Beale Street; a 600K SF historic office building at 215/245 Market Street; and a two-story parking garage at 50 Main Street.
According to plans disclosed to the Wall Street Journal in 2021, Hines was aiming to renovate both office buildings and replace the garage with a residential tower encompassing 800 homes, but the project did not move forward.
Dan Snider, chief of staff for San Francisco’s planning department, told the Business Times last week that the city had paused technical work on the development application at the applicant’s request. “They’ve requested that the application remain active and stressed their continued intent to pursue development at this site,” Snider added.
Hines unveiled an upbeat global investment outlook for 2025 last week entitled “A New Dawn: Seizing Real Estate’s Moment of Opportunity.”
“We believe a new era of recovery and opportunity is upon us,” said David Steinbach, Hines’ global chief investment officer. “As many central banks have begun cutting interest rates, fundamentals are improving, more capital is coming into markets, and global growth is showing signs of strength.”
According to Hines’ report, 66% of global CRE markets now are in some phase of the “Buy” cycle, the highest level in eight years.
“We’ll likely look back on 2025 as a pivotal moment of recovery in many areas of the commercial real estate sector,” Steinbach said. “For investors, we believe the time is now to reposition portfolios as the window opens in the year ahead.”
The former PG&E HQ property isn’t the only massive Hines development project currently on hold in San Francisco. In July 2023, Hines and its partners, Goldman Sachs and Urban Pacific Development, placed Parcel F up for sale.
The partnership, operating as F4 Transbay Partners, won approval in 2021 to build a 61-story tower at the Parcel F site on Howard Street next to the Salesforce Transit Center. The project, which would have become the fourth-tallest building in San Francisco, envisioned a 189-key hotel, 165 condos and 274K SF of office space.
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