Paramount Group Makes Firm History with $775M Debt Fund

The Paramount Group has closed the largest debt fund in the company's history.
Albert Behler, Paramount Group

Albert Behler, Paramount Group

New York—New York City-based Paramount Group Inc., has closed its second debt fund, the largest in the company’s history, with $775 million in commitments. Three investments totaling about $167 million have already been made in Manhattan properties.

Most of the capital raised for Paramount Group Real Estate Fund VIII LP has come from German institutional investors. The fund focuses on mezzanine and preferred equity investments in office properties in Paramount’s target markets of New York City, Washington, D.C., and San Francisco.

“The successful close of Fund VIII is recognition of Paramount’s stellar reputation and the confidence institutional investors have in our platform,” Albert Behler, chairman, CEO & president of Paramount, said in a prepared statement. “Through our current and prior investments and our significant operating experience, we have developed a deep understanding of the critical success factors in our target markets.”

As of March 31, Fund VIII has deployed about $167 million in three investments in Manhattan. The largest investment was $80 million of mezzanine and mortgage loans secured by 700 Eighth Ave., a 26,126-square-foot retail property located at the base of the Row NYC Hotel which includes space leased to several stores and a high-end food court.

One mezzanine loan of approximately $46 million is secured by equity interests in 26 Broadway, a 31-story office building located in the Financial District. The loan has a fixed interest rate of 8.3 percent and matures in 2022. The building, the former Standard Oil headquarters, is a New York City landmark that is home to tenants such as a law firm, the New York Film Academy and a New York City public middle school.

The third investment is a mezzanine loan of $40 million security by equity interests in 1440 Broadway, a 25-story, 751,546-square-foot office and retail property in Manhattan’s Times Square area. The loan bears interest at LIBOR plus 600 bps and matures in October 2019 with an option for a one-year extension.

“We appreciate the enthusiasm and strong support shown for Fund VIII from new and key existing investors,” Christian Fischer, Paramount’s director of European Capital Markets, said in a prepared statement. “The combination of Paramount’s market knowledge and finance expertise together with Fund VIII’s investment objectives were convincing reasons for investors.”

Paramount Group is a fully integrated REIT that owns, operates, manages, acquires and redevelops high-quality Class A office properties. The firm has been busy refinancing some of its own assets, including 31 W. 52nd St. and 1633 Broadway, both in Manhattan, in recent months.