CHICAGO--(BUSINESS WIRE)--Prime Group Realty Trust (OTC PINK: PMGEP) (the “Company”) and Five Mile Capital Partners LLC (“Five Mile”), a Connecticut-based commercial real estate and alternative investment firm, announced today that an affiliate of Five Mile has completed the purchase of 6,250,000 shares of newly issued common stock (“Common Shares”) from the Company for a purchase price of $625,000.00, plus the reimbursement of the Company’s transaction expenses. All of the Company’s outstanding common shares are now owned by an affiliate of Five Mile. Five Mile is the Company’s joint venture partner at the 330 N. Wabash Avenue property in Chicago, Illinois. This transaction was originally announced by the Company and Five Mile on October 10, 2011.
Pursuant to the stock purchase agreement between the Company and Five Mile, Five Mile is obligated to commence a tender offer by December 1, 2011 to purchase any and all of the Company’s outstanding 9% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B Preferred Shares”) for a purchase price of not less than $5.00 per share in cash. Five Mile will also reimburse the Company for expenses it incurs in connection with the tender offer.
In addition, the Company has also resolved the litigation brought by Tyler Rameson and certain funds managed by Caspian Capital in the Circuit Court for Baltimore City, Maryland captioned Rameson et al. v. Prime Group Realty Trust et al. At a recent hearing, the court granted the Company and Five Mile’s motion dismissing the Caspian funds from the case, and denied Caspian and Rameson’s motion arguing that the Company’s preferred shareholders acceded to the voting rights of the Company’s common shares. After these rulings for the Company and Five Mile, plaintiffs’ counsel approached the Company and Five Mile regarding settlement. The settlement that was subsequently negotiated provides, among other things, that Mr. Rameson will resign from the Company’s Board of Trustees, that Five Mile’s tender offer will be priced at $5.25 per share for all holders of Series B Preferred Shares, and that plaintiffs and certain other parties will tender all of their shares at that price. The Company and Five Mile agreed to the settlement to avoid the continued expenditure of Company resources on this costly litigation and the diversion of management’s attention from the operation of the Company’s properties.
The board of trustees of the Company (the “Board”) has received fairness opinions from Duff & Phelps, LLC, its independent financial advisor, for both the common share issuance and the tender offer. Duff & Phelps has concluded that (i) the consideration to be received by the Company for the issuance to Five Mile of the Common Shares is fair, from a financial point of view, to the Company and (ii) the consideration to be received by the holders of the Series B Preferred Shares in the tender offer is fair, from a financial point of view, to such shareholders, without giving effect to any impact on any particular shareholder other than in his, her or its capacity as a shareholder, and excluding all affiliates of the Company.
Duff & Phelps has determined that the minimum offer price of $5.00 per share consideration in the tender offer represents a premium of approximately 86% over the high end of Duff & Phelps’ current valuation range of the Series B Preferred Shares ($2.69 per share).
Jeffrey A. Patterson, the Company’s President and Chief Executive Officer, said that, “We are pleased to have completed the issuance of our common stock to an affiliate of Five Mile and to continue the relationship that began when we partnered with them earlier this year on the 330 N. Wabash office property.” Mr. Patterson continued, “We will be working closely with Five Mile to have the tender offer begun on or before December 1, 2011, which will provide a cash offer to all of the holders for the Series B Preferred Shares. The increased price of $5.25 per share cash offer is a premium of 39% over the closing trading price of the Series B Preferred Shares on the day before the execution of the stock purchase agreement with Five Mile.”
Duff & Phelps, LLC acted as financial advisor to the Board and Winston & Strawn LLP provided legal advice to the Company. Compass Point Research and Trading, LLC was engaged as an investment advisor to the Company. Five Mile was represented by Goodwin Procter LLP.
About Prime Group Realty Trust
Prime Group Realty Trust is a self-administered and self-managed real estate investment trust (REIT) which owns, manages, leases, develops and redevelops office and industrial real estate in metropolitan Chicago. The Company currently owns 1 office property containing an aggregate of 167,756 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 1.31 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 commercial real estate and alternative investment firm 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 tender offer, a definitive tender offer statement and other materials will be sent to the holders of the Company’s 9% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest. SECURITY HOLDERS ARE ADVISED TO READ THE TENDER OFFER STATEMENT WHEN IT IS RECEIVED BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.
This press release is provided for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell any securities of the Company pursuant to the tender offer or otherwise.
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.