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Paramount Group Faces Profit Loss from Lease Agreements

1 Mins read

Paramount Group, a real estate investment trust based in New York, recently announced an expected decrease in profit for the current fiscal year. The loss in revenue is a result of lease agreements with First Republic Bank and Silicon Valley Bank.

According to a regulatory filing, Paramount Group predicts $13.9 million in non-cash write-offs and a $5.7 million reduction in rental revenue for the fiscal year. As a result, net income will be negatively impacted by $19.6 million, or 8 cents per diluted share.

To mitigate the impact, Paramount Group has reached an agreement with J.P. Morgan, the entity that acquired all assets and liabilities from First Republic Bank after its closure in May. J.P. Morgan will assume 344,000 square feet of the original 461,000-square-foot lease with Paramount, while surrendering the remainder.

Furthermore, Paramount Group has terminated its lease with Silicon Valley Bank, which filed for bankruptcy in March. The termination affects 109,000 square feet and took effect on June 28. However, the company has entered into a new lease agreement with the entity acquiring Silicon Valley Bank’s assets. Unfortunately, this has resulted in the loss of a $6.6 million rent receivable balance under the previous lease.

Overall, Paramount Group is preparing for a decrease in profit due to these lease agreement changes.

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