Paramount Board of Directors Unanimously Rejects Unsolicited Proposal from Monarch

Rhea-AI Summary

Paramount Group, Inc. (NYSE: PGRE) has unanimously rejected an unsolicited proposal from Monarch Alternative Capital LP to acquire the company’s shares for $12.00 each. The Board determined the offer undervalued Paramount, especially given its strong operating performance in 2021, with over one million square feet leased and a projected Core FFO growth above market consensus for 2022. The company aims to enhance stockholder value by repositioning its Class A assets and leveraging its management capabilities, expressing confidence in future growth opportunities.

Positive

• 2021 saw a 45% growth in leasing year-over-year.
• Core FFO results were 10.8% above market consensus.
• Strong rental growth with 18.7% mark-to-market growth on second generation space in Q4 2021.
• Expectations for continued strong same-store occupancy growth and Core FFO growth in 2022.

Negative

• Monarch's proposal could indicate potential undervaluation concerns among investors.

Proposal Significantly Undervalues Paramount and is Not in the Best Interest of Stockholders

NEW YORK--(BUSINESS WIRE)-- Paramount Group, Inc. (NYSE: PGRE) (“Paramount” or the “Company”) today announced that its Board of Directors has unanimously rejected an unsolicited, non-binding proposal received from Monarch Alternative Capital LP (“Monarch”) to acquire all of the Company’s outstanding common stock for $12.00 per share in cash.

Consistent with its fiduciary duties, Paramount’s Board of Directors conducted a thorough review of the proposal in consultation with its independent financial and legal advisors. Following this comprehensive review, the Board unanimously determined that the proposal significantly undervalues Paramount and is not in the best interest of the stockholders.

“Our Board is committed to enhancing value for stockholders and regularly reviews our strategy against market opportunities to ensure we are pursuing the best path to achieve this objective,” said Albert Behler, Chairman, Chief Executive Officer and President of Paramount. “The Board, in consultation with our advisors, carefully reviewed Monarch’s proposal and determined that it significantly undervalues the Company, particularly considering our recent momentum and the compelling opportunities we see ahead as we capitalize on industry tailwinds. We achieved impressive operating performance in 2021, executing leases of more than one million square feet and our 2022 guidance demonstrates our confidence in our ability to continue to drive growth as the industry environment recovers. As we execute our strategy, we remain open-minded to opportunities that could allow us to create additional value for our stockholders; however, it is clear that Monarch’s opportunistic proposal significantly undervalues our company and does not take into account our future value-creation potential.”

Paramount’s Board and management team are focused on executing the Company’s strategy to reposition its portfolio of Class A and Trophy assets and leverage its best-in-class operating platform to drive strong financial and operating performance and significant stockholder value. Paramount’s 2021 performance demonstrates the substantial value of its assets and the potential of its platform as it achieved 45% growth in leasing year-over-year and reported Core FFO results that were 10.8% above market consensus when the year began. The Company continues to drive strong rental growth as it repositions its trophy assets to meet tenants’ modern needs, as evidenced by its 18.7% mark-to-market growth on second generation space in the fourth quarter of 2021. Looking forward, Paramount expects strong same-store occupancy growth and Core FFO growth above current consensus for the full year 2022. The Paramount Board remains confident in the management team’s ability to reach these targets and drive significant value for stockholders as market dynamics normalize throughout 2022.

The full text of the letter sent by the Paramount Board of Directors to Monarch is below:

March 21, 2022
Mr. Adam Sklar
Co-Portfolio Manager
Co-Head of Real Estate
Mr. Joshua Acheatel
Managing Principal
Monarch Alternative Capital LP
535 Madison Avenue
New York, New York 10022
Dear Adam and Josh:
This will respond on behalf of our Board of Directors to your proposal letter provided on February 24, 2022.
Our Board has fully and carefully reviewed and considered your proposal, with the benefit of advice from our external financial and legal advisors. The Board has unanimously determined that your proposal significantly undervalues Paramount Group, Inc. (“Paramount”). Our Board and management team remain open-minded, and we will continue to thoroughly consider all opportunities to enhance stockholder value.
As always, we are committed to advancing the best interests of Paramount and all of our stockholders.
	Very truly yours,
	Albert P. Behler
	Chairman of the Board of Directors

BofA Securities is acting as Paramount’s financial advisor and Goodwin Procter LLP and Wachtell, Lipton, Rosen & Katz are acting as legal counsel.

About Paramount Group, Inc.

Headquartered in New York City, Paramount Group, Inc. is a fully-integrated real estate investment trust that owns, operates, manages, acquires and redevelops high-quality, Class A office properties located in select central business district submarkets of New York City and San Francisco. Paramount is focused on maximizing the value of its portfolio by leveraging the sought-after locations of its assets and its proven property management capabilities to attract and retain high-quality tenants.

Forward Looking Statements

This press release may contain “forward-looking statements” within the meaning of the federal securities laws. Such statements are identified by use of the words “anticipates,” “believes,” “estimates,” “expects,” “guidance,” “intends,” “plans,” “predicts,” “projects,” “should,” 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, regional and global economies and the Company’s tenants’ financial condition and results of operations; the ability to enter into new leases or renew leases on favorable terms; dependence on tenants’ financial condition; 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; the costs and availability of financing; the ability of the Company’s 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 the Company’s operating results; regulatory changes, including changes to tax laws and regulations; and other risks and uncertainties detailed from time to time in Paramount’s filings with the U.S. Securities and Exchange Commission. Paramount does not undertake a duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220321005846/en/

Andrew Siegel / Lucas Pers

Joele Frank, Wilkinson Brimmer Katcher

212-355-4449

Source: Paramount Group, Inc.

FAQ

What was the reason for Paramount Group's rejection of Monarch's proposal?

Paramount Group rejected Monarch's acquisition proposal because it significantly undervalued the company despite its strong financial performance and growth potential.

What is the current stock price proposal from Monarch Alternative Capital for PGRE?

Monarch proposed to acquire PGRE shares for $12.00 each, which was rejected by Paramount's Board.

What are Paramount Group's growth expectations for the year 2022?

Paramount expects strong same-store occupancy growth and Core FFO growth above current market consensus for 2022.

How did Paramount perform financially in 2021?

In 2021, Paramount achieved a 45% growth in leasing year-over-year and Core FFO results that exceeded market expectations.

What is the next step for Paramount Group after rejecting Monarch's proposal?

Paramount's Board remains open-minded to other opportunities that could enhance stockholder value while focusing on executing its strategy.