Possible Paramount Group sale to Rithm shows Manhattan office market’s strength

Rithm Capital’s prospective purchase of Paramount Group is a stroke of faith in the strength of the Manhattan office market, which is where most of Paramount’s holdings are concentrated.

The deal would give Rithm, a major force in commercial and residential credit and asset management, a significant, 13.1 million square-feet, bricks-and-mortar stake for the first time.

Several major players including SL Green and Blackstone reportedly made offers as well after Paramount quietly announced in April it was seeking “strategic alternatives.”

6

6

But if Paramount shareholders approve the sale, the new owners might shuffle some of the deck in Paramount’s 11-building Manhattan portfolio, sources told Realty Check. (Paramount also has five properties in San Francisco which aren’t doing as well but are rebounding from that city’s malaise).

Rithm CEO Michael Nierenberg has such a low public profile, he doesn’t even have a personal Wikipedia entry. He declined to comment directly, as both Rithm and Paramount are subject to Securities and Exchange Commission disclosure rules. (He would say only through a spokesman he was “thrilled and excited” to soon welcome Paramount’s “excellent” real estate team.)

In a statement, he called the Paramount acquisition a “generational opportunity to that will serve as a springboard to build out our commercial real estate and asset management platform and expands our owner-operator model.”

Market sources said they expected what one called “rationalization” of Paramount’s Manhattan holdings. That might include capital upgrades to several buildings that “are in need of love,” as one put it.

Sales of certain Paramount buildings by Rithm aren’t out of the question, our source said. “They’re going to examine every asset very closely, in New York as well as in San Francisco.”

6

Apart from 60 Wall St. – the currently empty tower which Paramount and its institutional partners are spending $250 million to modernize and beautify – Paramount’s holdings such as 900 Third Ave. and 31 West 52nd St. have been largely absent from our recent stories about big-budget Midtown upgradings beyond lobby improvements.

Meanwhile, there could be a breakthrough soon at 60 Wall St. The Post’s Lois Weiss reported in June that law firm Sullivan & Cromwell, Moody’s and Aon have all looked at the tower for possible relocations or expansions. No leases have yet been signed but a brokerage source said on Friday there’s “a lot of paper being traded.”

Paramount’s Manhattan holdings are 88.1% leased, the most since early 2022. The data announced in the company’s second-quarter earnings call didn’t include 60 Wall’s 1.6 million empty square feet. But as we reported last year, Paramount’s equity in that tower is a mere 5%.

6

Some other publicly-traded REITS such as SL Green have higher percentages of space leased and higher asking rents than Paramount.

The sale to Rithm is under scrutiny by analysts and by some Paramount shareholders who say the $1.6 billion price – or $6.60 per share – is too low.

Meanwhile, the SEC is reportedly looking into certain payments made to Paramount CEO Alfred Behler. It’s unclear how that would be affected by a sale to Rithm, although a buyer typically assumes any liabilities of the purchased entity.

Rithm, which was founded by Fortress in 2013 and became fully self-managed in 2022, claims it has over $100 billion in investable assets.

Milestone news: An 11,321 square-foot lease with BAM Labs brought L&L Holding Company’s reconfigured 150 Fifth Ave. to 100% office and retail occupancy.

The studio, BAM’s first in the US, will be situated along the building’s West 20th Street side.

6

L&L recently transformed the 11-story property into a more collaborative and efficient work environment. Mastercard’s 227,500 square feet fill the boutique property’s entire office portion.

Although hearts were broken at SL Green over a state panel’s rejection of its Times Square casino bid with Caesars Resorts, the developer can take heart that 1515 Broadway – the proposed gaming site – remains in sound shape.

6

The office portion is fully leased through 2031 to Paramount Global (formerly Viacom), which is responsible for rent payments even if it downsizes as reports have suggested it might do.

A $742 million mortgage on the tower was recently extended on favorable terms to 2028. And crowds continue to flock to “The Lion King” at the Minskoff Theatre inside the tower.