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PG&E’s SF headquarters may be worth $1 billion

Bankrupt utility may sell longtime HQ to cover fire debts

PG&E’s headquarters in downtown San Francisco.
PG&E headquarters in San Francisco.
Photo by Brock Keeling

Pacific Gas and Electric Company (PG&E) has been based in San Francisco since 1905, and its predecessor San Francisco Gas Company put down roots in the SF in 1852.

But nothing is too precious to part with when the company finds itself teetering on bankruptcy and looking at a potential $30 billion legal liability stemming from two years of devastating wildfires, many of which Cal Fire says were caused by PG&E equipment.

In order to cover the bills, the utility may resort to selling its circa-1925 building at 245 Market Street, which Bloomberg reports may fetch as much as $1 billion.

According to its 2017 annual report to investors, PG&E has a considerable real estate footprint in San Francisco in terms of office space:

In total, the Utility occupies 11 million square feet of real property, including 9 million square feet owned by the Utility. The Utility’s corporate headquarters comprises approximately 1.7 million square feet located in several Utility-owned buildings in San Francisco, California.

PG&E also says that it leases 42,000 square feet, a deal that expires in 2022.

In that same report, released in February 2018, PG&E also warned investors of the potential dangers it faced from fire investigations:

If the Utility’s facilities, such as its electric distribution and transmission lines, are determined to be the cause of one or more fires, and the doctrine of inverse condemnation applies, the Utility could be liable for property damage, interest, and attorneys’ fee s without having been found negligent, which liability, in the aggregate, could be substantial

[...] There is no guarantee that the CPUC would authorize cost recovery even if a court decision were to determine that the doctrine of inverse condemnation applies. In addition to such claims for property damage, interest and attorneys’ fees, the Utility could be liable for fire suppression costs, evacuation costs, medical expenses, personal injury damages, and other damages under other theories of liability.

In the year since, the state of PG&E’s legal and financial problems has turned out to be much worse than it anticipated at the time.

Cal Fire is still investigating the worst of the recent fires—the 2017 Tubbs Fire and the 2018 Camp Fire—either of which could expose PG&E even further.

Bloomberg’s projection of $1,000 per square foot for a potential (pardon the term) PG&E fire sale is about the only good news the company has received since November.

Although exorbitant, such a price is not outside the realms of possibility—345 Brannan, less than a mile away, sold for a record $1,300/square foot, “the highest price ever for a large San Francisco office building” according to the San Francisco Business Times.

Of course, those are very different buildings and deals, and the Brannan seller wasn’t staring down the barrel of a Chapter 11 bankruptcy.

Nevertheless, office space remains in the highest demand in the city—and PG&E is flush with property. For now.