Paramount Group Swings to Deeper Loss Amidst Pending Rithm Merger

TL;DR

**Paramount Group's deepening losses and surging transaction costs make the Rithm Capital merger a necessary exit, not a growth play.**

AI Summary

Paramount Group, Inc. (PGRE) reported a significant net loss of $30.28 million for the three months ended September 30, 2025, a substantial increase from the $4.20 million net loss in the prior-year period. For the nine months ended September 30, 2025, the company posted a net loss of $56.01 million, a sharp decline from the $9.67 million net income in the same period of 2024. Total revenues decreased to $172.96 million for the three-month period in 2025 from $194.90 million in 2024, and to $537.02 million for the nine-month period in 2025 from $571.18 million in 2024, primarily driven by a reduction in rental revenue. Transaction-related costs surged to $9.98 million for the three months and $10.84 million for the nine months ended September 30, 2025, up from $0.24 million and $0.84 million respectively in 2024, largely due to the proposed mergers with Rithm Capital Corp. The company's strategic outlook is dominated by the pending acquisition by Rithm Capital Corp., which was announced on September 17, 2025, and amended on October 8, 2025, indicating a significant change in corporate control and structure. Interest and debt expense also increased to $44.42 million for the three months and $129.90 million for the nine months ended September 30, 2025, contributing to the overall loss.

Why It Matters

This filing is critical for investors as Paramount Group, Inc. is undergoing a significant corporate transaction with Rithm Capital Corp., which will result in a change of control. The substantial increase in net loss, from $4.20 million to $30.28 million for the quarter, and the decline in revenue highlight operational challenges and increased costs, particularly transaction-related expenses. For employees, the merger could bring organizational changes. Customers and the broader market will observe how the new ownership impacts Paramount's Class A office properties in New York City and San Francisco, potentially shifting competitive dynamics in these key real estate markets.

Risk Assessment

Risk Level: high — The company reported a net loss of $30.28 million for the three months ended September 30, 2025, a significant deterioration from the $4.20 million loss in the prior year. Transaction-related costs jumped to $9.98 million for the quarter, up from $0.24 million, indicating substantial expenses associated with the pending merger. These financial declines, coupled with the uncertainty of a major acquisition, present a high risk profile.

Analyst Insight

Investors should closely monitor the progress and terms of the Rithm Capital Corp. merger, as the company's financial performance is deteriorating. Given the increased losses and transaction costs, current shareholders should evaluate the merger's offer price against the company's declining fundamentals and consider exiting their positions if the offer is favorable.

Financial Highlights

debt To Equity

0.96

revenue

$172.96M

operating Margin

N/A

total Assets

$7,974.50M

total Debt

$3,711.50M

net Income

-$30.28M

eps

N/A

gross Margin

N/A

cash Position

$330.21M

revenue Growth

-11.25%

Revenue Breakdown

Key Numbers

• $30.28M — Net loss for Q3 2025 (Increased from $4.20M net loss in Q3 2024)
• $56.01M — Net loss for nine months ended Sept 30, 2025 (Shift from $9.67M net income in the same period of 2024)
• $172.96M — Total revenues for Q3 2025 (Decreased from $194.90M in Q3 2024)
• $537.02M — Total revenues for nine months ended Sept 30, 2025 (Decreased from $571.18M in the same period of 2024)
• $9.98M — Transaction related costs for Q3 2025 (Increased significantly from $0.24M in Q3 2024)
• $10.84M — Transaction related costs for nine months ended Sept 30, 2025 (Increased significantly from $0.84M in the same period of 2024)
• $44.42M — Interest and debt expense for Q3 2025 (Increased from $43.81M in Q3 2024)
• $129.90M — Interest and debt expense for nine months ended Sept 30, 2025 (Increased from $124.08M in the same period of 2024)
• 221,897,427 — Common shares outstanding as of Oct 15, 2025 (Indicates current share count)
• 93.2% — Ownership of Operating Partnership (Paramount Group's ownership stake as of September 30, 2025)

Key Players & Entities

• Paramount Group, Inc. (company) — registrant and target in merger
• Rithm Capital Corp. (company) — acquiring company in proposed merger
• Paramount Group Operating Partnership LP (company) — Delaware limited partnership, subsidiary of Paramount Group, Inc.
• REIT Merger Sub, Inc. (company) — wholly owned subsidiary of Rithm Capital Corp.
• Operating Merger Sub LP (company) — wholly owned subsidiary of Rithm Capital Corp.
• New York City (location) — primary market for Class A office properties
• San Francisco (location) — primary market for Class A office properties
• September 30, 2025 (date) — end of the reported quarterly period
• October 8, 2025 (date) — date of Amendment No. 1 to the Merger Agreement
• September 17, 2025 (date) — date of the original Merger Agreement

FAQ

Risk Factors

• Increased Transaction Costs [high — financial]: Transaction-related costs surged to $9.98 million for Q3 2025 and $10.84 million for the nine months ended September 30, 2025, up from $0.24 million and $0.84 million respectively in 2024. This increase is largely due to the proposed mergers with Rithm Capital Corp.
• Rising Interest and Debt Expense [medium — financial]: Interest and debt expense increased to $44.42 million for Q3 2025 and $129.90 million for the nine months ended September 30, 2025. This rise contributes to the company's net losses.
• Pending Acquisition by Rithm Capital Corp. [high — market]: The company's strategic outlook is dominated by the pending acquisition by Rithm Capital Corp., announced on September 17, 2025, and amended on October 8, 2025. This indicates a significant change in corporate control and structure, with potential implications for future operations and shareholder value.
• Significant Net Loss [high — financial]: Paramount Group reported a net loss of $30.28 million for Q3 2025, a substantial increase from the $4.20 million net loss in the prior-year period. For the nine months ended September 30, 2025, the net loss was $56.01 million, a sharp decline from a $9.67 million net income in the same period of 2024.
• Decreased Rental Revenue [medium — operational]: Total revenues decreased to $172.96 million for Q3 2025 from $194.90 million in Q3 2024, and to $537.02 million for the nine-month period in 2025 from $571.18 million in 2024. This decline is primarily driven by a reduction in rental revenue.

Industry Context

Paramount Group operates as a fully-integrated REIT focused on Class A office properties in New York City and San Francisco. The office real estate market is currently facing headwinds due to evolving work-from-home trends and economic uncertainty. Companies in this sector are navigating challenges related to tenant demand, lease renewals, and property valuations.

Regulatory Implications

The proposed merger with Rithm Capital Corp. will be subject to regulatory review and approval processes. Any changes in corporate structure or ownership may trigger specific reporting requirements and compliance obligations with securities and real estate regulations.

What Investors Should Do

1. Monitor the progress and terms of the Rithm Capital Corp. acquisition.
2. Analyze the impact of increased transaction and interest expenses on profitability.
3. Evaluate the company's ability to generate rental revenue in the current market.

Key Dates

• 2025-09-17: Announcement of Agreement and Plan of Merger with Rithm Capital Corp. — Initiated the process for a significant change in corporate control and structure, impacting the company's future strategic direction.
• 2025-10-08: Amendment No. 1 to the Merger Agreement with Rithm Capital Corp. — Modified terms of the proposed merger, potentially affecting the termination payment and other conditions.
• 2025-03-17: Long-stop date for the merger to occur. — Sets a deadline for the completion of the Rithm Capital Corp. acquisition, after which either party may have termination rights.

Glossary

REIT

Real Estate Investment Trust. A company that owns, operates, or finances income-generating real estate. (Paramount Group operates as a REIT, focusing on Class A office properties.)

Operating Partnership

Paramount Group Operating Partnership LP, a limited partnership through which the company holds its properties and investments. (The company conducts substantially all of its business through this entity, and it is a consolidated variable interest entity.)

Variable Interest Entity (VIE)

An entity for which the voting interests are not sufficient to dictate its activities, requiring consolidation by the primary beneficiary. (The Operating Partnership is a VIE consolidated by Paramount Group, indicating a significant financial relationship.)

Company Merger Consideration

The cash amount ($6.60 per share) shareholders will receive upon the merger with Rithm Capital Corp. (Directly impacts the value shareholders will receive in the proposed acquisition.)

Company Termination Payment

A specified amount ($47.7 million or $59.7 million) the company may have to pay if the merger agreement is terminated under certain conditions. (Represents a potential financial liability for the company if the merger does not proceed as planned.)

Year-Over-Year Comparison

Paramount Group, Inc. has experienced a significant deterioration in financial performance compared to the prior year. Total revenues for the nine months ended September 30, 2025, decreased to $537.02 million from $571.18 million in 2024, primarily due to reduced rental income. This revenue decline, coupled with a substantial increase in transaction-related costs and higher interest expenses, has led to a shift from a net income of $9.67 million in the first nine months of 2024 to a net loss of $56.01 million for the same period in 2025. The company's balance sheet shows an increase in total assets to $7,974.50 million from $7,871.50 million, while total liabilities also rose slightly to $3,898.21 million from $3,862.01 million.

Key Financial Figures

• $0.01 — Common stock of Paramount Group, Inc., $0.01 par value per share PGRE New York S

Filing Documents

• pgre-20250930.htm (10-Q) — 5728KB
• pgre-ex10_1.htm (EX-10.1) — 31KB
• pgre-ex10_2.htm (EX-10.2) — 30KB
• pgre-ex10_3.htm (EX-10.3) — 32KB
• pgre-ex31_1.htm (EX-31.1) — 18KB
• pgre-ex31_2.htm (EX-31.2) — 18KB
• pgre-ex32_1.htm (EX-32.1) — 12KB
• pgre-ex32_2.htm (EX-32.2) — 13KB
• img254875516_0.jpg (GRAPHIC) — 17KB
• 0001193125-25-256464.txt ( ) — 17160KB
• pgre-20250930.xsd (EX-101.SCH) — 1675KB
• pgre-20250930_htm.xml (XML) — 3263KB

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 10 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 28 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 58 Item 4.

Controls and Procedures

Controls and Procedures 59 Part II. Other Information Item 1.

Legal Proceedings

Legal Proceedings 60 Item 1A.

Risk Factors

Risk Factors 60 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 63 Item 3. Defaults Upon Senior Securities 63 Item 4. Mine Safety Disclosures 63 Item 5. Other Information 63 Item 6. Exhibits 64

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS PARAMOUNT GROUP, INC. C ONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in thousands, except share, unit and per share amounts) September 30, 2025 December 31, 2024 Assets Real estate, at cost Land $ 1,966,237 $ 1,966,237 Buildings and improvements 6,384,243 6,325,097 8,350,480 8,291,334 Accumulated depreciation and amortization ( 1,737,783 ) ( 1,639,529 ) Real estate, net 6,612,697 6,651,805 Cash and cash equivalents 330,207 375,056 Restricted cash 324,150 180,391 Accounts and other receivables 26,582 18,229 Investments in unconsolidated real estate related funds 4,416 4,649 Investments in unconsolidated joint ventures 81,509 85,952 Deferred rent receivable 352,906 356,425 Deferred charges, net of accumulated amortization of $ 90,418 and $ 91,818 126,587 100,684 Intangible assets, net of accumulated amortization of $ 114,133 and $ 147,133 41,093 50,492 Other assets 74,348 47,820 Total assets (1) $ 7,974,495 $ 7,871,503 Liabilities and Equity Notes and mortgages payable, net of unamortized deferred financing costs of $ 20,546 and $ 15,420 $ 3,711,504 $ 3,676,630 Accounts payable and accrued expenses 138,689 119,881 Intangible liabilities, net of accumulated amortization of $ 78,074 and $ 93,748 16,541 20,870 Other liabilities 31,473 44,625 Total liabilities (1) 3,898,207 3,862,006 Commitments and contingencies Paramount Group, Inc. equity: Common stock $ 0.01 par value per share; authorized 900,000,000 shares; issued and outstanding 221,897,427 and 217,527,797 shares in 2025 and 2024, respectively 2,219 2,175 Additional paid-in-capital 4,086,243 4,144,301 Earnings less than distributions ( 1,064,525 ) ( 1,005,627 ) Accumulated other comprehensive income - 428 Paramount Group, Inc. equity 3,023,937 3,141,277 Noncontrolling interests in:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Business As used in these consolidated financial statements, unless otherwise indicated, all references to "we," "us," "our," the "Company," and "Paramount" refer to Paramount Group, Inc., a Maryland corporation, and its consolidated subsidiaries, including Paramount Group Operating Partnership LP, a Delaware limited partnership (the "Operating Partnership"). We are a fully-integrated real estate investment trust ("REIT") focused on owning, operating, managing, acquiring and redeveloping high-quality, Class A office properties in select central business district submarkets of New York City and San Francisco. We conduct our business through, and substantially all of our interests in properties and investments are held by, the Operating Partnership. We are the sole general partner of, and owned approximately 93.2 % of, the Operating Partnership as of September 30, 2025. As of September 30, 2025 , we own and/or manage a portfolio of 17 properties aggregating 13.1 million square feet comprised of: Eight wholly and partially owned Class A properties aggregating 8.7 million square feet in New York, comprised of 8.2 million square feet of office space and 0.5 million square feet of retail and theater space; Five wholly and partially owned Class A properties aggregating 3.6 million square feet in San Francisco, comprised of 3.4 million square feet of office space and 0.2 million square feet of retail space; and Four managed properties aggregating 0.8 million square feet in New York and Washington, D.C. Additionally, we have an investment management business, where we serve as the general partner of several real estate related funds for institutional investors and high net-worth individuals. Proposed Mergers On September 17, 2025, we and the Operating Partnership (collectively, the "Company Parties"), Rithm Capital Corp., a Delaware corporation ("Parent"), Panorama REIT Merger Sub,

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) At the effective time of the Company Merger (the "Company Merger Effective Time"), each share of common stock of the Company, par value $ 0.01 per share, that is issued and outstanding immediately prior to the Company Merger Effective Time will be automatically cancelled and converted into the right to receive an amount in cash equal to $ 6.60 per share, without interest (the "Company Merger Consideration"). The Company Merger Consideration is subject to decrease in the event the Company declares and pays any additional dividends, which dividends are necessary to maintain its tax status as a REIT. The Merger Agreement contains customary termination rights, including, but not limited to, the right of either party to terminate the Merger Agreement (i) if the Mergers have not occurred on or before 11:59 p.m. (Eastern time) on March 17, 2026, (ii) if any governmental authority of competent jurisdiction has issued a final, non-appealable order permanently restraining or otherwise prohibiting the transactions contemplated by the Merger Agreement, or (iii) if stockholder approval has not been obtained upon a vote taken at the special meeting of the Company's stockholders or any postponement or adjournment thereof, at which a vote on the approval of the Company Merger was taken. In certain specified circumstances further described in the Merger Agreement, in connection with the termination of the Merger Agreement, the Company will be required to pay Parent a termination payment of $ 59,700,000 . Pursuant to the Amendment, the definition of "Company Termination Payment" in the Original Merger Agreement was modified to provide that, notwithstanding the foregoing, the Company will instead be required to pay Parent a termination payment of $ 47,700,000 if the Company enters into an alternative acquisition agreement providing for a Superior Proposal (as defined in the Merger Agreement) with certain persons. The Par

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