First Republic Poised to Shed SF Real Estate

The reported spinoff of assets by First Republic Bank could start at home.

The beleaguered San Francisco-based bank, now looking to divest up to $100 billion in assets to shore up its balance sheet, also plans to spin off real estate holdings, which include its headquarters at 111 Pine Street, the San Francisco Business Times reported.

The corporate offices now stretch across three buildings and two blocks in Downtown.

The company’s annual report filed with the Federal Deposit Insurance Corp. doesn’t list where and how much space it leases – but unidentified real estate sources told the Business Times it has 750,000 square feet.

More than half of its 7,200 employees are based in the Bay Area, and the company said it will lay off 20 to 25 percent of its workforce this quarter.

Before the pandemic, First Republic had worked to create an urban campus clustered around Pine, Market and Front streets — which the bank is likely looking to put on the market, insiders said.

The bank’s headquarters at 111 Pine Street in the Financial District is 158,000 square feet. It has leased the space since 1989 from Double Wood Investments, based in San Francisco.

First Republic’s biggest lease is at 1 Front Street next door, which now includes nearly 455,000 square feet of offices owned by Paramount Group, based in New York. Across the street, the bank also leases 132,000 square feet at 388 Market Street, owned by San Francisco-based Honorway Investment.

Plans by First Republic to cut its real estate holdings, announced Monday as the bank reported it had lost $102 billion in deposits during the first quarter, raise many questions, according to one local broker.

“Will it be attractive to a sublessee? Will they be able to transfer their signage rights on the property if they have existing signage in place? Tenants are always concerned with the motivation behind the sublessor and the space being subleased. Is it a distress situation?” Tony Zucker, executive vice president at Dunhill Partners West, asked the Business Times.

“If the sublandlord defaults, the tenant will be dealing with the landlord directly,” he said. “In a market like today, a landlord may be very open to a direct lease with a potential tenant if the landlord is concerned about the status of the sublessor, in this case First Republic Bank.”

Across the U.S., First Republic operates 84 banking offices and nine additional offices used for lending, trust and wealth management services, regulatory filings show.

Shedding offices in San Francisco would add to a glut of offices in a market where vacancy now stands at a record 32.7 percent, according to Savills.

— Dana Bartholomew