Juul Shrinks Hometown Footprint After Job Cuts and Scrutiny
Juul bought the tower in June after outgrowing its Pier 70 headquarters in San Francisco’s Dogpatch neighborhood.
(Bloomberg) -- Juul Labs Inc. is reducing its presence in its home city of San Francisco, as the embattled e-cigarette maker’s new management continues a far-reaching review of its operations.
The company is looking for a way to exit a WeWork location at Two Embarcadero Center in the city’s financial district, according to people familiar with the matter, at the same time it’s seeking to sell a nearby office tower it bought for about $400 million last year.
Juul’s building at 123 Mission Street could be a tempting target for prospective buyers. Marketing materials reviewed by Bloomberg News show the property would have nearly 225,000 square feet available for lease, a vast swath of space in a city known for sky-high commercial rents. Google parent Alphabet Inc., Salesforce.com Inc. and other technology icons have offices nearby.
Juul bought the tower in June after outgrowing its Pier 70 headquarters in San Francisco’s Dogpatch neighborhood. It has been shuttling employees between multiple offices throughout the city, and has employees on three floors at 123 Mission Street.
The company is retrenching after a vaping backlash that culminated in new U.S. curbs on flavored e-cigarette products. In November, Juul said it would cut 650 employees, or about 16% of its global workforce, as part of a plan to trim $1 billion in costs.
Juul spokesman Austin Finan said that while the company is evaluating its ownership of 123 Mission Street, it will retain a substantial amount of leased office space across the city.
“We remain committed to our presence in San Francisco, which is where Juul Labs was founded and where many of our talented employees live,” Finan said in a statement.
A representative for WeWork declined to comment.
Growing Pains
The decision to buy was a rare move in a market where even deep-pocketed tech giants often lease, but Juul had struggled to secure enough room in San Francisco as it rapidly expanded. Real-estate brokers found that landlords were worried about the risk of renting to a company that sold vaping products, according to two people familiar with the situation who asked not to be identified discussing private negotiations.
San Francisco, which passed a ban on the sale of e-cigarettes last summer, limits construction of office buildings because of a voter-approved measure dating to the 1980s. In recent years, tech companies like Google and Facebook Inc. rushed to secure space in the city, contributing to soaring rents and intense competition among tenants.
The shortage of a large amount of readily available office space in the city could now help Juul as it looks to sell 123 Mission. Newmark Knight Frank, the broker handling the listing, highlighted in its marketing material that a buyer could take advantage of a “severe supply-demand imbalance” in the city’s office market.
A spokesman for Newmark had no immediate comment.
Juul paid $397 million for the tower in June, or about $1,149 a square foot, according to data from Real Capital Analytics.
Shifting Fortunes
When Juul bought the building it was flush with cash after taking a $12.8 billion investment from Marlboro-cigarette maker Altria Group Inc. in late 2018. But the industry’s fortunes shifted this summer after a mysterious lung illness later linked to illegal THC vaping products sickened thousands in the U.S.
The outbreak prompted fresh scrutiny of vaping companies including Juul, already the subject of multiple federal and Congressional investigations over its popularity among minors. Juul in September replaced Chief Executive Officer Kevin Burns with longtime Altria executive K.C. Crosthwaite, who opened a review of the company’s business after taking the helm. The company has said it never targeted minors.
Juul remains a focus of several Congressional inquiries. A House Energy and Commerce subcommittee on Wednesday said that Juul will testify in front of lawmakers on Feb. 5, alongside four other major e-cigarette manufacturers.
Crosthwaite has undertaken sweeping changes, suspending all product advertising and halting sales of sweet flavors like mango and mint in the U.S.
To contact the reporters on this story: Angelica LaVito in New York at alavito@bloomberg.net;Noah Buhayar in Seattle at nbuhayar@bloomberg.net
To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, ;Craig Giammona at cgiammona@bloomberg.net, Timothy Annett
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