Prime Group Acquires an Interest in Extended Stay
JULY 9, 2007. Prime Group Realty Trust (NYSE: PGEPRB) (the "Company") announced today that on June 29, 2007 the Company, through its wholly-owned qualified REIT subsidiary PGRT ESH, Inc. ("PGRT ESH"), purchased a $120 million membership interest in BHAC Capital IV, L.L.C., an entity which owns 100% of Extended Stay Hotels, Inc. ("ESH"), from Lightstone Holdings LLC ("Lightstone Holdings"), an affiliate of The Lightstone Group, LLC ("Lightstone LLC"). ESH and its affiliates own mid-price extended-stay properties in the United States and Canada. The Company, and its operating partnership Prime Group Realty, L.P., are owned by affiliates of Lightstone LLC and the acquisition of the membership interest was approved unanimously by the Company's independent Trustees.
The $120 million membership interest has a liquidation preference of $120 million, a 12% preferred dividend rate per annum payable monthly, and is entitled to receive a 15.14% residual profits interest. The purchase price was financed by a $120 million non-recourse loan to PGRT ESH from Citicorp USA, Inc., which loan is secured by a pledge of the membership interest and any proceeds from such interest. The loan has a maturity date of June 10, 2008, and an interest rate of 4% above LIBOR or 1.50% above Citicorp's base interest rate, as selected by PGRT ESH from time to time. The loan is guaranteed by Lightstone Holdings and David Lichtenstein.
Additional information regarding the foregoing transaction 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.
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