Working Capital Asset Purchase Agreement

In what is anticipated to be a multi-million-dollar transaction, Chicago-based Prime Group Realty Trust (PINK SHEETS: PMGEP) and Five Mile Capital Partners LLC, a Connecticut-based alternative investment and asset management company, jointly announced that affiliates of Five Mile have signed a definitive merger contract and also other agreements to get the REIT. The deal is anticipated to close inside the second half of 2011.

In a prepared statement, the parties say Five Mile will acquire Prime Group for $5 in cash per share for that company’s 9% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B Preferred Shares”).

There are still no common shares of beneficial interest with the company outstanding. Prime Group’s Board of Trustees has approved the merger agreement and offers to submit the merger for approval with the holders with the Series B Preferred Shares.

Following completion from the transaction, the Company’s Series B Preferred Shares will cease to be traded being an over-the-counter security.

The Company and Five Mile also announced an affiliate of Five Mile plus a Prime Group affiliate have signed a jv contract about the ownership, management and operation 330 N. Wabash Avenue, a Chicago workplace landmark.

The three way partnership contract calls with the pay down of $20 million of principal and also the additional reduction from the principal by $20 million; the extension from the maturity date to Jan. 31, 2016; the reduction with the loan deal with $128 million (that $30 million remains accessible to be drawn for tenant improvement, building redevelopment along with other costs); and providing certain additional contingent interest towards the lenders never to exceed $20 million. Five Mile also accepted provide nearly $75 million of extra capital to the partnership.
“We are content to have inked a merger agreement that can offer a cash purchase price towards the holders of our own Series B Preferred Shares tight of approximately 10.5% within the average trading closing price from May 14, 2010 through February 14, 2011,” Jeffrey A. Patterson, their President and Chief Executive Officer, said inside the statement.

“The Series B Shares are already thinly traded so we are happy use a cash offer allowing all from the holders for this price. We look forward to closing the transaction with Five Mile.”

He added, “The three way partnership with Five Mile for your 330 N. Wabash property affords the capital resources required to lease the property to stabilization.”

The closing in the merger agreement is governed by various customary conditions, like the approval by at the least 2/3 from the holders on the Series B Preferred Shares.

The transaction is not governed by any financing condition. The jv related for the property located at 330 N. Wabash Avenue in Chicago, Illinois as well as the debt refinancing will not be contingent for the completion with the merger, according to your statement.

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