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San Francisco

Bay Area landlords sue FDIC over rejected First Republic Bank leases

Lawsuit claims agency lowballed unpaid rent claims after lender collapse in May 2023

First Republic's Mike Roffler2121 North California Boulevard (Getty, First Republic Bank, calplaza)
First Republic's Mike Roffler2121 North California Boulevard (Getty, First Republic Bank, calplaza)

Bay Area office landlords have filed separate lawsuits against the Federal Deposit Insurance Corporation, accusing the agency of giving lowball offers to settle unpaid rent claims against shuttered lender First Republic Bank.  

The three lawsuits, which involve rejected First Republic leases in Walnut Creek, Noe Valley and Greenbrae, outline claims of $48.3 million in unpaid rent. Out of that total, the FDIC only approved payouts totaling nearly $1.5 million. 

The FDIC was appointed as the receiver of the failed bank in May 2023. The closure was the second-largest bank collapse in the history of the United States, behind the failure of Washington Mutual in 2008. J.P. Morgan acquired First Republic Bank through an auction in April last year.   

The biggest claim relates to California Plaza, a 10-story office building in Walnut Creek. First Republic signed an 88,000-square-foot lease at the property, located at 2121 North California Boulevard, in March 2022, court records show. That transaction was one of the largest lease deals in Walnut Creek for the second quarter of 2022, according to a report from Colliers. 

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In its complaint, the owner of California Plaza, an entity managed by commercial brokerage Newmark Knight Frank, claims that the FDIC took more than seven months to repudiate the lease. The plaintiff claims that this “unreasonable delay” led to “lost opportunities to lease the premises to other tenants.” 

In September, Newmark submitted a claim of $47 million. It also claimed that “at a minimum,” it is entitled to $3.9 million in unpaid rent dating to when the lease was repudiated in December 2023. In response, the FDIC approved a $1.4 million payment, or 3 percent  of the claim. According to the complaint, the FDIC stopped paying rent in August 2023 and First Republic has yet to vacate the property. 

One of the other cases against the FDIC relates to 505 Sir Francis Drake Boulevard in Greenbrae, a low-slung standalone office buildling. An entity managed by investor Soheyla Hifai claims she is owed $1.3 million. The FDIC only allowed a $23,000 portion of her claim. Meanwhile, Noe Valley LLC, which owns 3936 and 3938 24th Street in Noe Valley, said that it is owed $500,000 in unpaid rent and construction costs for the retail location. The FDIC approved a payment of $6,239.

First Republic Bank will cease to exist on May 24, with its remaining 62 branches across the country set to close. The closures will include 25 locations in the Bay Area. 

The FDIC declined to comment.