Everything started to go up in smoke for Juul in the summer of 2019. The same month the e-cigarette maker closed on a 29-story building for its downtown San Francisco headquarters, the Board of Supervisors accused it of targeting children in its advertising. State lawsuits and a federal investigation followed.\u00a0<\/p>\n
Juul abandoned San Francisco then and there, never moving into the offices at 123 Mission St. Now, after years of sitting mostly empty, the property, blocks from Salesforce Tower, is poised to change hands.<\/p>\n
A group headlined by New York-based Madison Capital has reached an agreement to buy the debt tied to the building and take control, sources say. The terms of the deal are not known, but the buyer is partnering with a subsidiary of Prudential Financial.<\/p>\n
The San Francisco Chronicle first reported (opens in new tab)<\/a> the deal. Jonathan Nachmani, head of acquisitions at Madison, told the paper the company expects to purchase the building through a deed in lieu of foreclosure in the \u201clow $90 million\u201d range, representing more than a 75% discount on the previous purchase price.\u00a0<\/p>\n Such a transaction involves the delinquent borrower \u201cpeacefully\u201d transferring ownership to the next party rather than being forced to do so through the foreclosure process.<\/p>\n Although no notices of default were ever filed against Juul, public records show the company took out a $220 million loan from Affinius Capital for the building purchase in 2019.\u00a0<\/p>\n Since the building nearly emptied out under ownership of the e-cigarette maker, it is likely that Juul fell behind or chose to avoid payment on its debt. A spokesperson for Affinius\u2019 investments in California did not respond to a request for comment.\u00a0<\/p>\n The 363,000-square-foot building is 13% leased, according to CoStar. Listings are offering contiguous space for a single tenant, as Juul initially envisioned. If split, each floor available averages about 16,000 square feet.\u00a0<\/p>\n The tower was built in 1987 by the Shorenstein Company<\/a>, and its lobby was renovated in 2010 by Gensler.\u00a0<\/p>\n Madison Capital is new to the San Francisco commercial real estate market, which has seen property valuations plummet because of pandemic shutdowns.\u00a0<\/p>\n The firm recently opened an office at another skyscraper that is similarly under financial distress, 45 Fremont St. Madison Capital is a frontrunner to acquire the debt<\/a> on that building too.\u00a0<\/p>\n