,
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,March 31, 20222023
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., | 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,April 14, 2023, there were 225,355,435217,211,716 shares of the registrant’s common stock outstanding.
Table of Contents
Item | Page Number | ||||
Part I. | Financial Information | ||||
Item 1. | 3 | ||||
Consolidated Balance Sheets (Unaudited) as of | 3 | ||||
Consolidated Statements of Income (Unaudited) for the three | 4 | ||||
5 | |||||
6 | |||||
| |||||
| |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |||
Item 3. |
| ||||
Item 4. |
| ||||
Part II. | Other Information | ||||
Item 1. |
| ||||
Item 1A. |
| ||||
Item 2. |
| ||||
Item 3. |
| ||||
Item 4. |
| ||||
Item 5. |
| ||||
Item 6. |
| ||||
|
2
PART I – FINANCIAL INFORMATIONINFORMATION
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 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate, at cost: |
|
|
|
|
|
| |||||||||
Real estate, at cost |
|
|
|
|
| ||||||||||
Land | $ | 1,966,237 |
|
| $ | 1,966,237 |
|
| $ | 1,966,237 |
|
| $ | 1,966,237 |
|
Buildings and improvements |
| 6,103,782 |
|
|
| 6,061,824 |
|
|
| 6,185,311 |
|
|
| 6,177,540 |
|
|
| 8,070,019 |
|
|
| 8,028,061 |
|
|
| 8,151,548 |
|
|
| 8,143,777 |
|
Accumulated depreciation and amortization |
| (1,199,035 | ) |
|
| (1,112,977 | ) |
|
| (1,337,552 | ) |
|
| (1,297,553 | ) |
Real estate, net |
| 6,870,984 |
|
|
| 6,915,084 |
|
|
| 6,813,996 |
|
|
| 6,846,224 |
|
Cash and cash equivalents |
| 506,933 |
|
|
| 524,900 |
|
|
| 451,796 |
|
|
| 408,905 |
|
Restricted cash |
| 24,934 |
|
|
| 4,766 |
|
|
| 59,179 |
|
|
| 40,912 |
|
Accounts and other receivables |
| 19,409 |
|
|
| 23,866 |
| ||||||||
Real estate related fund investments |
| 108,176 |
|
|
| 105,369 |
| ||||||||
Investments in unconsolidated real estate related funds |
| 3,180 |
|
|
| 3,411 |
| ||||||||
Investments in unconsolidated joint ventures |
| 429,418 |
|
|
| 408,096 |
|
|
| 385,034 |
|
|
| 393,503 |
|
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 |
|
|
| 354,326 |
|
|
| 346,338 |
|
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 |
|
| |||||||
Deferred charges, net of accumulated amortization of $72,965 and $68,686 |
| 120,359 |
|
|
| 120,685 |
| ||||||||
Intangible assets, net of accumulated amortization of $185,725 and $246,723 |
| 84,352 |
|
|
| 90,381 |
| ||||||||
Other assets |
| 56,920 |
|
|
| 40,388 |
|
|
| 80,282 |
|
|
| 73,660 |
|
Total assets (1) | $ | 8,482,229 |
|
| $ | 8,494,562 |
|
| $ | 8,480,089 |
|
| $ | 8,453,254 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
| ||||
Notes and mortgages payable, net of unamortized deferred financing costs | $ | 3,837,968 |
|
| $ | 3,835,620 |
|
| |||||||
Notes and mortgages payable, net of unamortized deferred financing costs | $ | 3,841,492 |
|
| $ | 3,840,318 |
| ||||||||
Revolving credit facility |
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
Accounts payable and accrued expenses |
| 108,464 |
|
|
| 116,192 |
|
|
| 118,932 |
|
|
| 123,176 |
|
Dividends and distributions payable |
| 18,787 |
|
|
| 16,895 |
|
|
| 18,110 |
|
|
| 18,026 |
|
Intangible liabilities, net of accumulated amortization of $97,607 and $105,790 |
| 41,119 |
|
|
| 45,328 |
|
| |||||||
Intangible liabilities, net of accumulated amortization of $104,415 and $102,533 |
| 33,938 |
|
|
| 36,193 |
| ||||||||
Other liabilities |
| 24,537 |
|
|
| 25,495 |
|
|
| 30,537 |
|
|
| 24,775 |
|
Total liabilities (1) |
| 4,030,875 |
|
|
| 4,039,530 |
|
|
| 4,043,009 |
|
|
| 4,042,488 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
| ||||
Paramount Group, Inc. equity: |
|
|
|
|
|
|
|
|
|
|
| ||||
Common stock $0.01 par value per share; authorized 900,000,000 shares; issued and |
| 2,255 |
|
|
| 2,190 |
|
| |||||||
Common stock $0.01 par value per share; authorized 900,000,000 shares; issued and |
| 2,171 |
|
|
| 2,165 |
| ||||||||
Additional paid-in-capital |
| 4,228,674 |
|
|
| 4,122,680 |
|
|
| 4,181,983 |
|
|
| 4,186,161 |
|
Earnings less than distributions |
| (570,577 | ) |
|
| (538,845 | ) |
|
| (659,641 | ) |
|
| (644,331 | ) |
Accumulated other comprehensive income |
| 36,840 |
|
|
| 2,138 |
|
|
| 38,058 |
|
|
| 48,296 |
|
Paramount Group, Inc. equity |
| 3,697,192 |
|
|
| 3,588,163 |
|
|
| 3,562,571 |
|
|
| 3,592,291 |
|
Noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated joint ventures |
| 412,189 |
|
|
| 428,833 |
|
|
| 403,902 |
|
|
| 402,118 |
|
Consolidated real estate fund |
| 80,557 |
|
|
| 81,925 |
|
| |||||||
Operating Partnership (15,900,186 and 21,740,404 units outstanding) |
| 261,416 |
|
|
| 356,111 |
|
| |||||||
Consolidated real estate related funds |
| 220,206 |
|
|
| 173,375 |
| ||||||||
Operating Partnership (15,212,454 and 14,586,411 units outstanding) |
| 250,401 |
|
|
| 242,982 |
| ||||||||
Total equity |
| 4,451,354 |
|
|
| 4,455,032 |
|
|
| 4,437,080 |
|
|
| 4,410,766 |
|
Total liabilities and equity | $ | 8,482,229 |
|
| $ | 8,494,562 |
|
| $ | 8,480,089 |
|
| $ | 8,453,254 |
|
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) | 2023 |
|
| 2022 |
| ||
Revenues: |
|
|
|
|
| ||
Rental revenue | $ | 181,713 |
|
| $ | 169,922 |
|
Fee and other income |
| 6,761 |
|
|
| 13,763 |
|
Total revenues |
| 188,474 |
|
|
| 183,685 |
|
Expenses: |
|
|
|
|
| ||
Operating |
| 70,309 |
|
|
| 66,661 |
|
Depreciation and amortization |
| 58,888 |
|
|
| 55,624 |
|
General and administrative |
| 14,623 |
|
|
| 15,645 |
|
Transaction related costs |
| 128 |
|
|
| 117 |
|
Total expenses |
| 143,948 |
|
|
| 138,047 |
|
Other income (expense): |
|
|
|
|
| ||
Income from real estate related fund investments |
| 3,550 |
|
|
| - |
|
(Loss) income from unconsolidated real estate related funds |
| (178 | ) |
|
| 170 |
|
Loss from unconsolidated joint ventures |
| (5,762 | ) |
|
| (5,113 | ) |
Interest and other income, net |
| 2,925 |
|
|
| 231 |
|
Interest and debt expense |
| (36,459 | ) |
|
| (34,277 | ) |
Income before income taxes |
| 8,602 |
|
|
| 6,649 |
|
Income tax expense |
| (288 | ) |
|
| (527 | ) |
Net income |
| 8,314 |
|
|
| 6,122 |
|
Less net (income) loss attributable to noncontrolling interests in: |
|
|
|
| |||
Consolidated joint ventures |
| (5,641 | ) |
|
| (3,425 | ) |
Consolidated real estate related funds |
| (823 | ) |
|
| 1,016 |
|
Operating Partnership |
| (121 | ) |
|
| (342 | ) |
Net income attributable to common stockholders | $ | 1,729 |
|
| $ | 3,371 |
|
|
|
|
|
|
| ||
|
|
|
|
|
| ||
Income per Common Share - Basic: |
|
|
|
|
| ||
Income per common share | $ | 0.01 |
|
| $ | 0.02 |
|
Weighted average shares outstanding |
| 216,563,108 |
|
|
| 218,782,296 |
|
|
|
|
|
|
| ||
Income per Common Share - Diluted: |
|
|
|
|
| ||
Income per common share | $ | 0.01 |
|
| $ | 0.02 |
|
Weighted average shares outstanding |
| 216,617,020 |
|
|
| 218,840,094 |
|
| 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 |
| 2,949 |
|
|
| 365 |
|
|
| 13,402 |
|
|
| 4,749 |
|
Comprehensive income (loss) |
| 13,096 |
|
|
| (9,763 | ) |
|
| 48,216 |
|
|
| (3,495 | ) |
Less comprehensive (income) loss attributable to |
|
|
|
|
|
|
|
|
|
|
| ||||
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 | ) |
| For the Three Months Ended March 31, |
| |||||
(Amounts in thousands) | 2023 |
|
| 2022 |
| ||
Net income | $ | 8,314 |
|
| $ | 6,122 |
|
Other comprehensive (loss) income: |
|
|
|
|
| ||
Change in value of interest rate swaps and interest rate caps |
| (8,390 | ) |
|
| 18,545 |
|
Pro rata share of other comprehensive (loss) income of unconsolidated |
| (2,563 | ) |
|
| 10,453 |
|
Comprehensive (loss) income |
| (2,639 | ) |
|
| 35,120 |
|
Less comprehensive (income) loss attributable to noncontrolling interests in: |
|
|
|
|
| ||
Consolidated joint ventures |
| (5,641 | ) |
|
| (3,425 | ) |
Consolidated real estate related funds |
| (823 | ) |
|
| 1,016 |
|
Operating Partnership |
| 594 |
|
|
| (3,012 | ) |
Comprehensive (loss) income attributable to common stockholders | $ | (8,509 | ) |
| $ | 29,699 |
|
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 |
|
| 6,530 |
|
|
| 65 |
|
|
| 107,147 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (107,212 | ) |
|
| - |
|
Common shares issued under Omnibus |
|
| 18 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Dividends and distributions ($0.0775 per share |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (17,485 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,302 | ) |
|
| (18,787 | ) |
Distributions to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (10,167 | ) |
|
| - |
|
|
| - |
|
|
| (10,167 | ) |
Change in value of interest rate swaps and |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,648 |
|
|
| - |
|
|
| - |
|
|
| 461 |
|
|
| 6,109 |
|
Pro rata share of other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,726 |
|
|
| - |
|
|
| - |
|
|
| 223 |
|
|
| 2,949 |
|
Amortization of equity awards |
|
| - |
|
|
| - |
|
|
| 317 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,872 |
|
|
| 4,189 |
|
Reallocation of noncontrolling interest |
|
| - |
|
|
| - |
|
|
| 1,133 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,133 | ) |
|
| - |
|
Balance as of June 30, 2022 |
|
| 225,625 |
|
| $ | 2,255 |
|
| $ | 4,228,674 |
|
| $ | (570,577 | ) |
| $ | 36,840 |
|
| $ | 412,189 |
|
| $ | 80,557 |
|
| $ | 261,416 |
|
| $ | 4,451,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance as of March 31, 2021 |
|
| 218,950 |
|
| $ | 2,189 |
|
| $ | 4,111,144 |
|
| $ | (476,051 | ) |
| $ | (8,809 | ) |
| $ | 438,937 |
|
| $ | 79,114 |
|
| $ | 359,411 |
|
| $ | 4,505,935 |
|
Net (loss) income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (15,943 | ) |
|
| - |
|
|
| 7,428 |
|
|
| (29 | ) |
|
| (1,584 | ) |
|
| (10,128 | ) |
Common shares issued upon redemption of |
|
| 10 |
|
|
| - |
|
|
| 165 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (165 | ) |
|
| - |
|
Common shares issued under Omnibus |
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Dividends and distributions ($0.07 per share |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (15,327 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,570 | ) |
|
| (16,897 | ) |
Distributions to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,937 | ) |
|
| - |
|
|
| - |
|
|
| (3,937 | ) |
Pro rata share of other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 331 |
|
|
| - |
|
|
| - |
|
|
| 34 |
|
|
| 365 |
|
Amortization of equity awards |
|
| - |
|
|
| - |
|
|
| 304 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,481 |
|
|
| 4,785 |
|
Reallocation of noncontrolling interest |
|
| - |
|
|
| - |
|
|
| 2,276 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,276 | ) |
|
| - |
|
Balance as of June 30, 2021 |
|
| 218,962 |
|
| $ | 2,189 |
|
| $ | 4,113,889 |
|
| $ | (507,321 | ) |
| $ | (8,478 | ) |
| $ | 442,428 |
|
| $ | 79,085 |
|
| $ | 358,331 |
|
| $ | 4,480,123 |
|
See notes to consolidated financial statements (unaudited).
6
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| Noncontrolling Interests in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
| Noncontrolling Interests in |
|
|
|
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Consolidated |
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
| Earnings |
|
| Other |
|
| Consolidated |
| Consolidated |
|
|
|
|
|
| ||||||||||||||||||||||
(Amounts in thousands, except per share |
| Common Shares |
|
| Paid-in- |
|
| Less than |
|
| Comprehensive |
|
| Joint |
| Real Estate |
|
| Operating |
|
| Total |
|
| 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 |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Distributions |
|
| Income |
|
| Ventures |
|
| Related Funds |
|
| Partnership |
|
| Equity |
| ||||||||||||||||||
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 |
|
| 614 |
|
|
| 6 |
|
|
| 10,222 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (10,228 | ) |
|
| - |
| ||||||||||||||||||||||||||||||||||||
Common shares issued under Omnibus |
|
| 39 |
|
|
| - |
|
|
| - |
|
|
| (205 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (205 | ) | ||||||||||||||||||||||||||||||||||||
Dividends and distributions ($0.0775 per share |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (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 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7,842 | ) |
|
| - |
|
|
| - |
|
|
| (548 | ) |
|
| (8,390 | ) | ||||||||||||||||||||||||||||||||||||
Pro rata share of other comprehensive income (loss) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (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 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2021 |
|
| 218,992 |
|
| $ | 2,190 |
|
| $ | 4,122,680 |
|
| $ | (538,845 | ) |
| $ | 2,138 |
|
| $ | 428,833 |
|
| $ | 81,925 |
|
| $ | 356,111 |
|
| $ | 4,455,032 |
|
|
| 218,992 |
|
| $ | 2,190 |
|
| $ | 4,122,680 |
|
| $ | (538,845 | ) |
| $ | 2,138 |
|
| $ | 428,833 |
|
| $ | 81,925 |
|
| $ | 356,111 |
|
| $ | 4,455,032 |
|
Net income (loss) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,011 |
|
|
| - |
|
|
| 8,204 |
|
|
| (1,368 | ) |
|
| 313 |
|
|
| 10,160 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,371 |
|
|
| - |
|
|
| 3,425 |
|
|
| (1,016 | ) |
|
| 342 |
|
|
| 6,122 |
|
Common shares issued upon redemption of |
|
| 6,530 |
|
|
| 65 |
|
|
| 107,147 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (107,212 | ) |
|
| - |
| ||||||||||||||||||||||||||||||||||||
Common shares issued under Omnibus |
|
| 103 |
|
|
| - |
|
|
| - |
|
|
| (280 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (280 | ) |
|
| 85 |
|
|
| - |
|
|
| - |
|
|
| (280 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (280 | ) |
Dividends and distributions ($0.155 per share |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (34,463 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,101 | ) |
|
| (37,564 | ) | ||||||||||||||||||||||||||||||||||||
Dividends and distributions ($0.0775 per share |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (16,978 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,799 | ) |
|
| (18,777 | ) | ||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (24,848 | ) |
|
| - |
|
|
| - |
|
|
| (24,848 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (14,681 | ) |
|
| - |
|
|
| - |
|
|
| (14,681 | ) |
Change in value of interest rate swaps and |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 22,485 |
|
|
| - |
|
|
| - |
|
|
| 2,169 |
|
|
| 24,654 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 16,837 |
|
|
| - |
|
|
| - |
|
|
| 1,708 |
|
|
| 18,545 |
|
Pro rata share of other comprehensive income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 12,217 |
|
|
| - |
|
|
| - |
|
|
| 1,185 |
|
|
| 13,402 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9,491 |
|
|
| - |
|
|
| - |
|
|
| 962 |
|
|
| 10,453 |
|
Amortization of equity awards |
|
| - |
|
|
| - |
|
|
| 639 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10,159 |
|
|
| 10,798 |
|
|
| - |
|
|
| - |
|
|
| 322 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,287 |
|
|
| 6,609 |
|
Reallocation of noncontrolling interest |
|
| - |
|
|
| - |
|
|
| (1,792 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,792 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (2,925 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,925 |
|
|
| - |
|
Balance as of June 30, 2022 |
|
| 225,625 |
|
| $ | 2,255 |
|
| $ | 4,228,674 |
|
| $ | (570,577 | ) |
| $ | 36,840 |
|
| $ | 412,189 |
|
| $ | 80,557 |
|
| $ | 261,416 |
|
| $ | 4,451,354 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 |
|
| 218,817 |
|
| $ | 2,188 |
|
| $ | 4,120,173 |
|
| $ | (456,393 | ) |
| $ | (12,791 | ) |
| $ | 437,161 |
|
| $ | 79,017 |
|
| $ | 346,379 |
|
| $ | 4,515,734 |
| ||||||||||||||||||||||||||||||||||||
Net (loss) income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (19,521 | ) |
|
| - |
|
|
| 13,156 |
|
|
| 56 |
|
|
| (1,935 | ) |
|
| (8,244 | ) | ||||||||||||||||||||||||||||||||||||
Common shares issued upon redemption of |
|
| 10 |
|
|
| - |
|
|
| 165 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (165 | ) |
|
| - |
| ||||||||||||||||||||||||||||||||||||
Common shares issued under Omnibus |
|
| 135 |
|
|
| 1 |
|
|
| - |
|
|
| (201 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (200 | ) | ||||||||||||||||||||||||||||||||||||
Dividends and distributions ($0.14 per share |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (30,654 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,132 | ) |
|
| (33,786 | ) | ||||||||||||||||||||||||||||||||||||
Contributions from noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 121 |
|
|
| - |
|
|
| - |
|
|
| 121 |
| ||||||||||||||||||||||||||||||||||||
Distributions to noncontrolling interests |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8,562 | ) |
|
| - |
|
|
| - |
|
|
| (8,562 | ) | ||||||||||||||||||||||||||||||||||||
Pro rata share of other comprehensive income of |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,313 |
|
|
| - |
|
|
| 12 |
|
|
| 424 |
|
|
| 4,749 |
| ||||||||||||||||||||||||||||||||||||
Amortization of equity awards |
|
| - |
|
|
| - |
|
|
| 611 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9,700 |
|
|
| 10,311 |
| ||||||||||||||||||||||||||||||||||||
Reallocation of noncontrolling interest |
|
| - |
|
|
| - |
|
|
| (7,060 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7,060 |
|
|
| - |
| ||||||||||||||||||||||||||||||||||||
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (552 | ) |
|
| - |
|
|
| 552 |
|
|
| - |
|
|
| - |
|
|
| - |
| ||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2021 |
|
| 218,962 |
|
| $ | 2,189 |
|
| $ | 4,113,889 |
|
| $ | (507,321 | ) |
| $ | (8,478 | ) |
| $ | 442,428 |
|
| $ | 79,085 |
|
| $ | 358,331 |
|
| $ | 4,480,123 |
| ||||||||||||||||||||||||||||||||||||
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 |
|
See notes to consolidated financial statements (unaudited).
76
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended June 30, |
| For the Three Months Ended March 31, |
| ||||||||||
(Amounts in thousands) | 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) | $ | 10,160 |
|
| $ | (8,244 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by |
|
|
|
|
| |||||||||
Net income | $ | 8,314 |
|
| $ | 6,122 |
| |||||||
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
| |||||||||
Depreciation and amortization |
| 113,022 |
|
|
| 118,230 |
|
| 58,888 |
|
|
| 55,624 |
|
Straight-lining of rental revenue |
| (4,001 | ) |
|
| (9,632 | ) |
| (7,756 | ) |
|
| 1,789 |
|
Amortization of stock-based compensation expense |
| 10,704 |
|
|
| 10,229 |
|
| 5,117 |
|
|
| 6,562 |
|
Amortization of deferred financing costs |
| 1,538 |
|
|
| 1,538 |
| |||||||
Loss from unconsolidated joint ventures |
| 9,529 |
|
|
| 21,033 |
|
| 5,762 |
|
|
| 5,113 |
|
Amortization of deferred financing costs |
| 3,077 |
|
|
| 4,640 |
| |||||||
Distributions of earnings from unconsolidated real estate funds |
| 304 |
|
|
| 266 |
| |||||||
Distributions of earnings from unconsolidated joint ventures |
| 34 |
|
|
| 623 |
|
| 144 |
|
|
| 18 |
|
Unrealized loss on real estate related fund investments |
| 1,111 |
|
|
| - |
| |||||||
Loss (income) from unconsolidated real estate related funds |
| 178 |
|
|
| (170 | ) | |||||||
Distributions of earnings from unconsolidated real estate related funds |
| 51 |
|
|
| 150 |
| |||||||
Amortization of above and below-market leases, net |
| (673 | ) |
|
| (1,613 | ) |
| (1,036 | ) |
|
| (358 | ) |
Income from unconsolidated real estate funds |
| (325 | ) |
|
| (328 | ) | |||||||
Realized and unrealized gains on marketable securities |
| - |
|
|
| (1,480 | ) | |||||||
Other non-cash adjustments |
| 560 |
|
|
| 868 |
|
| (42 | ) |
|
| 302 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
| ||||
Real estate related fund investments |
| (3,918 | ) |
|
| - |
| |||||||
Accounts and other receivables |
| (2,206 | ) |
|
| 4,136 |
|
| 4,457 |
|
|
| 3,904 |
|
Deferred charges |
| (5,097 | ) |
|
| (4,506 | ) |
| (1,689 | ) |
|
| (1,086 | ) |
Other assets |
| 2,741 |
|
|
| (5,569 | ) |
| (8,469 | ) |
|
| (17,688 | ) |
Accounts payable and accrued expenses |
| (4,714 | ) |
|
| 3,698 |
|
| (3,797 | ) |
|
| (3,162 | ) |
Other liabilities |
| (2,013 | ) |
|
| 2,107 |
|
| (885 | ) |
|
| 16 |
|
Net cash provided by operating activities |
| 131,102 |
|
|
| 134,458 |
|
| 57,968 |
|
|
| 58,674 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
|
| ||||
Additions to real estate |
| (54,136 | ) |
|
| (52,114 | ) |
| (18,883 | ) |
|
| (29,025 | ) |
Due from affiliates |
| (51,916 | ) |
|
| - |
|
| - |
|
|
| (49,316 | ) |
Repayment of amounts due from affiliates |
| 51,916 |
|
|
| - |
| |||||||
Investments in and contributions of capital to unconsolidated joint ventures |
| (11,252 | ) |
|
| (11,750 | ) | |||||||
Contributions of capital to unconsolidated real estate funds |
| (4,219 | ) |
|
| - |
| |||||||
Distributions of capital from unconsolidated real estate funds |
| 1,506 |
|
|
| - |
| |||||||
Purchases of marketable securities |
| - |
|
|
| (9,562 | ) | |||||||
Sales of marketable securities |
| - |
|
|
| 11,381 |
| |||||||
Investments in an unconsolidated joint venture |
| - |
|
|
| (9,684 | ) | |||||||
Contributions of capital to unconsolidated real estate related funds |
| - |
|
|
| (133 | ) | |||||||
Net cash used in investing activities |
| (68,101 | ) |
|
| (62,045 | ) |
| (18,883 | ) |
|
| (88,158 | ) |
See notes to consolidated financial statements (unaudited).
87
PARAMOUNT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
| For the Six Months Ended June 30, |
| For the Three Months Ended March 31, |
| ||||||||||
(Amounts in thousands) | 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
| ||||
Contributions from noncontrolling interests in consolidated real estate related funds | $ | 49,748 |
|
| $ | - |
| |||||||
Distributions to noncontrolling interests in consolidated real estate related funds |
| (3,740 | ) |
|
| - |
| |||||||
Dividends paid to common stockholders | $ | (32,307 | ) |
| $ | (30,643 | ) |
| (16,827 | ) |
|
| (15,329 | ) |
Distributions paid to common unitholders |
| (3,365 | ) |
|
| (3,042 | ) |
| (1,199 | ) |
|
| (1,566 | ) |
Distributions to noncontrolling interests |
| (24,848 | ) |
|
| (8,562 | ) | |||||||
Contributions from noncontrolling interests |
| - |
|
|
| 121 |
| |||||||
Distributions to noncontrolling interests in consolidated joint ventures |
| (4,140 | ) |
|
| (14,681 | ) | |||||||
Contributions from noncontrolling interests in consolidated joint ventures |
| 283 |
|
|
| - |
| |||||||
Settlement of accounts payable in connection with repurchases of common shares |
| (1,847 | ) |
|
| - |
| |||||||
Repurchase of shares related to stock compensation agreements |
| (280 | ) |
|
| (200 | ) |
| (205 | ) |
|
| (280 | ) |
Proceeds from notes and mortgages payable |
| - |
|
|
| 12,430 |
| |||||||
Net cash used in financing activities |
| (60,800 | ) |
|
| (29,896 | ) | |||||||
Net cash provided by (used in) financing activities |
| 22,073 |
|
|
| (31,856 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
| ||||
Net increase in cash and cash equivalents and restricted cash |
| 2,201 |
|
|
| 42,517 |
| |||||||
Net increase (decrease) in cash and cash equivalents and restricted cash |
| 61,158 |
|
|
| (61,340 | ) | |||||||
Cash and cash equivalents and restricted cash at beginning of period |
| 529,666 |
|
|
| 465,324 |
|
| 449,817 |
|
|
| 529,666 |
|
Cash and cash equivalents and restricted cash at end of period | $ | 531,867 |
|
| $ | 507,841 |
| $ | 510,975 |
|
| $ | 468,326 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
| ||||||
Reconciliation of Cash and Cash Equivalents and Restricted Cash: | Reconciliation of Cash and Cash Equivalents and Restricted Cash: |
|
|
| Reconciliation of Cash and Cash Equivalents and Restricted Cash: |
|
|
| ||||||
Cash and cash equivalents at beginning of period | $ | 524,900 |
|
| $ | 434,530 |
| $ | 408,905 |
|
| $ | 524,900 |
|
Restricted cash at beginning of period |
| 4,766 |
|
|
| 30,794 |
|
| 40,912 |
|
|
| 4,766 |
|
Cash and cash equivalents and restricted cash at beginning of period | $ | 529,666 |
|
| $ | 465,324 |
| $ | 449,817 |
|
| $ | 529,666 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents at end of period | $ | 506,933 |
|
| $ | 475,289 |
| $ | 451,796 |
|
| $ | 461,995 |
|
Restricted cash at end of period |
| 24,934 |
|
|
| 32,552 |
|
| 59,179 |
|
|
| 6,331 |
|
Cash and cash equivalents and restricted cash at end of period | $ | 531,867 |
|
| $ | 507,841 |
| $ | 510,975 |
|
| $ | 468,326 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
|
|
| ||||
Cash payments for interest | $ | 67,332 |
|
| $ | 65,227 |
| $ | 33,338 |
|
| $ | 33,190 |
|
Cash payments for income taxes, net of refunds |
| 1,941 |
|
|
| 210 |
|
| 317 |
|
|
| 1,193 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-Cash Transactions: |
|
|
|
|
|
|
|
|
|
| ||||
Common shares issued upon redemption of common units |
| 107,212 |
|
|
| 165 |
|
| 10,228 |
|
|
| - |
|
Dividends and distributions declared but not yet paid |
| 18,110 |
|
|
| 18,777 |
| |||||||
Change in value of interest rate swaps and interest rate caps |
| 24,654 |
|
|
| - |
|
| (8,390 | ) |
|
| 18,545 |
|
Dividends and distributions declared but not yet paid |
| 18,787 |
|
|
| 16,897 |
| |||||||
Write-off of fully amortized and/or depreciated assets |
| 8,617 |
|
|
| 37,149 |
|
| 10,170 |
|
|
| 7,084 |
|
Additions to real estate included in accounts payable and accrued expenses |
| 7,212 |
|
|
| 10,484 |
|
| 8,306 |
|
|
| 6,868 |
|
Transfer of deposit to investment in unconsolidated joint ventures |
| 6,230 |
|
|
| - |
|
See notes to consolidated financial statements (unaudited).
98
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 93.493.5% of, the Operating Partnership as of June 30, 2022.March 31, 2023.
As of June 30, 2022,March 31, 2023, we ownowned and/or managemanaged a portfolio of 18 properties aggregating 14.013.8 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.
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, 20212022 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, 2021,2022, as filed with the SEC.
10
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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, 2021.2022.
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 and six months ended June 30, 2022,March 31, 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”)ASC Topic 848, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial ReportingReporting. . 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 2020-04 is2021-01 was effective beginning on March 12, 2020January 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 may be applied prospectively to such transactions throughASU 2021-01 from December 31, 2022 and ASU 2021-01 is effective beginning on January 7, 2021 and may be applied retrospectively or prospectively to such transactions through December 31, 2022.2024. We will apply ASU 2020-04 and ASU 2021-01 prospectively as and when we enter into transactions to which these updates apply.
In August 2020,
10
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 FASB issued ASU 2020-06, an updateinvestments 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 ASC Topic 470, Subtopic - 20, Debt - Debt with Conversion and Other Options, and ASC Topic 815, Subtopic -December 12, 2022, was accounted for under the equity method of accounting (see Note 4, DerivativesInvestments in Unconsolidated Real Estate Related Funds). Subsequent to December 12, 2022, we increased our ownership interest in Fund X to 13.0% and Hedging - Contracts in Entity's Own Equity. ASU 2020-06 simplifies the guidance for certain financial instruments with characteristics of liability and equity, including convertible instruments and contracts on an entity’s own equity by reducing the number of accounting models for convertible instruments and amends guidance in ASC Topic 260, Earnings Per Share, relating to the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2021, with early adoption permitted for fiscal years that begin after December 15, 2020. We adopted the provisions of ASU 2020-06 on January 1, 2022. This adoption did not have an impact onbegan consolidating Fund X into our consolidated financial statements.
The following table sets forth the details of income from real estate related fund investments for the three months ended March 31, 2023.
| For the Three Months Ended |
| |
(Amounts in thousands) | March 31, 2023 |
| |
Net investment income | $ | 4,661 |
|
Net unrealized losses |
| (1,111 | ) |
Income from real estate related fund investments |
| 3,550 |
|
Less: noncontrolling interests in consolidated real estate related funds |
| (2,817 | ) |
Income from real estate related fund investments attributable | $ | 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.
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, 2023, our ownership interest in Fund VIII was approximately 1.3%. We account for our investment in Fund VIII under the equity method of accounting.
Prior to December 12, 2022, we owned an 8.2% interest in Fund X and accounted for our investment in Fund X under the equity method of accounting. Subsequent to December 12, 2022, we began consolidating Fund X into our consolidated financial statements (see Note 3, Consolidated Real Estate Related Funds).
As of March 31, 2023 and December 31, 2022, our share of the investments in the unconsolidated real estate related funds was $3,180,000 and $3,411,000, respectively, which is reflected as “investments in unconsolidated real estate related funds” in our consolidated balance sheets. During the three months ended March 31, 2023 and 2022, we recognized a loss of $178,000 and an income of $170,000, respectively, for our share of earnings, which is reflected as “(loss) income from unconsolidated real estate related funds” in our consolidated statements of income.
11
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On February 24, 2022, a joint venture, in which we own a 9.2% interest, acquired a 26,000 square foot retail condominium at 1600 Broadway in Manhattan for $191,500,000. In connection with the acquisition, the joint venture obtained a 10-year, $98,000,000 interest-only loan that has a fixed rate of 3.45%. The property, which is located in the heart of Times Square, is 100% leased to Mars, Inc. for a 15-year term and serves as the New York flagship location for M&M’s World. We account for our investment in 1600 Broadway under the equity method of accounting from the date of acquisition.
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 |
|
| Paramount |
| As of |
| ||||||||||
Our Share of Investments: |
| Ownership |
| June 30, 2022 |
|
| December 31, 2021 |
|
| Ownership |
| March 31, 2023 |
|
| December 31, 2022 |
| ||||
712 Fifth Avenue (1) |
| 50.0% |
| $ | - |
|
| $ | - |
|
| 50.0% |
| $ | - |
|
| $ | - |
|
Market Center |
| 67.0% |
|
| 194,000 |
|
|
| 185,344 |
|
| 67.0% |
|
| 187,471 |
|
|
| 192,948 |
|
55 Second Street (2) |
| 44.1% |
|
| 86,813 |
|
|
| 88,284 |
|
| 44.1% |
|
| 84,701 |
|
|
| 85,340 |
|
111 Sutter Street |
| 49.0% |
|
| 33,744 |
|
|
| 35,182 |
|
| 49.0% |
|
| - |
|
|
| - |
|
1600 Broadway |
| 9.2% |
|
| 9,882 |
|
|
| - |
|
| 9.2% |
|
| 8,968 |
|
|
| 9,113 |
|
60 Wall Street (2) |
| 5.0% |
|
| 20,623 |
|
|
| 19,230 |
|
| 5.0% |
|
| 24,976 |
|
|
| 25,034 |
|
One Steuart Lane (2) |
| 35.0% (4) |
|
| 80,870 |
|
|
| 76,428 |
|
| 35.0% (4) |
|
| 75,545 |
|
|
| 77,961 |
|
Oder-Center, Germany (2) |
| 9.5% |
|
| 3,486 |
|
|
| 3,628 |
|
| 9.5% |
|
| 3,373 |
|
|
| 3,107 |
|
Investments in unconsolidated joint ventures | Investments in unconsolidated joint ventures |
| $ | 429,418 |
|
| $ | 408,096 |
| Investments in unconsolidated joint ventures |
| $ | 385,034 |
|
| $ | 393,503 |
|
|
|
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| |||||||||||||||||
(Amounts in thousands) | (Amounts in thousands) | June 30, |
|
| June 30, |
| For the Three Months Ended March 31, |
| |||||||||||||||||
Our Share of Net Income (Loss): | Our Share of Net Income (Loss): | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||||||
712 Fifth Avenue (1) | 712 Fifth Avenue (1) | $ | - |
|
| $ | (11,128 | ) |
| $ | - |
|
| $ | (11,128 | ) | $ | - |
|
| $ | - |
| ||
Market Center | Market Center |
| (2,487 | ) |
|
| (2,914 | ) |
|
| (4,850 | ) |
|
| (7,044 | ) |
| (2,655 | ) |
|
| (2,363 | ) | ||
55 Second Street (2) | 55 Second Street (2) |
| (792 | ) |
|
| (847 | ) |
|
| (1,471 | ) |
|
| (1,469 | ) |
| (639 | ) |
|
| (679 | ) | ||
111 Sutter Street |
| (681 | ) |
|
| (699 | ) |
|
| (1,459 | ) |
|
| (1,189 | ) | ||||||||||
1600 Broadway (2)(3) |
| (20 | ) |
|
| - |
|
|
| (68 | ) |
|
| - |
| ||||||||||
111 Sutter Street (3) |
| - |
|
|
| (778 | ) | ||||||||||||||||||
1600 Broadway (2) |
| (3 | ) |
|
| (48 | ) | ||||||||||||||||||
60 Wall Street (2) | 60 Wall Street (2) |
| 53 |
|
|
| 17 |
|
|
| 65 |
|
|
| 34 |
|
| (17 | ) |
|
| 12 |
| ||
One Steuart Lane (2) | One Steuart Lane (2) |
| (518 | ) |
|
| (132 | ) |
|
| (1,787 | ) |
|
| (225 | ) |
| (2,416 | ) |
|
| (1,269 | ) | ||
Oder-Center, Germany (2) | Oder-Center, Germany (2) |
| 29 |
|
|
| (14 | ) |
|
| 41 |
|
|
| (12 | ) |
| (32 | ) |
|
| 12 |
| ||
Loss from unconsolidated joint ventures | Loss from unconsolidated joint ventures | $ | (4,416 | ) |
| $ | (15,717 | ) |
| $ | (9,529 | ) |
| $ | (21,033 | ) | $ | (5,762 | ) |
| $ | (5,113 | ) |
12
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 |
| As of |
|
| ||||||||||
Balance Sheets: | June 30, 2022 |
|
| December 31, 2021 |
| March 31, 2023 |
|
| December 31, 2022 |
|
| ||||
Real estate, net | $ | 2,384,038 |
|
| $ | 2,246,152 |
| $ | 2,394,692 |
|
| $ | 2,377,084 |
|
|
Cash and cash equivalents and restricted cash |
| 264,334 |
|
|
| 216,910 |
|
| 237,588 |
|
|
| 252,540 |
|
|
Intangible assets, net |
| 80,237 |
|
|
| 58,590 |
|
| 64,517 |
|
|
| 69,599 |
|
|
For-sale residential condominium units (1) |
| 327,538 |
|
|
| 359,638 |
|
| 321,077 |
|
|
| 322,232 |
|
|
Other assets |
| 68,817 |
|
|
| 46,646 |
|
| 80,520 |
|
|
| 87,054 |
|
|
Total assets | $ | 3,124,964 |
|
| $ | 2,927,936 |
| $ | 3,098,394 |
|
| $ | 3,108,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Notes and mortgages payable, net | $ | 1,845,996 |
|
| $ | 1,791,404 |
| $ | 1,839,321 |
|
| $ | 1,834,916 |
|
|
Intangible liabilities, net |
| 14,489 |
|
|
| 18,397 |
|
| 9,299 |
|
|
| 10,972 |
|
|
Other liabilities |
| 61,123 |
|
|
| 61,097 |
|
| 60,496 |
|
|
| 50,783 |
|
|
Total liabilities |
| 1,921,608 |
|
|
| 1,870,898 |
|
| 1,909,116 |
|
|
| 1,896,671 |
|
|
Equity |
| 1,203,356 |
|
|
| 1,057,038 |
|
| 1,189,278 |
|
|
| 1,211,838 |
|
|
Total liabilities and equity | $ | 3,124,964 |
|
| $ | 2,927,936 |
| $ | 3,098,394 |
|
| $ | 3,108,509 |
|
|
|
|
|
|
|
| ||||||||||||||||||
(Amounts in thousands) | For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| For the Three Months Ended March 31, |
|
| |||||||||||||||
Income Statements: | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Rental revenue | $ | 54,516 |
|
| $ | 57,195 |
|
| $ | 112,036 |
|
| $ | 113,723 |
| $ | 40,221 |
|
| $ | 57,520 |
|
|
Other income |
| 31,444 |
| (2) |
| 581 |
|
|
| 50,026 |
| (2) |
| 1,338 |
|
| 1,757 |
|
|
| 18,582 |
| (2) |
Total revenues |
| 85,960 |
|
|
| 57,776 |
|
|
| 162,062 |
|
|
| 115,061 |
|
| 41,978 |
|
|
| 76,102 |
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating |
| 52,293 |
| (2) |
| 25,467 |
|
|
| 94,801 |
| (2) |
| 50,577 |
|
| 24,701 |
|
|
| 42,508 |
| (2) |
Depreciation and amortization |
| 23,508 |
|
|
| 27,014 |
|
|
| 50,406 |
|
|
| 54,467 |
|
| 17,765 |
|
|
| 26,898 |
|
|
Total expenses |
| 75,801 |
|
|
| 52,481 |
|
|
| 145,207 |
|
|
| 105,044 |
|
| 42,466 |
|
|
| 69,406 |
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Interest and other income (loss) |
| 58 |
|
|
| (23 | ) |
|
| 16 |
|
|
| (56 | ) |
| 709 |
|
|
| (42 | ) |
|
Interest and debt expense |
| (16,335 | ) |
|
| (13,892 | ) |
|
| (33,933 | ) |
|
| (27,632 | ) |
| (15,446 | ) |
|
| (17,598 | ) |
|
Net loss before income taxes |
| (6,118 | ) |
|
| (8,620 | ) |
|
| (17,062 | ) |
|
| (17,671 | ) | ||||||||
Income tax (expense) benefit |
| (14 | ) |
|
| 1 |
|
|
| (43 | ) |
|
| (15 | ) | ||||||||
Loss before income taxes |
| (15,225 | ) |
|
| (10,944 | ) |
| |||||||||||||||
Income tax expense |
| (11 | ) |
|
| (29 | ) |
| |||||||||||||||
Net loss | $ | (6,132 | ) |
| $ | (8,619 | ) |
| $ | (17,105 | ) |
| $ | (17,686 | ) | $ | (15,236 | ) |
| $ | (10,973 | ) |
|
13
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
We are the general partner and investment manager of Paramount Group Real Estate Fund VIII, LP (“Fund VIII”) and Paramount Group Real Estate Fund X, LP and its parallel fund, Paramount Group Real Estate Fund X-ECI, LP, (collectively, “Fund X”), our Alternative Investment Funds, which invest in mortgage and mezzanine loans and preferred equity investments. While Fund VIII’s investment period has ended, Fund X’s investment period ends in December 2025. As of June 30, 2022, Fund X has $192,000,000 of capital committed, of which $134,225,000 has been invested and $48,401,000 has been reserved for future funding. Our ownership interest in Fund VIII and Fund X was approximately 1.3% and 7.8%, respectively, as of June 30, 2022.
As of June 30, 2022 and December 31, 2021, our share of the investments in the unconsolidated real estate funds aggregated $14,156,000 and $11,421,000, respectively. We recognized $155,000 and $148,000 for our share of income in the three months ended June 30, 2022 and 2021, respectively, and $325,000 and $328,000 for our share of income in the six months ended June 30, 2022 and 2021, respectively.
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 |
| As of |
| ||||||||||
(Amounts in thousands) | June 30, 2022 |
|
| December 31, 2021 |
| March 31, 2023 |
|
| December 31, 2022 |
| ||||
Intangible assets: |
|
|
|
|
|
|
|
| ||||||
Gross amount | $ | 338,930 |
|
| $ | 371,555 |
| $ | 270,077 |
|
| $ | 337,104 |
|
Accumulated amortization |
| (234,001 | ) |
|
| (252,142 | ) |
| (185,725 | ) |
|
| (246,723 | ) |
| $ | 104,929 |
|
| $ | 119,413 |
| $ | 84,352 |
|
| $ | 90,381 |
|
Intangible liabilities: |
|
|
|
|
|
|
|
|
|
| ||||
Gross amount | $ | 138,726 |
|
| $ | 151,118 |
| $ | 138,353 |
|
| $ | 138,726 |
|
Accumulated amortization |
| (97,607 | ) |
|
| (105,790 | ) |
| (104,415 | ) |
|
| (102,533 | ) |
| $ | 41,119 |
|
| $ | 45,328 |
| $ | 33,938 |
|
| $ | 36,193 |
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| |||||||||||||||||
| June 30, |
|
| June 30, |
| For the Three Months Ended March 31, |
| |||||||||||||||
(Amounts in thousands) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||||
Amortization of above and below-market leases, net | $ | 315 |
|
| $ | 758 |
|
| $ | 673 |
|
| $ | 1,613 |
| $ | 1,036 |
|
| $ | 358 |
|
Amortization of acquired in-place leases |
| 5,412 |
|
|
| 6,551 |
|
|
| 10,943 |
|
|
| 13,770 |
|
| 4,809 |
|
|
| 5,531 |
|
The following table sets forth amortization of acquired above and below-market leases, net and amortization of acquired in-place leases for the six-monthnine-month period from JulyApril 1, 20222023 through December 31, 2022,2023, and each of the five succeeding years commencing from January 1, 2023.2024.
(Amounts in thousands) |
| Above and |
|
| In-Place Leases |
|
| Above and |
|
| In-Place Leases |
| ||||
2022 |
| $ | 673 |
|
| $ | 10,702 |
| ||||||||
2023 |
|
| 5,080 |
|
|
| 17,705 |
|
| $ | 4,230 |
|
| $ | 12,896 |
|
2024 |
|
| 6,020 |
|
|
| 14,248 |
|
|
| 5,930 |
|
|
| 14,248 |
|
2025 |
|
| 4,674 |
|
|
| 10,451 |
|
|
| 4,584 |
|
|
| 10,451 |
|
2026 |
|
| 2,801 |
|
|
| 7,896 |
|
|
| 2,711 |
|
|
| 7,896 |
|
2027 |
|
| 2,489 |
|
|
| 7,252 |
|
|
| 2,398 |
|
|
| 7,252 |
|
2028 |
|
| 2,318 |
|
|
| 6,979 |
|
14
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table summarizes our consolidated outstanding debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
| Interest Rate |
|
|
|
|
| Interest Rate |
|
|
| ||||||||||||||||||||
| Maturity |
| Fixed/ |
| as of |
| As of |
|
| Maturity |
| Fixed/ |
| as of |
| As of |
| ||||||||||||||
(Amounts in thousands) | Date |
| Variable Rate |
| June 30, 2022 |
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| Date |
| Variable Rate |
| March 31, 2023 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||
Notes and mortgages payable: | Notes and mortgages payable: |
|
|
|
|
|
|
|
| Notes and mortgages payable: |
|
|
|
|
|
|
| ||||||||||||||
1633 Broadway (1) | Dec-2029 |
| Fixed |
|
| 2.99 | % |
| $ | 1,250,000 |
|
| $ | 1,250,000 |
|
| Dec-2029 |
| Fixed |
|
| 2.99 | % |
| $ | 1,250,000 |
|
| $ | 1,250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
One Market Plaza (1) | Feb-2024 |
| Fixed |
|
| 4.03 | % |
|
| 975,000 |
|
|
| 975,000 |
|
| Feb-2024 (2) |
| Fixed |
|
| 4.03 | % |
|
| 975,000 |
|
|
| 975,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1301 Avenue of the Americas | 1301 Avenue of the Americas |
|
|
|
|
|
|
|
| 1301 Avenue of the Americas |
|
|
|
|
|
|
|
| |||||||||||||
| Aug-2026 |
| Fixed (2) |
|
| 2.46 | % |
|
| 500,000 |
|
|
| 500,000 |
|
| Aug-2026 |
| Fixed (3) |
|
| 2.46 | % |
|
| 500,000 |
|
|
| 500,000 |
|
| Aug-2026 |
| L + 356 bps (3) |
|
| 4.68 | % |
|
| 360,000 |
|
|
| 360,000 |
|
| Aug-2026 |
| L + 356 bps (4) |
|
| 5.56 | % |
|
| 360,000 |
|
|
| 360,000 |
|
|
|
|
|
| 3.39 | % |
|
| 860,000 |
|
|
| 860,000 |
|
|
|
|
|
| 3.76 | % |
|
| 860,000 |
|
|
| 860,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
31 West 52nd Street | Jun-2026 |
| Fixed |
|
| 3.80 | % |
|
| 500,000 |
|
|
| 500,000 |
|
| Jun-2026 |
| Fixed |
|
| 3.80 | % |
|
| 500,000 |
|
|
| 500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
300 Mission Street (1) | Oct-2023 |
| Fixed |
|
| 3.65 | % |
|
| 273,000 |
|
|
| 273,000 |
|
| Oct-2023 (2) |
| Fixed |
|
| 3.65 | % |
|
| 273,000 |
|
|
| 273,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total notes and mortgages payable | Total notes and mortgages payable |
|
| 3.49 | % |
|
| 3,858,000 |
|
|
| 3,858,000 |
|
| Total notes and mortgages payable |
|
| 3.58 | % |
|
| 3,858,000 |
|
|
| 3,858,000 |
| ||||
Less: unamortized deferred financing costs | Less: unamortized deferred financing costs |
|
|
|
| (20,032 | ) |
|
| (22,380 | ) |
| Less: unamortized deferred financing costs |
|
|
|
| (16,508 | ) |
|
| (17,682 | ) | ||||||||
Total notes and mortgages payable, net | Total notes and mortgages payable, net |
|
|
| $ | 3,837,968 |
|
| $ | 3,835,620 |
|
| Total notes and mortgages payable, net |
|
|
| $ | 3,841,492 |
|
| $ | 3,840,318 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
$750 Million Revolving | Mar-2026 |
| SOFR + 115 bps |
| n/a |
|
| $ | - |
|
| $ | - |
|
| Mar-2026 |
| SOFR + 115 bps | n/a |
|
| $ | - |
|
| $ | - |
|
15
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
We have entered into interest rate swap agreements with an aggregate notional amount of $500,000,000 to fix LIBOR at 0.46% through August 2024. We also entered into interest rate cap agreements with an aggregate notional amount of $360,000,000 to cap LIBOR at 2.00% through August 2023. These interest rate swaps and interest rate caps are designated as cash flow hedges and therefore changes in their fair values are recognized in other comprehensive income or loss (outside of earnings). We recognized other comprehensive loss of $8,390,000 and other comprehensive income of $6,109,000 and $24,654,00018,545,000 for the three and six months ended June 30,March 31, 2023 and 2022, respectively, from the changes in fair value of these derivative financial instruments. See Note 9,10, Accumulated Other Comprehensive Income. During the next twelve months, we estimate that $17,227,00024,666,000 of the amounts to be recognized in accumulated other comprehensive income will be reclassified as a decrease to interest expense.
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 |
|
| Notional |
| Effective |
| Maturity |
| Benchmark |
| Strike |
| Fair Value as of |
| ||||||||||||||||||
Property |
| Amount |
|
| Date |
| Date |
| Rate |
| Rate |
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| Amount |
|
| Date |
| Date |
| Rate |
| Rate |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||
(Amounts in thousands) | (Amounts in thousands) |
|
|
|
|
|
|
|
|
| (Amounts in thousands) |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
1301 Avenue of the Americas |
| $ | 500,000 |
|
| Jul-2021 |
| Aug-2024 |
| LIBOR |
|
| 0.46 | % |
| $ | 26,820 |
|
| $ | 6,691 |
|
| $ | 500,000 |
|
| Jul-2021 |
| Aug-2024 |
| LIBOR |
|
| 0.46 | % |
| $ | 26,610 |
|
| $ | 32,681 |
|
Total interest rate swap assets designated as cash flow hedges (included in "other assets") | Total interest rate swap assets designated as cash flow hedges (included in "other assets") | $ | 26,820 |
|
| $ | 6,691 |
| Total interest rate swap assets designated as cash flow hedges (included in "other assets") | $ | 26,610 |
|
| $ | 32,681 |
|
|
| Notional |
| Effective |
| Maturity |
| Benchmark |
| Strike |
| Fair Value as of |
|
| Notional |
| Effective |
| Maturity |
| Benchmark |
| Strike |
| Fair Value as of |
| ||||||||||||||||||
Property |
| Amount |
|
| Date |
| Date |
| Rate |
| Rate |
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| Amount |
|
| Date |
| Date |
| Rate |
| Rate |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||||||
(Amounts in thousands) | (Amounts in thousands) |
|
|
|
|
|
|
|
|
| (Amounts in thousands) |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
1301 Avenue of the Americas |
| $ | 360,000 |
|
| Jul-2021 |
| Aug-2023 |
| LIBOR |
|
| 2.00 | % |
| $ | 4,826 |
|
| $ | 306 |
|
| $ | 360,000 |
|
| Jul-2021 |
| Aug-2023 |
| LIBOR |
|
| 2.00 | % |
| $ | 3,773 |
|
| $ | 6,123 |
|
Total interest rate cap assets designated as cash flow hedges (included in "other assets") | Total interest rate cap assets designated as cash flow hedges (included in "other assets") | $ | 4,826 |
|
| $ | 306 |
| Total interest rate cap assets designated as cash flow hedges (included in "other assets") | $ | 3,773 |
|
| $ | 6,123 |
|
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 June 30, 2022,March 31, 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 $200,000,000 of our common stock, from time to time, in the open market or in privately negotiated transactions. During 2020,As of December 31, 2022, we had repurchased a total of 13,813,15824,183,768 common shares at a weighted average price of $8.697.65 per share, or $120,000,000185,000,000 in the aggregate. As of June 30, 2022,March 31, 2023 we hadhave $80,000,00015,000,000 available for future repurchases under the existing program. Subsequent to June 30, 2022, we repurchased 268,231 common shares at a weighted average price of $6.96 per share, or $1,867,000 in the aggregate; accordingly, as of July 25, 2022, we have $78,133,000 available for future repurchases. 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.
16
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 six months ended June 30,March 31, 2023 and 2022, and 2021, respectively, including amounts attributable to noncontrolling interests in the Operating Partnership.
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(Amounts in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Amount of income related to the cash flow hedges recognized |
| $ | 6,479 |
| (1) | $ | - |
|
| $ | 24,652 |
| (1) | $ | - |
|
Amounts reclassified from accumulated other comprehensive |
|
| (370 | ) | (1) |
| - |
|
|
| 2 |
| (1) |
| - |
|
Amount of income (loss) related to unconsolidated joint ventures |
|
| 2,401 |
|
|
| (637 | ) |
|
| 11,896 |
|
|
| 2,785 |
|
Amounts reclassified from accumulated other comprehensive |
|
| 548 |
|
|
| 1,002 |
|
|
| 1,506 |
|
|
| 1,964 |
|
|
| For the Three Months Ended March 31, |
| |||||
(Amounts in thousands) |
| 2023 |
|
| 2022 |
| ||
Amount of (loss) income related to the cash flow hedges recognized | $ | (1,039 | ) |
| $ | 18,173 |
| |
Amounts reclassified from accumulated other comprehensive |
| (7,351 | ) |
|
| 372 |
| |
Amount of (loss) income related to unconsolidated joint ventures |
| (573 | ) |
|
| 9,495 |
| |
Amounts reclassified from accumulated other comprehensive income |
| (1,990 | ) |
|
| 958 |
|
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 June 30, 2022March 31, 2023 and December 31, 2021,2022, noncontrolling interests in our consolidated joint ventures aggregated $412,189,000403,902,000 and $428,833,000402,118,000, respectively.
Consolidated Real Estate FundRelated Funds
Noncontrolling interests in our consolidated real estate fund consistsrelated funds consist of equity interests held by third parties in our Residential Development Fund.Fund and Fund X. As of June 30, 2022March 31, 2023 and December 31, 2021,2022, the noncontrolling interestinterests in our consolidated real estate fundrelated funds aggregated $80,557,000220,206,000 and $81,925,000173,375,000, respectively.
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 one-for-one basis. Since the number of common shares outstanding is equal to the number of common units owned by us, the redemption value of each common unit is equal to the market value of each common share and distributions paid to each common unitholder is equivalent to dividends paid to common stockholders. As of June 30, 2022March 31, 2023 and December 31, 2021,2022, noncontrolling interests in the Operating Partnership on our consolidated balance sheets had a carrying amount of $261,416,000250,401,000 and $356,111,000242,982,000, respectively, and a redemption value of $114,958,00069,369,000 and $181,315,00086,644,000, respectively, based on the closing share price of our common stock on the New York Stock Exchange at the end of each period.
17
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 93.493.5% of, the Operating Partnership as of June 30, 2022.March 31, 2023. The Operating Partnership is considered a VIE and is consolidated in our consolidated financial statements. Since we conduct our business through and substantially all of our interests are held by the Operating Partnership, the assets and liabilities on our consolidated financial statements represent the assets and liabilities of the Operating Partnership. As of June 30, 2022March 31, 2023 and December 31, 2021,2022, the Operating Partnership held interests in consolidated VIEs owning properties and a real estate fundrelated funds that were determined to be VIEs. The assets of these consolidated VIEs may only be used to settle the obligations of the entities and such obligations are secured only by the assets of the entities and are non-recourse to the Operating Partnership or us. The following table summarizes the assets and liabilities of consolidated VIEs of the Operating Partnership.
|
| As of |
|
| As of |
| ||||||||||
(Amounts in thousands) |
| June 30, 2022 |
|
| December 31, 2021 |
|
| March 31, 2023 |
|
| December 31, 2022 |
| ||||
Real estate, net |
| $ | 3,380,167 |
|
| $ | 3,415,735 |
|
| $ | 3,349,043 |
|
| $ | 3,364,482 |
|
Cash and cash equivalents and restricted cash |
|
| 167,173 |
|
|
| 198,154 |
|
|
| 199,287 |
|
|
| 144,446 |
|
Accounts and other receivables |
|
| 10,613 |
|
|
| 13,647 |
| ||||||||
Real estate related fund investments |
|
| 108,176 |
|
|
| 105,369 |
| ||||||||
Investments in unconsolidated joint ventures |
|
| 80,870 |
|
|
| 76,428 |
|
|
| 75,545 |
|
|
| 77,961 |
|
Accounts and other receivables |
|
| 8,830 |
|
|
| 6,801 |
| ||||||||
Deferred rent receivable |
|
| 195,704 |
|
|
| 197,794 |
|
|
| 201,190 |
|
|
| 197,658 |
|
Deferred charges, net |
|
| 51,886 |
|
|
| 53,013 |
|
|
| 48,133 |
|
|
| 49,485 |
|
Intangible assets, net |
|
| 56,543 |
|
|
| 62,380 |
|
|
| 47,963 |
|
|
| 50,553 |
|
Other assets |
|
| 13,784 |
|
|
| 15,551 |
|
|
| 25,892 |
|
|
| 9,860 |
|
Total VIE assets |
| $ | 3,954,957 |
|
| $ | 4,025,856 |
|
| $ | 4,065,842 |
|
| $ | 4,013,461 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Notes and mortgages payable, net |
| $ | 2,488,886 |
|
| $ | 2,487,871 |
|
| $ | 2,490,410 |
|
| $ | 2,489,902 |
|
Accounts payable and accrued expenses |
|
| 50,172 |
|
|
| 54,738 |
|
|
| 64,878 |
|
|
| 61,492 |
|
Intangible liabilities, net |
|
| 25,170 |
|
|
| 27,674 |
|
|
| 20,747 |
|
|
| 21,936 |
|
Other liabilities |
|
| 5,707 |
|
|
| 6,427 |
|
|
| 11,579 |
|
|
| 6,051 |
|
Total VIE liabilities |
| $ | 2,569,935 |
|
| $ | 2,576,710 |
|
| $ | 2,587,614 |
|
| $ | 2,579,381 |
|
Unconsolidated VIEs
As of June 30, 2022,March 31, 2023, the Operating Partnership held variable interests in entities that own our unconsolidated real estate related funds that were deemed to be VIEs. The following table summarizes our investments in these unconsolidated real estate related funds and the maximum risk of loss from these investments.
|
| As of |
|
|
| As of |
|
| ||||||||||
(Amounts in thousands) |
| June 30, 2022 |
|
| December 31, 2021 |
|
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| ||||
Investments |
| $ | 14,156 |
|
| $ | 11,421 |
|
|
| $ | 3,180 |
|
| $ | 3,411 |
|
|
Asset management fees and other receivables |
|
| 2 |
|
|
| 9 |
|
|
|
| 5 |
|
|
| 21 |
|
|
Maximum risk of loss |
| $ | 14,158 |
|
| $ | 11,430 |
|
|
| $ | 3,185 |
|
| $ | 3,432 |
|
|
18
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 June 30, 2022 |
| As of March 31, 2023 |
| ||||||||||||||||||||||||||
(Amounts in thousands) | Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
Real estate related fund investments | $ | 108,176 |
|
| $ | - |
|
| $ | - |
|
| $ | 108,176 |
| |||||||||||||||
Interest rate swap assets (included in "other assets") | $ | 26,820 |
|
| $ | - |
|
| $ | 26,820 |
|
| $ | - |
|
| 26,610 |
|
|
| - |
|
|
| 26,610 |
|
|
| - |
|
Interest rate cap assets (included in "other assets") |
| 4,826 |
|
|
| - |
|
|
| 4,826 |
|
|
| - |
|
| 3,773 |
|
|
| - |
|
|
| 3,773 |
|
|
| - |
|
Total assets | $ | 31,646 |
|
| $ | - |
|
| $ | 31,646 |
|
| $ | - |
| $ | 138,559 |
|
| $ | - |
|
| $ | 30,383 |
|
| $ | 108,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of December 31, 2021 |
| As of December 31, 2022 |
| ||||||||||||||||||||||||||
(Amounts in thousands) | Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
Real estate related fund investments | $ | 105,369 |
|
| $ | - |
|
| $ | - |
|
| $ | 105,369 |
| |||||||||||||||
Interest rate swap assets (included in "other assets") | $ | 6,691 |
|
| $ | - |
|
| $ | 6,691 |
|
| $ | - |
|
| 32,681 |
|
|
| - |
|
|
| 32,681 |
|
|
| - |
|
Interest rate cap assets (included in "other assets") |
| 306 |
|
|
| - |
|
|
| 306 |
|
|
| - |
|
| 6,123 |
|
|
| - |
|
|
| 6,123 |
|
|
| - |
|
Total assets | $ | 6,997 |
|
| $ | - |
|
| $ | 6,997 |
|
| $ | - |
| $ | 144,173 |
|
| $ | - |
|
| $ | 38,804 |
|
| $ | 105,369 |
|
Real Estate Related Fund Investments
As of March 31, 2023, real estate related fund investments were comprised of investments in 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 inputs used in determining the fair value of mezzanine loans are credit spreads paid over the base rate, which ranged between 9.25% and 10.00% as of March 31, 2023. A significant increase or decrease in the credit spreads would result in a significantly lower or higher fair value, respectively.
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 months ended March 31, 2023.
|
| For the Three Months Ended |
| |
(Amounts in thousands) |
| March 31, 2023 |
| |
Beginning balance |
| $ | 105,369 |
|
Additional investments |
|
| 3,918 |
|
Net unrealized losses |
|
| (1,111 | ) |
Ending balance |
| $ | 108,176 |
|
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. The following table summarizes the carrying amounts and fair value of these financial instruments as of the dates set forth below.
| As of June 30, 2022 |
|
| As of December 31, 2021 |
| As of March 31, 2023 |
|
| As of December 31, 2022 |
| ||||||||||||||||||||
(Amounts in thousands) | Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
| Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
| ||||||||
Notes and mortgages payable | $ | 3,858,000 |
|
| $ | 3,686,354 |
|
| $ | 3,858,000 |
|
| $ | 3,893,252 |
| $ | 3,858,000 |
|
| $ | 3,585,494 |
|
| $ | 3,858,000 |
|
| $ | 3,566,096 |
|
Revolving credit facility |
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total liabilities | $ | 3,858,000 |
|
| $ | 3,686,354 |
|
| $ | 3,858,000 |
|
| $ | 3,893,252 |
| $ | 3,858,000 |
|
| $ | 3,585,494 |
|
| $ | 3,858,000 |
|
| $ | 3,566,096 |
|
19
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 five to fifteen years. Most of our leases provide tenants with extension options at either fixed or market rates and few of our leases provide tenants with options to early terminate, but such options generally impose an economic penalty on the tenant upon exercising. Rental revenue is recognized in accordance with ASC Topic 842, Leases, and includes (i) fixed payments of cash rents, which represents revenue each tenant pays in accordance with the terms of its respective lease and that is recognized on a straight-line basis over the non-cancellable term of the lease, and includes the effects of rent steps and rent abatements under the leases, (ii) variable payments of tenant reimbursements, which are recoveries of all or a portion of the operating expenses and real estate taxes of the property and is recognized in the same period as the expenses are incurred, (iii) amortization of acquired above and below-market leases, net and (iv) lease termination income.
The following table sets forth the details of our rental revenue.
| For the Three Months Ended March 31, |
| |||||
(Amounts in thousands) | 2023 |
|
| 2022 |
| ||
Rental revenue: |
|
|
|
|
| ||
Fixed | $ | 165,863 |
|
| $ | 154,777 |
|
Variable |
| 15,850 |
|
|
| 15,145 |
|
Total rental revenue | $ | 181,713 |
|
| $ | 169,922 |
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
|
| ||||||||||
(Amounts in thousands) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| ||||
Rental revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fixed | $ | 163,545 |
|
| $ | 159,641 |
|
| $ | 318,322 |
|
| $ | 320,270 |
|
|
Variable |
| 13,698 |
|
|
| 14,987 |
| (1) |
| 28,843 |
|
|
| 27,504 |
| (1) |
Total rental revenue | $ | 177,243 |
|
| $ | 174,628 |
|
| $ | 347,165 |
|
| $ | 347,774 |
|
|
The following table is a schedule of future undiscounted cash flows under non-cancellable operating leases in effect as of June 30, 2022,March 31, 2023, for the six-monthnine-month period from JulyApril 1, 20222023 through December 31, 2022,2023, and each of the five succeeding years and thereafter commencing January 1, 2023.2024.
(Amounts in thousands) | (Amounts in thousands) |
|
| (Amounts in thousands) |
|
| ||
2022 |
| $ | 321,344 |
| ||||
2023 |
|
| 630,105 |
|
| $ | 474,452 |
|
2024 |
|
| 630,171 |
|
|
| 638,075 |
|
2025 |
|
| 575,286 |
|
|
| 590,547 |
|
2026 |
|
| 479,154 |
|
|
| 510,358 |
|
2027 |
|
| 414,169 |
|
|
| 449,888 |
|
2028 |
|
| 444,113 |
| ||||
Thereafter |
|
| 2,025,747 |
|
|
| 1,953,956 |
|
Total |
| $ | 5,075,976 |
|
| $ | 5,061,389 |
|
20
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table sets forth the details of our fee and other income.
| For the Three Months Ended March 31, |
| ||||||
(Amounts in thousands) | 2023 |
|
| 2022 |
| |||
Fee income: |
|
|
|
|
|
| ||
Asset management | $ | 2,175 |
|
| $ | 2,885 |
| |
Property management |
|
| 1,862 |
|
|
| 2,219 |
|
Acquisition, disposition, leasing and other |
| 520 |
|
|
| 6,884 |
| |
Total fee income |
| 4,557 |
|
|
| 11,988 |
| |
Other income (1) |
| 2,204 |
|
|
| 1,775 |
| |
Total fee and other income | $ | 6,761 |
|
| $ | 13,763 |
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
|
| |||||||||||
(Amounts in thousands) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| |||||
Fee income: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Asset management | $ | 3,087 |
|
| $ | 3,409 |
|
| $ | 5,972 |
|
| $ | 6,895 |
|
| |
Property management |
|
| 2,103 |
|
|
| 2,085 |
|
|
| 4,322 |
|
|
| 4,281 |
|
|
Acquisition, disposition, leasing and other |
| 784 |
|
|
| 707 |
|
|
| 7,668 |
|
|
| 1,695 |
|
| |
Total fee income |
| 5,974 |
|
|
| 6,201 |
|
|
| 17,962 |
|
|
| 12,871 |
|
| |
Other income (1) |
| 2,300 |
|
|
| 1,440 |
|
|
| 4,075 |
|
|
| 2,790 |
|
| |
Total fee and other income | $ | 8,274 |
|
| $ | 7,641 |
|
| $ | 22,037 |
|
| $ | 15,661 |
|
|
The following table sets forth the details of interest and other income, net.20
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
| ||||||||||
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
(Amounts in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Interest income, net |
| $ | 796 |
|
| $ | 397 |
|
| $ | 1,027 |
|
| $ | 787 |
|
Mark-to-market of investments in our |
|
| - |
|
|
| 673 |
|
|
| - |
|
|
| 1,585 |
|
Total interest and other income, net |
| $ | 796 |
|
| $ | 1,070 |
|
| $ | 1,027 |
|
| $ | 2,372 |
|
(UNAUDITED)
The following table sets forth the details of interest and debt expense.
|
|
|
|
|
|
| ||||||||||
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
(Amounts in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Interest expense |
| $ | 34,039 |
|
| $ | 32,593 |
|
| $ | 66,778 |
|
| $ | 65,013 |
|
Amortization of deferred financing costs |
|
| 1,539 |
|
|
| 2,321 |
|
|
| 3,077 |
|
|
| 4,640 |
|
Total interest and debt expense |
| $ | 35,578 |
|
| $ | 34,914 |
|
| $ | 69,855 |
|
| $ | 69,653 |
|
|
|
|
| |||||
|
| For the Three Months Ended March 31, |
| |||||
(Amounts in thousands) |
| 2023 |
|
| 2022 |
| ||
Interest expense |
| $ | 34,921 |
|
| $ | 32,739 |
|
Amortization of deferred financing costs |
|
| 1,538 |
|
|
| 1,538 |
|
Total interest and debt expense |
| $ | 36,459 |
|
| $ | 34,277 |
|
21
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 and time-based appreciation only LTIP (“AOLTIP”) units. We account for all stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation. We recognized stock-based compensation expense of $4,142,0005,117,000 and $4,743,0006,562,000 for the three months ended June 30,March 31, 2023 and 2022, and 2021, respectively, and $10,704,000 and $10,229,000 for the six months ended June 30, 2022 and 2021, respectively, related to awards granted in prior periods, including the equity awards granted on January 13, 202225, 2023 (“20222023 Equity Grants”) described below.
20222023 Equity Grants
20222023 Performance-Based Awards Program (“20222023 Performance Program”)
On January 13, 2022,25, 2023, the Compensation Committee of our Board of Directors (the “Compensation Committee”) approved the 20222023 Performance Program, a multi-year performance-based long-term incentive compensation program. Under the 20222023 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 three-year performance measurement period beginning on January 1, 20222023 and continuing through December 31, 20242025. The amount of LTIP units otherwise earned based on the achievement of the NOI goals would then be increased or decreased based on our Total Shareholder Return (“TSR”) versus that of our New York City office REIT peers (comprised of Vornado Realty Trust, SL Green Realty Corp. and Empire State Realty Trust) but the modifier will not result in a total payout exceeding 100% of the units granted. Additionally, if our TSR is negative over the three-year performance measurement period, then the number of LTIP units that are earned under the 20222023 Performance Program will be reduced by 30.0% of the number of such awards that otherwise would have been earned. Furthermore, awards earned under the 20222023 Performance Program are subject to vesting based on continued employment with us through December 31, 2025,2026, with 50.0% of each award vesting upon the conclusion of the performance measurement period, and the remaining 50.0% vesting on December 31, 2025. Lastly, our2026. Our Named Executive Officers are required to hold earned awards for an additional year following vesting. Awards granted under the 20222023 Performance Program had a fair value of $7,188,0007,067,000 on the date of the grant, which is being amortized into expense over the four-year vesting period using a graded vesting attribution method.
Time-Based Unit Awards Program (LTIP Units, AOLTIP Units and Restricted Stock)
On January 13, 2022,25, 2023, we also granted an aggregate of 626,942796,349 LTIP units, 2,703,4992,054,270 AOLTIP units and 120,24381,531 shares of Restricted Stock to our executive officers and employees that will vest over a period of three to four years. The fair value of LTIP units, AOLTIP units and restricted stock on the date of the grant were $5,313,0004,528,000, $5,831,0003,752,000, and $1,119,000503,000, respectively, and these awards are being amortized into expense on a straight-line basis over the vesting period.
Completion of the 2019 Performance-Based Awards Program (“2019 Performance Program”)
On December 31, 2021, the performance measurement period for the 2019 Performance Program ended. On January 13, 2022, the Compensation Committee determined that the performance goals set forth in the 2019 Performance Program were not met. Accordingly, all of the LTIP units that were granted on January 14, 2019, were forfeited, with no awards being earned. These awards had a grant date fair value of $8,106,000 and a remaining unrecognized compensation cost of $475,000 as of June 30, 2022, which will be amortized over a weighted-average period of 0.5 years.
2221
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Completion of the 2020 Performance-Based Awards Program (“2020 Performance Program”)
The three-year performance measurement period with respect to our 2020 Performance Program ended on December 31, 2022. On January 25, 2023, the Compensation Committee determined that (i) our TSR ranked in the 75th percentile amongst the TSR of our New York City office REIT peers and (ii) our TSR ranked in the 37th percentile amongst the performance of the SNL U.S. Office REIT Index constituents, resulting in a payout of approximately 59.7% of the LTIP units granted. Additionally, in accordance with the 2020 Performance Program, the final payout was reduced by 30.0% since our TSR was negative over the three-year performance measurement period. Accordingly, of the 1,068,693 LTIP units that were granted under the 2020 Performance Program, 443,713 LTIP units were earned. Of the LTIP units that were earned, 221,850 LTIP units vested immediately on January 25, 2023 and the remaining 221,863 LTIP units will vest on December 31, 2023. This award had a grant date fair value of $7,488,000 and a remaining unrecognized compensation cost of $613,000 as of March 31, 2023, which will be amortized into expense over a weighted-average period of 0.8 years.
The following table summarizes our net (loss) income and the number of common shares used in the computation of basic and diluted (loss) 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 Six Months Ended |
| |||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| For the Three Months Ended March 31, |
| |||||||||||||||
(Amounts in thousands, except per share amounts) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Net (loss) income attributable to common stockholders |
| $ | (360 | ) |
| $ | (15,943 | ) |
| $ | 3,011 |
|
| $ | (19,521 | ) | ||||||||
Net income attributable to common stockholders |
| $ | 1,729 |
|
| $ | 3,371 |
| ||||||||||||||||
Earnings allocated to unvested participating securities |
|
| (22 | ) |
|
| (18 | ) |
|
| (43 | ) |
|
| (37 | ) |
|
| (20 | ) |
|
| (21 | ) |
Numerator for (loss) income per common share - |
|
| (382 | ) |
|
| (15,961 | ) |
|
| 2,968 |
|
|
| (19,558 | ) | ||||||||
Numerator for income per common share - basic and diluted |
| $ | 1,709 |
|
| $ | 3,350 |
| ||||||||||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Denominator for basic loss per common share - |
|
| 222,972 |
|
|
| 218,696 |
|
|
| 220,889 |
|
|
| 218,681 |
| ||||||||
Denominator for basic income per common share - weighted average shares |
|
| 216,563 |
|
|
| 218,782 |
| ||||||||||||||||
Effect of dilutive stock-based compensation plans (1) |
|
| - |
|
|
| - |
|
|
| 41 |
|
|
| - |
|
|
| 54 |
|
|
| 58 |
|
Denominator for diluted loss per common share - |
|
| 222,972 |
|
|
| 218,696 |
|
|
| 220,930 |
|
|
| 218,681 |
| ||||||||
Denominator for diluted income per common share - weighted average shares |
|
| 216,617 |
|
|
| 218,840 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
(Loss) income per common share - basic and diluted |
| $ | (0.00 | ) |
| $ | (0.07 | ) |
| $ | 0.01 |
|
| $ | (0.09 | ) | ||||||||
Income per common share - basic and diluted |
| $ | 0.01 |
|
| $ | 0.02 |
|
2322
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 $260,000263,000 and $710,000489,000 for the three months ended June 30,March 31, 2023 and 2022, and 2021, respectively, and $749,000 and $1,227,000 for the six months ended June 30, 2022 and 2021, respectively, in connection with these agreements, which is included as a component of “fee and other income” on our consolidated statements of income. As of June 30, 2022March 31, 2023 and December 31, 2021,2022, amounts owed to us under these agreements aggregated $46,00049,000 and $484,00052,000, respectively, which are included as a component of “accounts and other receivables” on our consolidated balance sheets.
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 $5,015,0003,653,000 and $4,916,00010,783,000 for the three months ended June 30,March 31, 2023 and 2022, and 2021, respectively, and $15,798,000 and $10,502,000 for the six months ended June 30, 2022 and 2021, respectively, in connection with these agreements, which is included as a component of “fee and other income” on our consolidated statements of income. As of June 30, 2022March 31, 2023 and December 31, 2021,2022, amounts owed to us under these agreements aggregated $2,846,0002,583,000 and $2,883,0003,032,000, respectively, which are included as a component of “accounts and other receivables” on our consolidated balance sheets.
Hamburg TrustHT Consulting HTC GmbH (“HTC”)
We have an agreement with HTC,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 10%. HTC is 100% owned by Albert Behler, our Chairman, Chief Executive Officer and President. We incurred costs aggregating $124,000117,000 and $123,000389,000 for the three months ended June,March 31, 2023 and 2022, and 2021, respectively, and $513,000 and $245,000 for the six months ended June 30, 2022 and 2021, respectively, in connection with this agreement. As of June 30, 2022March 31, 2023 and December 31, 2021,2022, we owed $124,000117,000 and $523,000119,000, respectively, to HTC under this agreement, which are included as a component of “accounts payable and accrued expenses” on our consolidated balance sheets.
ParkProperty Capital, LP
ParkProperty Capital, LP (“ParkProperty”), an entity partially owned by Katharina Otto-Bernstein (a member of our Board of Directors), leased 3,330 square feet at 1633 Broadway (“1633 Lease”). In December 2022, upon expiration of the 1633 Lease, ParkProperty entered into a five-year lease for 4,233 square feet at 1325 Avenue of the Americas. We recognized rental revenue of $69,000 and $54,000 for the three months ended March 31, 2023 and 2022, respectively, pursuant to these leases.
Mannheim Trust
A subsidiary of Mannheim Trust leases3,127 square feet of office space at 712 Fifth Avenue, our 50.0% owned unconsolidated joint venture, pursuant to a lease agreement which expires in April 2023.June 2025. The Mannheim Trust is for the benefit of the children of Dr. Martin Bussmann, (awho is a member of our Board of Directors) is also a trustee and a director of Mannheim Trust.Directors. We recognized $93,000 and $91,000 in each offor the three months ended June 30,March 31, 2023 and 2022, and 2021, respectively, and $182,000 and $181,000 for the six months ended June 30, 2022 and 2021, respectively, for our share of rental income pursuant to this lease.
Due from Affiliates
During the six months ended June 30, 2022, Fund X borrowed $51,916,000 from us at an interest rate of Secured Overnight Financing Rate (“SOFR”) plus 220 basis points. On June 28, 2022, Fund X repaid the $51,916,000 loan, together with $385,000 of accrued interest.
2423
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, including claims arising specifically from the formation transactions, in connection with our initial public offering, 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 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 June 30, 2022,March 31, 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 a 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 $54,500,00057,400,000. 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.
25
24
PARAMOUNT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Our reportable segments are separated by region, based on the 2two regions in which we conduct our business: New York and San Francisco. Our determination of segments is aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker, makes key operating decisions, evaluates financial results and manages our business.
The following tables provide Net Operating Income (“NOI”) for each reportable segment for the periods set forth below.
|
| For the Three Months Ended June 30, 2022 |
|
| For the Three Months Ended March 31, 2023 |
| ||||||||||||||||||||||||||
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
| ||||||||
Property-related revenues |
| $ | 179,543 |
|
| $ | 116,300 |
|
| $ | 64,042 |
|
| $ | (799 | ) |
| $ | 183,917 |
|
| $ | 117,226 |
|
| $ | 67,302 |
|
| $ | (611 | ) |
Property-related operating expenses |
|
| (67,814 | ) |
|
| (48,147 | ) |
|
| (18,581 | ) |
|
| (1,086 | ) |
|
| (70,309 | ) |
|
| (49,521 | ) |
|
| (20,268 | ) |
|
| (520 | ) |
NOI from unconsolidated joint ventures |
|
| 11,585 |
|
|
| 3,528 |
|
|
| 7,971 |
|
|
| 86 |
|
|
| 10,381 |
|
|
| 3,363 |
|
|
| 7,019 |
|
|
| (1 | ) |
NOI (1) |
| $ | 123,314 |
|
| $ | 71,681 |
|
| $ | 53,432 |
|
| $ | (1,799 | ) |
| $ | 123,989 |
|
| $ | 71,068 |
|
| $ | 54,053 |
|
| $ | (1,132 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| For the Three Months Ended June 30, 2021 |
|
| For the Three Months Ended March 31, 2022 |
| ||||||||||||||||||||||||||
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
| ||||||||
Property-related revenues |
| $ | 176,068 |
|
| $ | 108,191 |
|
| $ | 68,674 |
|
| $ | (797 | ) |
| $ | 171,697 |
|
| $ | 115,405 |
|
| $ | 57,089 |
|
| $ | (797 | ) |
Property-related operating expenses |
|
| (64,072 | ) |
|
| (45,801 | ) |
|
| (17,067 | ) |
|
| (1,204 | ) |
|
| (66,661 | ) |
|
| (48,211 | ) |
|
| (17,292 | ) |
|
| (1,158 | ) |
NOI from unconsolidated joint ventures |
|
| 10,557 |
|
|
| 2,749 |
|
|
| 7,852 |
|
|
| (44 | ) | ||||||||||||||||
NOI (1) |
| $ | 122,553 |
|
| $ | 65,139 |
|
| $ | 59,459 |
|
| $ | (2,045 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
| For the Six Months Ended June 30, 2022 |
| |||||||||||||||||||||||||||||
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
| ||||||||||||||||||||
Property-related revenues |
| $ | 351,240 |
|
| $ | 231,705 |
|
| $ | 121,131 |
|
| $ | (1,596 | ) | ||||||||||||||||
Property-related operating expenses |
|
| (134,475 | ) |
|
| (96,358 | ) |
|
| (35,873 | ) |
|
| (2,244 | ) | ||||||||||||||||
NOI from unconsolidated joint ventures |
|
| 22,819 |
|
|
| 6,346 |
|
|
| 16,325 |
|
|
| 148 |
|
|
| 11,234 |
|
|
| 2,818 |
|
|
| 8,354 |
|
|
| 62 |
|
NOI (1) |
| $ | 239,584 |
|
| $ | 141,693 |
|
| $ | 101,583 |
|
| $ | (3,692 | ) |
| $ | 116,270 |
|
| $ | 70,012 |
|
| $ | 48,151 |
|
| $ | (1,893 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| For the Six Months Ended June 30, 2021 |
| |||||||||||||||||||||||||||||
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
| ||||||||||||||||||||
Property-related revenues |
| $ | 350,564 |
|
| $ | 220,028 |
|
| $ | 132,146 |
|
| $ | (1,610 | ) | ||||||||||||||||
Property-related operating expenses |
|
| (130,690 | ) |
|
| (94,825 | ) |
|
| (34,005 | ) |
|
| (1,860 | ) | ||||||||||||||||
NOI from unconsolidated joint ventures |
|
| 20,883 |
|
|
| 5,570 |
|
|
| 15,389 |
|
|
| (76 | ) | ||||||||||||||||
NOI (1) |
| $ | 240,757 |
|
| $ | 130,773 |
|
| $ | 113,530 |
|
| $ | (3,546 | ) |
2625
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 Six Months Ended |
| |||||||||||||||||
| June 30, |
|
| June 30, |
| For the Three Months Ended March 31, |
| |||||||||||||||
(Amounts in thousands) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||||
NOI | $ | 123,314 |
|
| $ | 122,553 |
|
| $ | 239,584 |
|
| $ | 240,757 |
| $ | 123,989 |
|
| $ | 116,270 |
|
Add (subtract) adjustments to arrive to net income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Fee income |
| 5,974 |
|
|
| 6,201 |
|
|
| 17,962 |
|
|
| 12,871 |
|
| 4,557 |
|
|
| 11,988 |
|
Depreciation and amortization expense |
| (57,398 | ) |
|
| (59,925 | ) |
|
| (113,022 | ) |
|
| (118,230 | ) |
| (58,888 | ) |
|
| (55,624 | ) |
General and administrative expenses |
| (16,706 | ) |
|
| (18,418 | ) |
|
| (32,351 | ) |
|
| (32,782 | ) |
| (14,623 | ) |
|
| (15,645 | ) |
Income from real estate related fund investments |
| 3,550 |
|
|
| - |
| |||||||||||||||
NOI from unconsolidated joint ventures (excluding |
| (11,585 | ) |
|
| (10,557 | ) |
|
| (22,819 | ) |
|
| (20,883 | ) |
| (10,381 | ) |
|
| (11,234 | ) |
Loss from unconsolidated joint ventures |
| (4,416 | ) |
|
| (15,717 | ) |
|
| (9,529 | ) |
|
| (21,033 | ) |
| (5,762 | ) |
|
| (5,113 | ) |
Interest and other income, net |
| 796 |
|
|
| 1,070 |
|
|
| 1,027 |
|
|
| 2,372 |
|
| 2,925 |
|
|
| 231 |
|
Interest and debt expense |
| (35,578 | ) |
|
| (34,914 | ) |
|
| (69,855 | ) |
|
| (69,653 | ) |
| (36,459 | ) |
|
| (34,277 | ) |
Other, net |
| (4 | ) |
|
| 13 |
|
|
| 49 |
|
|
| (88 | ) |
| (306 | ) |
|
| 53 |
|
Net income (loss) before income taxes |
| 4,397 |
|
|
| (9,694 | ) |
|
| 11,046 |
|
|
| (6,669 | ) | |||||||
Income before income taxes |
| 8,602 |
|
|
| 6,649 |
| |||||||||||||||
Income tax expense |
| (359 | ) |
|
| (434 | ) |
|
| (886 | ) |
|
| (1,575 | ) |
| (288 | ) |
|
| (527 | ) |
Net income (loss) |
| 4,038 |
|
|
| (10,128 | ) |
|
| 10,160 |
|
|
| (8,244 | ) | |||||||
Less: net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net income |
| 8,314 |
|
|
| 6,122 |
| |||||||||||||||
Less net income attributable to noncontrolling interests in: | Less net income attributable to noncontrolling interests in: |
|
|
|
| |||||||||||||||||
Consolidated joint ventures |
| (4,779 | ) |
|
| (7,428 | ) |
|
| (8,204 | ) |
|
| (13,156 | ) |
| (5,641 | ) |
|
| (3,425 | ) |
Consolidated real estate fund |
| 352 |
|
|
| 29 |
|
|
| 1,368 |
|
|
| (56 | ) | |||||||
Consolidated real estate related funds |
| (823 | ) |
|
| 1,016 |
| |||||||||||||||
Operating Partnership |
| 29 |
|
|
| 1,584 |
|
|
| (313 | ) |
|
| 1,935 |
|
| (121 | ) |
|
| (342 | ) |
Net (loss) income attributable to common stockholders | $ | (360 | ) |
| $ | (15,943 | ) |
| $ | 3,011 |
|
| $ | (19,521 | ) | |||||||
Net income attributable to common stockholders | $ | 1,729 |
|
| $ | 3,371 |
|
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 |
|
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
| ||||||||
June 30, 2022 |
| $ | 8,482,229 |
|
| $ | 5,315,584 |
|
| $ | 2,676,453 |
|
| $ | 490,192 |
| ||||||||||||||||
December 31, 2021 |
|
| 8,494,562 |
|
|
| 5,336,210 |
|
|
| 2,696,131 |
|
|
| 462,221 |
| ||||||||||||||||
March 31, 2023 |
| $ | 8,480,089 |
|
| $ | 5,286,815 |
|
| $ | 2,630,453 |
|
| $ | 562,821 |
| ||||||||||||||||
December 31, 2022 |
|
| 8,453,254 |
|
|
| 5,311,636 |
|
|
| 2,631,265 |
|
|
| 510,353 |
|
27
On May 1, 2023, First Republic Bank (“First Republic”) was closed by the California Department of Financial Protection and Innovation and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. In connection therewith, JPMorgan Chase Bank, National Association (N.A.), Columbus, Ohio, acquired all deposit accounts and substantially all the assets and assumed certain of the liabilities of First Republic from the FDIC. While the details of the acquisition of First Republic’s assets and the assumption of First Republic’s liabilities are unclear at this time, Paramount, through a wholly-owned subsidiary, is the landlord under certain lease agreements with First Republic at our One Front Street property in San Francisco. These lease agreements expire over various periods between June 2025 and December 2032. As of March 31, 2023, First Republic leased approximately 460,000 square feet pursuant to these lease agreements and accounts for approximately $43,000,000, or 6.4% of our annualized rents. First Republic remains current on its financial obligations under these lease agreements through May 2023.
26
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:
27
28
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, 2021.2022.
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, 2021.2022.
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.
2928
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 93.4%93.5% of, the Operating Partnership as of June 30, 2022.March 31, 2023.
As of June 30, 2022,March 31, 2023, we ownowned and/or managemanaged a portfolio of 18 properties aggregating 14.013.8 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.
Acquisitions
On February 24, 2022, a joint venture, in which we own a 9.2% interest, acquired a 26,000 square foot retail condominium at 1600 Broadway in Manhattan for $191,500,000. In connection with the acquisition, the joint venture obtained a 10-year, $98,000,000 interest-only loan that has a fixed rate of 3.45%. The property, which is located in the heart of Times Square, is 100% leased to Mars, Inc. for a 15-year term and serves as the New York flagship location for M&M’s World.
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. During 2020,As of December 31, 2022, we had repurchased 13,813,158a total of 24,183,768 common shares at a weighted average price of $8.69$7.65 per share, or $120,000,000$185,000,000 in the aggregate. As of June 30, 2022,March 31, 2023 we had $80,000,000have $15,000,000 available for future repurchases under the existing program. Subsequent to June 30, 2022, we repurchased 268,231 common shares at a weighted average price of $6.96 per share, or $1,867,000 in the aggregate, accordingly, as of July 25, 2022, we have $78,133,000 available for future repurchases. 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.
30
Subsequent Events
On May 1, 2023, First Republic Bank (“First Republic”) was closed by the California Department of Financial Protection and Innovation and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver. In connection therewith, JPMorgan Chase Bank, National Association (N.A.), Columbus, Ohio, acquired all deposit accounts and substantially all the assets and assumed certain of the liabilities of First Republic from the FDIC. While the details of the acquisition of First Republic’s assets and the assumption of First Republic’s liabilities are unclear at this time, Paramount, through a wholly-owned subsidiary, is the landlord under certain lease agreements with First Republic at our One Front Street property in San Francisco. These lease agreements expire over various periods between June 2025 and December 2032. As of March 31, 2023, First Republic leased approximately 460,000 square feet pursuant to these lease agreements and accounts for approximately $43,000,000, or 6.4% of our annualized rents. First Republic remains current on its financial obligations under these lease agreements through May 2023.
29
Leasing Results - Three Months Ended June 30, 2022March 31, 2023
In the three months ended June 30, 2022,March 31, 2023, we leased 250,231195,634 square feet, of which our share was 188,175170,333 square feet that was leased at a weighted average initial rent of $78.28$82.21 per square foot. This leasing activity, partially offset by the lease expirations in the three months, increaseddecreased leased occupancy by 80 basis points to 91.4% at June 30, 2022 from 90.6% at March 31, 2022. Sameand same store leased occupancy (properties owned by us in a similar manner during both reporting periods), increased by 90150 basis points to 91.4% at June 30, 2022 from 90.5%89.8% at March 31, 2023 from 91.3% at December 31, 2022. The 150 basis point decrease in leased occupancy was driven primarily by the scheduled expiration of Credit Agricole's 305,132 square foot lease in February 2023, partially offset by O'Melveny & Myers 160,708 square foot lease; both of which were at 1301 Avenue of the Americas in our New York portfolio.
Of the 188,175195,634 square feet leased 96,052in the three months ended March 31, 2023, 143,882 square feet represented our share of second generation space (space leased in the current period that hadhas been (i) vacant for less than twelve months)months, or (ii) pre-leased prior to its scheduled expiration) for which rental rates increased by 0.9% on a GAAP basis and decreased by 5.3%1.9% on a cash basis and increased by 0.5% on a GAAP basis. The weighted average lease term for leases signed during the three months was 9.013.0 years and weighted average tenant improvements and leasing commissions on these leases were $10.43$12.77 per square foot per annum, or 13.3%15.5% of initial rent.
New York
In the three months ended June 30, 2022,March 31, 2023, we leased 152,970118,967 square feet in our New York portfolio, of which our share was 141,575 square feet that was leased at a weighted average initial rent of $69.48 per square foot. This leasing activity, partially offset by lease expirations in the three months, increased leased occupancy by 120 basis points to 92.0% at June 30, 2022 from 90.8% at March 31, 2022. Same store leased occupancy increased by 130 basis points to 92.0% at June 30, 2022 from 90.7% at March 31, 2022. Of the 141,575 square feet leased, 63,280 square feet represented our share of second generation space (space that had been vacant for less than twelve months) for which rental rates decreased by 9.6% on a cash basis and 9.1% on a GAAP basis. The weighted average lease term for leases signed during the three months was 9.3 years and weighted average tenant improvements and leasing commissions on these leases were $10.43 per square foot per annum, or 15.0% of initial rent.
San Francisco
In the three months ended June 30, 2022, we leased 97,261 square feet in our San Francisco portfolio, of which our share was 46,600 square feet that was leased at a weighted average initial rent of $105.02$81.00 per square foot. This leasing activity, offset by lease expirations in the three months, decreased leased occupancy and same store leased occupancy by 30190 basis points to 89.8% at June 30, 2022 from 90.1%90.2% at March 31, 2023 from 92.1% at December 31, 2022. The 190 basis point decrease in leased occupancy was driven primarily by the scheduled expiration of Credit Agricole's 305,132 square foot lease in February 2023, partially offset by O'Melveny & Myers 160,708 square foot lease; both of which were at 1301 Avenue of the Americas.
Of the 46,600118,967 square feet leased in the three months 32,772ended March 31, 2023, 92,516 square feet represented our share of second generation space for which we achieved rental rate increases of 0.2%rates increased by 8.7% on a cashGAAP basis and 13.1%decreased by 3.6% on a GAAPcash basis. The weighted average lease term for leases signed during the three months was 7.916.5 years and weighted average tenant improvements and leasing commissions on these leases were $10.44$11.82 per square foot per annum, or 9.9%14.6% of initial rent.
San Francisco
In the three months ended March 31, 2023, we leased 76,667 square feet in our San Francisco portfolio, of which our share was 51,366 square feet that was leased at a weighted average initial rent of $85.00 per square foot. This leasing activity, offset by lease expirations in the three months, decreased leased occupancy and same store leased occupancy by 20 basis points to 88.7% at March 31, 2023 from 88.9% at December 31, 2022. Of the 76,667 square feet leased in the three months, 51,366 square feet represented our share of second generation space for which rental rates decreased by 11.0% on a GAAP basis and increased by 1.2% on a cash basis. The weighted average lease term for leases signed during the three months was 5.0 years and weighted average tenant improvements and leasing commissions on these leases were $20.00 per square foot per annum, or 23.5% of initial rent.
30
31
The following table presents additional details on the leases signed during the three months ended June 30, 2022.March 31, 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 June 30, 2022 | Total |
|
| New York |
|
| San Francisco |
|
| ||||||||
| Total square feet leased |
| 250,231 |
|
|
| 152,970 |
|
|
| 97,261 |
|
| ||||
| Pro rata share of total square feet leased: |
| 188,175 |
|
|
| 141,575 |
|
|
| 46,600 |
|
| ||||
|
| Initial rent (1) | $ | 78.28 |
|
| $ | 69.48 |
|
| $ | 105.02 |
|
| |||
|
| Weighted average lease term (in years) |
| 9.0 |
|
|
| 9.3 |
|
|
| 7.9 |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Tenant improvements and leasing commissions: |
|
|
|
|
|
|
|
| |||||||
|
|
| Per square foot | $ | 93.63 |
|
| $ | 97.15 |
|
| $ | 82.94 |
|
| ||
|
|
| Per square foot per annum | $ | 10.43 |
|
| $ | 10.43 |
|
| $ | 10.44 |
|
| ||
|
|
| Percentage of initial rent |
| 13.3 | % |
|
| 15.0 | % |
|
| 9.9 | % |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Rent concessions: |
|
|
|
|
|
|
|
| |||||||
|
|
| Average free rent period (in months) |
| 9.6 |
|
|
| 10.7 |
|
|
| 6.1 |
|
| ||
|
|
| Average free rent period per annum (in months) |
| 1.1 |
|
|
| 1.1 |
|
|
| 0.8 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Second generation space: (2) |
|
|
|
|
|
|
|
| |||||||
|
| Square feet |
| 96,052 |
|
|
| 63,280 |
|
|
| 32,772 |
|
| |||
|
| Cash basis: |
|
|
|
|
|
|
|
|
| ||||||
|
|
| Initial rent (1) | $ | 81.80 |
|
| $ | 66.63 |
|
| $ | 111.07 |
|
| ||
|
|
| Prior escalated rent (3) | $ | 86.37 |
|
| $ | 73.71 |
|
| $ | 110.82 |
|
| ||
|
|
| Percentage (decrease) increase |
| (5.3 | %) |
|
| (9.6 | %) |
|
| 0.2 | % |
| ||
|
| GAAP basis: |
|
|
|
|
|
|
|
|
| ||||||
|
|
| Straight-line rent | $ | 81.34 |
|
| $ | 63.62 |
|
| $ | 115.54 |
|
| ||
|
|
| Prior straight-line rent | $ | 80.96 |
|
| $ | 69.96 |
|
| $ | 102.20 |
|
| ||
|
|
| Percentage increase (decrease) |
| 0.5 | % |
|
| (9.1 | %) |
|
| 13.1 | % |
|
Three Months Ended March 31, 2023 | Total |
|
| New York |
|
| San Francisco |
|
| ||||||||
| Total square feet leased |
| 195,634 |
|
|
| 118,967 |
|
|
| 76,667 |
|
| ||||
| Pro rata share of total square feet leased: |
| 170,333 |
|
|
| 118,967 |
|
|
| 51,366 |
|
| ||||
|
| Initial rent (1) | $ | 82.21 |
|
| $ | 81.00 |
|
| $ | 85.00 |
|
| |||
|
| Weighted average lease term (in years) |
| 13.0 |
|
|
| 16.5 |
|
|
| 5.0 |
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Tenant improvements and leasing commissions: |
|
|
|
|
|
|
|
| |||||||
|
|
| Per square foot | $ | 166.38 |
|
| $ | 195.04 |
|
| $ | 100.00 |
|
| ||
|
|
| Per square foot per annum | $ | 12.77 |
|
| $ | 11.82 |
|
| $ | 20.00 |
|
| ||
|
|
| Percentage of initial rent |
| 15.5 | % |
|
| 14.6 | % |
|
| 23.5 | % |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Rent concessions: |
|
|
|
|
|
|
|
| |||||||
|
|
| Average free rent period (in months) |
| 15.0 |
|
|
| 18.0 |
|
|
| 8.0 |
|
| ||
|
|
| Average free rent period per annum (in months) |
| 1.1 |
|
|
| 1.1 |
|
|
| 1.6 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Second generation space: (2) |
|
|
|
|
|
|
|
| |||||||
|
| Square feet |
| 143,882 |
|
|
| 92,516 |
|
|
| 51,366 |
|
| |||
|
| Cash basis: |
|
|
|
|
|
|
|
|
| ||||||
|
|
| Initial rent (1) | $ | 82.43 |
|
| $ | 81.00 |
|
| $ | 85.00 |
|
| ||
|
|
| Prior escalated rent (3) | $ | 84.00 |
|
| $ | 84.02 |
|
| $ | 83.97 |
|
| ||
|
|
| Percentage (decrease) increase |
| (1.9 | %) |
|
| (3.6 | %) |
|
| 1.2 | % |
| ||
|
| GAAP basis: |
|
|
|
|
|
|
|
|
| ||||||
|
|
| Straight-line rent | $ | 79.72 |
|
| $ | 80.31 |
|
| $ | 78.66 |
|
| ||
|
|
| Prior straight-line rent | $ | 79.04 |
|
| $ | 73.88 |
|
| $ | 88.35 |
|
| ||
|
|
| Percentage increase (decrease) |
| 0.9 | % |
|
| 8.7 | % |
|
| (11.0 | %) |
|
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 June 30, 2022 |
| 91.4 | % |
|
| 92.0 | % |
|
| 89.8 | % |
| As of March 31, 2022 |
| 90.5 | % |
|
| 90.7 | % |
|
| 90.1 | % |
Same Store Leased Occupancy (1) | Total |
|
| New York |
|
| San Francisco |
| ||||
| As of March 31, 2023 |
| 89.8 | % |
|
| 90.2 | % |
|
| 88.7 | % |
| As of December 31, 2022 |
| 91.3 | % |
|
| 92.1 | % |
|
| 88.9 | % |
3231
Leasing Results - Six Months Ended June 30, 2022
In the six months ended June 30, 2022, we leased 453,051 square feet, of which our share was 340,377 that was leased at a weighted average initial rent of $73.54 per square foot. This leasing activity, partially offset by lease expirations in the six months, increased leased occupancy by 70 basis points to 91.4% at June 30, 2022 from 90.7% at December 31, 2021. Same store leased occupancy (properties owned by us in a similar manner during both reporting periods), increased by 80 basis points to 91.4% at June 30, 2022 from 90.6% at December 31, 2021. Of the 340,377 square feet leased, 237,321 square feet represented our share of second generation space (space that had been vacant for less than twelve months) for which rental rates decreased by 2.5% on a cash basis and were in-line with prior rent on a GAAP basis. The weighted average lease term for leases signed during the six months was 8.5 years and weighted average tenant improvements and leasing commissions on these leases were $9.59 per square foot per annum, or 13.0% of initial rent.
New York
In the six months ended June 30, 2022, we leased 328,494 square feet in our New York portfolio, of which our share was 275,679 square feet that was leased at a weighted average initial rent of $66.50 per square foot. This leasing activity, partially offset by lease expirations in the six months, increased leased occupancy by 160 basis points to 92.0% at June 30, 2022 from 90.4% at December 31, 2021. Same store leased occupancy increased by 170 basis points to 92.0% at June 30, 2022 from 90.3% at December 31, 2021. Of the 275,679 square feet leased, 189,405 square feet represented our share of second generation space (space that had been vacant for less than twelve months) for which rental rates decreased by 4.3% on a cash basis and 6.1% on a GAAP basis. The weighted average lease term for leases signed during the six months was 8.8 years and weighted average tenant improvements and leasing commissions on these leases were $9.66 per square foot per annum, or 14.5% of initial rent.
San Francisco
In the six months ended June 30, 2022, we leased 124,557 square feet in our San Francisco portfolio, of which our share was 64,698 square feet that was leased at a weighted average initial rent of $103.53 per square foot. This leasing activity, offset by lease expirations in the six months, decreased leased occupancy and same store leased occupancy by 180 basis points to 89.8% at June 30, 2022 from 91.6% at December 31, 2021. Of the 64,698 square feet leased in the six months, 47,916 square feet represented our share of second generation space for which we achieved rental rate increases of 2.0% on a cash basis and 16.3% on a GAAP basis. The weighted average lease term for leases signed during the six months was 7.0 years and weighted average tenant improvements and leasing commissions on these leases were $9.24 per square foot per annum, or 8.9% of initial rent.
33
The following table presents additional details on the leases signed during the six months ended June 30, 2022. 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.
Six Months Ended June 30, 2022 | Total |
|
| New York |
|
| San Francisco |
| ||||||||
| Total square feet leased |
| 453,051 |
|
|
| 328,494 |
|
|
| 124,557 |
| ||||
| Pro rata share of total square feet leased: |
| 340,377 |
|
|
| 275,679 |
|
|
| 64,698 |
| ||||
|
| Initial rent (1) | $ | 73.54 |
|
| $ | 66.50 |
|
| $ | 103.53 |
| |||
|
| Weighted average lease term (in years) |
| 8.5 |
|
|
| 8.8 |
|
|
| 7.0 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Tenant improvements and leasing commissions: |
|
|
|
|
|
|
| |||||||
|
|
| Per square foot | $ | 81.20 |
|
| $ | 85.04 |
|
| $ | 64.84 |
| ||
|
|
| Per square foot per annum | $ | 9.59 |
|
| $ | 9.66 |
|
| $ | 9.24 |
| ||
|
|
| Percentage of initial rent |
| 13.0 | % |
|
| 14.5 | % |
|
| 8.9 | % | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Rent concessions: |
|
|
|
|
|
|
| |||||||
|
|
| Average free rent period (in months) |
| 9.1 |
|
|
| 10.1 |
|
|
| 4.8 |
| ||
|
|
| Average free rent period per annum (in months) |
| 1.1 |
|
|
| 1.1 |
|
|
| 0.7 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Second generation space: (2) |
|
|
|
|
|
|
| |||||||
|
| Square feet |
| 237,321 |
|
|
| 189,405 |
|
|
| 47,916 |
| |||
|
| Cash basis: |
|
|
|
|
|
|
|
| ||||||
|
|
| Initial rent (1) | $ | 72.43 |
|
| $ | 63.37 |
|
| $ | 108.25 |
| ||
|
|
| Prior escalated rent (3) | $ | 74.27 |
|
| $ | 66.20 |
|
| $ | 106.15 |
| ||
|
|
| Percentage (decrease) increase |
| (2.5 | %) |
|
| (4.3 | %) |
|
| 2.0 | % | ||
|
| GAAP basis: |
|
|
|
|
|
|
|
| ||||||
|
|
| Straight-line rent | $ | 71.28 |
|
| $ | 61.07 |
|
| $ | 111.64 |
| ||
|
|
| Prior straight-line rent | $ | 71.31 |
|
| $ | 65.06 |
|
| $ | 96.02 |
| ||
|
|
| Percentage (decrease) increase |
| (0.0 | %) |
|
| (6.1 | %) |
|
| 16.3 | % |
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 June 30, 2022 |
| 91.4 | % |
|
| 92.0 | % |
|
| 89.8 | % |
| As of December 31, 2021 |
| 90.6 | % |
|
| 90.3 | % |
|
| 91.6 | % |
34
Financial Results - Three Months Ended June 30,March 31, 2023 and 2022 and 2021
Net Income, FFO and Core FFO
Net lossincome attributable to common stockholders was $360,000,$1,729,000, or $0.00$0.01 per diluted share, for the three months ended June 30, 2022,March 31, 2023, compared to $15,943,000,$3,371,000, or $0.07$0.02 per diluted share, for the three months ended June 30, 2021. Net loss attributable to common stockholders for the three months ended June 30, 2021 includes a $10,688,000 contribution to an unconsolidated joint venture that was expensed in accordance with GAAP.March 31, 2022.
Funds from Operations (“FFO”) attributable to common stockholders was $53,322,000,$56,779,000, or $0.24$0.26 per diluted share, for the three months ended June 30, 2022,March 31, 2023, compared to $37,943,000,$54,873,000, or $0.17$0.25 per diluted share, for the three months ended June 30, 2021.March 31, 2022. FFO attributable to common stockholders for the three months ended June 30, 2021 includes a $10,688,000 contribution to an unconsolidated joint venture that was expensed in accordance with GAAP. FFO attributable to common stockholders for the three months ended June 30,March 31, 2023 and 2022 and 2021 also includes the impact of other non-core items, which are listed in the table on page 58. The44. While the aggregate of the non-core items, net of amounts attributable to noncontrolling interests, decreasedincreased FFO attributable to common stockholders for the three months ended June 30,March 31, 2023 and 2022 by $605,000 and 2021 by $311,000 and $9,665,000,$295,000, respectively, or $0.00 and $0.05it had no impact on FFO per diluted share respectively.in either period.
Core Funds from Operations (“Core FFO”) attributable to common stockholders, which excludes the impact of the non-core items listed on page 58,44, was $53,633,000,$56,174,000, or $0.24$0.26 per diluted share, for the three months ended June 30, 2022,March 31, 2023, compared to $47,608,000,$54,578,000, or $0.22$0.25 per diluted share, for the three months ended June 30, 2021.March 31, 2022.
Same Store Results
The table below summarizes the percentage increase (decrease) in our share of Same Store NOI and Same Store Cash NOI, by segment, for the three months ended June 30, 2022March 31, 2023 versus June 30, 2021.March 31, 2022.
|
| Total |
|
| New York |
|
| San Francisco |
|
| Total |
|
| New York |
|
| San Francisco |
| ||||||
Same Store NOI |
|
| 9.0 | % |
|
| 11.6 | % |
|
| 4.1 | % |
|
| 7.1 | % |
|
| 5.4 | % |
|
| 10.9 | % |
Same Store Cash NOI |
|
| 5.6 | % |
|
| 9.2 | % |
|
| (2.0 | %) |
|
| 0.1 | % |
|
| (0.7 | %) |
|
| 1.9 | % |
See pages 50-5840-44 “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.
3532
Financial Results - Six Months Ended June 30, 2022 and 2021
Net Income, FFO and Core FFO
Net income attributable to common stockholders was $3,011,000, or $0.01 per diluted share, for the six months ended June 30, 2022, compared to net loss attributable to common stockholders of $19,521,000, or $0.09 per diluted share, for the six months ended June 30, 2021. Net loss attributable to common stockholders for the six months ended June 30, 2021 includes a $10,688,000 contribution to an unconsolidated joint venture that was expensed in accordance with GAAP.
FFO attributable to common stockholders was $108,195,000, or $0.49 per diluted share, for the six months ended June 30, 2022, compared to $88,817,000, or $0.40 per diluted share, for the six months ended June 30, 2021. FFO attributable to common stockholders for the six months ended June 30, 2021 includes a $10,688,000 contribution to an unconsolidated joint venture that was expensed in accordance with GAAP. FFO attributable to common stockholders for the six months ended June 30, 2022 and 2021 also includes the impact of other non-core items, which are listed in the table on page 58. The aggregate of the non-core items, net of amounts attributable to noncontrolling interests, decreased FFO attributable to common stockholders for the six months ended June 30, 2022 and 2021 by $16,000 and $9,363,000, respectively, or $0.00 and $0.05 per diluted share, respectively.
Core FFO attributable to common stockholders, which excludes the impact of the non-core items listed on page 58, was $108,211,000, or $0.49 per diluted share, for the six months ended June 30, 2022, compared to $98,180,000, or $0.45 per diluted share, for the six months ended June 30, 2021.
Same Store Results
The table below summarizes the percentage increase (decrease) in our share of Same Store NOI and Same Store Cash NOI, by segment, for the six months ended June 30, 2022 versus June 30, 2021.
|
| Total |
|
| New York |
|
| San Francisco |
| |||
Same Store NOI |
|
| 3.0 | % |
|
| 7.3 | % |
|
| (4.8 | %) |
Same Store Cash NOI |
|
| 4.7 | % |
|
| 7.9 | % |
|
| (1.8 | %) |
See pages 50-58 “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
Results of Operations - Three Months Ended June 30,March 31, 2023 and 2022 and 2021
The following pages summarize our consolidated results of operations for the three months ended June 30, 2022March 31, 2023 and 2021.2022.
|
| For the Three Months Ended June 30, |
|
|
|
|
| For the Three Months Ended March 31, |
|
|
|
| ||||||||||||||||||||
(Amounts in thousands) | (Amounts in thousands) | 2022 |
|
| 2021 |
|
| Change |
| (Amounts in thousands) | 2023 |
|
| 2022 |
|
| Change |
| ||||||||||||||
Revenues: | Revenues: |
|
|
|
|
|
|
| Revenues: |
|
|
|
|
|
|
| ||||||||||||||||
| Rental revenue | $ | 177,243 |
|
| $ | 174,628 |
|
| $ | 2,615 |
| Rental revenue | $ | 181,713 |
|
| $ | 169,922 |
|
| $ | 11,791 |
| ||||||||
| Fee and other income |
| 8,274 |
|
|
| 7,641 |
|
|
| 633 |
| Fee and other income |
| 6,761 |
|
|
| 13,763 |
|
|
| (7,002 | ) | ||||||||
|
| Total revenues |
| 185,517 |
|
|
| 182,269 |
|
|
| 3,248 |
|
| Total revenues |
| 188,474 |
|
|
| 183,685 |
|
|
| 4,789 |
| ||||||
Expenses: | Expenses: |
|
|
|
|
|
|
| Expenses: |
|
|
|
|
|
|
| ||||||||||||||||
| Operating |
| 67,814 |
|
|
| 64,072 |
|
|
| 3,742 |
| Operating |
| 70,309 |
|
|
| 66,661 |
|
|
| 3,648 |
| ||||||||
| Depreciation and amortization |
| 57,398 |
|
|
| 59,925 |
|
|
| (2,527 | ) | Depreciation and amortization |
| 58,888 |
|
|
| 55,624 |
|
|
| 3,264 |
| ||||||||
| General and administrative |
| 16,706 |
|
|
| 18,418 |
|
|
| (1,712 | ) | General and administrative |
| 14,623 |
|
|
| 15,645 |
|
|
| (1,022 | ) | ||||||||
| Transaction related costs |
| 159 |
|
|
| 135 |
|
|
| 24 |
| Transaction related costs |
| 128 |
|
|
| 117 |
|
|
| 11 |
| ||||||||
|
| Total expenses |
| 142,077 |
|
|
| 142,550 |
|
|
| (473 | ) |
| Total expenses |
| 143,948 |
|
|
| 138,047 |
|
|
| 5,901 |
| ||||||
Other income (expense): | Other income (expense): |
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
| ||||||||||||||||
| Loss from unconsolidated joint ventures |
| (4,416 | ) |
|
| (15,717 | ) |
|
| 11,301 |
| Income from real estate related fund investments |
| 3,550 |
|
|
| - |
|
|
| 3,550 |
| ||||||||
| Income from unconsolidated real estate funds |
| 155 |
|
|
| 148 |
|
|
| 7 |
| (Loss) income from unconsolidated real estate related funds |
| (178 | ) |
|
| 170 |
|
|
| (348 | ) | ||||||||
| Interest and other income, net |
| 796 |
|
|
| 1,070 |
|
|
| (274 | ) | Loss from unconsolidated joint ventures |
| (5,762 | ) |
|
| (5,113 | ) |
|
| (649 | ) | ||||||||
| Interest and debt expense |
| (35,578 | ) |
|
| (34,914 | ) |
|
| (664 | ) | Interest and other income, net |
| 2,925 |
|
|
| 231 |
|
|
| 2,694 |
| ||||||||
Net income (loss) before income taxes |
| 4,397 |
|
|
| (9,694 | ) |
|
| 14,091 |
| |||||||||||||||||||||
| Income tax expense |
| (359 | ) |
|
| (434 | ) |
|
| 75 |
| Interest and debt expense |
| (36,459 | ) |
|
| (34,277 | ) |
|
| (2,182 | ) | ||||||||
Net income (loss) |
| 4,038 |
|
|
| (10,128 | ) |
|
| 14,166 |
| |||||||||||||||||||||
Less net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
| ||||||||||||||||||||||||||
Income before income taxes | Income before income taxes |
| 8,602 |
|
|
| 6,649 |
|
|
| 1,953 |
| ||||||||||||||||||||
| Income tax expense |
| (288 | ) |
|
| (527 | ) |
|
| 239 |
| ||||||||||||||||||||
Net income | Net income |
| 8,314 |
|
|
| 6,122 |
|
|
| 2,192 |
| ||||||||||||||||||||
Less net (income) loss attributable to noncontrolling | Less net (income) loss attributable to noncontrolling |
|
|
|
|
|
| |||||||||||||||||||||||||
| Consolidated joint ventures |
| (4,779 | ) |
|
| (7,428 | ) |
|
| 2,649 |
| interests in: |
|
|
|
|
|
|
| ||||||||||||
| Consolidated real estate fund |
| 352 |
|
|
| 29 |
|
|
| 323 |
| Consolidated joint ventures |
| (5,641 | ) |
|
| (3,425 | ) |
|
| (2,216 | ) | ||||||||
| Operating Partnership |
| 29 |
|
|
| 1,584 |
|
|
| (1,555 | ) | Consolidated real estate related funds |
| (823 | ) |
|
| 1,016 |
|
|
| (1,839 | ) | ||||||||
Net loss attributable to common stockholders | $ | (360 | ) |
| $ | (15,943 | ) |
| $ | 15,583 |
| |||||||||||||||||||||
| Operating Partnership |
| (121 | ) |
|
| (342 | ) |
|
| 221 |
| ||||||||||||||||||||
Net income attributable to common stockholders | Net income attributable to common stockholders | $ | 1,729 |
|
| $ | 3,371 |
|
| $ | (1,642 | ) |
3733
Revenues
Our revenues, which consist of rental revenue and fee and other income, were $185,517,000$188,474,000 for the three months ended June 30, 2022,March 31, 2023, compared to $182,269,000$183,685,000 for the three months ended June 30, 2021,March 31, 2022, an increase of $3,248,000.$4,789,000. Below are the details of the increase (decrease)or decrease by segment.
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
|
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
| ||||||||
Rental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Same store operations |
| $ | 7,650 |
|
| $ | 8,177 |
| (1) | $ | (527 | ) |
| $ | - |
|
|
| $ | 13,374 |
|
| $ | 3,097 |
| (1) | $ | 10,277 |
| (1) | $ | - |
|
|
Other, net |
|
| (5,035 | ) |
|
| (471 | ) |
|
| (4,564 | ) | (2) |
| - |
|
|
|
| (1,583 | ) |
|
| (1,771 | ) | (2) |
| - |
|
|
| 188 |
|
|
Increase (decrease) in rental revenue |
| $ | 2,615 |
|
| $ | 7,706 |
|
| $ | (5,091 | ) |
| $ | - |
|
| |||||||||||||||||
Increase in rental revenue |
| $ | 11,791 |
|
| $ | 1,326 |
|
| $ | 10,277 |
|
| $ | 188 |
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Fee and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Asset management |
| $ | (322 | ) |
| $ | - |
|
| $ | - |
|
| $ | (322 | ) |
|
| $ | (710 | ) |
| $ | - |
|
| $ | - |
|
| $ | (710 | ) |
|
Property management |
|
| 18 |
|
|
| - |
|
|
| - |
|
|
| 18 |
|
|
|
| (357 | ) |
|
| - |
|
|
| - |
|
|
| (357 | ) |
|
Acquisition, disposition, leasing and other |
|
| 77 |
|
|
| - |
|
|
| - |
|
|
| 77 |
|
|
|
| (6,364 | ) |
|
| - |
|
|
| - |
|
|
| (6,364 | ) | (3) |
Decrease in fee income |
|
| (227 | ) |
|
| - |
|
|
| - |
|
|
| (227 | ) |
|
|
| (7,431 | ) |
|
| - |
|
|
| - |
|
|
| (7,431 | ) |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Same store operations |
|
| 860 |
|
|
| 403 |
|
|
| 459 |
|
|
| (2 | ) |
|
|
| 429 |
|
|
| 495 |
|
|
| (64 | ) |
|
| (2 | ) |
|
Increase (decrease) in other income |
|
| 860 |
|
|
| 403 |
|
|
| 459 |
|
|
| (2 | ) |
|
|
| 429 |
|
|
| 495 |
|
|
| (64 | ) |
|
| (2 | ) |
|
Increase (decrease) in fee and other income |
| $ | 633 |
|
| $ | 403 |
|
| $ | 459 |
|
| $ | (229 | ) |
| |||||||||||||||||
(Decrease) increase in fee and other income |
| $ | (7,002 | ) |
| $ | 495 |
|
| $ | (64 | ) |
| $ | (7,433 | ) |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total increase (decrease) in revenues |
| $ | 3,248 |
|
| $ | 8,109 |
|
| $ | (4,632 | ) |
| $ | (229 | ) |
|
| $ | 4,789 |
|
| $ | 1,821 |
|
| $ | 10,213 |
|
| $ | (7,245 | ) |
|
38
Expenses
Our expenses, which consist of operating, depreciation and amortization, general and administrative and transaction related costs, were $142,077,000 for the three months ended June 30, 2022, compared to $142,550,000 for the three months ended June 30, 2021, a decrease of $473,000. Below are the details of the (decrease) increase by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
| |||||
Operating |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same store operations |
| $ | 3,859 |
|
| $ | 2,346 |
|
| $ | 1,513 |
|
| $ | - |
|
| |
Other, net |
|
| (117 | ) |
|
| - |
|
|
| - |
|
|
| (117 | ) |
| |
Increase (decrease) in operating |
| $ | 3,742 |
|
| $ | 2,346 |
|
| $ | 1,513 |
|
| $ | (117 | ) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operations |
| $ | (2,527 | ) |
| $ | 382 |
|
| $ | (2,861 | ) | (1) | $ | (48 | ) |
| |
(Decrease) increase in depreciation and amortization |
| $ | (2,527 | ) |
| $ | 382 |
|
| $ | (2,861 | ) |
| $ | (48 | ) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Mark-to-market of investments |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
in our deferred compensation plan |
| $ | (673 | ) |
| $ | - |
|
| $ | - |
|
| $ | (673 | ) | (2) | |
Operations |
|
| (1,039 | ) |
|
| - |
|
|
| - |
|
|
| (1,039 | ) |
| |
Decrease in general and administrative |
| $ | (1,712 | ) |
| $ | - |
|
| $ | - |
|
| $ | (1,712 | ) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Increase in transaction related costs |
| $ | 24 |
|
| $ | - |
|
| $ | - |
|
| $ | 24 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total (decrease) increase in expenses |
| $ | (473 | ) |
| $ | 2,728 |
|
| $ | (1,348 | ) |
| $ | (1,853 | ) |
|
39
Loss from Unconsolidated Joint Ventures
Loss from unconsolidated joint ventures was $4,416,000 for the three months ended June 30, 2022, compared to $15,717,000 in the three months ended June 30, 2021, a decrease in loss of $11,301,000. This decrease resulted from:
(Amounts in thousands) |
|
|
|
| |
712 Fifth Avenue |
| $ | 11,128 |
| (1) |
Other, net |
|
| 173 |
|
|
Total decrease in loss |
| $ | 11,301 |
|
|
Income from Unconsolidated Real Estate Funds
Income from unconsolidated real estate funds was $155,000 for the three months ended June 30, 2022, compared to $148,000 for the three months ended June 30, 2021, an increase in income of $7,000.
Interest and Other Income, net
Interest and other income was $796,000 for the three months ended June 30, 2022, compared to $1,070,000 for the three months ended June 30, 2021, a decrease in income of $274,000. This decrease resulted from:
(Amounts in thousands) |
|
|
|
| |
Mark-to-market of investments in our deferred compensation plan in 2021 (1) |
| $ | (673 | ) |
|
Other, net (primarily higher yields on short-term investments) |
|
| 399 |
|
|
Total decrease in income |
| $ | (274 | ) |
|
Interest and Debt Expense
Interest and debt expense was $35,578,000 for the three months ended June 30, 2022, compared to $34,914,000 for the three months ended June 30, 2021, an increase of $664,000. This increase resulted primarily from higher interest on variable rate debt due to an increase in average LIBOR rates in the current year's three months compared to prior year's three months, partially offset by lower amortization of deferred financing costs in connection with the refinancing of 1301 Avenue of the Americas in July 2021.
Income Tax Expense
Income tax expense was $359,000 for the three months ended June 30, 2022, compared to $434,000 for the three months ended June 30, 2021, a decrease of $75,000.
40
Net Income Attributable to Noncontrolling Interests in Consolidated Joint Ventures
Net income attributable to noncontrolling interests in consolidated joint ventures was $4,779,000 for the three months ended June 30, 2022, compared to $7,428,000 for the three months ended June 30, 2021, a decrease in income allocated to noncontrolling interests of $2,649,000. This decrease in income resulted from:
(Amounts in thousands) |
|
|
|
| |
Lower income attributable to 300 Mission Street ($1,096 of income in 2022, |
| $ | (3,249 | ) | (1) |
Other, net |
|
| 600 |
|
|
Total decrease in income attributable to noncontrolling interests |
| $ | (2,649 | ) |
|
Net Loss Attributable to Noncontrolling Interests in Consolidated Real Estate Fund
Net loss attributable to noncontrolling interests in consolidated real estate fund was $352,000 for the three months ended June 30, 2022, compared to $29,000 for the three months ended June 30, 2021, an increase in loss allocated to noncontrolling interest of $323,000. This increase resulted primarily from a lower loss in the prior year’s three months due to the capitalization of expenses at One Steuart Lane (which was under development last year), partially offset by gains on sale of residential condominium units at One Steuart Lane in the current year’s three months.
Net Loss Attributable to Noncontrolling Interests in Operating Partnership
Net loss attributable to noncontrolling interests in the Operating Partnership was $29,000 for the three months ended June 30, 2022, compared to net loss attributable to noncontrolling interests of $1,584,000 for the three months ended June 30, 2021, a decrease in loss allocated to noncontrolling interests of $1,555,000. This decrease in loss resulted from lower net loss subject to allocation to the unitholders of the Operating Partnership for the three months ended June 30, 2022.
41
Results of Operations - Six Months Ended June 30, 2022 and 2021
The following pages summarize our consolidated results of operations for the six months ended June 30, 2022 and 2021.
|
|
|
|
|
| For the Six Months Ended June 30, |
|
|
|
| ||||||
(Amounts in thousands) | 2022 |
|
| 2021 |
|
| Change |
| ||||||||
Revenues: |
|
|
|
|
|
|
|
| ||||||||
| Rental revenue | $ | 347,165 |
|
| $ | 347,774 |
|
| $ | (609 | ) | ||||
| Fee and other income |
| 22,037 |
|
|
| 15,661 |
|
|
| 6,376 |
| ||||
|
| Total revenues |
| 369,202 |
|
|
| 363,435 |
|
|
| 5,767 |
| |||
Expenses: |
|
|
|
|
|
|
|
| ||||||||
| Operating |
| 134,475 |
|
|
| 130,690 |
|
|
| 3,785 |
| ||||
| Depreciation and amortization |
| 113,022 |
|
|
| 118,230 |
|
|
| (5,208 | ) | ||||
| General and administrative |
| 32,351 |
|
|
| 32,782 |
|
|
| (431 | ) | ||||
| Transaction related costs |
| 276 |
|
|
| 416 |
|
|
| (140 | ) | ||||
|
| Total expenses |
| 280,124 |
|
|
| 282,118 |
|
|
| (1,994 | ) | |||
Other income (expense): |
|
|
|
|
|
|
|
| ||||||||
| Loss from unconsolidated joint ventures |
| (9,529 | ) |
|
| (21,033 | ) |
|
| 11,504 |
| ||||
| Income from unconsolidated real estate funds |
| 325 |
|
|
| 328 |
|
|
| (3 | ) | ||||
| Interest and other income, net |
| 1,027 |
|
|
| 2,372 |
|
|
| (1,345 | ) | ||||
| Interest and debt expense |
| (69,855 | ) |
|
| (69,653 | ) |
|
| (202 | ) | ||||
Income (loss) from continuing operations, before income taxes |
| 11,046 |
|
|
| (6,669 | ) |
|
| 17,715 |
| |||||
| Income tax expense |
| (886 | ) |
|
| (1,575 | ) |
|
| 689 |
| ||||
Net income (loss) |
| 10,160 |
|
|
| (8,244 | ) |
|
| 18,404 |
| |||||
Less net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
| |||||||||
| Consolidated joint ventures |
| (8,204 | ) |
|
| (13,156 | ) |
|
| 4,952 |
| ||||
| Consolidated real estate fund |
| 1,368 |
|
|
| (56 | ) |
|
| 1,424 |
| ||||
| Operating Partnership |
| (313 | ) |
|
| 1,935 |
|
|
| (2,248 | ) | ||||
Net income (loss) attributable to common stockholders | $ | 3,011 |
|
| $ | (19,521 | ) |
| $ | 22,532 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Revenues
Our revenues, which consist of rental revenue and fee and other income, were $369,202,000 for the six months ended June 30, 2022, compared to $363,435,000 for the six months ended June 30, 2021, an increase of $5,767,000. Below are the details of the increase (decrease) by segment.
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
| ||||
Rental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same store operations |
| $ | 1,737 |
|
| $ | 9,214 |
| (1) | $ | (7,477 | ) | (2) | $ | - |
|
|
Other, net |
|
| (2,346 | ) |
|
| 1,840 |
|
|
| (4,191 | ) | (3) |
| 5 |
|
|
(Decrease) increase in rental revenue |
| $ | (609 | ) |
| $ | 11,054 |
|
| $ | (11,668 | ) |
| $ | 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fee and other income |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fee income |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Asset management |
| $ | (923 | ) |
| $ | - |
|
| $ | - |
|
| $ | (923 | ) |
|
Property management |
|
| 41 |
|
|
| - |
|
|
| - |
|
|
| 41 |
|
|
Acquisition, disposition, leasing and other |
|
| 5,973 |
|
|
| - |
|
|
| - |
|
|
| 5,973 |
| (4) |
Increase in fee income |
|
| 5,091 |
|
|
| - |
|
|
| - |
|
|
| 5,091 |
|
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same store operations |
|
| 1,285 |
|
|
| 623 |
|
|
| 653 |
|
|
| 9 |
|
|
Increase in other income |
|
| 1,285 |
|
|
| 623 |
|
|
| 653 |
|
|
| 9 |
|
|
Increase in fee and other income |
| $ | 6,376 |
|
| $ | 623 |
|
| $ | 653 |
|
| $ | 5,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total increase (decrease) in revenues |
| $ | 5,767 |
|
| $ | 11,677 |
|
| $ | (11,015 | ) |
| $ | 5,105 |
|
|
43
34
Expenses
Our expenses, which consist of operating, depreciation and amortization, general and administrative and transaction related costs, were $280,124,000$143,948,000 for the sixthree months ended June 30, 2022,March 31, 2023, compared to $282,118,000$138,047,000 for the sixthree months ended June 30, 2021, a decreaseMarch 31, 2022, an increase of $1,994,000.$5,901,000. Below are the details of the (decrease) increase or decrease by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
| |||||
Operating |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same store operations |
| $ | 4,286 |
|
| $ | 1,310 |
| (1) | $ | 2,976 |
| (1) | $ | - |
|
| |
Other, net |
|
| (638 | ) |
|
| - |
|
|
| - |
|
|
| (638 | ) |
| |
Increase (decrease) in operating |
| $ | 3,648 |
|
| $ | 1,310 |
|
| $ | 2,976 |
|
| $ | (638 | ) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operations |
| $ | 3,264 |
|
| $ | 1,554 |
|
| $ | 1,417 |
|
| $ | 293 |
|
| |
Increase in depreciation and amortization | $ | 3,264 |
|
| $ | 1,554 |
|
| $ | 1,417 |
|
| $ | 293 |
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operations |
| $ | (1,022 | ) |
| $ | - |
|
| $ | - |
|
| $ | (1,022 | ) |
| |
Decrease in general and administrative |
| $ | (1,022 | ) |
| $ | - |
|
| $ | - |
|
| $ | (1,022 | ) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Increase in transaction related costs |
| $ | 11 |
|
| $ | - |
|
| $ | - |
|
| $ | 11 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total increase (decrease) in expenses |
| $ | 5,901 |
|
| $ | 2,864 |
|
| $ | 4,393 |
|
| $ | (1,356 | ) |
|
(Amounts in thousands) |
| Total |
|
| New York |
|
| San Francisco |
|
| Other |
|
| ||||
Operating |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same store operations |
| $ | 3,400 |
|
| $ | 1,533 |
|
| $ | 1,867 |
|
| $ | - |
|
|
Other, net |
|
| 385 |
|
|
| - |
|
|
| - |
|
|
| 385 |
|
|
Increase in operating |
| $ | 3,785 |
|
| $ | 1,533 |
|
| $ | 1,867 |
|
| $ | 385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operations |
| $ | (5,208 | ) |
| $ | (1,289 | ) |
| $ | (3,848 | ) | (1) | $ | (71 | ) |
|
Decrease in depreciation |
| $ | (5,208 | ) |
| $ | (1,289 | ) |
| $ | (3,848 | ) |
| $ | (71 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mark-to-market of investments |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
in our deferred compensation plan |
| $ | (1,585 | ) |
| $ | - |
|
| $ | - |
|
| $ | (1,585 | ) | (2) |
Operations |
|
| 1,154 |
|
|
| - |
|
|
| - |
|
|
| 1,154 |
|
|
Decrease in general and administrative |
| $ | (431 | ) |
| $ | - |
|
| $ | - |
|
| $ | (431 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Decrease in transaction related costs |
| $ | (140 | ) |
| $ | - |
|
| $ | - |
|
| $ | (140 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total (decrease) increase in expenses |
| $ | (1,994 | ) |
| $ | 244 |
|
| $ | (1,981 | ) |
| $ | (257 | ) |
|
Income from Income from real estate related fund investments (Loss) Income from Unconsolidated Real Estate Related Funds Loss from unconsolidated real estate related funds was $178,000 for the Fund X. Loss from Unconsolidated Joint Ventures Loss from unconsolidated joint ventures was 712 Fifth Avenue $ 11,128 (1) Other, net 376 Total decrease in loss $ 11,504 (Amounts in thousands) Higher loss on One Steuart Lane ($2,416 in 2023, compared to $1,269 $ (1,147 ) (1) Other, net 498 Total increase in loss $ (649 ) 35 Interest and Other Income, net Interest and other income was (Amounts in thousands) Mark-to-market of investments in our deferred compensation plan in 2021 (1) $ (1,585 ) Other, net (primarily higher yields on short-term investments) 240 Total decrease in income $ (1,345 ) Interest and Debt Expense Interest and debt expense was Income Tax Expense Income tax expense was Net Income Attributable to Noncontrolling Interests in Consolidated Joint Ventures Net income attributable to noncontrolling interests in consolidated joint ventures was (Amounts in thousands) Lower income attributable to 300 Mission Street ($1,710 of income in 2022, $ (4,872 ) (1) Other, net (80 ) Total decrease in income attributable to noncontrolling interests $ (4,952 ) Net (Income) Loss Attributable to Noncontrolling Interests in Consolidated Real Estate Related Funds Net income attributable to noncontrolling interest in consolidated real estate related funds was $823,000 for the three months ended March 31, 2023, compared to a net loss attributable to noncontrollling interests of $1,016,000 for the three months ended March 31, 2022, an increase in income of $1,839,000. This increase was primarily due to income from Fund X that was attributable to the noncontrolling interests resulting from the consolidation of Fund X effective December 12, 2022. Net Income Attributable to Noncontrolling Interests in Operating Partnership Net income attributable to noncontrolling interests in the Operating Partnership was 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 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 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 Off Balance Sheet Arrangements As of 37 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. 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, including claims arising specifically from the The terms of our 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 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 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. 38 Cash Flows Cash and cash equivalents and restricted cash were For the Six Months Ended June 30, For the Three Months Ended March 31, (Amounts in thousands) (Amounts in thousands) 2022 2021 (Amounts in thousands) 2023 2022 Net cash provided by (used in): Net cash provided by (used in): Net cash provided by (used in): Operating activities Operating activities $ 131,102 $ 134,458 Operating activities $ 57,968 $ 58,674 Investing activities Investing activities (68,101 ) (62,045 ) Investing activities (18,883 ) (88,158 ) Financing activities Financing activities (60,800 ) (29,896 ) Financing activities 22,073 (31,856 ) Operating Activities Three months ended March 31, 2022 – We generated $58,674,000 of cash from operating activities for the three months ended March 31, 2022, primarily from (i) $76,522,000 of net income (before $70,400,000 of non-cash adjustments) and (ii) $168,000 of distributions from unconsolidated joint ventures and real estate related funds, partially offset by (iii) $18,016,000 of net changes in operating assets and liabilities. Non-cash adjustments of $70,400,000 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 Three months ended March 31, 2022 – We used $88,158,000 of cash for investing activities for the three months ended March 31, 2022, primarily for (i) Financing Activities 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 For the Three Months Ended June 30, 2022 For the Three Months Ended March 31, 2023 (Amounts in thousands) Total New York San Francisco Other Total New York San Francisco Other Reconciliation of net income (loss) to NOI and Cash NOI: Net income (loss) $ 4,038 $ 7,427 $ 11,069 $ (14,458 ) $ 8,314 $ 5,838 $ 13,087 $ (10,611 ) Add (subtract) adjustments to arrive at NOI and Cash NOI: Depreciation and amortization 57,398 38,671 17,799 928 58,888 39,167 18,482 1,239 General and administrative 16,706 - - 16,706 14,623 - - 14,623 Interest and debt expense 35,578 22,136 12,684 758 36,459 23,122 12,582 755 Income tax expense 359 1 - 358 288 - 23 265 Income from real estate related fund investments (3,550 ) - - (3,550 ) NOI from unconsolidated joint ventures (excluding 11,585 3,528 7,971 86 10,381 3,363 7,019 (1 ) Loss (income) from unconsolidated joint ventures 4,416 (33 ) 3,960 489 Loss from unconsolidated joint ventures 5,762 20 3,294 2,448 Fee income (5,974 ) - - (5,974 ) (4,557 ) - - (4,557 ) Interest and other income, net (796 ) (49 ) (51 ) (696 ) (2,925 ) (442 ) (434 ) (2,049 ) Other, net 4 - - 4 306 - - 306 NOI 123,314 71,681 53,432 (1,799 ) 123,989 71,068 54,053 (1,132 ) Less NOI attributable to noncontrolling interests in: Consolidated joint ventures (21,796 ) (2,616 ) (19,180 ) - (22,712 ) (2,623 ) (20,089 ) - Paramount's share of NOI $ 101,518 $ 69,065 $ 34,252 $ (1,799 ) $ 101,277 $ 68,445 $ 33,964 $ (1,132 ) NOI $ 123,314 $ 71,681 $ 53,432 $ (1,799 ) $ 123,989 $ 71,068 $ 54,053 $ (1,132 ) Less: Straight-line rent adjustments (including our share of unconsolidated joint ventures) (5,977 ) (1,180 ) (4,767 ) (30 ) (7,691 ) (3,024 ) (4,989 ) 322 Amortization of above and below-market leases, net (1,128 ) 422 (1,550 ) - (1,838 ) (320 ) (1,518 ) - Cash NOI 116,209 70,923 47,115 (1,829 ) 114,460 67,724 47,546 (810 ) Less Cash NOI attributable to noncontrolling interests in: Consolidated joint ventures (20,693 ) (2,769 ) (17,924 ) - (19,845 ) (2,778 ) (17,067 ) - Paramount's share of Cash NOI $ 95,516 $ 68,154 $ 29,191 $ (1,829 ) $ 94,615 $ 64,946 $ 30,479 $ (810 ) For the Three Months Ended June 30, 2021 For the Three Months Ended March 31, 2022 (Amounts in thousands) Total New York San Francisco Other Total New York San Francisco Other Reconciliation of net (loss) income to NOI and Cash NOI: Net (loss) income $ (10,128 ) $ (8,357 ) $ 13,965 $ (15,736 ) Reconciliation of net income (loss) to NOI and Cash NOI: Net income (loss) $ 6,122 $ 8,604 $ 6,360 $ (8,842 ) Add (subtract) adjustments to arrive at NOI and Cash NOI: Depreciation and amortization 59,925 38,289 20,660 976 55,624 37,613 17,065 946 General and administrative 18,418 - - 18,418 15,645 - - 15,645 Interest and debt expense 34,914 21,339 12,540 1,035 34,277 20,937 12,576 764 Income tax expense 434 5 - 429 527 1 4 522 NOI from unconsolidated joint ventures 10,557 2,749 7,852 (44 ) NOI from unconsolidated joint ventures (excluding 11,234 2,818 8,354 62 Loss from unconsolidated joint ventures 15,717 11,111 4,460 146 5,113 36 3,820 1,257 Fee income (6,201 ) - - (6,201 ) (11,988 ) - - (11,988 ) Interest and other (income) loss, net (1,070 ) 3 (18 ) (1,055 ) (231 ) 3 (28 ) (206 ) Other, net (13 ) - - (13 ) (53 ) - - (53 ) NOI 122,553 65,139 59,459 (2,045 ) 116,270 70,012 48,151 (1,893 ) Less NOI attributable to noncontrolling interests in: Consolidated joint ventures (26,233 ) (2,519 ) (23,714 ) - (20,322 ) (2,809 ) (17,513 ) - Consolidated real estate fund 121 - - 121 Paramount's share of NOI $ 96,441 $ 62,620 $ 35,745 $ (1,924 ) $ 95,948 $ 67,203 $ 30,638 $ (1,893 ) NOI $ 122,553 $ 65,139 $ 59,459 $ (2,045 ) $ 116,270 $ 70,012 $ 48,151 $ (1,893 ) Less: Straight-line rent adjustments (including our share of unconsolidated joint ventures) (2,958 ) 158 (3,086 ) (30 ) 1,658 549 1,019 90 Amortization of above and below-market leases, net (1,662 ) 371 (2,033 ) - (1,197 ) 467 (1,664 ) - Cash NOI 117,933 65,668 54,340 (2,075 ) 116,731 71,028 47,506 (1,803 ) Less Cash NOI attributable to noncontrolling interests in: Consolidated joint ventures (24,198 ) (2,479 ) (21,719 ) - (20,513 ) (2,915 ) (17,598 ) - Consolidated real estate fund 121 - - 121 Paramount's share of Cash NOI $ 93,856 $ 63,189 $ 32,621 $ (1,954 ) $ 96,218 $ 68,113 $ 29,908 $ (1,803 ) For the Six Months Ended June 30, 2022 (Amounts in thousands) Total New York San Francisco Other Reconciliation of net income (loss) to NOI and Cash NOI: Net income (loss) $ 10,160 $ 16,031 $ 17,429 $ (23,300 ) Add (subtract) adjustments to arrive at NOI and Cash NOI: Depreciation and amortization 113,022 76,284 34,864 1,874 General and administrative 32,351 - - 32,351 Interest and debt expense 69,855 43,073 25,260 1,522 Income tax expense 886 2 4 880 NOI from unconsolidated joint ventures (excluding 22,819 6,346 16,325 148 Loss from unconsolidated joint ventures 9,529 3 7,780 1,746 Fee income (17,962 ) - - (17,962 ) Interest and other income, net (1,027 ) (46 ) (79 ) (902 ) Other, net (49 ) - - (49 ) NOI 239,584 141,693 101,583 (3,692 ) Less NOI attributable to noncontrolling interests in: Consolidated joint ventures (42,118 ) (5,425 ) (36,693 ) - Paramount's share of NOI $ 197,466 $ 136,268 $ 64,890 $ (3,692 ) NOI $ 239,584 $ 141,693 $ 101,583 $ (3,692 ) Less: Straight-line rent adjustments (including our share of unconsolidated joint ventures) (4,319 ) (631 ) (3,748 ) 60 Amortization of above and below-market leases, net (2,325 ) 889 (3,214 ) - Cash NOI 232,940 141,951 94,621 (3,632 ) Less Cash NOI attributable to noncontrolling interests in: Consolidated joint ventures (41,206 ) (5,684 ) (35,522 ) - Paramount's share of Cash NOI $ 191,734 $ 136,267 $ 59,099 $ (3,632 ) For the Six Months Ended June 30, 2021 (Amounts in thousands) Total New York San Francisco Other Reconciliation of net (loss) income to NOI and Cash NOI: Net (loss) income $ (8,244 ) $ (6,084 ) $ 24,885 $ (27,045 ) Add (subtract) adjustments to arrive at NOI and Cash NOI: Depreciation and amortization 118,230 77,573 38,712 1,945 General and administrative 32,782 - - 32,782 Interest and debt expense 69,653 42,598 24,893 2,162 Income tax expense 1,575 5 4 1,566 NOI from unconsolidated joint ventures 20,883 5,570 15,389 (76 ) Loss from unconsolidated joint ventures 21,033 11,094 9,702 237 Fee income (12,871 ) - - (12,871 ) Interest and other (income) loss, net (2,372 ) 17 (55 ) (2,334 ) Other, net 88 - - 88 NOI 240,757 130,773 113,530 (3,546 ) Less NOI attributable to noncontrolling interests in: Consolidated joint ventures (48,958 ) (5,112 ) (43,846 ) - Consolidated real estate fund 206 - - 206 Paramount's share of NOI $ 192,005 $ 125,661 $ 69,684 $ (3,340 ) NOI $ 240,757 $ 130,773 $ 113,530 $ (3,546 ) Less: Straight-line rent adjustments (including our share of unconsolidated joint ventures) (11,060 ) (1,637 ) (9,483 ) 60 Amortization of above and below-market leases, net (3,465 ) 638 (4,103 ) - Cash NOI 226,232 129,774 99,944 (3,486 ) Less Cash NOI attributable to noncontrolling interests in: Consolidated joint ventures (43,139 ) (4,964 ) (38,175 ) - Consolidated real estate fund 206 - - 206 Paramount's share of Cash NOI $ 183,299 $ 124,810 $ 61,769 $ (3,280 ) 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 For the Three Months Ended June 30, 2022 (Amounts in thousands) Total New York San Francisco Other Paramount's share of NOI for the three months ended June 30, 2022 (1) $ 101,518 $ 69,065 $ 34,252 $ (1,799 ) Acquisitions / Redevelopment (164 ) (164 ) (2) - - Lease termination income (157 ) (157 ) - - Other, net 1,578 - (221 ) 1,799 Paramount's share of Same Store NOI for the three months ended June 30, 2022 $ 102,775 $ 68,744 $ 34,031 $ - For the Three Months Ended June 30, 2021 (Amounts in thousands) Total New York San Francisco Other Paramount's share of NOI for the three months ended June 30, 2021 (1) $ 96,441 $ 62,620 $ 35,745 $ (1,924 ) Acquisitions / Redevelopment (231 ) (231 ) (3) - - Lease termination income (1,614 ) (44 ) (1,570 ) - Other, net (294 ) (732 ) (1,486 ) 1,924 Paramount's share of Same Store NOI for the three months ended June 30, 2021 $ 94,302 $ 61,613 $ 32,689 $ - Increase in Same Store NOI $ 8,473 $ 7,131 $ 1,342 $ - % Increase 9.0 % 11.6 % 4.1 % For the Three Months Ended March 31, 2023 (Amounts in thousands) Total New York San Francisco Other Paramount's share of NOI for the three months ended March 31, 2023 (1) $ 101,277 $ 68,445 $ 33,964 $ (1,132 ) Acquisitions / Redevelopment and other, net 1,079 (53 ) (2) - 1,132 Paramount's share of Same Store NOI for the three months ended March 31, 2023 $ 102,356 $ 68,392 $ 33,964 $ - For the Three Months Ended March 31, 2022 (Amounts in thousands) Total New York San Francisco Other Paramount's share of NOI for the three months ended March 31, 2022 (1) $ 95,948 $ 67,203 $ 30,638 $ (1,893 ) Lease termination income (1,718 ) (1,718 ) - - Acquisitions / Redevelopment and other, net 1,314 (579 ) (2) - 1,893 Paramount's share of Same Store NOI for the three months ended March 31, 2022 $ 95,544 $ 64,906 $ 30,638 $ - Increase in Same Store NOI $ 6,812 $ 3,486 $ 3,326 $ - % Increase 7.1 % 5.4 % 10.9 % For the Three Months Ended June 30, 2022 For the Three Months Ended March 31, 2023 (Amounts in thousands) Total New York San Francisco Other Total New York San Francisco Other Paramount's share of Cash NOI for the three months ended June 30, 2022 (1) $ 95,516 $ 68,154 $ 29,191 $ (1,829 ) Acquisitions / Redevelopment (176 ) (176 ) (2) - - Lease termination income (157 ) (157 ) - - Other, net 1,608 - (221 ) 1,829 ended March 31, 2023 (1) $ 94,615 $ 64,946 $ 30,479 $ (810 ) Acquisitions / Redevelopment and other, net 753 (57 ) (2) - 810 Paramount's share of Same Store Cash NOI for the three months ended June 30, 2022 $ 96,791 $ 67,821 $ 28,970 $ - three months ended March 31, 2023 $ 95,368 $ 64,889 $ 30,479 $ - For the Three Months Ended June 30, 2021 For the Three Months Ended March 31, 2022 (Amounts in thousands) Total New York San Francisco Other Total New York San Francisco Other Paramount's share of Cash NOI for the three months ended June 30, 2021 (1) $ 93,856 $ 63,189 $ 32,621 $ (1,954 ) Acquisitions / Redevelopment (287 ) (287 ) (3) - - ended March 31, 2022 (1) $ 96,218 $ 68,113 $ 29,908 $ (1,803 ) Lease termination income (1,614 ) (44 ) (1,570 ) - (1,718 ) (1,718 ) - - Other, net (271 ) (732 ) (1,493 ) 1,954 Acquisitions / Redevelopment and other, net 749 (1,054 ) (2) - 1,803 Paramount's share of Same Store Cash NOI for the three months ended June 30, 2021 $ 91,684 $ 62,126 $ 29,558 $ - three months ended March 31, 2022 $ 95,249 $ 65,341 $ 29,908 $ - Increase (decrease) in Same Store Cash NOI $ 5,107 $ 5,695 $ (588 ) $ - $ 119 $ (452 ) $ 571 $ - % Increase (decrease) 5.6 % 9.2 % (2.0 %) 0.1 % (0.7 %) 1.9 % For the Six Months Ended June 30, 2022 (Amounts in thousands) Total New York San Francisco Other Paramount's share of NOI for the six months ended June 30, 2022 (1) $ 197,466 $ 136,268 $ 64,890 $ (3,692 ) Acquisitions / Redevelopment (211 ) (211 ) (2) - - Lease termination income (1,875 ) (1,875 ) - - Other, net 3,577 106 (221 ) 3,692 Paramount's share of Same Store NOI for the six months ended June 30, 2022 $ 198,957 $ 134,288 $ 64,669 $ - For the Six Months Ended June 30, 2021 (Amounts in thousands) Total New York San Francisco Other Paramount's share of NOI for the six months ended June 30, 2021 (1) $ 192,005 $ 125,661 $ 69,684 $ (3,340 ) Acquisitions / Redevelopment (231 ) (231 ) (3) - - Lease termination income (1,712 ) (128 ) (1,584 ) - Other, net 3,044 (103 ) (193 ) 3,340 Paramount's share of Same Store NOI for the six months ended June 30, 2021 $ 193,106 $ 125,199 $ 67,907 $ - Increase (decrease) in Same Store NOI $ 5,851 $ 9,089 $ (3,238 ) $ - % Increase (decrease) 3.0 % 7.3 % (4.8 %) For the Six Months Ended June 30, 2022 (Amounts in thousands) Total New York San Francisco Other Paramount's share of Cash NOI for the six months ended June 30, 2022 (1) $ 191,734 $ 136,267 $ 59,099 $ (3,632 ) Acquisitions / Redevelopment (242 ) (242 ) (2) - - Lease termination income (1,875 ) (1,875 ) - - Other, net 3,211 (200 ) (221 ) 3,632 Paramount's share of Same Store Cash NOI for the six months ended June 30, 2022 $ 192,828 $ 133,950 $ 58,878 $ - For the Six Months Ended June 30, 2021 (Amounts in thousands) Total New York San Francisco Other Paramount's share of Cash NOI for the six months ended June 30, 2021 (1) $ 183,299 $ 124,810 $ 61,769 $ (3,280 ) Acquisitions / Redevelopment (287 ) (287 ) (3) - - Lease termination income (1,712 ) (128 ) (1,584 ) - Other, net 2,835 (245 ) (200 ) 3,280 Paramount's share of Same Store Cash NOI for the six months ended June 30, 2021 $ 184,135 $ 124,150 $ 59,985 $ - Increase (decrease) in Same Store Cash NOI $ 8,693 $ 9,800 $ (1,107 ) $ - % Increase (decrease) 4.7 % 7.9 % (1.8 %) 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. The following table presents a reconciliation of net income For the Three Months Ended For the Six Months Ended June 30, June 30, For the Three Months Ended March 31, (Amounts in thousands, except share and per share amounts) 2022 2021 2022 2021 2023 2022 Reconciliation of net income (loss) to FFO and Core FFO: Net income (loss) $ 4,038 $ (10,128 ) $ 10,160 $ (8,244 ) Reconciliation of net income to FFO and Core FFO: Net income $ 8,314 $ 6,122 Real estate depreciation and amortization (including our share of unconsolidated joint ventures) 67,235 70,264 133,060 139,405 68,431 65,825 FFO 71,273 60,136 143,220 131,161 76,745 71,947 Less FFO attributable to noncontrolling interests in: Consolidated joint ventures (13,945 ) (18,453 ) (26,460 ) (33,527 ) (15,175 ) (12,515 ) Consolidated real estate fund 346 29 1,355 (56 ) Consolidated real estate related funds (830 ) 1,009 Operating Partnership (4,352 ) (3,769 ) (9,920 ) (8,761 ) (3,961 ) (5,568 ) FFO attributable to common stockholders $ 53,322 $ 37,943 $ 108,195 $ 88,817 $ 56,779 $ 54,873 Per diluted share $ 0.24 $ 0.17 $ 0.49 $ 0.40 $ 0.26 $ 0.25 FFO $ 71,273 $ 60,136 $ 143,220 $ 131,161 $ 76,745 $ 71,947 Non-core items: Adjustments to equity in earnings for contributions to 168 10,492 (415 ) 9,915 Consolidated real estate fund's share of after-tax net gain on (1,022 ) - (1,684 ) - FFO attributable to One Steuart Lane, including after-tax 2,409 1,262 Adjustments to equity in earnings for contributions to (1,322 ) (583 ) Adjustment for realized and unrealized losses from consolidated and 1,335 47 Other, net 1,664 133 3,752 379 128 117 Core FFO 72,083 70,761 144,873 141,455 79,295 72,790 Less Core FFO attributable to noncontrolling interests in: Consolidated joint ventures (13,945 ) (18,453 ) (26,460 ) (33,527 ) (15,175 ) (12,515 ) Consolidated real estate fund (128 ) 29 (287 ) (56 ) Consolidated real estate related funds (4,027 ) (159 ) Operating Partnership (4,377 ) (4,729 ) (9,915 ) (9,692 ) (3,919 ) (5,538 ) Core FFO attributable to common stockholders $ 53,633 $ 47,608 $ 108,211 $ 98,180 $ 56,174 $ 54,578 Per diluted share $ 0.24 $ 0.22 $ 0.49 $ 0.45 $ 0.26 $ 0.25 Reconciliation of weighted average shares outstanding: Weighted average shares outstanding 222,971,886 218,696,284 220,888,664 218,681,228 216,563,108 218,782,296 Effect of dilutive securities 26,594 51,117 41,355 50,563 53,912 57,798 Denominator for FFO and Core FFO per diluted share 222,998,480 218,747,401 220,930,019 218,731,791 216,617,020 218,840,094 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 Property Property Rate 2022 2023 2024 2025 2026 Thereafter Total Fair Value Property Rate 2023 2024 2025 2026 2027 Thereafter Total Fair Value (Amounts in thousands) (Amounts in thousands) (Amounts in thousands) Fixed Rate Debt: Fixed Rate Debt: Fixed Rate Debt: 300 Mission Street 3.65% $ - $ 273,000 $ - $ - $ - $ - $ 273,000 $ 267,783 300 Mission Street (1) 3.65% $ 273,000 $ - $ - $ - $ - $ - $ 273,000 $ 267,965 One Market Plaza 4.03% - - 975,000 - - - 975,000 960,383 One Market Plaza 4.03% - 975,000 - - - - 975,000 950,751 31 West 52nd Street 3.80% - - - - 500,000 - 500,000 476,130 31 West 52nd Street 3.80% - - - 500,000 - - 500,000 462,966 1301 Avenue of the Americas (1) 2.46% - - - - 500,000 - 500,000 498,309 1301 Avenue of the Americas (2) 2.46% - - - 500,000 - - 500,000 499,438 1633 Broadway 2.99% - - - - - 1,250,000 1,250,000 1,124,967 1633 Broadway 2.99% - - - - - 1,250,000 1,250,000 1,044,779 Total Fixed Rate Debt Total Fixed Rate Debt 3.37% $ - $ 273,000 $ 975,000 $ - $ 1,000,000 $ 1,250,000 $ 3,498,000 $ 3,327,572 Total Fixed Rate Debt 3.37% $ 273,000 $ 975,000 $ - $ 1,000,000 $ - $ 1,250,000 $ 3,498,000 $ 3,225,899 Variable Rate Debt: Variable Rate Debt: Variable Rate Debt: 1301 Avenue of the Americas (2) 4.68% $ - $ - $ - $ - $ 360,000 $ - $ 360,000 $ 358,782 1301 Avenue of the Americas (3) 5.56% $ - $ - $ - $ 360,000 $ - $ - $ 360,000 $ 359,595 Revolving Credit Facility n/a - - - - - - - - Revolving Credit Facility n/a - - - - - - - - Total Variable Rate Debt Total Variable Rate Debt 4.68% $ - $ - $ - $ - $ 360,000 $ - $ 360,000 $ 358,782 Total Variable Rate Debt 5.56% $ - $ - $ - $ 360,000 $ - $ - $ 360,000 $ 359,595 Total Consolidated Debt Total Consolidated Debt 3.49% $ - $ 273,000 $ 975,000 $ - $ 1,360,000 $ 1,250,000 $ 3,858,000 $ 3,686,354 Total Consolidated Debt 3.58% $ 273,000 $ 975,000 $ - $ 1,360,000 $ - $ 1,250,000 $ 3,858,000 $ 3,585,494 In addition to the above, our unconsolidated joint ventures had $1.74 billion of outstanding indebtedness as of The tables below provide additional details on our interest rate swaps and interest rate caps as of Notional Effective Maturity Benchmark Strike Fair Value as of Notional Effective Maturity Benchmark Strike Fair Value as of Property Amount Date Date Rate Rate June 30, 2022 December 31, 2021 Amount Date Date Rate Rate March 31, 2023 December 31, 2022 (Amounts in thousands) (Amounts in thousands) (Amounts in thousands) 1301 Avenue of the Americas $ 500,000 Jul-2021 Aug-2024 LIBOR 0.46 % $ 26,820 $ 6,691 $ 500,000 Jul-2021 Aug-2024 LIBOR 0.46 % $ 26,610 $ 32,681 Total interest rate swap assets designated as cash flow hedges (included in "other assets") Total interest rate swap assets designated as cash flow hedges (included in "other assets") $ 26,820 $ 6,691 Total interest rate swap assets designated as cash flow hedges (included in "other assets") $ 26,610 $ 32,681 Notional Effective Maturity Benchmark Strike Fair Value as of Notional Effective Maturity Benchmark Strike Fair Value as of Property Amount Date Date Rate Rate June 30, 2022 December 31, 2021 Amount Date Date Rate Rate March 31, 2023 December 31, 2022 (Amounts in thousands) (Amounts in thousands) (Amounts in thousands) 1301 Avenue of the Americas $ 360,000 Jul-2021 Aug-2023 LIBOR 2.00 % $ 4,826 $ 306 $ 360,000 Jul-2021 Aug-2023 LIBOR 2.00 % $ 3,773 $ 6,123 Total interest rate cap assets designated as cash flow hedges (included in "other assets") Total interest rate cap assets designated as cash flow hedges (included in "other assets") $ 4,826 $ 306 Total interest rate cap assets designated as cash flow hedges (included in "other assets") $ 3,773 $ 6,123 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 June 30, 2022 As of December 31, 2021 As of March 31, 2023 As of December 31, 2022 (Amounts in thousands, except per share amount) Balance Weighted Effect of 1% Increase in Base Rates Balance Weighted Balance Weighted Effect of 1% Increase in Base Rates Balance Weighted Paramount's share of consolidated debt: Variable rate $ 360,000 4.68 % $ 3,600 $ 360,000 3.67 % $ 360,000 5.56 % $ 3,600 $ 360,000 5.56 % Fixed rate 2,687,665 3.25 % - 2,687,665 3.25 % Fixed Rate (1) Fixed Rate (1) 2,687,665 3.25 % - 2,687,665 3.25 % $ 3,047,665 3.42 % $ 3,600 $ 3,047,665 3.30 % $ 3,047,665 3.52 % $ 3,600 $ 3,047,665 3.52 % Paramount's share of debt of non-consolidated entities (non-recourse): Variable rate $ 111,238 3.63 % $ 1,112 $ 108,963 3.27 % $ 114,299 6.53 % $ 1,143 $ 113,739 6.12 % Fixed rate 512,476 3.30 % - 503,598 3.30 % 511,025 3.30 % - 511,025 3.30 % $ 623,714 3.36 % $ 1,112 $ 612,561 3.30 % $ 625,324 3.89 % $ 1,143 $ 624,764 3.82 % Noncontrolling interests' share of above Noncontrolling interests' share of above $ (356 ) Noncontrolling interests' share of above $ (309 ) Total change in annual net income $ 4,356 $ 4,434 Per diluted share $ 0.02 $ 0.02 On December 31, 2021, the Financial Conduct Authority (“FCA”) ceased the publication of the one-week and two-month LIBOR rates. The remaining LIBOR rates will continue to be published through June 30, 2023, after which the interest rate for our variable rate debt and derivative instruments, including interest rates for our variable rate debt and derivative instruments of our unconsolidated joint ventures, will be based on an alternative variable rate as specified in the applicable documentation governing such debt or derivative instruments or as otherwise agreed upon. While we expect LIBOR to be available in substantially its current form until at least the end of June 2023, if sufficient banks decline to make ITEM 4. CONTROLS 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 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. 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 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, On May 1, 2023, our tenant, First Republic Bank (“First Republic”), was closed by the California Department of Financial Protection and Innovation, which immediately appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver, and such closing could cause an adverse effect on us, including our results of operations and cash flow. On May 1, 2023, First Republic was closed by the California Department of Financial Protection and Innovation and the FDIC was appointed as receiver. In connection therewith, JPMorgan Chase Bank, National Association (N.A.), Columbus, Ohio acquired all deposit accounts and substantially all the assets and assumed certain of the liabilities of First Republic from the FDIC. While the details of the acquisition of First Republic’s assets and the assumption of First Republic’s liabilities are unclear at this time, Paramount, through a wholly-owned subsidiary, is the landlord under certain lease agreements with First Republic at our One Front Street property in San Francisco. These lease agreements expire over various periods between June 2025 and December 2032. As of March 31, 2023, First Republic leased approximately 460,000 square feet pursuant to these lease agreements and accounts for approximately $43,000,000, or 6.4% of our annualized rents. First Republic remains current on its financial obligations under these lease agreements through May 2023. Although the situation is still developing, if First Republic’s leases are repudiated, or if First Republic or any successor were to default under its leases or fail to renew its leases, our results of operations and cash flow could be adversely affected. 48 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Recent Sales of Unregistered Securities During the three months ended March 31, 2023, we issued an aggregate of 113,288 shares of common stock in exchange for 113,288 common units of our Operating Partnership held by certain limited partners. These shares were issued in reliance on an exemption from registration under Section 4(a)(2) of the Securities Act. We relied on this exemption based upon factual representations received from the limited partners who received the shares of common stock. Recent Purchases of Equity Securities The following table summarizes our purchase of equity securities in the three months ended March 31, 2023. Period (a) (b) (c) (d) January 2023 - $ - - $ 15,000,000 February 2023 34,059 (1) 6.03 - 15,000,000 March 2023 - - - 15,000,000 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. MINE SAFETY DISCLOSURES None. ITEM 5. OTHER INFORMATION None. 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 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 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: By: /s/ Wilbur Paes Chief Operating Officer, Chief Financial Officer and Treasurer Wilbur Paes (duly authorized officer and principal financial officer) Date: By: /s/ Ermelinda Berberi Senior Vice President, Chief Accounting Officer Ermelinda Berberi (duly authorized officer and principal accounting officer)a tenant’s lease termination at 300 Mission Street.(2)Represents the mark-to-market ofin our deferred compensation plan liabilities in the prior year’s six months, which is entirely offset by the change in deferred compensation plan assets that is included in “interest and other income, net”was $3,550,000 for the same period. Inthree months ended March 31, 2023, and represented income attributable to Fund X, which we began consolidating into our consolidated financial statements effective December 2021,12, 2022, and in which we have a 13% ownership interest.deferred compensation planthree months ended March 31, 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 terminated$170,000 for the three months ended March 31, 2022, which represented our share of income from Fund VIII and the net proceeds were distributed to the plan participants.44$9,529,000$5,762,000 for the sixthree months ended June 30, 2022,March 31, 2023, compared to $21,033,000 in$5,113,000 for the sixthree months ended June 30, 2021, a decreaseMarch 31, 2022, an increase in loss of $11,504,000.$649,000. This decreaseincrease in loss resulted from:
in 2022)Primarily due to an $11,750 contributionThe loss in the prior year’s sixthree months toended March 31, 2022 was partially offset by the joint venture that owns 712 Fifth Avenue that was expensed in accordance with GAAP. See Note 3, Investments in Unconsolidated Joint Ventures.gain on sale of residential condominium units at One Steuart Lane.Income from Unconsolidated Real Estate FundsIncome from unconsolidated real estate funds was $325,000 for the six months ended June 30, 2022, compared to $328,000 for the six months ended June 30, 2021, a decrease in income of $3,000.$1,027,000$2,925,000 for the sixthree months ended June 30, 2022,March 31, 2023, compared to $2,372,000$231,000 for the sixthree months ended June 30, 2021, a decreaseMarch 31, 2022, an increase in income of $1,345,000.$2,694,000. This decreaseincrease resulted from:from higher yields on short-term investments in the current year.(1)Represents the mark-to-market of investments in our deferred compensation plan assets in the prior year’s six months, which is entirely offset by the change in deferred compensation plan liabilities that is included in “general and administrative” expenses for the same period. In December 2021, the deferred compensation plan was terminated and the net proceeds were distributed to the plan participants.$69,855,000$36,459,000 for the sixthree months ended June 30, 2022,March 31, 2023, compared to $69,653,000$34,277,000 for the sixthree months ended June 30, 2021,March 31, 2022, an increase of $202,000.$2,182,000. This increase resulted primarily from higher interest on the variable rate portion of our debt at 1301 Avenue of the Americas due to an increase in average LIBOR rates in the current year's sixthree months compared to the prior year's six months, partially offset by lower amortization of deferred financing costs in connection with the refinancing of 1301 Avenue of the Americas in July 2021.year.$886,000$288,000 for the sixthree months ended June 30, 2022,March 31, 2023, compared to $1,575,000$527,000 for the sixthree months ended June 30, 2021,March 31, 2022, a decrease of $689,000.$239,000. This decrease resulted primarily from lower taxable income attributable to our taxable REIT subsidiaries in the current year’s six months.year.45$8,204,000$5,641,000 for the sixthree months ended June 30, 2022,March 31, 2023, compared to $13,156,000$3,425,000 for the sixthree months ended June 30, 2021,March 31, 2022, a decrease$2,216,000 increase in income allocated to noncontrolling interests of $4,952,000. This decrease in income resulted from:
compared to $6,582 in 2021)(1)Primarily due to a decrease in occupancy in the current year's six months and lease termination income in the prior year's six months.Net Loss (Income) Attributable to Noncontrolling Interests in Consolidated Real Estate FundNet loss attributable to noncontrolling interests in consolidated real estate fund was $1,368,000 for the six months ended June 30, 2022, compared to net income attributable to noncontrolling interests in consolidated real estate fund of $56,000 for the six months ended June 30, 2021, an increase in loss allocated to noncontrolling interest of $1,424,000.joint ventures. This increase resulted primarily from a lower loss in the prior year’s six months duehigher net income attributable to the capitalization of expenses at One Steuart Lane (which was under development last year), partially offset by gains on sale of residential condominium units at One Steuart LaneMarket Plaza, resulting from higher average occupancy in the current year’s six months.year.$313,000$121,000 for the sixthree months ended June 30, 2022,March 31, 2023, compared to net loss attributable to noncontrolling interests of $1,935,000$342,000 for the sixthree months ended June 30, 2021, an increaseMarch 31, 2022, a decrease in net income allocated to noncontrolling interests of $2,248,000.$221,000. This increase in incomedecrease resulted from higher(i) lower net income subject to allocation to the unitholders of the Operating Partnership forin the three months ended June 30, 2022.current year and (ii) lower ownership in the Operating Partnership due to unit redemptions.4636June 30, 2022,March 31, 2023, we had $1.28$1.26 billion of liquidity comprised of $506,933,000$451,796,000 of cash and cash equivalents, $24,934,000$59,179,000 of restricted cash and $750,000,000 of borrowing capacity under our revolving credit facility.June 30, 2022,March 31, 2023, our outstanding consolidated debt aggregated $3.86 billion. We had no amounts outstanding under our revolving credit facilityfacility. In October 2023, the $273,000,000 mortgage loan at 300 Mission Street is scheduled to mature and none of our debt matures until October 2023.in February 2024, the $975,000,000 mortgage loan at One Market Plaza is also scheduled to mature. We are exploring various alternatives to refinance these loans. We may refinance these debts 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.JuneMarch 15, 2022,2023, we declared a quarterly cash dividend of $0.0775 per share of common stock for the secondfirst quarter ended June 30, 2022,March 31, 2023, which was paid on July 15, 2022April 14, 2023 to stockholders of record as of the close of business on June 30, 2022.March 31, 2023. This dividend policy, if continued, would require us to pay out approximately $18,800,000$18,100,000 each quarter to common stockholders and unitholders.June 30, 2022,March 31, 2023, our unconsolidated joint ventures had $1.74 billion of outstanding indebtedness, of which our share was $623,714,000.$625,324,000. 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.47During 2020,As of December 31, 2022, we had repurchased 13,813,158a total of 24,183,768 common shares at a weighted average price of $8.69$7.65 per share, or $120,000,000$185,000,000 in the aggregate. As of June 30, 2022,March 31, 2023 we had $80,000,000have $15,000,000 available for future repurchases under the existing program. Subsequent to June 30, 2022, we repurchased 268,231 common shares at a weighted average price of $6.96 per share, or $1,867,000 in the aggregate; accordingly, as of July 25, 2022, we have $78,133,000 available for future repurchases. 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.formation transactions,Formation Transactions, in connection with our initial public offering, 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,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.June 30, 2022,March 31, 2023, we believe we are in compliance with all of our covenants.a 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 $54,500,000.$57,400,000. 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.48$531,867,000$510,975,000 and $449,817,000 as of March 31, 2023 and December 31, 2022, respectively, and $468,326,000 and $529,666,000 as of June 30,March 31, 2022 and December 31, 2021, respectively, and $507,841,000 and $465,324,000 as of June 30, 2021 and December 31, 2020, respectively. Cash and cash equivalents and restricted cash increased by $2,201,000 and $42,517,000$61,158,000 for the sixthree months ended June 30, 2022March 31, 2023 and 2021, respectively.decreased by $61,340,000 for the three months ended March 31, 2022. The following table sets forth the changes in cash flow.SixThree months ended June 30, 2022March 31, 2023 – We generated $131,102,000$57,968,000 of cash from operating activities for the sixthree months ended June 30, 2022,March 31, 2023, primarily from (i) $142,053,000$72,074,000 of net income (before $131,893,000$63,760,000 of non-cash adjustments) and (ii) $338,000$195,000 of distributions from unconsolidated joint ventures and real estate related funds, partially offset by (iii) $11,289,000$14,301,000 of net changes in operating assets and liabilities. Non-cash adjustments of $131,893,000$63,760,000 were primarily comprised of depreciation and amortization, loss from unconsolidated joint ventures, straight-lining of rental revenue, amortization of above and below-market leases, net and amortization of stock-based compensation.Six months ended June 30, 2021 – We generated $134,458,000 of cash from operating activities for the six months ended June 30, 2021, primarily from (i) $133,703,000 of net income (before $141,947,000 of non-cash adjustments) and (ii) $889,000 of distributions from unconsolidated joint ventures and real estate funds, partially offset by (iii) $134,000 of net changes in operating assets and liabilities. Non-cash adjustments of $141,947,000 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.SixThree months ended June 30, 2022March 31, 2023 – We used $68,101,000$18,883,000 of cash for investing activities for the sixthree months ended June 30,March 31, 2023, for additions to real estate, which were comprised of spending for tenant improvements and other building improvements.$54,136,000$49,316,000 for amounts due from affiliates, (ii) $29,025,000 for additions to real estate, which were comprised of spending for tenant improvements and other building improvements, (ii) $11,252,000(iii) $9,684,000 for investmentsour investment in an unconsolidated joint venture,1600 Broadway, and (iii) $2,713,000 of(iv) $133,000 for contributions of capital to unconsolidated real estate funds, net of distributions received.related funds.Six months ended June 30, 2021 – We used $62,045,000 of cash for investing activities for the six months ended June 30, 2021, primarily for (i) $52,114,000 for additions to real estate, which were comprised of spending for tenant improvements and other building improvements and (ii) $11,750,000 of contributions to an unconsolidated joint venture, partially offset by (iii) $1,819,000 from net sales of marketable securities (which are held in our deferred compensation plan).SixThree months ended June 30, 2022March 31, 2023 – We used $60,800,000generated $22,073,000 of cash forfrom financing activities for the sixthree months ended June 30, 2022,March 31, 2023, primarily forfrom (i) $35,672,000$49,748,000 of contributions from noncontrolling interests in consolidated real estate related funds and (ii) $283,000 of contributions from noncontrolling interests in consolidated joint ventures, partially offset by (iii) $18,026,000 for dividends and distributions to common stockholders and unitholders, (ii) $24,848,000(iv) $4,140,000 for distributions to noncontrolling interests in 300 Mission Street and (iii) $280,0001633 Broadway, (v) $3,740,000 for distributions to noncontrolling interests in Fund X, (vi) $1,847,000 for the settlement of accounts payable in connection with repurchases of common shares in 2022 and (vii) $205,000 for the repurchase of shares related to stock compensation agreements and related tax withholdings.SixThree months ended June 30, 2021March 31, 2022 – We used $29,896,000$31,856,000 of cash for financing activities for the sixthree months ended June 30, 2021,March 31, 2022, primarily for (i) $33,685,000$16,895,000 for dividends and distributions paid to common stockholders and unitholders, (ii) $8,562,000$14,681,000 for distributions to noncontrolling interests in One Market Plaza, 300 Mission Street and 1633 Broadway and (iii) $200,000$280,000 for the repurchaserepurchases of shares related to stock compensation agreements and related tax withholdings, partially offset by (iv) $12,430,000 of proceeds from notes and mortgages payable and (v) $121,000 of contributions from noncontrolling interests.withholdings.4939and six months ended June 30, 2022March 31, 2023 and 2021.2022.
One Steuart Lane)
(including our share of unconsolidated joint ventures)5040
One Steuart Lane)
(including our share of unconsolidated joint ventures)5141
One Steuart Lane)
(including our share of unconsolidated joint ventures)52
(including our share of unconsolidated joint ventures)53and six months ended June 30, 2022March 31, 2023 and 2021.2022. 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 represents 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.5040 “Non-GAAP Financial Measures – NOI” for a reconciliation to net income or loss in accordance with GAAP and the reasons why we believe these non-GAAP measures are useful.Represents our share of NOI attributable to 1600 Broadway for the months in which it was not owned by us in both reporting periods.(3)RepresentsIncludes our share of NOI attributable to 60 Wall Street which was taken "out-of-service" for redevelopment.54425040 “Non-GAAP Financial Measures – NOI” for a reconciliation to net income or loss in accordance with GAAP and the reasons why we believe these non-GAAP measures are useful.Represents our share of Cash NOI attributable to 1600 Broadway for the months in which it was not owned by us in both reporting periods.(3)RepresentsIncludes our share of Cash NOI attributable to 60 Wall Street which was taken "out-of-service" for redevelopment.5543(1)See page 50 “Non-GAAP Financial Measures – NOI” for a reconciliation to net income or loss in accordance with GAAP and the reasons why we believe these non-GAAP measures are useful.(2)Represents our share of NOI attributable to 1600 Broadway for the months in which it was not owned by us in both reporting periods.(3)Represents our share of NOI attributable to 60 Wall Street which was taken "out-of-service" for redevelopment.56(1)See page 50 “Non-GAAP Financial Measures – NOI” for a reconciliation to net income or loss in accordance with GAAP and the reasons why we believe these non-GAAP measures are useful.(2)Represents our share of Cash NOI attributable to 1600 Broadway for the months in which it was not owned by us in both reporting periods.(3)Represents our share of Cash NOI attributable to 60 Wall Street which was taken "out-of-service" for redevelopment.57 (loss) to FFO and Core FFO for the periods set forth below.
(distributions from) an unconsolidated joint venture
sale of residential condominium units (One Steuart Lane)
net gain on sale of residential condominium units
(distributions from) unconsolidated joint ventures
unconsolidated real estate related fund investments5844June 30, 2022.March 31, 2023.(2)(3)June 30, 2022,March 31, 2023, of which our share was $623,714,000.$625,324,000.June 30, 2022.March 31, 2023.5945
Average
Interest
Rate
Average
Interest
Rate
Average
Interest
Rate
Average
Interest
Ratesubmissionsubmissions to the LIBOR administrator, it is possible that LIBOR may become unavailable prior to that point, which could increase our risk associated with the transition to an alternative variable rate. As ofEffective December 31, 2021, banks are no longerstopped issuing any new LIBOR indexed debt. The discontinuation of LIBOR and the related transition to an alternative rate would not affect our ability to borrow or maintain already outstanding borrowings or swaps, however, future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form. As of June 30, 2022,March 31, 2023, all of our outstanding variable rate notes and mortgages payable and derivative instruments are indexed to LIBOR and we will continue to monitor and evaluate the related risks.6046ANDAND PROCEDURESJune 30, 2022,March 31, 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.6147June 30, 2022,March 31, 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.2021.2022.None.
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Approximate Dollar Value of Shares that May Yet be Available for Future Purchased under the Plans or Programs (2)During 2020,As of December 31, 2022, we had repurchased 13,813,158a total of 24,183,768 common shares at a weighted average price of $8.69$7.65 per share, or $120,000,000$185,000,000 in the aggregate. As of June 30, 2022,March 31, 2023 we had $80,000,000have $15,000,000 available for future repurchases under the existing program. Subsequent to June 30, 2022, we repurchased 268,231 common shares at a weighted average price of $6.96 per share, or $1,867,000 in the aggregate; accordingly, as of July 25, 2022, we have $78,133,000 available for future repurchases. 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.6249
Number3.16350July 26, 2022May 3, 2023July 26, 2022May 3, 20236451