- $1.6B Sale Approved: Shareholders greenlit Paramount Group’s sale to Rithm Capital at $6.60 per share, transferring a 13.1M SF office portfolio.
- CEO Exit Package Rejected: Despite shareholder rejection, CEO Albert Behler is still expected to receive a $34M exit package.
- Controversy Over Payments: SEC investigation underway following revelations of undisclosed payments to firms tied to Behler and his family.
- Rithm’s Expansion Play: The acquisition boosts Rithm’s presence in Class A office markets, viewed by the company as poised for recovery.
A Divisive Exit
Shareholders of Paramount Group voted this week to approve the company’s $1.6B sale to Rithm Capital, reports Commercial Observer. The deal marks a major shift for the New York-based office landlord. The vote also signaled disapproval of CEO Albert Behler’s $34M golden parachute, which the board still plans to grant.
The vote was nonbinding, and Paramount says it still plans to grant Behler the full payout now that the deal is approved.
Portfolio Overview
The acquisition gives Rithm Capital a 13.1M SF office portfolio, including 13 Class A properties and four managed assets. As of mid-2024, over 85% of the portfolio was leased. Notable assets include 1633 Broadway and 1301 and 745 Fifth Avenue.
Rithm plans to fund the deal with its balance sheet and potential co-investor capital. CEO Michael Nierenberg framed the acquisition as a “generational opportunity” to grow its commercial real estate and asset management platform.
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A Tarnished Legacy
Behler, who has led Paramount since 1991, departs under scrutiny. Earlier this year, Crain’s revealed that Paramount had paid over $4.6M to companies with ties to Behler and his family, including:
- $3M+ to a private aviation firm half-owned by Behler
- $1.6M to a consulting company he controls
- $425K to a design firm owned by his wife
- $12K for wine from his German vineyard
Following the reports, the SEC launched an investigation into the company’s disclosure practices, and shareholder outrage reportedly led to the board exploring a sale just two months later.
Deal Drama
The Rithm deal beat a higher offer from Dubai-based Saray Capital, which holds a 5.4% stake in Paramount. Saray offered $6.95 per share, but the board rejected it due to lack of committed financing and other material deficiencies.
Why It Matters
The deal underscores both the opportunities and pitfalls in distressed office markets. For Rithm, it’s a long-term bet on Class A office fundamentals improving. For Paramount, it’s an exit overshadowed by governance issues and shareholder unrest.
With increasing investor scrutiny on executive compensation and corporate transparency, the Paramount-Rithm deal could serve as a cautionary tale — even in an environment ripe for consolidation.
