Paramount Group Real Estate Advisor Llc

Allegations: THE SEC ALLEGED THAT PARAMOUNT GROUP REAL ESTATE ADVISOR LLC ("PARAMOUNT") CAUSED PARAMOUNT GROUP REAL ESTATE FUND III, L.P. ("FUND III") TO SELL ONE OF ITS INVESTMENTS IN REAL PROPERTY, A PARKING GARAGE, TO PARAMOUNT GROUP RESIDENTIAL DEVELOPMENT FUND, L.P. ("RDF"). IN CONNECTION WITH THE TRANSACTION, THE SEC ALLEGED THAT PARAMOUNT FAILED TO CAUSE RDF TO REIMBURSE FUND III FOR CERTAIN DEVELOPMENT EXPENSES FUND III HAD INCURRED BEFORE THE SALE, DESPITE PARAMOUNT'S COMMITMENT TO FUND III'S INVESTOR ADVISORY COMMITTEE ("FUND III IAC") AT THE TIME THE FUND III IAC APPROVED THE SALE THAT THE REIMBURSEMENT WOULD BE MADE. FOLLOWING THE APPRAISAL PROCESS, PARAMOUNT DECIDED NOT TO CAUSE RDF TO REIMBURSE FUND III FOR THE DEVELOPMENT EXPENSES FUND III INCURRED IN AN EFFORT TO GET THE GARAGE UPZONED BEFORE THE SALE. IN PARAMOUNT'S VIEW, THE FINAL PRICE RDF PAID TO FUND III ALREADY REFLECTED THE INCREASED VALUE THAT WOULD RESULT FROM THE UPZONING, AND RELATED EXPENSES, BECAUSE ONE OF THE TWO APPRAISALS ULTIMATELY USED TO CALCULATE THE PURCHASE PRICE EFFECTIVELY ASSUMED THE UPZONING WOULD BE ACHIEVED. THE SEC ALLEGED THAT PARAMOUNT IMPROPERLY FAILED TO SEEK APPROVAL FROM THE FUND III IAC, OR THE FUND III LIMITED PARTNERS, TO ELIMINATE THE REIMBURSEMENT REQUIREMENT AS A CONDITION OF THE SALE, AND FAILED TO DISCLOSE ITS DECISION TO THE FUND III IAC OR THE FUND III LIMITED PARTNERS THAT NO SUCH REIMBURSEMENT WOULD BE MADE. AT THE TIME OF THE SALE, PARAMOUNT SERVED AS INVESTMENT ADVISER TO BOTH FUND III AND RDF, OF WHICH PARAMOUNT AND ITS AFFILIATES OWNED 3% AND 26.7%, RESPECTIVELY. BASED ON THE FOREGOING CONDUCT, THE SEC ALLEGED THAT PARAMOUNT VIOLATED SECTIONS 206(2) AND 206(4) OF THE ADVISERS ACT, AND RULE 206(4)-8 THEREUNDER. Status: Final Sanction Detail: PARAMOUNT WAS ORDERED TO PAY A CIVIL MONETARY PENALTY IN THE AMOUNT OF $250,000, WHICH PARAMOUNT HAS PAID. Summary: ON APRIL 25, 2017, PARAMOUNT SUBMITTED AN OFFER OF SETTLEMENT (THE "OFFER") IN CONNECTION WITH AN ADMINISTRATIVE PROCEEDING PURSUANT TO SECTIONS 203(E) AND 203(K) OF THE INVESTMENT ADVISERS ACT OF 1940. THE OFFER WAS PRESENTED TO THE SEC AND THE SEC DETERMINED TO ACCEPT IT. SOLELY FOR THE PURPOSE OF PROCEEDINGS BROUGHT BY OR ON BEHALF OF THE SEC, OR TO WHICH THE SEC IS A PARTY, PARAMOUNT AGREED TO CONSENT TO AN ORDER IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER (THE "ORDER") WITHOUT ADMITTING OR DENYING THE MATTERS SET FORTH THEREIN (OTHER THAN THOSE RELATING TO THE JURISDICTION OF THE SEC OVER IT AND THE SUBJECT MATTER OF THE ACTION). THE ORDER, WHICH WAS ENTERED ON JULY 6, 2017, RESOLVED THE SEC'S ALLEGATIONS THAT ARE DESCRIBED ABOVE UNDER ITEM 7.