FDIC Terminates First Republic’s 212K SF Hudson Yards Office Lease
Following its failure earlier this year, First Republic Bank's large new Hudson Yards office space is getting handed back over to its landlord, Bisnow has learned.
The Federal Deposit Insurance Corp. has terminated First Republic's 212K SF lease at 410 10th Ave., an executive with 601W Cos., which owns the building, told Bisnow.
JPMorgan Chase bought most of First Republic's assets from the FDIC in May, but it never took over the space in the Hudson Yards neighborhood of Manhattan, a JPMorgan spokesperson said Friday.
The FDIC took possession of the lease from First Republic in late September and has been working on a termination agreement with 601W Cos. that went into effect within the last 10 days, said the 601W executive, who declined to be identified because they weren't authorized to speak publicly.
The FDIC didn't immediately respond to Bisnow’s request for comment, although federal and local government agencies are closed Friday in observance of Veterans Day.
First Republic pre-leased the Class-A office space at 410 10th Ave. in 2019 from SL Green, which acquired the property and undertook a $240M gut renovation. Amazon is the largest tenant at the 640K SF building, occupying 330K SF in a lease that expires in 2037, according to the Morningstar Credit database.
601W Cos. bought the building in December 2020 for $953M, then the largest office sale in the U.S. since the onset of the pandemic. JPMorgan Chase provided a $705M debt package for the acquisition, The Real Deal reported, which was securitized into several CMBS loans that are set to mature in 2028.
The senior debt totals $565M, with another $140M in mezzanine financing, according to documents filed when the loan was securitized. First Republic’s lease in the building was due to expire in September 2036.
The request for a lease termination triggered a clause in the loan for 601W Cos. that requires the borrower to deposit all excess cash flow from 410 10th Ave. into an account controlled by the loan's servicer. The servicer placed the loan on a watchlist as a result.
The building is cash flow-positive even without rent from First Republic, the executive said, adding that the landlord is already speaking to at least two tenants looking to occupy the space left by the failed bank. The space is being marketed by JLL.
First Republic moved into the fully furnished space in 2020, but because of the pandemic and flexible work policies, it “never fully occupied it,” according to the executive.
“It’s not the outcome we wanted, for First Republic to leave, but we have the bones that you want in a building,” the person said.
Other tenants in the building include bakery Maman, which has a ground-floor lease in the property, and Hudson Yards Construction LLC, which occupies 38K SF in a lease due to expire next month, according to Morningstar Credit's database.
Rents in the area have increased since the onset of the pandemic, the spokesperson said. Asking rents for Class-A properties in the Penn Station submarket, where 410 10th Ave. sits, were $118.67 per SF during the third quarter, according to Cushman & Wakefield data. The submarket's vacancy rate was 22.5%.
The termination shows that the dust still hasn't settled following regional bank collapses this spring. Credit Suisse, Signature Bank and First Republic occupied approximately 2M SF in New York City alone as of March.
Ethan Rothstein contributed reporting to this story.
