Prime Group Realty Trust (NYSE:PGE) (the "Company") announced its
results today for the quarter ended March 31, 2005. Net income
available to common shareholders was $2.3 million or $0.10 per
share for the first quarter of 2005, as compared to a net loss of
$7.3 million or $0.31 per share reported for the first quarter of
2004. Funds From Operations ("FFO") available to common
shareholders for the first quarter of 2005 totaled $0.07 per share,
as compared to $0.13 per share for the first quarter of 2004.
Revenue for the first quarter was $28.5 million, a decrease of $1.0
million from first quarter 2004 revenue of $29.5 million. The
decrease was principally due to a lease termination fee of $0.3
million received in 2004, a decrease of $0.3 million due to lower
occupancy, and a reduction in the Company's Services Company
revenues of $0.2 million. The $9.6 million, or $0.41 per share,
improvement in the net income (loss) was principally a result of:
-- Additional gain on sale related to the Bank One Center Joint
Venture of $8.7 million, or $0.37 per share, net of minority
interest, as a result of a $9.8 million distribution received from
the joint venture in January 2005 due to the Company meeting a
leasing earnout target under the joint venture agreement, -- A net
loss of $1.8 million, or $0.08 per share, in first quarter 2004
from the operations of the Company's former 33 West Monroe Street
property, which was sold in April 2004, -- A $0.8 million, or $0.03
per share, improvement in the Company's share of the 77 West Wacker
Drive joint venture results, and -- A reduction in first quarter
2005 interest expense and deferred financing fee amortization of
$0.5 million, or $0.02 per share, principally related to the
retirement of debt with proceeds from properties sold in 2004.
These were partially offset by: -- An increase in the non-cash
allocation of accounting losses of $0.4 million, or $0.02 per
share, for the Company's share of the Bank One Center joint venture
operations, and -- An increase in strategic alternative costs of
$1.9 million, or $0.08 per share. The decrease in FFO is
principally due to the reasons discussed above for the change in
GAAP loss, with the exception of real estate depreciation and
amortization, which is excluded from expense when computing FFO as
well as the exclusion of the gain on sale of real estate. In
addition, for the purposes of computing FFO available to common
shareholders per share, the Company included outstanding common
shares and common units in its operating partnership in arriving at
weighted average shares of beneficial interest. FFO is a non-GAAP
financial measure. The Company believes that net income (loss) is
the most directly comparable GAAP financial measure to FFO and has
included a reconciliation of this measure to GAAP net income (loss)
with this press release. With respect to the Company's leasing
activity, Jeffrey A. Patterson, the Company's President and CEO
commented, "We are pleased with our leasing volume, particularly if
you include leases signed after quarter-end, totaling 597,694
rentable square feet. This included 25,140 rentable square feet of
new leases, 82,203 rentable square feet of lease expansions and
57,351 rentable square feet of lease renewals and extensions which
commenced during the first quarter. During the quarter, we also
executed 34,730 rentable square feet of new leases and 29,483
rentable square feet of renewals and expansions, which commence in
the second quarter of 2005 or beyond. Portfolio occupancy
(including joint venture properties) decreased to 83.2% as of March
31st versus 83.3% at the end of the fourth quarter of 2004.
However, occupancy is up for the first three months of 2005 from
the 82.0% occupancy level at the end of the first quarter of 2004.
During this period, the Chicago CBD and Suburban office market
overall vacancy factor (including sublease space) increased from
20.5% to 20.6% according to CB Richard Ellis. Subsequent to the end
of the quarter, we entered into an additional 368,787 rentable
square feet of new leases, renewals and expansions, including our
recently announced 294,175 rentable square foot lease at Bank One
Center with Seyfarth Shaw, LLP, a leading national law firm. This
brings the leased percentage for our total portfolio, including
joint ventures, from 83.2% to 87.9%". Continental Towers Refinanced
On May 5, 2005, the Company refinanced its Continental Towers
property with a first mortgage loan in the principal amount of
$75.0 million from SunAmerica Life Insurance Company. Proceeds of
the loan were utilized to repay the existing first mortgage loan
encumbering the property in the amount of $65.6 million, including
accrued interest, pay closing costs and expenses and for general
corporate purposes. The loan matures on May 1, 2008 and bears
interest at 30-day LIBOR plus 1.75%. The previous loan had a fixed
interest rate of 7.22% per year. Payments of interest only are due
monthly and there is no required principal amortization. The
Company entered into an environmental indemnity agreement and
intercreditor agreement for the benefit of the lender.
Simultaneously with the closing, the Company purchased an interest
rate protection agreement capping LIBOR at 6.5%, which results in a
maximum interest rate of 8.25%. The loan can be repaid at any time
provided there is a 1.0% prepayment fee through October 31, 2005, a
0.50% prepayment fee from November 1, 2005 through April 30, 2007
and no prepayment fee thereafter. The Company has two one-year
extension options for the loan at then current market rates and
upon the payment of a 0.25% extension fee, provided, among other
things, the property is meeting at least a 1.35 debt service
coverage ratio. The Company has the right to convert the loan to a
seven-year fixed rate loan at any time during the term subject to
the lender's underwriting requirements and then market loan terms.
Conference Call Information Prime Group Realty Trust has scheduled
an investor conference call for Tuesday, May 10, 2005 at 9:00 a.m.
(CT) to discuss the Company's results for the quarter ended March
31, 2005. Investors and interested parties may listen to the call
via a live webcast accessible on the Company's web site at
www.pgrt.com. To listen, please register and download audio
software on the site at least fifteen minutes prior to the start of
the call. The webcast will be archived on the site until May 17,
2005. To participate via teleconference, please call 877-294-9745
at least five minutes prior to the beginning of the call. If you
are calling from outside North America, please call 706-679-7562. A
replay of the call will be available through May 17, 2005 by
calling 800-642-1687 or 706-645-9291 and entering the Conference ID
#5959397 with your telephone keypad. In addition to the information
provided in this press release, the Company publishes a quarterly
"Supplemental Financial and Operating Statistics" package. The
supplemental information package and the information contained in
this press release can be found on the Company's web site under
"Investor Information," and as part of a current report on Form 8-K
furnished to the Securities and Exchange Commission. About the
Company Prime Group Realty Trust is a fully integrated,
self-administered, and self-managed real estate investment trust
(REIT) that owns, manages, leases, develops, and redevelops
primarily office real estate, in metropolitan Chicago. The Company
owns 11 office properties containing an aggregate of approximately
4.6 million net rentable square feet, one industrial property
comprised of approximately 120,000 net rentable square feet, three
joint venture interests in office properties totaling 2.8 million
net rentable square feet, and approximately 6.3 acres of land
suitable for new construction. This press release contains certain
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 "will be", "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. -0- *T Prime Group Realty Trust Consolidated
Statements of Operations (dollars in thousands, except per share
data) (Unaudited) Three Months ended March 31 2005 2004
-------------------------- Revenue: Rental $ 15,991 $ 16,314 Tenant
reimbursements 10,543 11,029 Other property revenues 932 891
Services Company revenue 1,022 1,270 --------------------------
Total revenue 28,488 29,504 Expenses: Property operations 7,828
7,744 Real estate taxes 6,351 6,231 Depreciation and amortization
5,574 5,440 General and administrative 2,424 2,479 Services Company
expenses 775 1,266 Severance costs 176 - Strategic alternative
costs 1,934 - -------------------------- Total expenses 25,062
23,160 Operating income 3,426 6,344 Loss from investments in
unconsolidated joint ventures (3,057) (3,288) Other income 578 655
Interest: Expense (6,771) (7,210) Amortization of deferred
financing costs (256) (363) -------------------------- Loss from
continuing operations before minority interests (6,080) (3,862)
Minority interests 958 644 -------------------------- Loss from
continuing operations (5,122) (3,218) Discontinued operations, net
of minority interests of $(123) and $233 in 2005 and 2004,
respectively 947 (1,764) -------------------------- Loss before
gain (loss) on sales of real estate (4,175) (4,982) Gain (loss) on
sales of real estate, net of minority interests of $(1,138) and $2
in 2005 and 2004, respectively 8,758 (18)
-------------------------- Net income (loss) 4,583 (5,000) Net
income allocated to preferred shareholders (2,250) (2,250)
-------------------------- Net income (loss) available to common
shareholders $ 2,333 $ (7,250) ========================== Basic and
diluted earnings available to common shares per weighted-average
common share: Loss from continuing operations $ (0.31) $ (0.23)
Discontinued operations, net of minority interests 0.04 (0.08) Gain
(loss) on sales of real estate, net of minority interests 0.37 -
-------------------------- Net income (loss) available per
weighted- average common share of beneficial interest -basic and
diluted $ 0.10 $ (0.31) ========================== Prime Group
Realty Trust GAAP Reconciliation of Net(Loss) Income to Funds From
Operations(FFO) Available to Common Share/Unit Holders (Unaudited)
Three Months Ended March 31 2005 2004 --------------------------
(in thousands) Net income (loss) $ 4,583 $ (5,000) Adjustments to
reconcile to Funds from Operations available to common
shareholders: Real estate depreciation and amortization 5,244 5,108
Amortization of costs for leases assumed 69 72 Joint venture
adjustments 4,480 4,388 (Gain) loss on sale of operating property,
net of minority interests (8,758) 18 Adjustment for discontinued
operations: Real estate depreciation and amortization - 2,079 Gain
on sale (included in discontinued operations) (709) - Minority
interests 123 (233) Minority interests (958) (644)
-------------------------- Funds From Operations 4,074 5,788 Income
allocated to preferred shareholders (2,250) (2,250)
-------------------------- Funds from Operations available to
common shareholders (1) $ 1,824 $ 3,538 ==========================
FFO available to common share/unit holders per share/unit of
beneficial interest: Basic and Diluted $ 0.07 $ 0.13
========================== Weighted average shares/units of
beneficial interest: Common shares 23,675 23,671 Nonvested employee
stock grants 6 9 Operating Partnership units 3,076 3,076
-------------------------- Basic 26,757 26,756
========================== Common shares 23,675 23,671 Nonvested
employee stock grants 6 - Employee stock options 26 20 Operating
Partnership units 3,076 3,076 -------------------------- Diluted
26,783 26,767 ========================== (1) Funds from Operations
is a non-GAAP financial measure. Funds from Operations ("FFO") is
defined as net income (loss), computed in accordance with generally
accepted accounting principles ("GAAP") plus real estate
depreciation and amortization, excluding gains (or losses) from
sales of operating properties, and after comparable adjustments for
unconsolidated joint ventures and discontinued operations. FFO
includes results from discontinued operations, including revenues,
property operations expense, real estate taxes expense and interest
expense. We compute FFO in accordance with standards established by
the National Association of Real Estate Investment Trusts
("NAREIT"), which may not be comparable to FFO reported by other
REITs that do not define the term in accordance with the current
NAREIT definition or that interpret the current NAREIT definition
differently than us. We utilize FFO as a performance measure. We
believe that FFO provides useful information to investors regarding
our performance as FFO provides investors with additional means of
comparing our operating performance with the operating performance
of our competitors. FFO is not representative of cash flow from
operations, is not indicative that cash flows are adequate to fund
all cash needs, and should not be considered as an alternative to
cash flows as a measure of liquidity. We believe that net income
(loss) is the most directly comparable GAAP financial measure to
FFO. Prime Group Realty Trust Consolidated Balance Sheets (dollars
in thousands, except share data) (Unaudited) Assets March 31
December 31 2005 2004 -------------------------- Real estate, at
cost: Land $ 124,100 $ 124,100 Building and improvements 495,688
494,742 Tenant improvements 65,750 62,452 Furniture, fixtures and
equipment 9,966 9,927 -------------------------- 695,504 691,221
Accumulated depreciation (112,493) (107,440)
-------------------------- 583,011 583,781 Property held for
development 1,588 1,588 -------------------------- 584,599 585,369
Properties held for sale - 591 Investments in unconsolidated joint
ventures 22,607 26,088 Cash and cash equivalents 75,469 71,731
Receivables, net of allowance of $1,887 and $1,985 at March 31,
2005 and December 31, 2004, respectively: Tenant 1,966 641 Deferred
rent 18,722 18,934 Other 1,419 2,190 Restricted cash escrows 36,279
42,774 Deferred costs, net 16,751 16,255 Other 1,915 2,790
-------------------------- Total assets $ 759,727 $ 767,363
========================== Liabilities and Shareholders' Equity
Mortgage notes payable $ 426,433 $ 427,445 Accrued interest payable
1,544 1,508 Accrued real estate taxes 20,744 25,861 Accrued tenant
improvement allowances 6,428 4,884 Accounts payable and accrued
expenses 7,767 9,184 Liabilities for leases assumed 9,301 9,957
Deficit investment in unconsolidated joint venture 3,962 4,087
Dividends payable 2,250 2,250 Other 14,052 17,609
-------------------------- Total liabilities 492,481 502,785
Minority interests: Operating Partnership 19,457 19,154
Shareholders' equity: Preferred Shares, $0.01 par value; 30,000,000
shares authorized: Series B - Cumulative Redeemable Preferred
Shares, 4,000,000 shares designated, issued and outstanding 40 40
Common Shares, $0.01 par value; 100,000,000 shares authorized;
23,675,121 and 23,671,996 shares issued and outstanding at March
31, 2005 and December 31, 2004, respectively 236 236 Additional
paid-in capital 381,293 381,293 Accumulated other comprehensive
loss (436) (468) Distributions in excess of earnings (133,344)
(135,677) -------------------------- Total shareholders' equity
247,789 245,424 -------------------------- Total liabilities and
shareholders' equity $ 759,727 $ 767,363 ==========================
*T
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