Hines and Pension Fund Pay Off $503M Loan on SF Buildings

Hines and the National Pension Service of Korea can burn the mortgage of a 1.7 million-square-foot office campus in San Francisco after paying off a $503 million loan.

The Houston- and Korea-based investors have paid off the loan secured by the former PG&E headquarters at 215 and 245 Market Street, 77 Beale Street and 50 Main Street, in the Financial District, the San Francisco Business Times reported.

The duo bought the block-size campus in 2021 for $800 million, using a $503.3 million loan from Goldman Sachs, Blackstone and the Pentagon Federal Credit Union.

Now they’ve cut a deal with their lenders to completely pay off the loan, according to the Business Times, citing public documents and legal experts.

Hines and NPS now own the four-building complex, which spans a Downtown block bounded by Market, Main, Mission and Beale streets. The reason: deep pockets.

The National Pension Service, which contributed 95 percent of the equity needed to buy the campus three years ago, has more than $800 billion in assets under management, unidentified sources told the newspaper.

The sale of the former PG&E hub, known as the Atlas Block, was the largest real estate deal by square footage in the history of San Francisco.

The campus includes the 600,000-square-foot historic office building on Market, a 1 million-square-foot office tower on Beale and a two-story parking garage for 400 cars on Main.

In 2021, Hines and NPS had planned to redevelop the block by restoring the 17-story, century-old building on Market, revamping the 34-story tower on Beale, replacing the garage with an 800-unit residential tower and adding a 1-acre park.

The project, hampered by a crumbling office market during the pandemic, never got off the ground.

Dan Sider, chief of staff at San Francisco’s Planning Department, said the city had paused technical work on the development application at Hines’ request.

“At the same time, they’ve requested that the application remain active and stressed their continued intent to pursue development at this site,” Sider said in an email to the Business Times.

The stalled project, as well as the size of the loan, would have made refinancing difficult.

The recent deal with lenders will grant Hines and NPS the ability to move forward with their project when they see fit, according to the newspaper. It could also allow the investors to change their development plans.

— Dana Bartholomew