– Raises Guidance for Full Year 2023 –
Paramount Group, Inc. (NYSE: PGRE) (“Paramount” or the
“Company”) filed its Quarterly Report on Form 10-Q for the quarter
ended March 31, 2023 today and reported results for the first
quarter ended March 31, 2023.
First Quarter Highlights:
Results of Operations:
- Reported net income attributable to common stockholders of $1.7
million, or $0.01 per diluted share, for the quarter ended March
31, 2023, compared to $3.4 million, or $0.02 per diluted share, for
the quarter ended March 31, 2022.
- Reported Core Funds from Operations (“Core FFO”) attributable
to common stockholders of $56.2 million, or $0.26 per diluted
share, for the quarter ended March 31, 2023, compared to $54.6
million, or $0.25 per diluted share, for the quarter ended March
31, 2022.
- Raised its full year 2023 Earnings Guidance as follows:
- Estimated net loss attributable to common stockholders is
expected to be between $0.11 and $0.07 per diluted share, compared
to its prior estimate of $0.13 and $0.07 per diluted share, an
increase in net income of $0.01 per diluted share at the midpoint
of the Company's prior estimate.
- Estimated Core FFO attributable to common stockholders is
expected to be between $0.90 and $0.94 per diluted share, compared
to its prior estimate of $0.88 and $0.94 per diluted share, an
increase of $0.01 per diluted share at the midpoint of the
Company's prior guidance.
- Reported a 7.1% increase in Same Store Net Operating Income
(“NOI”) and a 0.1% increase in Same Store Cash NOI in the quarter
ended March 31, 2023, compared to the same period in the prior
year.
- Leased 195,634 square feet, of which the Company’s share was
170,333 square feet that was leased at a weighted average initial
rent of $82.21 per square foot. Of the 195,634 square feet leased,
143,882 square feet represented the Company’s share of second
generation space(1), for which mark-to-markets were 0.9% on a GAAP
basis and negative 1.9% on a cash basis.
- Declared a first quarter cash dividend of $0.0775 per common
share on March 15, 2023, which was paid on April 14, 2023.
___________________ (1) Second generation space represents space
leased in the current period that has been (i) vacant for less than
twelve months, or (ii) pre-leased prior to its scheduled
expiration.
Financial Results
Quarter Ended March 31,
2023
Net income attributable to common stockholders was $1.7 million,
or $0.01 per diluted share, for the quarter ended March 31, 2023,
compared to $3.4 million, or $0.02 per diluted share, for the
quarter ended March 31, 2022.
Funds from Operations (“FFO”) attributable to common
stockholders was $56.8 million, or $0.26 per diluted share, for the
quarter ended March 31, 2023, compared to $54.9 million, or $0.25
per diluted share, for the quarter ended March 31, 2022. FFO
attributable to common stockholders for the quarters ended March
31, 2023 and 2022 includes the impact of certain non-core items,
which are listed in the table on page 8. While the aggregate of the
non-core items, net of amounts attributable to noncontrolling
interests, increased FFO attributable to common stockholders for
the quarter ended March 31, 2023 and 2022 by $0.6 million and $0.3
million, respectively, it had no impact on FFO per diluted share in
either period.
Core FFO attributable to common stockholders, which excludes the
impact of the non-core items listed on page 8, was $56.2 million,
or $0.26 per diluted share, for the quarter ended March 31, 2023,
compared to $54.6 million, or $0.25 per diluted share, for the
quarter ended March 31, 2022.
Portfolio Operations
Quarter Ended March 31,
2023
Same Store NOI increased by $6.8 million, or 7.1%, to $102.4
million for the quarter ended March 31, 2023 from $95.6 million for
the quarter ended March 31, 2022. Same Store Cash NOI increased by
$0.1 million, or 0.1%, to $95.4 million for the quarter ended March
31, 2023 from $95.3 million for the quarter ended March 31,
2022.
During the quarter ended March 31, 2023, the Company leased
195,634 square feet, of which the Company’s share was 170,333
square feet that was leased at a weighted average initial rent of
$82.21 per square foot. This leasing activity, offset by lease
expirations in the quarter, decreased leased occupancy and same
store leased occupancy (properties owned by the Company in a
similar manner during both reporting periods) by 150 basis points
to 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 the Company's New York portfolio.
Of the 195,634 square feet leased in the first quarter, 143,882
square feet represented the Company’s share of second generation
space for which mark-to-markets were 0.9% on a GAAP basis and
negative 1.9% on a cash basis. The weighted average lease term for
leases signed during the first quarter was 13.0 years and weighted
average tenant improvements and leasing commissions on these leases
were $12.77 per square foot per annum, or 15.5% of initial
rent.
Guidance
The Company is raising its Estimated Core FFO Guidance for the
full year of 2023, which is reconciled below to estimated net loss
attributable to common stockholders per diluted share in accordance
with GAAP. The Company estimates that net loss attributable to
common stockholders will be between $0.11 and $0.07 per diluted
share, compared to its prior estimate of $0.13 and $0.07 per
diluted share, an increase in net income of $0.01 per diluted share
at the midpoint of the Company's prior estimate. The estimated net
loss attributable to common stockholders per diluted share is not a
projection and is being provided solely to satisfy the disclosure
requirements of the U.S. Securities and Exchange Commission.
Based on the Company’s performance for the three months ended
March 31, 2023 and its outlook for the remainder of 2023, the
Company is raising its Estimated 2023 Core FFO to be between $0.90
and $0.94 per diluted share, compared to its prior estimate of
$0.88 and $0.94 per diluted share. This represents an increase of
$0.01 per diluted share at the midpoint of the Company's prior
guidance, resulting primarily from better than expected portfolio
operations.
Full Year 2023
(Amounts per diluted share)
Low
High
Estimated net loss attributable to common
stockholders
$
(0.11
)
$
(0.07
)
Pro rata share of real estate depreciation
and amortization, including the Company's share of unconsolidated
joint ventures
1.01
1.01
Estimated Core FFO
$
0.90
$
0.94
Except as described above, these estimates reflect management’s
view of current and future market conditions, including assumptions
with respect to rental rates, occupancy levels and the earnings
impact of the events referenced in this release and otherwise to be
referenced during the conference call referred to on page 5. These
estimates do not include the impact on operating results from the
Federal Deposit Insurance Corporation being appointed as receiver
of our tenant First Republic Bank and the acquisition of all
deposit accounts and substantially all the assets of First Republic
Bank by JPMorgan Chase Bank, possible future property acquisitions
or dispositions, or realized and unrealized gains and losses on
real estate related fund investments. The estimates set forth above
may be subject to fluctuations as a result of several factors,
including the negative impact of the COVID-19 global pandemic.
There can be no assurance that the Company’s actual results will
not differ materially from the estimates set forth above.
Forward-Looking Statements
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 ability to enter into new leases or renew
leases on favorable terms; dependence on tenants’ financial
condition; the risk we may lose a major tenant or that a major
tenant may be adversely impacted by market and economic conditions,
including rising inflation and interest rates; the impact of the
Federal Deposit Insurance Corporation being appointed as receiver
of our tenant First Republic Bank and the acquisition of all
deposit accounts and substantially all the assets of First Republic
Bank by JPMorgan Chase Bank; trends in the office real estate
industry including telecommuting, flexible work schedules, open
workplaces and teleconferencing; the uncertainties of real estate
development, acquisition and disposition activity; the ability to
effectively integrate acquisitions; fluctuations in interest rates
and 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
and the impact of rising inflation and interest rates on such
market conditions; the effects of acquisitions, dispositions and
possible impairment charges on our operating results; the negative
impact of the COVID-19 global pandemic or any future pandemic,
endemic or outbreak of infectious disease on the U.S., regional and
global economies and our tenants’ financial condition and results
of operations; 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.
Non-GAAP Financial Measures
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.
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
the 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 the Company 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, 2023, which is available on our website.
Investor Conference Call and Webcast
The Company will host a conference call and audio webcast on
Thursday, May 4, 2023 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 877-300-8521
(domestic) or 412-317-6026 (international). An audio replay of the
conference call will be available from 2:00 p.m. ET on May 4, 2023
through May 11, 2023 and can be accessed by dialing 844-512-2921
(domestic) or 412-317-6671 (international) and entering the
passcode 10177231.
A live audio webcast of the conference call will be available
through the “Investors” section of the Company’s website,
www.pgre.com. A replay of the webcast will be archived on the
Company’s website.
About Paramount Group, Inc.
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.
Paramount Group, Inc.
Consolidated Balance
Sheets
(Unaudited and in thousands)
Assets:
March 31, 2023
December 31, 2022
Real estate, at cost:
Land
$
1,966,237
$
1,966,237
Buildings and improvements
6,185,311
6,177,540
8,151,548
8,143,777
Accumulated depreciation and
amortization
(1,337,552
)
(1,297,553
)
Real estate, net
6,813,996
6,846,224
Cash and cash equivalents
451,796
408,905
Restricted cash
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
385,034
393,503
Deferred rent receivable
354,326
346,338
Deferred charges, net
120,359
120,685
Intangible assets, net
84,352
90,381
Other assets
80,282
73,660
Total assets
$
8,480,089
$
8,453,254
Liabilities:
Notes and mortgages payable, net
$
3,841,492
$
3,840,318
Revolving credit facility
-
-
Accounts payable and accrued expenses
118,932
123,176
Dividends and distributions payable
18,110
18,026
Intangible liabilities, net
33,938
36,193
Other liabilities
30,537
24,775
Total liabilities
4,043,009
4,042,488
Equity:
Paramount Group, Inc. equity
3,562,571
3,592,291
Noncontrolling interests in:
Consolidated joint ventures
403,902
402,118
Consolidated real estate related funds
220,206
173,375
Operating Partnership
250,401
242,982
Total equity
4,437,080
4,410,766
Total liabilities and equity
$
8,480,089
$
8,453,254
Paramount Group, Inc.
Consolidated Statements of
Income
(Unaudited and in thousands,
except share and per share amounts)
For the Three Months
Ended
March 31,
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
Per Share:
Basic
$
0.01
$
0.02
Diluted
$
0.01
$
0.02
Weighted average common shares
outstanding:
Basic
216,563,108
218,782,296
Diluted
216,617,020
218,840,094
Paramount Group, Inc.
Reconciliation of Net Income
to FFO and Core FFO
(Unaudited and in thousands,
except share and per share amounts)
For the Three Months
Ended
March 31,
2023
2022
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)
68,431
65,825
FFO
76,745
71,947
Less FFO attributable to noncontrolling
interests in:
Consolidated joint ventures
(15,175
)
(12,515
)
Consolidated real estate related funds
(830
)
1,009
FFO attributable to Paramount Group
Operating Partnership
60,740
60,441
Less FFO attributable to noncontrolling
interests in Operating Partnership
(3,961
)
(5,568
)
FFO attributable to common
stockholders
$
56,779
$
54,873
Per diluted share
$
0.26
$
0.25
FFO
$
76,745
$
71,947
Non-core items:
FFO attributable to One Steuart Lane,
including after-tax net gain on sale of residential condominium
units
2,409
1,262
Adjustment to equity in earnings for
contributions to (distributions from unconsolidated joint
ventures
(1,322
)
(583
)
Adjustments for realized and unrealized
gains and losses on consolidated and unconsolidated real estate
related fund investments
1,335
47
Other, net
128
117
Core FFO
79,295
72,790
Less Core FFO attributable to
noncontrolling interests in:
Consolidated joint ventures
(15,175
)
(12,515
)
Consolidated real estate related funds
(4,027
)
(159
)
Core FFO attributable to Paramount Group
Operating Partnership
60,093
60,116
Less Core FFO attributable to
noncontrolling interests in Operating Partnership
(3,919
)
(5,538
)
Core FFO attributable to common
stockholders
$
56,174
$
54,578
Per diluted share
$
0.26
$
0.25
Reconciliation of weighted average
shares outstanding:
Weighted average shares outstanding
216,563,108
218,782,296
Effect of dilutive securities
53,912
57,798
Denominator for FFO and Core FFO per
diluted share
216,617,020
218,840,094
Paramount Group, Inc.
Reconciliation of Net Income
to Same Store NOI and Same Store Cash NOI
(Unaudited and in thousands)
For the Three Months
Ended
March 31,
2023
2022
Reconciliation of Net Income to Same
Store NOI and Same Store Cash NOI:
Net income
$
8,314
$
6,122
Add (subtract) adjustments to arrive at
NOI and Cash NOI:
Depreciation and amortization
58,888
55,624
General and administrative
14,623
15,645
Interest and debt expense
36,459
34,277
Income tax expense
288
527
Income from real estate related fund
investments
(3,550
)
-
NOI from unconsolidated joint ventures
(excluding One Steuart Lane)
10,381
11,234
Loss from unconsolidated joint
ventures
5,762
5,113
Fee income
(4,557
)
(11,988
)
Interest and other income, net
(2,925
)
(231
)
Other, net
306
(53
)
NOI
123,989
116,270
Less NOI attributable to noncontrolling
interests in:
Consolidated joint ventures
(22,712
)
(20,322
)
PGRE's share of NOI
101,277
95,948
Lease termination income
-
(1,718
)
Acquisitions / Redevelopment and other,
net
1,079
1,314
PGRE's share of Same Store NOI
$
102,356
$
95,544
NOI
$
123,989
$
116,270
Less:
Straight-line rent adjustments (including
our share of unconsolidated joint ventures)
(7,691
)
1,658
Amortization of above and below-market
leases, net (including our share of unconsolidated joint
ventures)
(1,838
)
(1,197
)
Cash NOI
114,460
116,731
Less Cash NOI attributable to
noncontrolling interests in:
Consolidated joint ventures
(19,845
)
(20,513
)
PGRE's share of Cash NOI
94,615
96,218
Lease termination income
-
(1,718
)
Acquisitions / Redevelopment and other,
net
753
749
PGRE's share of Same Store Cash
NOI
$
95,368
$
95,249
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005857/en/
Wilbur Paes Chief Operating Officer, Chief Financial Officer and
Treasurer 212-237-3122 ir@pgre.com
Tom Hennessy Vice President, Investor Relations and Business
Development 212-237-3138 ir@pgre.com
Media: 212-492-2285 pr@pgre.com
Paramount (NYSE:PGRE)
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Paramount (NYSE:PGRE)
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