R1 Picks San Francisco’s 140 New Montgomery as New HQ for AI Lab

Tony Bennett once crooned about leaving his heart in San Francisco and — some 63 years later — R1 has decided to make the city the heart of its artificial intelligence lab’s operations. 

R1 — a healthcare revenue management company that provides services for hospitals, health care systems and physicians — just leased 12,453 square feet at San Francisco’s 140 New Montgomery to serve as its new AI lab’s headquarters, Commercial Observer can first report. 

The lab, R37, was launched in March by R1 and joint venture partner Palantir Technologies with a goal of quickly scaling health care revenue solutions. R1 — which was taken private by TowerBrook and CD&R last year — is already a significant player in the health care administration space, while Palantir is a leader in AI systems. 

Starting in the second quarter of 2026, R37 will fully occupy the seventh floor of Pembroke’s 140 New Montgomery for seven and a half years. With room for 70 employees, its space will include 15 private offices, 56 desks and six conference rooms. 

Earlier this month, R1 launched its Phare Operating System, the healthcare industry’s first AI-driven revenue operating system, and R37’s new HQ builds on —and creates a physical space for — that building momentum.

“We believe that the current trajectory of spend in health care and its revenue cycle is unsustainable, and so as the company transitioned from what was previously a public entity to a private one, part of that thesis was that we can leverage technology to meaningfully disrupt the cost curve of health care and start to make it more affordable by addressing the economics of processing in the revenue cycle,” Chris Hartemayer, executive vice president of enterprise operations for R1, told CO. 

“Coming out of that transaction, which closed in December of last year, we embarked on that journey, and we started by picking an enterprise-wide, AI-native partnership with Palantir and infusing that partnership with top talent from our engineering group as well as our operations group in a dedicated, focused environment — which we called our R37 lab,” Hartemayer said. 

As the lab got underway, R1 and Palantir knew they had to invest not only in its technology platform but also the talent to support it. That meant a significant operating base. 

“The reason for acquiring office space in San Francisco came about from us asking how we’d support that growth that we knew that we were going to embark upon,” Hartemayer said. “That question is also about how we serve our existing customers, because we want to be able to deliver this new agentic solution to who we serve — which is over 95 of the top 100 health systems in the U.S., and over $80 billion in outpatient service revenue that we serve on an end-to-end basis.” 

R1 is headquartered in Chicago and also has a large footprint in Salt Lake City, but when it came to a home for R37 there was a standout choice. “To Chris’s point, we wanted to tap into the tech talent in our focus on AI services and, through other acquisitions that the company has done through the years, we also already have an employee base in the Bay Area,” said Corey Perman, R1’s executive vice president and chief risk and compliance officer. 

The firm also recently made an — undisclosed — acquisition in New York, meaning it will soon have tech-focused bases on both coasts. 

“We felt it was really important to add those assets in San Francisco and New York to make sure that we were attracting the highest-caliber AI researchers and AI engineers to supplement our growth,” Hartemeyer said.

The 26-story building, South of Market district building at 140 New Montgomery was erected in 1925 as the headquarters for the Pacific Telephone and Telegraph Company. It fittingly earned the nickname of the “Telephone Building” and, at 435 feet, was the tallest building in San Francisco for a time. (Today, that crown has been taken by the city’s SalesForce Tower, which rises 1,070 feet.) Its amenities include a cafe, a bar, a restaurant and a spa. 

Perman, Hartemayer and their colleagues spent time looking at a number of buildings in San Francisco’s financial district as well as other parts of the city that have continued to rebound and grow post-COVID, but 140 New Montgomery was one around which they quickly coalesced. 

First, there was the building’s history, but “it also had all the contemporary features a modern workforce wants, and the space that lends itself to the way we want to work collaboratively, in a tech-focused way,” Perman said. “We’re in the process of designing and building out areas where developers, engineers and tech-focused teams can sit in open spaces and work together, but also the conference rooms, executive meeting rooms, private offices and all of that. It’s a building that has bicycle facilities and, importantly, is also close to public transportation. We’re very excited about it.” 

When employees move in to the space next year they’ll get to work on revolutionizing procedures ranging from patient admitting to insurance billing and collections, and everything in between. 

It also comes at a time where San Francisco is on a clear upward swing — in no small part due to demand from AI-powered firms like R1. 

 “What we’ve seen and heard from our partners we’ve been working with on our real estate efforts is that the occupancy rates are picking up in the area we’ll be in and the business district more generally, and the rate at which employees are coming into offices is picking up again too, particularly over the last 18 months,” Perman said. “So you’ve got to return-to-office vibrancy on top of companies taking more space or building out their own spaces. So, there’s definitely an upward trajectory in everything we’re experiencing and hearing about in San Francisco.” 

Cathy Cunningham can be reached at cunningham@commercialobserver.com.