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Paramount Group: More Progress Needed On Upcoming Expirations

Jan. 03, 2023 1:46 PM ETParamount Group, Inc. (PGRE)15 Comments
Justin Purohit profile picture
Justin Purohit


  • Paramount Group, Inc. has an interest in a targeted portfolio of Class A office properties in select central business districts in New York and San Francisco.
  • The company has favorable exposure to the Legal and Financial sectors, two industries with higher return rates to in-person office work.
  • This is offset by their elevated tenant and building concentration and their upcoming expirations in 2023.
  • While the company has made measurable progress in addressing their near-term expirations, more progress is needed.

Aerial view of Lower Manhattan skyscrapers

Ultima_Gaina/iStock via Getty Images

Paramount Group, Inc. (NYSE:PGRE) is a New York City-based real estate investment trust (“REIT”) that has an interest in a targeted portfolio of Class A office properties located in select central business districts in New York

This article was written by

Justin Purohit profile picture
Regularly providing timely analysis on operating results, with a particular emphasis on REITs and other Macro-focused stocks. Opinions are determined through comparative financial statement analysis, earnings coverage, and various valuation techniques. My profession is in accounting, and I am a licensed CPA.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I am broadly bullish on the overall office sector with positioning on several select names not mentioned within this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (15)

PianoCat profile picture
If you look at PGRE's chart since IPO, it has been consistently going down. Stock is trading at just 0.37x book value. I wonder how good is that book value and whether a write-down is in the cards.
Justin Purohit profile picture
@PianoCat Thank you for raising the point. Definitely worth the further consideration!
Andrew Corporate profile picture
@PianoCat 4.5 p/fcf i smell value, 26 february btw ceo bought 220k piano. i bought 3 days ago 1.5% of portfolio. Greeting here I randomly saw you here, considering stalking you to see value in places you have passed and not taken a hit? anymore pgre's you saw last month :)) ? sending ticker symbols to me is like sending roses

send me more tickers to analyze pretty please, also bough 0.6% in richter a week ago, and ofcs i joined 5% in EC and 2.5% in pbr, not because of you but because of the 22% dividend and 12% dividend for pbr which is for half year right so we can get one more, plus that 9.4-9.6$ price is a freaking bottom, (think i talk about pbr.a price), although I dont like talking about tehnical analysis, but 1.7 p/e that chicky pbr
PianoCat profile picture
@andrew1corporate1 I don't analyze that many stocks. I try to stay focused and have a somewhat concentrated portfolio.

I see some value in office REITs. PGRE has about $2 worth of cash per share plus a bunch of unencumbered office buildings. It's clearly undervalued. It's a good buy IF you think interest rate will go down soon.

What I don't like is they have a lot of debt on their buildings and some are maturing soon. And I suspect some office REITs might cut dividends or even face liquidity crisis and become even better deals than PGRE so I'm not too eager to buy right now. I really dislike debt or highly leveraged companies. And I like to buy stocks that are going up from the bottom, not hitting 52-week lows.

I picked up 1000 shares of CPLP last week and bought 10K shares of PBR.A.
You cover interesting smaller stocks. Office is out of favor now. HIW seems to be covered a lot.
Justin Purohit profile picture
@jasonjones Thank you very much for taking the time to check out my coverage of the smaller names. I greatly appreciate it!

$HIW indeed is covered more widely. But for good reason given its significant potential (full disclosure: I'm long on HIW).

Thanks again for taking the time to stop by, and I hope that I can continue producing reports that are of continued interest to you!
BeaBaggage profile picture
with a healthy allocation to ofc now, other names piqued my interest; it will be interesting to see if offers come to buyout or consolidate ofc space including $PGRE. The low payout ratio is helpful to a position here. With rates still rising, squeezing G&A out of costs via mergers would make sense. Bea
Justin Purohit profile picture
@BeaBaggage Agreed! Consol would definitely sound right for the sector, though that is likely being hindered by ongoing price discovery challenges. I, on a personal level, would need more yield to go in on $PGRE. I've been eyeing up $BDN. But like you, I already have a good allocation to offices, with $PDM a top add in recent months.

Thanks again for the input, and I hope you are having a great start to the new year!
Andrew Corporate profile picture
@Justin Purohit You are smart bdn is better I think, at least on a financial basis its much better

BDN 1bn market cap was 2.8bn just before 2020 march crash, it was trading at a 12 p/fcf then

Now 1bn mkt cap vs 2.8bn 4.6 p/fcf

Longterm debt-cash and equivalents versus free cash flow is 8.7 for BDN

Versus 3.84bn long term debt of PGRE -400mn$ cash and equivalents
which gives 3.44 bn$ net debt versus

p/b is indeed higher for bdn 0.6 p/b yet at highs of bdn p/b feb 2020 p/b was 1.7 so I guess better quality

PGRE p/b is 0.3p/b now yet at highs of market cap, feb 2020 also p/b was 0.8, so I would say

conclusion bdn decreased even more in p/b has much better leverage 8.7 vs 14 for pgre, and same p/fcf 4.6.
Justin Purohit profile picture
@Andrew Corporate Thank you so much for the words of encouragement and for taking the time to provide the write-up on your thoughts. Good points to hear out and consider.

Thanks again for your time. It's much appreciated!
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