–Raises Guidance for Full Year 2022–

Paramount Group, Inc. (NYSE:PGRE) ("Paramount" or the "Company") filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 today and reported results for the second quarter ended June 30, 2022.

Second Quarter Highlights:

Reported net loss attributable to common stockholders of $0.4 million, or $0.00 per diluted share, for the quarter ended June 30, 2022, compared to $15.9 million, or $0.07 per diluted share, for the quarter ended June 30, 2021.
Reported Core Funds from Operations ("Core FFO") attributable to common stockholders of $53.6 million, or $0.24 per diluted share, for the quarter ended June 30, 2022, compared to $47.6 million, or $0.22 per diluted share, for the quarter ended June 30, 2021.
Raised its full year 2022 earnings guidance as follows:
- Estimated earnings attributable to common stockholders will be between a net loss of $0.01 per diluted share and net income of $0.03 per diluted share, compared to its prior estimated range of net loss attributable to common stockholders of $0.05 and $0.01 per diluted share, an increase in net income of $0.04 per diluted share at the midpoint of the Company's prior estimate.
- Estimated Core FFO attributable to common stockholders will be between $0.95 and $0.99 per diluted share, compared to its prior estimated range of $0.93 to $0.97 per diluted share, an increase of $0.02 per diluted share at the midpoint of the Company's prior guidance.
Reported a 5.6% increase in Same Store Cash Net Operating Income ("NOI") and a 9.0% increase in Same Store NOI in the quarter ended June 30, 2022, compared to the same period in the prior year.
Leased 250,231 square feet, of which the Company's share was 188,175 square feet that was leased at a weighted average initial rent of $78.28 per square foot. Of the 188,175 square feet that was leased, 96,052 square feet represented the Company's share of second generation space, for which rental rates decreased by 5.3% on a cash basis and increased by 0.5% on a GAAP basis.
Declared a second quarter cash dividend of $0.0775 per common share on June 15, 2022, which was paid on July 15, 2022.
Subsequent to quarter end, repurchased 268,231 common shares at a weighted average price of $6.96 per share, or $1.9 million in the aggregate.

Financial Results

Quarter Ended June 30, 2022

Net loss attributable to common stockholders was $0.4 million, or $0.00 per diluted share, for the quarter ended June 30, 2022, compared to $15.9 million, or $0.07 per diluted share, for the quarter ended June 30, 2021. Net loss attributable to common stockholders for the quarter ended June 30, 2021 includes a $10.7 million contribution to an unconsolidated joint venture, that was expensed in accordance with GAAP.

Funds from Operations ("FFO") attributable to common stockholders was $53.3 million, or $0.24 per diluted share, for the quarter ended June 30, 2022, compared to $37.9 million, or $0.17 per diluted share, for the quarter ended June 30, 2021. FFO attributable to common stockholders for the quarter ended June 30, 2021 includes a $10.7 million contribution to an unconsolidated joint venture, that was expensed in accordance with GAAP. FFO attributable to common stockholders for the quarters ended June 30, 2022 and 2021 also includes the impact of other non-core items, which are listed in the table on page 9. The aggregate of the non-core items, net of amounts attributable to noncontrolling interests, decreased FFO attributable to common stockholders for the quarter ended June 30, 2022 and 2021 by $0.3 million and $9.7 million, respectively, or $0.00 and $0.05 per diluted share, respectively.

Core FFO attributable to common stockholders, which excludes the impact of the non-core items listed on page 9, was $53.6 million, or $0.24 per diluted share, for the quarter ended June 30, 2022, compared to $47.6 million, or $0.22 per diluted share, for the quarter ended June 30, 2021.

Six Months Ended June 30, 2022

Net income attributable to common stockholders was $3.0 million, or $0.01 per diluted share, for the six months ended June 30, 2022, compared to net loss attributable to common stockholders of $19.5 million, or $0.09 per diluted share, for the six months ended June 30, 2021. Net loss attributable to common stockholders for the six months ended June 30, 2021 includes a $10.7 million contribution to an unconsolidated joint venture, that was expensed in accordance with GAAP.

FFO attributable to common stockholders was $108.2 million, or $0.49 per diluted share, for the six months ended June 30, 2022, compared to $88.8 million, or $0.40 per diluted share, for the six months ended June 30, 2021. FFO attributable to common stockholders for the six months ended June 30, 2021 includes a $10.7 million contribution to an unconsolidated joint venture, that was expensed in accordance with GAAP. FFO attributable to common stockholders for the six months ended June 30, 2022 and 2021 also includes the impact of other non-core items, which are listed in the table on page 9. The aggregate of the non-core items, net of amounts attributable to noncontrolling interests, did not impact FFO attributable to common stockholders for the six months ended June 30, 2022 and decreased FFO attributable to common stockholders for the six months ended June 30, 2021 by $9.4 million, or $0.05 per diluted share.

Core FFO attributable to common stockholders, which excludes the impact of the non-core items listed on page 9, was $108.2 million, or $0.49 per diluted share, for the six months ended June 30, 2022, compared to $98.2 million, or $0.45 per diluted share, for the six months ended June 30, 2021.

Portfolio Operations

Quarter Ended June 30, 2022

Same Store Cash NOI increased by $5.1 million, or 5.6%, to $96.8 million for the quarter ended June 30, 2022 from $91.7 million for the quarter ended June 30, 2021. Same Store NOI increased by $8.5 million, or 9.0%, to $102.8 million for the quarter ended June 30, 2022 from $94.3 million for the quarter ended June 30, 2021.

During the quarter ended June 30, 2022, the Company leased 250,231 square feet, of which the Company's share was 188,175 square feet that was leased at a weighted average initial rent of $78.28 per square foot. This leasing activity, partially offset by lease expirations in the quarter, increased leased occupancy by 80 basis points to 91.4% at June 30, 2022 from 90.6% at March 31, 2022. Same store leased occupancy (properties owned by the Company in a similar manner during both reporting periods), increased by 90 basis points to 91.4% at June 30, 2022 from 90.5% at March 31, 2022. Of the 188,175 square feet leased, 96,052 square feet represented the Company's share of second generation space (space that had been vacant for less than twelve months) for which rental rates decreased by 5.3% on a cash basis and increased 0.5% on a GAAP basis. The weighted average lease term for leases signed during the second quarter was 9.0 years and weighted average tenant improvements and leasing commissions on these leases were $10.43 per square foot per annum, or 13.3% of initial rent.

Six Months Ended June 30, 2022

Same Store Cash NOI increased by $8.7 million, or 4.7%, to $192.8 million for the six months ended June 30, 2022 from $184.1 million for the six months ended June 30, 2021. Same Store NOI increased by $5.9 million, or 3.0%, to $199.0 million for the six months ended June 30, 2022 from $193.1 million for the six months ended June 30, 2021.

During the six months ended June 30, 2022, the Company leased 453,051 square feet, of which the Company's share was 340,377 square feet that was leased at a weighted average initial rent of $73.54 per square foot. This leasing activity, partially offset by lease expirations in the six months, increased leased occupancy by 70 basis points to 91.4% at June 30, 2022 from 90.7% at December 31, 2021. Same store leased occupancy (properties owned by the Company in a similar manner during both reporting periods), increased by 80 basis points to 91.4% at June 30, 2022 from 90.6% at December 31, 2021. Of the 340,377 square feet leased, 237,321 square feet represented the Company's share of second generation space (space that had been vacant for less than twelve months) for which rental rates decreased by 2.5% on a cash basis and remained in-line with prior rental rates on a GAAP basis. The weighted average lease term for leases signed during the six months was 8.5 years and weighted average tenant improvements and leasing commissions on these leases were $9.59 per square foot per annum, or 13.0% of initial rent.

Guidance

The Company is raising its Estimated Core FFO Guidance for the full year of 2022, which is reconciled below to estimated net (loss) income attributable to common stockholders per diluted share in accordance with GAAP. The Company estimates that earnings attributable to common stockholders will be between a net loss of $0.01 per diluted share and net income of $0.03 per diluted share, compared to its prior estimated range of net loss attributable to common stockholders of $0.05 and $0.01 per diluted share, an increase in net income of $0.04 per diluted share at the midpoint of the Company's prior estimate, resulting from (i) $0.01 per diluted share from better than expected portfolio operations, (ii) $0.01 per diluted share from higher straight line rental income, (iii) $0.01 per diluted share from lower interest expense and (iv) $0.02 per diluted share from lower depreciation expense, partially offset by (v) $0.01 per diluted share from higher general and administrative expenses. The estimated net (loss) income attributable to common stockholders 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.

Based on the Company's performance for the six months ended June 30, 2022, and its outlook for the remainder of 2022, the Company is raising its Estimated 2022 Core FFO to be between $0.95 and $0.99 per diluted share, compared to its prior estimate of $0.93 to $0.97 per diluted share. This represents an increase of $0.02 per diluted share at the midpoint of the Company's guidance, resulting primarily from (i) $0.01 per diluted share from better than expected portfolio operations, (ii) $0.01 per diluted share from higher straight line rental income, and (iii) $0.01 per diluted share from lower interest expense, partially offset by, (iv) $0.01 per diluted share from higher general and administrative expenses.

	Full Year 2022
(Amounts per diluted share)	Low			High
Estimated net (loss) income attributable to common stockholders	$	(0.01	)	$	0.03
Pro rata share of real estate depreciation and amortization, including the Company's share of unconsolidated joint ventures		0.96			0.96
Estimated Core FFO	$	0.95		$	0.99

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 6. These estimates do not include the impact on operating results from possible future property acquisitions or dispositions, or realized and unrealized gains and losses on real estate 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 negative impact of the COVID-19 global pandemic on the U.S., regional and global economies and our 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; 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; regulatory changes, including changes to tax laws and regulations; and other risks and uncertainties detailed from time to time in the Company's filings with the U.S. 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 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, realized and unrealized gains or losses on real estate 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 property level.

Same Store NOI is used to measure the operating performance of properties in our New York and San Francisco portfolios that were owned by the Company in a similar manner during both the current period and prior reporting periods and represents Same Store NOI from consolidated and unconsolidated joint ventures based on our percentage ownership in the underlying assets. Same Store NOI also excludes lease termination income, impairment of receivables arising from operating leases and certain other items that may vary from period to period. We also present Same Store Cash NOI, which excludes the effect of non-cash items such as the straight-line rent adjustments and the amortization of above and below-market leases.

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 June 30, 2022, which is available on our website.

Investor Conference Call and Webcast

The Company will host a conference call and audio webcast on Wednesday, July 27, 2022 at 12:00 p.m. Eastern Time (ET), during which management will discuss the second 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 877-407-0789 (domestic) or 201-689-8562 (international). An audio replay of the conference call will be available from 3:00 p.m. ET on July 27, 2022 through August 3, 2022 and can be accessed by dialing 844-512-2921 (domestic) or 412-317-6671 (international) and entering the passcode 13729527.

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 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.

Paramount Group, Inc. Consolidated Balance Sheets (Unaudited and in thousands)

Assets:	June 30, 2022			December 31, 2021
Real estate, at cost:
Land	$	1,966,237		$	1,966,237
Buildings and improvements		6,103,782			6,061,824
		8,070,019			8,028,061
Accumulated depreciation and amortization		(1,199,035	)		(1,112,977	)
Real estate, net		6,870,984			6,915,084
Cash and cash equivalents		506,933			524,900
Restricted cash		24,934			4,766
Investments in unconsolidated joint ventures		429,418			408,096
Investments in unconsolidated real estate funds		14,156			11,421
Accounts and other receivables		17,788			15,582
Deferred rent receivable		336,736			332,735
Deferred charges, net		119,431			122,177
Intangible assets, net		104,929			119,413
Other assets		56,920			40,388
Total assets	$	8,482,229		$	8,494,562

Liabilities:
Notes and mortgages payable, net	$	3,837,968		$	3,835,620
Revolving credit facility		-			-
Accounts payable and accrued expenses		108,464			116,192
Dividends and distributions payable		18,787			16,895
Intangible liabilities, net		41,119			45,328
Other liabilities		24,537			25,495
Total liabilities		4,030,875			4,039,530
Equity:
Paramount Group, Inc. equity		3,697,192			3,588,163
Noncontrolling interests in:
Consolidated joint ventures		412,189			428,833
Consolidated real estate fund		80,557			81,925
Operating Partnership		261,416			356,111
Total equity		4,451,354			4,455,032
Total liabilities and equity	$	8,482,229		$	8,494,562

Paramount Group, Inc. Consolidated Statements of Income (Unaudited and in thousands, except share and per share amounts)

			For the Three Months Ended						For the Six Months Ended
			June 30,						June 30,
			2022			2021			2022			2021
Revenues:
	Rental revenue		$	177,243		$	174,628		$	347,165		$	347,774
	Fee and other income			8,274			7,641			22,037			15,661
		Total revenues		185,517			182,269			369,202			363,435
Expenses:
	Operating			67,814			64,072			134,475			130,690
	Depreciation and amortization			57,398			59,925			113,022			118,230
	General and administrative			16,706			18,418			32,351			32,782
	Transaction related costs			159			135			276			416
		Total expenses		142,077			142,550			280,124			282,118
Other income (expense):
	Loss from unconsolidated joint ventures			(4,416	)		(15,717	)		(9,529	)		(21,033	)
	Income from unconsolidated real estate funds			155			148			325			328
	Interest and other income, net			796			1,070			1,027			2,372
	Interest and debt expense			(35,578	)		(34,914	)		(69,855	)		(69,653	)
Net income (loss) before income taxes				4,397			(9,694	)		11,046			(6,669	)
	Income tax expense			(359	)		(434	)		(886	)		(1,575	)
Net income (loss)				4,038			(10,128	)		10,160			(8,244	)
Less net (income) loss attributable to noncontrolling interests in:
	Consolidated joint ventures			(4,779	)		(7,428	)		(8,204	)		(13,156	)
	Consolidated real estate fund			352			29			1,368			(56	)
	Operating Partnership			29			1,584			(313	)		1,935
Net (loss) income attributable to common stockholders			$	(360	)	$	(15,943	)	$	3,011		$	(19,521	)

Per Share:
Basic			$	(0.00	)	$	(0.07	)	$	0.01		$	(0.09	)
Diluted			$	(0.00	)	$	(0.07	)	$	0.01		$	(0.09	)

Weighted average common shares outstanding:
Basic				222,971,886			218,696,284			220,888,664			218,681,228
Diluted				222,971,886			218,696,284			220,930,019			218,681,228

Paramount Group, Inc. Reconciliation of Net Income (Loss) to FFO and Core FFO (Unaudited and in thousands, except share and per share amounts)

				For the Three Months Ended						For the Six Months Ended
				June 30,						June 30,
				2022			2021			2022			2021
Reconciliation of Net Income (Loss) to FFO and Core FFO:
	Net income (loss)			$	4,038		$	(10,128	)	$	10,160		$	(8,244	)
	Real estate depreciation and amortization (including our share
		of unconsolidated joint ventures)			67,235			70,264			133,060			139,405
	FFO				71,273			60,136			143,220			131,161
	Less FFO attributable to noncontrolling interests in:
		Consolidated joint ventures			(13,945	)		(18,453	)		(26,460	)		(33,527	)
		Consolidated real estate fund			346			29			1,355			(56	)
	FFO attributable to Paramount Group Operating Partnership				57,674			41,712			118,115			97,578
	Less FFO attributable to noncontrolling interests in
		Operating Partnership			(4,352	)		(3,769	)		(9,920	)		(8,761	)
	FFO attributable to common stockholders			$	53,322		$	37,943		$	108,195		$	88,817
	Per diluted share			$	0.24		$	0.17		$	0.49		$	0.40

	FFO			$	71,273		$	60,136		$	143,220		$	131,161
	Non-core items:
		Adjustment to equity in earnings for contributions to
			(distributions from) an unconsolidated joint venture		168			10,492			(415	)		9,915
		Consolidated real estate fund's share of after-tax net gain
			on sale of residential condominium units (One Steuart Lane)		(1,022	)		-			(1,684	)		-
		Other, net			1,664			133			3,752			379
	Core FFO				72,083			70,761			144,873			141,455
	Less Core FFO attributable to noncontrolling interests in:
		Consolidated joint ventures			(13,945	)		(18,453	)		(26,460	)		(33,527	)
		Consolidated real estate fund			(128	)		29			(287	)		(56	)
	Core FFO attributable to Paramount Group Operating Partnership				58,010			52,337			118,126			107,872
	Less Core FFO attributable to noncontrolling interests in
		Operating Partnership			(4,377	)		(4,729	)		(9,915	)		(9,692	)
	Core FFO attributable to common stockholders			$	53,633		$	47,608		$	108,211		$	98,180
	Per diluted share			$	0.24		$	0.22		$	0.49		$	0.45

Reconciliation of weighted average shares outstanding:
	Weighted average shares outstanding				222,971,886			218,696,284			220,888,664			218,681,228
	Effect of dilutive securities				26,594			51,117			41,355			50,563
	Denominator for FFO and Core FFO per diluted share				222,998,480			218,747,401			220,930,019			218,731,791

Paramount Group, Inc. Reconciliation of Net Income (Loss) to Same Store NOI and Same Store Cash NOI (Unaudited and in thousands)

			For the Three Months Ended						For the Six Months Ended
			June 30,						June 30,
			2022			2021			2022			2021
Reconciliation of Net Income (Loss) to Same Store NOI and Same Store Cash NOI:
	Net income (loss)		$	4,038		$	(10,128	)	$	10,160		$	(8,244	)
	Add (subtract) adjustments to arrive at NOI and Cash NOI:
		Depreciation and amortization		57,398			59,925			113,022			118,230
		General and administrative		16,706			18,418			32,351			32,782
		Interest and debt expense		35,578			34,914			69,855			69,653
		Income tax expense		359			434			886			1,575
		NOI from unconsolidated joint ventures (excluding One Steuart Lane)		11,585			10,557			22,819			20,883
		Loss from unconsolidated joint ventures		4,416			15,717			9,529			21,033
		Fee income		(5,974	)		(6,201	)		(17,962	)		(12,871	)
		Interest and other income, net		(796	)		(1,070	)		(1,027	)		(2,372	)
		Other, net		4			(13	)		(49	)		88
	NOI			123,314			122,553			239,584			240,757
	Less NOI attributable to noncontrolling interests in:
		Consolidated joint ventures		(21,796	)		(26,233	)		(42,118	)		(48,958	)
		Consolidated real estate fund		-			121			-			206
	PGRE's share of NOI			101,518			96,441			197,466			192,005
		Acquisitions / Redevelopment		(164	)		(231	)		(211	)		(231	)
		Lease termination income		(157	)		(1,614	)		(1,875	)		(1,712	)
		Other, net		1,578			(294	)		3,577			3,044
	PGRE's share of Same Store NOI		$	102,775		$	94,302		$	198,957		$	193,106

	NOI		$	123,314		$	122,553		$	239,584		$	240,757
	Less:
		Straight-line rent adjustments (including our share of unconsolidated joint ventures)		(5,977	)		(2,958	)		(4,319	)		(11,060	)
		Amortization of above and below-market leases, net (including our share of unconsolidated joint ventures)		(1,128	)		(1,662	)		(2,325	)		(3,465	)
	Cash NOI			116,209			117,933			232,940			226,232
	Less Cash NOI attributable to noncontrolling interests in:
		Consolidated joint ventures		(20,693	)		(24,198	)		(41,206	)		(43,139	)
		Consolidated real estate fund		-			121			-			206
	PGRE's share of Cash NOI			95,516			93,856			191,734			183,299
		Acquisitions / Redevelopment		(176	)		(287	)		(242	)		(287	)
		Lease termination income		(157	)		(1,614	)		(1,875	)		(1,712	)
		Other, net		1,608			(271	)		3,211			2,835
	PGRE's share of Same Store Cash NOI		$	96,791		$	91,684		$	192,828		$	184,135

View source version on businesswire.com: https://www.businesswire.com/news/home/20220726006067/en/

Paramount Announces Second Quarter 2022 Results