Exclusive: Healthcare giant McKesson selling, leasing back San Francisco HQ
McKesson Corp., the fifth-largest U.S. public company by revenue, is listing its San Francisco headquarters at One Post St. for sale, with plans to lease back a portion of the building.
The tower is one of the most prominent buildings along Market Street, adjacent to the Montgomery BART station, and McKesson (NYSE: MCK) will maintain the property as its company headquarters. The company, which is the largest pharmaceutical distributor in North America, plans to have about 1,200 employees in the building by 2017, consolidating workers from other offices in the city including 123 Mission St. It will occupy 200,000 square feet of the 488,882-square-foot building under the leaseback. It wasn’t clear what McKesson’s rent would be. Following McKesson’s consolidation, around 25 percent of the building will be vacant, said a source familiar with the property.
“The sale-leaseback is a strategic opportunity to free up a significant amount of capital. We will invest these resources back into our employees and our customers, and continue our focus on driving shareholder value,” said Mike Huaco, senior vice president of corporate real estate at McKesson, in a statement.
McKesson’s property is another prominent listing amid record-high activity and pricing in San Francisco’s investment market, and the company sees the strong market as an attractive time to sell. The source said that the building could sell in the mid-$600s per square foot, more than $300 million. McKesson has owned 100 percent of the building since 2012, when it bought Glenborough Realty Trust’s 50 percent stake, according to property records. McKesson initially had a 50 percent stake when the property was built in 1969.
McKesson is also planning to renovate its office space with a more open floor plan, new work stations and increased natural light. Huaco said the investments would lead to “better employee collaboration and overall workplace wellness.”
Rob Hielscher, managing director of brokerage JLL, who is marketing the property, said the tower’s central downtown location, McKesson’s continued presence in the building and opportunity for more renovations would appeal to a wide range of investors. A new owner could renovate the space not occupied by McKesson as part of a value-add strategy, he said.
“It’s a very rare opportunity to buy a landmark San Francisco office tower, with a big chunk of it leased to a Fortune 5 company,” said Hielscher. He said that the property’s attractive mix of stability and growth opportunity would appeal to a broad pool of investors. Both domestic and international buyers have flocked to San Francisco during the latest real estate boom, and the city is seen as a safe haven with strong job growth.
“San Francisco continues to be one of the most strongest markets in the U.S.,” said Hielscher. “We don’t see any investor interest declining.”
In March, McKesson announced it was laying off 1,600 employees companywide. The layoffs includ ed 158 employees in San Francisco, according to a notice filedwith the state’s Employment Development Department. The building sale isn’t related to the downsizing.
