Paramount Group CEO Albert Behler’s financial involvement with a board member has raised further questions about the office landlord’s decision-making and the independence of its board. According to Securities and Exchange Commission filings reviewed by The Real Deal, Behler provided loans and invested in Boomerang Systems, a company led by Mark Patterson, who serves on Paramount’s board.
This information comes amid ongoing scrutiny of Paramount and its leadership over issues related to shareholder interests and corporate governance. Earlier this year, Paramount disclosed millions of dollars in previously unreported payments to companies owned by Behler. In July, the company revealed it was under investigation by the SEC. The Real Deal also reported that Behler advocated for a no-bid contract awarded to a security firm where his former girlfriend held a senior position.
The business relationship between Behler and Patterson dates back roughly ten years. At that time, Boomerang Systems—headed by Patterson—was facing bankruptcy when Behler agreed to provide at least two loans to the company. Public records do not clarify whether these debts were repaid.
“It’s not a good look, whether in fact he’s compromised or not; the optics are bad,” said Charles Elson, founding director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
Paramount declined to comment on these matters. Patterson did not respond to requests for comment.
Independent directors are intended to ensure objective oversight at publicly traded firms. However, recent disclosures about large sums paid to Behler’s personal businesses and his compensation relative to stock performance have prompted concerns regarding whose interests are being prioritized—the shareholders’ or Behler’s.
These developments come as Paramount is attempting to sell itself while its stock trades around $7 per share (https://www.nasdaq.com/market-activity/stocks/pgre).
Patterson became CEO of Boomerang Systems in 2010 after serving as managing director at Merrill Lynch. Boomerang developed automated parking technology designed for real estate projects; one such project involved a 256-space garage for an unnamed West Coast multifamily property managed by Paramount.
“Having an accomplished and experienced real estate firm like Paramount Group select Boomerang provides great affirmation of our value proposition of enhancing developer’s margins,” said Patterson in a release at the time.
Despite early promise, Boomerang encountered operational problems—including significant delays for residents using its system in Miami—and ultimately filed for bankruptcy in August 2015. As an investor, Behler participated in convertible note offerings and joined other investors in lending up to $400,000 as an “affiliate” lender. He controlled more than five percent of Boomerang’s common stock as of June 2015 according to SEC filings.
After bankruptcy proceedings concluded with asset sales totaling $2.5 million approved by court order in 2016, equity holders lost their investments; it remains unclear if any loans from Behler were repaid since he was not listed as a creditor during bankruptcy proceedings.
In May 2018, Patterson joined Paramount’s board where he chaired its nominating and corporate governance committee before becoming lead independent director—a role acting as liaison between chairman Behler and other independent directors.
Behler’s prior connections with Boomerang were never disclosed in regulatory filings or proxy statements submitted by Paramount (https://www.sec.gov/edgar/browse/?CIK=PGRE).
Corporate governance experts note that relationships between CEOs and board members are common but highlight that standards defining “independence” can be vague or lenient under current regulations (https://corpgov.law.harvard.edu/2021/06/23/the-state-of-board-independence-in-corporate-america/). Ann Lipton from University of Colorado Law School described them as “very loose.”
Shareholder confidence was tested further when more than half voted against retaining Patterson on Paramount’s board during an uncontested election in 2021—a rare occurrence according to Michael Levin from consulting firm Activist Investor—but management decided he should remain due to his perceived value (https://www.crainsnewyork.com/commercial-real-estate/shareholders-reject-paramount-group-director-patterson-remains-board).
Patterson continues serving on both the corporate governance committee at Paramount and on Digital Realty’s board alongside Greg Wright—another member associated with both organizations—which has drawn criticism elsewhere regarding potential conflicts of interest (https://investor.digitalrealty.com/corporate-governance/governance-documents/default.aspx).
Laurence Chapman resigned from Digital Realty’s board last year citing concerns about objectivity due partly to close personal ties among certain directors including Patterson: “potential to impact real or perceived objectivity and independence” wrote Chapman upon departure.
Chapman also claimed that Patterson had lobbied fellow directors over executive changes—behavior Chapman deemed inappropriate for someone holding such responsibilities: “When I tried to discuss my concerns about his approach, Mark told me that in his view, ‘The end justifies the means.’ That principle originated in Machiavelli’s ‘The Prince,’” wrote Chapman.“When it comes to the traits of good governance…Machiavelli’s principles seem to be the polar opposite.”
