☒

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

☐

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

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)

Title of each Class

Trading Symbol

Name of each exchange on which registered

PGRE

New York Stock Exchange

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

Item

Page Number

Part I.

Financial Information

Item 1.

Consolidated Financial Statements

Consolidated Balance Sheets (Unaudited) as of June 30, 2020 and December 31, 2019

3

Consolidated Statements of Income (Unaudited) for the three and six months
   ended June 30, 2020 and 2019

4

Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months
   ended June 30, 2020 and 2019

5

Consolidated Statements of Changes in Equity (Unaudited) for the three and six months
   ended June 30, 2020 and 2019

6

Consolidated Statements of Cash Flows (Unaudited) for the six months
   ended June 30, 2020 and 2019

8

Notes to Consolidated Financial Statements (Unaudited)

10

Item 2.

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

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

62

Item 4.

Controls and Procedures

64

Part II.

Other Information

Item 1.

Legal Proceedings

65

Item 1A.

Risk Factors

65

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

68

Item 4.

Mine Safety Disclosures

68

Item 5.

Other Information

68

Item 6.

Exhibits

69

Signatures

70

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

June 30, 2020

December 31, 2019

Assets

Real estate, at cost:

Land

$

1,966,237

$

1,966,237

Buildings and improvements

5,957,831

5,923,648

7,924,068

7,889,885

Accumulated depreciation and amortization

(873,732

)

(790,216

)

Real estate, net

7,050,336

7,099,669

Cash and cash equivalents

522,502

306,215

Restricted cash

33,957

25,272

Investments in unconsolidated joint ventures

421,183

449,180

Investments in unconsolidated real estate funds

13,041

10,317

Accounts and other receivables

18,738

19,231

Due from affiliates

-

36,918

Deferred rent receivable

321,480

301,588

Deferred charges, net of accumulated amortization of $49,314 and $42,096

123,446

126,367

Intangible assets, net of accumulated amortization of $259,158 and $262,930

179,244

203,169

Assets related to discontinued operations

103,915

104,836

Other assets

45,340

51,373

Total assets ⁽¹⁾

$

8,833,182

$

8,734,135

Liabilities and Equity

Notes and mortgages payable, net of unamortized deferred financing costs

   of $22,286 and $25,792

$

3,790,430

$

3,783,851

Revolving credit facility

200,000

36,918

Accounts payable and accrued expenses

105,924

117,356

Dividends and distributions payable

24,292

25,255

Intangible liabilities, net of accumulated amortization of $98,208 and $100,881

65,769

73,789

Other liabilities

59,091

66,004

Total liabilities ⁽¹⁾

4,245,506

4,103,173

Commitments and contingencies

Paramount Group, Inc. equity:

Common stock $0.01 par value per share; authorized 900,000,000 shares; issued

   and outstanding 221,763,687 and 227,432,030 shares in 2020 and 2019, respectively

2,219

2,274

Additional paid-in-capital

4,133,542

4,133,184

Earnings less than distributions

(397,220

)

(349,557

)

Accumulated other comprehensive loss

(15,031

)

(171

)

Paramount Group, Inc. equity

3,723,510

3,785,730

Noncontrolling interests in:

Consolidated joint ventures

436,183

360,778

Consolidated real estate fund

79,243

72,396

Operating Partnership (20,780,392 and 24,758,472 units outstanding)

348,740

412,058

Total equity

4,587,676

4,630,962

Total liabilities and equity

$

8,833,182

$

8,734,135

⁽¹⁾

Represents the consolidated assets and liabilities of Paramount Group Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which we are the sole general partner and own approximately 91.4% as of June 30, 2020. The assets and liabilities of the Operating Partnership, as of June 30, 2020, include $4,019,707 and $2,537,846 of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. See Note 12, Variable Interest Entities (“VIEs”).

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

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

2020

2019

2020

2019

Revenues:

Rental revenue

$

163,989

$

174,044

$

339,414

$

349,385

Fee and other income

7,129

7,299

15,690

16,347

Total revenues

171,118

181,343

355,104

365,732

Expenses:

Operating

64,313

64,736

131,327

130,197

Depreciation and amortization

58,716

60,277

117,143

120,989

General and administrative

17,901

17,695

30,150

35,138

Transaction related costs

258

182

461

918

Total expenses

141,188

142,890

279,081

287,242

Other income (expense):

Loss from unconsolidated joint ventures

(5,955

)

(456

)

(10,176

)

(1,483

)

Income from unconsolidated real estate funds

89

19

141

65

Interest and other income, net

2,252

2,583

1,256

6,483

Interest and debt expense

(36,009

)

(37,213

)

(72,628

)

(74,137

)

(Loss) income from continuing operations, before income taxes

(9,693

)

3,386

(5,384

)

9,418

Income tax expense

(138

)

(268

)

(742

)

(1,406

)

(Loss) income from continuing operations, net

(9,831

)

3,118

(6,126

)

8,012

Income from discontinued operations, net

2,147

2,056

3,668

4,162

Net (loss) income

(7,684

)

5,174

(2,458

)

12,174

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

Consolidated joint ventures

(405

)

(2,408

)

(1,919

)

(5,202

)

Consolidated real estate fund

1,235

(53

)

1,212

(147

)

Operating Partnership

584

(258

)

243

(661

)

Net (loss) income attributable to common stockholders

$

(6,270

)

$

2,455

$

(2,922

)

$

6,164

(Loss) income per Common Share - Basic:

(Loss) income from continuing operations, net

$

(0.04

)

$

0.00

$

(0.03

)

$

0.01

Income from discontinued operations, net

0.01

0.01

0.02

0.02

Net (loss) income per common share

$

(0.03

)

$

0.01

$

(0.01

)

$

0.03

Weighted average common shares outstanding

221,573,199

234,329,904

224,671,206

233,877,117

(Loss) income per Common Share - Diluted:

(Loss) income from continuing operations, net

$

(0.04

)

$

0.00

$

(0.03

)

$

0.01

Income from discontinued operations, net

0.01

0.01

0.02

0.02

Net (loss) income per common share

$

(0.03

)

$

0.01

$

(0.01

)

$

0.03

Weighted average common shares outstanding

221,573,199

234,355,864

224,671,206

233,908,236

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

(Amounts in thousands)

2020

2019

2020

2019

Net (loss) income

$

(7,684

)

$

5,174

$

(2,458

)

$

12,174

Other comprehensive loss:

Change in value of interest rate swaps

-

(15,345

)

-

(24,371

)

Pro rata share of other comprehensive loss of unconsolidated

   joint ventures

(1,696

)

(76

)

(16,357

)

(184

)

Comprehensive loss

(9,380

)

(10,247

)

(18,815

)

(12,381

)

Less comprehensive (income) loss attributable to noncontrolling

   interests in:

Consolidated joint ventures

(405

)

(2,408

)

(1,919

)

(5,202

)

Consolidated real estate fund

1,233

(48

)

1,208

(99

)

Operating Partnership

729

1,209

1,744

1,697

Comprehensive loss attributable to common stockholders

$

(7,823

)

$

(11,494

)

$

(17,782

)

$

(15,985

)

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

(Loss) Income

Ventures

Fund

Partnership

Equity

Balance as of March 31, 2020

221,750

$

2,219

$

4,102,287

$

(368,767

)

$

(13,478

)

$

359,120

$

80,476

$

345,335

$

4,507,192

Net (loss) income

-

-

-

(6,270

)

-

405

(1,235

)

(584

)

(7,684

)

Common shares issued under Omnibus

   share plan, net of shares withheld for taxes

14

-

-

(7

)

-

-

-

-

(7

)

Dividends and distributions ($0.10 per share

   and unit)

-

-

-

(22,176

)

-

-

-

(2,116

)

(24,292

)

Contributions from noncontrolling interests

-

-

-

-

-

3,500

-

-

3,500

Distributions to noncontrolling interests

-

-

-

-

-

(3,185

)

-

-

(3,185

)

Pro rata share of other comprehensive loss

   of unconsolidated joint ventures

-

-

-

-

(1,553

)

-

2

(145

)

(1,696

)

Amortization of equity awards

-

-

294

-

-

-

-

3,981

4,275

Sale of a 10.0% interest in 1633 Broadway

-

-

33,230

-

-

76,343

-

-

109,573

Reallocation of noncontrolling interest

-

-

(2,269

)

-

-

-

-

2,269

-

Balance as of June 30, 2020

221,764

$

2,219

$

4,133,542

$

(397,220

)

$

(15,031

)

$

436,183

$

79,243

$

348,740

$

4,587,676

Balance as of March 31, 2019

234,478

$

2,345

$

4,218,060

$

(239,949

)

$

8,421

$

367,012

$

81,434

$

417,313

$

4,854,636

Net income

-

-

-

2,455

-

2,408

53

258

5,174

Common shares issued upon redemption of

   common units

118

1

2,007

-

-

-

-

(2,008

)

-

Common shares issued under Omnibus

   share plan, net of shares withheld for taxes

2

-

-

(6

)

-

-

-

-

(6

)

Repurchases of common shares

(474

)

(5

)

(6,483

)

-

-

-

-

-

(6,488

)

Dividends and distributions ($0.10 per share

   and unit)

-

-

-

(23,439

)

-

-

-

(2,514

)

(25,953

)

Contributions from noncontrolling interests

-

-

-

-

-

-

470

-

470

Distributions to noncontrolling interests

-

-

-

-

-

(4,142

)

-

-

(4,142

)

Change in value of interest rate swaps

-

-

-

-

(13,884

)

-

-

(1,461

)

(15,345

)

Pro rata share of other comprehensive loss

   of unconsolidated joint ventures

-

-

-

-

(62

)

-

(8

)

(6

)

(76

)

Amortization of equity awards

-

-

643

-

-

-

-

4,476

5,119

Reallocation of noncontrolling interest

-

-

(34

)

-

-

-

-

34

-

Balance as of June 30, 2019

234,124

$

2,341

$

4,214,193

$

(260,939

)

$

(5,525

)

$

365,278

$

81,949

$

416,092

$

4,813,389

Accumulated