IPO Report: Paramount Group (PGRE)

Paramount Group (PGRE) is avertically-integrated real estate companies focused on owning, operating and managing high-quality, Class A office properties in select CBD submarkets of New York City, Washington, D.C. and San Francisco. It is based in New York, NY.

Eight other companies are scheduled for the week of Nov. 17, 2014.  The full IPO calendar is available at IPOpremium.

SEC  Documents

Manager, Joint-managers: BofA Merrill Lynch, Morgan Stanley, Wells Fargo Securities, and Deutsche Bank Securities.

Co-managers: Citigroup, Credit Suisse, Goldman Sachs, J.P. Morgan, RBC Capital Markets, and UBS Investment Bank.

End of lockup (180 days):

End of 25-day quiet period:

PGRE scheduled a $2.3 billion IPO with a market capitalization of $4.3 billion at a price range midpoint of $17.50 for Wednesday, November 19, 2014 on NYSE.

Paramount Group IPO Report

Summary

Vertically-integrated real estate companies focused on owning, operating and managing high-quality, Class A office properties in select CBD submarkets of New York City, Washington, D.C. and San Francisco.

Valuation

Glossary

Conclusion

Neutral

Expected to yield 2.17%

Compared to BXP and BPO, 'in the range', see 'valuation' below

Selling 54% on the IPO

Business

PGRE is one of the largest vertically-integrated real estate companies focused on owning, operating and managing high-quality, Class A office properties in select CBD submarkets of New York City, Washington, D.C. and San Francisco.

As of September 30, 2014, PGRE’s portfolio consisted of 12 Class A office properties with an aggregate of approximately 10.4 million rentable square feet that was 92.1% leased to 260 tenants. PGRE’s New York City portfolio accounted for 75.6% of its annualized rent as of September 30, 2014, while its Washington, D.C. and San Francisco portfolios accounted for 11.7% and 12.7%, respectively.

PGRE’s portfolio reflects its strategy, which has been consistent for nearly 20 years, of concentrating on select submarkets within leading gateway cities in the U.S. that have high barriers to entry, are supply constrained, exhibit strong economic characteristics and have a deep pool of prospective tenants in various industries with a strong demand for high-quality office space.

PGRE’s properties are located in premier submarkets within midtown Manhattan, Washington, D.C. and San Francisco.

Within these submarkets, PGRE’s portfolio includes Class A office properties that are consistently among the most sought after addresses in the business community.

As a result of the strong underlying fundamentals in PGRE’s submarkets, the location and high-quality of its assets and its proven management capabilities, PGRE believes that its portfolio is well positioned to provide continued cash flow growth and value creation.

PGRE has a demonstrated expertise in asset management, property management, leasing, acquisitions, repositioning, redevelopment, investment management and financing.

Since 1995, PGRE has acquired 28 high-quality office properties with a total value of approximately $11.5 billion primarily in its markets.

PGRE has a well established reputation as a value-enhancing owner of Class A office properties in its markets and have a proven ability to redevelop and reposition acquired office properties to appeal to the most discerning tenants.

PGRE’s organization brings an international understanding and sophistication to the marketing and management of its properties that resonates with its tenants, which include many of the world’s leading companies.

PGRE has an unwavering commitment to superior tenant service, which helps it attract and retain high-quality tenants.

PGRE believes its recognized commitment to excellence and demonstrated expertise in the ownership, acquisition, redevelopment and management of Class A office properties will enable PGRE to maximize the operating performance and growth of its portfolio.

Competition

PGRE competes with numerous acquirers, developers, owners and operators of commercial real estate, many of which own or may seek to acquire or develop properties similar to ours in the same markets in which PGRE’s properties are located.

The principal means of competition are rent charged, location, services provided and the nature and condition of the facility to be leased.

In addition, PGRE faces competition from other real estate companies including other REITs, private real estate funds, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, individual investors and others that may have greater financial resources or access to capital than PGRE does or that are willing to acquire properties in transactions which are more highly leveraged or are less attractive from a financial viewpoint than PGRE is willing to pursue.

If PGRE’s competitors offer space at rental rates below current market rates, below the rental rates PGRE currently charges its tenants, in better locations within its markets or in higher quality facilities, PGRE may lose potential tenants and PGRE may be pressured to reduce its rental rates below those PGRE currently charges in order to retain tenants when its tenants’ leases expire.

5% shareholders pre-IPO

The Otto Family Group              17.2%

Alexander Otto              7.4%

Katharina Otto-Bernstein            6.2%

Wilhelm von Finck         5.6%

Katharina Otto-Bernstein   6.2% 

Dividends

PGRE intends to pay regular quarterly distributions to holders of its common stock. PGRE intends to pay a pro rata initial distribution with respect to the period commencing on the completion of this offering and ending on the last day of the then current fiscal quarter, based on $0.095 per share for a full quarter.

On an annualized basis, this would be $0.38 per share, or an annual distribution rate of approximately 2.2% based on an assumed initial public offering price at the midpoint of the price range.

Use of proceeds

PGRE expects to receive $2.3 billion from its IPO and use it for the following:

in exchange for common units.

Repayment of outstanding indebtedness.