Paramount Group, a big Midtown landlord, made millions worth of previously undisclosed payments to outside companies owned by CEO Albert Behler.
More than $3 million was paid over the last three years to an aviation company 50% owned by Behler, who uses a private jet owned by that company. Another $1.6 million was paid over the last three years to a consulting firm that’s 100% owned by Behler that markets Paramount’s real estate investment funds. Paramount also paid $12,000 last year for wine from Behler’s vineyard in Germany.
In addition, a company 100% owned by Behler’s spouse was paid $200,000 over the past two years to design a lounge at 1301 Sixth Ave., a Paramount-owned office building. Last month the spouse’s firm, Kramer Design, was awarded a $225,000 contract to provide branding and design services for another Paramount tower.
The company first disclosed the payments for Behler’s private jet and winery in footnotes to its annual report released Feb. 27.
In a written statement, a Paramount representative said “The information provided in our 10-K [annual report] reflects our commitment to transparency and enhancing our disclosures.”
The previously undisclosed payments came on top of Behler’s disclosed compensation, which was $20.2 million in 2023, including $1.1 million in salary and most of the rest in shares. Behler’s 2024 compensation hasn’t yet been reported. Payments from Paramount to Behler’s consulting firm and to his wife’s design business were reported by the company last year.
Paramount Group owns 13 million square feet of commercial space in Manhattan and San Francisco, including Paramount Plaza at 1633 Broadway and 712 Fifth Ave. Some of its Midtown buildings are 25% empty or more.
Even before the new disclosures, Paramount shareholders were not happy. The stock traded Friday at $4.05 a share, or 70% below pre-pandemic value. And in an unusual move, a majority of investors voted against Behler’s pay package for 2023, a non-binding measure but one that sent an unmistakable message of dissatisfaction.
Paramount’s disclosure of additional payments to Behler has further angered shareholders. One who insisted on anonymity pointed to language in Behler’s publicly disclosed employment agreement that says the company agreed to reimburse up to $20,000 in annual club membership dues for the CEO and provide “appropriate” limousine service. The agreement doesn’t mention paying for flights, consulting, his wife’s design work, or wine. Behler’s winery, Karthäuserhof, produces distinguished Rieslings.
Securities regulations require executive perks over $10,000 in any given year must be disclosed by amount and type, said Allison Kernisky, a partner at law firm Holland & Knight.
In a letter to the Paramount board sent Jan. 13 and shared with Crain’s, a shareholder accused Behler of “improper self-dealing at the company’s expense.” The letter said that flights for the CEO billed to Paramount, described by the firm as made for business purposes, were in fact personal and intended to minimize time spent in the U.S. by Behler to avoid taxes.
Paramount didn’t address the allegation about taxes. In its written statement, it said: “As a publicly-traded company, Paramount receives correspondence from time to time from shareholders, vendors and other stakeholders, and we take such matters seriously.”
Paramount was founded in the 1970s by German mail-order tycoon Werner Otto and went public on the New York Stock Exchange in 2014. Behler, who was raised near the German city of Hanover, has been CEO since 1991 and assembled Paramount’s real estate portfolio, according to a company filing.
Last month Paramount warned funds from operations would fall by 33% this year because tenants are moving out faster than they’re moving in. In January the landlord sold a 45% stake in 900 Third Ave. for half its previous valuation and Behler indicated on a February earnings call that he’s ready to sell more.
During the Biden administration, the Securities and Exchange Commission charged several CEOs for failing to disclose perks. Such cases are less likely now, Kernisky said, based on speeches and statements from new SEC leaders saying they plan to return to the first Trump’s administration’s light-touch approach to regulation.
“Under the current administration, it stands to reason that we would see the SEC bring fewer enforcement actions over purely technical violations like failure to disclose executive perks,” Kernisky said. She added exceptions could be made in instances when an executive committed fraud.
