UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 5, 2015

 

 

Paramount Group, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Maryland		001-36746		32-0439307
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

1633 Broadway, Suite 1801 New York, New York		10019
(Address of Principal Executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 237-3100

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02 Results of Operations and Financial Condition.

On November 5, 2015, Paramount Group, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2015. A copy of that press release as well as the supplemental information referred to in the press release is available on the Company’s website and are attached hereto as Exhibits 99.1 and 99.2 and incorporated herein by reference. This Item 2.02 and the attached exhibits 99.1 and 99.2 are being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act.

The Company will host a webcast and conference call at 10:00 a.m. Eastern Time on November 6, 2015, to discuss third quarter 2015 results. The number to call is 1-877-407-0789 (domestic) and 1-201-689-8562 (international). A live webcast will be available in the “Investors” section of the Company’s website. A replay of the conference call will be archived on the Company’s website and will be available through November 13, 2015, by dialing 1-877-870-5176 (domestic) and 1-858-384-5517 (international) and entering the passcode 13621407.

In the press release referred to above, the Company discloses that the non-GAAP financial measure of Core Funds From Operations (“Core FFO”) attributable to common stockholders was $42.3 million, or $0.20 per diluted share, for the quarter ended September 30, 2015. Net income attributable to common stockholders, which is the most directly comparable GAAP financial measure, was $1.1 million, or $0.01 per diluted share, for the quarter ended September 30, 2015.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

 

Exhibit Number		Description
99.1		Press release dated November 5, 2015 and entitled “Paramount Announces Third Quarter 2015 Results”
99.2		Supplemental information entitled “Paramount Group, Inc. Supplemental Operating and Financial Data for the Quarter Ended September 30, 2015”

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 5, 2015

Exhibit 99.1

 

Paramount Announces Third Quarter 2015 Results

– Reports Core FFO of $0.20 per Diluted Share –

– Leases over 1 million square feet through the end of October –

– Raises Guidance for Full Year 2015 –

NEW YORK—November 5, 2015 – Paramount Group, Inc. (NYSE: PGRE) (the “Company”) today reported results for the quarter ended September 30, 2015.

Third Quarter Highlights:

 

•

Reported Core Funds from Operations (“Core FFO”) attributable to common stockholders of $42.3 million, or $0.20 per diluted share, for the quarter ended September 30, 2015.

 

•

Leased 390,142 square feet at a weighted average initial rent of $80.97 per square foot, of which 325,217 square feet represents second generation space for which the Company achieved positive mark-to-markets of 13.4% on a cash basis and 8.8% on a GAAP basis.

 

•

On September 15, 2015, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.095 per share for the third quarter ended September 30, 2015, which was paid on October 15, 2015.

 

•

On September 16, 2015, the Company entered into forward starting interest rate swaps with an aggregate notional amount of $1.0 billion at a weighted average interest rate of 1.79% and a weighted average term of 5.9 years. The forward starting interest rate swaps were entered into in advance of the anticipated refinancing of mortgage debt at 1633 Broadway.

 

•

On September 30, 2015, Fund VIII (the Company’s debt fund), made a $40.0 million mezzanine loan secured by the equity interests in the owner of 1440 Broadway, a 751,546 square foot office and retail property located on the southeast corner of Broadway and 40th Street in Manhattan. The loan bears interest at LIBOR plus 600 bps, matures in October 2019 and has a one-year extension option.

Transactions Subsequent to the Third Quarter:

 

•

On October 1, 2015, the Company completed the previously announced acquisition of the remaining 35.8% ownership interest that it did not own in 31 West 52nd Street from its joint venture partner for $378 million, comprised of $230.0 million in cash and the assumption of $148.0 million of existing debt.

 

•

On October 29, 2015, Fund VII (the Company’s real estate equity fund) completed the previously announced acquisition of 670 Broadway, a 77,480 square foot creative office building in the NoHo submarket of Manhattan, for $112.0 million.

 

•

During October 2015, the Company leased an additional 260,829 square feet at 1633 Broadway, bringing total leased space for the portfolio in 2015 to 1,006,771 square feet.

 

1

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Financial Results

Quarter Ended September 30, 2015

Net income attributable to common stockholders was $1.1 million, or $0.01 per diluted share, for the quarter ended September 30, 2015.

FFO attributable to common stockholders was $51.8 million, or $0.24 per diluted share. FFO attributable to common stockholders includes the impact of (i) unrealized gains on interest rate swaps, including the Company’s pro rata share of such gains of an unconsolidated joint venture and (ii) acquisition and transaction related costs. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO attributable to common stockholders by $9.5 million, or $0.04 per diluted share.

Core FFO attributable to common stockholders, which excludes the impact of these items, was $42.3 million, or $0.20 per diluted share, for the quarter ended September 30, 2015.

Nine Months Ended September 30, 2015

Net loss attributable to common stockholders was $13.3 million, or $0.06 per diluted share, for the nine months ended September 30, 2015.

FFO attributable to common stockholders was $147.8 million, or $0.70 per diluted share. FFO attributable to common stockholders includes the impact of (i) unrealized gains on interest rate swaps, including the Company’s pro rata share of such gains of an unconsolidated joint venture, (ii) transfer taxes due in connection with the sale of shares by a former joint venture partner, (iii) acquisition and transaction related costs, (iv) a true-up in the income tax liability related to the Company’s predecessor and (v) severance costs. The aggregate of these items, net of amounts attributable to noncontrolling interests, increased FFO attributable to common stockholders by $20.2 million, or $0.10 per diluted share.

Core FFO attributable to common stockholders, which excludes the impact of these items, was $127.6 million, or $0.60 per diluted share, for the nine months ended September 30, 2015.

Portfolio Operations

Quarter Ended September 30, 2015

During the third quarter, the Company leased 390,142 square feet at a weighted average initial rent of $80.97 per square foot. This leasing activity, offset by lease expirations during the quarter, decreased portfolio wide leased percentage by 190 basis points from June 30, 2015. Of the 390,142 square feet leased in the third quarter, 325,217 square feet represents second generation space (space that has been vacant for less than twelve months) for which the Company achieved positive mark-to-markets of 13.4% on a cash basis and 8.8% on a GAAP basis. The weighted average lease term for leases signed during the third quarter was 9.4 years and weighted average tenant improvements and leasing commissions on these leases were $7.66 per square foot per annum, or 9.5% of initial rent.

 

2

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Nine Months Ended September 30, 2015

During the nine months ended September 30, 2015, the Company leased 745,942 square feet at a weighted average initial rent of $77.36 per square foot. Of 745,942 square feet leased during the nine months, 487,178 square feet represents second generation space for which the Company achieved positive mark-to-markets of 14.1% on a cash basis and 13.0% on a GAAP basis. The weighted average lease term for leases signed during the nine months was 11.0 years and weighted average tenant improvements and leasing commissions on these leases were $7.64 per square foot per annum, or 9.9% of initial rent.

Guidance

Based on the Company’s performance for the nine months ended September 30, 2015 and its outlook for the remainder of 2015, including the Company’s acquisition of the 35.8% joint venture interest in 31 West 52^nd Street that it did not previously own, the Company is raising its Projected Core FFO Guidance for 2015 to a range of $0.80 to $0.82 per diluted share, from its prior range of $0.79 to $0.81 per diluted share. The Company is providing the following reconciliation of Projected Core FFO per diluted share to estimated net loss per diluted share in accordance with GAAP. The estimated net loss 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.

 

For the Year Ending December 31, 2015:		Low				High
Estimated net loss attributable to common stockholders per diluted share		$	(0.10	)		$	(0.08	)
Pro rata share of real estate depreciation and amortization, including the Company’s share of unconsolidated joint ventures			1.00				1.00
Adjustments for non-core items1			(0.10	)			(0.10	)
Projected Core FFO per diluted share		$	0.80			$	0.82

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 referenced during the conference call referred to below. The estimates do not include the impact on operating results from possible future property acquisitions or dispositions, capital markets activity or unrealized gains or losses on real estate fund investments. The estimates set forth above may be subject to fluctuations as a result of several factors, including the straight lining of rental income and the amortization of above and below market leases. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth above.

 

 

1

Represents non-core items for the nine months ended September 30, 2015, which are summarized in this press release and the Company’s Supplemental Information for the quarter ended September 30, 2015, which is available on the Company’s website. The Company is not making projections for non-core items that may impact its financial results in the fourth quarter of 2015, which may include unrealized gains or losses on interest rate swaps, acquisition and transaction related costs and other items that are not included in Core FFO.

 

3

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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 uncertainties of real estate development, acquisition and disposition activity, the ability to effectively integrate acquisitions, the costs and availability of financing, the ability of our joint venture partners to satisfy their obligations, the effects of local, national and international economic and market conditions, the effects of acquisitions, dispositions and possible impairment charges on our operating results, regulatory changes and other risks and uncertainties detailed from time to time in the Company’s filings with the 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 GAAP net income or loss adjusted to exclude net gain from sales of depreciated real estate assets, impairment losses on depreciable real estate and depreciation and amortization expense from real estate assets, including the pro rata 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, including acquisition and transaction related costs and unrealized gains or losses on interest rate swaps, which we believe enhances the comparability of our FFO across periods.

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.

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 September 30, 2015, which is available on our website.

 

4

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Investor Conference Call and Webcast

The Company will host a webcast and conference call at 10:00 a.m. Eastern Time on November 6, 2015, to discuss third quarter 2015 results. The number to call is 1-877-407-0789 (domestic) or 1-201-689-8562 (international). A live webcast will be available in the Investors section of the Company’s website. A replay of the conference call will be archived on the Company’s website and will be available through November 13, 2015, by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international) and entering the passcode 13621407.

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, Washington, D.C. 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.

Contact Information:

Investor Relations:

212-492-2298

[email protected]

Media:

212-492-2285

[email protected]

 

5

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Paramount Group, Inc.

Consolidated Balance Sheets

(Unaudited and in thousands)

 

		September 30, 2015				December 31, 2014
ASSETS:
Rental Property
Land		$	2,042,071			$	2,042,071
Buildings and improvements			5,567,789				5,488,168
			7,609,860				7,530,239
Accumulated depreciation and amortization			(202,105	)			(81,050	)
Rental Property, net			7,407,755				7,449,189
Real estate fund investments			336,393				323,387
Investments in unconsolidated joint ventures			6,537				5,749
Cash and cash equivalents			418,095				438,599
Restricted cash			92,696				55,728
Marketable securities			20,365				20,159
Deferred rent receivable			58,117				8,267
Accounts and other receivables, net			12,313				7,692
Deferred charges, net			54,467				39,165
Intangible assets, net			546,432				669,385
Other assets			33,636				13,121
Total Assets		$	8,986,806			$	9,030,441
LIABILITIES:
Mortgages and notes payable		$	2,853,735			$	2,852,287
Credit facility			—				—
Due to affiliates			27,299				27,299
Loans payable to noncontrolling interests			44,822				42,195
Accounts payable and accrued expenses			97,157				93,472
Dividends and distributions payable			25,066				—
Deferred income taxes			2,560				2,861
Interest rate swap liabilities			163,301				194,196
Intangible liabilities, net			193,042				219,228
Other liabilities			44,958				43,950
Total Liabilities			3,451,940				3,475,488
EQUITY:
Paramount Group, Inc. stockholders’ equity			3,855,843				3,910,862
Noncontrolling interests in consolidated joint ventures and funds			781,343				685,888
Noncontrolling interests in Operating Partnership			897,680				958,203
Total Equity		$	5,534,866			$	5,554,953
Total Liabilities and Equity		$	8,986,806			$	9,030,441

 

6

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Paramount Group, Inc.

Consolidated Statements of Income

(Unaudited and in thousands, except share and per share data)

 

		Quarter Ended September 30, 2015				Nine Months Ended September 30, 2015
REVENUES:
Property rentals		$	127,176			$	382,532
Straight-line rent adjustments			17,817				49,859
Amortization of below-market leases, net			1,477				3,239
Rental income			146,470				435,630
Tenant reimbursement income			14,405				39,956
Fee income			2,085				5,400
Other income			4,766				10,894
Total revenues			167,726				491,880
EXPENSES:
Operating			63,354				183,019
Depreciation and amortization			70,654				223,658
General and administrative			6,666				28,412
Acquisition and transaction related costs			485				9,832
Total expenses			141,159				444,921
Operating income			26,567				46,959
Income from real estate fund investments			10,933				30,226
Income from unconsolidated joint ventures			1,458				4,444
Unrealized gains on interest rate swaps			15,772				49,497
Interest and other income (loss), net			(1,763	)			(397	)
Interest and debt expense			(42,821	)			(126,945	)
Net income before income taxes			10,146				3,784
Income tax expense			(789	)			(2,706	)
Net income			9,357				1,078
Less net (income) loss attributable to noncontrolling interests in:
Consolidated joint ventures and funds			(7,969	)			(17,641	)
Operating partnership			(272	)			3,239
Net income (loss) attributable to common stockholders		$	1,116			$	(13,324	)
Net income (loss) per share attributable to common stockholders:
Basic		$	0.01			$	(0.06	)
Diluted		$	0.01			$	(0.06	)
Weighted average common shares outstanding:
Basic			212,106,718				212,106,718
Diluted			212,108,079				212,106,718

 

7

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Paramount Group, Inc.

Reconciliation of Net Income to Funds from Operations

and Core Funds from Operations

(Unaudited and in thousands, except share and per share data)

 

		Quarter Ended September 30, 2015				Nine Months Ended September 30, 2015
Reconciliation of net income to FFO and Core FFO:
Net income		$	9,357			$	1,078
Real estate depreciation and amortization			70,654				223,658
Pro rata share of real estate depreciation and amortization of unconsolidated joint ventures			1,512				4,518
FFO			81,523				229,254
Less FFO attributable to noncontrolling interests in consolidated joint ventures and funds			(17,094	)			(45,497	)
FFO attributable to Paramount Group Operating Partnership			64,429				183,757
Less FFO attributable to noncontrolling interests in Operating Partnership			(12,619	)			(35,967	)
FFO attributable to common stockholders		$	51,810			$	147,790
Per diluted share		$	0.24			$	0.70
FFO		$	81,523			$	229,254
Non-core (income) expense:
Transfer taxes due in connection with sale of shares by former joint venture partner			—				5,872
Acquisition and transaction related costs			485				3,960
Predecessor income tax true-up			—				721
Severance costs			—				3,315
Unrealized gains on interest rate swaps			(15,772	)			(49,497	)
Pro rata share of unrealized gains on interest rate swaps of an unconsolidated joint venture			(37	)			(1,047	)
Core FFO			66,199				192,578
Less Core FFO attributable to noncontrolling interests in consolidated joint ventures and funds			(13,560	)			(33,916	)
Core FFO attributable to Paramount Group Operating Partnership			52,639				158,662
Less Core FFO attributable to noncontrolling interests in Operating Partnership			(10,309	)			(31,054	)
Core FFO attributable to common stockholders		$	42,330			$	127,608
Per diluted share		$	0.20			$	0.60

 

8

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Paramount Group, Inc.

Reconciliation of Net Income to Funds from Operations

and Core Funds from Operations – continued

(Unaudited and in thousands, except share and per share data)

 

		Quarter Ended September 30, 2015				Nine Months Ended September 30, 2015
Reconciliation of weighted average shares outstanding:
Weighted average shares outstanding			212,106,718				212,106,718
Effect of dilutive securities			1,361				4,004
Denominator for FFO per diluted share			212,108,079				212,110,722

 

9

Exhibit 99.2

 

 

SUPPLEMENTAL OPERATING AND FINANCIAL DATA

FOR THE QUARTER ENDED SEPTEMBER 30, 2015

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		FORWARD-LOOKING STATEMENTS

 

This supplemental information 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 our 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 uncertainties of real estate development, acquisition and disposition activity, the ability to effectively integrate acquisitions, the costs and availability of financing, the ability of our joint venture partners to satisfy their obligations, the effects of local, national and international economic and market conditions, the effects of acquisitions, dispositions and possible impairment charges on our operating results, regulatory changes and other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission. We do not undertake a duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

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		TABLE OF CONTENTS

 

		Page
Company Profile		4
Research Coverage		5
Selected Financial Information
Financial Highlights		6
Consolidated Balance Sheets		7
Consolidated Statements of Income		8
Funds From Operations (“FFO”)		9
Funds Available for Distribution (“FAD”)		10
Net Operating Income (“NOI”)		11
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)		12
Consolidated Joint Ventures and Funds		13 - 14
Unconsolidated Joint Ventures		15 - 16
Capital Structure		17
Debt Analysis		18
Debt Maturities		19
Selected Property Data
Portfolio Summary		20
Funds Summary		21
Top Tenants and Industry Diversification		22
Leasing Activity		23 - 24
Lease Expirations		25
Capital Expenditures - Cash Basis		26
Definitions		27

 

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		COMPANY PROFILE

 

Paramount Group, Inc. (“Paramount”) 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, Washington, D.C. 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.

EXECUTIVE MANAGEMENT

 

Albert Behler		Chairman, Chief Executive Officer and President
Michael Walsh		Executive Vice President, Chief Financial Officer and Treasurer
Jolanta Bott		Executive Vice President, Operations and Human Resources
Theodore Koltis		Executive Vice President, Leasing
Daniel Lauer		Executive Vice President, Chief Investment Officer
Ralph DiRuggiero		Senior Vice President, Property Management
Gage Johnson		Senior Vice President, General Counsel and Secretary
Vito Messina		Senior Vice President, Asset Management
Wilbur Paes		Senior Vice President, Chief Accounting Officer
BOARD OF DIRECTORS
Albert Behler		Director, Chairman of the Board
Thomas Armbrust		Director
Dan Emmett		Director, Chair of Audit Committee
Lizanne Galbreath		Director, Chair of Compensation Committee
Peter Linneman		Director, Chair of Nominating and Corporate Governance Committee; Lead Independent Director
David O’Connor		Director
Katharina Otto-Bernstein		Director
COMPANY INFORMATION
Corporate Headquarters		Investor Relations		Stock Exchange Listing		Trading Symbol
1633 Broadway, Suite 1801		[email protected]		New York Stock Exchange		PGRE
New York, NY 10019		(212) 492-2298
(212) 237-3100

 

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		RESEARCH COVERAGE (1)

 

James Feldman		Vin Chao		Steve Sakwa		Brad Burke
Bank of America Merrill Lynch		Deutsche Bank		Evercore ISI		Goldman Sachs
(646) 855-5808		(212) 250-6799		(212) 446-9462		(917) 343-2082
Jed Reagan		Richard Anderson		Vance Edelson		Ross Nussbaum
Green Street Advisors		Mizuho Securities USA Inc.		Morgan Stanley		UBS
(949) 640-8780		(212) 205-8445		(212) 761-0078		(212) 713-2484
Brendan Maiorana
Wells Fargo
(443) 263-6516

 

(1)

With the exception of Green Street Advisors, an independent research firm, the equity analysts listed above are those analysts that, according to First Call Corporation, have published research material on the Company and are listed as covering the Company. Please note that any opinions, estimates or forecasts regarding the Company’s performance made by such analysts do not represent the opinions, estimates or forecasts of the Company or its management. The Company does not by its reference above, imply its endorsement of or concurrence with any information, conclusions or recommendations made by any of such analysts.

 

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		FINANCIAL HIGHLIGHTS
(unaudited and in thousands, except square feet and per share data)

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
SELECTED FINANCIAL DATA
Total revenues		$	167,726			$	162,928			$	161,226
Pro rata share of NOI (1)		$	91,428			$	92,452			$	87,969
Pro rata share of Cash NOI (1)		$	77,223			$	80,457			$	75,341
Net income (loss) attributable to common stockholders		$	1,116			$	(4,709	)		$	(9,731	)
Per share - basic		$	0.01			$	(0.02	)		$	(0.05	)
Per share - diluted		$	0.01			$	(0.02	)		$	(0.05	)
FFO attributable to common stockholders (1)		$	51,810			$	52,663			$	43,317
Per share - diluted		$	0.24			$	0.25			$	0.20
FFO payout ratio (1)			38.9	%			38.3	%			46.5	%
Core FFO attributable to common stockholders (1)		$	42,330			$	46,315			$	38,963
Per share - diluted		$	0.20			$	0.22			$	0.18
Core FFO payout ratio (1)			47.6	%			43.5	%			51.7	%
FAD attributable to common stockholders (1)		$	22,449			$	21,635			$	16,852
FAD payout ratio (1)			89.8	%			93.1	%			119.6	%

COMMON SHARE DATA

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
Share Price
High		$	18.35			$	19.73			$	20.21
Low		$	15.65			$	16.97			$	17.66
Closing (end of period)		$	16.80			$	17.16			$	19.30
Dividends per common share		$	0.095			$	0.095			$	0.095	(2)
Annualized dividends per common share		$	0.380			$	0.380			$	0.380
Dividend yield (on closing share price)			2.3	%			2.2	%			2.0	%

PORTFOLIO STATISTICS

 

		Number of				Square				% Occupied (1)				% Leased (1)
		Properties				Feet				at September 30, 2015				at September 30, 2015
Region:
New York			6				7,152,207				90.4	%			92.3	%
Washington, D.C.			5				1,602,655				88.5	%			90.3	%
San Francisco			1				1,611,125				96.7	%			98.4	%
			12				10,365,987				91.1	%			92.9	%

 

(1)	See page 27 for our definition of this measure.

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

 

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		CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)

 

		September 30, 2015				June 30, 2015				March 31, 2015				December 31, 2014
ASSETS:
Rental Property
Land		$	2,042,071			$	2,042,071			$	2,042,071			$	2,042,071
Buildings and improvements			5,567,789				5,534,885				5,503,475				5,488,168
			7,609,860				7,576,956				7,545,546				7,530,239
Accumulated depreciation and amortization			(202,105	)			(162,377	)			(121,165	)			(81,050	)
Rental Property, net			7,407,755				7,414,579				7,424,381				7,449,189
Real estate fund investments			336,393				335,545				324,282				323,387
Investments in unconsoliated joint ventures			6,537				6,128				6,370				5,749
Cash and cash equivalents			418,095				438,088				380,889				438,599
Restricted cash			92,696				45,737				53,864				55,728
Marketable securities			20,365				21,524				21,386				20,159
Deferred rent receivable			58,117				40,308				24,261				8,267
Accounts and other receivables, net			12,313				10,781				12,863				7,692
Deferred charges, net			54,467				49,547				43,713				39,165
Intangible assets, net			546,432				583,126				629,021				669,385
Other assets			33,636				9,529				31,948				13,121
Total Assets		$	8,986,806			$	8,954,892			$	8,952,978			$	9,030,441
LIABILITIES:
Mortgages and notes payable		$	2,853,735			$	2,853,237			$	2,852,754			$	2,852,287
Credit facility			—				—				—				—
Due to affiliates (1)			27,299				27,299				27,299				27,299
Loans payable to noncontrolling interests			44,822				43,981				43,188				42,195
Accounts payable and accrued expenses			97,157				96,595				78,282				93,472
Dividends and distributions payable			25,066				25,066				—				—
Deferred income taxes			2,560				2,659				3,183				2,861
Interest rate swap liabilities			163,301				160,473				182,218				194,196
Intangible liabilities, net			193,042				201,839				210,964				219,228
Other liabilities			44,958				45,922				45,742				43,950
Total Liabilities			3,451,940				3,457,071				3,443,630				3,475,488
EQUITY:
Paramount Group, Inc. stockholders’ equity			3,855,843				3,889,542				3,829,373				3,910,862
Noncontrolling interests in consolidated joint ventures and funds			781,343				703,596				685,176				685,888
Noncontrolling interests in Operating Partnership			897,680				904,683				994,799				958,203
Total Equity			5,534,866				5,497,821				5,509,348				5,554,953
TOTAL LIABILITIES AND EQUITY		$	8,986,806			$	8,954,892			$	8,952,978			$	9,030,441

 

(1)	Represents notes payable to affiliates, which are due in October 2017 and bear interest at a fixed rate of 0.50%.

 

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		CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in thousands, except share and per share data)

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
REVENUES:
Property rentals		$	127,176			$	128,954			$	126,402
Straight-line rent adjustments			17,817				16,091				15,951
Amortization of below-market leases, net			1,477				872				890
Rental income			146,470				145,917				143,243
Tenant reimbursement income			14,405				12,063				13,488
Fee income			2,085				1,780				1,535
Other income			4,766				3,168				2,960
Total revenues			167,726				162,928				161,226
EXPENSES:
Operating			63,354				57,781				61,884
Depreciation and amortization			70,654				79,421				73,583
General and administrative (1)			6,666				9,133				12,613
Acquisition and transaction related costs			485				8,208				1,139
Total expenses			141,159				154,543				149,219
Operating income			26,567				8,385				12,007
Income from real estate fund investments			10,933				14,072				5,221
Income from unconsolidated joint ventures			1,458				2,011				975
Unrealized gains on interest rate swaps			15,772				21,747				11,978
Interest and other income (loss), net			(1,763	)			512				854
Interest and debt expense			(42,821	)			(42,236	)			(41,888	)
Net income (loss) before income taxes			10,146				4,491				(10,853	)
Income tax expense			(789	)			(1,343	)			(574	)
Net income (loss)			9,357				3,148				(11,427	)
Less net (income) loss attributable to noncontrolling interests in:
Consolidated joint ventures and funds			(7,969	)			(9,004	)			(668	)
Operating Partnership			(272	)			1,147				2,364
Net income (loss) attributable to common stockholders		$	1,116			$	(4,709	)		$	(9,731	)
Weighted average common shares outstanding
Basic			212,106,718				212,106,718				212,106,718
Diluted			212,108,079				212,106,718				212,106,718
Net income (loss) per share attributable to common stockholders
Basic		$	0.01			$	(0.02	)		$	(0.05	)
Diluted		$	0.01			$	(0.02	)		$	(0.05	)

 

(1)

Includes $1,940 of loss in the quarter ended September 30, 2015 and income of $362 and $733 in the quarters ended June 30, 2015 and March 31, 2015, respectively, from the mark-to-market of investments in our deferred compensation plan for which there is a corresponding decrease (increase) in interest and other income, net. The quarter ended March 31, 2015 also includes $3,315 of severance costs.

 

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		FUNDS FROM OPERATIONS (“FFO”)
(unaudited and in thousands, except share and per share data)

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
Reconciliation of net income (loss) to FFO and Core FFO:
Net income (loss)		$	9,357			$	3,148			$	(11,427	)
Real estate depreciation and amortization			70,654				79,421				73,583
Pro rata share of real estate depreciation and amortization of unconsolidated joint ventures			1,512				1,530				1,476
FFO (1)			81,523				84,099				63,632
Less FFO attributable to noncontrolling interests in consolidated joint ventures and funds			(17,094	)			(18,614	)			(9,789	)
FFO attributable to Paramount Group Operating Partnership			64,429				65,485				53,843
Less FFO attributable to noncontrolling interests in Operating Partnership			(12,619	)			(12,822	)			(10,526	)
FFO attributable to common stockholders (1)		$	51,810			$	52,663			$	43,317
Per diluted share		$	0.24			$	0.25			$	0.20
FFO		$	81,523			$	84,099			$	63,632
Non-core (income) expense:
Transfer taxes due in connection with the sale of shares by a former joint venture partner			—				5,872				—
Acquisition and transaction related costs			485				2,336				1,139
Predecessor income tax true-up			—				721				—
Severance costs			—				—				3,315
Unrealized gains on interest rate swaps			(15,772	)			(21,747	)			(11,978	)
Pro rata share of unrealized gain on interest rate swap of unconsolidated joint venture			(37	)			(624	)			(386	)
Core FFO (1)			66,199				70,657				55,722
Less Core FFO attributable to noncontrolling interests in consolidated joint ventures and funds			(13,560	)			(13,065	)			(7,291	)
Core FFO attributable to Paramount Group Operating Partnership			52,639				57,592				48,431
Less Core FFO attributable to noncontrolling interests in Operating Partnership			(10,309	)			(11,277	)			(9,468	)
Core FFO attributable to common stockholders (1)		$	42,330			$	46,315			$	38,963
Per diluted share		$	0.20			$	0.22			$	0.18
Reconciliation of weighted average shares outstanding:
Weighted average shares outstanding			212,106,718				212,106,718				212,106,718
Effect of dilutive securities			1,361				5,004				11,928
Denominator for FFO per diluted share			212,108,079				212,111,722				212,118,646

 

(1)	See page 27 for our definition of this measure.

 

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		FUNDS AVAILABLE FOR DISTRIBUTION (“FAD”)
(unaudited and in thousands)

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
Reconciliation of Core FFO to FAD
Core FFO		$	66,199			$	70,657			$	55,722
Add:
Amortization of stock-based compensation expense			1,613				1,370				1,174
Amortization of deferred financing costs			635				688				584
Less:
Recurring tenant improvements, leasing commissions and other capital expenditures			(12,703	)			(16,882	)			(18,093	)
Straight-line rent adjustments			(17,817	)			(16,091	)			(15,951	)
Unrealized gains on real estate fund investments			(1,830	)			(11,264	)			(873	)
Amortization of below-market leases, net			(1,477	)			(872	)			(890	)
Pro rata share of straight-line rent adjustments of unconsolidated joint ventures			146				48				41
FAD (1)			34,766				27,654				21,714
Less FAD attributable to noncontrolling interests in consolidated joint ventures and funds			(6,849	)			(751	)			(768	)
FAD attributable to Paramount Group Operating Partnership			27,917				26,903				20,946
Less FAD attributable to noncontrolling interests in Operating Partnership			(5,468	)			(5,268	)			(4,094	)
FAD attributable to common stockholders (1)		$	22,449			$	21,635			$	16,852
FAD payout ratio (1)			89.8	%			93.1	%			119.6	%

 

(1)	See page 27 for our definition of this measure.

 

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		NET OPERATING INCOME (“NOI”)
(unaudited and in thousands)

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
Reconciliation of net income (loss) to NOI and Cash NOI:
Net income (loss)		$	9,357			$	3,148			$	(11,427	)
Add:
Depreciation and amortization			70,654				79,421				73,583
General and administrative expenses			6,666				9,133				12,613
Interest and debt expense			42,821				42,236				41,888
Transfer taxes due in connection with the sale of shares by a former joint venture partner			—				5,872				—
Acquisition and transaction related costs			485				2,336				1,139
Income tax expense			789				1,343				574
NOI from unconsolidated joint ventures			4,303				4,278				3,781
Less:
Income from real estate fund investments			(10,933	)			(14,072	)			(5,221	)
Income from unconsolidated joint ventures			(1,458	)			(2,011	)			(975	)
Fee income			(2,085	)			(1,780	)			(1,535	)
Unrealized gains on interest rate swaps			(15,772	)			(21,747	)			(11,978	)
Interest and other loss (income), net			1,763				(512	)			(854	)
NOI (1)			106,590				107,645				101,588
Less NOI attributable to noncontrolling interests in consolidated joint ventures			(15,162	)			(15,193	)			(13,619	)
Pro rata share of NOI (1)		$	91,428			$	92,452			$	87,969
NOI		$	106,590			$	107,645			$	101,588
Less:
Straight-line rent adjustments			(17,817	)			(16,091	)			(15,951	)
Amortization of below-market leases, net			(1,477	)			(872	)			(890	)
Pro rata share of straight-line rent adjustments of unconsolidated joint ventures			146				48				41
Cash NOI (1)			87,442				90,730				84,788
Less Cash NOI attributable to noncontrolling interests in consolidated joint ventures			(10,219	)			(10,273	)			(9,447	)
Pro rata share of Cash NOI (1)		$	77,223			$	80,457			$	75,341

 

(1)	See page 27 for our definition of this measure.

 

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		EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (“EBITDA”)
(unaudited and in thousands)

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
Reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:
Net income (loss)		$	9,357			$	3,148			$	(11,427	)
Add:
Depreciation and amortization			70,654				79,421				73,583
Interest and debt expense			42,821				42,236				41,888
Income tax expense			789				1,343				574
Pro rata share of above adjustments of unconsolidated joint ventures			2,885				2,895				3,190
EBITDA (1)			126,506				129,043				107,808
Less EBITDA attributable to noncontrolling interests in consolidated joint ventures and funds			(27,466	)			(28,071	)			(19,323	)
Pro rata share of EBITDA (1)		$	99,040			$	100,972			$	88,485
EBITDA		$	126,506			$	129,043			$	107,808
Add:
Transfer taxes due in connection with the sale of shares by a former joint venture partner			—				5,872				—
Acquisition and transaction related costs			485				2,336				1,139
Severance costs			—				—				3,315
Less:
Unrealized gains on interest rate swaps			(15,772	)			(21,747	)			(11,978	)
EBITDA from real estate fund investments			(9,730	)			(15,124	)			(4,010	)
Pro rata share of unrealized gain on interest rate swap of unconsolidated joint venture			(37	)			(624	)			(386	)
Adjusted EBITDA (1)			101,452				99,756				95,888
Less Adjusted EBITDA attributable to noncontrolling interests in consolidated joint ventures			(14,934	)			(14,936	)			(13,411	)
Pro rata share of Adjusted EBITDA (1)		$	86,518			$	84,820			$	82,477

 

(1)	See page 27 for our definition of this measure.

 

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		CONSOLIDATED JOINT VENTURES AND FUNDS - BALANCE SHEETS
(unaudited and in thousands)

 

		As of September 30, 2015
		Consolidated Properties
		31 West 52nd Street (1)				One Market Plaza				Real Estate Funds (2)				Total
Ownership %		64.2%				49.0%				Various
ASSETS:
Rental property, net		$	815,197			$	1,277,999			$	65,860			$	2,159,056
Real estate fund investments			—				—				336,393				336,393
Cash and cash equivalents			5,673				9,675				98,989				114,337
Restricted cash			17,509				23,589				11,290				52,388
Deferred rent receivable			3,137				13,757				—				16,894
Accounts and other receivables, net			793				207				377				1,377
Deferred charges, net			—				1,461				—				1,461
Intangible assets, net			80,580				76,917				—				157,497
Other assets			3,955				994				—				4,949
Total Assets		$	926,844			$	1,404,599			$	512,909			$	2,844,352
LIABILITIES:
Mortgages and notes payable		$	413,490			$	856,183			$	—			$	1,269,673
Loans payable to noncontrolling interests			—				—				44,822				44,822
Accounts payable and accrued expenses			4,234				32,740				459				37,433
Interest rate swap liabilities			22,114				68,047				—				90,161
Intangible liabilities, net			41,762				69,741				—				111,503
Other liabilities			188				2,657				544				3,389
Total Liabilities			481,788				1,029,368				45,825				1,556,981
EQUITY:
Paramount Group, Inc. stockholders’ equity			285,764				183,927				36,337				506,028
Noncontrolling interests in consolidated joint ventures and funds			159,292				191,304				430,747				781,343
Total Equity			445,056				375,231				467,084				1,287,371
TOTAL LIABILITIES AND EQUITY		$	926,844			$	1,404,599			$	512,909			$	2,844,352

 

(1)	On October 1, 2015, we acquired the remaining 35.8% ownership interest in this joint venture.

(2)	See page 21 for details of our ownership interest in the Funds and the Funds’ ownership interest in the underlying investments.

 

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		CONSOLIDATED JOINT VENTURES AND FUNDS - OPERATING RESULTS
(unaudited and in thousands)

 

		Quarter Ended September 30, 2015
		Consolidated Properties
		31 West 52nd Street (1)				One Market Plaza				Real Estate Funds (2)				Total
Total revenues		$	17,944			$	29,156			$	863			$	47,963
Total operating expenses			6,757				7,267				307				14,331
Net operating income			11,187				21,889				556				33,632
Depreciation and amortization expense			(6,540	)			(12,862	)			(259	)			(19,661	)
Income from real estate fund investments			—				—				10,933				10,933
Unrealized gains on interest rate swaps			1,899				5,598				—				7,497
Interest and other income, net			16				3				1				20
Interest and debt expense			(5,339	)			(14,974	)			(840	)			(21,153	)
Net income before income taxes			1,223				(346	)			10,391				11,268
Income tax benefit			—				30				—				30
Net income (loss)		$	1,223			$	(316	)		$	10,391			$	11,298
Paramount Group, Inc.’s pro rata share
Ownership %		64.2%				49.0%				Various				Total
Net income (loss)		$	786			$	(154	)		$	520			$	1,152
Add: Management fee income			132				111				1,617				1,860
Add: Carried interest			—				—				317				317
Net income attributable to Paramount Group, Inc.			918				(43	)			2,454				3,329
Add: Real estate depreciation and amortization			4,199				6,302				35				10,536
FFO (3)			5,117				6,259				2,489				13,865
Less: Unrealized gains on interest rate swaps			(1,220	)			(2,743	)			—				(3,963	)
Core FFO (3)		$	3,897			$	3,516			$	2,489			$	9,902
Noncontrolling Interests’ pro rata share
Ownership %		35.8%				51.0%				Various				Total
Net income		$	437			$	(162	)		$	9,871			$	10,146
Less: Management fee expense			(132	)			(111	)			(1,617	)			(1,860	)
Less: Carried interest			—				—				(317	)			(317	)
Net income attributable to noncontrolling interests			305				(273	)			7,937				7,969
Add: Real estate depreciation and amortization			2,341				6,560				224				9,125
FFO (3)			2,646				6,287				8,161				17,094
Less: Unrealized gains on interest rate swaps			(679	)			(2,855	)			—				(3,534	)
Core FFO (3)		$	1,967			$	3,432			$	8,161			$	13,560

 

(1)	On October 1, 2015, we acquired the remaining 35.8% ownership interest in this joint venture.

(2)	See page 21 for details of our ownership interest in the Funds and the Funds’ ownership interest in the underlying investments.

(3)	See page 27 for our definition of this measure.

 

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		UNCONSOLIDATED JOINT VENTURES - BALANCE SHEETS
(unaudited and in thousands)

 

		As of September 30, 2015
		712 Fifth Avenue				Oder-Center, Germany				Total
Ownership %		50.0%				9.5%
ASSETS:
Rental property, net		$	214,741			$	6,680			$	221,421
Cash and cash equivalents			15,098				1,152				16,250
Restricted cash			323				—				323
Deferred rent receivable			12,830				—				12,830
Accounts and other receivables, net			156				—				156
Deferred charges, net			10,612				—				10,612
Other assets			3,399				179				3,578
Total Assets		$	257,159			$	8,011			$	265,170
LIABILITIES:
Mortgages and notes payable		$	246,500			$	24,273			$	270,773
Accounts payable and accrued expenses			4,108				157				4,265
Interest rate swap liabilities			11,275				—				11,275
Other liabilities			1,460				137				1,597
Total Liabilities			263,343				24,567				287,910
Total Equity			(6,184	)			(16,556	)			(22,740	)
TOTAL LIABILITIES AND EQUITY		$	257,159			$	8,011			$	265,170

 

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		UNCONSOLIDATED JOINT VENTURES - OPERATING RESULTS
(unaudited and in thousands)

 

		Quarter Ended September 30, 2015
		712				Oder-Center,
		Fifth Avenue				Germany				Total
Total revenues		$	13,921			$	1,056			$	14,977
Total operating expenses			5,500				140				5,640
Net operating income			8,421				916				9,337
Depreciation and amortization expense			(2,945	)			(96	)			(3,041	)
Unrealized gains on interest rate swaps			74				—				74
Interest and other income, net			3				—				3
Interest and debt expense			(2,687	)			(283	)			(2,970	)
Net income before income taxes			2,866				537				3,403
Income tax expense			—				(2	)			(2	)
Net income		$	2,866			$	535			$	3,401
Paramount Group, Inc.’s pro rata share Ownership %		50.0%				9.5%				Total
Net income		$	1,433			$	51			$	1,484
Less: Step-up basis adjustment			—				(26	)			(26	)
Net income attributable to Paramount Group, Inc.			1,433				25				1,458
Add: Real estate depreciation and amortization			1,472				40				1,512
FFO (1)			2,905				65				2,970
Less: Unrealized gains on interest rate swaps			(37	)			—				(37	)
Core FFO (1)		$	2,868			$	65			$	2,933
Joint Venture Partners’ pro rata share Ownership %		50.0%				90.5%				Total
Net income		$	1,433			$	484			$	1,917
Add: Real estate depreciation and amortization			1,472				89				1,561
FFO (1)			2,905				573				3,478
Less: Unrealized gains on interest rate swaps			(37	)			—				(37	)
Core FFO (1)		$	2,868			$	573			$	3,441

 

(1)	See page 27 for our definition of this measure.

 

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		CAPITAL STRUCTURE
(unaudited and in thousands, except share and per share data)

 

										As of September 30, 2015
Debt:
Consolidated debt:
Mortgages and notes payable										$	2,853,735
$1.0 billion credit facility											—
											2,853,735
Less:
Noncontrolling interests’ share of consolidated debt (One Market Plaza and 31 West 52nd Street)											(584,682	)
Add:
Pro rata share of unconsolidated joint venture debt (712 Fifth Avenue and Oder-Center, Germany)											125,556
Total debt											2,394,609
		Shares / Units Outstanding				Share Price at September 30, 2015
Equity:
Common stock			212,111,937			$	16.80				3,563,481
Operating Partnership units			51,660,088				16.80				867,889
			263,772,025				16.80				4,431,370
Total Market Capitalization										$	6,825,979

 

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		DEBT ANALYSIS
(unaudited and in thousands)

 

		Total Debt								Fixed Rate Debt								Variable Rate Debt
		Amount				Rate				Amount				Rate				Amount				Rate
Consolidated Debt:
1633 Broadway		$	926,260				5.35	%		$	772,100				6.10	%		$	154,160				1.62	%
31 West 52nd Street			413,490				5.00	%			337,500				5.74	%			75,990				1.70	%
900 Third Avenue			274,337				5.10	%			255,000				5.35	%			19,337				1.78	%
Waterview			210,000				5.76	%			210,000				5.76	%			—				—
1899 Pennsylvania Avenue			89,465				4.88	%			89,465				4.88	%			—				—
Liberty Place			84,000				4.50	%			84,000				4.50	%			—				—
One Market Plaza			856,183				6.14	%			856,183				6.14	%			—				—
Total consolidated debt			2,853,735				5.50	%			2,604,248				5.87	%			249,487				1.65	%
Noncontrolling interests’ share			(584,682	)							(557,478	)							(27,204	)
Pro rata share of consolidated debt		$	2,269,053				5.41	%		$	2,046,770				5.82	%		$	222,283				1.65	%
Unconsolidated Joint Venture Debt:
712 Fifth Avenue		$	246,500				4.10	%		$	135,000				5.78	%		$	111,500				2.07	%
Oder-Center, Germany			24,273				4.62	%			24,273				4.62	%			—				0.00	%
Total unconsolidated debt			270,773				4.15	%			159,273				5.60	%			111,500				2.07	%
Joint venture partners’ share			(145,217	)							(89,467	)							(55,750	)
Pro rata share of unconsolidated debt		$	125,556				4.11	%		$	69,806				5.74	%		$	55,750				2.07	%
Pro Rata Share of Total Debt		$	2,394,609				5.35	%		$	2,116,576				5.82	%		$	278,033				1.73	%

 

 

(1)

This section presents ratios as of September 30, 2015 in accordance with the terms of the Company’s credit facility, which has been filed with the SEC. Management is not presenting these ratios and the related calculations for any other purpose or for any other period, and is not intending for these measures to otherwise provide information to investors about the Company’s financial condition or results of operations. Investors should not rely on these measures other than for purposes of testing our compliance with the credit facility.

 

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		DEBT MATURITIES
(unaudited and in thousands)

 

		2015				2016				2017				2018				2019				Thereafter				Total
Consolidated Debt:
1633 Broadway		$	—			$	926,260			$	—			$	—			$	—			$	—			$	926,260
31 West 52nd Street			—				—				413,490				—				—				—				413,490
900 Third Avenue			—				—				274,337				—				—				—				274,337
Waterview			—				—				210,000				—				—				—				210,000
1899 Pennsylvania Avenue			—				—				—				—				—				89,465				89,465
Liberty Place			—				—				—				84,000				—				—				84,000
One Market Plaza			—				—				—				—				856,183				—				856,183
Total consolidated debt			—				926,260				897,827				84,000				856,183				89,465				2,853,735
Noncontrolling interests’ share			—				—				(148,029	)			—				(436,653	)			—				(584,682	)
Pro rata share of consolidated debt		$	—			$	926,260			$	749,798			$	84,000			$	419,530			$	89,465			$	2,269,053
Unconsolidated Debt:
712 Fifth Avenue		$	—			$	—			$	—			$	246,500			$	—			$	—			$	246,500
Oder-Center, Germany			—				—				—				—				—				24,273				24,273
Total unconsolidated debt			—				—				—				246,500				—				24,273				270,773
Joint venture partners’ share			—				—				—				(123,250	)			—				(21,967	)			(145,217	)
Pro rata share of unconsolidated debt		$	—			$	—			$	—			$	123,250			$	—			$	2,306			$	125,556
Pro rata share of debt		$	—			$	926,260			$	749,798			$	207,250			$	419,530			$	91,771				2,394,609
Weighted average rate			—				5.35	%			5.25	%			4.26	%			6.14	%			4.87	%			5.35	%
% of Debt Maturing			—				38.7	%			31.3	%			8.7	%			17.5	%			3.8	%			100.0	%

 

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		PORTFOLIO SUMMARY
(unaudited)

 

Property		Submarket		% Ownership				Square Feet (1)				% Occupied (2)				% Leased (2)				Annualized Rent (2)
																				Amount				Per Square Foot (3)
As of September 30, 2015
New York:
1633 Broadway		West Side			100.0	%			2,643,065				87.4	%			87.4	%		$	145,928,000			$	68.79
1301 Avenue of the Americas		Sixth Ave / Rock Center			100.0	%			1,767,992				85.5	%			91.5	%			111,925,000				74.90
1325 Avenue of the Americas		Sixth Ave / Rock Center			100.0	%			814,892				91.1	%			94.2	%			50,089,000				70.13
31 West 52nd Street		Sixth Ave / Rock Center			64.2	%			786,647				100.0	%			100.0	%			60,298,000				79.09
900 Third Avenue		East Side			100.0	%			596,270				97.0	%			97.8	%			41,078,000				71.77
712 Fifth Avenue		Madison/Fifth			50.0	%			543,341				98.5	%			98.5	%			55,748,000				104.69
Subtotal / Weighted Average									7,152,207				90.4	%			92.3	%			465,066,000				75.16
Washington, D.C.:
Waterview		Rosslyn, VA			100.0	%			647,243				98.9	%			98.9	%			34,086,000				51.41
425 Eye Street		East End			100.0	%			380,090				88.9	%			96.5	%			15,045,000				45.79
2099 Pennsylvania Avenue		CBD			100.0	%			208,636				62.0	%			62.0	%			9,987,000				77.06
1899 Pennsylvania Avenue		CBD			100.0	%			192,481				88.8	%			88.8	%			13,452,000				79.73
Liberty Place		East End			100.0	%			174,205				80.1	%			80.1	%			10,852,000				76.50
Subtotal / Weighted Average									1,602,655				88.5	%			90.3	%			83,422,000				58.32
San Francisco:
One Market Plaza		South Financial District			49.0	%			1,611,125				96.7	%			98.4	%			96,983,000				63.35
Total / Weighted Average									10,365,987				91.1	%			92.9	%		$	645,471,000			$	70.58

 

(1)	Represents the remeasured square feet, which includes an aggregate of 176,107 square feet of either REBNY or BOMA remeasurement adjustments that are not reflected in current leases.

(2)	See page 27 for our definition of this measure.

(3)	Excludes square feet and revenue from parking, storage, theater, signage and roof space.

 

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		FUNDS SUMMARY
(unaudited)

 

Property Funds:

The following is a summary of the Property Funds, our ownership interest in these Funds and the Funds’ ownership interest in the underlying investments, as of September 30, 2015.

 

		% Ownership				60 Wall Street				One Market Plaza				50 Beale Street
Fund II			10.0	%			46.3	%			—				—
Fund III			3.1	%			16.0	%			2.0	%			—
Fund VII/VII-H			7.2	%			—				—				42.8	%
Total Property Funds							62.3	%			2.0	%			42.8	%
Other Investors							37.7	%			98.0	%(1)			57.2	%
Total							100.0	%			100.0	%			100.0	%

The following is a summary of the Property Fund investments and our ownership interest in the underlying investments, as of September 30, 2015.

 

		Submarket		% Ownership				Square Feet				% Leased				Annualized Rent (2)
																Amount				Per Square Foot (3)
60 Wall Street		Downtown			5.1	%			1,625,483				100.0	%		$	67,000,000	(4)		$	41.22	(4)
50 Beale Street		South Financial District			3.1	%			663,483				98.6	%			33,805,000				51.68

Alternative Investment Funds:

The following is a summary of our ownership interest in the Alternative Investment Funds and the Funds’ underlying investments, as of September 30, 2015.

 

				%				Interest/								Investment
Fund		Investment Type		Ownership				Dividend Rate				Initial Maturity				Total				Our Share
Fund VIII		Mezzanine Loans			1.7%				6.0% - 8.3%				Oct-2019 - Jan-2022			$	86,813,000			$	1,493,000
PGRESS Funds		Preferred Equity Investments			4.9%				10.3%				Apr-2017 - Feb-2019				54,318,000				2,360,000

 

(1)	Includes a 49.0% direct ownership interest held by us.

(2)	See page 27 for our definition of this measure.

(3)	Excludes square feet and revenue from parking, storage, signage and roof space.

(4)	Represents triple net base rent only.

 

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		TOP TENANTS AND INDUSTRY DIVERSIFICATION
(unaudited)

 

		Lease Expiration				Square Feet Occupied				% of Total Square Feet				Annualized Rent (1)								% of Annualized Rent
														Amount				Per Square Foot
Top 10 Tenants:
As of September 30, 2015
The Corporate Executive Board Company			Jan-2028				625,062				6.0	%		$	32,048,000			$	51.27				5.0	%
Barclays Capital, Inc.			Dec-2020				497,418				4.8	%			30,184,000				60.68				4.7	%
Allianz Global Investors, LP			Jan-2031	(2)			326,457	(2)			3.1	%			26,170,000				80.16				4.1	%
Clifford Chance LLP			Jun-2024				328,992				3.2	%			25,510,000				77.54				4.0	%
Credit Agricole Corporate & Investment Bank			Feb-2023				311,291				3.0	%			25,065,000				80.52				3.9	%
Commerzbank AG			May-2016				287,535				2.8	%			24,486,000				85.16				3.8	%
Kasowitz Benson Torres & Friedman, LLP			Mar-2037	(3)			302,213	(3)			2.9	%			18,896,000				62.53				2.9	%
Google			Apr-2025				267,274				2.6	%			16,942,000				63.39				2.6	%
Deloitte & Touche, LLP			Mar-2016				212,052				2.0	%			16,735,000				78.92				2.6	%
WMG Acquisition Corp. (Warner Music Group)			Jul-2029				293,487				2.8	%			16,313,000				55.58				2.5	%

 

		Square Feet Occupied				% of Occupied Square Feet				Annualized Rent				% of Annualized Rent
Industry Diversification:
As of September 30, 2015
Legal Services			1,870,087				20.2	%		$	136,823,000				21.2	%
Financial Services - Commercial and Investment Banking			1,735,145				18.8	%			125,718,000				19.5	%
Financial Services - All other			1,390,169				15.0	%			110,806,000				17.2	%
Technology and Media			1,368,688				14.8	%			86,539,000				13.4	%
Insurance			338,399				3.7	%			26,908,000				4.2	%
Retail			321,188				3.5	%			26,382,000				4.1	%
Accounting			275,263				3.0	%			20,718,000				3.2	%
Real Estate			252,680				2.7	%			18,340,000				2.8	%
Government			316,700				3.4	%			14,674,000				2.3	%
Other			1,374,124				14.9	%			78,563,000				12.1	%

 

(1)	See page 27 for our definition of this measure.

(2)	5,546 of the square feet leased expires in December 2018.

(3)	100,422 of the square feet leased expires in November 2015.

 

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		LEASING ACTIVITY
(unaudited)

 

		Total				New York				Washington, D.C.				San Francisco
Quarter Ended September 30, 2015:
Total square feet leased			390,142				306,824				16,453				66,865
Pro rata share of total square feet leased:			333,516				284,299				16,453				32,764
Initial rent (1)		$	80.97			$	78.73			$	80.35			$	100.68
Weighted average lease term (years)			9.4				10.0				5.6				5.9
Tenant improvements and leasing commissions:
Per square foot		$	71.89			$	75.83			$	67.65			$	39.78
Per square foot per annum		$	7.66			$	7.58			$	12.13			$	6.69
Percentage of initial rent			9.5	%			9.6	%			15.1	%			6.6	%
Rent concessions:
Average free rent period (in months)			7.8				8.5				6.4				2.6
Average free rent period per annum (in months)			0.8				0.9				1.1				0.4
Second generation space: (1)
Square feet			325,217				281,525				16,453				27,239
Cash basis:
Initial rent (1)		$	80.61			$	78.71			$	80.35			$	100.46
Prior escalated rent		$	71.08			$	72.53			$	63.89			$	60.46
Percentage increase			13.4	%			8.5	%			25.8	%			66.2	%
GAAP basis:
Straight-line rent		$	77.43			$	75.88			$	73.22			$	95.99
Prior straight-line rent		$	71.15			$	72.98			$	57.75			$	60.29
Percentage increase			8.8	%			4.0	%			26.8	%			59.2	%

 

(1)	See page 27 for our definition of this measure.

 

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		LEASING ACTIVITY
(unaudited)

 

		Total				New York				Washington, D.C.				San Francisco
Nine Months Ended September 30, 2015:
Total square feet leased			745,942				596,310				49,633				99,999
Pro rata share of total square feet leased:			659,209				560,576				49,633				49,000
Initial rent (1)		$	77.36			$	77.92			$	56.58			$	92.08
Weighted average lease term (years)			11.0				11.3				11.1				6.7
Tenant improvements and leasing commissions:
Per square foot		$	83.70			$	86.22			$	92.63			$	45.91
Per square foot per annum		$	7.64			$	7.61			$	8.35			$	6.90
Percentage of initial rent			9.9	%			9.8	%			14.8	%			7.5	%
Rent concessions:
Average free rent period (in months)			9.3				9.9				10.3				2.1
Average free rent period per annum (in months)			0.8				0.9				0.9				0.3
Second generation space: (1)
Square feet			487,179				427,244				20,770				39,165
Cash basis:
Initial rent (1)		$	79.37			$	78.19			$	78.62			$	92.66
Prior escalated rent		$	69.54			$	70.66			$	64.86			$	59.87
Percentage increase			14.1	%			10.7	%			21.2	%			54.8	%
GAAP basis:
Straight-line rent		$	78.55			$	77.45			$	77.00			$	91.37
Prior straight-line rent		$	69.54			$	71.32			$	51.72			$	59.62
Percentage increase			13.0	%			8.6	%			48.9	%			53.3	%

 

(1)	See page 27 for our definition of this measure.

 

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		LEASE EXPIRATIONS
(unaudited)

 

Year of Lease Expiration (3)		Square Feet of Expiring Leases				Annualized Rent (1)								% of Annualized Rent
						Amount				Per Square Foot (2)
Month to Month			6,093			$	644,000			$	104.08				0.1	%
4Q 2015			130,145				8,306,000				63.78				1.3	%
1Q 2016			6,247				1,560,000				81.32				0.2	%
2Q 2016			448,264				38,015,000				84.50				5.8	%
3Q 2016			204,992				13,658,000				66.65				2.1	%
4Q 2016			172,002				11,553,000				67.39				1.8	%
Total 2016			831,505				64,786,000				76.55				9.9	%
2017			547,751				40,145,000				73.93				6.1	%
2018			323,709				25,816,000				79.62				3.9	%
2019			531,766				41,590,000				78.65				6.4	%
2020			485,687				34,107,000				78.37				5.2	%
2021			1,460,359				85,919,000				60.09				13.1	%
2022			298,411				18,785,000				77.50				2.9	%
2023			666,507				53,127,000				80.31				8.1	%
2024			682,055				53,589,000				79.02				8.2	%
Thereafter			3,417,566				227,655,000				66.32				34.8	%

 

(1)	See page 27 for our definition of this measure.

(2)	Excludes square feet and revenue from parking, storage, theater, signage and roof space.

(3)	Leases that expire on the last day of the quarter are treated as occupied and are reflected as expiring space in the following quarters.

 

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		CAPITAL EXPENDITURES - CASH BASIS
(unaudited and in thousands)

 

		Quarter Ended
		September 30, 2015				June 30, 2015				March 31, 2015
Capital expenditures to maintain assets:
Recurring (1)		$	3,101			$	273			$	3,754
Non-recurring (1)			—				—				—
Total capital expenditures to maintain assets		$	3,101			$	273			$	3,754
Tenant improvements:
Recurring (1)		$	5,298			$	13,254			$	10,795
Non-recurring (1)			10,555				1,431				1,693
Total tenant improvements		$	15,853			$	14,685			$	12,488
Leasing commissions:
Recurring (1)		$	4,304			$	3,355			$	3,544
Non-recurring (1)			1,124				1,678				2,587
Total leasing commissions		$	5,428			$	5,033			$	6,131
Total capital expenditures, tenant improvements and leasing commissions:
Total recurring (1)		$	12,703			$	16,882			$	18,093
Total non-recurring (1)			11,679				3,109				4,280
Total capital expenditures, tenant improvements and leasing commissions		$	24,382			$	19,991			$	22,373
Development expenditures (1)
One Market Plaza - Lobby and Retail repositioning (2)		$	3,421			$	3,866			$	5,301
1633 Broadway - Plaza and Retail development (3)			2,873				879				93
Other			679				576				—
Total Development expenditures		$	6,973			$	5,321			$	5,394

 

(1)	See page 27 for our definition of this measure.

(2)	Of the $25,000 budget, $16,265 has been expended as of September 30, 2015.

(3)	Of the $15,000 budget, $3,845 has been expended as of September 30, 2015.

 

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		DEFINITIONS

 

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is calculated by adjusting EBITDA for certain other items, including acquisition and transaction related costs and unrealized gains or losses on interest rate swaps, including our share of such adjustments of unconsolidated joint ventures.

Annualized Rent represents the end of period monthly base rent plus escalations in accordance with the lease terms, multiplied by 12.

Capital Expenditures consist of expenditures to maintain assets, tenant improvement allowances and leasing commissions. Recurring Capital Expenditures include capital expenditures to maintain current revenues and tenant improvements and leasing commissions related to space leased that has not been vacant for more than twelve months. Nonrecurring Capital Expenditures include capital expenditures completed in the year of acquisition and the following two years that were planned at the time of acquisition, as well as tenant improvements and leasing commissions on space leased that has been vacant for more than twelve months. Development Expenditures consist of hard and soft costs related to the development of a property in getting it ready for its intended use.

Core FFO Payout Ratio is calculated as dividends per share divided by Core FFO per share.

Core Funds from Operations (“Core FFO”) is calculated by adjusting FFO for certain other items, including acquisition and transaction related costs and unrealized gains or losses on interest rate swaps, including our share of such adjustments of unconsolidated joint ventures.

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) is calculated as GAAP net income or loss plus (i) depreciation and amortization (ii) interest and debt expense and (iii) income tax expense, including our share of such adjustments of unconsolidated joint ventures.

FAD Payout Ratio is calculated as total dividends divided by FAD.

FFO Payout Ratio is calculated as dividends per share divided by FFO per share.

Funds Available for Distribution (“FAD”) is calculated as Core FFO less (i) recurring tenant improvements, leasing commissions and other capital expenditures (ii) straight-line rent adjustments (iii) unrealized gains on real estate fund investments and (iv) amortization of above and below-market leases, net, plus (v) amortization of stock-based compensation expense and (vi) amortization of deferred financing costs.

Funds from Operations (“FFO”) is calculated in accordance with the definition adopted by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as GAAP net income or loss adjusted to exclude net gains from sales of depreciated real estate assets, impairment losses on depreciable real estate and depreciation and amortization expense from real estate assets, including our share of such adjustments of unconsolidated joint ventures.

Initial Rent represents the weighted average cash basis starting rent per square foot and does not include free rent or periodic step-ups in rent.

Leased % represents percentage of square feet that is leased, including signed leases not yet commenced.

Net Operating Income (“NOI”) is calculated as GAAP net income or loss plus (i) depreciation and amortization (ii) general and administrative expenses (iii) interest and debt expense (iv) acquisition and transaction related costs and (v) income tax expense, less (vi) fee income (vii) unrealized gains or losses on interest rate swaps (viii) interest and other income and (ix) the gain on consolidation of a consolidated joint venture, including our share of such adjustments of unconsolidated joint ventures. We also present Cash NOI which deducts from NOI, straight-line rent adjustments and the amortization of above and below-market leases, net, including our share of such adjustments of unconsolidated joint ventures. In addition, we present our pro rata 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.

Occupied % represents the percentage of space for which we have commenced rental revenue in accordance with GAAP.

Second Generation Space relates to space leased that has not been vacant for more than twelve months.

 

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