CHICAGO--(BUSINESS WIRE)--Prime Group Realty Trust (PINK SHEETS: PMGEP) (the “Company”) and Five Mile Capital Partners LLC (“Five Mile”), a Connecticut-based alternative investment and asset management company, announced today that affiliates of Five Mile have entered into a definitive merger agreement and other agreements to acquire the Company. Five Mile will acquire the Company for $5.00 in cash per share for the Company’s 9% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B Preferred Shares”). There are currently no common shares of beneficial interest of the Company outstanding. The Company’s Board of Trustees has approved the merger agreement and intends to submit the merger for approval by the holders of the Series B Preferred Shares. Following completion of the transaction, which is expected to occur in the second quarter of 2011, the Company’s Series B Preferred Shares will cease to be traded as an over-the-counter security.
The Company and Five Mile also announced today that an affiliate of Five Mile and an affiliate of the Company have entered into a joint venture agreement in connection with the ownership, management and operation of the property located at 330 N. Wabash Avenue in Chicago, Illinois. The joint venture entered into amendments to its financing documents with the existing lenders at the property providing, among other things, (i) the pay down of $20 million of principal and the additional reduction of the principal by $20 million, (ii) the extension of the maturity date to January 31, 2016, (iii) the reduction of the loan commitment to $128 million (of which $30 million remains available to be drawn for tenant improvement, building redevelopment and other costs) and (iv) providing certain additional contingent interest to the lenders not to exceed $20 million. Five Mile also agreed to provide up to $75 million of additional capital to the joint venture.
Jeffrey A. Patterson, the Company’s President and Chief Executive Officer, said that, “We are pleased to have entered into a merger agreement that provides a cash purchase price to the holders of our Series B Preferred Shares at a premium of approximately 10.5% over the average trading closing price from May 14, 2010 through February 14, 2011. The Series B Shares have been thinly traded and we are happy to provide a cash offer that allows all of the holders to receive this price. We look forward to closing the transaction with Five Mile.”
He also commented that “The joint venture with Five Mile for the 330 N. Wabash property provides the capital resources necessary to lease up the property to stabilization.”
The closing of the merger agreement is subject to various customary conditions, including the approval by at least 2/3 of the holders of the Series B Preferred Shares. The transaction is not subject to any financing condition. The joint venture related to the property located at 330 N. Wabash Avenue in Chicago, Illinois and the debt refinancing are not contingent on the completion of the merger.
The Board will meet at a later date to set the date for the special meeting of the Company’s shareholders and the record date for such meeting. The purposes of the special meeting will also include the election by the holders of the Series B Preferred Shares of two (2) additional trustees to the Company’s Board in the event the merger transaction is not approved by the requisite number of the holders of the Series B Preferred Shares. In addition, if the merger is not approved, the Board anticipates authorizing a common stock dividend to be issued to the holders of the Series B Shares on a basis of one common share for each Series B Share outstanding. After the date and record date of the special meeting is set, the Company expects to send notice of the special meeting and a proxy statement to each holder of the Series B Preferred Shares.
Duff & Phelps, LLC acted as financial advisor to the Company’s Board of Trustees and Winston & Strawn LLP provided legal advice to the Company. Five Mile was represented by Goodwin Procter LLP.
About Prime Group Realty Trust
Prime Group Realty Trust is a fully-integrated, self-administered and self-managed real estate investment trust (REIT) which owns, manages, leases, develops and redevelops office and industrial real estate, primarily in metropolitan Chicago. The Company currently owns 2 office properties containing an aggregate of 230,000 net rentable square feet and interests in two joint ventures that own two office properties comprised of approximately 1.24 million net rentable square feet. The Company leases and manages approximately 1.24 million square feet comprising all of its wholly-owned properties and its 330 N. Wabash Avenue joint venture property. For more information about Prime Group Realty Trust, contact the Company’s Chicago headquarters at (312) 917-1300 or visit its website at www.pgrt.com.
About Five Mile Capital Partners
Five Mile Capital Partners LLC is a privately-held alternative investment and asset management company established in 2003 and based in Stamford, Connecticut. The firm specializes in investment opportunities in real estate, debt products, structured finance, asset-based lending and financial services private equity. Five Mile Capital Partners has executed numerous transactions involving distressed and non performing first mortgage, mezzanine loans, equity and high yield structured products. Five Mile Capital Partners’ principals have significant experience, knowledge and skills relevant to the financial services industry and believe the cyclical and dynamic nature of the sector continually provides a broad opportunity for investments across the capital structure. Five Mile Capital Partners currently manages approximately $2 billion of capital. For more information, visit www.fivemilecapital.com.
Notice To Investors
In connection with the proposed merger, a definitive proxy statement and other materials will be sent to the holders of the Company’s 9% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest seeking their approval of the proposed transaction. SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT IS RECEIVED BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. This communication is not a solicitation of a proxy from any security holder of Prime Group Realty Trust.
The proxy statement and other documents may also be obtained for free from Prime Group Realty Trust’s website at www.pgrt.com under the Investors tab or by directing such request to Prime Group Realty Trust, Attention: Investors Relations, 330 North Wabash Avenue, Suite 2800, Chicago, Illinois 60611.
Prime Group Realty Trust’s trustees, officers and employees may be deemed to be participants in the solicitation of proxies from its shareholders in connection with the proposed merger. Information concerning the interests of Prime Group Realty Trust’s participants in the solicitation will be set forth in the proxy statement relating to the merger when it becomes available.
This press release contains certain forward-looking statements which involve known or unknown risks, uncertainties or other factors not under the Company’s control which may cause the actual results, performance or achievement of the Company to be materially different from the results, performance or other expectations implied by these forward-looking statements.