The Real Deal New York

Q4 leasing spurt pushes Paramount over 1M sf target for 2015

NYC leads way with more than 750K sf of deals at 1633 Broadway and 1301 Sixth Avenue alone

February 24, 2016 04:40PM
By Rey Mashayekhi

Paramount Group

From left: 1633 Broadway in Midtown, Albert Behler (credit: STUDIO SCRIVO) and 1301 Sixth Avenue in Midtown

On its year-end earnings call Wednesday, Paramount Group talked up a leasing effort that saw the real estate investment trust lease roughly 1.4 million square feet of office space across its portfolio last year – buoyed by 750,000 square feet of deals struck at 1633 Broadway and 1301 Sixth Avenue, its two largest New York City assets.

Paramount comfortably exceeded its full-year leasing target of 1 million square feet, thanks largely to a strong Q4 push that saw it lease nearly 650,000 square feet before the calendar turned, the Midtown-based office landlord said.

The company, led by chair, president and CEO Albert Behler, saw its overall portfolio occupancy increase to 95.3 percent at the end of 2015 – up 2 percent from the previous quarter and a 1.4 percent increase from the end of 2014.

Most of the roughly 648,000 square feet leased in the fourth quarter was in New York, where the company — which also holds assets in San Francisco and Washington, D.C. — secured more than 478,000 square feet worth of deals at weighted average initial rents of just under $79 per square foot, it said.

The REIT’s office properties at 1633 Broadway and 1301 Sixth Avenue were responsible for most of those New York City transactions. 1633 Broadway alone saw nearly 290,000 square feet of leases signed in the fourth quarter, bringing total deals at the 48-story, 2.6 million-square-foot office tower to more than 425,000 square feet on the year.

While the company is set to see another 220,000 square feet of space at 1633 Broadway expire this year – including a 200,000-square-foot block of tower floors currently occupied by Deloitte – Behler said the REIT’s “recent leasing success” at the building “has positioned us well to address the upcoming expirations.”

At the 45-story, 1.7 million-square-foot 1301 Sixth Avenue, Paramount tied up more than 320,000 square feet of office leases over the course of 2015 – with 53 percent of those deals coming in the fourth quarter.

Much of that leasing addressed the upcoming expiration of Commerzbank’s nearly 288,000 square feet at 1301 Sixth Avenue, Behler said, with Paramount having already preleased more than half of the German banking giant’s space at the property to other tenants. The building presently stands at around 97 percent occupied.

Last year also saw Paramount complete a $1 billion refinancing of 1633 Broadway, with the new seven-year loan containing a company option to increase the amount by an additional $250 million. The financing “extends our debt maturities and reduces interest costs,” Behler said, while strengthening the company’s balance sheet.

Like other REIT executives this earnings season, Behler fielded questions on the earnings call regarding his company’s outlook on volatile macroeconomic conditions and the potential effects such conditions may have on the real estate market at large.

“While the stock market has been very volatile in recent weeks, we remain confident in our business,” he said. “From our perspective, actively owning and managing real estate portfolios in our markets for more than 20 years, we have successfully managed through all phases of multiple cycles.”

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