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Real estate

NPS, Hines ink $2.5 bn US redevelopment project

The investment is the latest in a series of their joint venture's build-to-core property deals

By Sep 23, 2021 (Gmt+09:00)

Pacific Gas & Electric Co. (PG&E) headquarters in San Francisco (Courtesy of Hines)
Pacific Gas & Electric Co. (PG&E) headquarters in San Francisco (Courtesy of Hines)


South Korea's National Pension Service (NPS) and Hines have jointly acquired the headquarters complex of Pacific Gas & Electric Company (PG&E) in San Francisco for $800 million, as part of their build-to-core strategy.

Both NPS and the US real estate investment firm will spend an additional $1.7 billion to redevelop the property into two office buildings and a multifamily apartment complex of over 600 units, according to Hines and NPS.

Their ownership details about the real estate project were not disclosed.

"As part of the joint venture that NPS and Hines formed last year, this project aims to capture evolving demands by modernizing spaces across the real estate industry," Hines said in a statement released on Tuesday.

Last December, NPS set up a $1.5 billion joint venture with Hines to target a build-to-core strategy to create a portfolio of prime assets resilient to market uncertainties. The JV is seeking to invest up to $5 billion won in commercial real estate.

“This project embodies NPS and Hines’ belief that long-term investments in proven locations, supported by innovation and new technology, will capture sustained demand and create outsized value,” Scott Kim, NPS' real estate investment head, said in the statement.

Location of PG&E headquarters (Courtesy of Hines)
Location of PG&E headquarters (Courtesy of Hines)

The California utility giant PG&E sold the headquarters campus in downtown San Francisco to reduce administration costs. Last year, it declared Chapter 11 bankruptcy due to the financial impacts of northern California wildfires. It will move its head office to Oakland next year.

The project will involve the restoration and renovation of one of the office buildings dating back to the early 1900s, alongside the complete transformation of the other office tower.

Previously, Hines had completed a redevelopment project for the PG&E campus in the mid-1990s and served as property manager for a decade. 

NPS and Hines had teamed up on landmark investments in Europe and North America, including the 2010 purchase of Sony Center in Berlin; the 2017 development project of the skyscraper One Vanderbilt in New York City; as well as the redevelopment project of the luxury residential tower One Madison, also in New York, in 2020.

The NPS aims to boost overseas investments by 2024 to more than half of its assets which are projected to surpass 1,000 trillion won ($850 billion) by then. Currently, overseas investments account for 35% of the $780 billion pension scheme.

Overseas investments had returned 10.06% on average between 2015 and 2019 for the world's third-largest pension fund. It compared with the 3.69% return from domestic assets during the same period.

Write to Jae-fu Kim at hu@hankyung.com

Yeonhee Kim edited this article.

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