pgre-10q_20150630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

x

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

For the Quarterly Period Ended: June 30, 2015

 

OR

 

o

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

 

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  x    NO  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    x  Yes    ¨  No

 

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

o

 

Accelerated Filer

o

Non-Accelerated Filer

x

(Do not check if smaller reporting company)

Smaller Reporting Company

o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES  ¨    NO  x

 

As of July 31, 2015, there were 212,111,937 shares of the registrant’s common stock outstanding.

 

 

 

 

 

 


 

 

 

Table of Contents

 

Item

 

 

 

Page Number

Part I.

 

Financial Information

 

 

Item 1.

 

Consolidated Financial Statements

 

3

 

 

Consolidated Balance Sheets (Unaudited) as of June 30, 2015 and December 31, 2014

 

3

 

 

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

 

 

 

 

    ended June 30, 2015

 

4

 

 

Combined Consolidated Statements of Income of the Predecessor (Unaudited) for the three

 

 

 

 

    and six months ended June 30, 2014

 

5

 

 

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

 

 

 

 

    months ended June 30, 2015

 

6

 

 

Combined Consolidated Statements of Changes in Equity (Unaudited) of the Company for the six months

 

 

 

 

    ended June 30, 2015 and the Predecessor for the six months ended June 30, 2014

 

7

 

 

Combined Consolidated Statements of Cash Flows (Unaudited) of the Company for the six months

 

 

 

 

   ended June 30, 2015 and the Predecessor for the six months ended June 30, 2014

 

8

 

 

Notes to Combined Consolidated Financial Statements (Unaudited)

 

9

Item 2.

 

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

 

32

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

49

Item 4.

 

Controls and Procedures

 

50

 

 

 

 

 

Part II.

 

Other Information

 

 

Item 1.

 

Legal Proceedings

 

51

Item 1A.

 

Risk Factors

 

51

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

51

Item 3.

 

Defaults Upon Senior Securities

 

51

Item 4.

 

Mine Safety Disclosures

 

51

Item 5.

 

Other Information

 

51

Item 6.

 

Exhibits

 

51

Signatures

 

52

 

 

 

2

 


 

PART I – FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

 

PARAMOUNT GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

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

 

The Company

 

ASSETS

 

June 30, 2015

 

 

December 31, 2014

 

Rental property, at cost

 

 

 

 

 

 

 

 

Land

 

$

2,042,071

 

 

$

2,042,071

 

Buildings and improvements

 

 

5,534,885

 

 

 

5,488,168

 

 

 

 

7,576,956

 

 

 

7,530,239

 

Accumulated depreciation and amortization

 

 

(162,377

)

 

 

(81,050

)

Rental property, net

 

 

7,414,579

 

 

 

7,449,189

 

Real estate fund investments

 

 

335,545

 

 

 

323,387

 

Investments in unconsolidated joint ventures

 

 

6,128

 

 

 

5,749

 

Cash and cash equivalents

 

 

438,088

 

 

 

438,599

 

Restricted cash

 

 

45,737

 

 

 

55,728

 

Marketable securities

 

 

21,524

 

 

 

20,159

 

Deferred rent receivable

 

 

40,308

 

 

 

8,267

 

Accounts and other receivables, net of allowance of $406 and $333 in 2015

     and 2014, respectively

 

 

10,781

 

 

 

7,692

 

Deferred charges, net of accumulated amortization of $13,002 and $10,859 in 2015

     and 2014, respectively

 

 

49,547

 

 

 

39,165

 

Intangible assets, net of accumulated amortization of $103,158 and $20,509 in 2015

     and 2014, respectively

 

 

583,126

 

 

 

669,385

 

Other assets

 

 

9,529

 

 

 

13,121

 

Total assets

 

$

8,954,892

 

 

$

9,030,441

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Mortgages and notes payable

 

$

2,853,237

 

 

$

2,852,287

 

Credit facility

 

 

-

 

 

 

-

 

Due to affiliates

 

 

27,299

 

 

 

27,299

 

Loans payable to noncontrolling interests

 

 

43,981

 

 

 

42,195

 

Accounts payable and accrued expenses

 

 

96,595

 

 

 

93,472

 

Deferred income taxes

 

 

2,659

 

 

 

2,861

 

Interest rate swap liabilities

 

 

160,473

 

 

 

194,196

 

Intangible liabilities, net of accumulated amortization of $21,064 and $3,757 in 2015

       and 2014, respectively

 

 

201,839

 

 

 

219,228

 

Dividends and distributions payable

 

 

25,066

 

 

 

-

 

Other liabilities

 

 

45,922

 

 

 

43,950

 

Total liabilities

 

 

3,457,071

 

 

 

3,475,488

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Paramount Group, Inc. equity:

 

 

 

 

 

 

 

 

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

      and outstanding 212,111,937 and 212,106,718 shares in 2015 and 2014, respectively

 

 

2,122

 

 

 

2,122

 

Additional paid-in-capital

 

 

3,893,756

 

 

 

3,851,432

 

Earnings (less than) in excess of distributions

 

 

(5,843

)

 

 

57,308

 

Accumulated other comprehensive loss

 

 

(493

)

 

 

-

 

Paramount Group, Inc. equity

 

 

3,889,542

 

 

 

3,910,862

 

Noncontrolling interests in:

 

 

 

 

 

 

 

 

Consolidated joint ventures and funds

 

 

703,596

 

 

 

685,888

 

Operating Partnership (51,660,088 and 51,543,993 units outstanding in 2015

      and 2014, respectively)

 

 

904,683

 

 

 

958,203

 

Total equity

 

 

5,497,821

 

 

 

5,554,953

 

Total liabilities and equity

 

$

8,954,892

 

 

$

9,030,441

 

 

See notes to combined consolidated financial statements (unaudited).

3

 


 

PARAMOUNT GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

The Company

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

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

 

June 30, 2015

 

 

June 30, 2015

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

Rental income

 

$

145,917

 

 

$

289,160

 

 

Tenant reimbursement income

 

 

12,063

 

 

 

25,551

 

 

Fee and other income

 

 

4,948

 

 

 

9,443

 

 

Total revenues

 

 

162,928

 

 

 

324,154

 

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Operating

 

 

57,781

 

 

 

119,665

 

 

Depreciation and amortization

 

 

79,421

 

 

 

153,004

 

 

General and administrative

 

 

9,133

 

 

 

21,746

 

 

Acquisition and transaction related costs

 

 

8,208

 

 

 

9,347

 

 

Total expenses

 

 

154,543

 

 

 

303,762

 

 

Operating income

 

 

8,385

 

 

 

20,392

 

 

Income from real estate fund investments

 

 

14,072

 

 

 

19,293

 

 

Income from unconsolidated joint ventures

 

 

2,011

 

 

 

2,986

 

 

Unrealized gains on interest rate swaps

 

 

21,747

 

 

 

33,725

 

 

Interest and other income, net

 

 

512

 

 

 

1,366

 

 

Interest and debt expense

 

 

(42,236

)

 

 

(84,124

)

 

Net income (loss) before income taxes

 

 

4,491

 

 

 

(6,362

)

 

Income tax expense

 

 

(1,343

)

 

 

(1,917

)

 

Net income (loss)

 

 

3,148

 

 

 

(8,279

)

 

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

 

 

 

 

 

 

 

 

 

Consolidated joint ventures and funds

 

 

(9,004

)

 

 

(9,672

)

 

Operating Partnership

 

 

1,147

 

 

 

3,511

 

 

Net loss attributable to common shareholders

 

$

(4,709

)

 

$

(14,440

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS PER COMMON SHARE - BASIC:

 

 

 

 

 

 

 

 

 

Loss per common share

 

$

(0.02

)

 

$

(0.07

)

 

Weighted average shares outstanding

 

 

212,106,718

 

 

 

212,106,718

 

 

 

 

 

 

 

 

 

 

 

 

LOSS PER COMMON SHARE - DILUTED:

 

 

 

 

 

 

 

 

 

Loss per common share

 

$

(0.02

)

 

$

(0.07

)

 

Weighted average shares outstanding

 

 

212,106,718

 

 

 

212,106,718

 

 

 

 

 

 

 

 

 

 

 

 

DIVIDENDS PER COMMON SHARE

 

$

0.095

 

 

$

0.190

 

(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes the $0.039 cash dividend for the 38 day period following the completion of our initial public offering and related formation transactions and ending on December 31, 2014.

 

 

 

 

See notes to combined consolidated financial statements (unaudited).

 

 


4

 


 

PARAMOUNT PREDECESSOR

COMBINED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

 

 

The Predecessor

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(Amounts in thousands)

 

June 30, 2014

 

 

June 30, 2014

 

REVENUES:

 

 

 

 

 

 

 

 

Rental income

 

$

8,499

 

 

$

16,312

 

Tenant reimbursement income

 

 

441

 

 

 

896

 

Distributions from real estate fund investments

 

 

4,744

 

 

 

11,247

 

Realized and unrealized gains, net

 

 

33,750

 

 

 

79,917

 

Fee and other income

 

 

6,400

 

 

 

11,582

 

Total revenues

 

 

53,834

 

 

 

119,954

 

EXPENSES:

 

 

 

 

 

 

 

 

Operating

 

 

4,214

 

 

 

7,753

 

Depreciation and amortization

 

 

2,899

 

 

 

5,566

 

General and administrative

 

 

4,363

 

 

 

12,448

 

Profit sharing compensation

 

 

3,438

 

 

 

8,232

 

Other

 

 

2,634

 

 

 

3,901

 

Total expenses

 

 

17,548

 

 

 

37,900

 

Operating income

 

 

36,286

 

 

 

82,054

 

Income from unconsolidated joint ventures

 

 

903

 

 

 

2,035

 

Unrealized loss on interest rate swaps

 

 

(354

)

 

 

(196

)

Interest and other income, net

 

 

997

 

 

 

1,706

 

Interest and debt expense

 

 

(7,988

)

 

 

(15,787

)

Net income before income taxes

 

 

29,844

 

 

 

69,812

 

Income tax expense

 

 

(3,842

)

 

 

(7,105

)

Net income

 

 

26,002

 

 

 

62,707

 

Net income attributable to noncontrolling interests

 

 

(25,823

)

 

 

(53,133

)

Net income attributable to the Predecessor

 

$

179

 

 

$

9,574

 

 

 

See notes to combined consolidated financial statements (unaudited).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 


 

 

 

 

 

 

PARAMOUNT GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

 

 

 

The Company

 

 

 

Three Months Ended

 

 

Six Months Ended

 

(Amounts in thousands)

 

June 30, 2015

 

 

June 30, 2015

 

Net income (loss)

 

$

3,148

 

 

$

(8,279

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Pro rata share of other comprehensive loss of unconsolidated joint ventures

 

 

(613

)

 

 

(613

)

Comprehensive income (loss)

 

 

2,535

 

 

 

(8,892

)

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

 

 

 

 

 

 

 

 

Consolidated joint ventures and funds

 

 

(9,004

)

 

 

(9,672

)

Operating Partnership

 

 

1,267

 

 

 

3,631

 

Comprehensive loss attributable to Paramount Group, Inc.

 

$

(5,202

)

 

$

(14,933

)

 

 

 

 

 

 

 

 

 

See notes to combined consolidated financial statements (unaudited).

 

 

 

 

6

 


 

PARAMOUNT GROUP, INC. AND PARAMOUNT PREDECESSOR

COMBINED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling Interests in

 

 

 

 

 

(Amounts in thousands)

 

Shares

 

 

Amount

 

 

Additional

Paid in Capital

 

 

Earnings (Less than) In Excess of Distributions

 

 

Accumulated Other Comprehensive Loss

 

 

Predecessor Shareholders' Equity

 

 

Consolidated Joint

Ventures

and Funds

 

 

Operating

Partnership

 

 

Total

Equity

 

The Predecessor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2013

 

 

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

321,769

 

 

$

1,703,675

 

 

$

-

 

 

$

2,025,444

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,574

 

 

 

53,133

 

 

 

-

 

 

 

62,707

 

Contributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,253

 

 

 

88,804

 

 

 

-

 

 

 

90,057

 

Distributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(22,323

)

 

 

(2,183

)

 

 

-

 

 

 

(24,506

)

Balance as of June 30, 2014

 

 

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

-

 

 

$

310,273

 

 

$

1,843,429

 

 

$

-

 

 

$

2,153,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2014

 

 

212,107

 

 

$

2,122

 

 

$

3,851,432

 

 

$

57,308

 

 

$

-

 

 

$

-

 

 

$

685,888

 

 

$

958,203

 

 

$

5,554,953

 

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14,440

)

 

 

-

 

 

 

-

 

 

 

9,672

 

 

 

(3,511

)

 

 

(8,279

)

Common shares and units issued under

     Omnibus share plan

 

 

5

 

 

 

-

 

 

 

(2,131

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

2,131

 

 

 

-

 

Dividends and distributions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(48,573

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11,819

)

 

 

(60,392

)

Contributions from noncontrolling

     interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,031

 

 

 

-

 

 

 

14,031

 

Distributions to noncontrolling

     interests

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,673

)

 

 

-

 

 

 

(5,673

)

Pro rata share of other comprehensive

    loss of unconsolidated joint ventures

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(493

)

 

 

-

 

 

 

 

 

 

 

(120

)

 

 

(613

)

Adjustments to noncontrolling interests

 

 

-

 

 

 

-

 

 

 

43,981

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(43,981

)

 

 

-

 

Amortization of equity awards

 

 

-

 

 

 

-

 

 

 

885

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,780

 

 

 

4,665

 

Other

 

 

-

 

 

 

-

 

 

 

(411

)

 

 

(138

)

 

 

-

 

 

 

-

 

 

 

(322

)

 

 

-

 

 

 

(871

)

Balance as of June 30, 2015

 

 

212,112

 

 

$

2,122

 

 

$

3,893,756

 

 

$

(5,843

)

 

$

(493

)

 

$

-

 

 

$

703,596

 

 

$

904,683

 

 

$

5,497,821

 

 

See notes to combined consolidated financial statements (unaudited).

 

 

 

7

 


 

PARAMOUNT GROUP, INC. AND PARAMOUNT PREDECESSOR

COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

The Company

 

 

The Predecessor

 

 

 

Six Months Ended June 30,

 

(Amounts in thousands)

 

2015

 

 

2014

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(8,279

)

 

$

62,707

 

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

153,004

 

 

 

5,566

 

Unrealized (gains) losses on interest rate swaps

 

 

(33,725

)

 

 

196

 

Straight-lining of rental income

 

 

(32,042

)

 

 

90

 

Realized and unrealized gains, net, on real estate fund investments

 

 

(12,136

)

 

 

(79,917

)

Income from unconsolidated joint ventures

 

 

(2,986

)

 

 

(2,035

)

Distributions of income from unconsolidated joint ventures

 

 

1,993

 

 

 

1,768

 

Amortization of above and below-market leases, net

 

 

(1,762

)

 

 

-

 

Amortization of deferred financing costs

 

 

1,170

 

 

 

216

 

Transfer taxes due in connection with the sale of shares by a former joint venture partner

 

 

5,872

 

 

 

-

 

Realized and unrealized gains on marketable securities

 

 

(924

)

 

 

(1,228

)

Other non-cash adjustments

 

 

8,091

 

 

 

3,756

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Restricted cash

 

 

-

 

 

 

2,481

 

Real estate fund investments

 

 

(22

)

 

 

(164,181

)

Accounts and other receivables

 

 

(261

)

 

 

(2,669

)

Deferred charges

 

 

(12,523

)

 

 

-

 

Other assets

 

 

2,721

 

 

 

(3,456

)

Accounts payable and accrued expenses

 

 

(7,635

)

 

 

(2,945

)

Profit sharing payables

 

 

-

 

 

 

5,414

 

Deferred income taxes

 

 

(202

)

 

 

10,043

 

Other liabilities

 

 

1,972

 

 

 

1,693

 

Net cash provided by (used in) operating activities

 

 

62,326

 

 

 

(162,501

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Acquisitions of, and additions to, rental properties

 

 

(41,914

)

 

 

(65,451

)

Changes in restricted cash

 

 

9,550

 

 

 

253

 

Distributions of capital from unconsolidated joint ventures

 

 

-

 

 

 

1,123

 

Net cash used in investing activities

 

 

(32,364

)

 

 

(64,075

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Dividends paid to common shareholders and unitholders

 

 

(35,325

)

 

 

-

 

Contributions from noncontrolling interests

 

 

11,203

 

 

 

88,804

 

Distributions to noncontrolling interests

 

 

(5,673

)

 

 

(2,183

)

Contributions from Predecessor shareholders

 

 

-

 

 

 

1,253

 

Distributions to Predecessor shareholders

 

 

-

 

 

 

(22,323

)

Proceeds from loans payable to noncontrolling interests

 

 

-

 

 

 

39,075

 

Repayment of mortgage notes and loans payable

 

 

(678

)

 

 

(1,877

)

Offering costs

 

 

-

 

 

 

(9,577

)

Net cash (used in) provided by financing activities

 

 

(30,473

)

 

 

93,172

 

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(511

)

 

 

(133,404

)

Cash and cash equivalents at beginning of period

 

 

438,599

 

 

 

307,161

 

Cash and cash equivalents at end of period

 

$

438,088

 

 

$

173,757

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash payments for interest

 

$

78,860

 

 

$

10,665

 

Cash payments for income taxes

 

$

1,213

 

 

$

5,168

 

NON-CASH TRANSACTIONS:

 

 

 

 

 

 

 

 

Dividends and distributions declared but not yet paid

 

$

25,066

 

 

$

-

 

Contributions from non controlling interests called but not yet received

 

 

2,828

 

 

 

-

 

(Purchases) sale of marketable securities

 

 

(441

)

 

 

6,946

 

See notes to combined consolidated financial statements (unaudited).

 

8

 


 

 

PARAMOUNT GROUP, INC. AND PARAMOUNT PREDECESSOR

NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.

Organization and Business

 

As used in these consolidated and combined financial statements, unless indicated otherwise, all references to “we,” “us,” “our,” the “Company,” and “Paramount” refer to Paramount Group, Inc. and its consolidated subsidiaries, including Paramount Group Operating Partnership LP, upon completion of the Formation Transactions (as more fully described below) and the initial public offering of common stock.

 

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, Washington, D.C. and San Francisco. As of June 30, 2015, our portfolio consisted of 12 Class A office properties aggregating approximately 10.4 million square feet that had an occupancy rate of 92.9%.      

 

We were incorporated in Maryland as a corporation on April 14, 2014 to continue the business of our Predecessor, as defined, and did not have any meaningful operations until the acquisition of substantially all of the assets of our Predecessor and the assets of the Property Funds, as defined, that it controlled, as well as the interests of unaffiliated third parties in certain properties. Our properties were acquired through a series of Formation Transactions (the “Formation Transactions”) concurrently with our initial public offering of 150,650,000 common shares at a public offering price of $17.50 per share on November 24, 2014 (the “Offering”).  

 

We conduct our business through, and substantially all of our interests 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 80.4% of, the Operating Partnership as of June 30, 2015.    

 

 

Our Predecessor

 

Our Predecessor is not a legal entity but a combination of entities under common control as they were entities controlled by members of the Otto family that held various assets, including interests in (i) 15 private equity real estate funds controlled by our Predecessor (which included nine primary funds and six parallel funds) (collectively, the “Funds”) that owned interests in 12 properties, (ii) a wholly-owned property, Waterview, in Rosslyn, Virginia and (iii) three partially owned properties in New York, NY (See note 4, Investments in Unconsolidated Joint Ventures).

 

Below is a summary of the 15 private equity real estate funds that were controlled by our Predecessor prior to the completion of the Formation Transactions.

 

The following funds are collectively referred to herein as the “Property Funds”:

 

Paramount Group Real Estate Fund I, L.P. (“Fund I”)

Paramount Group Real Estate Fund II, L.P. (“Fund II”)

Paramount Group Real Estate Fund III, L.P. (“Fund III”)

Paramount Group Real Estate Fund IV, L.P. (“Fund IV”)

PGREF IV Parallel Fund (Cayman), L.P. (“Fund IV Cayman”)

Paramount Group Real Estate Fund V (CIP), L.P. (“Fund V CIP”)

Paramount Group Real Estate Fund V (Core), L.P. (“Fund V Core”)

PGREF V (Core) Parallel Fund (Cayman), L.P. (“Fund V Cayman”)

Paramount Group Real Estate Fund VII, LP (“Fund VII”)

Paramount Group Real Estate Fund VII-H, LP (“Fund VII-H”)

 

 

9

 


PARAMOUNT GROUP, INC. AND PARAMOUNT PREDECESSOR

NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The following fund was formed to acquire, develop and manage the residential development project at 75 Howard Street:

Paramount Group Residential Development Fund, LP (“Residential Fund”)

 

The following funds are collectively referred to herein as the “Alternative Investment Funds”:

Paramount Group Real Estate Special Situations Fund, L.P. (“PGRESS”)

Paramount Group Real Estate Special Situations Fund–H, L.P. (“PGRESS-H”)

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