Cautious Outlook for Paramount Group Amidst San Francisco Market Challenges and Financial Complications

In a report released on May 9, Ronald Kamdem from Morgan Stanley maintained a Sell rating on Paramount Group (PGRE – Research Report), with a price target of $3.25.

Ronald Kamdem has given his Sell rating due to a combination of factors impacting Paramount Group’s financial outlook. The recent sale of a 25% stake in One Front Street at a valuation significantly lower than its 2016 purchase price suggests challenges in the San Francisco office market, which continues to face demand headwinds. The building’s lease rate is also expected to drop significantly due to JPMorgan Chase’s partial renewal, indicating potential revenue declines.
Additionally, the seller financing provided by Paramount Group is below market rates, which may not be favorable for the company’s financial health. The net proceeds from the sale are relatively modest, and the termination of a credit facility further complicates the financial picture. These elements combined suggest a cautious outlook for Paramount Group, justifying the Sell rating.

In another report released on April 30, Wells Fargo also reiterated a Sell rating on the stock with a $5.00 price target.