The 29-story office building at 123 Mission St. in the heart of San Francisco’s financial district has sold, providing a stark example of the rise and fall of the city’s pre-pandemic tech boom.
Embattled e-cigarette maker Juul Labs purchased a 360,000-square-foot office building three blocks from Salesforce Tower for nearly $400 million in 2019, during a period of rapid growth as the tech industry boomed. The tower is designed to house the company’s large local workforce. But as the pandemic gripped the city in 2020, 123 Mission became a poster child for the collapse of the real estate market, facing severe vacancy rates and multiple failed attempts to lease and sell the property.
While the building was originally Juul’s headquarters, the company left San Francisco without fully relocating its workforce — estimated at one point to be 3,000 employees. Juul was still headquartered in the Dogpatch area when it purchased Financial District skyscrapers for a massive expansion, but by mid-2020, the company had cut more than half its workforce.
Debt associated with the property was sold Friday for less than $100 million to PGIM, the investment arm of Madison Capital Corp. and Prudential Financial Corp., which now has the option to formally take control of the building through foreclosure or negotiate a transfer, multiple sources confirmed to The Chronicle. By comparison, Juul paid more than $1,000 per square foot for 123 Mission more than five years ago.
While the exact terms of the deal are unclear, Madison’s director of acquisitions Jonathan Nachmani said the debt was purchased in the “low $90 million” range, meaning Madison acquired the tower for less than 25% of its pre-pandemic value.
Neither Juul nor Affinius Capital, Juul’s lender that sold debt on the property last week, responded to requests for comment Monday. Real estate brokerages Newmark and Align Real Estate, which facilitated the deal between Madison and Affinius, also declined to comment. Public records show that Affinius, which previously operated as Square Mile Capital Management LLC, provided a $220 million loan for Juul to acquire 123 Mission.
The layoffs come as Juul faces increasing city and state scrutiny of its marketing practices amid what lawmakers call a “teen vaping epidemic.” The city’s Board of Supervisors accused the company’s products of targeting children and voted unanimously in the summer of 2019 to ban the sale of most e-cigarettes without U.S. Food and Drug Administration marketing approval, including those made by Juul.
