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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended: March 31, 2024

 

OR

 

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: 001-36746

 

PARAMOUNT GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

Maryland

 

32-0439307

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

 

1633 Broadway, New York, NY

 

10019

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (212) 237-3100

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class

Trading Symbol

Name of each exchange on which registered

Common stock of Paramount Group, Inc.,
$0.01 par value per share

PGRE

New York Stock Exchange

 

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. Yes No

 

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). Yes No

 

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.

 

Large Accelerated Filer

 

Accelerated Filer

Non-Accelerated Filer

 

Smaller Reporting Company

 

 

 

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 April 15, 2024, there were 217,329,254 shares of the registrant’s common stock outstanding.

 

 

 


 

 

 

Table of Contents

Item

 

Page Number

Part I.

Financial Information

 

 

 

 

 

 

Item 1.

Consolidated Financial Statements

3

 

 

 

 

 

 

Consolidated Balance Sheets (Unaudited) as of March 31, 2024 and December 31, 2023

3

 

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) for the three months

ended March 31, 2024 and 2023

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited) for the three months

ended March 31, 2024 and 2023

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Equity (Unaudited) for the three months

ended March 31, 2024 and 2023

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the three months

ended March 31, 2024 and 2023

7

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

9

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

 

 

 

 

 

Item 4.

Controls and Procedures

46

 

Part II.

Other Information

 

 

 

 

 

 

Item 1.

Legal Proceedings

47

 

 

 

 

 

Item 1A.

Risk Factors

47

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

47

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

47

 

 

 

 

 

Item 4.

Mine Safety Disclosures

47

 

 

 

 

 

Item 5.

Other Information

47

 

 

 

 

 

Item 6.

Exhibits

48

 

 

 

 

 

Signatures

49

 

 

 

2


 

PART I – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

 

PARAMOUNT GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

(Amounts in thousands, except share, unit and per share amounts)

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

Real estate, at cost

 

 

 

 

 

Land

$

1,966,237

 

 

$

1,966,237

 

Buildings and improvements

 

6,278,863

 

 

 

6,250,379

 

 

 

8,245,100

 

 

 

8,216,616

 

Accumulated depreciation and amortization

 

(1,524,078

)

 

 

(1,471,819

)

Real estate, net

 

6,721,022

 

 

 

6,744,797

 

Cash and cash equivalents

 

276,235

 

 

 

428,208

 

Restricted cash

 

171,776

 

 

 

81,391

 

Accounts and other receivables

 

16,048

 

 

 

18,053

 

Real estate related fund investments

 

-

 

 

 

775

 

Investments in unconsolidated real estate related funds

 

4,603

 

 

 

4,549

 

Investments in unconsolidated joint ventures

 

132,788

 

 

 

132,239

 

Deferred rent receivable

 

353,826

 

 

 

351,209

 

Deferred charges, net of accumulated amortization of $86,845 and $82,265

 

107,407

 

 

 

108,751

 

Intangible assets, net of accumulated amortization of $197,756 and $194,536

 

62,609

 

 

 

68,005

 

Other assets

 

83,411

 

 

 

68,238

 

Total assets (1)

$

7,929,725

 

 

$

8,006,215

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Notes and mortgages payable, net of unamortized deferred financing costs
   of $
22,200 and $13,566

$

3,669,850

 

 

$

3,803,484

 

Revolving credit facility

 

-

 

 

 

-

 

Accounts payable and accrued expenses

 

115,038

 

 

 

114,463

 

Dividends and distributions payable

 

8,376

 

 

 

8,360

 

Intangible liabilities, net of accumulated amortization of $108,708 and $108,817

 

26,026

 

 

 

28,003

 

Other liabilities

 

31,774

 

 

 

37,017

 

Total liabilities (1)

 

3,851,064

 

 

 

3,991,327

 

Commitments and contingencies

 

 

 

 

 

Paramount Group, Inc. equity:

 

 

 

 

 

Common stock $0.01 par value per share; authorized 900,000,000 shares; issued and
   outstanding
217,329,254 and 217,366,089 shares in 2024 and 2023, respectively

 

2,173

 

 

 

2,173

 

Additional paid-in-capital

 

4,131,652

 

 

 

4,133,801

 

Earnings less than distributions

 

(941,855

)

 

 

(943,935

)

Accumulated other comprehensive income

 

7,080

 

 

 

11,246

 

Paramount Group, Inc. equity

 

3,199,050

 

 

 

3,203,285

 

Noncontrolling interests in:

 

 

 

 

 

Consolidated joint ventures

 

480,542

 

 

 

413,925

 

Consolidated real estate related funds

 

103,886

 

 

 

110,589

 

Operating Partnership (20,035,314 and 19,468,095 units outstanding)

 

295,183

 

 

 

287,089

 

Total equity

 

4,078,661

 

 

 

4,014,888

 

Total liabilities and equity

$

7,929,725

 

 

$

8,006,215

 

 

 

(1)
Represents the consolidated assets and liabilities of Paramount Group Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which we are the sole general partner and own approximately 91.6% as of March 31, 2024. As of March 31, 2024, the assets and liabilities of the Operating Partnership include $3,844,572 and $2,390,281 of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. See Note 12, Variable Interest Entities (VIEs).

 

See notes to consolidated financial statements (unaudited).

3


 

PARAMOUNT GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

For the Three Months Ended March 31,

 

(Amounts in thousands, except share and per share amounts)

2024

 

 

2023

 

Revenues:

 

 

 

 

 

Rental revenue

$

179,723

 

 

$

181,713

 

Fee and other income

 

9,154

 

 

 

6,761

 

Total revenues

 

188,877

 

 

 

188,474

 

Expenses:

 

 

 

 

 

Operating

 

71,740

 

 

 

70,309

 

Depreciation and amortization

 

61,114

 

 

 

58,888

 

General and administrative

 

16,634

 

 

 

14,623

 

Transaction related costs

 

178

 

 

 

128

 

Total expenses

 

149,666

 

 

 

143,948

 

Other income (expense):

 

 

 

 

 

(Loss) income from real estate related fund investments

 

(43

)

 

 

3,550

 

Income (loss) from unconsolidated real estate related funds

 

105

 

 

 

(178

)

Loss from unconsolidated joint ventures

 

(1,346

)

 

 

(5,762

)

Interest and other income, net

 

19,420

 

 

 

2,925

 

Interest and debt expense

 

(40,269

)

 

 

(36,459

)

Income before income taxes

 

17,078

 

 

 

8,602

 

Income tax expense

 

(347

)

 

 

(288

)

Net income

 

16,731

 

 

 

8,314

 

Less net income attributable to noncontrolling interests in:

 

 

 

 

Consolidated joint ventures

 

(5,206

)

 

 

(5,641

)

Consolidated real estate related funds

 

(762

)

 

 

(823

)

Operating Partnership

 

(898

)

 

 

(121

)

Net income attributable to common stockholders

$

9,865

 

 

$

1,729

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per Common Share - Basic:

 

 

 

 

 

Income per common share

$

0.05

 

 

$

0.01

 

Weighted average common shares outstanding

 

217,105,686

 

 

 

216,563,108

 

 

 

 

 

 

 

Income per Common Share - Diluted:

 

 

 

 

 

Income per common share

$

0.05

 

 

$

0.01

 

Weighted average common shares outstanding

 

217,186,409

 

 

 

216,617,020

 

 

See notes to consolidated financial statements (unaudited).

 

 

4


 

 

PARAMOUNT GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

For the Three Months Ended March 31,

 

(Amounts in thousands)

2024

 

 

2023

 

Net income

$

16,731

 

 

$

8,314

 

Other comprehensive income (loss):

 

 

 

 

 

Change in value of interest rate swaps and interest rate caps

 

(4,687

)

 

 

(8,390

)

Pro rata share of other comprehensive income (loss) of unconsolidated joint ventures

 

143

 

 

 

(2,563

)

Comprehensive income (loss)

 

12,187

 

 

 

(2,639

)

Less comprehensive (income) loss attributable to noncontrolling interests in:

 

 

 

 

 

Consolidated joint ventures

 

(5,206

)

 

 

(5,641

)

Consolidated real estate related funds

 

(762

)

 

 

(823

)

Operating Partnership

 

(520

)

 

 

594

 

Comprehensive income (loss) attributable to common stockholders

$

5,699

 

 

$

(8,509

)

 

 

See notes to consolidated financial statements (unaudited).

 

5


 

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, 2023

 

 

217,366

 

 

$

2,173

 

 

$

4,133,801

 

 

$

(943,935

)

 

$

11,246

 

 

$

413,925

 

 

$

110,589

 

 

$

287,089

 

 

$

4,014,888

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,865

 

 

 

-

 

 

 

5,206

 

 

 

762

 

 

 

898

 

 

 

16,731

 

Common shares issued under Omnibus
   share plan, net of shares withheld for taxes

 

 

(37

)

 

 

-

 

 

 

-

 

 

 

(178

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(178

)

Dividends and distributions ($0.035 per share
   and unit)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,607

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(769

)

 

 

(8,376

)

Contributions from noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

62,220

 

 

 

889

 

 

 

-

 

 

 

63,109

 

Distributions to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(809

)

 

 

(8,354

)

 

 

-

 

 

 

(9,163

)

Change in value of interest rate swaps and
   interest rate caps

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,297

)

 

 

-

 

 

 

-

 

 

 

(390

)

 

 

(4,687

)

Pro rata share of other comprehensive income
   of unconsolidated joint ventures

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

131

 

 

 

-

 

 

 

-

 

 

 

12

 

 

 

143

 

Amortization of equity awards

 

 

-

 

 

 

-

 

 

 

269

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,925

 

 

 

6,194

 

Reallocation of noncontrolling interest

 

 

-

 

 

 

-

 

 

 

(2,418

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,418

 

 

 

-

 

Balance as of March 31, 2024

 

 

217,329

 

 

$

2,173

 

 

$

4,131,652

 

 

$

(941,855

)

 

$

7,080

 

 

$

480,542

 

 

$

103,886

 

 

$

295,183

 

 

$

4,078,661

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

 

216,559

 

 

$

2,165

 

 

$

4,186,161

 

 

$

(644,331

)

 

$

48,296

 

 

$

402,118

 

 

$

173,375

 

 

$

242,982

 

 

$

4,410,766

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,729

 

 

 

-

 

 

 

5,641

 

 

 

823

 

 

 

121

 

 

 

8,314

 

Common shares issued upon redemption of
   common units

 

 

614

 

 

 

6

 

 

 

10,222

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,228

)

 

 

-

 

Common shares issued under Omnibus
   share plan, net of shares withheld for taxes

 

 

39

 

 

 

-

 

 

 

-

 

 

 

(205

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(205

)

Dividends and distributions ($0.0775 per share
   and unit)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(16,834

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,276

)

 

 

(18,110

)

Contributions from noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

283

 

 

 

49,748

 

 

 

-

 

 

 

50,031

 

Distributions to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,140

)

 

 

(3,740

)

 

 

-

 

 

 

(7,880

)

Change in value of interest rate swaps and
   interest rate caps

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,842

)

 

 

-

 

 

 

-

 

 

 

(548

)

 

 

(8,390

)

Pro rata share of other comprehensive income (loss)
   of unconsolidated joint ventures

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,396

)

 

 

-

 

 

 

-

 

 

 

(167

)

 

 

(2,563

)

Amortization of equity awards

 

 

-

 

 

 

-

 

 

 

324

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,793

 

 

 

5,117

 

Reallocation of noncontrolling interest

 

 

-

 

 

 

-

 

 

 

(14,724

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,724

 

 

 

-

 

Balance as of March 31, 2023

 

 

217,212

 

 

$

2,171

 

 

$

4,181,983

 

 

$

(659,641

)

 

$

38,058

 

 

$

403,902

 

 

$

220,206

 

 

$

250,401

 

 

$

4,437,080

 

 

 

See notes to consolidated financial statements (unaudited).

6


 

PARAMOUNT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

For the Three Months Ended March 31,

 

(Amounts in thousands)

2024

 

 

2023

 

Cash Flows from Operating Activities:

 

 

 

 

 

Net income

$

16,731

 

 

$

8,314

 

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

Depreciation and amortization

 

61,114

 

 

 

58,888

 

Straight-lining of rental revenue

 

(2,854

)

 

 

(7,756

)

Amortization of stock-based compensation expense

 

6,194

 

 

 

5,117

 

Amortization of deferred financing costs

 

2,368

 

 

 

1,538

 

Loss from unconsolidated joint ventures

 

1,346

 

 

 

5,762

 

Distributions of earnings from unconsolidated joint ventures

 

150

 

 

 

144

 

Unrealized losses on real estate related fund investments

 

775

 

 

 

1,111

 

(Income) loss from unconsolidated real estate related funds

 

(105

)

 

 

178

 

Distributions of earnings from unconsolidated real estate related funds

 

51

 

 

 

51

 

Amortization of above and below-market leases, net

 

(1,340

)

 

 

(1,036

)

Non-cash gain on extinguishment of IPO related tax liability

 

(15,437

)

 

 

-

 

Other non-cash adjustments

 

(57

)

 

 

(42

)

Changes in operating assets and liabilities:

 

 

 

 

 

Real estate related fund investments

 

-

 

 

 

(3,918

)

Accounts and other receivables

 

2,005

 

 

 

4,457

 

Deferred charges

 

(728

)

 

 

(1,689

)

Other assets

 

(19,648

)

 

 

(8,469

)

Accounts payable and accrued expenses

 

8,963

 

 

 

(3,797

)

Other liabilities

 

10,362

 

 

 

(885

)

Net cash provided by operating activities

 

69,890

 

 

 

57,968

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Additions to real estate

 

(39,344

)

 

 

(18,883

)

Contributions of capital to unconsolidated joint ventures

 

(1,904

)

 

 

-

 

Net cash used in investing activities

 

(41,248

)

 

 

(18,883

)

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Repayment of notes and mortgages payable

 

(975,000

)

 

 

-

 

Proceeds from notes and mortgages payable

 

850,000

 

 

 

-

 

Debt issuance costs

 

(10,638

)

 

 

-

 

Contributions from noncontrolling interests in consolidated joint ventures

 

62,220

 

 

 

283

 

Distributions to noncontrolling interests in consolidated joint ventures

 

(809

)

 

 

(4,140

)

Contributions from noncontrolling interests in consolidated real estate related funds

 

889

 

 

 

49,748

 

Distributions to noncontrolling interests in consolidated real estate related funds

 

(8,354

)

 

 

(3,740

)

Dividends paid to common stockholders

 

(7,608

)

 

 

(16,827

)

Distributions paid to common unitholders

 

(752

)

 

 

(1,199

)

Settlement of accounts payable in connection with repurchases of common shares

 

-

 

 

 

(1,847

)

Repurchase of shares related to stock compensation agreements
   and related tax withholdings

 

(178

)

 

 

(205

)

Net cash (used in) provided by financing activities

 

(90,230

)

 

 

22,073

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

(61,588

)

 

 

61,158

 

Cash and cash equivalents and restricted cash at beginning of period

 

509,599

 

 

 

449,817

 

Cash and cash equivalents and restricted cash at end of period

$

448,011

 

 

$

510,975

 

 

 

See notes to consolidated financial statements (unaudited).

 

7


 

PARAMOUNT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

 

 

 

For the Three Months Ended March 31,

 

(Amounts in thousands)

2024

 

 

2023

 

Reconciliation of Cash and Cash Equivalents and Restricted Cash:

 

 

 

 

Cash and cash equivalents at beginning of period

$

428,208

 

 

$

408,905

 

Restricted cash at beginning of period

 

81,391

 

 

 

40,912

 

Cash and cash equivalents and restricted cash at beginning of period

$

509,599

 

 

$

449,817

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

$

276,235

 

 

$

451,796

 

Restricted cash at end of period

 

171,776

 

 

 

59,179

 

Cash and cash equivalents and restricted cash at end of period

$

448,011

 

 

$

510,975

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

Cash payments for interest

$

38,228

 

 

$

33,338

 

Cash payments for income taxes, net of refunds

 

216

 

 

 

317

 

 

 

 

 

 

 

Non-Cash Transactions:

 

 

 

 

 

Dividends and distributions declared but not yet paid

$

8,376

 

 

$

18,110

 

Change in value of interest rate swaps and interest rate caps

 

(4,687

)

 

 

(8,390

)

Write-off of fully amortized and/or depreciated assets

 

1,659

 

 

 

10,170

 

Additions to real estate included in accounts payable and accrued expenses

 

5,099

 

 

 

8,306

 

Common shares issued upon redemption of common units

 

-

 

 

 

10,228

 

 

See notes to consolidated financial statements (unaudited).

8


PARAMOUNT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1.
Organization and Business

 

 

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 91.6% of, the Operating Partnership as of March 31, 2024.

 

As of March 31, 2024, we owned and/or managed a portfolio of 18 properties aggregating 13.8 million square feet comprised of:

Eight wholly and partially owned Class A properties aggregating 8.7 million square feet in New York, comprised of 8.2 million square feet of office space and 0.5 million square feet of retail and theater space;
Six wholly and partially owned Class A properties aggregating 4.3 million square feet in San Francisco, comprised of 4.1 million square feet of office space and 0.2 million square feet of retail space; and
Four managed properties aggregating 0.8 million square feet in New York and Washington, D.C.

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.

 

2.
Basis of Presentation and Significant Accounting Policies

 

 

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, 2023 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, 2023, 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, 2023.

 

 

 

9


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 months ended March 31, 2024 are not necessarily indicative of the operating results for the full year. Certain prior year balances have been reclassified to conform to current year presentation.

 

 

Recently Issued Accounting Pronouncements

 

In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, an update to Accounting Standards Codification (“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 in the joint venture’s separate financial statements. 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.

 

In November 2023, the FASB issued ASU 2023-07, an update to ASC Topic 280, Segment Reporting. ASU 2023-07 enhances the segment reporting by requiring disclosures of (i) the significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, (ii) the composition of the other segment items, including the nature and type of the other segment items, and (iii) the title and position of the CODM. ASU 2023-07 is effective for our year ending December 31, 2024 and for our interim periods that begin on January 1, 2025, with early adoption permitted. We are evaluating the impact of ASU 2023-07 on our consolidated financial statements.

 

In March 2024, the SEC issued final rules on the enhancement and standardization of climate-related disclosures, and in April 2024, as a result of pending legal challenges, the SEC voluntarily stayed the new rules. The rules require disclosures relating to (i) material climate-related risks, (ii) governance and management of such risks and (iii) greenhouse gas emissions. Additionally, the rules require disclosure of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds, in the notes to the financial statements. The requirements in the rule will be phased in starting with our Annual Report on Form 10-K for the year ending December 31, 2025. We are evaluating the impact of the new rules on our consolidated financial statements and the related disclosures.

 

 

 

 

10


PARAMOUNT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

3.
Consolidated Real Estate Related Funds

 

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 and own a 13.0% interest. The following table sets forth the details of income or loss from real estate related fund investments for the three months ended March 31, 2024 and 2023.

 

 

For the Three Months Ended March 31,

 

(Amounts in thousands)

2024

 

 

2023

 

Net investment income

$

732

 

 

$

4,661

 

Net unrealized losses

 

(775

)

 

 

(1,111

)

(Loss) income from real estate related fund investments

 

(43

)

 

 

3,550

 

Less: noncontrolling interests in consolidated real estate related funds

 

50

 

 

 

(2,817

)

Income from real estate related fund investments attributable to
   Paramount Group, Inc.

$

7

 

 

$

733

 

 

 

Residential Development Fund (“RDF”)

 

We are also the general partner of RDF in which we own a 7.4% interest. RDF owns a 35.0% interest in One Steuart Lane, a for-sale residential condominium project, in San Francisco, California. We consolidate the financial results of RDF into our consolidated financial statements and reflect the 92.6% interest that we do not own as noncontrolling interests in consolidated real estate related funds. RDF accounts for its 35.0% interest in One Steuart Lane under the equity method of accounting. Accordingly, our economic interest in One Steuart Lane (based on our 7.4% ownership interest in RDF) is 2.6%. See Note 5, Investments in Unconsolidated Joint Ventures.

 

 

4.
Investments in Unconsolidated Real Estate Related Funds

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 March 31, 2024, our ownership interest in Fund VIII was approximately 1.3%. We account for our investment in Fund VIII under the equity method of accounting.

 

As of March 31, 2024 and December 31, 2023, our share of the investments in the unconsolidated real estate related funds was $4,603,000 and $4,549,000, respectively, which is reflected as “investments in unconsolidated real estate related funds” on our consolidated balance sheets. We recognized income of $105,000 and loss of $178,000 during the three months ended March 31, 2024 and 2023, respectively, for our share of earnings, which is reflected as “income (loss) from unconsolidated real estate related funds” in our consolidated statements of income.

 

11


PARAMOUNT GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

 

5.
Investments in Unconsolidated Joint Ventures

 

On March 29, 2024, the joint venture that owns 60 Wall Street, in which we have a 5.0% ownership interest, modified the existing $575,000,000 mortgage loan and extended the maturity to May 2029. In connection with the modification, the loan was split into (i) a $316,250,000 A-Note that bears interest at Secured Overnight Financing Rate (“SOFR”) plus 245 basis points, of which 4.0% is current pay and the remaining is accrued, and (ii) a $258,750,000 B-Note that accrues interest at 12.0%. The joint venture plans to redevelop the property and all amounts funded by the joint venture will be senior to the B-Note and all accrued interest.

 

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

 

March 31, 2024

 

 

December 31, 2023

 

712 Fifth Avenue (1)

 

50.0%

 

$

-

 

 

$

-

 

Market Center (1)

 

67.0%

 

 

-

 

 

 

-

 

55 Second Street (2)

 

44.1%

 

 

30,019

 

 

 

30,322

 

111 Sutter Street (1)

 

49.0%

 

 

-

 

 

 

-

 

1600 Broadway (2)

 

9.2%

 

 

8,496

 

 

 

8,646

 

60 Wall Street (3)

 

5.0%

 

 

217

 

 

 

-

 

One Steuart Lane (2)

 

35.0% (4)

 

 

90,640

 

 

 

89,949

 

Oder-Center, Germany (2)

 

9.5%

 

 

3,416

 

 

 

3,322

 

Investments in unconsolidated joint ventures

 

$

132,788

 

 

$

132,239

 

 

(Amounts in thousands)

For the Three Months Ended March 31,

 

Our Share of Net (Loss) Income:

2024

 

 

2023

 

712 Fifth Avenue (1)