Paramount Announces First Quarter 2023 Results
– Raises Guidance for Full Year 2023 –
First Quarter Highlights:
Results of Operations:
-
Reported net income attributable to common stockholders of
$1.7 million $0.01 $3.4 million $0.02 -
Reported Core Funds from Operations (“Core FFO”) attributable to common stockholders of
$56.2 million $0.26 $54.6 million $0.25 -
Raised its full year 2023 Earnings Guidance as follows:
-
Estimated net loss attributable to common stockholders is expected to be between
$0.11 $0.07 $0.13 $0.07 $0.01 -
Estimated Core FFO attributable to common stockholders is expected to be between
$0.90 $0.94 $0.88 $0.94 $0.01
-
Estimated net loss attributable to common stockholders is expected to be between
-
Reported a
7.1% increase in Same Store Net Operating Income (“NOI”) and a0.1% increase in Same Store Cash NOI in the quarter ended March 31, 2023, compared to the same period in the prior year. -
Leased 195,634 square feet, of which the Company’s share was 170,333 square feet that was leased at a weighted average initial rent of
$82.21 0.9% on a GAAP basis and negative1.9% on a cash basis. -
Declared a first quarter cash dividend of
$0.07 75
___________________
(1) Second generation space represents space leased in the current period that has been (i) vacant for less than twelve months, or (ii) pre-leased prior to its scheduled expiration.
Financial Results
Quarter Ended March 31, 2023
Net income attributable to common stockholders was
Funds from Operations (“FFO”) attributable to common stockholders was
Core FFO attributable to common stockholders, which excludes the impact of the non-core items listed on page 8, was
Portfolio Operations
Quarter Ended March 31, 2023
Same Store NOI increased by
During the quarter ended March 31, 2023, the Company leased 195,634 square feet, of which the Company’s share was 170,333 square feet that was leased at a weighted average initial rent of
Of the 195,634 square feet leased in the first quarter, 143,882 square feet represented the Company’s share of second generation space for which mark-to-markets were
Guidance
The Company is raising its Estimated Core FFO Guidance for the full year of 2023, which is reconciled below to estimated net loss attributable to common stockholders per diluted share in accordance with GAAP. The Company estimates that net loss attributable to common stockholders will be between
Based on the Company’s performance for the three months ended March 31, 2023 and its outlook for the remainder of 2023, the Company is raising its Estimated 2023 Core FFO to be between
|
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|
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|
|
Full Year 2023 |
|
|||||
(Amounts per diluted share) |
Low |
|
|
High |
|
||||||||
Estimated net loss attributable to common stockholders |
$ |
(0.11 |
) |
|
$ |
(0.07 |
) |
||||||
Pro rata share of real estate depreciation and amortization, including the Company's share of unconsolidated joint ventures |
|
1.01 |
|
|
|
1.01 |
|
||||||
Estimated Core FFO |
$ |
0.90 |
|
|
$ |
0.94 |
|
||||||
Except as described above, these estimates reflect management’s view of current and future market conditions, including assumptions with respect to rental rates, occupancy levels and the earnings impact of the events referenced in this release and otherwise to be referenced during the conference call referred to on page 5. These estimates do not include the impact on operating results from the Federal Deposit Insurance Corporation being appointed as receiver of our tenant First Republic Bank and the acquisition of all deposit accounts and substantially all the assets of First Republic Bank by JPMorgan Chase Bank, possible future property acquisitions or dispositions, or realized and unrealized gains and losses on real estate related fund investments. The estimates set forth above may be subject to fluctuations as a result of several factors, including the negative impact of the COVID-19 global pandemic. There can be no assurance that the Company’s actual results will not differ materially from the estimates set forth above.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws. You can identify these statements by our use of the words “assumes,” “believes,” “estimates,” “expects,” “guidance,” “intends,” “plans,” “projects” and similar expressions that do not relate to historical matters. You should exercise caution in interpreting and relying on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and could materially affect actual results, performance or achievements. These factors include, without limitation, the ability to enter into new leases or renew leases on favorable terms; dependence on tenants’ financial condition; the risk we may lose a major tenant or that a major tenant may be adversely impacted by market and economic conditions, including rising inflation and interest rates; the impact of the Federal Deposit Insurance Corporation being appointed as receiver of our tenant First Republic Bank and the acquisition of all deposit accounts and substantially all the assets of First Republic Bank by JPMorgan Chase Bank; trends in the office real estate industry including telecommuting, flexible work schedules, open workplaces and teleconferencing; the uncertainties of real estate development, acquisition and disposition activity; the ability to effectively integrate acquisitions; fluctuations in interest rates and the costs and availability of financing; the ability of our joint venture partners to satisfy their obligations; the effects of local, national and international economic and market conditions and the impact of rising inflation and interest rates on such market conditions; the effects of acquisitions, dispositions and possible impairment charges on our operating results; the negative impact of the COVID-19 global pandemic or any future pandemic, endemic or outbreak of infectious disease on the
Non-GAAP Financial Measures
FFO is a supplemental measure of our performance. We present FFO in accordance with the definition adopted by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines FFO as net income or loss, calculated in accordance with GAAP, adjusted to exclude depreciation and amortization from real estate assets, impairment losses on certain real estate assets and gains or losses from the sale of certain real estate assets or from change in control of certain real estate assets, including our share of such adjustments of unconsolidated joint ventures. FFO is commonly used in the real estate industry to assist investors and analysts in comparing results of real estate companies because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. In addition, we present Core FFO as an alternative measure of our operating performance, which adjusts FFO for certain other items that we believe enhance the comparability of our FFO across periods. Core FFO, when applicable, excludes the impact of certain items, including, transaction related costs and adjustments, realized and unrealized gains or losses on real estate related fund investments, unrealized gains or losses on interest rate swaps, severance costs and gains or losses on early extinguishment of debt, in order to reflect the Core FFO of our real estate portfolio and operations. In future periods, we may also exclude other items from Core FFO that we believe may help investors compare our results.
FFO and Core FFO are presented as supplemental financial measures and do not fully represent our operating performance. Other REITs may use different methodologies for calculating FFO and Core FFO or use other definitions of FFO and Core FFO and, accordingly, our presentation of these measures may not be comparable to other real estate companies. Neither FFO nor Core FFO is intended to be a measure of cash flow or liquidity. Please refer to our financial statements, prepared in accordance with GAAP, for purposes of evaluating our financial condition, results of operations and cash flows.
NOI is used to measure the operating performance of our properties. NOI consists of rental revenue (which includes property rentals, tenant reimbursements and lease termination income) and certain other property-related revenue less operating expenses (which includes property-related expenses such as cleaning, security, repairs and maintenance, utilities, property administration and real estate taxes). We also present Cash NOI which deducts from NOI, straight-line rent adjustments and the amortization of above and below-market leases, including our share of such adjustments of unconsolidated joint ventures. In addition, we present PGRE's share of NOI and Cash NOI which represents our share of NOI and Cash NOI of consolidated and unconsolidated joint ventures, based on our percentage ownership in the underlying assets. We use NOI and Cash NOI internally as performance measures and believe they provide useful information to investors regarding our financial condition and results of operations because they reflect only those income and expense items that are incurred at the property level.
Same Store NOI is used to measure the operating performance of properties in our
A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure can be found in this press release and in our Supplemental Information for the quarter ended March 31, 2023, which is available on our website.
Investor Conference Call and Webcast
The Company will host a conference call and audio webcast on Thursday, May 4, 2023 at 10:00 a.m. Eastern Time (ET), during which management will discuss the first quarter results and provide commentary on business performance. A question and answer session with analysts and investors will follow the prepared remarks.
The conference call can be accessed by dialing 877-300-8521 (domestic) or 412-317-6026 (international). An audio replay of the conference call will be available from 2:00 p.m. ET on May 4, 2023 through May 11, 2023 and can be accessed by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 10177231.
A live audio webcast of the conference call will be available through the “Investors” section of the Company’s website, www.pgre.com. A replay of the webcast will be archived on the Company’s website.
About Paramount Group, Inc.
Headquartered in
Paramount Group, Inc. |
||||||||
Consolidated Balance Sheets |
||||||||
(Unaudited and in thousands) |
||||||||
Assets: |
|
March 31, 2023 |
|
December 31, 2022 |
||||
Real estate, at cost: |
|
|
|
|
|
|
||
Land |
|
$ |
1,966,237 |
|
|
$ |
1,966,237 |
|
Buildings and improvements |
|
|
6,185,311 |
|
|
|
6,177,540 |
|
|
|
|
8,151,548 |
|
|
|
8,143,777 |
|
Accumulated depreciation and amortization |
|
|
(1,337,552 |
) |
|
|
(1,297,553 |
) |
Real estate, net |
|
|
6,813,996 |
|
|
|
6,846,224 |
|
Cash and cash equivalents |
|
|
451,796 |
|
|
|
408,905 |
|
Restricted cash |
|
|
59,179 |
|
|
|
40,912 |
|
Accounts and other receivables |
|
|
19,409 |
|
|
|
23,866 |
|
Real estate related fund investments |
|
|
108,176 |
|
|
|
105,369 |
|
Investments in unconsolidated real estate related funds |
|
|
3,180 |
|
|
|
3,411 |
|
Investments in unconsolidated joint ventures |
|
|
385,034 |
|
|
|
393,503 |
|
Deferred rent receivable |
|
|
354,326 |
|
|
|
346,338 |
|
Deferred charges, net |
|
|
120,359 |
|
|
|
120,685 |
|
Intangible assets, net |
|
|
84,352 |
|
|
|
90,381 |
|
Other assets |
|
|
80,282 |
|
|
|
73,660 |
|
Total assets |
|
$ |
8,480,089 |
|
|
$ |
8,453,254 |
|
|
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
||
Notes and mortgages payable, net |
|
$ |
3,841,492 |
|
|
$ |
3,840,318 |
|
Revolving credit facility |
|
|
- |
|
|
|
- |
|
Accounts payable and accrued expenses |
|
|
118,932 |
|
|
|
123,176 |
|
Dividends and distributions payable |
|
|
18,110 |
|
|
|
18,026 |
|
Intangible liabilities, net |
|
|
33,938 |
|
|
|
36,193 |
|
Other liabilities |
|
|
30,537 |
|
|
|
24,775 |
|
Total liabilities |
|
|
4,043,009 |
|
|
|
4,042,488 |
|
Equity: |
|
|
|
|
|
|
||
Paramount Group, Inc. equity |
|
|
3,562,571 |
|
|
|
3,592,291 |
|
Noncontrolling interests in: |
|
|
|
|
|
|
||
Consolidated joint ventures |
|
|
403,902 |
|
|
|
402,118 |
|
Consolidated real estate related funds |
|
|
220,206 |
|
|
|
173,375 |
|
Operating Partnership |
|
|
250,401 |
|
|
|
242,982 |
|
Total equity |
|
|
4,437,080 |
|
|
|
4,410,766 |
|
Total liabilities and equity |
|
$ |
8,480,089 |
|
|
$ |
8,453,254 |
|
Paramount Group, Inc. |
||||||||
Consolidated Statements of Income |
||||||||
(Unaudited and in thousands, except share and per share amounts) |
||||||||
|
|
For the Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Revenues: |
|
|
|
|
|
|
||
Rental revenue |
|
$ |
181,713 |
|
|
$ |
169,922 |
|
Fee and other income |
|
|
6,761 |
|
|
|
13,763 |
|
Total revenues |
|
|
188,474 |
|
|
|
183,685 |
|
Expenses: |
|
|
|
|
|
|
||
Operating |
|
|
70,309 |
|
|
|
66,661 |
|
Depreciation and amortization |
|
|
58,888 |
|
|
|
55,624 |
|
General and administrative |
|
|
14,623 |
|
|
|
15,645 |
|
Transaction related costs |
|
|
128 |
|
|
|
117 |
|
Total expenses |
|
|
143,948 |
|
|
|
138,047 |
|
Other income (expense): |
|
|
|
|
|
|
||
Income from real estate related fund investments |
|
|
3,550 |
|
|
|
- |
|
(Loss) income from unconsolidated real estate related funds |
|
|
(178 |
) |
|
|
170 |
|
Loss from unconsolidated joint ventures |
|
|
(5,762 |
) |
|
|
(5,113 |
) |
Interest and other income, net |
|
|
2,925 |
|
|
|
231 |
|
Interest and debt expense |
|
|
(36,459 |
) |
|
|
(34,277 |
) |
Income before income taxes |
|
8,602 |
|
|
|
6,649 |
|
|
Income tax expense |
|
|
(288 |
) |
|
|
(527 |
) |
Net income |
|
|
8,314 |
|
|
|
6,122 |
|
Less net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
||
Consolidated joint ventures |
|
|
(5,641 |
) |
|
|
(3,425 |
) |
Consolidated real estate related funds |
|
|
(823 |
) |
|
|
1,016 |
|
Operating Partnership |
|
|
(121 |
) |
|
|
(342 |
) |
Net income attributable to common stockholders |
|
$ |
1,729 |
|
|
$ |
3,371 |
|
|
|
|
|
|
|
|
||
Per Share: |
|
|
|
|
|
|
||
Basic |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
Diluted |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
||
Weighted average common shares outstanding: |
|
|
|
|
|
|
||
Basic |
|
|
216,563,108 |
|
|
|
218,782,296 |
|
Diluted |
|
|
216,617,020 |
|
|
|
218,840,094 |
|
Paramount Group, Inc. |
||||||||
Reconciliation of Net Income to FFO and Core FFO |
||||||||
(Unaudited and in thousands, except share and per share amounts) |
||||||||
|
|
For the Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Reconciliation of Net Income to FFO and Core FFO: |
|
|
|
|
|
|
||
Net income |
|
$ |
8,314 |
|
|
$ |
6,122 |
|
Real estate depreciation and amortization (including our share of unconsolidated
|
|
|
68,431 |
|
|
|
65,825 |
|
FFO |
|
|
76,745 |
|
|
|
71,947 |
|
Less FFO attributable to noncontrolling interests in: |
|
|
|
|
|
|
||
Consolidated joint ventures |
|
|
(15,175 |
) |
|
|
(12,515 |
) |
Consolidated real estate related funds |
|
|
(830 |
) |
|
|
1,009 |
|
FFO attributable to Paramount Group Operating Partnership |
|
|
60,740 |
|
|
|
60,441 |
|
Less FFO attributable to noncontrolling interests in Operating Partnership |
|
|
(3,961 |
) |
|
|
(5,568 |
) |
FFO attributable to common stockholders |
|
$ |
56,779 |
|
|
$ |
54,873 |
|
Per diluted share |
|
$ |
0.26 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
||
FFO |
|
$ |
76,745 |
|
|
$ |
71,947 |
|
Non-core items: |
|
|
|
|
|
|
||
FFO attributable to One Steuart Lane, including after-tax net gain on sale of residential condominium units |
|
|
2,409 |
|
|
|
1,262 |
|
Adjustment to equity in earnings for contributions to (distributions from unconsolidated joint ventures |
|
|
(1,322 |
) |
|
|
(583 |
) |
Adjustments for realized and unrealized gains and losses on consolidated and unconsolidated real estate related fund investments |
|
|
1,335 |
|
|
|
47 |
|
Other, net |
|
|
128 |
|
|
|
117 |
|
Core FFO |
|
|
79,295 |
|
|
|
72,790 |
|
Less Core FFO attributable to noncontrolling interests in: |
|
|
|
|
|
|
||
Consolidated joint ventures |
|
|
(15,175 |
) |
|
|
(12,515 |
) |
Consolidated real estate related funds |
|
|
(4,027 |
) |
|
|
(159 |
) |
Core FFO attributable to Paramount Group Operating Partnership |
|
|
60,093 |
|
|
|
60,116 |
|
Less Core FFO attributable to noncontrolling interests in Operating Partnership |
|
|
(3,919 |
) |
|
|
(5,538 |
) |
Core FFO attributable to common stockholders |
|
$ |
56,174 |
|
|
$ |
54,578 |
|
Per diluted share |
|
$ |
0.26 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
||
Reconciliation of weighted average shares outstanding: |
|
|
|
|
|
|
||
Weighted average shares outstanding |
|
|
216,563,108 |
|
|
|
218,782,296 |
|
Effect of dilutive securities |
|
|
53,912 |
|
|
|
57,798 |
|
Denominator for FFO and Core FFO per diluted share |
|
|
216,617,020 |
|
|
|
218,840,094 |
|
Paramount Group, Inc. |
|||||||
Reconciliation of Net Income to Same Store NOI and Same Store Cash NOI |
|||||||
(Unaudited and in thousands) |
|||||||
|
For the Three Months Ended |
|
|||||
|
March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Reconciliation of Net Income to Same Store NOI and Same Store Cash NOI: |
|
|
|
|
|
||
Net income |
$ |
8,314 |
|
|
$ |
6,122 |
|
Add (subtract) adjustments to arrive at NOI and Cash NOI: |
|
|
|
|
|
||
Depreciation and amortization |
|
58,888 |
|
|
|
55,624 |
|
General and administrative |
|
14,623 |
|
|
|
15,645 |
|
Interest and debt expense |
|
36,459 |
|
|
|
34,277 |
|
Income tax expense |
|
288 |
|
|
|
527 |
|
Income from real estate related fund investments |
|
(3,550 |
) |
|
|
- |
|
NOI from unconsolidated joint ventures (excluding One Steuart Lane) |
|
10,381 |
|
|
|
11,234 |
|
Loss from unconsolidated joint ventures |
|
5,762 |
|
|
|
5,113 |
|
Fee income |
|
(4,557 |
) |
|
|
(11,988 |
) |
Interest and other income, net |
|
(2,925 |
) |
|
|
(231 |
) |
Other, net |
|
306 |
|
|
|
(53 |
) |
NOI |
|
123,989 |
|
|
|
116,270 |
|
Less NOI attributable to noncontrolling interests in: |
|
|
|
|
|
||
Consolidated joint ventures |
|
(22,712 |
) |
|
|
(20,322 |
) |
PGRE's share of NOI |
|
101,277 |
|
|
|
95,948 |
|
Lease termination income |
|
- |
|
|
|
(1,718 |
) |
Acquisitions / Redevelopment and other, net |
|
1,079 |
|
|
|
1,314 |
|
PGRE's share of Same Store NOI |
$ |
102,356 |
|
|
$ |
95,544 |
|
|
|
|
|
|
|
||
NOI |
$ |
123,989 |
|
|
$ |
116,270 |
|
Less: |
|
|
|
|
|
||
Straight-line rent adjustments (including our share of unconsolidated joint ventures) |
|
(7,691 |
) |
|
|
1,658 |
|
Amortization of above and below-market leases, net (including our share of unconsolidated joint ventures) |
|
(1,838 |
) |
|
|
(1,197 |
) |
Cash NOI |
|
114,460 |
|
|
|
116,731 |
|
Less Cash NOI attributable to noncontrolling interests in: |
|
|
|
|
|
||
Consolidated joint ventures |
|
(19,845 |
) |
|
|
(20,513 |
) |
PGRE's share of Cash NOI |
|
94,615 |
|
|
|
96,218 |
|
Lease termination income |
|
- |
|
|
|
(1,718 |
) |
Acquisitions / Redevelopment and other, net |
|
753 |
|
|
|
749 |
|
PGRE's share of Same Store Cash NOI |
$ |
95,368 |
|
|
$ |
95,249 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20230503005857/en/
Wilbur Paes
Chief Operating Officer, Chief Financial Officer and Treasurer
212-237-3122
ir@pgre.com
Tom Hennessy
Vice President, Investor Relations and Business Development
212-237-3138
ir@pgre.com
Media:
212-492-2285
pr@pgre.com
Source: Paramount Group, Inc.
