Rithm Capital is nearing the finish line to acquire New York City and San Francisco office landlord Paramount Group, according to sources familiar with the matter.
This comes after a months-long multiple-round bidding process, which included SL Green, Vornado, Blackstone, Empire State Realty and DivcoWest with Dubai-based Saray Capital, sources said.
Through the acquisition, Rithm, one of the largest mortgage servicers in the U.S., can expand deeper into commercial real estate amid an acquisition spree. The news was first reported in the Wall Street Journal.
If the deal goes through, Rithm will take on Paramount’s 17-building office portfolio in New York City and San Francisco, totaling 13 million square feet of space. Among the more notable properties: 1301 Sixth Avenue, 1633 Broadway and 900 Third Avenue in New York City
Paramount announced in May that it hired Bank of America as a financial advisor to explore strategic alternatives, including the possibility of a sale. The news came as the company and its CEO faced increasing scrutiny.
Paramount revealed earlier this year that it made millions of dollars in previously undisclosed payments to Behler’s personal expenses and outside companies over the past three years. This included $900,000 on Behler’s personal accounting services and $3 million on a private jet firm, co-owned by Behler.
A short time later, an analyst at Green Street Advisors called for the removal of certain Paramount board members, citing management’s high compensation relative to its stock performance.
In July, Paramount disclosed it was under an investigation by the Securities and Exchange Commission in its second-quarter report.
The Real Deal reported in August that Behler personally pushed for a no-bid contract to a security company where his ex-girlfriend, 30 years his junior, was a senior manager. Text messages reviewed by TRD showed Behler and the employee maintained a friendly personal relationship years after their romantic relationship ended. (In those messages, the employee refers to Behler as “Albertcim,” using a suffix meant to show endearment in the Turkish language, with the term roughly translating to “my dear Albert.”)
Paramount has also seen an exodus of top employees in recent months. Paramount announced Wilbur Paes, the firm’s chief operating officer, chief financial officer and treasurer, and Gage Johnson, Paramount’s general counsel, left the company.
Paramount was founded in 1978 by German mail-order entrepreneur Werner Otto. Behler was appointed as president and CEO in 1991. The firm went public in 2014 with an initial public offering of $2.3 billion, the largest IPO for a U.S. REIT at the time.
Paramount, like other office landlords, took a hit during the pandemic as occupancy dropped and employees worked from home. But as the office market has rebounded, Paramount’s New York City portfolio is up to 88 percent leased as of its second quarter, the highest mark since 2022. In its most recent quarter, Paramount reported a net loss attributable to shareholders of $19.8 million.
As of today, Paramount has a market capitalization of $1.56 billion with its stock price hovering around $7, about half of what the stock was trading at prior to the pandemic.
When the company announced its plan for a possible sale, Behler said the company and board “remain focused closing the persistent gap between the company’s public market valuation and our assessment of its intrinsic value.”
Rithm, which has $36 billion in assets under management, has expanded from a mortgage servicing company. In 2023, it purchased the hedge fund Sculptor Capital Management. More recently, it inked a deal to buy Crestline, a $17 billion private lender.
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