Morgan Stanley Real Estate is under contract to buy the Macy’s building in San Francisco for $250m (€229.6m), according to several sources.

The purchase of the 248,000 sqft Macy’s Men’s retail asset in Union Square is likely to be completed by early next year.

Macy’s declined to name the future buyer of the property, while Morgan Stanley also declined to comment.

The Prime Property – the core, open-ended fund managed by Morgan Stanley – is the likely candidate for future ownership of the asset.

The retailer is planning to use the proceeds from the sale to consolidate the Men’s store into its main Union Square store.

Macy’s will lease the Men’s store property for 2-3 years as it completes reconfiguration of the main store.

The retailer is looking at options for downtown stores in Minneapolis, on State Street in Chicago and in New York City’s Herald Square.

Macy’s has also formed a strategic alliance with Brookfield Asset Management to create increased value within its real estate portfolio.

Brookfield will have an exclusive right for up to 24 months to create a pre-development plan for each of Macy’s 50 real estate assets.

Brian Kingston, chief executive at Brookfield Property Group, said: “We are pleased to partner with Macy’s on this important initiative. The Macy’s portfolio includes some of the highest-quality real estate in the US, and we look forward to working with them to unlock value for their shareholders and enhance the shopping experience for their customers.”

The manager will have the option of continuing to identify and add assets into the alliance in the future.

Most assets in the relationship include owned and ground-lease stories and associated land.

Opportunity within the portfolio ranges from additional development to the complete redevelopment of existing stores.