fma
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, 2016
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 |
x |
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Accelerated Filer |
o |
|
Non-Accelerated Filer |
o |
(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, 2016, there were 219,490,007 shares of the registrant’s common stock outstanding.
Table of Contents
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Item |
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Page Number |
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Part I. |
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Financial Information |
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Item 1. |
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Consolidated Balance Sheets (Unaudited) as of June 30, 2016 and December 31, 2015 |
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3 |
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4 |
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5 |
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6 |
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Consolidated Statements of Cash Flows (Unaudited) for the six months |
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7 |
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9 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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31 |
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Item 3. |
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61 |
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Item 4. |
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63 |
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Part II. |
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Other Information |
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Item 1. |
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64 |
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Item 1A. |
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64 |
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Item 2. |
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64 |
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Item 3. |
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64 |
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Item 4. |
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64 |
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Item 5. |
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64 |
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Item 6. |
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64 |
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65 |
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2
PART I – FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PARAMOUNT GROUP, INC.
(UNAUDITED)
|
(Amounts in thousands, except share and per share amounts) |
|
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ASSETS |
June 30, 2016 |
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December 31, 2015 |
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||
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Rental property, at cost |
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Land |
$ |
2,042,071 |
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$ |
2,042,071 |
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Buildings and improvements |
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5,668,268 |
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5,610,046 |
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|
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7,710,339 |
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7,652,117 |
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Accumulated depreciation and amortization |
|
(323,224 |
) |
|
|
(243,089 |
) |
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Rental property, net |
|
7,387,115 |
|
|
|
7,409,028 |
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Cash and cash equivalents |
|
224,489 |
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143,884 |
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Restricted cash |
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29,043 |
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41,823 |
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Real estate fund investments |
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- |
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416,438 |
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Investments in unconsolidated real estate funds |
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25,798 |
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- |
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Investments in unconsolidated joint ventures |
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5,800 |
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7,102 |
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Preferred equity investments |
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54,595 |
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53,941 |
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Marketable securities |
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21,477 |
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21,521 |
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Deferred rent receivable |
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122,334 |
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77,792 |
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Accounts and other receivables, net of allowance of $366 and $365 |
|
10,895 |
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10,844 |
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Deferred charges, net of accumulated amortization of $17,462 and $14,204 |
|
79,617 |
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74,991 |
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Intangible assets, net of accumulated amortization of $156,683 and $143,987 |
|
435,450 |
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511,207 |
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Other assets |
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11,596 |
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6,658 |
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Total assets (1) |
$ |
8,408,209 |
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$ |
8,775,229 |
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LIABILITIES AND EQUITY |
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Notes and mortgages payable, net of deferred financing costs of $23,382 and $18,914 |
$ |
3,012,290 |
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$ |
2,922,610 |
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Revolving credit facility |
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20,000 |
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20,000 |
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Due to affiliates |
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27,299 |
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27,299 |
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Loans payable to noncontrolling interests |
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- |
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45,662 |
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Accounts payable and accrued expenses |
|
147,048 |
|
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102,730 |
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Dividends and distributions payable |
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25,151 |
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25,067 |
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Deferred income taxes |
|
246 |
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2,533 |
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Interest rate swap liabilities |
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102,577 |
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93,936 |
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Intangible liabilities, net of accumulated amortization of $62,363 and $41,931 |
|
154,658 |
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179,741 |
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Other liabilities |
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45,997 |
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45,101 |
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Total liabilities (1) |
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3,535,266 |
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3,464,679 |
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Commitments and contingencies |
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Paramount Group, Inc. equity: |
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Common stock $0.01 par value per share; authorized 900,000,000 shares; issued and outstanding 219,490,007 and 212,112,137 shares in 2016 and 2015, respectively |
|
2,195 |
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2,122 |
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Additional paid-in-capital |
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3,927,872 |
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3,802,858 |
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Earnings less than distributions |
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(80,496 |
) |
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(36,120 |
) |
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Accumulated other comprehensive loss |
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(41,498 |
) |
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(7,843 |
) |
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Paramount Group, Inc. equity |
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3,808,073 |
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3,761,017 |
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Noncontrolling interests in: |
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Consolidated real estate funds |
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62,857 |
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414,637 |
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Consolidated joint ventures |
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240,483 |
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236,849 |
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Operating Partnership (45,035,400 and 51,660,088 units outstanding) |
|
761,530 |
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|
898,047 |
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Total equity |
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4,872,943 |
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5,310,550 |
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Total liabilities and equity |
$ |
8,408,209 |
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|
$ |
8,775,229 |
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(1) |
Represents the consolidated assets and liabilities of Paramount Group Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership”). The Operating Partnership is a consolidated variable interest entity (“VIE”), of which we are the sole general partner and own approximately 83.0%. As of June 30, 2016, the assets and liabilities of the Operating Partnership include $1,503,938 and $987,546 of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership. See Note 11, Variable Interest Entities. |
See notes to consolidated financial statements (unaudited).
3
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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For the Three Months Ended June 30, |
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For the Six Months Ended June 30, |
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(Amounts in thousands, except share and per share amounts) |
2016 |
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2015 |
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2016 |
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2015 |
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||||
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REVENUES: |
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Rental income |
$ |
155,181 |
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$ |
145,917 |
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$ |
296,433 |
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$ |
289,160 |
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Tenant reimbursement income |
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10,334 |
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12,063 |
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21,123 |
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25,551 |
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Fee and other income |
|
6,788 |
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|
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4,948 |
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27,665 |
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|
9,443 |
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Total revenues |
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172,303 |
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162,928 |
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345,221 |
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324,154 |
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EXPENSES: |
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Operating |
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59,994 |
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|
57,781 |
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122,939 |
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|
119,665 |
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Depreciation and amortization |
|
67,287 |
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|
79,421 |
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|
142,099 |
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|
153,004 |
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General and administrative |
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12,139 |
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|
9,133 |
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26,100 |
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21,746 |
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Acquisition and transaction related costs |
|
508 |
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|
8,208 |
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1,443 |
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|
9,347 |
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Total expenses |
|
139,928 |
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|
154,543 |
|
|
|
292,581 |
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|
|
303,762 |
|
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Operating income |
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32,375 |
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|
|
8,385 |
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|
52,640 |
|
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|
20,392 |
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Income from real estate fund investments |
|
- |
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|
14,072 |
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- |
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|
19,293 |
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Loss from unconsolidated real estate funds |
|
(960 |
) |
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|
- |
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(1,286 |
) |
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- |
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Income from unconsolidated joint ventures |
|
2,003 |
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|
2,011 |
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|
3,499 |
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|
2,986 |
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Interest and other income, net |
|
1,030 |
|
|
|
512 |
|
|
|
2,730 |
|
|
|
1,366 |
|
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Interest and debt expense |
|
(38,009 |
) |
|
|
(42,236 |
) |
|
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(75,128 |
) |
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|
(84,124 |
) |
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Unrealized gain on interest rate swaps |
|
10,073 |
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|
|
21,747 |
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|
16,933 |
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|
33,725 |
|
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Net income (loss) before income taxes |
|
6,512 |
|
|
|
4,491 |
|
|
|
(612 |
) |
|
|
(6,362 |
) |
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Income tax benefit (expense) |
|
1,398 |
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|
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(1,343 |
) |
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|
1,035 |
|
|
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(1,917 |
) |
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Net income (loss) |
|
7,910 |
|
|
|
3,148 |
|
|
|
423 |
|
|
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(8,279 |
) |
|
|
Less net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated real estate funds |
|
78 |
|
|
|
(6,532 |
) |
|
|
752 |
|
|
|
(8,741 |
) |
|
|
Consolidated joint ventures |
|
(4,107 |
) |
|
|
(2,472 |
) |
|
|
(5,359 |
) |
|
|
(931 |
) |
|
|
Operating Partnership |
|
(693 |
) |
|
|
1,147 |
|
|
|
878 |
|
|
|
3,511 |
|
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|
Net income (loss) attributable to common stockholders |
$ |
3,188 |
|
|
$ |
(4,709 |
) |
|
$ |
(3,306 |
) |
|
$ |
(14,440 |
) |
|
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INCOME (LOSS) PER COMMON SHARE - BASIC: |
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|
|
Income (loss) per common share |
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.07 |
) |
|
|
Weighted average shares outstanding |
|
217,121,592 |
|
|
|
212,106,718 |
|
|
|
214,762,593 |
|
|
|
212,106,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) PER COMMON SHARE - DILUTED: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share |
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.07 |
) |
|
|
Weighted average shares outstanding |
|
217,137,557 |
|
|
|
212,106,718 |
|
|
|
214,762,593 |
|
|
|
212,106,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS PER COMMON SHARE |
$ |
0.095 |
|
|
$ |
0.095 |
|
|
$ |
0.190 |
|
|
$ |
0.229 |
|
(1) |
|
(1) |
Includes 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 consolidated financial statements (unaudited).
4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
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||||||||||
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For the Three Months Ended June 30, |
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|
For the Six Months Ended June 30, |
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||||||||||
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(Amounts in thousands) |
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
Net income (loss) |
$ |
7,910 |
|
|
$ |
3,148 |
|
|
$ |
423 |
|
|
$ |
(8,279 |
) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of interest rate swaps |
|
(11,747 |
) |
|
|
- |
|
|
|
(41,614 |
) |
|
|
- |
|
|
Pro rata share of other comprehensive (loss) income of unconsolidated joint ventures |
|
(44 |
) |
|
|
(613 |
) |
|
|
63 |
|
|
|
(613 |
) |
|
Comprehensive (loss) income |
|
(3,881 |
) |
|
|
2,535 |
|
|
|
(41,128 |
) |
|
|
(8,892 |
) |
|
Less comprehensive (income) loss attributable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated real estate funds |
|
78 |
|
|
|
(6,532 |
) |
|
|
752 |
|
|
|
(8,741 |
) |
|
Consolidated joint ventures |
|
(4,107 |
) |
|
|
(2,472 |
) |
|
|
(5,359 |
) |
|
|
(931 |
) |
|
Operating Partnership |
|
1,415 |
|
|
|
1,267 |
|
|
|
8,774 |
|
|
|
3,631 |
|
|
Comprehensive loss attributable to common stockholders |
$ |
(6,495 |
) |
|
$ |
(5,202 |
) |
|
$ |
(36,961 |
) |
|
$ |
(14,933 |
) |
See notes to consolidated financial statements (unaudited).
5
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
|
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests in |
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|
|
|
||||||||||||||
|
(Amounts in thousands, except per share amounts) |
|
Shares |
|
|
Amount |
|
|
Additional Paid in Capital |
|
|
Earnings (Less than) In Excess of Distributions |
|
|
Accumulated Other Comprehensive Loss |
|
|
Consolidated Real Estate Funds |
|
|
Consolidated Joint Ventures |
|
|
Operating Partnership |
|
|
Total Equity |
|
|||||||||
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|
|
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|
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|
|
|
|
|
|
|
|
Balance as of December 31, 2014 |
|
|
212,107 |
|
|
$ |
2,122 |
|
|
$ |
3,851,432 |
|
|
$ |
57,308 |
|
|
$ |
- |
|
|
$ |
338,070 |
|
|
$ |
347,818 |
|
|
$ |
958,203 |
|
|
$ |
5,554,953 |
|
|
Net (loss) income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(14,440 |
) |
|
|
- |
|
|
|
8,741 |
|
|
|
931 |
|
|
|
(3,511 |
) |
|
|
(8,279 |
) |
|
Common shares and units issued under Omnibus share plan |
|
|
5 |
|
|
|
- |
|
|
|
(2,131 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,131 |
|
|
|
- |
|
|
Dividends and distributions ($0.229 per share and unit) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(48,573 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11,819 |
) |
|
|
(60,392 |
) |
|
Contributions from noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,501 |
|
|
|
2,530 |
|
|
|
- |
|
|
|
14,031 |
|
|
Distributions to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,957 |
) |
|
|
(716 |
) |
|
|
- |
|
|
|
(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 |
) |
|
$ |
353,033 |
|
|
$ |
350,563 |
|
|
$ |
904,683 |
|
|
$ |
5,497,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015 |
|
|
212,112 |
|
|
$ |
2,122 |
|
|
$ |
3,802,858 |
|
|
$ |
(36,120 |
) |
|
$ |
(7,843 |
) |
|
$ |
414,637 |
|
|
$ |
236,849 |
|
|
$ |
898,047 |
|
|
$ |
5,310,550 |
|
|
Deconsolidation of real estate fund investments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(351,035 |
) |
|
|
- |
|
|
|
- |
|
|
|
(351,035 |
) |
|
Balance as of January 1, 2016 |
|
|
212,112 |
|
|
$ |
2,122 |
|
|
$ |
3,802,858 |
|
|
$ |
(36,120 |
) |
|
$ |
(7,843 |
) |
|
$ |
63,602 |
|
|
$ |
236,849 |
|
|
$ |
898,047 |
|
|
$ |
4,959,515 |
|
|
Net (loss) income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,306 |
) |
|
|
- |
|
|
|
(752 |
) |
|
|
5,359 |
|
|
|
(878 |
) |
|
|
423 |
|
|
Common shares issued upon redemption of common units |
|
|
7,277 |
|
|
|
73 |
|
|
|
124,006 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(124,079 |
) |
|
|
- |
|
|
Common shares and units issued under Omnibus share plan |
|
|
101 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Dividends and distributions ($0.190 per share and unit) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(41,090 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9,208 |
) |
|
|
(50,298 |
) |
|
Distributions to noncontrolling interests |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,740 |
) |
|
|
- |
|
|
|
(1,740 |
) |
|
Change in value of interest rate swaps |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(33,705 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7,909 |
) |
|
|
(41,614 |
) |
|
Pro rata share of other comprehensive income of unconsolidated joint ventures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
50 |
|
|
|
- |
|
|
|
- |
|
|
|
13 |
|
|
|
63 |
|
|
Amortization of equity awards |
|
|
- |
|
|
|
- |
|
|
|
1,175 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,544 |
|
|
|
6,719 |
|
|
Other |
|
|
- |
|
|
|
- |
|
|
|
(167 |
) |
|
|
20 |
|
|
|
- |
|
|
|
7 |
|
|
|
15 |
|
|
|
- |
|
|
|
(125 |
) |
|
Balance as of June 30, 2016 |
|
|
219,490 |
|
|
$ |
2,195 |
|
|
$ |
3,927,872 |
|
|
$ |
(80,496 |
) |
|
$ |
(41,498 |
) |
|
$ |
62,857 |
|
|
$ |
240,483 |
|
|
$ |
761,530 |
|
|
$ |
4,872,943 |
|
See notes to consolidated financial statements (unaudited).
6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the Six Months Ended June 30, |
|
|||||
|
(Amounts in thousands) |
2016 |
|
|
2015 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
423 |
|
|
$ |
(8,279 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
142,099 |
|
|
|
153,004 |
|
|
Amortization of deferred financing costs |
|
2,663 |
|
|
|
1,170 |
|
|
Straight-lining of rental income |
|
(44,542 |
) |
|
|
(32,042 |
) |
|
Amortization of above and below-market leases, net |
|
(3,481 |
) |
|
|
(1,762 |
) |
|
Unrealized gain on interest rate swaps |
|
(16,933 |
) |
|
|
(33,725 |
) |
|
Transfer taxes due in connection with the sale of shares by a former joint venture partner |
|
- |
|
|
|
5,872 |
|
|
Realized and unrealized losses (gains) on marketable securities |
|
312 |
|
|
|
(924 |
) |
|
Realized and unrealized gains, net, on real estate fund investments |
|
- |
|
|
|
(12,136 |
) |
|
Income from unconsolidated joint ventures |
|
(3,499 |
) |
|
|
(2,986 |
) |
|
Loss from unconsolidated real estate funds |
|
1,286 |
|
|
|
- |
|
|
Distributions of income from unconsolidated real estate funds |
|
84 |
|
|
|
- |
|
|
Distributions of income from unconsolidated joint ventures |
|
4,838 |
|
|
|
1,993 |
|
|
Amortization of stock-based compensation expense |
|
6,183 |
|
|
|
4,405 |
|
|
Other non-cash adjustments |
|
957 |
|
|
|
3,686 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Real estate fund investments |
|||||||