CHICAGO - (Business Wire) Prime Group Realty Trust (NYSE: PGEPRB), a Chicago-based real estate investment trust (
“PGRT
” and the
”Company
”), announced today that its affiliate that sold floors 2 through 13 of 330 N. Wabash Avenue to a hotel developer on March 18, 2008, simultaneously refinanced the remaining portion of the Property (the
“Office Property”) with (i) a loan in the principal amount of $88.0 million (
“Loan A”) from ING USA Annuity and Life Insurance Company (the
“Loan A Lender”) and (ii) a loan in the principal amount of $100.0 million (
“Loan B” and, together with Loan A, the
“Loans”) from General Electric Capital Corporation (the
“Loan B Lender”). The initial advance of Loan B consisted of $50.0 million, and the Company has the right to draw the remaining $50.0 million for future leasing and redevelopment costs relating to the Property, subject to compliance with the conditions for future draws contained in the Loan B documents. The Loans are secured by, among other things: (i) a first mortgage on the Office Property, (ii) a leasehold mortgage on the adjacent 902-space parking garage (the
“Parking Garage”) leased by an affiliate of the Company pursuant to a long-term ground lease, and (iii) all rents related to the Office Property and Parking Garage. Loan B is further secured by a cash deposit or letter of credit in the amount of $2.75 million (which will be released after the third anniversary of the Loans if the Company satisfies certain financial benchmarks).
Loan A matures on April 1, 2038. On April 1 of each year (starting with April 1, 2011), the Loan A Lender has an option to call Loan A, provided that the Company may negate the Loan A Lender’s call options, if exercised, for 2011 and 2012 upon the satisfaction of certain conditions. Loan A bears interest at a fixed rate of 6.00% per year. If the Company negates the Loan A Lender’s call options as described above, Loan A will bear interest at a rate equal to the 30-day London Interbank Offer Rate plus a market-based spread not to exceed 4.50% per year for the remainder of the term of Loan A. Loan A may be prepaid in whole during the first two years with a prepayment premium, and may be prepaid thereafter at par. Payments of interest are due monthly and the principal amount of Loan A amortizes at $1,000 per year for the first five years of the term of Loan A. For the remainder of its term, Loan A amortizes based on a 25 year amortization schedule with equal monthly installments of principal and interest.
Loan B matures on March 31, 2013. The initial advance of Loan B bears interest at a fixed rate of 7.95% per year. Subsequent advances will bear interest at a rate equal to the 30-day London Interbank Offer Rate plus 4.62%. Loan B may not be prepaid during the first year; thereafter, it is payable in whole subject to a yield maintenance payment. Payments of interest only are due monthly and there is no required principal amortization.
The Loans are non-recourse to the Company and its affiliates except for certain recourse exceptions, including waste, fraud, misallocation of funds and other similar exceptions. The recourse exceptions have been guaranteed by the Company’s operating partnership. The operating partnership also entered into a completion guaranty relating to certain construction, demolition and asbestos abatement work at the Office Property for the benefit of the Loan B Lender. The guaranties include a covenant that the operating partnership will maintain a minimum net worth of $15.0 million, calculated by adding back accumulated depreciation, and a minimum cash liquidity balance of $10.0 million. The Guaranties also include a guaranty that approximately $15.3 million will be deposited into the leasing escrow from property cash flow within approximately two (2) years of closing.
The Loans required the establishment of various customary and negotiated leasing, tenant improvements, real estate tax, ground lease rent, capital improvements, debt service and insurance reserves, all as more fully set forth in the loan documents. Net cash flow from the Office Property and the Parking Garage will be deposited into the escrows to fund future leasing, capital improvements and other costs relating to the Office Property and the Parking Garage.
Additional information regarding the foregoing matters can be found in the Company’s current Report on Form 8-K filed with the United States Securities and Exchange Commission on or about the date of this press release. A copy of the Form 8-K can be found at the Company’s web site at www.pgrt.com.
About Prime Group Realty Trust
Owned by one of the largest private real estate owners in the country, The Lightstone Group, 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 owns 9 office properties containing an aggregate of 3.4 million net rentable square feet, one industrial property comprised of approximately 120,000 square feet, a joint venture interest in one office property comprised of approximately 101,000 net rentable square feet and a membership interest in an unconsolidated entity which owns extended-stay hotel properties. It leases and manages approximately 3.5 million square feet comprising all of the wholly-owned properties. In addition, the Company is also the managing and leasing agent for the approximately 959,000 square foot property located at 77 West Wacker Drive in Chicago, Illinois, and the approximately 1.5 million square foot Citadel Center office building located at 131 South Dearborn Street in Chicago, Illinois. 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 the Lightstone Group
The Lightstone Group is one of the country’s largest privately held real estate companies with interests in residential, office, retail, hospitality, and industrial real estate assets. The company, principally through its related operating entities, Prime Retail, Extended Stay Hotels, and Prime Group Realty Trust, owns a diversified portfolio of over 687 hotels, 18,000 residential units and approximately 29 million square feet of office, industrial and retail properties in 46 states, the District of Columbia, Canada and Puerto Rico. Headquartered in New York, The Lightstone Group employs approximately 14,000 staff and professionals and maintains regional offices in Maryland, South Carolina, Illinois and New Jersey. For more information on The Lightstone Group, call 800-347-4078 or visit www.lightstonegroup.com.
Certain statements contained in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect management’s current views with respect to future events and financial performance. The words, “believes,” “expects,” “anticipates,” “estimates,” and similar words or expressions are generally intended to identify forward-looking statements. Actual results may differ materially from those expected because of various risks and uncertainties, including, but not limited to, changes in general economic conditions, adverse changes in real estate markets as well as other risks and uncertainties included from time to time in the Company’s filings with the Securities and Exchange Commission.
Prime Group Realty Trust
Jeffrey A. Patterson
President and Chief Executive Officer
312/917-1300
or
Paul G. Del Vecchio
Senior Vice President—Capital Markets
312/917-1300
