(Reuters) – Global asset manager Rithm Capital on Wednesday said it had agreed to acquire real estate investment trust Paramount Group for $1.6 billion in cash, betting on a rebound in office real estate.
The offer values New York City-based Paramount Group at $6.60 per share, repenting a 10.7% discount to the stock’s last closing price.
Shares of Paramount fell 11.8% in premarket trading.
The deal comes as investors gauge whether the U.S. office market, hit hard by rising interest rates, remote work and declining property values, may be reaching a bottom.
Rithm, which manages credit and real estate assets, said it plans to fund the deal with a mix of cash, existing balance sheet liquidity and possible contributions from co-investors.
“(The deal) will serve as a springboard to build out our commercial real estate and asset management platform and expands our owner-operator model,” Rithm CEO Michael Nierenberg said in a statement.
Paramount Group owns, operates and redevelops office properties in select central business district submarkets of New York City and San Francisco. Its portfolio includes 13 owned and four managed office properties.
The REIT’s portfolio spans more than 13.1 million square feet, with 85.4% leased as of June 30, the company said.
“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,” Rithm’s Nierenberg added.
The deal, which still needs to be approved by Paramount shareholders, is expected to close by the end of the fourth quarter, the companies said.
(Reporting by Abhinav Parmar in Bengaluru; Editing by Maju Samuel)
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