Five Mile to tender for Prime Group's 9% series B preferreds by Dec. 1

By Susanna Moon

Chicago, Nov. 1 - Five Mile Capital Partners LLC plans to begin a tender offer for Prime Group Realty Trust's outstanding 9% series B cumulative redeemable preferred shares of beneficial interest for at least $5.00 per share in cash by Dec. 1.

The company is required to tender for the notes under a stock purchase agreement between an affiliate of Five Mile and Prime Group, according to a press release by Prime Group. It will also pay for tender offer expenses.

Five Mile purchased 6.25 million common shares from Prime Group for $625,000 plus the reimbursement of transaction expenses. All of Prime Group's shares are now owned by an affiliate of Five Mile.

In other news, the company resolved the litigation brought by Tyler Rameson and funds managed by Caspian Capital in the Circuit Court for Baltimore City. 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.

Under terms of a settlement, Five Mile's tender offer will be priced at $5.25 per share for all holders of series B preferred shares, Rameson will resign from the company's board of trustees and the plaintiffs and other parties will tender all of their shares at that price.

The company said they agreed to the settlement to avoid continued spending on the costly litigation and the diversion of management's attention from the operation of the company's properties.

Duff & Phelps, LLC, the company's independent financial adviser, concluded that the payment to be received by preferred holders and the payment for the issuance of shares to Five Mile are both fair.

The minimum offer price of $5.00 per share in the tender offer represents a premium of about 86% over the high end of Duff & Phelps' current valuation range of the series B preferreds, which is $2.69 per share, the release noted.

The price also is a premium of 39% over the closing trading price of the preferreds on the day before the execution of the stock purchase agreement with Five Mile, noted Jeffrey A. Patterson, the company's president and chief executive officer.

Prime Group is a self-administered and self-managed real estate investment trust, which owns, manages, leases, develops and redevelops office and industrial real estate in metropolitan Chicago.

Five Mile Capital Partners is a commercial real estate and alternative investment firm based in Stamford, Conn.

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