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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: June 30, 2022

 

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, Suite 1801, 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 shar
e

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 July 15, 2022, there were 225,355,435 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 June 30, 2022 and December 31, 2021

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income (Unaudited) for the three and six months

ended June 30, 2022 and 2021

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months
ended June 30, 2022 and 2021

 

5

 

 

 

 

 

 

 

Consolidated Statements of Changes in Equity (Unaudited) for the three and six months
ended June 30, 2022 and 2021

 

6

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the six months
ended June 30, 2022 and 2021

 

8

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

10

 

 

 

 

 

Item 2.

 

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

 

28

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

59

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

61

 

 

 

 

 

Part II.

 

Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

62

 

 

 

 

 

Item 1A.

 

Risk Factors

 

62

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

62

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

62

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

62

 

 

 

 

 

Item 5.

 

Other Information

 

62

 

 

 

 

 

Item 6.

 

Exhibits

 

63

 

 

 

 

 

Signatures

 

64

 

 

 

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)

June 30, 2022

 

 

December 31, 2021

 

 

Assets

 

 

 

 

 

 

Real estate, at cost:

 

 

 

 

 

 

Land

$

1,966,237

 

 

$

1,966,237

 

 

Buildings and improvements

 

6,103,782

 

 

 

6,061,824

 

 

 

 

8,070,019

 

 

 

8,028,061

 

 

Accumulated depreciation and amortization

 

(1,199,035

)

 

 

(1,112,977

)

 

Real estate, net

 

6,870,984

 

 

 

6,915,084

 

 

Cash and cash equivalents

 

506,933

 

 

 

524,900

 

 

Restricted cash

 

24,934

 

 

 

4,766

 

 

Investments in unconsolidated joint ventures

 

429,418

 

 

 

408,096

 

 

Investments in unconsolidated real estate funds

 

14,156

 

 

 

11,421

 

 

Accounts and other receivables

 

17,788

 

 

 

15,582

 

 

Deferred rent receivable

 

336,736

 

 

 

332,735

 

 

Deferred charges, net of accumulated amortization of $61,033 and $70,666

 

119,431

 

 

 

122,177

 

 

Intangible assets, net of accumulated amortization of $234,001 and $252,142

 

104,929

 

 

 

119,413

 

 

Other assets

 

56,920

 

 

 

40,388

 

 

Total assets (1)

$

8,482,229

 

 

$

8,494,562

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Notes and mortgages payable, net of unamortized deferred financing costs
   of $
20,032 and $22,380

$

3,837,968

 

 

$

3,835,620

 

 

Revolving credit facility

 

-

 

 

 

-

 

 

Accounts payable and accrued expenses

 

108,464

 

 

 

116,192

 

 

Dividends and distributions payable

 

18,787

 

 

 

16,895

 

 

Intangible liabilities, net of accumulated amortization of $97,607 and $105,790

 

41,119

 

 

 

45,328

 

 

Other liabilities

 

24,537

 

 

 

25,495

 

 

Total liabilities (1)

 

4,030,875

 

 

 

4,039,530

 

 

Commitments and contingencies

 

 

 

 

 

 

Paramount Group, Inc. equity:

 

 

 

 

 

 

Common stock $0.01 par value per share; authorized 900,000,000 shares; issued and
   outstanding
225,625,481 and 218,991,795 shares in 2022 and 2021, respectively

 

2,255

 

 

 

2,190

 

 

Additional paid-in-capital

 

4,228,674

 

 

 

4,122,680

 

 

Earnings less than distributions

 

(570,577

)

 

 

(538,845

)

 

Accumulated other comprehensive income

 

36,840

 

 

 

2,138

 

 

Paramount Group, Inc. equity

 

3,697,192

 

 

 

3,588,163

 

 

Noncontrolling interests in:

 

 

 

 

 

 

Consolidated joint ventures

 

412,189

 

 

 

428,833

 

 

Consolidated real estate fund

 

80,557

 

 

 

81,925

 

 

Operating Partnership (15,900,186 and 21,740,404 units outstanding)

 

261,416

 

 

 

356,111

 

 

Total equity

 

4,451,354

 

 

 

4,455,032

 

 

Total liabilities and equity

$

8,482,229

 

 

$

8,494,562

 

 

 

 

(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 93.4% as of June 30, 2022. As of June 30, 2022, the assets and liabilities of the Operating Partnership include $3,954,957 and $2,569,935 of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. See Note 11, 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

 

 

For the Six Months Ended

 

 

June 30,

 

 

June 30,

 

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

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

$

177,243

 

 

$

174,628

 

 

$

347,165

 

 

$

347,774

 

Fee and other income

 

8,274

 

 

 

7,641

 

 

 

22,037

 

 

 

15,661

 

Total revenues

 

185,517

 

 

 

182,269

 

 

 

369,202

 

 

 

363,435

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

Operating

 

67,814

 

 

 

64,072

 

 

 

134,475

 

 

 

130,690

 

Depreciation and amortization

 

57,398

 

 

 

59,925

 

 

 

113,022

 

 

 

118,230

 

General and administrative

 

16,706

 

 

 

18,418

 

 

 

32,351

 

 

 

32,782

 

Transaction related costs

 

159

 

 

 

135

 

 

 

276

 

 

 

416

 

Total expenses

 

142,077

 

 

 

142,550

 

 

 

280,124

 

 

 

282,118

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Loss from unconsolidated joint ventures

 

(4,416

)

 

 

(15,717

)

 

 

(9,529

)

 

 

(21,033

)

Income from unconsolidated real estate funds

 

155

 

 

 

148

 

 

 

325

 

 

 

328

 

Interest and other income, net

 

796

 

 

 

1,070

 

 

 

1,027

 

 

 

2,372

 

Interest and debt expense

 

(35,578

)

 

 

(34,914

)

 

 

(69,855

)

 

 

(69,653

)

Net income (loss) before income taxes

 

4,397

 

 

 

(9,694

)

 

 

11,046

 

 

 

(6,669

)

Income tax expense

 

(359

)

 

 

(434

)

 

 

(886

)

 

 

(1,575

)

Net income (loss)

 

4,038

 

 

 

(10,128

)

 

 

10,160

 

 

 

(8,244

)

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

 

 

 

 

 

 

 

 

 

 

Consolidated joint ventures

 

(4,779

)

 

 

(7,428

)

 

 

(8,204

)

 

 

(13,156

)

Consolidated real estate fund

 

352

 

 

 

29

 

 

 

1,368

 

 

 

(56

)

Operating Partnership

 

29

 

 

 

1,584

 

 

 

(313

)

 

 

1,935

 

Net (loss) income attributable to common stockholders

$

(360

)

 

$

(15,943

)

 

$

3,011

 

 

$

(19,521

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Income per Common Share - Basic:

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share

$

(0.00

)

 

$

(0.07

)

 

$

0.01

 

 

$

(0.09

)

Weighted average shares outstanding

 

222,971,886

 

 

 

218,696,284

 

 

 

220,888,664

 

 

 

218,681,228

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Income per Common Share - Diluted:

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share

$

(0.00

)

 

$

(0.07

)

 

$

0.01

 

 

$

(0.09

)

Weighted average shares outstanding

 

222,971,886

 

 

 

218,696,284

 

 

 

220,930,019

 

 

 

218,681,228

 

 

See notes to consolidated financial statements (unaudited).

 

4


 

PARAMOUNT GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

June 30,

 

 

June 30,

 

(Amounts in thousands)

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

$

4,038

 

 

$

(10,128

)

 

$

10,160

 

 

$

(8,244

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Change in value of interest rate swaps and interest rate caps

 

6,109

 

 

 

-

 

 

 

24,654

 

 

 

-

 

Pro rata share of other comprehensive income of
   unconsolidated joint ventures

 

2,949

 

 

 

365

 

 

 

13,402

 

 

 

4,749

 

Comprehensive income (loss)

 

13,096

 

 

 

(9,763

)

 

 

48,216

 

 

 

(3,495

)

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

 

 

 

 

 

 

 

 

 

 

 

Consolidated joint ventures

 

(4,779

)

 

 

(7,428

)

 

 

(8,204

)

 

 

(13,156

)

Consolidated real estate fund

 

352

 

 

 

29

 

 

 

1,368

 

 

 

(68

)

Operating Partnership

 

(655

)

 

 

1,552

 

 

 

(3,667

)

 

 

1,511

 

Comprehensive income (loss) attributable to common stockholders

$

8,014

 

 

$

(15,610

)

 

$

37,713

 

 

$

(15,208

)

 

 

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 (Loss)

 

 

Ventures

 

 

Fund

 

 

Partnership

 

 

Equity

 

Balance as of March 31, 2022

 

 

219,077

 

 

$

2,190

 

 

$

4,120,077

 

 

$

(552,732

)

 

$

28,466

 

 

$

417,577

 

 

$

80,909

 

 

$

366,536

 

 

$

4,463,023

 

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(360

)

 

 

-

 

 

 

4,779

 

 

 

(352

)

 

 

(29

)

 

 

4,038

 

Common shares issued upon redemption of
   common units

 

 

6,530

 

 

 

65

 

 

 

107,147

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(107,212

)

 

 

-

 

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

 

 

18

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Dividends and distributions ($0.0775 per share
   and unit)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,485

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,302

)

 

 

(18,787

)

Distributions to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,167

)

 

 

-

 

 

 

-

 

 

 

(10,167

)

Change in value of interest rate swaps and
   interest rate caps

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,648

 

 

 

-

 

 

 

-

 

 

 

461

 

 

 

6,109

 

Pro rata share of other comprehensive income
   of unconsolidated joint ventures

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,726

 

 

 

-

 

 

 

-

 

 

 

223

 

 

 

2,949

 

Amortization of equity awards

 

 

-

 

 

 

-

 

 

 

317

 

 

 

-

 

 

 

-

 

 

 

-