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:
•unfavorable market and economic conditions in the United States, including New York City and San Francisco, and globally, including as a result of rising inflation and interest rates;
•risks associated with high concentrations of our properties in New York City and San Francisco;
•risks associated with ownership of real estate;
•decreased rental rates or increased vacancy rates;
•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;
•limited ability to dispose of assets because of the relative illiquidity of real estate investments;
•intense competition in the real estate market that may limit our ability to acquire attractive investment opportunities and increase the costs of those opportunities;
•insufficient amounts of insurance;
•uncertainties and risks related to adverse weather conditions, natural disasters and climate change;
•risks associated with actual or threatened terrorist attacks;
•exposure to liability relating to environmental and health and safety matters;
•high costs associated with compliance with the Americans with Disabilities Act;
•failure of acquisitions to yield anticipated results;
•risks associated with real estate activity through our joint ventures and real estate related funds;
•the negative impact of the coronavirus 2019 (“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;
•general volatility of the capital and credit markets and the market price of our common stock;
27
•exposure to litigation or other claims;
•risks associated with security breaches through cyber attacks or cyber intrusions and other significant disruptions of our information technology (“IT”) networks and related systems;
•risks associated with our substantial indebtedness;
•failure to refinance current or future indebtedness on favorable terms, or at all;
•failure to meet the restrictive covenants and requirements in our existing debt agreements;
•fluctuations in interest rates and increased costs to refinance or issue new debt;
•risks associated with variable rate debt, derivatives or hedging activity;
•risks associated with the market for our common stock;
•regulatory changes, including changes to tax laws and regulations;
•failure to qualify as a real estate investment trust (“REIT”);
•compliance with REIT requirements, which may cause us to forgo otherwise attractive opportunities or liquidate certain of our investments; or
•any of the other risks included in this Quarterly Report on Form 10-Q or in our Annual Report on Form 10-K for the year ended December 31, 2022, including those set forth in Item 1A entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.
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, 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, 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.
28
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 93.5% of, the Operating Partnership as of March 31, 2023.
As of March 31, 2023, we owned and/or managed a portfolio of 18 properties aggregating 13.8 million square feet comprised of:
•Eight wholly and partially owned Class A properties aggregating 8.7 million square feet in New York, comprised of 8.2 million square feet of office space and 0.5 million square feet of retail, theater and amenity space;
•Six wholly and partially owned Class A properties aggregating 4.3 million square feet in San Francisco, comprised of 4.1 million square feet of office space and 0.2 million square feet of retail space; and
•Four managed properties aggregating 0.8 million square feet in New York and Washington, D.C.
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.
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. As of December 31, 2022, we had repurchased a total of 24,183,768 common shares at a weighted average price of $7.65 per share, or $185,000,000 in the aggregate. As of March 31, 2023 we have $15,000,000 available for future repurchases under the existing program. 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.
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 March 31, 2023
In the three months ended March 31, 2023, we leased 195,634 square feet, of which our 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 the lease expirations in the three months, decreased leased occupancy and same store leased occupancy (properties owned by us 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 our New York portfolio.
Of the 195,634 square feet leased in 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 has been (i) vacant for less than twelve 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 1.9% on a cash basis. The weighted average lease term for leases signed during the three months 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.
New York
In the three months ended March 31, 2023, we leased 118,967 square feet in our New York portfolio, which was leased at a weighted average initial rent of $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 190 basis points to 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 118,967 square feet leased in the three months ended March 31, 2023, 92,516 square feet represented second generation space for which rental rates increased by 8.7% on a GAAP basis and decreased by 3.6% on a cash basis. The weighted average lease term for leases signed during the three months was 16.5 years and weighted average tenant improvements and leasing commissions on these leases were $11.82 per square foot per annum, or 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
The following table presents additional details on the leases signed during the three months ended 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 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 |
%) |
|
(1)Represents the weighted average cash basis starting rent per square foot and does not include free rent or periodic step-ups in rent.
(2)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.
(3)Represents the weighted average cash basis rents (including reimbursements) per square foot at expiration.
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 March 31, 2023 |
|
89.8 |
% |
|
|
90.2 |
% |
|
|
88.7 |
% |
|
As of December 31, 2022 |
|
91.3 |
% |
|
|
92.1 |
% |
|
|
88.9 |
% |
(1)Represents percentage of square feet that is leased, including signed leases not yet commenced, for properties that were owned by us in a similar manner during both the current and prior reporting periods.
31
Financial Results - Three Months Ended March 31, 2023 and 2022
Net Income, FFO and Core FFO
Net income attributable to common stockholders was $1,729,000, or $0.01 per diluted share, for the three months ended March 31, 2023, compared to $3,371,000, or $0.02 per diluted share, for the three months ended March 31, 2022.
Funds from Operations (“FFO”) attributable to common stockholders was $56,779,000, or $0.26 per diluted share, for the three months ended March 31, 2023, compared to $54,873,000, or $0.25 per diluted share, for the three months ended March 31, 2022. FFO attributable to common stockholders for the three months ended March 31, 2023 and 2022 includes the impact of other non-core items, which are listed in the table on page 44. While the aggregate of the non-core items, net of amounts attributable to noncontrolling interests, increased FFO attributable to common stockholders for the three months ended March 31, 2023 and 2022 by $605,000 and $295,000, respectively, it had no impact on FFO per diluted share 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 44, was $56,174,000, or $0.26 per diluted share, for the three months ended March 31, 2023, compared to $54,578,000, or $0.25 per diluted share, for the three months ended 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 March 31, 2023 versus March 31, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
New York |
|
|
San Francisco |
|
Same Store NOI |
|
|
7.1 |
% |
|
|
5.4 |
% |
|
|
10.9 |
% |
Same Store Cash NOI |
|
|
0.1 |
% |
|
|
(0.7 |
%) |
|
|
1.9 |
% |
See pages 40-44 “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.
32
Results of Operations - Three Months Ended March 31, 2023 and 2022
The following pages summarize our consolidated results of operations for the three months ended March 31, 2023 and 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
|
|
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
|
Change |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Rental revenue |
$ |
181,713 |
|
|
$ |
169,922 |
|
|
$ |
11,791 |
|
|
Fee and other income |
|
6,761 |
|
|
|
13,763 |
|
|
|
(7,002 |
) |
|
|
Total revenues |
|
188,474 |
|
|
|
183,685 |
|
|
|
4,789 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
Operating |
|
70,309 |
|
|
|
66,661 |
|
|
|
3,648 |
|
|
Depreciation and amortization |
|
58,888 |
|
|
|
55,624 |
|
|
|
3,264 |
|
|
General and administrative |
|
14,623 |
|
|
|
15,645 |
|
|
|
(1,022 |
) |
|
Transaction related costs |
|
128 |
|
|
|
117 |
|
|
|
11 |
|
|
|
Total expenses |
|
143,948 |
|
|
|
138,047 |
|
|
|
5,901 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Income from real estate related fund investments |
|
3,550 |
|
|
|
- |
|
|
|
3,550 |
|
|
(Loss) income from unconsolidated real estate related funds |
|
(178 |
) |
|
|
170 |
|
|
|
(348 |
) |
|
Loss from unconsolidated joint ventures |
|
(5,762 |
) |
|
|
(5,113 |
) |
|
|
(649 |
) |
|
Interest and other income, net |
|
2,925 |
|
|
|
231 |
|
|
|
2,694 |
|
|
Interest and debt expense |
|
(36,459 |
) |
|
|
(34,277 |
) |
|
|
(2,182 |
) |
Income before income taxes |
|
8,602 |
|
|
|
6,649 |
|
|
|
1,953 |
|
|
Income tax expense |
|
(288 |
) |
|
|
(527 |
) |
|
|
239 |
|
Net income |
|
8,314 |
|
|
|
6,122 |
|
|
|
2,192 |
|
Less net (income) loss attributable to noncontrolling |
|
|
|
|
|
|
|
|
interests in: |
|
|
|
|
|
|
|
|
|
Consolidated joint ventures |
|
(5,641 |
) |
|
|
(3,425 |
) |
|
|
(2,216 |
) |
|
Consolidated real estate related funds |
|
(823 |
) |
|
|
1,016 |
|
|
|
(1,839 |
) |
|
Operating Partnership |
|
(121 |
) |
|
|
(342 |
) |
|
|
221 |
|
Net income attributable to common stockholders |
$ |
1,729 |
|
|
$ |
3,371 |
|
|
$ |
(1,642 |
) |
33
Revenues
Our revenues, which consist of rental revenue and fee and other income, were $188,474,000 for the three months ended March 31, 2023, compared to $183,685,000 for the three months ended March 31, 2022, an increase of $4,789,000. Below are the details of the increase or decrease by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
Rental revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store operations |
|
$ |
13,374 |
|
|
$ |
3,097 |
|
(1) |
$ |
10,277 |
|
(1) |
$ |
- |
|
|
Other, net |
|
|
(1,583 |
) |
|
|
(1,771 |
) |
(2) |
|
- |
|
|
|
188 |
|
|
Increase in rental revenue |
|
$ |
11,791 |
|
|
$ |
1,326 |
|
|
$ |
10,277 |
|
|
$ |
188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset management |
|
$ |
(710 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(710 |
) |
|
Property management |
|
|
(357 |
) |
|
|
- |
|
|
|
- |
|
|
|
(357 |
) |
|
Acquisition, disposition, leasing and other |
|
|
(6,364 |
) |
|
|
- |
|
|
|
- |
|
|
|
(6,364 |
) |
(3) |
Decrease in fee income |
|
|
(7,431 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7,431 |
) |
|
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store operations |
|
|
429 |
|
|
|
495 |
|
|
|
(64 |
) |
|
|
(2 |
) |
|
Increase (decrease) in other income |
|
|
429 |
|
|
|
495 |
|
|
|
(64 |
) |
|
|
(2 |
) |
|
(Decrease) increase in fee and other income |
|
$ |
(7,002 |
) |
|
$ |
495 |
|
|
$ |
(64 |
) |
|
$ |
(7,433 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total increase (decrease) in revenues |
|
$ |
4,789 |
|
|
$ |
1,821 |
|
|
$ |
10,213 |
|
|
$ |
(7,245 |
) |
|
(1)Primarily due to higher average occupancy in the current year and higher expense reimbursements from increased operating expenses.
(2)Primarily due to income of $1,809 in the prior year, in connection with a tenant's lease termination at 1633 Broadway.
(3)Primarily due to fee income earned in connection with the acquisition of 1600 Broadway in February 2022.
34
Expenses
Our expenses, which consist of operating, depreciation and amortization, general and administrative and transaction related costs, were $143,948,000 for the three months ended March 31, 2023, compared to $138,047,000 for the three months ended March 31, 2022, an increase of $5,901,000. Below are the details of the 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 |
) |
|
(1)Primarily due to higher operating expenses driven by higher average occupancy in the current year.
Income from Real Estate Related Fund Investments
Income from real estate related fund investments was $3,550,000 for the three months ended March 31, 2023, and represented income attributable to Fund X, which we began consolidating into our consolidated financial statements effective December 12, 2022, and in which we have a 13% ownership interest.
(Loss) Income from Unconsolidated Real Estate Related Funds
Loss from unconsolidated real estate related funds was $178,000 for the three 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 $170,000 for the three months ended March 31, 2022, which represented our share of income from Fund VIII and Fund X.
Loss from Unconsolidated Joint Ventures
Loss from unconsolidated joint ventures was $5,762,000 for the three months ended March 31, 2023, compared to $5,113,000 for the three months ended March 31, 2022, an increase in loss of $649,000. This increase in loss resulted from:
|
|
|
|
|
|
(Amounts in thousands) |
|
|
|
|
Higher loss on One Steuart Lane ($2,416 in 2023, compared to $1,269
in 2022) |
|
$ |
(1,147 |
) |
(1) |
Other, net |
|
|
498 |
|
|
Total increase in loss |
|
$ |
(649 |
) |
|
(1)The loss in the three months ended March 31, 2022 was partially offset by the gain on sale of residential condominium units at One Steuart Lane.
35
Interest and Other Income, net
Interest and other income was $2,925,000 for the three months ended March 31, 2023, compared to $231,000 for the three months ended March 31, 2022, an increase in income of $2,694,000. This increase resulted from higher yields on short-term investments in the current year.
Interest and Debt Expense
Interest and debt expense was $36,459,000 for the three months ended March 31, 2023, compared to $34,277,000 for the three months ended March 31, 2022, an increase of $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 three months compared to the prior year.
Income Tax Expense
Income tax expense was $288,000 for the three months ended March 31, 2023, compared to $527,000 for the three months ended March 31, 2022, a decrease of $239,000. This decrease resulted primarily from lower taxable income attributable to our taxable REIT subsidiaries in the current year.
Net Income Attributable to Noncontrolling Interests in Consolidated Joint Ventures
Net income attributable to noncontrolling interests in consolidated joint ventures was $5,641,000 for the three months ended March 31, 2023, compared to $3,425,000 for the three months ended March 31, 2022, a $2,216,000 increase in net income attributable to noncontrolling interests in consolidated joint ventures. This increase resulted primarily from higher net income attributable to One Market Plaza, resulting from higher average occupancy in the current year.
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 $121,000 for the three months ended March 31, 2023, compared to $342,000 for the three months ended March 31, 2022, a decrease in net income allocated to noncontrolling interests of $221,000. This decrease resulted from (i) lower net income subject to allocation to the unitholders of the Operating Partnership in the current year and (ii) lower ownership in the Operating Partnership due to unit redemptions.
36
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 March 31, 2023, we had $1.26 billion of liquidity comprised of $451,796,000 of cash and cash equivalents, $59,179,000 of restricted cash and $750,000,000 of borrowing capacity under our revolving credit facility.
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 March 31, 2023, our outstanding consolidated debt aggregated $3.86 billion. We had no amounts outstanding under our revolving credit facility. In October 2023, the $273,000,000 mortgage loan at 300 Mission Street is scheduled to mature and 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.
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 March 15, 2023, we declared a quarterly cash dividend of $0.0775 per share of common stock for the first quarter ended March 31, 2023, which was paid on April 14, 2023 to stockholders of record as of the close of business on March 31, 2023. This dividend policy, if continued, would require us to pay out approximately $18,100,000 each quarter to common stockholders and unitholders.
Off Balance Sheet Arrangements
As of March 31, 2023, our unconsolidated joint ventures had $1.74 billion of outstanding indebtedness, of which our share was $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.
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. As of December 31, 2022, we had repurchased a total of 24,183,768 common shares at a weighted average price of $7.65 per share, or $185,000,000 in the aggregate. As of March 31, 2023 we have $15,000,000 available for future repurchases under the existing program. 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.
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 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 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 $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.
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 $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 March 31, 2022 and December 31, 2021, respectively. Cash and cash equivalents and restricted cash increased by $61,158,000 for the three months ended March 31, 2023 and decreased by $61,340,000 for the three months ended March 31, 2022. The following table sets forth the changes in cash flow.
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
(Amounts in thousands) |
2023 |
|
|
2022 |
|
Net cash provided by (used in): |
|
|
|
|
|
Operating activities |
$ |
57,968 |
|
|
$ |
58,674 |
|
Investing activities |
|
(18,883 |
) |
|
|
(88,158 |
) |
Financing activities |
|
22,073 |
|
|
|
(31,856 |
) |
Operating Activities
Three months ended March 31, 2023 – We generated $57,968,000 of cash from operating activities for the three months ended March 31, 2023, primarily from (i) $72,074,000 of net income (before $63,760,000 of non-cash adjustments) and (ii) $195,000 of distributions from unconsolidated joint ventures and real estate related funds, partially offset by (iii) $14,301,000 of net changes in operating assets and liabilities. Non-cash adjustments of $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.
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, 2023 – We used $18,883,000 of cash for investing activities for the three months ended March 31, 2023, for additions to real estate, which were comprised of spending for tenant improvements and other building improvements.
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) $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, (iii) $9,684,000 for our investment in 1600 Broadway, and (iv) $133,000 for contributions of capital to unconsolidated real estate related funds.
Financing Activities
Three months ended March 31, 2023 – We generated $22,073,000 of cash from financing activities for the three months ended March 31, 2023, primarily from (i) $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, (iv) $4,140,000 for distributions to noncontrolling interests in 300 Mission Street and 1633 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.
Three months ended March 31, 2022 – We used $31,856,000 of cash for financing activities for the three months ended March 31, 2022, primarily for (i) $16,895,000 for dividends and distributions to common stockholders and unitholders, (ii) $14,681,000 for distributions to noncontrolling interests in One Market Plaza, 300 Mission Street and 1633 Broadway and (iii) $280,000 for the repurchases of shares related to stock compensation agreements and related tax withholdings.
39
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 months ended March 31, 2023 and 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2023 |
|
(Amounts in thousands) |
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
Reconciliation of net income (loss) to NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
8,314 |
|
|
$ |
5,838 |
|
|
$ |
13,087 |
|
|
$ |
(10,611 |
) |
Add (subtract) adjustments to arrive at NOI and Cash NOI: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
58,888 |
|
|
|
39,167 |
|
|
|
18,482 |
|
|
|
1,239 |
|
General and administrative |
|
14,623 |
|
|
|
- |
|
|
|
- |
|
|
|
14,623 |
|
Interest and debt expense |
|
36,459 |
|
|
|
23,122 |
|
|
|
12,582 |
|
|
|
755 |
|
Income tax expense |
|
288 |
|
|
|
- |
|
|
|
23 |
|
|
|
265 |
|
Income from real estate related fund investments |
|
(3,550 |
) |
|
|
- |
|
|
|
- |
|
|
|
(3,550 |
) |
NOI from unconsolidated joint ventures (excluding
One Steuart Lane) |
|
10,381 |
|
|
|
3,363 |
|
|
|
7,019 |
|
|
|
(1 |
) |
Loss from unconsolidated joint ventures |
|
5,762 |
|
|
|
20 |
|
|
|
3,294 |
|
|
|
2,448 |
|
Fee income |
|
(4,557 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,557 |
) |
Interest and other income, net |
|
(2,925 |
) |
|
|
(442 |
) |
|
|
(434 |
) |
|
|
(2,049 |
) |
Other, net |
|
306 |
|
|
|
- |
|
|
|
- |
|
|
|
306 |
|
NOI |
|
123,989 |
|
|
|
71,068 |
|
|
|
54,053 |
|
|
|
(1,132 |
) |
Less NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
Consolidated joint ventures |
|
(22,712 |
) |
|
|
(2,623 |
) |
|
|
(20,089 |
) |
|
|
- |
|
Paramount's share of NOI |
$ |
101,277 |
|
|
$ |
68,445 |
|
|
$ |
33,964 |
|
|
$ |
(1,132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
NOI |
$ |
123,989 |
|
|
$ |
71,068 |
|
|
$ |
54,053 |
|
|
$ |
(1,132 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
Straight-line rent adjustments (including our share |
|
|
|
|
|
|
|
|
|
|
|
of unconsolidated joint ventures) |
|
(7,691 |
) |
|
|
(3,024 |
) |
|
|
(4,989 |
) |
|
|
322 |
|
Amortization of above and below-market leases, net
(including our share of unconsolidated joint ventures) |
|
(1,838 |
) |
|
|
(320 |
) |
|
|
(1,518 |
) |
|
|
- |
|
Cash NOI |
|
114,460 |
|
|
|
67,724 |
|
|
|
47,546 |
|
|
|
(810 |
) |
Less Cash NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
Consolidated joint ventures |
|
(19,845 |
) |
|
|
(2,778 |
) |
|
|
(17,067 |
) |
|
|
- |
|
Paramount's share of Cash NOI |
$ |
94,615 |
|
|
$ |
64,946 |
|
|
$ |
30,479 |
|
|
$ |
(810 |
) |
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2022 |
|
(Amounts in thousands) |
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
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 |
|
55,624 |
|
|
|
37,613 |
|
|
|
17,065 |
|
|
|
946 |
|
General and administrative |
|
15,645 |
|
|
|
- |
|
|
|
- |
|
|
|
15,645 |
|
Interest and debt expense |
|
34,277 |
|
|
|
20,937 |
|
|
|
12,576 |
|
|
|
764 |
|
Income tax expense |
|
527 |
|
|
|
1 |
|
|
|
4 |
|
|
|
522 |
|
NOI from unconsolidated joint ventures (excluding
One Steuart Lane) |
|
11,234 |
|
|
|
2,818 |
|
|
|
8,354 |
|
|
|
62 |
|
Loss from unconsolidated joint ventures |
|
5,113 |
|
|
|
36 |
|
|
|
3,820 |
|
|
|
1,257 |
|
Fee income |
|
(11,988 |
) |
|
|
- |
|
|
|
- |
|
|
|
(11,988 |
) |
Interest and other (income) loss, net |
|
(231 |
) |
|
|
3 |
|
|
|
(28 |
) |
|
|
(206 |
) |
Other, net |
|
(53 |
) |
|
|
- |
|
|
|
- |
|
|
|
(53 |
) |
NOI |
|
116,270 |
|
|
|
70,012 |
|
|
|
48,151 |
|
|
|
(1,893 |
) |
Less NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
Consolidated joint ventures |
|
(20,322 |
) |
|
|
(2,809 |
) |
|
|
(17,513 |
) |
|
|
- |
|
Paramount's share of NOI |
$ |
95,948 |
|
|
$ |
67,203 |
|
|
$ |
30,638 |
|
|
$ |
(1,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
NOI |
$ |
116,270 |
|
|
$ |
70,012 |
|
|
$ |
48,151 |
|
|
$ |
(1,893 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
Straight-line rent adjustments (including our share |
|
|
|
|
|
|
|
|
|
|
|
of unconsolidated joint ventures) |
|
1,658 |
|
|
|
549 |
|
|
|
1,019 |
|
|
|
90 |
|
Amortization of above and below-market leases, net
(including our share of unconsolidated joint ventures) |
|
(1,197 |
) |
|
|
467 |
|
|
|
(1,664 |
) |
|
|
- |
|
Cash NOI |
|
116,731 |
|
|
|
71,028 |
|
|
|
47,506 |
|
|
|
(1,803 |
) |
Less Cash NOI attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
Consolidated joint ventures |
|
(20,513 |
) |
|
|
(2,915 |
) |
|
|
(17,598 |
) |
|
|
- |
|
Paramount's share of Cash NOI |
$ |
96,218 |
|
|
$ |
68,113 |
|
|
$ |
29,908 |
|
|
$ |
(1,803 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
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 months ended March 31, 2023 and 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
% |
|
|
|
|
(1)See page 40 “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)Includes our share of NOI attributable to 60 Wall Street which was taken "out-of-service" for redevelopment.
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2023 |
|
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
Paramount's share of Cash NOI for the three months |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2023 |
|
$ |
95,368 |
|
|
$ |
64,889 |
|
|
$ |
30,479 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2022 |
|
|
(Amounts in thousands) |
|
Total |
|
|
New York |
|
|
San Francisco |
|
|
Other |
|
|
Paramount's share of Cash NOI for the three months |
|
|
|
|
|
|
|
|
|
|
|
|
|
ended March 31, 2022 (1) |
|
$ |
96,218 |
|
|
$ |
68,113 |
|
|
$ |
29,908 |
|
|
$ |
(1,803 |
) |
|
Lease termination income |
|
|
(1,718 |
) |
|
|
(1,718 |
) |
|
|
- |
|
|
|
- |
|
|
Acquisitions / Redevelopment and other, net |
|
|
749 |
|
|
|
(1,054 |
) |
(2) |
|
- |
|
|
|
1,803 |
|
|
Paramount's share of Same Store Cash NOI for the |
|
|
|
|
|
|
|
|
|
|
|
|
|
three months ended March 31, 2022 |
|
$ |
95,249 |
|
|
$ |
65,341 |
|
|
$ |
29,908 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in Same Store Cash NOI |
|
$ |
119 |
|
|
$ |
(452 |
) |
|
$ |
571 |
|
|
$ |
- |
|
|
% Increase (decrease) |
|
|
0.1 |
% |
|
|
(0.7 |
%) |
|
|
1.9 |
% |
|
|
|
|
(1)See page 40 “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)Includes our share of Cash NOI attributable to 60 Wall Street which was taken "out-of-service" for redevelopment.
43
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 to FFO and Core FFO for the periods set forth below.
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, |
|
(Amounts in thousands, except share and per share amounts) |
|
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 |
|
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 |
|
Adjustments to equity in earnings for contributions to
(distributions from) unconsolidated joint ventures |
|
|
(1,322 |
) |
|
|
(583 |
) |
Adjustment for realized and unrealized losses from 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 |
) |
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 |
|
44