Juul puts San Francisco office building back on the market: $174 million, down from $450 million

Blue Hole New Consumer report, October 18, according to foreign news reports, Juul Labs, the former SAN Francisco-based e-cigarette company, has restarted its efforts to sell a 29-story office building in South Market. The price is $174 million.

The Washington, D.C.-based company has re-listed the 387,600-square-foot tower at 123 Mission Street after an unsuccessful attempt to sell it in 2020, the San Francisco Business Times reported, citing unnamed sources.

Newmark is listed at $450 per square foot.

Juul paid $397 million (more than $1,000 per square foot) for the four-year-old building when it bought it from Northwood Investors in 2019. When it was put up for sale a year later, it asked for $450 million.

The vaping company will put the property up for sale -- if it can be sold. According to the Business Times, the deal was muddied by CMBS loans.

Two office properties listed last summer - a 620,000-square-foot building at 550 California Street by Wells Fargo and a 374,000-square-foot building at 455 Market Street by UBS Real Estate Investors - were withdrawn after offers fell flat.

Wells Fargo wants $160 million, UBS $280 million. Both properties are in the financial district, as is 123 Mission in Juul.

The pandemic has upended San Francisco's office market, with vacancy rates at a record 25.5% at the end of last month, up 20% from a year earlier, according to CBRE. Other tracking firms put a lot of empty offices at slightly lower prices.

Workers have been slow to return to the city center, and office use is down 40 percent from before the pandemic spread, according to security firm Kastle Systems.

Office values in the city have fallen nearly 40 per cent per square foot from a high in December 2020, according to MSCI Real Assets.

The decline reflects a broader economic slowdown in San Francisco, with falling home prices, declining employment and lagging tourism.

In June, the Food and Drug Administration ordered Juul, which is partly owned by tobacco giant Altria, to remove all of its e-cigarettes from the market for failing to demonstrate that its products were suitable to protect public health.

Selling the Juul building will set a benchmark for overall pricing, according to local real estate experts. The market is beset by high interest rates, empty offices and a lack of compensation for sales.

"Once something sells, it may lead to more sales." "An unidentified source told the Business Times.

Last year was marked by some notable San Francisco office sales. The buildings at 510 Townsend Street and 505 Brannan Street were previously leased to Stripe and Pinterest, respectively, for $572 million. Another building at 153 Townsend leased to Ancestry.com sold for $225 million.

According to sources, some are predicting a wave of office deals next year -- and some distress. This could mean the keys being handed back to the lender, or the owner cutting his losses and selling at a discount.