UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 24, 2000
PRIME GROUP REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 1-13589 36-4173047
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(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 917-1300.
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
(a) January 24, 2000, Press Release: On January 24, 2000, Prime Group
Realty Trust issued the Press Release attached hereto as Exhibit 99.1. Such
Press Release is incorporated herein by reference.
(b) Exhibits:
Exhibit
No. Description
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99.1 Press Release of Prime Group Realty Trust dated
January 24, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRIME GROUP REALTY TRUST
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Registrant
Dated: January 25, 2000 By: /s/ William M. Karnes
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William M. Karnes
Executive Vice President and
Chief Financial Officer
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EXHIBIT NO. 99.1
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Richard S. Curto William M. Karnes Bill Murphy Georganne Palffy
President Executive Vice President General Inquiries Investor Inquiries
Chief Executive Chief Financial 312/266-7800 312/266-7800
Officer Officer
312/917-1300 312/917-1300
FOR IMMEDIATE RELEASE
MONDAY, JANUARY 24, 2000
PRIME GROUP REALTY TRUST ANNOUNCES PLANS TO START
CONSTRUCTION OF A 1.5 MILLION SQUARE FOOT OFFICE
DEVELOPMENT IN DOWNTOWN CHICAGO
618,000 Square Foot Lease Signed With Bank One
Development Highlights
o One of the largest single office leases in Chicago history.
o Development costs of approximately $305 million.
o Innovative, high-tech office building.
o Project is 60% economically pre-leased.
CHICAGO, Illinois, January 24, 2000 -- Prime Group Realty Trust (NYSE: PGE) (the
"Company"), the leading real estate investment trust specializing in office and
industrial properties in the Chicago metropolitan area and the largest owner of
office space in downtown Chicago, announced today plans to start construction on
Dearborn Center, a new 37-story Class A office tower containing 1.5 million
square feet of rentable area to be located at the half block site bordered by
State, Dearborn and Adams streets. The Company also announced the signing of a
15-year lease with Bank One for 618,000 net rentable square feet of office space
in the lower fourteen floors of Dearborn Center. Located in the heart of
downtown Chicago and less than one block from Bank One's corporate headquarters,
Dearborn Center will include 1.4 million square feet of technologically-advanced
office space, 100,000 square feet of retail space, and a 210-car underground
parking garage. Including the Bank One lease, the Company currently has signed
leases or letters of intent for approximately 718,000 square feet of office and
retail space.
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The project, designed by the internationally acclaimed architectural team of
Ricardo Bofill of Spain and James DeStefano of Chicago, will feature Bofill's
"modern classicism" architectural style and numerous new and innovative
technologies to increase the productivity and efficiency of the building's
occupants.
"This new building will provide us with a level of technology and workplace
efficiency that will significantly increase our operational productivity," said
Verne Istock, Chairman and Acting CEO of Bank One. "The large 63,000 square foot
floor plates in the low-rise portion of the building and access to
state-of-the-art technologies will significantly enhance our processing
capabilities. In addition, the location of the property, less than one block
from our corporate headquarters and directly connected to the regional rail
transportation system, will provide excellent access for our employees."
Bank One employs 17,000 people in the Chicago metropolitan area. Bank One plans
to consolidate several of its operational units totaling approximately 3,000
people into Dearborn Center.
High-Tech Building Design Enhances Employee Productivity
Michael W. Reschke, Chairman of the Company, stated, "We are extremely pleased
that Bank One has chosen Dearborn Center as the home for its continued growth
and consolidation in downtown Chicago. The building creates a workplace for the
new millennium, featuring numerous innovations in design and systems
technologies that will enhance the productivity and efficiency of any workforce
located within. Our large floor plates, 63,000 square feet in the low-rise and
33,000 square feet in the mid- and high-rise, are exceptionally efficient.
Ten-foot finished ceiling heights provide for numerous ambient lighting options
for enhanced viewing of computer screens and reduced eye strain on employees.
The building also features a 14-inch raised floor system that enables virtually
unlimited cabling and underfloor air distribution flexibility. The pressurized
floor plenum carries fresh heated or cooled air to every work station through
individually-controlled registers, giving each employee individualized
temperature control. The underfloor air distribution system also reduces energy
costs by an estimated 35% and provides 65% cleaner indoor air quality.
Furthermore, floor-to-ceiling windows will provide more natural light, reducing
the need for artificial lighting. Two separate risers give tenants superior data
and communications access. In addition, the building is adjacent to two separate
subway lines providing excellent access to public transportation. It truly
represents a new generation of building design and efficiency."
"We believe the building will be attractive to a broad spectrum of tenants,"
said Richard S. Curto, President and Chief Executive Officer of the Company.
"The 618,000 square foot Bank One lease is one of the largest office leases
signed in the history of Chicago real estate. At the present time, we have
signed letters of intent for an additional 100,000 square feet of office and
retail space and are in discussions with potential tenants for up to 400,000
additional square feet of office space. With the Bank One lease, the project
will be approximately 60% economically preleased at the start of construction.
We expect to be no less than 90% leased by the time the building is anticipated
to be completed in early 2002."
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Development Cost Projected to be $305 Million
The Company estimates that the total development cost of Dearborn Center will be
$305 million. Based upon existing signed leases and letters of intent and
projected rental rates in the remainder of the space, the Company expects a
first year stabilized net operating income in excess of $36.0 million,
representing approximately a 12.0% unleveraged return on cost. The Company
expects to break ground in early 2000. The project is expected to be completed
and initial tenancy to commence in early 2002.
"The Dearborn Center project presents an outstanding opportunity for us to
create value for our shareholders," said Mr. Reschke. "The Bank One lease, in
conjunction with the additional office and retail leases that we intend to sign
plus revenue from the parking garage, will provide an extremely attractive cash
flow. Given the strong fundamentals of the Chicago CBD office market and our
significant pre-leasing for the project, we believe Dearborn Center will provide
our shareholders with an outstanding risk adjusted rate of return and
significantly increase the net asset value of our company."
The Company also confirmed its previously announced plan to sell approximately
$500.0 million of properties and to use 50% of the proceeds to retire debt and
50% of the proceeds to repurchase its common and preferred stock. Mr. Reschke
stated, " The development of Dearborn Center will not alter our previously
announced plan to create value for our shareholders by repurchasing our common
stock. If anything, the value being created from the development of Dearborn
Center widens the spread between our current share price and our net asset value
per common share and increases our desire to repurchase our common stock."
Commenting on the project, Chicago Mayor Richard M. Daley said, "Bank One's
commitment to consolidate several operating units in downtown Chicago is further
evidence of the strength and vitality of Chicago's central business district.
Dearborn Center's retail space also represents a significant step in the
continued revitalization of State Street as a dominant retail corridor in the
city."
Upon completion, the Company expects that the building will result in an
increase in the Company's net asset value of approximately $3.00 per common
share. Assuming a permanent loan equal to 65% of the completed value of the
project at current interest rates and projected rents, the stabilized project is
expected to add $.35 in FFO per diluted share starting in 2003.
Dearborn Center is a joint venture development between the Company and J. Paul
Beitler Development Co. ("JPBD"). Under the terms of the joint venture between
the Company and JPBD, the Company is responsible for contributing substantially
all of the equity capital required to construct the project. After the Company
and JPBD realize a return of their contributed equity and a minimum return
thereon, the joint venture will allocate operating cash flow and net proceeds
from a sale 80% to Prime and 20% to JPBD. If certain return thresholds are
achieved, JPBD may earn the right to additional distributions. The Company has
the right to purchase JPBD's interest pursuant to a predetermined formula.
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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 office and industrial real estate, primarily in the
Chicago metropolitan area. Including Dearborn Center, the Company's portfolio
consists of 31 office properties, containing an aggregate of 11.1 million net
rentable square feet and 41 industrial properties containing an aggregate of 5.2
million net rentable square feet. The portfolio also includes approximately
272.2 acres of developable land and rights to acquire more than 237.2 additional
acres of developable land, which management believes could be developed with
approximately 9.6 million rentable square feet of office and industrial space.
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.
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