Prime Group series B preferred holder files suit over Five Mile merger

By Marisa Wong

Madison, Wis., Nov. 30 - Prime Group Realty Trust said that on Nov. 21 series B preferred shareholder Patricia Fox filed a putative class action lawsuit in the U.S. District Court for the Northern District of Illinois against the company, the company's trustees and Five Mile Capital Partners LLC and some of its affiliates.

The action relates to a previously announced merger agreement dated Sept. 28 between Prime Group and Five Mile. Five Mile agreed to acquire Prime Group's outstanding series B preferred shares for $5.25 in cash per preferred. The merger was subject to approval by holders of a majority of the company's common stock and at least two-thirds of the company's series B preferreds.

According to a Friday press release, plaintiff Fox alleges that:

• Prime Group and its trustees breached their contractual obligations with respect to the series B preferreds by approving the proposed merger;

• The trustees and Five Mile breached alleged fiduciary duties to the series B preferred holders by approving the proposed merger; and

• Five Mile would be unjustly enriched to the detriment of the series B preferred holders as a result of the merger.

The plaintiff seeks declaratory and injunctive relief, including enjoining the completion of the proposed merger, as well as damages.

Prime Group said it believes that the allegations in the complaint are without merit and intends to defend the action vigorously.

The company expects to incur significant expenses and costs to defend against the allegations.

The release said the special meeting of the common and series B preferred shareholders to approve the proposed merger will still take place on Dec. 5.

The company and Five Mile have agreed to delay the closing of the merger - assuming the necessary shareholder approvals are received at the special meeting - until the earlier of Dec. 12 or the resolution of Fox's motion for a preliminary injunction.

Instructions for receiving the merger consideration of $5.25 per series B preferred will be sent to the holders only after the merger is completed.

If Prime Group and Five Mile are preliminarily enjoined from completing the transaction, the merger agreement may terminate.

Prime Group's trustees are Jeffrey A. Patterson, James G. Glasgow, Jr., Scott R. Leitman, David L. Reynolds, John M. Sabin, Shawn R. Tominus and George R. Whittemore.

Prime Group is a real estate investment trust that owns, manages, leases, develops and redevelops office and industrial real estate in metropolitan Chicago.

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