Office Landlord Paramount Group Sold to Rithm Capital

Paramount Group, the office landlord and real estate investment trust that has become synonymous with San Francisco, is coming under new ownership.

New York City-based Rithm Capital won a bidding war for Paramount Group, beating out interested parties including investment firm Blackstone and office owners SL Green Realty and Vornado Realty Trust, the Wall Street Journal reported. Rithm was founded under Fortress Investment Group in 2013.

Rithm bought Paramount for $1.6 billion, according to the outlet. As of yesterday, Paramount had a market capitalization of $1.7 billion. Green Street analysts predict the deal could be about $2 billion.

New York-based Paramount put San Francisco at the heart of its premium office portfolio two decades ago. But as the pandemic wrecked the office market in San Francisco, Paramount has struggled to maintain ownership of several properties.

At its peak before the pandemic, Paramount owned six properties in San Francisco spanning more than 4.3 million square feet, according to the San Francisco Standard. Paramount owns more than a dozen office towers in New York and San Francisco, including One Market Plaza, One Front Street, and 300 Mission Street.

Months before the sale, Paramount had been working to improve its finances by selling off parts of its San Francisco portfolio.

Paramount sold a 25 percent equity interest in the 640,000-square-foot One Front Street office building in May. That deal was completed in exchange for $40.5 million of short-term, fixed-rate financing. At the time of the sale, the building was valued at $255 million — more than half the $521 million price Paramount paid for it in 2016.

That same month, Paramount sold the 770,000-square-foot Market Center office building to Flynn Properties, headed by local franchise operator Greg Flynn. The firm purchased the remainder of Paramount’s debt for $177 million, marking a 76 percent discount on the purchase price.

Last year, Paramount agreed to pay its lenders $125 million in order to push the loan maturity on One Market Plaza, the largest of Paramount’s San Francisco holdings, to 2028. At One Front Street and One Market Plaza, Paramount executives were in the process of adding amenities to keep tenants in its offices and attract new ones.

Google, Visa and law firm Morgan Lewis are exiting One Market Plaza. Meanwhile, Paramount’s 55 Second Street building is being marketed for sale by lenders.

Paramount’s remaining San Francisco portfolio was approximately 75 percent leased at the end of the second quarter.

— Chris Malone Méndez