Paramount Group is moving ahead with its process to sell the company while its CEO’s perks and deals continue to be scrutinized.
Paramount, a major office landlord in New York City and San Francisco, said it was exploring a possible sale of the company a few months ago as part of a “strategic review.”
Now, the REIT has reached the second round of bidding in its sales process, according to sources familiar with the matter.
Vornado, SL Green, Empire State Realty Trust, Blackstone, DivcoWest partnering with Dubai-based Saray Capital, and Rithm Capital are making bids to acquire the company, according to sources familiar with the matter. (Saray acquired a 5 percent stake in Paramount in May.)
All the bidders are large institutions, most being REITS with significant New York City office exposure that can absorb Paramount’s 13 million square feet of office space. Paramount’s office buildings in Midtown include 1301 Avenue of the Americas and 31 West 52nd Street. The firm reported its New York City office portfolio was 88 percent leased as of its second quarter.
The potential sale comes as Paramount and its board of directors face increasing questions over Chief Executive Albert Behler’s compensation and cushy perks.
Earlier this year, Paramount disclosed it made over $4 million in previously undisclosed payments for Behler’s personal and business interests over the past three years. This included over $400,000 to firms associated with Behler’s wife and $900,000 on Behler’s personal accounting services.
An analyst at Green Street Advisors released a report around that time, claiming there was a “misalignment” between the interests of shareholders and management, Crain’s reported, citing executives’ benefits while Paramount’s stock price languished.
In late July, the company revealed it was under investigation by the Securities and Exchange Commission regarding concerns over conflict of interest, related party and executive compensation disclosures. (Paramount said it is cooperating with the investigation in an SEC filing.)
This month, The Real Deal discovered Behler directed a no-bid contract for security services to a firm tied to his ex-girlfriend. Behler told staff to use Guardian Services at 60 Wall Street, an office tower in which Paramount owns a 5 percent stake and handles property management. TRD reviewed text messages showing Behler and his ex-girlfriend, 30 years his junior, maintained a friendly personal relationship years after their romantic relationship ended in 2013.
Paramount has hired Bank of America as its financial advisor and Latham Watkins as its legal advisor on the strategic review.
Paramount’s board previously nixed two offers to acquire the company, including one for $12 a share in cash from Monarch Alternative Capital in 2022. The offers came at a higher sales price than Paramount’s current stock price of $6.70.
As it prepares for a possible sale, Paramount has been active in the debt markets. It scored a $900 million refinancing for 1301 Avenue of the Americas in August, replacing an existing loan set to mature in 2026.
A spokesperson for Paramount declined to comment. Vornado, SL Green, Blackstone, Rithm Capital, also declined to comment. Empire State, Divco and Saray, did not return a request to comment.
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