pgre-ex991_121.htm

NEW YORK – April 29, 2020 – Paramount Group, Inc. (NYSE: PGRE) (“Paramount” or the “Company”) filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 today and reported results for the first quarter ended March 31, 2020.

Net income attributable to common stockholders was $3.3 million, or $0.01 per diluted share, for the quarter ended March 31, 2020, compared to $3.7 million, or $0.02 per diluted share, for the quarter ended March 31, 2019. Net income attributable to common stockholders for the quarters ended March 31, 2020 and 2019 includes $1.4 million and $1.9 million, or $0.00 and $0.01 per diluted share, respectively, of income from discontinued operations.

Funds from Operations (“FFO”) attributable to common stockholders was $61.6 million, or $0.27 per diluted share, for the quarter ended March 31, 2020, compared to $55.2 million, or $0.24 per diluted share, for the quarter ended March 31, 2019. FFO attributable to common stockholders for the quarters ended March 31, 2020 and 2019 includes the impact of non-core items, which are listed in the table on page 8. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO attributable to common stockholders for the quarter ended March 31, 2020 by $0.1 million, or $0.00 per diluted share, and decreased FFO attributable to common stockholders for the quarter ended March 31, 2019 by $1.9 million, or $0.00 per diluted share.

Core FFO attributable to common stockholders, which excludes the impact of the non-core items listed on page 8, was $61.5 million, or $0.27 per diluted share, for the quarter ended March 31, 2020, compared to $57.1 million, or $0.24 per diluted share, for the quarter ended March 31, 2019.

Same Store Cash NOI increased by $3.7 million, or 4.3%, to $90.8 million for the quarter ended March 31, 2020 from $87.1 million for the quarter ended March 31, 2019. Same Store NOI increased by $1.5 million, or 1.5%, to $100.6 million for the quarter ended March 31, 2020 from $99.1 million for the quarter ended March 31, 2019.

During the quarter ended March 31, 2020, the Company leased 206,784 square feet, of which the Company’s share was 126,068 square feet that was leased at a weighted average initial rent of $91.59 per square foot. This leasing activity, offset by lease expirations in the quarter, caused leased occupancy to remain at 95.9% leased at March 31, 2020, in-line with leased occupancy reported at December 31, 2019. Same store leased occupancy (properties owned by us during both reporting periods and not classified as discontinued operations), was 96.0% at March 31, 2020, in-line with same store leased occupancy at December 31, 2019. Of the 206,784 square feet leased in the first quarter, 104,308 square feet represented second generation space (space that had been vacant for less than twelve months) for which the Company achieved a positive mark-to-market of 31.3% on a cash basis and 38.2% on a GAAP basis. The weighted average lease term for leases signed during the first quarter was 4.8 years and weighted average tenant improvements and leasing commissions on these leases were $6.99 per square foot per annum, or 7.6% of initial rent.

The Company had previously provided its 2020 guidance on February 12, 2020, prior to the coronavirus (COVID-19) global pandemic, which has materially impacted the U.S. and global economy. Given the economic uncertainty and rapidly-evolving circumstances related to the COVID-19 pandemic, the Company is withdrawing its previously issued 2020 guidance and is not providing an updated outlook at this time. The Company will discuss the first quarter results and provide commentary on its business performance during its first quarter conference call.

This press release contains forward-looking statements within the meaning of the federal securities laws. You can identify these statements by our use of the words “assumes,” “believes,” “estimates,” “expects,” “guidance,” “intends,” “plans,” “projects” and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performance or achievements. These factors include, without limitation, the negative impact of the coronavirus (COVID-19) global pandemic on the U.S., regional and global economies and our tenants’ financial condition and results of operations, the ability to enter into new leases or renew leases on favorable terms, dependence on tenants’ financial condition, the uncertainties of real estate development, acquisition and disposition activity, the ability to effectively integrate acquisitions, the costs and availability of financing, the ability of our joint venture partners to satisfy their obligations, the effects of local, national and international economic and market conditions, the effects of acquisitions, dispositions and possible impairment charges on our operating results, regulatory changes, including changes to tax laws and regulations, and other risks and uncertainties detailed from time to time in the Company’s filings with the U.S. Securities and Exchange Commission. The Company does not undertake a duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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, realized and unrealized gains or losses on real estate 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. Other REITs may use different methodologies for calculating FFO and Core FFO or use other definitions of FFO and Core FFO and, accordingly, our presentation of these measures may not be comparable to other real estate companies. Neither FFO nor Core FFO is intended to be a measure of cash flow or liquidity. Please refer to our financial statements, prepared in accordance with GAAP, for purposes of evaluating our financial condition, results of operations and cash flows.

NOI is used 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 PGRE'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 property level.

Same Store NOI is used to measure the operating performance of properties in our New York and San Francisco portfolios that were owned by us in a similar manner during both the current period and prior reporting periods, and represents Same Store 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 may vary from period to period. We also present Same Store Cash NOI, which excludes the effect of non-cash items such as the straight-line rent adjustments and the amortization of above and below-market leases.

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in this press release and in our Supplemental Information for the quarter ended March 31, 2020, which is available on our website.

The Company will host a conference call and audio webcast on Thursday, April 30, 2020 at 10:00 a.m. Eastern Time (ET), during which management will discuss the first quarter results and provide commentary on business performance. A question and answer session with analysts and investors will follow the prepared remarks.

The conference call can be accessed by dialing 877-407-0789 (domestic) or 201-689-8562 (international). An audio replay of the conference call will be available from 1:00 p.m. ET on April 30, 2020 through May 7, 2020 and can be accessed by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13701451.

A live audio webcast of the conference call will be available through the “Investors” section of the Company’s website, www.paramount-group.com. A replay of the webcast will be archived on the Company’s website.

Headquartered in New York City, Paramount Group, Inc. is a fully-integrated real estate investment trust that owns, operates, manages, acquires and redevelops high-quality, Class A office properties located in select central business district submarkets of New York City and San Francisco. Paramount is focused on maximizing the value of its portfolio by leveraging the sought-after locations of its assets and its proven property management capabilities to attract and retain high-quality tenants.

Assets:	March 31, 2020			December 31, 2019
Real estate, at cost
Land	$	1,966,237		$	1,966,237
Buildings and improvements		5,948,631			5,923,648
		7,914,868			7,889,885
Accumulated depreciation and amortization		(832,164	)		(790,216	)
Real estate, net		7,082,704			7,099,669
Cash and cash equivalents		377,689			306,215
Restricted cash		20,563			25,272
Investments in unconsolidated joint ventures		429,358			449,180
Investments in unconsolidated real estate funds		13,116			10,317
Accounts and other receivables, net		17,826			19,231
Due from affiliates		-			36,918
Deferred rent receivable		312,249			301,588
Deferred charges, net		124,908			126,367
Intangible assets, net		191,183			203,169
Assets related to discontinued operations		104,028			104,836
Other assets		80,632			51,373
Total assets	$	8,754,256		$	8,734,135

Liabilities:
Notes and mortgages payable, net	$	3,788,684		$	3,783,851
Revolving credit facility		200,000			36,918
Accounts payable and accrued expenses		109,563			117,356
Dividends and distributions payable		24,342			25,255
Intangible liabilities, net		69,752			73,789
Other liabilities		54,723			66,004
Total liabilities		4,247,064			4,103,173
Equity:
Paramount Group, Inc. equity		3,722,261			3,785,730
Noncontrolling interests in:
Consolidated joint ventures		359,120			360,778
Consolidated real estate fund		80,476			72,396
Operating Partnership		345,335			412,058
Total equity		4,507,192			4,630,962
Total liabilities and equity	$	8,754,256		$	8,734,135

			For the Three Months Ended March 31,
			2020			2019
Revenues:
	Rental revenue		$	175,425		$	175,341
	Fee and other income			8,561			9,048
		Total revenues		183,986			184,389
Expenses:
	Operating			67,014			65,461
	Depreciation and amortization			58,427			60,712
	General and administrative			12,249			17,443
	Transaction related costs			203			736
		Total expenses		137,893			144,352
Other income (expense):
	Loss from unconsolidated joint ventures			(4,221	)		(1,027	)
	Income from unconsolidated real estate funds			52			46
	Interest and other (loss) income, net			(996	)		3,900
	Interest and debt expense			(36,619	)		(36,924	)
Income from continuing operations, before income taxes				4,309			6,032
	Income tax expense			(604	)		(1,138	)
Income from continuing operations, net				3,705			4,894
Income from discontinued operations, net				1,521			2,106
Net income				5,226			7,000
Less net (income) loss attributable to noncontrolling interests in:
	Consolidated joint ventures			(1,514	)		(2,794	)
	Consolidated real estate fund			(23	)		(94	)
	Operating Partnership			(341	)		(403	)
Net income attributable to common stockholders			$	3,348		$	3,709

Income per Common Share - Basic:
Income from continuing operations, net			$	0.01		$	0.01
Income from discontinued operations, net				0.00			0.01
Net income per common share			$	0.01		$	0.02
Weighted average common shares outstanding				227,769,213			233,419,299

Income per Common Share - Diluted:
Income from continuing operations, net			$	0.01		$	0.01
Income from discontinued operations, net				0.00			0.01
Net income per common share			$	0.01		$	0.02
Weighted average common shares outstanding				227,805,176			233,458,438

			For the Three Months Ended March 31,
			2020			2019
Reconciliation of Net Income to FFO and Core FFO:
	Net income		$	5,226		$	7,000
	Real estate depreciation and amortization (including our share of
		unconsolidated joint ventures)		70,940			63,688
	Adjustments related to discontinued operations			690			2,377
	FFO			76,856			73,065
	Less FFO attributable to noncontrolling interests in:
		Consolidated joint ventures		(8,969	)		(11,748	)
		Consolidated real estate fund		(23	)		(94	)
	FFO attributable to Paramount Group Operating Partnership			67,864			61,223
	Less FFO attributable to noncontrolling interests in in Operating Partnership			(6,278	)		(5,998	)
	FFO attributable to common stockholders		$	61,586		$	55,225
	Per diluted share		$	0.27		$	0.24

	FFO		$	76,856		$	73,065
	Non-core items:
		Our share of earnings in excess of distributions received from 712 Fifth Avenue		(388	)		1,270
		Other, net		303			823
	Core FFO			76,771			75,158
	Less Core FFO attributable to noncontrolling interests in:
		Consolidated joint ventures		(8,969	)		(11,748	)
		Consolidated real estate fund		(23	)		(94	)
	Core FFO attributable to Paramount Group Operating Partnership			67,779			63,316
	Less Core FFO attributable to noncontrolling interests in Operating Partnership			(6,270	)		(6,203	)
	Core FFO attributable to common stockholders		$	61,509		$	57,113
	Per diluted share		$	0.27		$	0.24

Reconciliation of weighted average shares outstanding:
	Weighted average shares outstanding			227,769,213			233,419,299
	Effect of dilutive securities			35,963			39,139
	Denominator for FFO and Core FFO per diluted share			227,805,176			233,458,438


			For the Three Months Ended March 31,
			2020			2019
Reconciliation of Net Income to Same Store NOI and Same Store Cash NOI:
	Net income		$	5,226		$	7,000
	Add (subtract) adjustments to arrive at NOI and Cash NOI:
		Depreciation and amortization		58,427			60,712
		General and administrative		12,249			17,443
		Interest and debt expense		36,619			36,924
		Income tax expense		604			1,138
		NOI from unconsolidated joint ventures		13,392			5,411
		Fee income		(6,330	)		(5,999	)
		Interest and other loss (income), net		996			(3,900	)
		Adjustments related to discontinued operations		690			2,377
		Other, net		4,372			1,717
	NOI			126,245			122,823
	Less NOI attributable to noncontrolling interests in:
		Consolidated joint ventures		(15,691	)		(17,909	)
		Consolidated real estate fund		3			29
	PGRE's share of NOI			110,557			104,943
		Acquisitions		(9,292	)		-
		Dispositions / Discontinued Operations⁽¹⁾		(2,211	)		(4,483	)
		Lease termination income and other, net		1,502			(1,342	)
	PGRE's share of Same Store NOI		$	100,556		$	99,118

	NOI		$	126,245		$	122,823
	Less:
		Straight-line rent adjustments (including our share of unconsolidated joint ventures)		(11,804	)		(11,869	)
		Amortization of above and below-market leases, net (including our share of unconsolidated joint ventures)		(2,832	)		(3,240	)
		Adjustments related to discontinued operations		119			111
	Cash NOI			111,728			107,825
	Less Cash NOI attributable to noncontrolling interests in:
		Consolidated joint ventures		(13,202	)		(14,785	)
		Consolidated real estate fund		3			29
	PGRE's share of Cash NOI			98,529			93,069
		Acquisitions		(6,806	)		-
		Dispositions / Discontinued Operations⁽¹⁾		(2,330	)		(4,594	)
		Lease termination income and other, net		1,421			(1,409	)
	PGRE's share of Same Store Cash NOI		$	90,814		$	87,066