8-K: Rithm Capital to Acquire Paramount Group for $1.6 Billion

Rithm Capital Corp. will acquire Paramount Group, Inc. for approximately $1.6 billion in cash, valuing Paramount common stock at $6.60 per share.

Summary

• Rithm Capital Corp. (Parent) has entered into a definitive agreement to acquire Paramount Group, Inc. (Company) and its operating partnership.
• The total cash consideration to Paramount shareholders is approximately $1.6 billion.
• Each share of Paramount common stock will be converted into the right to receive $6.60 in cash, without interest.
• Each Common Unit of the Operating Partnership will be converted into the right to receive cash equal to the product of its Conversion Factor multiplied by $6.60, without interest.
• Company options to purchase common stock will be cancelled for no consideration.
• Each restricted share of Company common stock will be cancelled and converted into the right to receive a cash payment equal to $6.60 per share.
• Operating Partnership LTIP Units subject to time-based vesting will fully vest and convert to cash based on their conversion factor and the $6.60 per unit consideration.
• Operating Partnership AOLTIP Units subject to performance-based vesting will fully vest at maximum performance and convert to cash based on their AOLTIP Conversion Factor and the $6.60 per unit consideration.
• The transaction has been approved by the Boards of Directors of both companies.
• Rithm expects to fund the transaction with a combination of cash, liquidity from its balance sheet, and potential opportunities from co-investors.
• The closing is expected in late Q4 2025, subject to customary closing conditions, including approval by Paramount's common stockholders.

Sentiment

Score: 8

Explanation: The filing announces a definitive merger agreement at a specific cash price, which is generally a positive and certain event for the acquired company's shareholders, offering immediate liquidity and a premium. The management comments are optimistic about the strategic benefits for the acquirer and the fairness of the value for the acquired company. While standard risks are disclosed, the overall tone and nature of the event are favorable for Paramount shareholders and strategically beneficial for Rithm.

Positives

• The transaction delivers immediate, full, and fair value to Paramount shareholders at $6.60 per share, as opined by BofA Securities.
• The acquisition provides Rithm Capital with a Class A office portfolio at scale in premier markets (New York City and San Francisco).
• The deal expands and diversifies Rithm's commercial real estate footprint and asset management capabilities.
• Rithm Capital expresses strong conviction in the recovery of office market fundamentals, including improving rent rolls, a more favorable interest rate environment, and increasing demand.
• Paramount's Board views Rithm as an 'ideal partner' offering the financial scale needed to improve operating performance.
• Retention bonuses have been approved for certain key Paramount employees, including the CEO, Head of Real Estate, and CFO, to ensure continuity.
• Continuing employees of Paramount will receive comparable base salary/hourly wage, target short-term incentive opportunities, and aggregate retirement, health, welfare, and fringe benefits for at least 12 months post-closing.

Negatives

• Company options to purchase shares of common stock will be cancelled for no consideration.
• Any dividends declared by Paramount to maintain its REIT qualification prior to closing will result in an offsetting decrease to the merger consideration.

Risks

• Paramount's ability to obtain the required stockholder approval and the timing of the closing.
• The risk that a condition to closing may not be satisfied within the expected timeframe or at all, or that the closing may not occur.
• The outcome of any legal proceedings that may be instituted against the parties related to the merger agreement.
• Stockholder litigation in connection with the proposed mergers may affect the timing or occurrence of the transaction or result in significant costs of defense, indemnification, and liability.
• Unanticipated difficulties or expenditures relating to the proposed transaction.
• The impact of the transaction on Rithm's and Paramount's respective businesses.
• The response of business partners and competitors to the announcement of the proposed transaction.
• Potential difficulties with Paramount's ability to retain and hire key personnel and maintain relationships with tenants and other third parties.
• Potential difficulties in employee retention as a result of the announcement and pendency of the proposed transaction.
• Changes affecting the real estate industry and changes in market and economic conditions, including tariffs, geopolitical tensions, and elevated inflation and interest rates.
• Trends in the office real estate industry, including telecommuting, flexible work schedules, open workplaces, and teleconferencing.
• Increased or unanticipated competition in the real estate market.
• Uncertainties of real estate development, acquisition, and disposition activity.
• Maintenance of REIT status.
• Fluctuations in interest rates and the costs and availability of financing.
• The ability to enter into new leases or renew leases on favorable terms.
• Dependence on tenants' financial condition.

Future Outlook

Rithm Capital expects the transaction to close in late Q4 2025. Rithm believes in the recovery of office market fundamentals, including improving rent rolls, a more favorable interest rate environment, and increasing demand. The acquisition is anticipated to serve as a springboard to build out Rithm's commercial real estate and asset management platform, expanding its owner-operator model and leveraging its GreenBarn team's expertise.

Management Comments

• Michael Nierenberg, Chief Executive Officer of Rithm: "The acquisition of Paramount is a generational opportunity that will serve as a springboard to build out our commercial real estate and asset management platform and expands our owner-operator model."
• Michael Nierenberg, Chief Executive Officer of Rithm: "The Paramount portfolio is situated in cities where we have a strong conviction in the recovery of office market fundamentals, including improving rent rolls, a more favorable interest rate environment, and increasing demand."
• Martin Bussmann, Lead Independent Director of Paramount: "We are incredibly proud of the high-quality portfolio we’ve built and believe strongly in its intrinsic value."
• Martin Bussmann, Lead Independent Director of Paramount: "Together, the Board and management team have found an ideal partner in Rithm, which offers the financial scale needed to improve our fundamental operating performance."
• Martin Bussmann, Lead Independent Director of Paramount: "After an extensive process and evaluation of a range of strategic alternatives, we are pleased to have reached this agreement which will deliver immediate, full and fair value to our shareholders."

Industry Context

This acquisition signifies Rithm Capital's strategic expansion into the Class A office real estate sector, particularly in key urban markets like New York City and San Francisco. It reflects Rithm's confidence in the long-term recovery of office market fundamentals, despite ongoing trends like telecommuting and flexible work schedules. The transaction also highlights a broader trend of consolidation within the REIT industry, where larger, diversified asset managers are acquiring specialized portfolios to enhance their platforms and capitalize on perceived market opportunities.

Management Changes

Corporate Governance

Legal Proceedings

• The filing identifies a risk of legal proceedings being instituted against the parties and others related to the Merger Agreement.
• It also highlights the risk that stockholder litigation in connection with the proposed mergers may affect the timing or occurrence of the transaction or result in significant costs of defense, indemnification, and liability.
• Paramount will provide Rithm with the opportunity to reasonably participate in the defense and settlement of any Transaction Litigation and will not settle without Rithm's consent.

Related Party Transactions

• If requested by Rithm, Paramount will use commercially reasonable efforts to cause each Company Related-Party Agreement identified by Rithm to be terminated on or prior to the Closing, effective upon the Closing, without any further obligations, liability, or payments by or on behalf of Paramount or any of its subsidiaries as of or following the Closing.

Stakeholder Impact

• Shareholders of Paramount Group will receive immediate liquidity and a cash payment of $6.60 per share, which the Board and its financial advisor deem fair.
• Shareholders of Rithm Capital are expected to benefit from the expansion and diversification of Rithm's commercial real estate and asset management platform, with management expressing conviction in the recovery of the office market.
• Certain key executives of Paramount Group (CEO, Head of Real Estate, CFO) will receive retention bonuses to ensure continuity through the transaction.
• Other continuing employees of Paramount Group will be provided with comparable annual base salary/hourly wage, target short-term incentive opportunities, and aggregate retirement, health, welfare, and fringe benefits for at least 12 months post-closing, along with service credit for new benefit plans.
• There is a risk of potential difficulties in retaining and hiring key personnel and maintaining relationships with tenants and other third parties as a result of the proposed transaction.
• The response of business partners and competitors to the announcement is identified as a potential risk.

Next Steps

• Paramount will prepare and file a proxy statement on Schedule 14A with the SEC.
• Paramount will mail the definitive proxy statement and a proxy card to each stockholder entitled to vote at the special meeting.
• Paramount will convene a Stockholders Meeting to obtain the required Stockholder Approval for the merger.
• The transaction is expected to close in late Q4 2025, subject to customary closing conditions.
• Rithm Capital's management will host a conference call on September 17, 2025, at 8:30 A.M. ET to discuss the transaction.
• Following the Company Merger Effective Time, Paramount and the Surviving Entity will use reasonable best efforts to delist Company Common Stock from the New York Stock Exchange and deregister it under the Exchange Act.
• If requested by Parent, Paramount will use commercially reasonable efforts to terminate identified Company Related-Party Agreements effective upon closing.
• Paramount will deliver evidence of director resignations, effective as of the Company Merger Effective Time, and cooperate in replacing directors and officers of its subsidiaries with Parent's designees.

Key Dates

Recommendation

For Paramount Group shareholders, the recommendation is to 'buy' (or hold if already owned) given the definitive cash offer of $6.60 per share. The Board of Directors, with the support of its financial advisor, has deemed this consideration fair, offering immediate and certain value. For Rithm Capital, the strategic rationale for acquiring a high-quality Class A office portfolio in premier markets, coupled with management's conviction in market recovery and platform expansion, suggests a 'buy' for investors aligned with Rithm's long-term growth strategy in commercial real estate.

Keywords

Rithm Capital, Paramount Group, Merger, Acquisition, Real Estate, REIT, Office Properties, New York City, San Francisco, Commercial Real Estate, Asset Management, PGRE