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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended:
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each Class |
Trading Symbol |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ |
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Accelerated Filer |
☐ |
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Non-Accelerated Filer |
☐ |
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Smaller Reporting Company |
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Emerging Growth Company |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
As of October 13, 2023, there were
Table of Contents
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Item |
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Page Number |
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Part I. |
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Financial Information |
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Item 1. |
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3 |
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Consolidated Balance Sheets (Unaudited) as of September 30, 2023 and December 31, 2022 |
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3 |
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Consolidated Statements of Income (Unaudited) for the three and nine months |
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4 |
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5 |
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6 |
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8 |
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10 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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29 |
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Item 3. |
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58 |
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Item 4. |
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60 |
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Part II. |
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Other Information |
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Item 1. |
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61 |
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Item 1A. |
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61 |
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Item 2. |
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61 |
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Item 3. |
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61 |
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Item 4. |
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61 |
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Item 5. |
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61 |
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Item 6. |
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62 |
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63 |
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2
PART I – FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PARAMOUNT GROUP, INC.
C ONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
(Amounts in thousands, except share, unit and per share amounts) |
September 30, 2023 |
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December 31, 2022 |
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Assets |
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Real estate, at cost |
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Land |
$ |
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$ |
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Buildings and improvements |
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Accumulated depreciation and amortization |
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(
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) |
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(
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Real estate, net |
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Cash and cash equivalents |
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Restricted cash |
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Accounts and other receivables |
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Real estate related fund investments |
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Investments in unconsolidated real estate related funds |
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Investments in unconsolidated joint ventures |
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Deferred rent receivable |
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Deferred charges, net of accumulated amortization of $
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Intangible assets, net of accumulated amortization of $
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Other assets |
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Total assets (1) |
$ |
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$ |
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Liabilities and Equity |
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Notes and mortgages payable, net of unamortized deferred financing costs
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$ |
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$ |
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Revolving credit facility |
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Accounts payable and accrued expenses |
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Dividends and distributions payable |
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Intangible liabilities, net of accumulated amortization of $
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Other liabilities |
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Total liabilities (1) |
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Paramount Group, Inc. equity: |
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Common stock $
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Additional paid-in-capital |
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Earnings less than distributions |
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(
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) |
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(
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Accumulated other comprehensive income |
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Paramount Group, Inc. equity |
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Noncontrolling interests in: |
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Consolidated joint ventures |
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Consolidated real estate related funds |
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Operating Partnership (
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Total equity |
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Total liabilities and equity |
$ |
|
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$ |
|
|
See notes to consolidated financial statements (unaudited).
3
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
|
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For the Three Months Ended |
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For the Nine Months Ended |
|
||||||||||
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September 30, |
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September 30, |
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||||||||||
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(Amounts in thousands, except share and per share amounts) |
2023 |
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2022 |
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2023 |
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2022 |
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||||
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Revenues: |
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Rental revenue |
$ |
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$ |
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$ |
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$ |
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Fee and other income |
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Total revenues |
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Expenses: |
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Operating |
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Depreciation and amortization |
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General and administrative |
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Transaction related costs |
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Total expenses |
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Other income (expense): |
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||||
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Income (loss) from real estate related fund investments |
|
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(
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) |
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(Loss) income from unconsolidated real estate related funds |
|
(
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) |
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(
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) |
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Loss from unconsolidated joint ventures |
|
(
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) |
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(
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) |
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(
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) |
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(
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) |
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Interest and other income, net |
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Interest and debt expense |
|
(
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) |
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(
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) |
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(
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) |
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(
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) |
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(Loss) income before income taxes |
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(
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) |
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(
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) |
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Income tax expense |
|
(
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) |
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(
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) |
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(
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) |
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(
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) |
|
Net (loss) income |
|
(
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) |
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(
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) |
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Less net (income) loss attributable to noncontrolling interests in: |
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|||||
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Consolidated joint ventures |
|
(
|
) |
|
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(
|
) |
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|
(
|
) |
|
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(
|
) |
|
Consolidated real estate related funds |
|
|
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Operating Partnership |
|
|
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|
|
|
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|
|
|
|
|
(
|
) |
|
Net (loss) income attributable to common stockholders |
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
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(Loss) Income per Common Share - Basic: |
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||||
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(Loss) income per common share |
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
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|
Weighted average shares outstanding |
|
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||||
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(Loss) Income per Common Share - Diluted: |
|
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||||
|
(Loss) income per common share |
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements (unaudited).
4
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Net (loss) income |
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
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|
|
||||
|
Change in value of interest rate swaps and interest rate caps |
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
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|
|
Pro rata share of other comprehensive (loss) income of
|
|
(
|
) |
|
|
|
|
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|
(
|
) |
|
|
|
|
|
Comprehensive (loss) income |
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Less comprehensive (income) loss attributable to noncontrolling
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Consolidated real estate related funds |
|
|
|
|
|
|
|
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|
|
|
|
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|
Operating Partnership |
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
Comprehensive (loss) income attributable to common
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
See notes to consolidated financial statements (unaudited).
5
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
|
|
|
|
|
|
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Accumulated |
|
|
Noncontrolling Interests in |
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|||||||||||||||
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Additional |
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Earnings |
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Other |
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Consolidated |
|
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Consolidated |
|
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|||||||||
|
(Amounts in thousands, except per share |
|
Common Shares |
|
|
Paid-in- |
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Less than |
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Comprehensive |
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Joint |
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Real Estate |
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Operating |
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Total |
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||||||||||||
|
and unit amounts) |
|
Shares |
|
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Amount |
|
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Capital |
|
|
Distributions |
|
|
Income |
|
|
Ventures |
|
|
Related Funds |
|
|
Partnership |
|
|
Equity |
|
|||||||||
|
Balance as of June 30, 2023 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net (loss) income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Common shares issued upon redemption of
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
Common shares issued under Omnibus
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Dividends and distributions ($
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Contributions from noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Distributions to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
- |
|
|
|
(
|
) |
|
Change in value of interest rate swaps and
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Pro rata share of other comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Amortization of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
Balance as of September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|||||||||
|
Balance as of June 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net (loss) income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
Common shares issued upon redemption of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
Common shares issued under Omnibus
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Repurchases of common shares |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Dividends and distributions ($
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Distributions to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Change in value of interest rate swaps and
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Pro rata share of other comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Amortization of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
Other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Balance as of September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
See notes to consolidated financial statements (unaudited).
6
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Noncontrolling Interests in |
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
Other |
|
|
Consolidated |
|
|
Consolidated |
|
|
|
|
|
|
|
|||||||||
|
(Amounts in thousands, except per share |
|
Common Shares |
|
|
Paid-in- |
|
|
Less than |
|
|
Comprehensive |
|
|
Joint |
|
|
Real Estate |
|
|
Operating |
|
|
Total |
|
||||||||||||
|
and unit amounts) |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Distributions |
|
|
Income |
|
|
Ventures |
|
|
Related Funds |
|
|
Partnership |
|
|
Equity |
|
|||||||||
|
Balance as of December 31, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net (loss) income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
|
|
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Common shares issued upon redemption of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
Common shares issued under Omnibus
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Dividends and distributions ($
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Contributions from noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
Distributions to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
|
- |
|
|
|
(
|
) |
|
Change in value of interest rate swaps and
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Pro rata share of other comprehensive loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Amortization of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
Balance as of September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Balance as of December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Net income (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
|
|
|
|
Common shares issued upon redemption of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
Common shares issued under Omnibus
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Repurchases of common shares |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Dividends and distributions ($
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
(
|
) |
|
Distributions to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Change in value of interest rate swaps and
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Pro rata share of other comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Amortization of equity awards |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
Other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(
|
) |
|
Balance as of September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
See notes to consolidated financial statements (unaudited).
7
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the Nine Months Ended September 30, |
|
|||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
||
|
Net (loss) income |
$ |
(
|
) |
|
$ |
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by
|
|
|
|
|
|
||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Straight-lining of rental revenue |
|
(
|
) |
|
|
(
|
) |
|
Amortization of stock-based compensation expense |
|
|
|
|
|
|
|
|
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
Loss from unconsolidated joint ventures |
|
|
|
|
|
|
|
|
Distributions of earnings from unconsolidated joint ventures |
|
|
|
|
|
|
|
|
Realized and unrealized losses on real estate related fund investments |
|
|
|
|
|
- |
|
|
Loss (income) from unconsolidated real estate related funds |
|
|
|
|
|
(
|
) |
|
Distributions of earnings from unconsolidated real estate related funds |
|
|
|
|
|
|
|
|
Amortization of above and below-market leases, net |
|
(
|
) |
|
|
(
|
) |
|
Other non-cash adjustments |
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
||
|
Real estate related fund investments |
|
(
|
) |
|
|
- |
|
|
Accounts and other receivables |
|
|
|
|
|
(
|
) |
|
Deferred charges |
|
(
|
) |
|
|
(
|
) |
|
Other assets |
|
(
|
) |
|
|
(
|
) |
|
Accounts payable and accrued expenses |
|
(
|
) |
|
|
|
|
|
Other liabilities |
|
|
|
|
|
(
|
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Cash Flows from Investing Activities: |
|
|
|
|
|
||
|
Additions to real estate |
|
(
|
) |
|
|
(
|
) |
|
Investments in and contributions of capital to unconsolidated joint ventures |
|
(
|
) |
|
|
(
|
) |
|
Advances to a partner in One Steuart Lane |
|
(
|
) |
|
|
- |
|
|
Repayment of advances by a partner in One Steuart Lane |
|
|
|
|
|
- |
|
|
Contributions of capital to unconsolidated real estate related funds |
|
(
|
) |
|
|
(
|
) |
|
Due from affiliates |
|
- |
|
|
|
(
|
) |
|
Repayment of amounts due from affiliates |
|
- |
|
|
|
|
|
|
Distributions of capital from unconsolidated real estate related funds |
|
- |
|
|
|
|
|
|
Net cash used in investing activities |
|
(
|
) |
|
|
(
|
) |
See notes to consolidated financial statements (unaudited).
8
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
|
|
For the Nine Months Ended September 30, |
|
|||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
||
|
Cash Flows from Financing Activities: |
|
|
|
|
|
||
|
Repayment of notes and mortgages payable |
$ |
(
|
) |
|
$ |
- |
|
|
Proceeds from notes and mortgages payable |
|
|
|
|
|
- |
|
|
Contributions from noncontrolling interests in consolidated real estate related funds |
|
|
|
|
|
- |
|
|
Distributions to noncontrolling interests in consolidated real estate related funds |
|
(
|
) |
|
|
- |
|
|
Dividends paid to common stockholders |
|
(
|
) |
|
|
(
|
) |
|
Distributions paid to common unitholders |
|
(
|
) |
|
|
(
|
) |
|
Distributions to noncontrolling interests in consolidated joint ventures |
|
(
|
) |
|
|
(
|
) |
|
Settlement of accounts payable in connection with repurchases of common shares |
|
(
|
) |
|
|
- |
|
|
Debt issuance costs |
|
(
|
) |
|
|
- |
|
|
Repurchases of common shares |
|
- |
|
|
|
(
|
) |
|
Repurchase of shares related to stock compensation agreements
|
|
(
|
) |
|
|
(
|
) |
|
Net cash used in financing activities |
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
|
|
||
|
Net increase (decrease) in cash and cash equivalents and restricted cash |
|
|
|
|
|
(
|
) |
|
Cash and cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash at end of period |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Reconciliation of Cash and Cash Equivalents and Restricted Cash: |
|
|
|
|
|||
|
Cash and cash equivalents at beginning of period |
$ |
|
|
|
$ |
|
|
|
Restricted cash at beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash at beginning of period |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
||
|
Cash and cash equivalents at end of period |
$ |
|
|
|
$ |
|
|
|
Restricted cash at end of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents and restricted cash at end of period |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
||
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
||
|
Cash payments for interest |
$ |
|
|
|
$ |
|
|
|
Cash payments for income taxes, net of refunds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Non-Cash Transactions: |
|
|
|
|
|
||
|
Common shares issued upon redemption of common units |
|
|
|
|
|
|
|
|
Dividends and distributions declared but not yet paid |
|
|
|
|
|
|
|
|
Change in value of interest rate swaps and interest rate caps |
|
(
|
) |
|
|
|
|
|
Write-off of fully amortized and/or depreciated assets |
|
|
|
|
|
|
|
|
Additions to real estate included in accounts payable and accrued expenses |
|
|
|
|
|
|
|
|
Transfer of deposit to investment in unconsolidated joint ventures |
|
- |
|
|
|
|
|
|
Repurchase of common shares included in accounts payable and accrued expenses |
|
- |
|
|
|
|
|
See notes to consolidated financial statements (unaudited).
9
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As used in these consolidated financial statements, unless otherwise indicated, all references to “we,” “us,” “our,” the “Company,” and “Paramount” refer to Paramount Group, Inc., a Maryland corporation, and its consolidated subsidiaries, including Paramount Group Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership”). We are a fully-integrated real estate investment trust (“REIT”) focused on owning, operating, managing, acquiring and redeveloping high-quality, Class A office properties in select central business district submarkets of New York City and San Francisco. We conduct our business through, and substantially all of our interests in properties and investments are held by, the Operating Partnership. We are the sole general partner of, and owned approximately
As of September 30, 2023
, we owned and/or managed a portfolio of
Additionally, we have an investment management business, where we serve as the general partner of several real estate related funds for institutional investors and high net-worth individuals.
Basis of Presentation
The accompanying consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted. These consolidated financial statements include the accounts of Paramount and its consolidated subsidiaries, including the Operating Partnership. In the opinion of management, all significant adjustments (which include only normal recurring adjustments) and eliminations (which include intercompany balances and transactions) necessary to present fairly the financial position, results of operations and changes in cash flows have been made. The consolidated balance sheet as of December 31, 2022 was derived from audited financial statements as of that date but does not include all information and disclosures required by GAAP. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC.
Significant Accounting Policies
There are no material changes to our significant accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
10
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Use of Estimates
We have made estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates. The results of operations for the three and nine months ended September 30, 2023 , are not necessarily indicative of the operating results for the full year.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, which adds Accounting Standards Codification (“ASC”) Topic 848, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides temporary optional expedients and exceptions to ease financial reporting burdens related to applying current GAAP to modifications of contracts, hedging relationships and other transactions in connection with the transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. ASU 2020-04 was effective beginning March 12, 2020 to December 31, 2022. In January 2021, the FASB issued ASU 2021-01 to clarify that certain optional expedients and exceptions apply to modifications of derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and for calculating price alignment interest. ASU 2021-01 was effective beginning January 7, 2021 to December 31, 2022. In December 2022, the FASB issued ASU 2022-06 to extend the effectiveness date of ASU 2020-04 and ASU 2021-01 from December 31, 2022 to December 31, 2024. In June 2023, we entered into loan modifications in connection with the transition from LIBOR to Secured Overnight Financing Rate (“SOFR”) for our variable rate loans and we applied the practical expedient to all such modifications.
In August 2023, the FASB issued ASU 2023-05, an update to ASC Topic 805, Business Combinations. ASU 2023-05 clarifies existing guidance by requiring a joint venture to recognize and initially measure assets contributed and liabilities assumed at fair value, upon its formation. These amendments are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. We will apply the provisions of ASU 2023-05 to new joint ventures, as applicable, but do not believe the adoption of ASU 2023-05 will have a material impact on our consolidated financial statements.
11
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Real Estate Related Fund Investments (Fund X)
Real estate related fund investments on our consolidated balance sheets represent the investments of Paramount Group Real Estate Fund X, LP (“Fund X”), which invests in mezzanine loans. We are the general partner and investment manager of Fund X, which, prior to December 12, 2022, was accounted for under the equity method of accounting (see Note 4,
Investments in Unconsolidated Real Estate Related Funds
). Subsequent to December 12, 2022, we increased our ownership interest in Fund X to
The following table sets forth the details of income or loss from real estate related fund investments for the three and nine months ended September 30, 2023.
|
|
|
|
|
|
|
|
||
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
||
|
(Amounts in thousands) |
September 30, 2023 |
|
|
September 30, 2023 |
|
|
||
|
Net investment income |
$ |
|
|
|
$ |
|
|
|
|
Net realized losses |
|
- |
|
|
|
(
|
) |
|
|
Net unrealized gains (losses) |
|
|
|
|
|
(
|
) |
(1) |
|
Income (loss) from real estate related fund
|
|
|
|
|
|
(
|
) |
|
|
Less: noncontrolling interests in consolidated
|
|
(
|
) |
|
|
|
|
|
|
Income (loss) from real estate related fund
|
$ |
|
|
|
$ |
(
|
) |
|
Residential Development Fund (“RDF”)
We are also the general partner of RDF in which we own a
We are the general partner and investment manager of Paramount Group Real Estate Fund VIII, LP (“Fund VIII”) which invests in real estate and related investments. As of September 30, 2023
, our ownership interest in Fund VIII was approximately
Prior to December 12, 2022, we owned an
As of September 30, 2023 and December 31, 2022, our share of the investments in the unconsolidated real estate related funds was
$
12
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables summarize our investments in unconsolidated joint ventures as of the dates thereof and the income or loss from these investments for the periods set forth below.
|
(Amounts in thousands) |
|
Paramount |
|
As of |
|
|||||
|
Our Share of Investments: |
|
Ownership |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
712 Fifth Avenue (1) |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
Market Center |
|
|
|
|
|
|
|
|
|
|
|
55 Second Street (2) |
|
|
|
|
|
|
|
|
|
|
|
111 Sutter Street (3) |
|
|
|
|
- |
|
|
|
- |
|
|
1600 Broadway (2) |
|
|
|
|
|
|
|
|
|
|
|
60 Wall Street |
|
|
|
|
- |
|
(4) |
|
|
|
|
One Steuart Lane (2) |
|
|
|
|
|
|
|
|
|
|
|
Oder-Center, Germany (2) |
|
|
|
|
|
|
|
|
|
|
|
Investments in unconsolidated joint ventures |
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
||||||||||
|
(Amounts in thousands) |
September 30, |
|
|
September 30, |
|
|||||||||||||
|
Our Share of Net Income (Loss): |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||||
|
712 Fifth Avenue (1) |
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|||
|
Market Center |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|||
|
55 Second Street (2) |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|||
|
111 Sutter Street (3) |
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
(
|
) |
|||
|
1600 Broadway (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|||
|
60 Wall Street |
|
- |
|
(4) |
|
(
|
) |
|
|
(
|
) |
(4) |
|
|
|
|||
|
One Steuart Lane (2) |
|
(
|
) |
(6) |
|
(
|
) |
|
|
(
|
) |
(6) |
|
(
|
) |
|||
|
Oder-Center, Germany (2) |
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|||
|
Loss from unconsolidated joint ventures |
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|||
13
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables provide the combined summarized financial information of our unconsolidated joint ventures as of the dates thereof and for the periods set forth below.
|
(Amounts in thousands) |
As of |
|
|||||
|
Balance Sheets: |
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Real estate, net |
$ |
|
|
|
$ |
|
|
|
Cash and cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
|
|
For-sale residential condominium units (1) |
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Total assets |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
||
|
Notes and mortgages payable, net |
$ |
|
|
|
$ |
|
|
|
Intangible liabilities, net |
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
|
|
|
$ |
|
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
||||||||||
|
(Amounts in thousands) |
September 30, |
|
|
September 30, |
|
|
||||||||||
|
Income Statements: |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Rental revenue |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Other income (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and debt expense |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
Impairment loss (3) |
|
(
|
) |
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
|
Loss before income taxes |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
Income tax expense |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
Net loss |
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
14
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables summarize our intangible assets (acquired above-market leases and acquired in-place leases) and intangible liabilities (acquired below-market leases) and the related amortization as of the dates thereof and for the periods set forth below.
|
|
As of |
|
|||||
|
(Amounts in thousands) |
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Intangible assets: |
|
|
|
|
|
||
|
Gross amount |
$ |
|
|
|
$ |
|
|
|
Accumulated amortization |
|
(
|
) |
|
|
(
|
) |
|
|
$ |
|
|
|
$ |
|
|
|
Intangible liabilities: |
|
|
|
|
|
||
|
Gross amount |
$ |
|
|
|
$ |
|
|
|
Accumulated amortization |
|
(
|
) |
|
|
(
|
) |
|
|
$ |
|
|
|
$ |
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Amortization of above and below-market leases, net
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
|
$ |
|
|
|
Amortization of acquired in-place leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth amortization of acquired above and below-market leases, net and amortization of acquired in-place leases for the three-month period from October 1, 2023 through December 31, 2023, and each of the five succeeding years commencing from January 1, 2024.
|
(Amounts in thousands) |
|
Above and
|
|
|
In-Place Leases |
|
||
|
2023 |
|
$ |
|
|
|
$ |
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
|
|
2027 |
|
|
|
|
|
|
|
|
|
2028 |
|
|
|
|
|
|
|
|
15
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On September 27, 2023, a joint venture in which we have a
The following table summarizes our consolidated outstanding debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
Interest Rate |
|
|
|
|
||||||
|
|
Maturity |
|
Fixed/ |
|
as of |
|
|
As of |
|
||||||
|
(Amounts in thousands) |
Date |
|
Variable Rate |
|
September 30, 2023 |
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
|||
|
Notes and mortgages payable: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
1633 Broadway (1) |
|
|
Fixed |
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
One Market Plaza (1) |
|
|
Fixed |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
1301 Avenue of the Americas |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
Fixed (3) |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
SOFR +
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
31 West 52nd Street |
|
|
Fixed |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
300 Mission Street (1) |
|
|
Fixed |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Total notes and mortgages payable |
|
|
|
% |
|
|
|
|
|
|
|
|
|||
|
Less: unamortized deferred financing costs |
|
|
|
|
|
(
|
) |
|
|
(
|
) |
||||
|
Total notes and mortgages payable, net |
|
|
|
|
$ |
|
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
$750 Million Revolving
|
|
|
SOFR +
|
n/a |
|
|
$ |
- |
|
|
$ |
- |
|
||
16
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On July 29, 2021, in connection with the $
The tables below provide additional details on our interest rate swaps and interest rate caps that are designated as cash flow hedges.
|
|
|
Notional |
|
|
Effective |
|
Maturity |
|
Benchmark |
|
Strike |
|
|
Fair Value as of |
|
|||||||
|
Property |
|
Amount |
|
|
Date |
|
Date |
|
Rate |
|
Rate |
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
1301 Avenue of the Americas |
|
$ |
|
|
|
|
|
|
|
SOFR |
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
Total interest rate swap assets designated as cash flow hedges (included in "other assets") |
$ |
|
|
|
$ |
|
|
|||||||||||||||
|
|
|
Notional |
|
|
Effective |
|
Maturity |
|
Benchmark |
|
Strike |
|
|
Fair Value as of |
|
|||||||
|
Property |
|
Amount |
|
|
Date |
|
Date |
|
Rate |
|
Rate |
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
1301 Avenue of the Americas |
|
$ |
|
|
|
|
|
|
|
SOFR |
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
1301 Avenue of the Americas |
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LIBOR |
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% |
|
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- |
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|
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Total interest rate cap assets designated as cash flow hedges (included in "other assets") |
$ |
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$ |
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|||||||||||||||
We have agreements with various derivative counterparties that contain provisions wherein a default on our indebtedness could be deemed a default on our derivative obligations, which would require us to settle our derivative obligations for cash. As of September 30, 2023 , we did not have any obligations relating to our interest rate swaps or interest rate caps that contained such provisions.
Stock Repurchase Program
On November 5, 2019, we received authorization from our Board of Directors to repurchase up to $
17
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table sets forth changes in accumulated other comprehensive income by component for the three and nine months ended September 30, 2023 and 2022, respectively, including amounts attributable to noncontrolling interests in the Operating Partnership.
|
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For the Three Months Ended September 30, |
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|
For the Nine Months Ended September 30, |
|
||||||||||
|
(Amounts in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Amount of income related to the cash flow hedges recognized
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Amounts reclassified from accumulated other comprehensive
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
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|
Amount of income related to unconsolidated joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Amounts reclassified from accumulated other comprehensive
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
|
|
|
Consolidated Joint Ventures
Noncontrolling interests in consolidated joint ventures consist of equity interests held by third parties in 1633 Broadway, One Market Plaza and 300 Mission Street. As of September 30, 2023 and December 31, 2022, noncontrolling interests in our consolidated joint ventures aggregated
$
Consolidated Real Estate Related Funds
Noncontrolling interests in our consolidated real estate related funds consist of equity interests held by third parties in our Residential Development Fund and Fund X. As of September 30, 2023 and December 31, 2022, the noncontrolling interests in our consolidated real estate related funds aggregated
$
Operating Partnership
Noncontrolling interests in the Operating Partnership represent common units of the Operating Partnership that are held by third parties, including management, and units issued to management under equity incentive plans. Common units of the Operating Partnership may be tendered for redemption to the Operating Partnership for cash. We, at our option, may assume that obligation and pay the holder either cash or common shares on a
18
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In the normal course of business, we are the general partner of various types of investment vehicles, which may be considered VIEs. We may, from time to time, own equity or debt securities through vehicles, each of which are considered variable interests. Our involvement in financing the operations of the VIEs is generally limited to our investments in the entity. We consolidate these entities when we are deemed to be the primary beneficiary.
Consolidated VIEs
We are the sole general partner of, and owned approximately
|
|
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As of |
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|||||
|
(Amounts in thousands) |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Real estate, net |
|
$ |
|
|
|
$ |
|
|
|
Cash and cash equivalents and restricted cash |
|
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|
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Accounts and other receivables |
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Real estate related fund investments |
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Investments in unconsolidated joint ventures |
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Deferred rent receivable |
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Deferred charges, net |
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Intangible assets, net |
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Other assets |
|
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|
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|
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Total VIE assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
||
|
Notes and mortgages payable, net |
|
$ |
|
|
|
$ |
|
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
|
|
|
Intangible liabilities, net |
|
|
|
|
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|
|
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Other liabilities |
|
|
|
|
|
|
|
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|
Total VIE liabilities |
|
$ |
|
|
|
$ |
|
|
Unconsolidated VIEs
As of September 30, 2023
, the Operating Partnership held variable interests in entities that own the unconsolidated real estate related funds that were deemed to be VIEs.
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As of |
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|||||
|
(Amounts in thousands) |
|
September 30, 2023 |
|
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December 31, 2022 |
|
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||
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Investments |
|
$ |
|
|
|
$ |
|
|
|
|
Asset management fees and other receivables |
|
|
- |
|
|
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|
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Maximum risk of loss |
|
$ |
|
|
|
$ |
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|
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19
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Financial Assets Measured at Fair Value
The following table summarizes the fair value of our financial assets that are measured at fair value on our consolidated balance sheets as of the dates set forth below, based on their levels in the fair value hierarchy.
|
|
As of September 30, 2023 |
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|||||||||||||
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(Amounts in thousands) |
Total |
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|
Level 1 |
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|
Level 2 |
|
|
Level 3 |
|
||||
|
Real estate related fund investments |
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
|
Interest rate swap assets (included in "other assets") |
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
Interest rate cap assets (included in "other assets") |
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
Total assets |
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
As of December 31, 2022 |
|
|||||||||||||
|
(Amounts in thousands) |
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
|
Real estate related fund investments |
$ |
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
|
Interest rate swap assets (included in "other assets") |
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
Interest rate cap assets (included in "other assets") |
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
Total assets |
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
|
$ |
|
|
Real Estate Related Fund Investments
As of September 30, 2023
, real estate related fund investments were comprised of investments in two mezzanine loans made by Fund X. These investments are measured at fair value on our consolidated balance sheet and are classified as Level 3. The primary unobservable input used in determining the fair value of one mezzanine loan is the credit spread over the base rate, which was
The table below summarizes the changes in the fair value of real estate related fund investments that are classified as Level 3 for the three and nine months ended September 30, 2023.
|
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For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|
||
|
(Amounts in thousands) |
|
September 30, 2023 |
|
|
September 30, 2023 |
|
|
||
|
Beginning balance |
|
$ |
|
|
|
$ |
|
|
|
|
Additional investments |
|
|
|
|
|
|
|
|
|
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Net realized losses |
|
|
- |
|
|
|
(
|
) |
|
|
Net unrealized gains (losses) |
|
|
|
|
|
|
(
|
) |
(1) |
|
Ending balance |
|
$ |
|
|
|
$ |
|
|
|
Financial Liabilities Not Measured at Fair Value
Financial liabilities not measured at fair value on our consolidated balance sheets consist of notes and mortgages payable, and the revolving credit facility.
|
|
As of September 30, 2023 |
|
|
As of December 31, 2022 |
|
||||||||||
|
(Amounts in thousands) |
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
||||
|
Notes and mortgages payable |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Revolving credit facility |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total liabilities |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
20
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
We lease office, retail and storage space to tenants, primarily under non-cancellable operating leases which generally have terms ranging from
to
The following table sets forth the details of our rental revenue.
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Rental revenue: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fixed |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Variable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rental revenue |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table is a schedule of future undiscounted cash flows under non-cancellable operating leases in effect as of September 30, 2023, for the three-month period from October 1, 2023 through December 31, 2023, and each of the five succeeding years and thereafter commencing January 1, 2024.
|
(Amounts in thousands) |
|
|
||
|
2023 |
|
$ |
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
The following table sets forth the details of our fee and other income.
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
|||||||||||
|
|
September 30, |
|
|
September 30, |
|
|||||||||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
Fee income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Asset management |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Property management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, disposition, leasing and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fee and other income |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
21
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table sets forth the details of interest and debt expense.
|
|
|
|
|
|
|
|
||||||||||
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
(Amounts in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Interest expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest and debt expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Stock-Based Compensation
Our Amended and Restated 2014 Equity Incentive Plan provides for grants of equity awards to our executive officers, non-employee directors and employees in order to attract and motivate talent for which we compete. In addition, equity awards are an effective management retention tool as they vest over multiple years based on continued employment. Equity awards are granted in the form of (i) restricted stock and (ii) long-term incentive plan (“LTIP”) units, which represent a class of partnership interests in our Operating Partnership and are typically comprised of Performance-Based LTIP units, Time-Based LTIP units, Performance-Based Appreciation Only LTIP (“AOLTIP”) units and Time-Based AOLTIP units. We account for all stock-based compensation in accordance with ASC 718,
Compensation – Stock Compensation
. We recognized stock-based compensation expense of $
2023 Equity Grants
2023 Performance-Based Awards Program ( “ 2023 Performance Program ” )
On January 25, 2023, the Compensation Committee of our Board of Directors (the “Compensation Committee”) approved the 2023 Performance Program, a multi-year Performance-Based long-term incentive compensation program. Under the 2023 Performance Program, participants may earn awards in the form of LTIP units based on our achievement of rigorous Net Operating Income (“NOI”) goals over a
Time-Based Unit Awards Program (LTIP Units, AOLTIP Units and Restricted Stock)
On January 25, 2023, we also granted an aggregate of
22
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Incentive and Retention Plan Grants
On September 8, 2023, the Compensation Committee approved the grant of equity awards to a broad group of employees, including our executive officers, to further incentivize and align our executive officers and employees with our stockholders and to support employee retention (the “Incentive and Retention Plan”). The awards granted under the Incentive and Retention Plan were comprised of
Performance-Based AOLTIP units
The Performance-Based AOLTIP units will only be earned and eligible to be converted into common units if the highest consecutive
The Performance-Based AOLTIP units are subject to linear interpolation for performance between levels. In addition, the Performance-Based AOLTIP units are also subject to Time-Based vesting, with
Time-Based LTIP units
The Time-Based LTIP units are subject to Service-Based vesting, with
Completion of the 2020 Performance-Based Awards Program (“2020 Performance Program”)
The
23
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes our net (loss) income and the number of common shares used in the computation of basic and diluted income per common share, which includes the weighted average number of common shares outstanding and the effect of dilutive potential common shares, if any.
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
(Amounts in thousands, except per share amounts) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net (loss) income attributable to common stockholders |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Earnings allocated to unvested participating securities |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Numerator for (loss) income per common share -
|
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Denominator for basic (loss) income per common share -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive stock-based compensation plans (1) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Denominator for diluted (loss) income per common share -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
(Loss) income per common share - basic and diluted |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
24
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Management Agreements
We provide property management, leasing and other related services to certain properties owned by members of the Otto Family. We recognized fee income of $
We also provide asset management, property management, leasing and other related services to our unconsolidated joint ventures and real estate related funds. We recognized fee income of $
HT Consulting GmbH
We have an agreement with HT Consulting GmbH (“HTC”), a licensed broker in Germany, to supervise selling efforts for our joint ventures and private equity real estate related funds (or investments in feeder vehicles for these funds) to investors in Germany, including distribution of securitized notes of feeder vehicles for Fund X. Pursuant to this agreement, we have agreed to pay HTC for the costs incurred plus a mark-up of
ParkProperty Capital, LP
ParkProperty Capital, LP (“ParkProperty”), an entity partially owned by Katharina Otto-Bernstein (a member of our Board of Directors), leased
Mannheim Trust
A subsidiary of Mannheim Trust leases
Other
We have entered into an agreement with Kramer Design Services (“Kramer Design”) to develop branding and signage for the amenity center at 1301 Avenue of the Americas. Kramer Design is
25
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Insurance
We carry commercial general liability coverage on our properties, with limits of liability customary within the industry. Similarly, we are insured against the risk of direct and indirect physical damage to our properties including coverage for the perils such as floods, earthquakes and windstorms. Our policies also cover the loss of rental income during an estimated reconstruction period. Our policies reflect limits and deductibles customary in the industry and specific to the buildings and portfolio. We also obtain title insurance policies when acquiring new properties. We currently have coverage for losses incurred in connection with both domestic and foreign terrorist-related activities. While we do carry commercial general liability insurance, property insurance and terrorism insurance with respect to our properties, these policies include limits and terms we consider commercially reasonable. In addition, there are certain losses (including, but not limited to, losses arising from known environmental conditions or acts of war) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in our belief, economically impractical to maintain such coverage. Should an uninsured loss arise against us, we would be required to use our own funds to resolve the issue, including litigation costs. We believe the policy specifications and insured limits are adequate given the relative risk of loss, the cost of the coverage and industry practice and, in consultation with our insurance advisors, we believe the properties in our portfolio are adequately insured.
Other Commitments and Contingencies
We are a party to various claims and routine litigation arising in the ordinary course of business. Some of these claims or others to which we may be subject from time to time may result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance. Payment of any such costs, settlements, fines or judgments that are not insured could have an adverse impact on our financial position and results of operations. Should any litigation arise in connection with the formation transactions, we would contest it vigorously. In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flow, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors.
The terms of our consolidated mortgage debt agreements in place include certain restrictions and covenants which may limit, among other things, certain investments, the incurrence of additional indebtedness and liens and the disposition or other transfer of assets and interests in the borrower and other credit parties, and require compliance with certain debt yield, debt service coverage and loan to value ratios. In addition, our revolving credit facility contains representations, warranties, covenants, other agreements and events of default customary for agreements of this type with comparable companies. As of September 30, 2023, we believe we are in compliance with all of our covenants.
Transfer Tax Assessments
During 2017, the New York City Department of Finance issued Notices of Determination (“Notices”) assessing additional transfer taxes (including interest and penalties) in connection with the transfer of interests in certain properties during our 2014 initial public offering. We believe, after consultation with legal counsel, that the likelihood of loss is reasonably possible, and while it is not possible to predict the outcome of these Notices, we estimate the range of loss could be between $
26
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Our reportable segments are separated by region, based on the
The following tables provide Net Operating Income (“NOI”) for each reportable segment for the periods set forth below.
|
|
|
For the Three Months Ended September 30, 2023 |
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Property-related revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
Property-related operating expenses |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
NOI from unconsolidated joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
NOI (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
For the Three Months Ended September 30, 2022 |
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Property-related revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
Property-related operating expenses |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
NOI from unconsolidated joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOI (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
For the Nine Months Ended September 30, 2023 |
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Property-related revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
Property-related operating expenses |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
NOI from unconsolidated joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOI (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
For the Nine Months Ended September 30, 2022 |
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Property-related revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
|
Property-related operating expenses |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
NOI from unconsolidated joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOI (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(
|
) |
27
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table provides a reconciliation of NOI to net (loss) income attributable to common stockholders for the periods set forth below.
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
NOI |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Add (subtract) adjustments to arrive to net (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
General and administrative expenses |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Income (loss) from real estate related fund investments |
|
|
|
|
|
- |
|
|
|
(
|
) |
|
|
- |
|
|
NOI from unconsolidated joint ventures (excluding
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Loss from unconsolidated joint ventures |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Interest and other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and debt expense |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Other, net |
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
(Loss) income before income taxes |
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Income tax expense |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Net (loss) income |
|
(
|
) |
|
|
|
|
|
|
(
|
) |
|
|
|
|
|
Less net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|||||
|
Consolidated joint ventures |
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
|
(
|
) |
|
Consolidated real estate related funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
(
|
) |
|
Net (loss) income attributable to common stockholders |
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
(
|
) |
|
$ |
|
|
The following table provides the total assets for each of our reportable segments as of the dates set forth below.
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total Assets as of: |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
September 30, 2023 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, including the related notes included therein.
Forward-Looking Statements
We make statements in this Quarterly Report on Form 10-Q that are considered “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are usually identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are including this statement for purposes of complying with those safe harbor provisions. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation:
29
Accordingly, there is no assurance that our expectations will be realized. Except as otherwise required by the U.S. federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. A reader should review carefully, our consolidated financial statements and the notes thereto, as well as Item 1A entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 or in Part II, “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023.
Critical Accounting Estimates
There are no material changes to our critical accounting estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
Recently Issued Accounting Literature
A summary of our recently issued accounting literature and their potential impact on our consolidated financial statements, if any, are included in Note 2, Basis of Presentation and Significant Accounting Policies , to our consolidated financial statements in this Quarterly Report on Form 10-Q.
30
Business Overview
We are a fully-integrated REIT focused on owning, operating, managing, acquiring and redeveloping high-quality, Class A office properties in select central business district submarkets of New York City and San Francisco. We conduct our business through, and substantially all of our interests in properties and investments are held by, Paramount Group Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership”). We are the sole general partner of, and owned approximately 91.8% of, the Operating Partnership as of September 30, 2023.
As of September 30, 2023, we owned and/or managed a portfolio of 18 properties aggregating 13.8 million square feet comprised of:
Additionally, we have an investment management business, where we serve as the general partner of several real estate related funds for institutional investors and high net-worth individuals.
Financings
On September 27, 2023, a joint venture in which we have a 31.1% interest, completed a $232,050,000 refinancing of 300 Mission Street, a 655,000 square foot Class A office building in San Francisco. The interest-only loan bears a fixed rate of 4.50% and matures in October 2026. The loan replaces the previous $273,000,000 loan that bore interest at 3.65% and was scheduled to mature in October 2023.
Stock Repurchase Program
On November 5, 2019, we received authorization from our Board of Directors to repurchase up to $200,000,000 of our common stock, from time to time, in the open market or in privately negotiated transactions. As of December 31, 2022, we had repurchased a total of 24,183,768 common shares at a weighted average price of $7.65 per share, or $185,000,000 in the aggregate. As of September 30, 2023, we have $15,000,000 available for future repurchases under the existing program. The amount and timing of future repurchases, if any, will depend on a number of factors, including, the price and availability of our shares, trading volume, general market conditions and available funding. The stock repurchase program may be suspended or discontinued at any time.
Other Items
We, through a wholly-owned subsidiary, were the landlord under certain lease agreements with First Republic Bank (“First Republic”) aggregating 460,726 square feet at our One Front Street property in San Francisco, CA. On May 1, 2023, First Republic was closed by the California Department of Financial Protection and Innovation and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. Subsequent thereto, JPMorgan Chase Bank, N.A. (“JPMorgan”) acquired all deposit accounts and substantially all the assets and assumed certain of the liabilities of First Republic from the FDIC. In connection therewith, JPMorgan had 60 days to assess whether or not to assume or reject our lease agreements with First Republic. On June 30, 2023, we entered into a surrender and assumption agreement with JPMorgan whereby JPMorgan (i) assumed, under the same lease terms that we had with First Republic, 344,010 square feet of existing space, and (ii) surrendered the remaining 116,716 square feet of space, which largely represented space that was not being utilized by First Republic, and a majority of which (88,236 square feet) was subleased to various other tenants under lease agreements expiring between 2023 and 2024.
Additionally, we, through a different wholly-owned subsidiary, are also the landlord under a long-term lease agreement with SVB Securities (“SVB Securities”), at our 1301 Avenue of the Americas property in Manhattan, NY. SVB Securities leased an aggregate of 108,994 square feet from us and is a subsidiary of SVB Financial Group, which filed for Chapter 11 bankruptcy relief on March 17, 2023. On June 28, 2023, we executed a termination of our lease with SVB Securities and entered into a new lease with the entity acquiring substantially all of the assets of SVB Securities, including 68,183 square feet on a long-term basis, and 40,811 square feet on a short-term basis.
31
Leasing Results - Three Months Ended September 30, 2023
In the three months ended September 30, 2023, we leased 298,259 square feet, of which our share was 227,082 square feet that was leased at a weighted average initial rent of $75.65 per square foot. This leasing activity, offset by the lease expirations in the three months, decreased leased occupancy and same store leased occupancy (properties owned by us in a similar manner during both reporting periods) by 150 basis points to 88.1% at September 30, 2023 from 89.6% at June 30, 2023. The 150 basis point decrease in leased occupancy was driven primarily by the scheduled expiration of Uber’s lease in July 2023 at Market Center in our San Francisco portfolio.
Of the 298,259 square feet leased in the three months ended September 30, 2023, 220,495 square feet represented our share of second generation space (space leased in the current period (i) prior to its originally scheduled expiration, or (ii) that has been vacant for less than twelve months) for which rental rates increased by 0.5% on a GAAP basis and decreased by 0.4% on a cash basis. The weighted average lease term for leases signed during the three months was 6.5 years and weighted average tenant improvements and leasing commissions on these leases were $8.96 per square foot per annum, or 11.8% of initial rent.
New York
In the three months ended September 30, 2023, we leased 184,782 square feet in our New York portfolio, of which our share was 180,847 square feet that was leased at a weighted average initial rent of $72.57 per square foot. This leasing activity, offset by lease expirations in the three months, decreased leased occupancy and same store leased occupancy by 10 basis points to 90.4% at September 30, 2023 from 90.5% at June 30, 2023. Of the 184,782 square feet leased in the three months ended September 30, 2023, 179,333 square feet represented second generation space for which rental rates decreased by 0.1% on a GAAP basis and increased by 0.6% on a cash basis. The weighted average lease term for leases signed during the three months was 6.6 years and weighted average tenant improvements and leasing commissions on these leases were $9.14 per square foot per annum, or 12.6% of initial rent.
San Francisco
In the three months ended September 30, 2023, we leased 113,477 square feet in our San Francisco portfolio, of which our share was 46,235 square feet that was leased at a weighted average initial rent of $87.71 per square foot. This leasing activity, offset by lease expirations in the three months, decreased leased occupancy and same store leased occupancy by 520 basis points to 82.0% at September 30, 2023 from 87.2% at June 30, 2023. The 520 basis point decrease in leased occupancy was driven primarily by the scheduled expiration of Uber’s lease in July 2023 at Market Center.
Of the 113,477 square feet leased in the three months, 41,162 square feet represented our share of second generation space for which rental rates increased by 2.6% on a GAAP basis and decreased by 4.0% on a cash basis. The weighted average lease term for leases signed during the three months was 6.0 years and weighted average tenant improvements and leasing commissions on these leases were $8.17 per square foot per annum, or 9.3% of initial rent.
32
The following table presents additional details on the leases signed during the three months ended September 30, 2023. It is not intended to coincide with the commencement of rental revenue in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The leasing statistics, except for square feet leased, represent office space only.
|
Three Months Ended September 30, 2023 |
Total |
|
|
New York |
|
|
San Francisco |
|
|
||||||||
|
|
Total square feet leased |
|
298,259 |
|
|
|
184,782 |
|
|
|
113,477 |
|
|
||||
|
|
Pro rata share of total square feet leased: |
|
227,082 |
|
|
|
180,847 |
|
|
|
46,235 |
|
|
||||
|
|
|
Initial rent (1) |
$ |
75.65 |
|
|
$ |
72.57 |
|
|
$ |
87.71 |
|
|
|||
|
|
|
Weighted average lease term (in years) |
|
6.5 |
|
|
|
6.6 |
|
|
|
6.0 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Tenant improvements and leasing commissions: |
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
Per square foot |
$ |
58.41 |
|
|
$ |
60.77 |
|
|
$ |
49.16 |
|
|
||
|
|
|
|
Per square foot per annum |
$ |
8.96 |
|
|
$ |
9.14 |
|
|
$ |
8.17 |
|
|
||
|
|
|
|
Percentage of initial rent |
|
11.8 |
% |
|
|
12.6 |
% |
|
|
9.3 |
% |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Rent concessions: |
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
Average free rent period (in months) |
|
5.0 |
|
|
|
5.1 |
|
|
|
4.9 |
|
|
||
|
|
|
|
Average free rent period per annum (in months) |
|
0.8 |
|
|
|
0.8 |
|
|
|
0.8 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Second generation space: (2) |
|
|
|
|
|
|
|
|
|||||||
|
|
|
Square feet |
|
220,495 |
|
|
|
179,333 |
|
|
|
41,162 |
|
|
|||
|
|
|
Cash basis: |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Initial rent (1) |
$ |
75.26 |
|
|
$ |
72.30 |
|
|
$ |
88.17 |
|
|
||
|
|
|
|
Prior escalated rent (3) |
$ |
75.58 |
|
|
$ |
71.84 |
|
|
$ |
91.86 |
|
|
||
|
|
|
|
Percentage (decrease) increase |
|
(0.4 |
%) |
|
|
0.6 |
% |
|
|
(4.0 |
%) |
|
||
|
|
|
GAAP basis: |
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Straight-line rent |
$ |
74.24 |
|
|
$ |
70.66 |
|
|
$ |
89.83 |
|
|
||
|
|
|
|
Prior straight-line rent |
$ |
73.89 |
|
|
$ |
70.76 |
|
|
$ |
87.52 |
|
|
||
|
|
|
|
Percentage increase (decrease) |
|
0.5 |
% |
|
|
(0.1 |
%) |
|
|
2.6 |
% |
|
||
The following table presents same store leased occupancy as of the dates set forth below.
|
Same Store Leased Occupancy (1) |
Total |
|
|
New York |
|
|
San Francisco |
|
||||
|
|
As of September 30, 2023 |
|
88.1 |
% |
|
|
90.4 |
% |
|
|
82.0 |
% |
|
|
As of June 30, 2023 |
|
89.6 |
% |
|
|
90.5 |
% |
|
|
87.2 |
% |
33
Leasing Results - Nine Months Ended September 30, 2023
In the nine months ended September 30, 2023, we leased 565,740 square feet, of which our share was 454,819 square feet that was leased at a weighted average initial rent of $78.42 per square foot. This leasing activity, offset by the lease expirations in the nine months, decreased leased occupancy and same store leased occupancy (properties owned by us in a similar manner during both reporting periods) by 320 basis points to 88.1% at September 30, 2023 from 91.3% at December 31, 2022. The 320 basis point decrease in leased occupancy was driven primarily by the scheduled expiration of (i) Credit Agricole’s lease in February 2023 at 1301 Avenue of the Americas in our New York portfolio and (ii) Uber’s lease in July 2023 at Market Center in our San Francisco portfolio.
Of the 565,740 square feet leased in the nine months ended September 30, 2023, 398,891 square feet represented our share of second generation space (space leased in the current period (i) prior to its originally scheduled expiration, or (ii) that has been vacant for less than twelve months) for which rental rates increased by 0.9% on a GAAP basis and decreased by 1.2% on a cash basis. The weighted average lease term for leases signed during the nine months was 9.5 years and weighted average tenant improvements and leasing commissions on these leases were $11.37 per square foot per annum, or 14.5% of initial rent.
New York
In the nine months ended September 30, 2023, we leased 363,530 square feet in our New York portfolio, of which our share was 352,901 square feet that was leased at a weighted average initial rent of $75.62 per square foot. This leasing activity, offset by lease expirations in the nine months, decreased leased occupancy and same store leased occupancy by 170 basis points to 90.4% at September 30, 2023 from 92.1% at December 31, 2022. The 170 basis point decrease in leased occupancy was driven primarily by scheduled expiration of Credit Agricole’s lease in February 2023.
Of the 363,530 square feet leased in the nine months ended September 30, 2023, 302,046 square feet represented second generation space for which rental rates increased by 2.8% on a GAAP basis and decreased by 1.5% on a cash basis. The weighted average lease term for leases signed during the nine months was 10.7 years and weighted average tenant improvements and leasing commissions on these leases were $11.03 per square foot per annum, or 14.6% of initial rent.
San Francisco
In the nine months ended September 30, 2023, we leased 202,210 square feet in our San Francisco portfolio, of which our share was 101,918 square feet that was leased at a weighted average initial rent of $88.14 per square foot. This leasing activity, offset by lease expirations in the nine months, decreased leased occupancy and same store leased occupancy by 690 basis points to 82.0% at September 30, 2023 from 88.9% at December 31, 2022. The 690 basis point decrease in leased occupancy and same store leased occupancy was driven primarily by (i) the scheduled expiration of Uber’s lease in July 2023 at Market Center and (ii) the surrendered JPMorgan space at One Front Street.
Of the 202,210 square feet leased in the nine months ended September 30, 2023, 96,845 square feet represented our share of second generation space for which rental rates decreased by 3.8% on a GAAP basis and decreased by 0.6% on a cash basis. The weighted average lease term for leases signed during the nine months was 5.3 years and weighted average tenant improvements and leasing commissions on these leases were $13.76 per square foot per annum, or 15.6% of initial rent.
34
The following table presents additional details on the leases signed during the nine months ended September 30, 2023. It is not intended to coincide with the commencement of rental revenue in accordance with GAAP. The leasing statistics, except for square feet leased, represent office space only.
|
Nine Months Ended September 30, 2023 |
Total |
|
|
New York |
|
|
San Francisco |
|
||||||||
|
|
Total square feet leased |
|
565,740 |
|
|
|
363,530 |
|
|
|
202,210 |
|
||||
|
|
Pro rata share of total square feet leased: |
|
454,819 |
|
|
|
352,901 |
|
|
|
101,918 |
|
||||
|
|
|
Initial rent (1) |
$ |
78.42 |
|
|
$ |
75.62 |
|
|
$ |
88.14 |
|
|||
|
|
|
Weighted average lease term (in years) |
|
9.5 |
|
|
|
10.7 |
|
|
|
5.3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Tenant improvements and leasing commissions: |
|
|
|
|
|
|
|
|||||||
|
|
|
|
Per square foot |
$ |
107.69 |
|
|
$ |
117.74 |
|
|
$ |
72.88 |
|
||
|
|
|
|
Per square foot per annum |
$ |
11.37 |
|
|
$ |
11.03 |
|
|
$ |
13.76 |
|
||
|
|
|
|
Percentage of initial rent |
|
14.5 |
% |
|
|
14.6 |
% |
|
|
15.6 |
% |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Rent concessions: |
|
|
|
|
|
|
|
|||||||
|
|
|
|
Average free rent period (in months) |
|
9.5 |
|
|
|
10.4 |
|
|
|
6.3 |
|
||
|
|
|
|
Average free rent period per annum (in months) |
|
1.0 |
|
|
|
1.0 |
|
|
|
1.2 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Second generation space: (2) |
|
|
|
|
|
|
|
|||||||
|
|
|
Square feet |
|
398,891 |
|
|
|
302,046 |
|
|
|
96,845 |
|
|||
|
|
|
Cash basis: |
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Initial rent (1) |
$ |
78.49 |
|
|
$ |
75.33 |
|
|
$ |
88.35 |
|
||
|
|
|
|
Prior escalated rent (3) |
$ |
79.46 |
|
|
$ |
76.44 |
|
|
$ |
88.89 |
|
||
|
|
|
|
Percentage decrease |
|
(1.2 |
%) |
|
|
(1.5 |
%) |
|
|
(0.6 |
%) |
||
|
|
|
GAAP basis: |
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Straight-line rent |
$ |
76.64 |
|
|
$ |
73.87 |
|
|
$ |
85.26 |
|
||
|
|
|
|
Prior straight-line rent |
$ |
75.94 |
|
|
$ |
71.87 |
|
|
$ |
88.62 |
|
||
|
|
|
|
Percentage increase (decrease) |
|
0.9 |
% |
|
|
2.8 |
% |
|
|
(3.8 |
%) |
||
The following table presents same store leased occupancy as of the dates set forth below.
|
Same Store Leased Occupancy (1) |
Total |
|
New York |
|
San Francisco |
|
|
|
As of September 30, 2023 |
88.1% |
|
90.4% |
|
82.0% |
|
|
As of December 31, 2022 |
91.3% |
|
92.1% |
|
88.9% |
35
Financial Results - Three Months Ended September 30, 2023 and 2022
Net Income, FFO and Core FFO
Net loss attributable to common stockholders was $8,385,000, or $0.04 per diluted share, for the three months ended September 30, 2023, compared to $1,537,000, or $0.01 per diluted share, for the three months ended September 30, 2022.
Funds from Operations (“FFO”) attributable to common stockholders was $46,721,000, or $0.21 per diluted share, for the three months ended September 30, 2023, compared to $53,366,000, or $0.24 per diluted share, for the three months ended September 30, 2022. FFO attributable to common stockholders for the three months ended September 30, 2023 and 2022 includes the impact of non-core items, which are listed in the table on page 56 . The aggregate of the non-core items, net of amounts attributable to noncontrolling interests, decreased FFO attributable to common stockholders for the three months ended September 30, 2023 and 2022 by $1,101,000 and $883,000, respectively, or $0.01 or $0.00 per diluted share, respectively.
Core Funds from Operations (“Core FFO”) attributable to common stockholders, which excludes the impact of the non-core items listed on page 56 , was $47,822,000, or $0.22 per diluted share, for the three months ended September 30, 2023, compared to $54,249,000, or $0.24 per diluted share, for the three months ended September 30, 2022.
Same Store Results
The table below summarizes the percentage decrease in our share of Same Store NOI and Same Store Cash NOI, by segment, for the three months ended September 30, 2023 versus September 30, 2022.
|
|
|
Total |
|
|
New York |
|
|
San Francisco |
|
|||
|
Same Store NOI |
|
|
(10.3 |
%) |
|
|
(8.2 |
%) |
|
|
(14.4 |
%) |
|
Same Store Cash NOI |
|
|
(7.1 |
%) |
|
|
(7.6 |
%) |
|
|
(6.1 |
%) |
See pages 49 - 57 “ Non-GAAP Financial Measures ” for a reconciliation of these measures to the most directly comparable GAAP measure and the reasons why we believe these non-GAAP measures are useful.
36
Financial Results - Nine Months Ended September 30, 2023 and 2022
Net Income, FFO and Core FFO
Net loss attributable to common stockholders was $54,194,000, or $0.25 per diluted share, for the nine months ended September 30, 2023, compared to net income attributable to common stockholders of $1,474,000, or $0.01 per diluted share, for the nine months ended September 30, 2022. Net loss attributable to the common stockholders for the nine months ended September 30, 2023 includes (i) $23,110,000, or $0.11 per diluted share, for our share of a non-cash real estate impairment loss related to an unconsolidated joint venture, and (ii) non-cash straight-line rent receivable write-offs aggregating $12,993,000, or $0.06 per diluted share, related to the terminated SVB Securities lease and the surrendered JPMorgan space.
FFO attributable to common stockholders was $137,517,000, or $0.63 per diluted share, for the nine months ended September 30, 2023, compared to $161,561,000, or $0.73 per diluted share, for the nine months ended September 30, 2022. FFO attributable to common stockholders for the nine months ended September 30, 2023 includes non-cash straight-line rent receivable write-offs aggregating $12,993,000, or $0.06 per diluted share, related to the terminated SVB Securities lease and the surrendered JPMorgan space. FFO attributable to common stockholders for the nine months ended September 30, 2023 and 2022 also includes the impact of non-core items, which are listed in the table on page 56 . The aggregate of the non-core items, net of amounts attributable to noncontrolling interests, decreased FFO attributable to common stockholders for the nine months ended September 30, 2023 and 2022 by $5,145,000 and $899,000, respectively, or $0.03 and $0.00 per diluted share, respectively.
Core FFO attributable to common stockholders, which excludes the impact of the non-core items listed on page 56 , was $142,662,000, or $0.66 per diluted share, for the nine months ended September 30, 2023, compared to $162,460,000, or $0.73 per diluted share, for the nine months ended September 30, 2022.
Same Store Results
The table below summarizes the percentage (decrease) increase in our share of Same Store NOI and Same Store Cash NOI, by segment, for the nine months ended September 30, 2023 versus September 30, 2022.
|
|
|
Total |
|
New York |
|
San Francisco |
|
Same Store NOI |
|
(2.9%) |
|
(3.6%) |
|
(1.7%) |
|
Same Store Cash NOI |
|
(3.9%) |
|
(6.0%) |
|
0.7% |
See pages 49 - 57 “ Non-GAAP Financial Measures ” for a reconciliation of these measures to the most directly comparable GAAP measure and the reasons why we believe these non-GAAP measures are useful.
37
Results of Operations - Three Months Ended September 30, 2023 and 2022
The following pages summarize our consolidated results of operations for the three months ended September 30, 2023 and 2022.
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
|
|
||||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
Change |
|
||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
||||||||
|
|
Rental revenue |
$ |
182,515 |
|
|
$ |
179,250 |
|
|
$ |
3,265 |
|
||||
|
|
Fee and other income |
|
6,666 |
|
|
|
7,897 |
|
|
|
(1,231 |
) |
||||
|
|
|
Total revenues |
|
189,181 |
|
|
|
187,147 |
|
|
|
2,034 |
|
|||
|
Expenses: |
|
|
|
|
|
|
|
|
||||||||
|
|
Operating |
|
75,502 |
|
|
|
72,845 |
|
|
|
2,657 |
|
||||
|
|
Depreciation and amortization |
|
60,263 |
|
|
|
58,284 |
|
|
|
1,979 |
|
||||
|
|
General and administrative |
|
15,460 |
|
|
|
13,150 |
|
|
|
2,310 |
|
||||
|
|
Transaction related costs |
|
132 |
|
|
|
105 |
|
|
|
27 |
|
||||
|
|
|
Total expenses |
|
151,357 |
|
|
|
144,384 |
|
|
|
6,973 |
|
|||
|
Other income (expense): |
|
|
|
|
|
|
|
|
||||||||
|
|
Income from real estate related fund investments |
|
2,060 |
|
|
|
- |
|
|
|
2,060 |
|
||||
|
|
(Loss) income from unconsolidated real estate related funds |
|
(721 |
) |
|
|
300 |
|
|
|
(1,021 |
) |
||||
|
|
Loss from unconsolidated joint ventures |
|
(28,974 |
) |
|
|
(5,797 |
) |
|
|
(23,177 |
) |
||||
|
|
Interest and other income, net |
|
4,115 |
|
|
|
1,580 |
|
|
|
2,535 |
|
||||
|
|
Interest and debt expense |
|
(39,102 |
) |
|
|
(36,949 |
) |
|
|
(2,153 |
) |
||||
|
(Loss) income before income taxes |
|
(24,798 |
) |
|
|
1,897 |
|
|
|
(26,695 |
) |
|||||
|
|
Income tax expense |
|
(263 |
) |
|
|
(673 |
) |
|
|
410 |
|
||||
|
Net (loss) income |
|
(25,061 |
) |
|
|
1,224 |
|
|
|
(26,285 |
) |
|||||
|
Less net (income) loss attributable to noncontrolling |
|
|
|
|
|
|
|
|||||||||
|
|
interests in: |
|
|
|
|
|
|
|
|
|||||||
|
|
Consolidated joint ventures |
|
(4,887 |
) |
|
|
(4,179 |
) |
|
|
(708 |
) |
||||
|
|
Consolidated real estate related funds |
|
20,934 |
|
|
|
1,309 |
|
|
|
19,625 |
|
||||
|
|
Operating Partnership |
|
629 |
|
|
|
109 |
|
|
|
520 |
|
||||
|
Net loss attributable to common stockholders |
$ |
(8,385 |
) |
|
$ |
(1,537 |
) |
|
$ |
(6,848 |
) |
|||||
38
Revenues
Our revenues, which consist of rental revenue and fee and other income, were $189,181,000 for the three months ended September 30, 2023, compared to $187,147,000 for the three months ended September 30, 2022, an increase of $2,034,000. Below are the details of the increase or decrease by segment.
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Rental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Same store operations |
|
$ |
(3,376 |
) |
|
$ |
(5,096 |
) |
(1) |
$ |
1,720 |
|
(2) |
$ |
- |
|
|
|
Non-cash write-offs of straight-line rent receivables |
|
|
1,784 |
|
|
|
1,784 |
|
|
|
- |
|
|
|
- |
|
|
|
Other, net |
|
|
4,857 |
|
|
|
4,913 |
|
(3) |
|
- |
|
|
|
(56 |
) |
|
|
Increase (decrease) in rental revenue |
|
$ |
3,265 |
|
|
$ |
1,601 |
|
|
$ |
1,720 |
|
|
$ |
(56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fee and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Asset management |
|
$ |
(707 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(707 |
) |
|
|
Property management |
|
|
(39 |
) |
|
|
- |
|
|
|
- |
|
|
|
(39 |
) |
|
|
Acquisition, disposition, leasing and other |
|
|
187 |
|
|
|
- |
|
|
|
- |
|
|
|
187 |
|
|
|
Decrease in fee income |
|
|
(559 |
) |
|
|
- |
|
|
|
- |
|
|
|
(559 |
) |
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Same store operations |
|
|
(672 |
) |
|
|
(283 |
) |
|
|
(135 |
) |
|
|
(254 |
) |
|
|
Decrease in other income |
|
|
(672 |
) |
|
|
(283 |
) |
|
|
(135 |
) |
|
|
(254 |
) |
|
|
Decrease in fee and other income |
|
$ |
(1,231 |
) |
|
$ |
(283 |
) |
|
$ |
(135 |
) |
|
$ |
(813 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total increase (decrease) in revenues |
|
$ |
2,034 |
|
|
$ |
1,318 |
|
|
$ |
1,585 |
|
|
$ |
(869 |
) |
|
39
Expenses
Our expenses, which consist of operating, depreciation and amortization, general and administrative and transaction related costs, were $151,357,000 for the three months ended September 30, 2023, compared to $144,384,000 for the three months ended September 30, 2022, an increase of $6,973,000. Below are the details of the increase or decrease by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
|||||
|
Operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Same store operations |
|
$ |
2,999 |
|
|
$ |
49 |
|
|
$ |
2,950 |
|
(1) |
$ |
- |
|
|
|
|
Other, net |
|
|
(342 |
) |
|
|
- |
|
|
|
- |
|
|
|
(342 |
) |
|
|
|
Increase (decrease) in operating |
|
$ |
2,657 |
|
|
$ |
49 |
|
|
$ |
2,950 |
|
|
$ |
(342 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Operations |
|
$ |
1,979 |
|
|
$ |
1,276 |
|
|
$ |
636 |
|
|
$ |
67 |
|
|
|
|
Increase in depreciation and amortization |
$ |
1,979 |
|
|
$ |
1,276 |
|
|
$ |
636 |
|
|
$ |
67 |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Operations |
|
$ |
2,310 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,310 |
|
(2) |
|
|
Increase in general and administrative |
|
$ |
2,310 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Increase in transaction related costs |
|
$ |
27 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total increase in expenses |
|
$ |
6,973 |
|
|
$ |
1,325 |
|
|
$ |
3,586 |
|
|
$ |
2,062 |
|
|
|
Income from Real Estate Related Fund Investments
Income from real estate related fund investments was $2,060,000 for the three months ended September 30, 2023, and represented income attributable to Paramount Group Real Estate Fund X, LP (“Fund X”), which we began consolidating into our consolidated financial statements effective December 12, 2022, and in which we have a 13.0% ownership interest.
(Loss) income from Unconsolidated Real Estate Related Funds
Loss from unconsolidated real estate related funds was $721,000 for the three months ended September 30, 2023, which represented our share of loss from Paramount Group Real Estate Fund VIII, LP (“Fund VIII”). Income from unconsolidated real estate related funds was $300,000 for the three months ended September 30, 2022, which represented our share of income from Fund VIII and Fund X. The loss in the current year resulted primarily from an unrealized loss on a mezzanine loan investment, of which our share was $762,000.
Loss from Unconsolidated Joint Ventures
Loss from unconsolidated joint ventures was $28,974,000 for the three months ended September 30, 2023, compared to $5,797,000 for the three months ended September 30, 2022, an increase in loss of $23,177,000. This increase in loss resulted primarily from:
|
(Amounts in thousands) |
|
|
|
|
|
|
RDF's share of an impairment loss related to residential condominium
|
|
$ |
(23,942 |
) |
|
|
Other, net |
|
|
765 |
|
|
|
Total increase in loss |
|
$ |
(23,177 |
) |
|
40
Interest and Other Income, net
Interest and other income was $4,115,000 for the three months ended September 30, 2023, compared to $1,580,000 for the three months ended September 30, 2022, an increase in income of $2,535,000. This increase resulted primarily from higher yields on cash balances and short-term investments in the current year.
Interest and Debt Expense
Interest and debt expense was $39,102,000 for the three months ended September 30, 2023, compared to $36,949,000 for the three months ended September 30, 2022, an increase of $2,153,000. This increase resulted primarily from higher interest expense on the variable rate portion of our debt at 1301 Avenue of the Americas due to an increase in average variable rates in the current year’s three months compared to prior year.
Income Tax Expense
Income tax expense was $263,000 for the three months ended September 30, 2023, compared to $673,000 for the three months ended September 30, 2022, a decrease of $410,000. This decrease resulted primarily from lower taxable income attributable to our taxable REIT subsidiaries in the current year.
Net Income Attributable to Noncontrolling Interests in Consolidated Joint Ventures
Net income attributable to noncontrolling interests in consolidated joint ventures was $4,887,000 for the three months ended September 30, 2023, compared to $4,179,000 for the three months ended September 30, 2022, a $708,000 increase in net income attributable to noncontrolling interests in consolidated joint ventures. This increase was primarily due to noncontrolling interests’ share of lease termination income in the current year at 1633 Broadway.
Net Loss Attributable to Noncontrolling Interests in Consolidated Real Estate Related Funds
Net loss attributable to noncontrolling interests in consolidated real estate related funds was $20,934,000 for the three months ended September 30, 2023, compared to $1,309,000 for the three months ended September 30, 2022, an increase in loss of $19,625,000. This increase was primarily due to the noncontrolling interests’ share of the $23,942,000 impairment loss related to residential condominium units at One Steuart Lane.
Net Loss Attributable to Noncontrolling Interests in Operating Partnership
Net loss attributable to noncontrolling interests in the Operating Partnership was $629,000 for the three months ended September 30, 2023, compared to $109,000 for the three months ended September 30, 2022, an increase in net loss allocated to noncontrolling interests of $520,000. This increase in loss resulted from higher net loss subject to allocation to the unitholders of the Operating Partnership in the current year.
41
Results of Operations - Nine Months Ended September 30, 2023 and 2022
The following pages summarize our consolidated results of operations for the nine months ended September 30, 2023 and 2022.
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
|
||||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
Change |
|
||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
||||||||
|
|
Rental revenue |
$ |
529,734 |
|
|
$ |
526,415 |
|
|
$ |
3,319 |
|
||||
|
|
Fee and other income |
|
20,583 |
|
|
|
29,934 |
|
|
|
(9,351 |
) |
||||
|
|
|
Total revenues |
|
550,317 |
|
|
|
556,349 |
|
|
|
(6,032 |
) |
|||
|
Expenses: |
|
|
|
|
|
|
|
|
||||||||
|
|
Operating |
|
216,889 |
|
|
|
207,320 |
|
|
|
9,569 |
|
||||
|
|
Depreciation and amortization |
|
181,778 |
|
|
|
171,306 |
|
|
|
10,472 |
|
||||
|
|
General and administrative |
|
46,307 |
|
|
|
45,501 |
|
|
|
806 |
|
||||
|
|
Transaction related costs |
|
323 |
|
|
|
381 |
|
|
|
(58 |
) |
||||
|
|
|
Total expenses |
|
445,297 |
|
|
|
424,508 |
|
|
|
20,789 |
|
|||
|
Other income (expense): |
|
|
|
|
|
|
|
|
||||||||
|
|
Loss from real estate related fund investments |
|
(37,034 |
) |
|
|
- |
|
|
|
(37,034 |
) |
||||
|
|
(Loss) income from unconsolidated real estate funds |
|
(867 |
) |
|
|
625 |
|
|
|
(1,492 |
) |
||||
|
|
Loss from unconsolidated joint ventures |
|
(63,138 |
) |
|
|
(15,326 |
) |
|
|
(47,812 |
) |
||||
|
|
Interest and other income, net |
|
10,007 |
|
|
|
2,607 |
|
|
|
7,400 |
|
||||
|
|
Interest and debt expense |
|
(112,440 |
) |
|
|
(106,804 |
) |
|
|
(5,636 |
) |
||||
|
(Loss) income before income taxes |
|
(98,452 |
) |
|
|
12,943 |
|
|
|
(111,395 |
) |
|||||
|
|
Income tax expense |
|
(1,124 |
) |
|
|
(1,559 |
) |
|
|
435 |
|
||||
|
Net (loss) income |
|
(99,576 |
) |
|
|
11,384 |
|
|
|
(110,960 |
) |
|||||
|
Less net (income) loss attributable to noncontrolling |
|
|
|
|
|
|
|
|||||||||
|
|
interests in: |
|
|
|
|
|
|
|
|
|||||||
|
|
Consolidated joint ventures |
|
(15,879 |
) |
|
|
(12,383 |
) |
|
|
(3,496 |
) |
||||
|
|
Consolidated real estate related funds |
|
57,412 |
|
|
|
2,677 |
|
|
|
54,735 |
|
||||
|
|
Operating Partnership |
|
3,849 |
|
|
|
(204 |
) |
|
|
4,053 |
|
||||
|
Net (loss) income attributable to common stockholders |
$ |
(54,194 |
) |
|
$ |
1,474 |
|
|
$ |
(55,668 |
) |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
42
Revenues
Our revenues, which consist of rental revenue and fee and other income, were $550,317,000 for the nine months ended September 30, 2023, compared to $556,349,000 for the nine months ended September 30, 2022, a decrease of $6,032,000. Below are the details of the increase or decrease by segment.
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Rental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Same store operations |
|
$ |
10,094 |
|
|
$ |
(7,073 |
) |
(1) |
$ |
17,167 |
|
(2) |
$ |
- |
|
|
|
Non-cash write-offs of straight-line rent receivables |
|
|
(11,794 |
) |
|
|
(4,451 |
) |
(3) |
|
(7,343 |
) |
(4) |
|
- |
|
|
|
Other, net |
|
|
5,019 |
|
|
|
4,941 |
|
(5) |
|
(692 |
) |
|
|
770 |
|
|
|
Increase (decrease) in rental revenue |
|
$ |
3,319 |
|
|
$ |
(6,583 |
) |
|
$ |
9,132 |
|
|
$ |
770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fee and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Asset management |
|
$ |
(2,178 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(2,178 |
) |
|
|
Property management |
|
|
(668 |
) |
|
|
- |
|
|
|
- |
|
|
|
(668 |
) |
|
|
Acquisition, disposition, leasing and other |
|
|
(6,142 |
) |
|
|
- |
|
|
|
- |
|
|
|
(6,142 |
) |
(6) |
|
Decrease in fee income |
|
|
(8,988 |
) |
|
|
- |
|
|
|
- |
|
|
|
(8,988 |
) |
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Same store operations |
|
|
(363 |
) |
|
|
259 |
|
|
|
(366 |
) |
|
|
(256 |
) |
|
|
(Decrease) increase in other income |
|
|
(363 |
) |
|
|
259 |
|
|
|
(366 |
) |
|
|
(256 |
) |
|
|
(Decrease) increase in fee and other income |
|
$ |
(9,351 |
) |
|
$ |
259 |
|
|
$ |
(366 |
) |
|
$ |
(9,244 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total (decrease) increase in revenues |
|
$ |
(6,032 |
) |
|
$ |
(6,324 |
) |
|
$ |
8,766 |
|
|
$ |
(8,474 |
) |
|
43
Expenses
Our expenses, which consist of operating, depreciation and amortization, general and administrative and transaction related costs, were $445,297,000 for the nine months ended September 30, 2023, compared to $424,508,000 for the nine months ended September 30, 2022, an increase of $20,789,000. Below are the details of the increase or decrease by segment.
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Same store operations |
|
$ |
11,057 |
|
|
$ |
1,897 |
|
|
$ |
9,160 |
|
(1) |
$ |
- |
|
|
|
Other, net |
|
|
(1,488 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,488 |
) |
|
|
Increase (decrease) in operating |
|
$ |
9,569 |
|
|
$ |
1,897 |
|
|
$ |
9,160 |
|
|
$ |
(1,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operations |
|
$ |
10,472 |
|
|
$ |
2,440 |
|
|
$ |
7,346 |
|
(2) |
$ |
686 |
|
|
|
Increase in depreciation and amortization |
|
$ |
10,472 |
|
|
$ |
2,440 |
|
|
$ |
7,346 |
|
|
$ |
686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operations |
|
$ |
806 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
806 |
|
|
|
Increase in general and administrative |
|
$ |
806 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
806 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Decrease in transaction related costs |
|
$ |
(58 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Total increase (decrease) in expenses |
|
$ |
20,789 |
|
|
$ |
4,337 |
|
|
$ |
16,506 |
|
|
$ |
(54 |
) |
|
Loss from Real Estate Related Fund Investments
Loss from real estate related fund investments was $37,034,000 for the nine months ended September 30, 2023, and represented loss attributable to Fund X, which we began consolidating into our consolidated financial statements effective December 12, 2022, and in which we have a 13.0% ownership interest. The loss resulted primarily from a $45,658,000 unrealized loss on a mezzanine loan investment based on a negotiated transaction price.
(Loss) Income from Unconsolidated Real Estate Related Funds
Loss from unconsolidated real estate related funds was $867,000 for the nine months ended September 30, 2023, which represented our share of loss from Fund VIII. Income from unconsolidated real estate related funds was $625,000 for the nine months ended September 30, 2022, which represented our share of income from Fund VIII and Fund X. The loss in the current year resulted primarily from an unrealized loss on a mezzanine loan investment, of which our share was $762,000.
Loss from Unconsolidated Joint Ventures
Loss from unconsolidated joint ventures was $63,138,000 for the nine months ended September 30, 2023, compared to $15,326,000 for the nine months ended September 30, 2022, an increase in loss of $47,812,000. This increase in loss resulted primarily from:
|
(Amounts in thousands) |
|
|
|
|
|
|
Real estate impairment loss related to 60 Wall Street |
|
$ |
(24,734 |
) |
|
|
RDF's share of an impairment loss related to residential condominium
|
|
|
(23,942 |
) |
|
|
Other, net |
|
|
864 |
|
|
|
Total increase in loss |
|
$ |
(47,812 |
) |
|
44
Interest and Other Income, net
Interest and other income was $10,007,000 for the nine months ended September 30, 2023, compared to $2,607,000 for the nine months ended September 30, 2022, an increase in income of $7,400,000. This increase resulted primarily from higher yields on cash balances and short-term investments in the current year.
Interest and Debt Expense
Interest and debt expense was $112,440,000 for the nine months ended September 30, 2023, compared to $106,804,000 for the nine months ended September 30, 2022, an increase of $5,636,000. This increase resulted primarily from higher interest expense on the variable rate portion of our debt at 1301 Avenue of the Americas due to an increase in average variable rates in the current year’s nine months compared to the prior year.
Income Tax Expense
Income tax expense was $1,124,000 for the nine months ended September 30, 2023, compared to $1,559,000 for the nine months ended September 30, 2022, a decrease of $435,000. This decrease resulted primarily from lower taxable income attributable to our taxable REIT subsidiaries in the current year.
Net Income Attributable to Noncontrolling Interests in Consolidated Joint Ventures
Net income attributable to noncontrolling interests in consolidated joint ventures was $15,879,000 for the nine months ended September 30, 2023, compared to $12,383,000 for the nine months ended September 30, 2022, a $3,496,000 increase in net income attributable to noncontrolling interests in consolidated joint ventures. This increase was primarily due to higher net income attributable to One Market Plaza, resulting from higher average occupancy in the current year.
Net Loss Attributable to Noncontrolling Interests in Consolidated Real Estate Related Funds
Net loss attributable to noncontrolling interests in consolidated real estate related funds was $57,412,000 for the nine months ended September 30, 2023, compared to $2,677,000 for the nine months ended September 30, 2022, an increase in loss of $54,735,000. This increase was primarily due to the noncontrolling interests’ share of (i) the $45,658,000 unrealized loss on an investment in a mezzanine loan and (ii) the $23,942,000 impairment loss related to residential condominium units at One Steuart Lane.
Net Loss (Income) Attributable to Noncontrolling Interests in Operating Partnership
Net loss attributable to noncontrolling interests in the Operating Partnership was $3,849,000 for the nine months ended September 30, 2023, compared to a net income attributable to noncontrolling interests in the Operating Partnership of $204,000 for the nine months ended September 30, 2022, an increase in net loss allocated to noncontrolling interests of $4,053,000. This increase in loss resulted from higher net loss subject to allocation to the unitholders of the Operating Partnership in the current year.
45
Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity include existing cash balances, cash flow from operations and borrowings available under our revolving credit facility. As of September 30, 2023, we had $1.22 billion of liquidity comprised of $399,631,000 of cash and cash equivalents, $70,892,000 of restricted cash and $750,000,000 of borrowing capacity under our revolving credit facility.
We expect that these sources will provide adequate liquidity over the next 12 months for all anticipated needs, including scheduled principal and interest payments on our outstanding indebtedness, existing and anticipated capital improvements, the cost of securing new and renewal leases, dividends to stockholders and distributions to unitholders, and all other capital needs related to the operations of our business.
We anticipate that our long-term needs including debt maturities and potential acquisitions will be funded by operating cash flow, third-party joint venture capital, mortgage financings and/or re-financings, and the issuance of long-term debt or equity and cash on hand. Although we may be able to anticipate and plan for certain of our liquidity needs, unexpected increases in uses of cash that are beyond our control and which affect our financial condition and results of operations may arise, or our sources of liquidity may be fewer than, and the funds available from such sources may be less than, anticipated or required.
Consolidated Debt
As of September 30, 2023, our outstanding consolidated debt aggregated $3.82 billion. We had no amounts outstanding under our revolving credit facility. In February 2024, the $975,000,000 mortgage loan at One Market Plaza is scheduled to mature. We are exploring various alternatives to refinance this loan. We may refinance this debt or any of our maturing debt when it comes due or repay it early depending on prevailing market conditions, liquidity requirements and other factors. The amounts involved in connection with these transactions could be material to our consolidated financial statements.
Revolving Credit Facility
Our $750,000,000 revolving credit facility matures in March 2026 and has two six-month extension options. The interest rate on the facility is 115 basis points over the Secured Overnight Financing Rate (“SOFR”) with adjustments based on the terms of advances, plus a facility fee of 20 basis points. The facility also features a sustainability-linked pricing component such that if we meet certain sustainability performance targets, the applicable per annum interest rate will be reduced by one basis point. The facility contains certain restrictions and covenants that require us to maintain, on an ongoing basis, (i) a leverage ratio not to exceed 60%, which may be increased to 65% for any fiscal quarter in which an acquisition of real estate is completed, and for up to the next three subsequent consecutive fiscal quarters, (ii) a secured leverage ratio not to exceed 50%, (iii) a fixed coverage ratio of at least 1.50, (iv) an unsecured leverage ratio to not to exceed 60%, which may be increased to 65% for any fiscal quarter in which an acquisition of real estate is completed, and for up to the next three subsequent consecutive fiscal quarters and (v) an unencumbered interest coverage ratio of at least 1.75. The facility also contains customary representations and warranties, limitations on permitted investments and other covenants.
Dividend Policy
On September 15, 2023, we declared a quarterly cash dividend of $0.035 per share of common stock for the third quarter ended September 30, 2023, which was paid on October 13, 2023 to stockholders of record as of the close of business on September 29, 2023. This dividend policy, if continued, would require us to pay out approximately $8,400,000 each quarter to common stockholders and unitholders.
Off Balance Sheet Arrangements
As of September 30, 2023, our unconsolidated joint ventures had $1.75 billion of outstanding indebtedness, of which our share was $626,292,000. In May 2023, the joint venture that owns 60 Wall Street defaulted on the $575,000,000 non-recourse mortgage loan securing the property. The joint venture is currently in negotiations with the lender to modify the loan. We do not guarantee the indebtedness of our unconsolidated joint ventures other than providing customary environmental indemnities and guarantees of non-recourse carve-outs; however, we may elect to fund additional capital to a joint venture through equity contributions (generally on a basis proportionate to our ownership interests), advances or partner loans in order to enable the joint venture to repay this indebtedness upon maturity.
46
Stock Repurchase Program
On November 5, 2019, we received authorization from our Board of Directors to repurchase up to $200,000,000 of our common stock, from time to time, in the open market or in privately negotiated transactions. As of December 31, 2022, we had repurchased a total of 24,183,768 common shares at a weighted average price of $7.65 per share, or $185,000,000 in the aggregate. As of September 30, 2023, we have $15,000,000 available for future repurchases under the existing program. The amount and timing of future repurchases, if any, will depend on a number of factors, including, the price and availability of our shares, trading volume, general market conditions and available funding. The stock repurchase program may be suspended or discontinued at any time.
Insurance
We carry commercial general liability coverage on our properties, with limits of liability customary within the industry. Similarly, we are insured against the risk of direct and indirect physical damage to our properties including coverage for the perils such as floods, earthquakes and windstorms. Our policies also cover the loss of rental income during an estimated reconstruction period. Our policies reflect limits and deductibles customary in the industry and specific to the buildings and portfolio. We also obtain title insurance policies when acquiring new properties. We currently have coverage for losses incurred in connection with both domestic and foreign terrorist-related activities. While we do carry commercial general liability insurance, property insurance and terrorism insurance with respect to our properties, these policies include limits and terms we consider commercially reasonable. In addition, there are certain losses (including, but not limited to, losses arising from known environmental conditions or acts of war) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in our belief, economically impractical to maintain such coverage. Should an uninsured loss arise against us, we would be required to use our own funds to resolve the issue, including litigation costs. We believe the policy specifications and insured limits are adequate given the relative risk of loss, the cost of the coverage and industry practice and, in consultation with our insurance advisors, we believe the properties in our portfolio are adequately insured.
Other Commitments and Contingencies
We are a party to various claims and routine litigation arising in the ordinary course of business. Some of these claims or others to which we may be subject from time to time may result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance. Payment of any such costs, settlements, fines or judgments that are not insured could have an adverse impact on our financial position and results of operations. Should any litigation arise in connection with the formation transactions, we would contest it vigorously. In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flow, expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors.
The terms of our consolidated mortgage debt agreements in place include certain restrictions and covenants which may limit, among other things, certain investments, the incurrence of additional indebtedness and liens and the disposition or other transfer of assets and interests in the borrower and other credit parties, and require compliance with certain debt yield, debt service coverage and loan to value ratios. In addition, our revolving credit facility contains representations, warranties, covenants, other agreements and events of default customary for agreements of this type with comparable companies. As of September 30, 2023, we believe we are in compliance with all of our covenants.
Transfer Tax Assessments
During 2017, the New York City Department of Finance issued Notices of Determination (“Notices”) assessing additional transfer taxes (including interest and penalties) in connection with the transfer of interests in certain properties during our 2014 initial public offering. We believe, after consultation with legal counsel that the likelihood of loss is reasonably possible, and while it is not possible to predict the outcome of these Notices, we estimate the range of loss could be between $0 and $61,000,000. Since no amount in this range is a better estimate than any other amount within the range, we have not accrued any liability arising from potential losses relating to these Notices in our consolidated financial statements.
Inflation
Substantially all of our leases provide for separate real estate tax and operating expense escalations. In addition, many of the leases provide for fixed base rent increases. We believe inflationary increases in expenses may be at least partially offset by the contractual rent increases and expense escalations described above. We do not believe inflation has had a material impact on our historical financial position or results of operations.
47
Cash Flows
Cash and cash equivalents and restricted cash were $470,523,000 and $449,817,000 as of September 30, 2023 and December 31, 2022, respectively, and $509,854,000 and $529,666,000 as of September 30, 2022 and December 31, 2021, respectively. Cash and cash equivalents and restricted cash increased by $20,706,000 and decreased by $19,812,000 for the nine months ended September 30, 2023 and 2022, respectively. The following table sets forth the changes in cash flow.
|
|
|
For the Nine Months Ended September 30, |
|
|||||
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|||
|
Net cash provided by (used in): |
|
|
|
|
|
|||
|
Operating activities |
$ |
175,597 |
|
|
$ |
174,417 |
|
|
|
Investing activities |
|
(106,945 |
) |
|
|
(85,672 |
) |
|
|
Financing activities |
|
(47,946 |
) |
|
|
(108,557 |
) |
|
Operating Activities
Nine months ended September 30, 2023 – We generated $175,597,000 of cash from operating activities for the nine months ended September 30, 2023, primarily from (i) $206,915,000 of net income (before $306,491,000 of non-cash adjustments) and (ii) $438,000 of distributions from unconsolidated joint ventures and real estate related funds, partially offset by (iii) $31,756,000 of net changes in operating assets and liabilities. Non-cash adjustments of $306,491,000 were primarily comprised of depreciation and amortization, realized and unrealized losses on real estate related fund investments, loss from unconsolidated joint ventures, straight-lining of rental revenue, amortization of above and below-market leases, net and amortization of stock-based compensation.
Nine months ended September 30, 2022 – We generated $174,417,000 of cash from operating activities for the nine months ended September 30, 2022, primarily from (i) $209,545,000 of net income (before $198,161,000 of non-cash adjustments) and (ii) $658,000 of distributions from unconsolidated joint ventures and real estate related funds, partially offset by (iii) $35,786,000 of net changes in operating assets and liabilities. Non-cash adjustments of $198,161,000 were primarily comprised of depreciation and amortization, straight-lining of rental revenue, amortization of above and below-market leases, net and amortization of stock-based compensation.
Investing Activities
Nine months ended September 30, 2023 – We used $106,945,000 of cash for investing activities for the nine months ended September 30, 2023, primarily (i) $67,373,000 for additions to real estate, which were comprised of spending for tenant improvements and other building improvements, (ii) $40,715,000 for contributions to an unconsolidated joint venture, (iii) $35,715,000 for advances to a partner in One Steuart Lane and (iv) $2,077,000 for contributions of capital to Fund VIII, partially offset by (v) $38,935,000 from repayment of advances by a partner in One Steuart Lane.
Nine months ended September 30, 2022 – We used $85,672,000 of cash for investing activities for the nine months ended September 30, 2022, primarily (i) $71,284,000 for additions to real estate, which were comprised of spending for tenant improvements and other building improvements, (ii) $11,252,000 for our investment in 1600 Broadway, and (iii) $3,136,000 for contributions of capital to unconsolidated real estate related funds, net of distributions received.
Financing Activities
Nine months ended September 30, 2023 – We used $47,946,000 of cash for financing activities for the nine months ended September 30, 2023, primarily (i) $273,000,000 for the repayment of notes and mortgages payable in connection with the refinancing of 300 Mission Street, (ii) $44,325,000 for payment of dividends and distributions to common stockholders and unitholders, (iii) $7,802,000 for distributions to noncontrolling interests in Fund X, (iv) $7,053,000 for distributions to noncontrolling interests in 300 Mission Street and 1633 Broadway, (v) $1,847,000 for the settlement of accounts payable in connection with repurchases of common shares in 2022, (vi) $576,000 for the payment of debt issuance costs in connection with the refinancing of 300 Mission Street and (vii) $205,000 for the repurchase of shares related to stock compensation agreements and related tax withholdings, partially offset by (viii) $232,050,000 of proceeds from notes and mortgages payable in connection with the refinancing of 300 Mission Street and (ix) $54,812,000 of contributions from noncontrolling interests in consolidated real estate related funds.
Nine months ended September 30, 2022 – We used $108,557,000 of cash for financing activities for the nine months ended September 30, 2022, primarily (i) $54,459,000 for dividends and distributions to common stockholders and unitholders, (ii) $33,814,000 for distributions to noncontrolling interests, (iii) $20,000,000 for the repurchases of common shares and (iv) $284,000 for the repurchase of shares related to stock compensation agreements and related tax withholdings.
48
Non-GAAP Financial Measures
We use and present NOI, Same Store NOI, FFO and Core FFO, as supplemental measures of our performance. The summary below describes our use of these measures, provides information regarding why we believe these measures are meaningful supplemental measures of our performance and reconciles these measures from net income or loss, the most directly comparable GAAP measure. Other real estate companies may use different methodologies for calculating these measures, and accordingly, our presentation of these measures may not be comparable to other real estate companies. These non-GAAP measures should not be considered a substitute for, and should only be considered together with and as a supplement to, financial information presented in accordance with GAAP.
Net Operating Income (“NOI”)
We use NOI to measure the operating performance of our properties. NOI consists of rental revenue (which includes property rentals, tenant reimbursements and lease termination income) and certain other property-related revenue less operating expenses (which includes property-related expenses such as cleaning, security, repairs and maintenance, utilities, property administration and real estate taxes). We also present Cash NOI, which deducts from NOI, straight-line rent adjustments and the amortization of above and below-market leases, including our share of such adjustments of unconsolidated joint ventures. In addition, we present Paramount’s share of NOI and Cash NOI, which represents our share of NOI and Cash NOI of consolidated and unconsolidated joint ventures, based on our percentage ownership in the underlying assets. We use NOI and Cash NOI internally as performance measures and believe they provide useful information to investors regarding our financial condition and results of operations because they reflect only those income and expense items that are incurred at the property level. The following tables present reconciliations of our net income or loss to NOI and Cash NOI for the three and nine months ended September 30, 2023 and 2022.
|
|
For the Three Months Ended September 30, 2023 |
|
|||||||||||||
|
(Amounts in thousands) |
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Reconciliation of net (loss) income to NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net (loss) income |
$ |
(25,061 |
) |
|
$ |
981 |
|
|
$ |
9,285 |
|
|
$ |
(35,327 |
) |
|
Add (subtract) adjustments to arrive at NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Depreciation and amortization |
|
60,263 |
|
|
|
40,431 |
|
|
|
18,554 |
|
|
|
1,278 |
|
|
General and administrative |
|
15,460 |
|
|
|
- |
|
|
|
- |
|
|
|
15,460 |
|
|
Interest and debt expense |
|
39,102 |
|
|
|
25,523 |
|
|
|
12,816 |
|
|
|
763 |
|
|
Income tax expense |
|
263 |
|
|
|
- |
|
|
|
- |
|
|
|
263 |
|
|
Income from real estate related fund investments |
|
(2,060 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,060 |
) |
|
NOI from unconsolidated joint ventures (excluding
|
|
9,233 |
|
|
|
3,376 |
|
|
|
5,858 |
|
|
|
(1 |
) |
|
Loss (income) from unconsolidated joint ventures |
|
28,974 |
|
|
|
(1 |
) |
|
|
3,890 |
|
|
|
25,085 |
|
|
Fee income |
|
(4,573 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,573 |
) |
|
Interest and other income, net |
|
(4,115 |
) |
|
|
(655 |
) |
|
|
(740 |
) |
|
|
(2,720 |
) |
|
Other, net |
|
853 |
|
|
|
- |
|
|
|
- |
|
|
|
853 |
|
|
NOI |
|
118,339 |
|
|
|
69,655 |
|
|
|
49,663 |
|
|
|
(979 |
) |
|
Less NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(22,275 |
) |
|
|
(3,049 |
) |
|
|
(19,226 |
) |
|
|
- |
|
|
Paramount's share of NOI |
$ |
96,064 |
|
|
$ |
66,606 |
|
|
$ |
30,437 |
|
|
$ |
(979 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
NOI |
$ |
118,339 |
|
|
$ |
69,655 |
|
|
$ |
49,663 |
|
|
$ |
(979 |
) |
|
Add (subtract) adjustments to arrive at Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Straight-line rent adjustments (including our share |
|
|
|
|
|
|
|
|
|
|
|
||||
|
of unconsolidated joint ventures) |
|
(1,514 |
) |
|
|
1,184 |
|
|
|
(2,668 |
) |
|
|
(30 |
) |
|
Amortization of above and below-market leases, net
|
|
(2,110 |
) |
|
|
(729 |
) |
|
|
(1,381 |
) |
|
|
- |
|
|
Cash NOI |
|
114,715 |
|
|
|
70,110 |
|
|
|
45,614 |
|
|
|
(1,009 |
) |
|
Less Cash NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(20,520 |
) |
|
|
(3,179 |
) |
|
|
(17,341 |
) |
|
|
- |
|
|
Paramount's share of Cash NOI |
$ |
94,195 |
|
|
$ |
66,931 |
|
|
$ |
28,273 |
|
|
$ |
(1,009 |
) |
49
|
|
For the Three Months Ended September 30, 2022 |
|
|||||||||||||
|
(Amounts in thousands) |
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Reconciliation of net income (loss) to NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income (loss) |
$ |
1,224 |
|
|
$ |
2,701 |
|
|
$ |
10,276 |
|
|
$ |
(11,753 |
) |
|
Add (subtract) adjustments to arrive at NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Depreciation and amortization |
|
58,284 |
|
|
|
39,155 |
|
|
|
17,918 |
|
|
|
1,211 |
|
|
General and administrative |
|
13,150 |
|
|
|
- |
|
|
|
- |
|
|
|
13,150 |
|
|
Interest and debt expense |
|
36,949 |
|
|
|
23,392 |
|
|
|
12,794 |
|
|
|
763 |
|
|
Income tax expense |
|
673 |
|
|
|
5 |
|
|
|
- |
|
|
|
668 |
|
|
NOI from unconsolidated joint ventures (excluding
|
|
11,540 |
|
|
|
3,556 |
|
|
|
7,837 |
|
|
|
147 |
|
|
Loss (income) from unconsolidated joint ventures |
|
5,797 |
|
|
|
(7 |
) |
|
|
4,384 |
|
|
|
1,420 |
|
|
Fee income |
|
(5,132 |
) |
|
|
- |
|
|
|
- |
|
|
|
(5,132 |
) |
|
Interest and other income, net |
|
(1,580 |
) |
|
|
(236 |
) |
|
|
(201 |
) |
|
|
(1,143 |
) |
|
Other, net |
|
(195 |
) |
|
|
- |
|
|
|
- |
|
|
|
(195 |
) |
|
NOI |
|
120,710 |
|
|
|
68,566 |
|
|
|
53,008 |
|
|
|
(864 |
) |
|
Less NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(21,222 |
) |
|
|
(2,383 |
) |
|
|
(18,839 |
) |
|
|
- |
|
|
Paramount's share of NOI |
$ |
99,488 |
|
|
$ |
66,183 |
|
|
$ |
34,169 |
|
|
$ |
(864 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
NOI |
$ |
120,710 |
|
|
$ |
68,566 |
|
|
$ |
53,008 |
|
|
$ |
(864 |
) |
|
Add (subtract) adjustments to arrive at Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Straight-line rent adjustments (including our share |
|
|
|
|
|
|
|
|
|
|
|
||||
|
of unconsolidated joint ventures) |
|
(3,969 |
) |
|
|
1,514 |
|
|
|
(5,453 |
) |
|
|
(30 |
) |
|
Amortization of above and below-market leases, net
|
|
(790 |
) |
|
|
708 |
|
|
|
(1,498 |
) |
|
|
- |
|
|
Cash NOI |
|
115,951 |
|
|
|
70,788 |
|
|
|
46,057 |
|
|
|
(894 |
) |
|
Less Cash NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(19,988 |
) |
|
|
(2,775 |
) |
|
|
(17,213 |
) |
|
|
- |
|
|
Paramount's share of Cash NOI |
$ |
95,963 |
|
|
$ |
68,013 |
|
|
$ |
28,844 |
|
|
$ |
(894 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
50
|
|
For the Nine Months Ended September 30, 2023 |
|
|||||||||||||
|
(Amounts in thousands) |
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Reconciliation of net (loss) income to NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net (loss) income |
$ |
(99,576 |
) |
|
$ |
(21,213 |
) |
|
$ |
23,025 |
|
|
$ |
(101,388 |
) |
|
Add (subtract) adjustments to arrive at NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Depreciation and amortization |
|
181,778 |
|
|
|
117,879 |
|
|
|
60,128 |
|
|
|
3,771 |
|
|
General and administrative |
|
46,307 |
|
|
|
- |
|
|
|
- |
|
|
|
46,307 |
|
|
Interest and debt expense |
|
112,440 |
|
|
|
72,081 |
|
|
|
38,082 |
|
|
|
2,277 |
|
|
Income tax expense (benefit) |
|
1,124 |
|
|
|
5 |
|
|
|
(78 |
) |
|
|
1,197 |
|
|
Loss from real estate related fund investments |
|
37,034 |
|
|
|
- |
|
|
|
- |
|
|
|
37,034 |
|
|
NOI from unconsolidated joint ventures (excluding
|
|
30,334 |
|
|
|
10,143 |
|
|
|
20,133 |
|
|
|
58 |
|
|
Loss from unconsolidated joint ventures |
|
63,138 |
|
|
|
25,000 |
|
|
|
10,262 |
|
|
|
27,876 |
|
|
Fee income |
|
(14,106 |
) |
|
|
- |
|
|
|
- |
|
|
|
(14,106 |
) |
|
Interest and other income, net |
|
(10,007 |
) |
|
|
(1,616 |
) |
|
|
(1,384 |
) |
|
|
(7,007 |
) |
|
Other, net |
|
1,190 |
|
|
|
- |
|
|
|
- |
|
|
|
1,190 |
|
|
NOI |
|
349,656 |
|
|
|
202,279 |
|
|
|
150,168 |
|
|
|
(2,791 |
) |
|
Less NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(67,551 |
) |
|
|
(8,415 |
) |
|
|
(59,136 |
) |
|
|
- |
|
|
Paramount's share of NOI |
$ |
282,105 |
|
|
$ |
193,864 |
|
|
$ |
91,032 |
|
|
$ |
(2,791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
NOI |
$ |
349,656 |
|
|
$ |
202,279 |
|
|
$ |
150,168 |
|
|
$ |
(2,791 |
) |
|
Add (subtract) adjustments to arrive at Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Straight-line rent adjustments (including our share |
|
|
|
|
|
|
|
|
|
|
|
||||
|
of unconsolidated joint ventures) |
|
(1,690 |
) |
|
|
3,270 |
|
|
|
(4,990 |
) |
|
|
30 |
|
|
Amortization of above and below-market leases, net
|
|
(6,187 |
) |
|
|
(1,779 |
) |
|
|
(4,408 |
) |
|
|
- |
|
|
Cash NOI |
|
341,779 |
|
|
|
203,770 |
|
|
|
140,770 |
|
|
|
(2,761 |
) |
|
Less Cash NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(60,072 |
) |
|
|
(8,837 |
) |
|
|
(51,235 |
) |
|
|
- |
|
|
Paramount's share of Cash NOI |
$ |
281,707 |
|
|
$ |
194,933 |
|
|
$ |
89,535 |
|
|
$ |
(2,761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
51
|
|
For the Nine Months Ended September 30, 2022 |
|
|||||||||||||
|
(Amounts in thousands) |
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
||||
|
Reconciliation of net income (loss) to NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income (loss) |
$ |
11,384 |
|
|
$ |
18,732 |
|
|
$ |
27,705 |
|
|
$ |
(35,053 |
) |
|
Add (subtract) adjustments to arrive at NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Depreciation and amortization |
|
171,306 |
|
|
|
115,439 |
|
|
|
52,782 |
|
|
|
3,085 |
|
|
General and administrative |
|
45,501 |
|
|
|
- |
|
|
|
- |
|
|
|
45,501 |
|
|
Interest and debt expense |
|
106,804 |
|
|
|
66,465 |
|
|
|
38,054 |
|
|
|
2,285 |
|
|
Income tax expense |
|
1,559 |
|
|
|
7 |
|
|
|
4 |
|
|
|
1,548 |
|
|
NOI from unconsolidated joint ventures (excluding
|
|
34,359 |
|
|
|
9,902 |
|
|
|
24,162 |
|
|
|
295 |
|
|
Loss (income) from unconsolidated joint ventures |
|
15,326 |
|
|
|
(4 |
) |
|
|
12,164 |
|
|
|
3,166 |
|
|
Fee income |
|
(23,094 |
) |
|
|
- |
|
|
|
- |
|
|
|
(23,094 |
) |
|
Interest and other income, net |
|
(2,607 |
) |
|
|
(282 |
) |
|
|
(280 |
) |
|
|
(2,045 |
) |
|
Other, net |
|
(244 |
) |
|
|
- |
|
|
|
- |
|
|
|
(244 |
) |
|
NOI |
|
360,294 |
|
|
|
210,259 |
|
|
|
154,591 |
|
|
|
(4,556 |
) |
|
Less NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(63,340 |
) |
|
|
(7,808 |
) |
|
|
(55,532 |
) |
|
|
- |
|
|
Paramount's share of NOI |
$ |
296,954 |
|
|
$ |
202,451 |
|
|
$ |
99,059 |
|
|
$ |
(4,556 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
NOI |
$ |
360,294 |
|
|
$ |
210,259 |
|
|
$ |
154,591 |
|
|
$ |
(4,556 |
) |
|
Add (subtract) adjustments to arrive at Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Straight-line rent adjustments (including our share |
|
|
|
|
|
|
|
|
|
|
|
||||
|
of unconsolidated joint ventures) |
|
(8,288 |
) |
|
|
883 |
|
|
|
(9,201 |
) |
|
|
30 |
|
|
Amortization of above and below-market leases, net
|
|
(3,115 |
) |
|
|
1,597 |
|
|
|
(4,712 |
) |
|
|
- |
|
|
Cash NOI |
|
348,891 |
|
|
|
212,739 |
|
|
|
140,678 |
|
|
|
(4,526 |
) |
|
Less Cash NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
(61,194 |
) |
|
|
(8,459 |
) |
|
|
(52,735 |
) |
|
|
- |
|
|
Paramount's share of Cash NOI |
$ |
287,697 |
|
|
$ |
204,280 |
|
|
$ |
87,943 |
|
|
$ |
(4,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
52
Same Store NOI
The tables below set forth the reconciliations of our share of NOI to our share of Same Store NOI and Same Store Cash NOI for the three and nine months ended September 30, 2023 and 2022. These metrics are used to measure the operating performance of our properties that were owned by us in a similar manner during both the current and prior reporting periods, and represent our share of Same Store NOI and Same Store Cash NOI from consolidated and unconsolidated joint ventures based on our percentage ownership in the underlying assets. Same Store NOI also excludes lease termination income, impairment of receivables arising from operating leases and certain other items that vary from period to period. Same Store Cash NOI excludes the effect of non-cash items such as the straight-line rent adjustments and the amortization of above and below-market leases.
|
|
|
For the Three Months Ended September 30, 2023 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of NOI for the three months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
September 30, 2023 (1) |
|
$ |
96,064 |
|
|
$ |
66,606 |
|
|
$ |
30,437 |
|
|
$ |
(979 |
) |
|
|
Lease termination income |
|
|
(5,249 |
) |
|
|
(4,066 |
) |
|
|
(1,183 |
) |
|
|
- |
|
|
|
Non-cash write-offs of straight-line receivables |
|
|
144 |
|
|
|
77 |
|
|
|
67 |
|
|
|
- |
|
|
|
Acquisitions / Redevelopment and other, net |
|
|
925 |
|
|
|
3 |
|
(2) |
|
(57 |
) |
|
|
979 |
|
|
|
Paramount's share of Same Store NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
three months ended September 30, 2023 |
|
$ |
91,884 |
|
|
$ |
62,620 |
|
|
$ |
29,264 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
For the Three Months Ended September 30, 2022 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of NOI for the three months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
September 30, 2022 (1) |
|
$ |
99,488 |
|
|
$ |
66,183 |
|
|
$ |
34,169 |
|
|
$ |
(864 |
) |
|
|
Non-cash write-offs of straight-line receivables |
|
|
1,674 |
|
|
|
1,674 |
|
|
|
- |
|
|
|
- |
|
|
|
Acquisitions / Redevelopment and other, net |
|
|
1,242 |
|
|
|
378 |
|
(2) |
|
- |
|
|
|
864 |
|
|
|
Paramount's share of Same Store NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
three months ended September 30, 2022 |
|
$ |
102,404 |
|
|
$ |
68,235 |
|
|
$ |
34,169 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Decrease in Same Store NOI |
|
$ |
(10,520 |
) |
|
$ |
(5,615 |
) |
|
$ |
(4,905 |
) |
|
$ |
- |
|
|
|
% Decrease |
|
|
(10.3 |
%) |
|
|
(8.2 |
%) |
|
|
(14.4 |
%) |
|
|
|
|
|
53
|
|
|
For the Three Months Ended September 30, 2023 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of Cash NOI for the three months |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
ended September 30, 2023 (1) |
|
$ |
94,195 |
|
|
$ |
66,931 |
|
|
$ |
28,273 |
|
|
$ |
(1,009 |
) |
|
|
Lease termination income |
|
|
(5,249 |
) |
|
|
(4,066 |
) |
|
|
(1,183 |
) |
|
|
- |
|
|
|
Acquisitions / Redevelopment and other, net |
|
|
1,012 |
|
|
|
3 |
|
(2) |
|
- |
|
|
|
1,009 |
|
|
|
Paramount's share of Same Store Cash NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
three months ended September 30, 2023 |
|
$ |
89,958 |
|
|
$ |
62,868 |
|
|
$ |
27,090 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
For the Three Months Ended September 30, 2022 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of Cash NOI for the three months |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
ended September 30, 2022 (1) |
|
$ |
95,963 |
|
|
$ |
68,013 |
|
|
$ |
28,844 |
|
|
$ |
(894 |
) |
|
|
Acquisitions / Redevelopment and other, net |
|
|
917 |
|
|
|
23 |
|
(2) |
|
- |
|
|
|
894 |
|
|
|
Paramount's share of Same Store Cash NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
three months ended September 30, 2022 |
|
$ |
96,880 |
|
|
$ |
68,036 |
|
|
$ |
28,844 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Decrease in Same Store Cash NOI |
|
$ |
(6,922 |
) |
|
$ |
(5,168 |
) |
|
$ |
(1,754 |
) |
|
$ |
- |
|
|
|
% Decrease |
|
|
(7.1 |
%) |
|
|
(7.6 |
%) |
|
|
(6.1 |
%) |
|
|
|
|
|
54
|
|
|
For the Nine Months Ended September 30, 2023 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of NOI for the nine months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
September 30, 2023 (1) |
|
$ |
282,105 |
|
|
$ |
193,864 |
|
|
$ |
91,032 |
|
|
$ |
(2,791 |
) |
|
|
Lease termination income |
|
|
(7,304 |
) |
|
|
(6,121 |
) |
|
|
(1,183 |
) |
|
|
- |
|
|
|
Non-cash write-offs of straight-line rent receivables |
|
|
14,050 |
|
|
|
6,640 |
|
(2) |
|
7,410 |
|
(2) |
|
- |
|
|
|
Acquisitions / Redevelopment and other, net |
|
|
2,690 |
|
|
|
(44 |
) |
(3) |
|
(57 |
) |
|
|
2,791 |
|
|
|
Paramount's share of Same Store NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
nine months ended September 30, 2023 |
|
$ |
291,541 |
|
|
$ |
194,339 |
|
|
$ |
97,202 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
For the Nine Months Ended September 30, 2022 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of NOI for the nine months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
September 30, 2022 (1) |
|
$ |
296,954 |
|
|
$ |
202,451 |
|
|
$ |
99,059 |
|
|
$ |
(4,556 |
) |
|
|
Lease termination income |
|
|
(1,875 |
) |
|
|
(1,875 |
) |
|
|
- |
|
|
|
- |
|
|
|
Non-cash write-offs of straight-line rent receivables |
|
|
1,980 |
|
|
|
1,980 |
|
|
|
- |
|
|
|
- |
|
|
|
Acquisitions / Redevelopment and other, net |
|
|
3,307 |
|
|
|
(1,028 |
) |
(3) |
|
(221 |
) |
|
|
4,556 |
|
|
|
Paramount's share of Same Store NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
nine months ended September 30, 2022 |
|
$ |
300,366 |
|
|
$ |
201,528 |
|
|
$ |
98,838 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Decrease in Same Store NOI |
|
$ |
(8,825 |
) |
|
$ |
(7,189 |
) |
|
$ |
(1,636 |
) |
|
$ |
- |
|
|
|
% Decrease |
|
|
(2.9 |
%) |
|
|
(3.6 |
%) |
|
|
(1.7 |
%) |
|
|
|
|
|
55
|
|
|
For the Nine Months Ended September 30, 2023 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of Cash NOI for the nine months |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
ended September 30, 2023 (1) |
|
$ |
281,707 |
|
|
$ |
194,933 |
|
|
$ |
89,535 |
|
|
$ |
(2,761 |
) |
|
|
Lease termination income |
|
|
(7,304 |
) |
|
|
(6,121 |
) |
|
|
(1,183 |
) |
|
|
- |
|
|
|
Acquisitions / Redevelopment and other, net |
|
|
2,713 |
|
|
|
(48 |
) |
(2) |
|
- |
|
|
|
2,761 |
|
|
|
Paramount's share of Same Store Cash NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
nine months ended September 30, 2023 |
|
$ |
277,116 |
|
|
$ |
188,764 |
|
|
$ |
88,352 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
For the Nine Months Ended September 30, 2022 |
|
|
|||||||||||||
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
||||
|
Paramount's share of Cash NOI for the nine months |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
ended September 30, 2022 (1) |
|
$ |
287,697 |
|
|
$ |
204,280 |
|
|
$ |
87,943 |
|
|
$ |
(4,526 |
) |
|
|
Lease termination income |
|
|
(1,875 |
) |
|
|
(1,875 |
) |
|
|
- |
|
|
|
- |
|
|
|
Acquisitions / Redevelopment and other, net |
|
|
2,655 |
|
|
|
(1,650 |
) |
(2) |
|
(221 |
) |
|
|
4,526 |
|
|
|
Paramount's share of Same Store Cash NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
nine months ended September 30, 2022 |
|
$ |
288,477 |
|
|
$ |
200,755 |
|
|
$ |
87,722 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
(Decrease) increase in Same Store Cash NOI |
|
$ |
(11,361 |
) |
|
$ |
(11,991 |
) |
|
$ |
630 |
|
|
$ |
- |
|
|
|
% (Decrease) increase |
|
|
(3.9 |
%) |
|
|
(6.0 |
%) |
|
|
0.7 |
% |
|
|
|
|
|
Funds from Operations (“FFO”) and Core Funds from Operations (“Core FFO”)
FFO is a supplemental measure of our performance. We present FFO in accordance with the definition adopted by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as net income or loss, calculated in accordance with GAAP, adjusted to exclude depreciation and amortization from real estate assets, impairment losses on certain real estate assets and gains or losses from the sale of certain real estate assets or from change in control of certain real estate assets, including our share of such adjustments of unconsolidated joint ventures. FFO is commonly used in the real estate industry to assist investors and analysts in comparing results of real estate companies because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. In addition, we present Core FFO as an alternative measure of our operating performance, which adjusts FFO for certain other items that we believe enhance the comparability of our FFO across periods. Core FFO, when applicable, excludes the impact of certain items, including, transaction related costs and adjustments, realized and unrealized gains or losses on real estate related fund investments, unrealized gains or losses on interest rate swaps, severance costs and gains or losses on early extinguishment of debt, in order to reflect the Core FFO of our real estate portfolio and operations. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.
FFO and Core FFO are presented as supplemental financial measures and do not fully represent our operating performance. Neither FFO nor Core FFO is intended to be a measure of cash flow or liquidity. Please refer to our consolidated financial statements, prepared in accordance with GAAP, for purposes of evaluating our financial condition, results of operations and cash flows.
56
The following table presents a reconciliation of net (loss) income to FFO and Core FFO for the periods set forth below.
|
|
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
(Amounts in thousands, except share and per share amounts) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Reconciliation of net (loss) income to FFO and Core FFO: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net (loss) income |
|
$ |
(25,061 |
) |
|
$ |
1,224 |
|
|
$ |
(99,576 |
) |
|
$ |
11,384 |
|
|
Real estate depreciation and amortization (including our |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
share of unconsolidated joint ventures) |
|
|
69,160 |
|
|
|
68,009 |
|
|
|
209,687 |
|
|
|
201,069 |
|
|
Our share of a non-cash real estate impairment loss
|
|
|
- |
|
|
|
- |
|
|
|
24,734 |
|
|
|
- |
|
|
FFO |
|
|
44,099 |
|
|
|
69,233 |
|
|
|
134,845 |
|
|
|
212,453 |
|
|
Less FFO attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
|
(14,801 |
) |
|
|
(13,408 |
) |
|
|
(44,865 |
) |
|
|
(39,868 |
) |
|
Consolidated real estate related funds |
|
|
20,933 |
|
|
|
1,304 |
|
|
|
57,398 |
|
|
|
2,659 |
|
|
Operating Partnership |
|
|
(3,510 |
) |
|
|
(3,763 |
) |
|
|
(9,861 |
) |
|
|
(13,683 |
) |
|
FFO attributable to common stockholders |
|
$ |
46,721 |
|
|
$ |
53,366 |
|
|
$ |
137,517 |
|
|
$ |
161,561 |
|
|
Per diluted share |
|
$ |
0.21 |
|
|
$ |
0.24 |
|
|
$ |
0.63 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
FFO |
|
$ |
44,099 |
|
|
$ |
69,233 |
|
|
$ |
134,845 |
|
|
$ |
212,453 |
|
|
Non-core items: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
RDF's share of a non-cash impairment loss related to
|
|
|
23,942 |
|
|
$ |
- |
|
|
$ |
23,942 |
|
|
$ |
- |
|
|
Adjustments to equity in earnings for (distributions
|
|
|
(1,917 |
) |
|
|
709 |
|
|
|
(4,540 |
) |
|
|
294 |
|
|
Adjustment for realized and unrealized gains and losses
|
|
|
711 |
|
|
|
21 |
|
|
|
47,732 |
|
|
|
39 |
|
|
Other, net (including after-tax net gains or losses on sale
|
|
|
1,606 |
|
|
|
1,614 |
|
|
|
4,802 |
|
|
|
3,664 |
|
|
Core FFO |
|
|
68,441 |
|
|
|
71,577 |
|
|
|
206,781 |
|
|
|
216,450 |
|
|
Less Core FFO attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Consolidated joint ventures |
|
|
(14,801 |
) |
|
|
(13,408 |
) |
|
|
(44,865 |
) |
|
|
(39,868 |
) |
|
Consolidated real estate related funds |
|
|
(2,226 |
) |
|
|
(94 |
) |
|
|
(9,026 |
) |
|
|
(381 |
) |
|
Operating Partnership |
|
|
(3,592 |
) |
|
|
(3,826 |
) |
|
|
(10,228 |
) |
|
|
(13,741 |
) |
|
Core FFO attributable to common stockholders |
|
$ |
47,822 |
|
|
$ |
54,249 |
|
|
$ |
142,662 |
|
|
$ |
162,460 |
|
|
Per diluted share |
|
$ |
0.22 |
|
|
$ |
0.24 |
|
|
$ |
0.66 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Reconciliation of weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average shares outstanding |
|
|
217,043,022 |
|
|
|
224,864,791 |
|
|
|
216,871,778 |
|
|
|
222,228,605 |
|
|
Effect of dilutive securities |
|
|
32,676 |
|
|
|
28,555 |
|
|
|
21,638 |
|
|
|
34,143 |
|
|
Denominator for FFO and Core FFO per diluted share |
|
|
217,075,698 |
|
|
|
224,893,346 |
|
|
|
216,893,416 |
|
|
|
222,262,748 |
|
57
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and interest rates. Our future earnings, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Our primary market risk results from our indebtedness, which bears interest at both fixed and variable rates. We manage our market risk on variable rate debt by entering into interest rate swap agreements to fix the rate or interest rate cap agreements to limit exposure to increases in rates, on all or a portion of the debt for varying periods through maturity. This in turn, reduces the risks of variability of cash flows created by variable rate debt and mitigates the risk of increases in interest rates. Our objective when undertaking such arrangements is to reduce our floating rate exposure and we do not enter into hedging arrangements for speculative purposes. Subject to maintaining our status as a REIT for Federal income tax purposes, we may utilize swap arrangements in the future.
The following table summarizes our consolidated debt, the weighted average interest rates and the fair value as of September 30, 2023.
|
Property |
|
|
Rate |
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
Thereafter |
|
|
Total |
|
|
Fair Value |
|
|||||||||
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Fixed Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
One Market Plaza |
4.03% |
|
$ |
- |
|
|
$ |
975,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
975,000 |
|
|
$ |
961,419 |
|
||
|
|
31 West 52nd Street |
3.80% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
500,000 |
|
|
|
- |
|
|
|
- |
|
|
|
500,000 |
|
|
|
454,062 |
|
||
|
|
1301 Avenue of the Americas (1) |
2.49% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
500,000 |
|
|
|
- |
|
|
|
- |
|
|
|
500,000 |
|
|
|
497,811 |
|
||
|
|
300 Mission Street |
4.50% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
232,050 |
|
|
|
- |
|
|
|
- |
|
|
|
232,050 |
|
|
|
213,256 |
|
||
|
|
1633 Broadway |
2.99% |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,250,000 |
|
|
|
1,250,000 |
|
|
|
957,064 |
|
||
|
Total Fixed Rate Debt |
|
|
3.43% |
|
$ |
- |
|
|
$ |
975,000 |
|
|
$ |
- |
|
|
$ |
1,232,050 |
|
|
$ |
- |
|
|
$ |
1,250,000 |
|
|
$ |
3,457,050 |
|
|
$ |
3,083,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Variable Rate Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
1301 Avenue of the Americas (2) |
8.18% |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
360,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
360,000 |
|
|
$ |
358,424 |
|
||
|
|
Revolving Credit Facility |
n/a |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
|
Total Variable Rate Debt |
8.18% |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
360,000 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
360,000 |
|
|
$ |
358,424 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Total Consolidated Debt |
3.88% |
|
$ |
- |
|
|
$ |
975,000 |
|
|
$ |
- |
|
|
$ |
1,592,050 |
|
|
$ |
- |
|
|
$ |
1,250,000 |
|
|
$ |
3,817,050 |
|
|
$ |
3,442,036 |
|
|||
In addition to the above, our unconsolidated joint ventures had $1.75 billion of outstanding indebtedness as of September 30, 2023, of which our share was $626,292,000.
The tables below provide additional details on our interest rate swaps and interest rate caps as of September 30, 2023.
|
|
|
Notional |
|
|
Effective |
|
Maturity |
|
Benchmark |
|
Strike |
|
|
Fair Value as of |
|
|||||||
|
Property |
|
Amount |
|
|
Date |
|
Date |
|
Rate |
|
Rate |
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
1301 Avenue of the Americas |
|
$ |
500,000 |
|
|
Jul-2021 |
|
Aug-2024 |
|
SOFR |
|
|
0.49 |
% |
|
$ |
20,865 |
|
|
$ |
32,681 |
|
|
Total interest rate swap assets designated as cash flow hedges (included in "other assets") |
$ |
20,865 |
|
|
$ |
32,681 |
|
|||||||||||||||
|
|
|
Notional |
|
|
Effective |
|
Maturity |
|
Benchmark |
|
Strike |
|
|
Fair Value as of |
|
|||||||
|
Property |
|
Amount |
|
|
Date |
|
Date |
|
Rate |
|
Rate |
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
|
(Amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
1301 Avenue of the Americas |
|
$ |
360,000 |
|
|
Aug-2023 |
|
Aug-2024 |
|
SOFR |
|
|
4.50 |
% |
|
$ |
2,776 |
|
|
$ |
- |
|
|
1301 Avenue of the Americas |
|
|
360,000 |
|
|
Jul-2021 |
|
Aug-2023 |
|
LIBOR |
|
|
2.00 |
% |
|
|
- |
|
|
|
6,123 |
|
|
Total interest rate cap assets designated as cash flow hedges (included in "other assets") |
$ |
2,776 |
|
|
$ |
6,123 |
|
|||||||||||||||
58
The following table summarizes our share of total indebtedness and the effect to interest expense of a 100 basis point increase in variable rates.
|
|
|
As of September 30, 2023 |
|
|
As of December 31, 2022 |
|
||||||||||||||
|
(Amounts in thousands, except per share amount) |
|
Balance |
|
|
Weighted
|
|
|
Effect of 1% Increase in Base Rates |
|
|
Balance |
|
|
Weighted
|
|
|||||
|
Paramount's share of consolidated debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Variable rate |
|
$ |
360,000 |
|
|
|
8.18 |
% |
|
$ |
3,600 |
|
|
$ |
360,000 |
|
|
|
5.56 |
% |
|
Fixed Rate (1) |
|
2,674,930 |
|
|
|
3.27 |
% |
|
|
- |
|
|
|
2,687,665 |
|
|
|
3.25 |
% |
|
|
|
|
$ |
3,034,930 |
|
|
|
3.86 |
% |
|
$ |
3,600 |
|
|
$ |
3,047,665 |
|
|
|
3.52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Paramount's share of debt of non-consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
entities (non-recourse): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Variable rate |
|
$ |
115,267 |
|
|
|
7.50 |
% |
|
$ |
1,153 |
|
|
$ |
113,739 |
|
|
|
6.12 |
% |
|
Fixed rate |
|
|
511,025 |
|
|
|
3.32 |
% |
|
|
- |
|
|
|
511,025 |
|
|
|
3.30 |
% |
|
|
|
$ |
626,292 |
|
|
|
4.09 |
% |
|
$ |
1,153 |
|
|
$ |
624,764 |
|
|
|
3.82 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Noncontrolling interests' share of above |
|
|
$ |
(332 |
) |
|
|
|
|
|
|
|||||||||
|
Total change in annual net income |
|
|
|
|
|
|
|
$ |
4,421 |
|
|
|
|
|
|
|
||||
|
Per diluted share |
|
|
|
|
|
|
|
$ |
0.02 |
|
|
|
|
|
|
|
||||
59
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and regulations, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As of September 30, 2023, the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures. Based on the foregoing evaluation, as of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting in connection with the evaluation referenced above that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
60
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are a party to various claims and routine litigation arising in the ordinary course of business. As of September 30, 2023, we do not believe that the results of any such claims or litigation, individually or in the aggregate, will have a material adverse effect on our business, financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, “ Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations ”), there were no material changes to the risk factors disclosed in Part I, “ Item 1A. Risk Factors ” of our Annual Report on Form 10-K for the year ended December 31, 2022 or in Part II, “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
None.
Recent Purchases of Equity Securities
On November 5, 2019, we received authorization from our Board of Directors to repurchase up to $200,000,000 of our common stock, from time to time, in the open market or in privately negotiated transactions. As of December 31, 2022, we had repurchased a total of 24,183,768 common shares at a weighted average price of $7.65 per share, or $185,000,000 in the aggregate. We did not repurchase any shares in the three and nine months ended September 30, 2023 under our stock repurchase program. As of September 30, 2023, we have $15,000,000 available for future repurchases under the existing program. The amount and timing of future repurchases, if any, will depend on a number of factors, including, the price and availability of our shares, trading volume, general market conditions and available funding. The stock repurchase program may be suspended or discontinued at any time.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangement
During the three months ended September 30, 2023
, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934)
61
ITEM 6. EXHIBITS
Exhibits required by Item 601 of Regulation S-K are filed, or furnished as indicated, herewith or incorporated herein by reference and are listed in the following Exhibit Index:
EXHIBIT INDEX
|
Exhibit
|
|
Exhibit Description |
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
10.2 |
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
32.1** |
|
|
|
|
|
|
|
32.2** |
|
|
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema. |
|
|
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase. |
|
|
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase. |
|
|
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase. |
|
|
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase. |
|
|
|
|
|
104* |
|
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.) |
|
|
|
_______________________________ |
|
* |
|
Filed herewith |
|
|
|
|
|
** |
|
Furnished herewith |
|
|
|
|
|
|
|
|
|
|
|
|
62
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Paramount Group, Inc.
|
|||||
|
Date: |
November 1, 2023 |
By: |
/s/ Wilbur Paes |
|
Chief Operating Officer, Chief Financial Officer and Treasurer |
|
|
|
|
Wilbur Paes |
|
(duly authorized officer and principal financial officer) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: |
November 1, 2023 |
By: |
/s/ Ermelinda Berberi |
|
Senior Vice President, Chief Accounting Officer |
|
|
|
|
Ermelinda Berberi |
|
(duly authorized officer and principal accounting officer) |
63