DEFM14A: Paramount Group Recommends $6.60/Share Cash Merger with Rithm Capital

Paramount Group's Board of Directors unanimously recommends stockholders approve a cash merger with Rithm Capital Corp. at $6.60 per share, offering a significant premium and immediate liquidity.

Summary

• A special meeting of stockholders is scheduled for December 16, 2025, at 10:00 a.m. ET, to be held virtually, to vote on the proposed merger.
• Paramount Group, Inc. (the Company) will merge with and into Panorama REIT Merger Sub, Inc., a wholly owned subsidiary of Rithm Capital Corp. (Parent).
• Paramount Group Operating Partnership LP will merge with and into Panorama Operating Merger Sub LP, also a wholly owned subsidiary of Parent.
• Upon completion of the mergers, the Company's stockholders will receive $6.60 in cash, without interest, for each share of Company Common Stock.
• The Board of Directors has unanimously approved the merger agreement and recommends stockholders vote FOR the merger proposal, a non-binding advisory proposal on executive compensation, and an adjournment proposal.
• The merger proposal requires the affirmative vote of holders of shares entitled to cast a majority of all votes at the special meeting.
• The record date for stockholders entitled to vote is November 4, 2025, with 221,919,163 shares of Company Common Stock outstanding.
• The mergers are anticipated to be completed three business days after the Special Meeting, assuming all conditions are satisfied or waived.
• Upon completion, Company Common Stock will be delisted from the NYSE and deregistered under the Exchange Act.
• The $6.60 per share consideration represents approximately a 38% premium over the unaffected closing price of $4.78 on May 16, 2025, and a 55% premium to the 30-day volume-weighted average stock price ending May 16, 2025.
• Paramount Group is a fully integrated REIT specializing in high-quality, Class A office properties in New York City and San Francisco.
• As of September 30, 2025, the Company's portfolio comprised 17 properties totaling 13.1 million square feet, including 8.7 million square feet in New York and 3.6 million square feet in San Francisco, plus 0.8 million square feet of managed properties.

Sentiment

Score: 8

Explanation: The merger offers a substantial premium (38% over unaffected closing price, 55% over 30-day VWAP) and immediate cash liquidity to shareholders, which the Board unanimously recommends. This provides certainty of value in a challenging Class A office market where the company's stock has traded at a discount to NAV.

Positives

• The Board of Directors determined the merger is advisable and in the best interests of the Company and its stockholders.
• A thorough and extensive strategic review process was conducted, involving approximately 44 potential bidders and 23 non-disclosure agreements.
• The proposed Company Merger Consideration of $6.60 per share offers a significant 38% premium over the unaffected closing price of $4.78 on May 16, 2025.
• The consideration also represents a 55% premium to the Company's unaffected 30-day volume-weighted average stock price ending May 16, 2025.
• The cash consideration provides stockholders with certainty of value and immediate liquidity, mitigating risks associated with remaining an independent public company.
• The strategic sales process was publicly announced, ensuring all potentially interested bidders had an opportunity to participate.
• Parent is prepared to transact now, offering closing certainty to the Company's stockholders.
• The Board believes there are few other potential third parties with both interest and demonstrable financial ability to acquire the Company in the immediate term.
• The Company retains the right to terminate the Merger Agreement under certain circumstances to pursue a Superior Proposal, with the termination payment not deemed preclusive to potential third-party bidders.
• The proposed Company Merger Consideration resulted from arms-length negotiations and reflects a $0.35 per share increase over Parent's initial non-binding proposal range.
• Parent possesses a strong business reputation, capitalization, and the ability to complete the mergers, and the Company has rights to specific performance.
• The mergers are not subject to a financing contingency, and Parent has confirmed access to sufficient funds.
• The limited number of conditions to the mergers and absence of significant regulatory approvals increase the likelihood of consummation.
• BofA Securities, Inc. provided an opinion that the $6.60 per share consideration is fair, from a financial point of view, to holders of Company Common Stock.
• The Company maintains sufficient operating flexibility under the Merger Agreement to conduct its business in the ordinary course prior to closing.

Negatives

• The proposed Company Merger Consideration of $6.60 per share represents approximately an 11% discount to the Company's stock price as of September 16, 2025 (approximately $7.42).
• The Company's inability to solicit competing proposals after signing the Merger Agreement (except under specific conditions) and the potential deterrent effect of the Company Termination Payment.
• Existing stockholders will no longer participate in any future earnings or growth of the Company, as it will cease to be an independent public entity.
• There is a risk that an alternative transaction or different strategic alternative could potentially be more beneficial to stockholders.
• The risk that the Company's stockholders may not approve the Company Merger.
• The risk that Parent fails to close or breaches the Merger Agreement.
• Restrictions on the conduct of the Company's business prior to completion could delay or prevent the Company from pursuing new business opportunities.
• Significant transaction costs, business disruption, and management distraction could harm the Company's prospects if the mergers do not close.
• Certain directors and executive officers may have interests in the mergers that are different from, or in addition to, those of other stockholders.
• The transaction will be taxable to the Company's stockholders for U.S. federal income tax purposes.
• Company stockholders are not entitled to appraisal or dissenters' rights in connection with the Company Merger.
• Under the Merger Agreement, the Company is restricted from declaring or paying regular cash dividends or distributions, except as necessary to preserve its REIT tax status.

Risks

• Risks associated with the Company's ability to obtain the required stockholder approval and the timing of the Closing.
• The occurrence of any change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the Merger Agreement.
• The outcome of any legal proceedings that may be instituted against the parties to, and others related to, the Mergers and the Merger Agreement.
• The risk that stockholder litigation in connection with the Mergers may affect the timing or occurrence of the Mergers or result in significant costs of defense, indemnification and liability.
• Unanticipated difficulties or expenditures relating to the Mergers, the response of business partners and competitors to the announcement, and potential difficulties in retaining and hiring key personnel and maintaining relationships with tenants and other third parties.
• Changes affecting the real estate industry and changes in market and economic conditions, including tariffs, geopolitical tensions and elevated inflation and interest rates that may adversely impact the Company or its tenants.
• Exposure to government investigations and litigation or other claims.
• Restrictions on the Company's ability to pay dividends pursuant to the Merger Agreement.
• Increased or unanticipated competition in the real estate market.
• The uncertainties of real estate development, acquisition and disposition activity.
• Risks associated with high concentrations of properties in New York City and San Francisco.
• Risks associated with ownership of real estate and real estate activity through joint ventures and real estate related funds.
• Decreased rental rates or increased vacancy rates.
• The risk that the Company may lose a major tenant or that a major tenant may be adversely impacted by market and economic conditions.
• Trends in the office real estate industry including telecommuting, flexible work schedules, open workplaces and teleconferencing.
• Limited ability to dispose of assets because of the relative illiquidity of real estate investments.
• Intense competition in the real estate market that may limit the ability to acquire attractive investment opportunities and increase the costs of those opportunities.
• Regulatory changes, including changes to tax laws and regulations.
• Uncertainties and risks related to adverse weather conditions, natural disasters and climate change.
• Risks associated with actual or threatened terrorist attacks.
• Exposure to liability relating to environmental and health and safety matters.
• The negative impact of any future pandemic, endemic or outbreak of infectious disease on the U.S., regional and global economies and the Company's tenants' financial condition and results of operations.
• Insufficient amounts of insurance.
• Risks associated with security breaches through cyber attacks or cyber intrusions and other significant disruptions of information technology networks and related systems.
• Risks associated with the Company's substantial indebtedness and the potential failure to meet the restrictive covenants and requirements in existing debt agreements.
• Fluctuations in interest rates and increased costs to refinance or issue new debt, and the potential failure to refinance current or future indebtedness on favorable terms, or at all.
• Failure of acquisitions to yield anticipated results.
• General volatility of the capital and credit markets and the market price of Company Common Stock.
• Risks associated with variable rate debt, derivatives or hedging activity.
• Failure to qualify as a REIT and compliance with REIT requirements, which may cause the Company to forgo otherwise attractive opportunities or liquidate certain investments.
• Risks associated with the Company's dependence on key personnel whose continued service is not guaranteed.

Future Outlook

The financial projections for fiscal years 2025 through 2029 were prepared assuming the Company continues as a standalone entity, including the completion of certain sales, financing, development, and redevelopment activities. These projections do not account for any changes or expenses resulting from the mergers or the potential impact if the mergers are not consummated. The Company disclaims any obligation to update or revise these forward-looking statements, except as required by applicable law.

Management Comments

• Albert Behler, Chairman of the Board, Chief Executive Officer and President, expressed gratitude for continued stockholder support.
• The Board of Directors determined and declared that the Merger Agreement, the Company Merger, and the other contemplated transactions are advisable and in the best interests of the Company and its stockholders.
• The Board recommended that the Company's stockholders vote in favor of the Merger Proposal.

Industry Context

The merger takes place amidst challenging economic, market, and capital raising conditions, including inflation and the state of the Class A office markets in which Paramount Group operates. The Company's stock has historically traded at a discount to third-party analysts' estimated net asset value per share. Broader industry trends such as telecommuting, flexible work schedules, open workplaces, and teleconferencing are noted as potential risks. Rithm Capital Corp., the acquirer, is a global alternative asset manager with significant experience in credit and real estate assets, suggesting a strategic move to integrate Paramount Group's Class A office portfolio into a diversified asset management platform.

Comparison to Industry Standards

• The $6.60 per share offer represents a 38% premium over Paramount Group's unaffected closing stock price of $4.78 on May 16, 2025, and a 55% premium to its unaffected 30-day volume-weighted average stock price, indicating a favorable valuation relative to recent market performance.
• Paramount Group's Common Stock has historically traded at a discount to third-party analysts' estimated net asset value per share, suggesting the cash offer provides a more certain and potentially higher value than the public market has recently afforded.
• BofA Securities' analysis compared Paramount Group to publicly traded REITs like BXP, Inc., Vornado Realty Trust, SL Green Realty Corp., Kilroy Realty Corporation, Douglas Emmett, Inc., and Empire State Realty Trust, Inc., using 2025E and 2026E FFO multiples. The implied per share equity value reference ranges from these comparisons were $4.85 $9.51 (2025E FFO) and $3.46 $6.91 (2026E FFO), with the $6.60 offer falling within these ranges.
• Publicly available research analysts' stock price targets for Paramount Group as of September 12, 2025, ranged from approximately $4.20 to $8.00 per share, with a present value of $3.86 to $7.35 per share, positioning the $6.60 offer within this range.
• Publicly available research analysts' net asset value per share targets for Paramount Group ranged from approximately $5.45 to $9.72 per share, indicating the offer is within the lower to mid-range of these NAV estimates, but provides immediate realization of value.

Management Changes

Corporate Governance

Legal Proceedings

• After filing its Preliminary Proxy Statement on October 29, 2025, the Company received demand letters from purported stockholders alleging violations of Sections 14(a) and 20(a) of the Exchange Act due to incomplete and misleading disclosures related to the Mergers.
• The Company does not believe these allegations are meritorious and intends to defend against them vigorously.

Related Party Transactions

• The Company has certain 'Company Related-Party Agreements' as described in its SEC Documents.
• If requested by Parent, the Company will use commercially reasonable efforts to terminate identified Company Related-Party Agreements on or prior to the Closing, effective upon the Closing, without further obligations or payments by the Company or its subsidiaries.

Stakeholder Impact

• Shareholders will receive $6.60 in cash per share, representing a significant premium and immediate liquidity, but will no longer hold equity in the Company or participate in its future growth.
• Continuing employees will receive comparable annual base salary, target short-term incentive opportunities, and aggregate retirement, health, welfare, and fringe benefits for 12 months post-closing, along with severance benefits no less favorable than similarly situated Parent employees.
• Executive officers and directors will benefit from accelerated vesting of compensatory awards, potential severance benefits, and retention bonuses, in addition to continued indemnification and D&O insurance for six years post-closing.
• The Company as an entity will cease to exist as an independent public company, becoming indirectly controlled by Rithm Capital Corp., leading to delisting from the NYSE and deregistration under the Exchange Act.

Next Steps

• The Special Meeting of Stockholders will be held on December 16, 2025, for stockholders to vote on the merger and related proposals.
• If stockholder approval is obtained and other conditions are met, the mergers are anticipated to be completed three business days after the Special Meeting.
• Upon completion, Company Common Stock will be delisted from the NYSE and deregistered under the Exchange Act.
• Parent will ensure that continuing employees receive comparable compensation and benefits for 12 months post-closing, and severance benefits no less favorable than similarly situated Parent employees.
• Parent will maintain officers and directors liability insurance for six years from the closing date.
• The Company will facilitate the resignation of its directors, effective at the Company Merger Effective Time, and cooperate in replacing subsidiary directors and officers with Parent's designees.

Key Dates

Recommendation

The Board has unanimously recommended the merger, and the offer price of $6.60 per share represents a substantial premium over the unaffected stock price. Given the current market price of $6.55 (as of Nov 7, 2025), the upside is minimal ($0.05 per share), and the downside risk if the merger fails is significant, as the stock was trading at $4.78 before the strategic review announcement. Therefore, holding until the merger closes is the most prudent action for shareholders seeking to realize the offer price, while new investors would find limited upside.

Keywords

Paramount Group, Rithm Capital, Merger, REIT, Office Properties, New York City, San Francisco, Real Estate, Acquisition, SEC Filing, Proxy Statement, Corporate Governance, Stockholder Vote, Financial Analysis, Class A Office