<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-13589
PRIME GROUP REALTY TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 36-4173047
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 917-1300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At May 11, 2000, 15,763,638 of the Registrant's Common Shares of Beneficial
Interest were outstanding.
<PAGE>
Prime Group Realty Trust
Form 10-Q
INDEX
Part I: Financial Information
Item 1. Financial Statements (Unaudited) PAGE
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Income for the Three Months
Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 18
Part II: Other Information
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRIME GROUP REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(000'S OMITTED, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------------------------------------
<S> <C> <C>
ASSETS
Real estate, at cost:
Land $ 185,917 $ 183,295
Building and improvements 941,690 928,567
Tenant improvements 43,476 39,232
----------------------------------------
1,171,083 1,151,094
Accumulated depreciation (45,750) (37,977)
----------------------------------------
1,125,333 1,113,117
Property under development 132,040 125,724
----------------------------------------
1,257,373 1,238,841
Mortgage note receivable 87,343 82,687
Cash and cash equivalents 16,995 21,167
Tenant receivables 9,586 11,438
Restricted cash escrows 41,853 42,140
Deferred rent receivable 11,744 9,501
Deferred costs, net 27,140 26,901
Other 13,976 11,500
----------------------------------------
Total assets $1,466,010 $1,444,175
========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 736,759 $ 705,194
Credit facilities 19,027 19,527
Bonds payable 74,450 74,450
Accrued interest payable 3,881 3,508
Accrued real estate taxes 31,740 40,689
Accounts payable and accrued expenses 34,779 36,133
Liabilities for leases assumed 2,957 3,235
Dividends payable 8,154 8,122
Other 10,481 10,909
----------------------------------------
Total liabilities 922,228 901,767
Minority interests:
Operating Partnership 170,215 168,070
Other 1,000 1,000
Series A - Cumulative Convertible Preferred Shares, 2,000,000 shares designated,
issued and outstanding at March 31, 2000 and December 31, 1999 39,740 39,703
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 at March 31,
2000 and December 31, 1999 40 40
Common Shares, $0.01 par value; 100,000,000 shares authorized; 15,271,678 and
15,189,438 shares issued and outstanding at March 31, 2000 and December 31,
1999, respectively 153 152
Additional paid-in capital 322,168 321,357
Retained earnings 10,466 12,086
----------------------------------------
Total shareholders' equity 332,827 333,635
----------------------------------------
Total liabilities and shareholders' equity $1,466,010 $1,444,175
========================================
</TABLE>
See notes to consolidated financial statements.
- 3 -
<PAGE>
PRIME GROUP REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(000'S OMITTED, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
2000 1999
------------------------------------
<S> <C> <C>
REVENUE
Rental $ 33,854 $32,616
Tenant reimbursements 16,472 12,901
Other property revenues 2,213 1,766
Mortgage note interest 2,011 1,506
Other 925 847
------------------------------------
Total revenue 55,475 49,636
EXPENSES
Property operations 12,810 10,650
Real estate taxes 10,389 9,375
Depreciation and amortization 9,232 7,958
Interest 12,986 10,378
Loss on treasury lock termination - 557
Loss on land development option - 600
General and administrative 2,264 2,050
------------------------------------
Total expenses 47,681 41,568
------------------------------------
Income before gain on sales of real estate and minority
interests 7,794 8,068
Gain on sales of real estate, net 1,196 -
------------------------------------
Income before minority interests 8,990 8,068
Minority interests (2,420) (2,056)
------------------------------------
Net income 6,570 6,012
Net income allocated to preferred shareholders (3,037) (3,000)
------------------------------------
Net income available to common shareholders $ 3,533 $ 3,012
====================================
Basic earnings available to common shares per weighted-average common share:
Income before gain on sales of real estate $ 0.18 $ 0.20
Gain on sales of real estate, net of minority interests 0.05 -
------------------------------------
Net income available per weighted-average common share of beneficial
interest - basic $ 0.23 $ 0.20
====================================
Diluted earnings available to common shares per weighted-average common share:
Income before gain on sales of real estate $ 0.18 $ 0.20
Gain on sales of real estate, net of minority interests 0.05 -
------------------------------------
Net income available per weighted-average common share of beneficial
interest - diluted $ 0.23 $ 0.20
====================================
</TABLE>
See notes to consolidated financial statements.
- 4 -
<PAGE>
PRIME GROUP REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
2000 1999
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,570 $ 6,012
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of costs for leases assumed (included in rental revenue) 162 245
Interest income and development fees added to mortgage note receivable
principal (1,145) (456)
Net equity in loss of unconsolidated investments 770 178
Depreciation and amortization 9,232 7,958
Loss on treasury lock termination - 557
Loss on land development option - 600
Gain on sales of real estate, net 1,196 -
Minority interests 2,420 2,056
Changes in operating assets and liabilities:
Decrease (increase) in tenant receivables 1,844 (3,550)
Increase in deferred rent receivable (2,254) (594)
(Increase) decrease in other assets 103 3,653
Increase in accrued interest payable 373 841
(Decrease) increase in accrued real estate taxes (8,949) 9,135
Increase (decrease) in accounts payable and accrued expenses (1,351) (4,724)
Decrease in liabilities for leases assumed (278) (277)
Decrease in other liabilities (430) (216)
------------------------------------
Net cash provided by operating activities 8,263 21,418
INVESTING ACTIVITIES
Expenditures for real estate and equipment (32,043) (157,324)
Proceeds from sales of real estate 8,340 -
Leasing costs (781) (941)
Additional advances on mortgage note receivable (3,511) (839)
Decrease in restricted cash escrows 287 25,127
Option deposits - (18,000)
Net (loans to) repayments from services company (2,991) 672
------------------------------------
Net cash used in investing activities (30,699) (151,305)
FINANCING ACTIVITIES
Financing costs (1,026) (849)
Deposits recovered on treasury lock agreements - 9,215
Proceeds from mortgage notes payable 42,805 72,000
Net (repayments of) proceeds from credit facilities (500) 28,595
Repayment of mortgage notes payable (11,240) (1,378)
Distribution to minority interest - Operating Partnership (3,653) (3,482)
Dividends paid to Series B-Preferred shareholders (2,250) (2,250)
Dividends paid to Series A-Preferred shareholders (750) (730)
Dividends paid to common shareholders (5,122) (5,100)
------------------------------------
Net cash provided by financing activities 18,264 96,021
------------------------------------
Net decrease in cash and cash equivalents (4,172) (33,866)
Cash and cash equivalents at beginning of period 21,167 46,500
------------------------------------
Cash and cash equivalents at end of period $16,995 $ 12,634
====================================
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE>
PRIME GROUP REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Prime Group Realty
Trust's annual report on Form 10-K for the year ended December 31, 1999 as filed
with the Securities and Exchange Commission on March 24, 2000 ("Form 10-K").
Certain prior period amounts have been reclassified to conform with the current
financial statement presentation.
2. FORMATION AND ORGANIZATION OF THE COMPANY
Prime Group Realty Trust (the "Company") was organized in Maryland on July 21,
1997 and intends to qualify as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended, for Federal income tax purposes. The
Company is the managing general partner of Prime Group Realty, L.P. (the
"Operating Partnership") and owns all of the preferred units and 57.9% and 58.4%
of the common units of the Operating Partnership issued at March 31, 2000 and
December 31, 1999, respectively. Each common unit entitles the Company to
receive distributions from the Operating Partnership. Distributions declared or
paid to holders of common shares and preferred shares are based upon such
distributions the Company receives with respect to its common units and
preferred units.
3. INCOME TAXES
The Company elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended. As a REIT, the Company generally will not be subject to
federal income tax to the extent that it distributes at least 95% of its REIT
taxable income to its shareholders. REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT in any taxable year, the Company will be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate tax rates.
4. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
- 6 -
<PAGE>
5. RECENT DEVELOPMENTS
During the period from January 1, 2000 through March 31, 2000, the Company
acquired and sold the following office and industrial properties, parcels of
land and its one retail center (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
for a description of the debt terms.):
<TABLE>
<CAPTION>
NET ACQUISITION
RENTABLE COST/SALES
SQUARE PRICE (IN MORTGAGE DEBT MONTH
PROPERTY LOCATION FEET MILLIONS) (IN MILLIONS) ACQUIRED/SOLD
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACQUIRED
Office:
Enterprise Center II (1) Westchester, IL 62,559 $ 9.1 $5.5 January
Industrial:
6700 Touhy Avenue Niles, IL 120,000 4.9 3.0 March
-----------------------------------------------
182,559 $14.0 $8.5
===============================================
Land:
Libertyville Office II Libertyville, IL 7.5 Acres $ 1.2 $ - January
Carol Stream (2)(3) Carol Stream, IL 29.1 Acres 3.8 - March
-----------------------------------------------
36.6 Acres $ 5.0 $ -
===============================================
SOLD
Land:
Carol Stream Land (3) Carol Stream, IL 46.1 Acres $ 7.4 $ - March
===============================================
Retail Center:
371-385 Gary Avenue (4) Carol Stream, IL 11,276 $ 1.1 $ - March
===============================================
</TABLE>
(1) Acquisition cost includes cash paid at closing, the proceeds of a
mortgage note payable plus prorations and accrued real estate
taxes.
(2) This parcel was acquired from a minority interest unit holder of the
Operating Partnership or one or more of its affiliates for a total of
$3.8 million in common units.
(3) On March 27, 2000, the Company sold this land for a total sales price
of $7,400, resulting in a gain of $1,326.
(4) On March 31, 2000, the Company sold this property for $1,100,
resulting in a loss of $130.
On March 20, 2000, the Company entered into an interest rate cap agreement for
the period from March 20, 2000 through November 17, 2000 for a notional amount
of $70.0 million. The interest rate under the agreement is capped at a LIBOR
index rate of 8.0%.
- 7 -
<PAGE>
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
available per weighted-average common share of beneficial interest for the three
months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
------------------------------------
<S> <C> <C>
Numerator:
Income before gain on sales of real estate, minority interests, and
preferred distributions $ 7,794 $ 8,068
Minority interests (1,934) (2,056)
Net income allocated to preferred distributions (3,037) (3,000)
------------------------------------
Income before gain on sales of real estate 2,823 3,012
Gain on sales of real estate, net of minority interests 710 -
------------------------------------
Numerator for earnings per share - income available to common shares $ 3,533 $ 3,012
====================================
Denominator:
Denominator for basic earnings per share-weighted-average common shares 15,215,512 15,131,849
Effect of dilutive securities:
Employee stock options 34,531 2,262
Employee stock grants 39,962 -
------------------------------------
Denominator for diluted earnings per share - adjusted weighted-average
common shares and assumed conversions 15,290,005 15,134,111
====================================
BASIC EARNINGS AVAILABLE TO COMMON SHARES PER WEIGHTED-AVERAGE COMMON SHARE
Income before gain on sales of real estate $ 0.18 $ 0.20
Gain on sales of real estate, net of minority interests 0.05 -
------------------------------------
Net income available per weighted-average common share of beneficial
interest - basic $ 0.23 $ 0.20
====================================
DILUTED EARNINGS AVAILABLE TO COMMON SHARES PER WEIGHTED-AVERAGE COMMON SHARE
Income before gain on sales of real estate $ 0.18 $ 0.20
Gain on sales of real estate, net of minority interests 0.05 -
------------------------------------
Net income available per weighted-average common share of beneficial
interest - diluted $ 0.23 $ 0.20
====================================
</TABLE>
Options to purchase 2,009,954 and 1,122,833 of the Company's common shares were
excluded in the computation of diluted earnings available to common shares for
the three months ended March 31, 2000 and 1999, respectively, because the effect
would be antidilutive.
The Company had 10,848,313 and 10,328,512 weighted-average common units
outstanding during the three months ended March 31, 2000 and 1999, respectively,
of which 9,347,248 and 9,390,799, respectively, may be converted (on a one for
one basis) into common shares at the option of the Company. The convertible
common units were not included in the computation of diluted earnings per share
because the conversion would be antidilutive.
The Company had 2,000,000 Series A preferred shares outstanding during the three
months ended March 31, 2000 and 1999 which were not included in the computation
of diluted earnings per share because the conversion would have been
antidilutive.
- 8 -
<PAGE>
7. SEGMENT REPORTING
The following summarizes the Company's historical segment operating results for
the three months ended March 31, 2000 and 1999 (Amounts in thousands):
<TABLE>
<CAPTION>
Three months ended March 31, 2000
-------------------------------------------------------------
Corporate/
Operating
Office Industrial Partnership Total
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $ 48,743 $ 5,704 $ 2,224 $ 56,671
Total expenses 28,454 3,977 15,250 47,681
-------------------------------------------------------------
Income (loss) before minority interests 20,289 1,727 (13,026) 8,990
FFO adjustments:
Real estate depreciation and
amortization 6,729 1,477 - 8,206
Straight-line rental revenue (1,979) (275) - (2,254)
Straight-line rental revenue from
joint venture (158) - - (158)
Amortization of costs for leases
assumed 162 - - 162
Joint venture adjustments 863 - - 863
Adjustments for sale of operating
property 130 - - 130
Net income allocated to preferred
shareholders - - (3,037) (3,037)
-------------------------------------------------------------
Funds from operations excluding
straight-line rental revenue 26,036 2,929 (16,063) 12,902
Straight-line rental revenue 1,979 275 - 2,254
Straight-line rental revenue from
joint venture 158 - - 158
-------------------------------------------------------------
Funds from operations including
straight-line rental revenue $ 28,173 $ 3,204 $(16,063) $ 15,314
==============================================================
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1999
==============================================================
Corporate/
Operating
Office Industrial Partnership Total
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenue $42,306 $6,676 $ 654 $49,636
Total expenses 23,732 3,879 13,957 41,568
-------------------------------------------------------------
Income (loss) before minority interests 18,574 2,797 (13,303) 8,068
FFO adjustments:
Real estate depreciation and amortization 5,773 1,560 - 7,333
Straight-line rental revenue (514) (80) - (594)
Amortization of costs for leases assumed 245 - - 245
Net income allocated to preferred
shareholders - - (3,000) (3,000)
-------------------------------------------------------------
Funds from operations excluding
straight-line rental revenue 24,078 4,277 (16,303) 12,052
Straight-line rental revenue 514 80 - 594
-------------------------------------------------------------
Funds from operations, including
straight-line rental revenue (1) $24,592 $4,357 $(16,303) $12,646
-------------------------------------------------------------
</TABLE>
- 9 -
<PAGE>
7. SEGMENT REPORTING (CONTINUED)
(1) The Company has restated funds from operations for the three months ended
March 31, 1999 to be in compliance with the National Association of Real
Estate Investment Trusts' ("NAREIT") revised October, 1999 standard for
funds from operations, which became effective January 1, 2000 (See "Funds
from Operations"). Accordingly, the Company has excluded the following
previously included adjustments: (i) loss on treasury lock termination of
$557 and (ii) loss on land development option of $600.
The following summarizes the Company's segment assets and activity as of March
31, 2000 and December 31, 1999 and for the three months ended March 31, 2000 and
1999:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------------------------------
<S> <C> <C>
Segment assets:
Office $1,254,182 $1,225,270
Industrial 154,768 149,158
Corporate/operating partnership 57,365 69,747
--------------------------------
Total consolidated assets $1,466,315 $1,444,175
================================
</TABLE>
<TABLE>
<CAPTION>
Three months
ended March 31,
2000 1999
--------------------------------
<S> <C> <C>
Expenditures for real estate:
Office $ 16,898 $ 145,434
Industrial 10,020 6,959
Corporate/operating partnership (includes property under
development) 5,125 4,931
================================
Total expenditures for real estate $ 32,043 $ 157,324
================================
</TABLE>
8. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
The accompanying unaudited Pro Forma Condensed Consolidated Statements of
Income of the Company are presented as if, at January 1, 1999, the Operating
Partnership acquired various office and industrial properties (eight
properties acquired in 1999 and two properties acquired in the first quarter
of 2000) with cash and debt proceeds, and sold 11 properties and a 50%
interest in a property in 1999. The unaudited Pro Forma Condensed
Consolidated Statements of Income should be read in conjunction with the
historical financial statements contained in the Company's Form 10-K. In
management's opinion, all adjustments necessary to reflect the effects of the
transactions described above have been made.
The unaudited Pro Forma Condensed Consolidated Statements of Income of the
Company are not necessarily indicative of what the actual results of operations
would have been assuming the transactions described above had occurred at the
dates indicated above, nor do they purport to present the future results of
operations of the Company.
<PAGE>
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
--------------------------
<S> <C> <C>
Total revenue (in thousands) $55,424 $54,640
=========================
Net income available to common shareholders (in thousands)
$ 2,808 $ 3,706
=========================
Earnings per diluted common share $ 0.18 $ 0.24
=========================
</TABLE>
- 10 -
<PAGE>
9. SUBSEQUENT EVENTS
During the period from April 1, 2000 through May 11, 2000, the Company acquired
or sold the following office and industrial properties:
<TABLE>
<CAPTION>
NET ACQUISITION
RENTABLE COST/SALES MORTGAGE MONTH
SQUARE PRICE (IN DEBT (IN ACQUIRED/
PROPERTY LOCATION FEET MILLIONS) MILLIONS) SOLD
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ACQUIRED
Industrial:
555 Kirk Road St. Charles, IL 62,400 $ 2.5 $ (1) April
1543 Abbott Drive Wheeling, IL 43,930 1.5 (1) April
7100 Madison Willowbrook, IL 51,160 5.4 3.9 April
---------------------------------
157,490 $ 9.4 $ 3.9
=================================
SOLD (2)
Office:
201 4th Avenue North Nashville, TN 250,566 $ 8.6 $ 4.8 April
625 Gay Street Knoxville, TN 91,426 6.1 9.0 April
4823 Old Kingston Pike Knoxville, TN 34,638 3.5 3.5 April
398 Unit Parking facility Knoxville, TN - 2.0 - April
---------------------------------
376,630 $20.2 $17.3
=================================
</TABLE>
(1) Both properties secure a mortgage debt in the amount of $2.35 million.
(2) These properties were sold in a single transaction with a total sales price
of $20.2 million, resulting in a loss of approximately $2.3 million.
In May 2000, the Company entered into a loan extension agreement on a $24.0
million loan collateralized by the property located at 300 West Monroe
Street, Chicago, Illinois, extending the maturity date to August 1, 2000.
Effective April 30, 2000, the terms of the Company's credit facilities were
modified. The maximum loan availability was reduced to $16.7 million for one
of the facilities and its maturity date was modified to the earlier of August
31, 2000 or the date of sale of the related collateral. The second facility's
maturity was also modified to August 1, 2000.
- 11 -
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
We are a fully-integrated real estate company providing property management,
leasing, marketing, acquisition, development, redevelopment, construction,
finance and other related services. We intend to qualify as a REIT for federal
income tax purposes. Through the Operating Partnership, we own 29 office
properties containing an aggregate of approximately 8.1 million net rentable
square feet and 41 industrial properties containing an aggregate of
approximately 5.3 million net rentable square feet. In addition, we own a 50%
common interest in a joint venture which owns an office property containing
944,556 net rentable square feet and mortgage on an office property containing
769,384 net rentable square feet. The above properties are located primarily in
the Chicago metropolitan area. At May 11, 2000, we also own approximately 230.5
acres of developable land and rights to acquire more than 165.4 additional acres
of developable land which management believes could be developed with
approximately 4.3 million rentable square feet of additional office space and
6.3 million square feet of additional industrial space.
In terms of net rentable square feet, approximately 85% of our office properties
and 86% of our industrial properties are located in the Chicago metropolitan
area in prime business locations within established business communities. The
properties located in the Chicago metropolitan area account for approximately
88.1% of our total rental and tenant reimbursement revenue for the three months
ended March 31, 2000. Our remaining office properties are located in Cleveland,
Ohio; Knoxville, Tennessee; and the Milwaukee, Wisconsin metropolitan areas, and
our remaining industrial properties are located in the Columbus, Ohio
metropolitan area. We intend to continue to invest in the acquisition,
development and redevelopment of office and industrial properties primarily
located in the Chicago metropolitan area.
We intend to access multiple sources of capital to fund future acquisition
and development activities. These capital sources may include undistributed
cash flow, borrowings under credit facilities, proceeds from the issuance of
long-term, tax-exempt bonds, joint venture arrangements, property sales and
other debt or equity securities and other bank and/or institutional
borrowings. There can be no assurance that any such financing will be
obtained.
CAUTIONARY STATEMENTS
The following discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 which
reflect management's current view with respect to future events and financial
performance. Such forward-looking statements are subject to certain risks and
uncertainties; including, but not limited to, the effects of future events on
our financial performance; the risk that we may be unable to finance our planned
acquisition and development activities; risks related to the industrial and
office industry in which our properties compete, including the potential adverse
impact of external factors such as inflation, consumer confidence, unemployment
rates and consumer tastes and preferences; risks associated with our development
activities, such as the potential for cost overruns, delays and lack of
predictability with respect to the financial returns associated with these
development activities; the risk of a potential increase in market interest
rates from current rates; and risks associated with real estate ownership, such
as the potential adverse impact of changes in the local economic climate on the
revenues and the value of our properties.
- 12 -
<PAGE>
RESULTS OF OPERATIONS: COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO
THE THREE MONTHS ENDED MARCH 31, 1999
In analyzing the operating results for the quarter ended March 31, 2000, the
changes in rental and tenant reimbursements income, property operating
expenses, real estate taxes and depreciation and amortization from 1999 are
due principally to the addition of a full three months of operating results
for three properties acquired in the first quarter of 1999, five properties
acquired in 1999 after the first quarter, two properties placed in service
after the first quarter of 1999, eleven properties sold in 1999 after the first
quarter, the sale of a 50% interest in one property in the third quarter of
1999 and the additions of a partial quarter's worth of operating results for
the two properties acquired during the first quarter of 2000.
For the three months ended March 31, 2000, rental revenue increased $1.2
million, or 3.8%, to $33.9 million, tenant reimbursement income increased
$3.6 million, or 27.7%, to $16.5 million, other income increased $0.5 million
or 20.1%, to $3.1 million, property operating expenses increased $2.2 million
or 20.3% to $12.8 million, real estate tax expense increased to $1.0 million
or 10.8% to $10.4 million and depreciation and amortization increased $1.3
million, or 16.0%, to $9.2 million as compared to the three months ended
March 31, 1999. The additional office properties resulted in increased rental
revenue of $2.2 million, tenant reimbursements income of $1.1 million, other
income of $0.1 million, property operating expenses of $0.7 million, real
estate tax expense of $0.9 million, and depreciation and amortization of $0.6
million for the three months ended March 31, 2000. Rental revenue and tenant
reimbursement income for properties held in both periods increased $2.8
million and $2.0 million, respectively, and other income decreased $0.1
million for the three months ended March 31, 2000 primarily due to two
properties acquired during the three months ended March 31, 1999 being owned
during the entire three months ending March 31, 2000 and increased occupancy
and rental rates at the other properties. Corresponding property operating
expenses increased $1.7 million, real estate tax expense increased $0.7
million and depreciation and amortization increased $1.3 million for the
three months ended March 31, 2000 primarily due to the two properties
acquired during the three months ended March 31, 1999 being owned during the
entire three months ending March 31, 2000.
Interest expense increased $2.6 million, or 25.1%, to $13.0 million during the
three months ended March 31, 2000. The increase was due to new mortgages
obtained on certain of the properties which were acquired in 2000 and 1999.
General and administrative expense increased $0.2 million, or 10.4%, to
$2.3 million during the three months ended March 31, 2000, representing the
expenses associated with the growth of the Company.
Gain on sales of real estate increased $1.2 million during the three months
ended March 31, 2000, due to the sale of certain properties as described in
"Recent Developments".
Income allocated to minority interests increased $0.4 million, or 17.7% to $2.4
million for the three months ended March 31, 2000 due to an increase in income
before minority interest of $0.9 million, or 11.4%, to $9.0 million. The
increase in income before minority interests is due to the additional properties
acquired and the effects they had on revenue and expenses described above.
Net income increased $0.6 million, or 9.3% to $6.6 million for the three months
ended March 31, 2000 due to the changes in revenue, expenses and minority
interests described above associated with acquisitions and new leasing and
releasing of tenant space.
HISTORICAL CASH FLOWS
We had net cash provided by operating activities of $8.3 million and $21.4
million for the three months ended March 31, 2000 and 1999, respectively. The
$13.1 million decrease is primarily due to a $0.6 million increase in net
income, a $1.3 million increase in depreciation and amortization expense, a $1.2
million increase in gain on sales of real estate, a $0.4 million increase in
- 13 -
<PAGE>
income allocated to minority interest, a $0.6 million increase in net equity in
loss of unconsolidated investments, a $5.4 million decrease in tenant
receivables, and a $3.4 million increase in accounts payable and accrued
expenses, offset by a $0.7 million increase in interest income and development
fees added to the mortgage note receivable principal, a $0.6 million decrease in
loss on treasury lock termination, a $0.6 million decrease in loss on land
development option, a $1.7 million increase in deferred rent receivable, $3.6
million increase in other assets, a $0.5 million decrease in accrued interest,
and a $18.1 million decrease in accrued real estate taxes, and a $0.2 million
decrease in other liabilities.
We had net cash used in investing activities of $30.7 million and $151.3 million
for the three months ended March 31, 2000 and 1999, respectively. The $120.6
million decrease in net cash used in investing activities from the period ended
March 31, 1999 through the period ended March 31, 2000 was primarily due to a
$125.3 million decrease in expenditures for real estate and equipment,
principally related to property acquisitions, a $18.0 million decrease in option
deposits, and a $0.2 million decrease in leasing costs, offset by a $24.8
million decrease in restricted escrow deposits, a $3.7 million net increase in
loans to the services company, and a $2.7 million increase in advances on the
mortgage note receivable.
We had net cash provided by financing activities of $18.3 million and $96.0
million for the three months ended March 31, 2000 and 1999, respectively. The
$77.7 million decrease in net cash provided by financing activities from the
period ended March 31, 1999 through the period ended March 31, 2000 was due to,
a $0.2 million increase in financing costs, a $9.2 million decrease in deposits
recovered on treasury lock agreements, a $9.9 million increase in the repayment
of mortgage notes payable, offset by a $29.2 million decrease in proceeds from
mortgage notes payable, $29.1 million decrease in net proceeds from the credit
facilities, and a $0.2 million increase in distributions to preferred
shareholders, common shareholders and minority interests.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. Net cash provided from operations represents the primary source
of liquidity to fund distributions, debt service and recurring capital costs. In
order to qualify as a REIT for federal income tax purposes, we must distribute
95% of our REIT's taxable income (excluding capital gains) annually.
Accordingly, we currently intend to continue to make, but are not contractually
bound to make, regular quarterly distributions to holders of our common
shares/units and our preferred shares. We have established annual distribution
rates as follows: $1.35 per annum per common share/unit, 7.5% per annum ($1.50
per share) for each Series A Preferred Shares and 9% per annum ($2.25 per share)
for each Series B Preferred Share.
CREDIT FACILITIES. Our credit facilities, with a maximum loan availability
totaling $46.0 million, have been provided by various financial institutions,
and are collateralized by first mortgages on certain properties owned by the
operating partnership. Subject to our compliance with the applicable loan
covenants, the credit facilities may be used to provide funds for acquisitions
and development activities and to provide the replacement letters-of-credit for
the $26.9 million of tax-exempt bonds. At March 31, 2000, $19.0 million was
drawn on credit facilities and an additional $26.9 million was used to provide
letters of credit for the tax-exempt bonds.
PROPERTY SALES. During the period from January 1, 2000 through May 11,
2000 we sold various office, and industrial properties and vacant land
parcels and used a portion of the net proceeds to acquire other office and
industrial properties and land parcels, retire debt, and fund development
activities. We may use the remaining proceeds and the sale of other
properties to fund future acquisitions and development activities.
- 14 -
<PAGE>
INDEBTEDNESS. We have financed a portion of our acquisitions with proceeds
from mortgage notes payable from various financial institutions, with fixed and
variable interest rates and maturities from 2000 through 2013. We believe that
certain of our properties have excess value that may be utilized for additional
mortgage borrowing or debt securitizations.
Under the provisions of one of the Credit Facilities, we are obligated to
maintain interest rate contracts on a portion of our variable rate indebtedness.
Our variable rate debt includes $160.0 million subject to an interest rate swap
agreement which effectively results in a fixed rate of 8.0%, $70.0 million
subject to an interest rate cap at the LIBOR index rate at 8.0%, and $65.0
million subject to an interest rate collar agreement, which effectively results
in a cap at 9.65% and a floor at 5.88%. Inflation, and its impact on floating
interest rates, could affect the amount of interest payments due on such
indebtedness.
- 15 -
<PAGE>
We obtained the following new indebtedness during the three months ended March
31, 2000:
<TABLE>
<CAPTION>
Original
Principal
Balance Maturity
Collateral (1) (In Millions) Interest Rate Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IBM Plaza $30.0 (2) 2/02
Enterprise Center II (3) 5.5 LIBOR + 2.75% 3/01
6700 Touhy Avenue (4) 3.0 LIBOR + 2.25% 3/05
</TABLE>
(1) All of the loans are subject to various financial and other operating
covenants and are collateralized by mortgages on the properties, unless
otherwise indicated.
(2) Interest is payable monthly at LIBOR + 4.25%, not to exceed 11%. Beginning
September 2001, monthly principal payments of $150,000 are also payable. At
maturity, a payment is required which will ensure that the lender achieves
an 11.75% return.
(3) Interest payable monthly, with principal due at maturity.
(4) Principal and interest payable monthly through maturity.
FUTURE OFFERINGS. On January 8, 1999, we filed our initial shelf
registration statement on Form S-3 with the Securities and Exchange Commission
to register up to $500.0 million of our equity and debt securities for future
sale.
CAPITAL IMPROVEMENTS. Our properties require periodic investments of
capital for tenant-related capital improvements. During 1999, our tenant
improvements and leasing commissions averaged $24.54 per square foot of newly
leased office space, $8.19 per square foot of renewal leased office space, and
$2.12 per square foot of newly leased industrial space. Our estimated annual
cost of recurring tenant improvements and leasing commissions is approximately
$7.4 million based upon average annual square feet for leases expiring during
the year ending December 31, 2000. Our cost of general capital improvements to
our properties averages approximately $3.5 million annually based upon an
estimate of $0.19 per square foot.
LIQUIDITY REQUIREMENTS. We expect to meet our long-term liquidity
requirements for the funding of property development, property acquisitions and
other nonrecurring capital improvements through a combination of net cash from
operations, long-term secured and unsecured indebtedness (including the credit
facilities), joint ventures, property sales and the issuance of additional
equity securities. The terms of the credit facilities and our preferred shares
impose restrictions on our ability to incur indebtedness and issue additional
preferred shares.
FUNDS FROM OPERATIONS
Industry analysts generally consider Funds from Operations, as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), an alternative
measure of performance of an equity REIT. In October 1999, NAREIT issued a new
white paper statement and redefined how funds from operations is calculated,
effective January 1, 2000. Funds from Operations is now defined by NAREIT as net
income (loss) determined in accordance with GAAP, excluding gains (or losses)
from sales of depreciable operating property, plus depreciation and amortization
(other than amortization of deferred financing costs and depreciation of
non-real estate assets) and after adjustment for unconsolidated partnerships and
joint ventures. Non-recurring items, other than those considered "extraordinary"
under GAAP, are no longer adjustments to funds from operations. We believe that
in order to facilitate a clear understanding of the combined historical
operating results of the Company, Funds from Operations should be examined in
conjunction with net income (loss) as presented in the unaudited financial
statements included elsewhere in this Form 10-Q. The following table represents
the unaudited calculation of our Funds from Operations for the three months
ended March 31, 2000 and 1999:
- 16 -
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended March 31
--------------------------
(IN THOUSANDS) 2000 1999
--------------------------
<S> <C> <C>
Net income allocated to common shareholders $ 3,533 $ 3,012
Adjustments to reconcile to Funds from Operations:
Real estate depreciation and amortization 8,206 7,333
Straight-line rental revenue (2,254) (594)
Straight-line rental revenue from joint venture (158) -
Amortization of costs for leases assumed 162 245
Joint venture adjustments 863 -
Adjustment for sale of operating property 130 -
Minority interests 2,420 2,056
--------------------------
Funds from operations excluding straight-line rental revenue 12,902 12,052
Straight-line rental revenue 2,254 594
Straight-line rental revenue from joint venture 158 -
--------------------------
Funds from Operations (1) $15,314 $12,646
==========================
</TABLE>
(1) We compute Funds from Operations in accordance with standards established
by the Board of Governors of NAREIT in its October 1999 White Paper. In
addition to this presentation, we also present funds from operations
excluding straight-line rental revenue (e.g., rental revenues based on
contractual lease terms), which we believe results in a more accurate
presentation of the Company's actual operating activities. Funds
from Operations does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion,
debt repayment obligations, or other commitments and uncertainties. Funds
from Operations should not be considered as an alternative to net income
(loss), as an indication of our performance or to cash flows as a measure
of liquidity or the ability to pay dividends or make distributions.
We have restated funds from operations for the three months ended March
31, 1999 to be in accordance with the new October, 1999 white paper
standard. We have excluded the following 1999 adjustments: (i) loss on
treasury lock of $557 and (ii) loss on land development option of $600.
INFLATION
Substantially all of our office and industrial leases require tenants to pay, as
additional rent, a portion of any increases in real estate taxes and operating
expenses over a base amount. In addition, many of the office and industrial
leases provide for fixed increases in base rent or indexed escalations (based on
the Consumer Price Index or other measures). We believe that inflationary
increases in expenses will be offset, in part, by the expense reimbursements and
contractual rent increases described above.
Certain of our debt is subject to interest at floating rates. This floating
rate debt includes (i) $160.0 million subject to an interest rate swap
agreement, which effectively results in a fixed rate of 8.0%, (ii) $70.0
million subject to an interest rate cap of the LIBOR index rate at 8.0%, and
(iii) $65.0 million subject to an interest rate collar agreement, which
effectively results in a cap at 9.65% and a floor at 5.88%. Future
indebtedness may also be subject to floating rate interest. As of March 31,
2000, approximately $472.1 million of our outstanding indebtedness (including
our Credit Facilities), which includes the $160.0 million described above
which is effectively fixed at 8.0%, was subject to interest at floating
rates. Inflation, and its impact on floating interest rates, could affect the
amount of interest payments due on such indebtedness.
- 17 -
<PAGE>
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates. For our mortgage note receivable, mortgage notes payable, credit
facilities and bonds payable, the table presents principal cash flows, including
principal amortization, and related weighted-average interest rates by expected
maturity dates as of March 31, 2000. For the interest rate protection agreement,
the table presents the notional amount entered into and the lock rate.
Interest Rate Sensitivity
Principal (Notional) amount by Expected Maturity
Average Interest Rate
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total
--------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Mortgage notes receivable
(1) - - - - $87.3 $ - $ 87.3
Fixed interest rate - - - - 9.64% -
Liabilities:
Mortgage notes payable (2):
Fixed rate $17.5 $63.0 $ 33.3 $ 4.1 $ 4.4 $235.8 $358.1
Average interest rate 9.91% 6.83% 11.24% 7.32% 7.32% 7.38%
Variable rate $39.6 $76.3 $246.1 $ 0.2 $14.2 $ 2.3 $378.7
Average interest rate (3) 8.64% 7.61% 7.89% 8.38% 9.49% 8.38%
Credit facilities (2):
Variable rate amount $19.0 - - - - - $ 19.0
Weighted-average interest rate
(3) 8.20% - - - - -
Bonds payable (2):
Variable rate - - $ 48.2 - - $ 26.3 $ 74.5
Average interest rate (3) - - 3.86% - - 4.05%
Interest rate swap agreement (2)(3):
Notional amount $ 1.6 $ 3.2 $155.2 - - - $160.0
Pay rate 5.97% 5.97% 5.97% - - -
Fixed swap rate 6.30% 6.30% 6.30% - - - -
Interest rate collar agreement (2)(3):
Notional amount - - $ 65.0 - - - $ 65.0
Pay rate - - 6.04% - - -
Cap rate - - 7.50% - - -
Floor rate - - 3.73% - - -
Interest rate cap agreement (3):
Notional amount $70.0 - - - - - $70.0
Cap rate 8.00% - - - - -
</TABLE>
- --------------------
(1) See Note 2 to our consolidated financial statements in our Form 10-K
for the year ended December 31, 1999 for additional information.
(2) See Note 4 to our consolidated financial statements in our Form 10-K
for the year ended December 31, 1999 for additional information.
(3) Based upon the rates in effect at March 31, 2000. The weighted-average
interest rate, including the interest rate swap and collar agreements,
on our mortgage notes payable, credit facilities, and bonds payable at
March 31, 2000 were 7.99%, 8.20%, and 3.93%, respectively. If interest
rates on our variable rate debt increased by one percentage point, our
annual interest expense would increase by approximately $3.1 million.
- 18 -
<PAGE>
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Neither we nor any of our properties are presently subject to
any material litigation nor, to the our knowledge, is any
material litigation threatened against us, other than routine
litigation arising in the ordinary course of business, some of
which is expected to be covered by liability insurance and all
of which collectively is not expected to have a material
adverse effect on our consolidated financial statements.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION
3.1 Amendment No. 33 to the Amended and Restated Agreement of Limited
Partnership of Prime Group Realty, L.P. dated as of January 17, 2000.
3.2 Amendment No. 34 to the Amended and Restated Agreement of Limited
Partnership of Prime Group Realty, L.P. dated as of February 15, 2000.
3.3. Amendment No. 35 to the Amended and Restated Agreement of Limited
Partnership of Prime Group Realty, L.P. dated as of March 15, 2000.
3.4 Amendment No. 36 to the Amended and Restated Agreement of Limited
Partnership of Prime Group Realty, L.P. dated as of March 15, 2000.
3.5 Amendment No. 37 to the Amended and Restated Agreement of Limited
Partnership of Prime Group Realty, L.P. dated as of March 24, 2000.
10.1 Eighth Amendment to Credit Agreement, dated March 31, 2000, among Prime
Group Realty, L.P., Prime Group Realty Trust, Fleet National Bank (f/k/a
BankBoston, N.A.), and CIBC Inc.
12.1 Computation of ratios of earnings to combined fixed charges and preferred
share distributions.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
- 19 -
<PAGE>
SIGNATURES
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 thereunto duly authorized.
PRIME GROUP REALTY TRUST
-----------------
Registrant
Date: May 15, 2000 /s/ Richard S. Curto
-----------------
Richard S. Curto
President and Chief Executive
Officer
Date: May 15, 2000 /s/ William M. Karnes
-----------------
William M. Karnes
Executive Vice President and
Chief Financial Officer
- 20 -
<PAGE>
AMENDMENT NO. 33 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 33 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of January
17, 2000 by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership
Agreement, the Managing General Partner may raise all or any portion of
Additional Funds required by the Partnership for the acquisition of additional
properties by accepting additional Capital Contributions, including the issuance
of Common Units for Capital Contributions that consist of property or interests
in property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of
December 15, 1997 by and between H Group LLC, a Delaware limited liability
company ("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among
other things, to grant to the Partnership an option (the "First Option") to
exchange the Underlying Option (as defined in the Exchange Agreement) for
220,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement), which grant of the First Option
contemplated the transfer by the Partnership to HG of 5,000 Common Units of
Limited Partner Interest on the date thereof and, subject to the terms of the
First Option, 5,000 Common Units of Limited Partner Interest (subject to
adjustment pursuant to the terms of the Exchange Agreement) on the 15th day of
each month thereafter (each such transfer a "First Option Maintenance Transfer")
for such number of months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of
the First Option set forth in the Exchange Agreement and desires to effect the
First Option Maintenance Transfer due on January 17, 2000;
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement
to reflect the increase in outstanding Common Units resulting from the issuance
of Common Units to HG in connection with the First Option Maintenance Transfer
due on January 17, 2000; and
<PAGE>
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON
UNITS. (a) PGRT, as Managing General Partner and on behalf of the Partnership,
hereby accepts the grant of the rights consisting of the First Option during the
twenty-sixth month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
6922.0 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 60 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest
issued to HG pursuant to this SECTION 1 shall have the same terms and provisions
of the Common Units of Limited Partner Interest issued by the Partnership on
November 17, 1997 except that (i) the Exchange Rights relating thereto may be
exercised at any time after December 15, 2000 (as opposed to November 17, 1998)
and (ii) such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of EXHIBIT A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated EXHIBIT A attached hereto shall be the only
Exhibit A to the Limited Partnership Agreement, unless and until it is hereafter
further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be
amended to the extent necessary to effect the matters contemplated by this
Amendment. Except as specifically provided for hereinabove, the provisions of
the Limited Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment
shall not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner, the other General Partner or any Limited Partner under
the Limited Partnership Agreement except as specifically set forth herein or
(ii) as a waiver or consent to any subsequent action or transaction.
-2-
<PAGE>
Section 4. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
[Signature Page Follows]
-3-
<PAGE>
AMENDMENT NO. 33 TO AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF PRIME GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: [s] James F. Hoffman
--------------------------
Name: James F. Hoffman
------------------------
Title: Senior Vice President
-----------------------
LIMITED PARTNERS:
Each Limited Partner hereby executes this
Amendment to the Limited Partnership
Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: [s] James F. Hoffman
--------------------------
Name: James F. Hoffman
------------------------
Title: Senior Vice President
-----------------------
-4-
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,244,537 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ---------------
The Nardi Group, L.L.C. 927,100 $18,542,000
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
- ----------------
The Nardi Group, L.L.C. 328,182 $ 4,906,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Carol Stream Industrial Park Joint Venture 151,621 $ 2,146,374
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman 398,427 $ 7,578,540
Trust Dated May 22, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
________________________________
* As amended by Amendment No. 33 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ -------------
<S> <C> <C>
Carolyn B. Hadesman 54,544 $ 1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $ 3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $ 661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 36,006 $ 720,120
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $ 1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $ 2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ -------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $ 6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 100,771 $ 1,500,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
Warren H. John, as Trustee of the Warren H. John 37,259 $ 745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
_____________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Ccontribution
- ------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000
77 West Wacker Drive Convertible Preferred Units **
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000
77 West Wacker Drive Series B Preferred Units **/
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
___________________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
AMENDMENT NO. 34 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 34 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of
February 15, 2000 by Prime Group Realty Trust, a Maryland real estate investment
trust ("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership
Agreement, the Managing General Partner may raise all or any portion of
Additional Funds required by the Partnership for the acquisition of additional
properties by accepting additional Capital Contributions, including the issuance
of Common Units for Capital Contributions that consist of property or interests
in property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of
December 15, 1997 by and between H Group LLC, a Delaware limited liability
company ("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among
other things, to grant to the Partnership an option (the "First Option") to
exchange the Underlying Option (as defined in the Exchange Agreement) for
220,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement), which grant of the First Option
contemplated the transfer by the Partnership to HG of 5,000 Common Units of
Limited Partner Interest on the date thereof and, subject to the terms of the
First Option, 5,000 Common Units of Limited Partner Interest (subject to
adjustment pursuant to the terms of the Exchange Agreement) on the 15th day of
each month thereafter (each such transfer a "First Option Maintenance Transfer")
for such number of months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of
the First Option set forth in the Exchange Agreement and desires to effect the
First Option Maintenance Transfer due on February 15, 2000;
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement
to reflect the increase in outstanding Common Units resulting from the issuance
of Common Units to HG in connection with the First Option Maintenance Transfer
due on February 15, 2000; and
<PAGE>
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON
UNITS. (a) PGRT, as Managing General Partner and on behalf of the Partnership,
hereby accepts the grant of the rights consisting of the First Option during the
twenty-seventh month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
7348.0 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 61 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest
issued to HG pursuant to this SECTION 1 shall have the same terms and provisions
of the Common Units of Limited Partner Interest issued by the Partnership on
November 17, 1997 except that (i) the Exchange Rights relating thereto may be
exercised at any time after December 15, 2000 (as opposed to November 17, 1998)
and (ii) such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of EXHIBIT A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated EXHIBIT A attached hereto shall be the only
Exhibit A to the Limited Partnership Agreement, unless and until it is hereafter
further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be
amended to the extent necessary to effect the matters contemplated by this
Amendment. Except as specifically provided for hereinabove, the provisions of
the Limited Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment
shall not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner, the other General Partner or any Limited Partner under
the Limited Partnership Agreement except as specifically set forth herein or
(ii) as a waiver or consent to any subsequent action or transaction.
2
<PAGE>
Section 4. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
3
<PAGE>
AMENDMENT NO. 34 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: [s] James F. Hoffman
---------------------
Name: James F. Hoffman
-----------------
Title: Senior Vice President
----------------------
LIMITED PARTNERS:
Each Limited Partner hereby executes this
Amendment to the Limited Partnership
Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: [s] James F. Hoffman
---------------------
Name: James F. Hoffman
-----------------
Title: Senior Vice President
----------------------
4
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,264,835 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
The Nardi Group, L.L.C. 927,100 $18,542,000
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
The Nardi Group, L.L.C. 328,182 $4,906,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Carol Stream Industrial Park Joint Venture 151,621 $2,146,374
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman
Trust Dated May 22, 1992 398,427 $7,968,540
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
_______________________
* As amended by Amendment No. 34 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Carolyn B. Hadesman 54,544 $1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 36,006 $720,120
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 87,821 $1,300,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
Warren H. John, as Trustee of the Warren H. John 37,259 $745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
_______________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
_______________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
AMENDMENT NO. 35 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 35 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of March
15, 2000, by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined) and The Nardi Group, L.L.C., a Delaware
limited liability company (the "Nardi Company"). Capitalized terms used but not
otherwise defined herein shall have the meanings given to such terms in the
Amended and Restated Agreement of Limited Partnership of the Partnership, dated
as of November 17, 1997, by and among PGRT and the other parties signatory
thereto, as amended thereafter (as so amended, the "Limited Partnership
Agreement").
W I T N E S S E T H:
WHEREAS, in connection with PGRT's November 1997 initial public
offering, the Nardi Company contributed certain properties to the Partnership
(the "Nardi Contribution") in exchange for 927,100 Common Units of General
Partner Interest in the Partnership (the "Nardi GP Common Units");
WHEREAS, concurrently with the Nardi Contribution, PGRT and the
Partnership granted to the Nardi Company two options to put portions of the
Nardi GP Common Units to PGRT and the Partnership on the terms and subject to
the conditions set forth in that certain Put Option Agreement, dated as of
November 17, 1997, by and among the Nardi Company, PGRT and the Partnership (the
"Put Option Agreement");
WHEREAS, also concurrently with the Nardi Contribution, the Partnership
entered into a Tax Indemnification Agreement, dated as of November 17, 1997 (the
"Tax Indemnification Agreement"), with affiliates of the Nardi Company
consisting of Stephen J. Nardi, an individual, Narco Enterprises, Inc., an
Illinois corporation and Nardi Group Limited, a Delaware corporation
(collectively, the "Nardi Indemnitees"), pursuant to which the Partnership
agreed to indemnify the Nardi Indemnitees against certain tax liabilities on the
terms and subject to the conditions set forth in the Tax Indemnification
Agreement;
<PAGE>
WHEREAS, the Nardi Company desires that the Nardi GP Common Units be
converted (the "Conversion") into Common Units of Limited Partner Interest in
the Partnership ("LP Common Units") and to withdraw from its capacity as a
General Partner of the Partnership concurrently with the Conversion;
WHEREAS, PGRT and the Partnership desire to convert the Nardi GP Common
Units into LP Common Units as described above;
WHEREAS, the Nardi Company was admitted to the Partnership as an
Additional Limited Partner as of April 22, 1999 pursuant to Amendment No. 22 to
the Limited Partnership Agreement;
WHEREAS, in connection with the Conversion, the parties desire to
concurrently terminate the Put Option Agreement and to modify the Tax
Indemnification Agreement;
WHEREAS, pursuant to Section 11.2.A. of the Limited Partnership
Agreement, the withdrawal of the Nardi Company from its capacity as a General
Partner of the Partnership requires the Consent of the Partners and the consent
of the Managing General Partner;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement
to reflect (i) the increase in outstanding Common Units of Limited Partner
Interest and the related decrease in outstanding Common Units of General Partner
Interest resulting from the Conversion and (ii) the withdrawal of the Nardi
Company from its capacity as a General Partner of the Partnership; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. CONVERSION OF THE NARDI GP COMMON UNITS; PGRT SHAREHOLDER
APPROVAL. (a) Upon the effectiveness of this Amendment, the 927,100 Nardi GP
Common Units are hereby converted into an aggregate of 927,100 LP Common Units
(the "New LP Common Units").
(b) Each of the New LP Common Units shall have the same terms
and provisions of the Common Units of Limited Partner Interest issued by the
Partnership on November 17, 1997 except that (i) the Exchange Rights relating
thereto may be exercised at any time after the date that is six months after the
date of this Amendment (as opposed to November 17, 1998) and (ii) such New LP
Common Units will be subject to the Registration Rights Agreement
- 2 -
<PAGE>
dated as of December 15, 1997 by and among PGRT, the Partnership and H Group
LLC (as opposed to the Registration Rights Agreement entered into by PGRT and
the Partnership on November 17, 1997).
Section 2. WITHDRAWAL OF THE NARDI COMPANY AS A GENERAL PARTNER. PGRT,
as Managing General Partner, hereby consents to the withdrawal of the Nardi
Company from its capacity as a General Partner of the Partnership, effective
upon the effectiveness of this Amendment. Upon the effectiveness of this
Amendment, the Nardi Company hereby withdraws from its capacity as a General
Partner of the Partnership.
Section 3. ACCEPTANCE OF TERMS AND CONDITIONS OF THE LIMITED
PARTNERSHIP AGREEMENT APPLICABLE TO LIMITED PARTNERS. The Nardi Company hereby
acknowledges and agrees that, as a Limited Partner of the Partnership, the Nardi
Company continues to be bound by all of the terms and conditions of the Limited
Partnership Agreement applicable to Limited Partners, including without
limitation, the provisions of Section 2.4 of the Limited Partnership Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE NARDI COMPANY. The
Nardi Company hereby acknowledges, represents and warrants to PGRT and the other
Partners that each of the representations and warranties set forth in Section
3.3.D. of the Limited Partnership Agreement are true and correct with respect to
the Nardi Company as of the date hereof.
Section 5. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Upon the effectiveness of this Amendment, Exhibit A to the Limited Partnership
Agreement is hereby amended and restated to reflect the aforementioned change(s)
by deleting Exhibit A attached thereto in its entirety, and by attaching in lieu
thereof a replacement exhibit in the form of EXHIBIT A attached hereto. From and
after the effectiveness of this Amendment, the amended and restated EXHIBIT A
attached hereto shall be the only Exhibit A to the Limited Partnership
Agreement, unless and until it is hereafter further amended.
Section 6. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective contemporaneously with, and subject to:
(i) the receipt by the Managing General Partner of the
Consent of the Partners to the withdrawal of the
Nardi Company from its capacity as a General Partner
of the Partnership, in the form of a written consent
pursuant to Section 14.1 of the Limited Partnership
Agreement;
(ii) the execution and delivery by the Partnership to the
Nardi Company of a Common Unit Certificate
representing 927,100 LP Common Units;
- 3 -
<PAGE>
(iii) the surrender and delivery by the Nardi Company to
the Partnership of the Common Unit Certificate
representing the 927,100 GP Common Units (Cert. No.
17) issued by the Partnership to the Nardi Company on
November 17, 1997;
(iv) the execution and delivery by the Nardi Company of
the Put Option Termination Agreement substantially in
the form of EXHIBIT B attached hereto;
(v) the execution and delivery by the Nardi Company of
the First Amendment to the Tax Indemnification
Agreement substantially in the form of EXHIBIT C
attached hereto; and
(vi) the approval by PGRT's common shareholders of the
issuance by PGRT of up to 927,100 (subject to any
applicable anti-dilution adjustments) of its common
shares of beneficial interest upon exchange of the
New LP Common Units.
Section 7. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be
amended to the extent necessary to effect the matters contemplated by this
Amendment. Except as specifically provided for hereinabove, the provisions of
the Limited Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment
shall not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner or any Limited Partner under the Limited Partnership
Agreement except as specifically set forth herein or (ii) as a waiver or consent
to any subsequent action or transaction.
Section 8. COUNTERPARTS. This Amendment may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Amendment immediately upon affixing its signatures hereto.
Section 9. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
[signature page follows]
- 4 -
<PAGE>
AMENDMENT NO. 35 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
MANAGING GENERAL PARTNER: LIMITED PARTNERS:
PRIME GROUP REALTY TRUST, a Each Limited Partner hereby
Maryland real estate investment executes this Amendment to
trust the Limited Partnership
Agreement.
By: PRIME GROUP REALTY TRUST, a
By: [s] James F. Hoffman Maryland real estate investment
------------------------- trust , as attorney-in-fact
Name: James F. Hoffman
Title: Senior Vice President
By: [s] James F. Hoffman
-------------------------------
Name: James F. Hoffman
Title: Senior Vice President
WITHDRAWING GENERAL PARTNER:
THE NARDI GROUP, L.L.C., a Delaware
limited liability company
By: [s] Stephen J. Nardi
-------------------------------
Name: Stephen J. Nardi
-----------------------------
Its: Managing Member
-----------------------------
- 5 -
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ -------------
<S> <C> <C>
Prime Group Realty Trust 15,264,835 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Limited Partners
The Nardi Group, L.L.C. 1,255,282 $23,448,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Carol Stream Industrial Park Joint Venture 151,621 $2,146,374
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman
Trust Dated May 22, 1992 398,427 $7,968,540
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
- -------------------
* As amended by Amendment No. 35 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P. This Exhibit A reflects the
ownership of units as of the date of this Amendment No. 35 assuming the
effectiveness of this Amendment No. 35. The units listed on this Exhibit A
are subject to revisions as indicated by future Amendments.
** This amount shall be inserted by the Managing General Partner.
Exhibit A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Carolyn B. Hadesman 54,544 $1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 36,006 $720,120
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
</TABLE>
Exhibit A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ -------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 87,821 $1,300,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $52,160
714 Blaine Court
Schaumburg, IL 60173
Warren H. John, as Trustee of the Warren H. John 37,259 $745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
______________
** This amount shall be inserted by the Managing General Partner.
Exhibit A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------------------- -------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
______________
** This amount shall be inserted by the Managing General Partner.
Exhibit A-4
<PAGE>
AMENDMENT NO. 36 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 36 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of March
15, 2000 by Prime Group Realty Trust, a Maryland real estate investment trust
("PGRT"), as the Managing General Partner of Prime Group Realty, L.P., a
Delaware limited partnership (the "Partnership"), and on behalf of the other
Partners (as hereinafter defined). Capitalized terms used but not otherwise
defined herein shall have the meanings given to such terms in the Amended and
Restated Agreement of Limited Partnership of the Partnership, dated as of
November 17, 1997, by and among PGRT and the other parties signatory thereto, as
amended thereafter (as so amended, the "Limited Partnership Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership
Agreement, the Managing General Partner may raise all or any portion of
Additional Funds required by the Partnership for the acquisition of additional
properties by accepting additional Capital Contributions, including the issuance
of Common Units for Capital Contributions that consist of property or interests
in property;
WHEREAS, pursuant to that certain Exchange Agreement dated as of
December 15, 1997 by and between H Group LLC, a Delaware limited liability
company ("HG"), and the Partnership (the "Exchange Agreement"), HG agreed, among
other things, to grant to the Partnership an option (the "First Option") to
exchange the Underlying Option (as defined in the Exchange Agreement) for
220,000 Common Units of Limited Partner Interest (subject to adjustment pursuant
to the terms of the Exchange Agreement), which grant of the First Option
contemplated the transfer by the Partnership to HG of 5,000 Common Units of
Limited Partner Interest on the date thereof and, subject to the terms of the
First Option, 5,000 Common Units of Limited Partner Interest (subject to
adjustment pursuant to the terms of the Exchange Agreement) on the 15th day of
each month thereafter (each such transfer a "First Option Maintenance Transfer")
for such number of months set forth in the Exchange Agreement;
WHEREAS, the Partnership has agreed to the terms of the grant by HG of
the First Option set forth in the Exchange Agreement and desires to effect the
First Option Maintenance Transfer due on April 17, 2000;
WHEREAS, HG was admitted to the Partnership as an Additional Limited
Partner as of December 15, 1997 pursuant to Amendment No. 2 to the Limited
Partnership Agreement;
WHEREAS, the Partners desire to amend the Limited Partnership Agreement
to reflect the increase in outstanding Common Units resulting from the issuance
of Common Units to HG in connection with the First Option Maintenance Transfer
due on April 17, 2000; and
<PAGE>
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON
UNITS. (a) PGRT, as Managing General Partner and on behalf of the Partnership,
hereby accepts the grant of the rights consisting of the First Option during the
twenty-ninth month of the term of the First Option from HG as a Capital
Contribution having a value on the date hereof of $100,000, in exchange for
7,355 Common Units of Limited Partner Interest which are hereby issued by the
Partnership to HG pursuant to Section 4.3.C. of the Limited Partnership
Agreement, and which are evidenced by Common Unit Certificate No. 63 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest
issued to HG pursuant to this SECTION 1 shall have the same terms and provisions
of the Common Units of Limited Partner Interest issued by the Partnership on
November 17, 1997 except that (i) the Exchange Rights relating thereto may be
exercised at any time after December 15, 2000 (as opposed to November 17, 1998)
and (ii) such Common Units of Limited Partner Interest will be subject to the
Registration Rights Agreement dated as of December 15, 1997 by and among PGRT,
the Partnership and HG as opposed to the Registration Rights Agreement entered
into by PGRT and the Partnership on November 17, 1997.
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of EXHIBIT A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated EXHIBIT A attached hereto shall be the only
Exhibit A to the Limited Partnership Agreement, unless and until it is hereafter
further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be
amended to the extent necessary to effect the matters contemplated by this
Amendment. Except as specifically provided for hereinabove, the provisions of
the Limited Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment
shall not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner, the other General Partner or any Limited Partner under
the Limited Partnership Agreement except as specifically set forth herein or
(ii) as a waiver or consent to any subsequent action or transaction.
- 2 -
<PAGE>
Section 4. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
[Signature Page Follows]
- 3 -
<PAGE>
AMENDMENT NO. 36 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By: [s] James F. Hoffman
---------------------------
Name: James F. Hoffman
-------------------------
Title: Senior Vice President
------------------------
LIMITED PARTNERS:
Each Limited Partner hereby executes
this Amendment to the Limited
Partnership Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By: [s] James F. Hoffman
--------------------------
Name: James F. Hoffman
------------------------
Title: Senior Vice President
------------------------
- 4 -
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,264,835 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ---------------
The Nardi Group, L.L.C. 927,100 $18,542,000
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
- ----------------
The Nardi Group, L.L.C. 328,182 $4,906,061
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Carol Stream Industrial Park Joint Venture 151,621 $2,146,374
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman
Trust Dated May 22, 1992 398,427 $7,968,540
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
___________________
* As amended by Amendment No. 36 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Carolyn B. Hadesman 54,544 $1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $ 661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 36,006 $ 720,120
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ -------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 95,176 $1,400,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
Warren H. John, as Trustee of the Warren H. John 37,259 $ 745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
___________________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Preferred Units Contribution
- ------------------------ --------------- ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
____________________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
AMENDMENT NO. 37 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF PRIME GROUP REALTY, L.P.
This AMENDMENT NO. 37 TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF PRIME GROUP REALTY, L.P. (this "Amendment") is made as of this
24th day of March, 2000, by Prime Group Realty Trust, a Maryland real estate
investment trust ("PGRT"), as the Managing General Partner of Prime Group
Realty, L.P., a Delaware limited partnership (the "Partnership"), and on behalf
of the other Partners (as hereinafter defined). Capitalized terms used but not
otherwise defined herein shall have the meanings given to such terms in the
Amended and Restated Agreement of Limited Partnership of the Partnership, dated
as of November 17, 1997, by and among PGRT and the other parties signatory
thereto, as amended thereafter (as so amended, the "Limited Partnership
Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to Section 4.3.C. of the Limited Partnership
Agreement, the Managing General Partner may raise all or any portion of
Additional Funds required by the Partnership for the acquisition of additional
properties by accepting additional Capital Contributions, including the issuance
of Common Units for Capital Contributions that consist of property or interests
in property;
WHEREAS, pursuant to that Real Estate Sales Contract, dated as of
October 20, 1997, by and among The Prime Group, Inc., an Illinois corporation,
Prime Group Realty Trust, a Maryland real estate investment trust, Prime Group
Realty, L.P., a Delaware limited partnership and the Contributors named therein
(the "Agreement"), the Partnership agreed to purchase the Vacant Parcels 2, 3, 6
and 9 in Carol Stream Industrial Business Park, Carol Stream, Illinois (the
"Property") upon the fulfillment of certain conditions;
WHEREAS, the conditions of the Agreement having been fulfilled, the
Partnership is acquiring the Property in return for issuing Common Units of
Limited Partner Interest to Carol Stream Industrial Park Joint Venture, James M.
Kane and Gloria I. Kane; and
WHEREAS, Sections 2.4 and 12.3 of the Limited Partnership Agreement
authorize, among other things, the Managing General Partner, as true and lawful
agent and attorney-in fact, to execute, swear to, acknowledge, deliver, file and
record this Amendment on behalf of each Partner that has executed the Limited
Partnership Agreement and on behalf of the Partnership.
NOW, THEREFORE, for good and adequate consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. ACCEPTANCE OF CAPITAL CONTRIBUTION IN EXCHANGE FOR COMMON
UNITS. (a) PGRT, as Managing General Partner and on behalf of the Partnership,
hereby accepts from Carol
<PAGE>
Stream Industrial Park Joint Venture the grant of all of its right, title and
interest in the Property, a legal description of which is attached hereto as
EXHIBIT 1, as a Capital Contribution in exchange for 272, 126 Common Units of
Limited Partner Interest which are hereby issued by the Partnership to Carol
Stream Industrial Park Joint Venture, James M. Kane and Gloria I. Kane (each,
a "Seller") pursuant to Section 4.3.C of the Limited Partnership Agreement,
and which are evidenced by Common Unit Certificates Nos. 64, 65 and 66 of the
Partnership.
(b) Each of the Common Units of Limited Partner Interest
issued to the Sellers pursuant to this SECTION 2 shall have the same terms and
provisions as the Common Units of Limited Partner Interest issued by the
Partnership on November 17, 1997 except that the Exchange Rights relating
thereto may be exercised only after the first (1st) anniversary of their
issuance (as opposed to November 17, 1998).
(c) Each Seller agrees that it has received and reviewed a
copy of the Partnership Agreement;
(d) Each Seller agrees that it desires to become an Additional
Limited Partner in the Partnership in accordance with the terms of the
Partnership Agreement;
(e) Each Seller, by execution hereof, accepts and agrees that
it is bound by all of the terms and provisions of the Partnership Agreement,
including without limitation the provisions of Section 2.4 and the restrictions
on transfer set forth in Article 11 of the Partnership Agreement;
(f) Each Seller assumes all of the obligations of an
Additional Limited Partner pursuant to the Partnership Agreement with respect to
the Common Units issued to such Seller;
(g) Each Seller agrees that the Partnership Agreement shall be
binding on and enforceable against such Seller as a Limited Partner in
accordance with its terms;
(h) Each Seller acknowledges and agrees to the following
representations and warranties: (i) such Seller is an "accredited investor"
within the meaning of Rule 501(a) promulgated under the Securities Act of 1933,
as amended (the "SECURITIES ACT"); (ii) such Seller understands the risks of,
and other considerations relating to, its acquisition of the Common Units; and
(iii) such Seller, by reason of its business and financial experience, together
with the business and financial experience of those persons, if any, retained by
it to represent or advise it with respect to its investment in the Common Units,
(x) has such knowledge, sophistication and experience in financial and business
matters and in making investment decisions of this type, that it is capable of
evaluating the merits and risks of an investment in Common Units of the
Partnership and of making an informed investment decision, (y) is capable of
protecting its own interests in connection with its acquisition of Common Units
or has engaged representatives or advisors to assist such Seller in protecting
its interests in connection with its acquisition of Common Units and (z) is
capable of bearing the economic risk of such investment in Common Units.
- 2 -
<PAGE>
(i) Each Seller acknowledges and agrees to the following
representations and warranties: (i) the Common Units to be issued to such Seller
are acquired by such Seller for its own account for investment only and not with
a view to, or with any intention of, a distribution or resale thereof, in whole
or in part, or the grant of any participation therein until and unless the
Common Units are exchanged for Common Shares of the Trust following the one year
lock-up period applicable to the Common Units, in accordance with the
Partnership Agreement; (ii) such Seller hereby confirms that all documents,
instruments, records and books pertaining to investment in Common Units of the
Partnership and requested by such Seller have been made available or delivered
to the undersigned; (iii) such Seller has had an opportunity to ask questions of
and receive answers from the Partnership, or from a person or persons acting on
the Partnership's behalf, concerning the Partnership, the terms and conditions
of the transaction contemplated by this Acknowledgment and Agreement and such
Seller's acquisition of Common Units; (iv) such Seller has relied upon, and is
making its investment decisions solely upon, such information as has been
provided to the undersigned by the Partnership, and such Seller has not relied
upon any other information, literature or any oral communications; and (v) such
Seller, if an entity, was not formed for the specific purpose of acquiring an
interest in the Partnership.
(j) Each Seller acknowledges that (i) the Common Units to be
issued to such Seller have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws; (ii)
the Partnership's reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and warranties of such Seller;
(iii) such Common Units, therefore, cannot be resold unless registered under the
Securities Act and applicable state securities laws, or unless an exemption from
registration is available; (iv) there is no public market for such Common Units;
and (v) the Partnership has no obligation or intention to register such Common
Units for resale under the Securities Act or any state securities laws or to
take any action that would make available any exemption from the registration
requirements of such laws. Each Seller hereby acknowledges that because of the
restrictions on transfer or assignment of such Common Units to be issued which
are set forth in this Amendment, such Seller may have to bear the economic risk
of the investment commitment evidenced by this Amendment and any Common Units
acquired as contemplated by this Amendment for an indefinite period of time, and
that the Common Units by their terms will not be exchangeable at the request of
the holder thereof for Common Shares of the Company prior to the first (1st)
anniversary of their issuance.
(k) Each Seller acknowledges that its address or principal
place of business, as the case may be, is set forth below. Such Seller does not
have any present intention of becoming a resident of any country, state or
jurisdiction other than the country and state in which its address or present
principal place of business, as the case may be, is sited.
Section 2. AMENDMENT OF EXHIBIT A TO THE LIMITED PARTNERSHIP AGREEMENT.
Exhibit A to the Limited Partnership Agreement is hereby amended and restated to
reflect the aforementioned change(s) by deleting Exhibit A attached thereto in
its entirety, and by attaching in lieu thereof a replacement exhibit in the form
of EXHIBIT A attached hereto. From and after the effectiveness of this
Amendment, the amended and restated EXHIBIT A attached hereto shall be
- 3 -
<PAGE>
the only Exhibit A to the Limited Partnership Agreement, unless and until it
is hereafter further amended.
Section 3. REFERENCE TO AND EFFECT ON THE LIMITED PARTNERSHIP
AGREEMENT.
A. The Limited Partnership Agreement is hereby deemed to be
amended to the extent necessary to effect the matters contemplated by this
Amendment. Except as specifically provided for hereinabove, the provisions of
the Limited Partnership Agreement shall remain in full force and effect.
B. The execution, delivery and effectiveness of this Amendment
shall not operate (i) as a waiver of any provision, right or obligation of the
Managing General Partner, the other General Partner or any Limited Partner under
the Limited Partnership Agreement except as specifically set forth herein or
(ii) as a waiver or consent to any subsequent action or transaction.
Section 4. APPLICABLE LAW. This Amendment shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
[signature page follows]
- 4 -
<PAGE>
AMENDMENT NO. 37 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF PRIME
GROUP REALTY, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
MANAGING GENERAL PARTNER:
PRIME GROUP REALTY TRUST, a
Maryland real estate investment trust
By:[s] James F. Hoffman
-----------------------------
Name: James F. Hoffman
---------------------------
Title: Senior Vice President
-------------------------
LIMITED PARTNERS:
Each Limited Partner hereby executes
this Amendment to the Limited
Partnership Agreement.
By: PRIME GROUP REALTY TRUST, a
Maryland real estate investment
trust, as attorney-in fact
By:[s] James F. Hoffman
-----------------------
Name: James F. Hoffman
---------------------
Title: Senior Vice President
---------------------
- 5 -
<PAGE>
As to Section 1 hereof,
ACKNOWLEDGED AND AGREED
CAROL STREAM INDUSTRIAL PARK JOINT
VENTURE, an Illinois general partnership
By: NARCO ENTERPRISES, INC.,
an Illinois corporation
Its Managing General Partner
By: [s] STEPHEN J. NARDI
----------------------
Stephen J. Nardi
President
- 6 -
<PAGE>
[s] James M. Kane
-----------------------------
James M. Kane
=============================
[s] Gloria I. Kane
-----------------------------
Gloria I. Kane
=============================
- 7 -
<PAGE>
EXHIBIT A*
PARTNERS, NUMBER OF UNITS AND CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
Number of Capital
Managing General Partner Common Units Contribution
- ------------------------ ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 15,264,835 **
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
General Partner
- ---------------
The Nardi Group, L.L.C. 927,100 $18,542,000
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Limited Partners
- ----------------
The Nardi Group, L.L.C. 573,096 $8,354,750
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Carol Stream Industrial Park Joint Venture 151,621 $2,146,374
c/o Stephen J. Nardi
4100 Madison Street
Hillside, IL 60162
Edward S. Hadesman
- ------------------
Trust Dated May 22, 1992 398,427 $7,968,540
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
</TABLE>
_____________________________
* As amended by Amendment No. 37 to the Amended and Restated Agreement of
Limited Partnership of Prime Group Realty, L.P.
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-1
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Carolyn B. Hadesman 54,544 $1,090,880
Trust Dated May 21, 1992
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Lisa Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Cynthia Hadesman 1991 Trust 169,053 $3,381,060
c/o Edward S. Hadesman
2500 North Lakeview
Unit 1401
Chicago, IL 60614
Tucker B. Magid 33,085 $ 661,700
545 Ridge Road
Highland Park, IL 60035
Frances S. Shubert 36,006 $ 720,120
511 Lynn Terrace
Waukegan, IL 60085
Sky Harbor Associates 62,149 $1,242,980
c/o Howard I. Bernstein
6541 North Kilbourn
Lincolnwood, IL 60646
Jeffrey A. Patterson 110,000 $2,200,000
c/o Prime Group Realty Trust
77 West Wacker Drive
Suite 3900
Chicago, IL 60601
</TABLE>
EXHIBIT A-2
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Primestone Investment Partners, L.P. 7,944,893 **
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Paul A. Roehri
Prime Group VI, L.P. 304,097 $6,050,500
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, IL 60601
Attn: Michael W. Reshcke
Robert J. Rudnik
H Group LLC 88,333 $1,300,000
c/o Heitman Financial Ltd.
180 N. LaSalle
Suite 3600
Chicago, IL 60601
Attn: Norman Perlmutter
Ray R. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
Sandra F. Grinvalds 2,608 $ 52,160
714 Blaine Court
Schaumburg, IL 60173
Warren H. John, as Trustee of the Warren H. John 37,259 $ 745,180
Trust dated December 18, 1998
1730 N. Clark Street
Chicago, IL 60614
</TABLE>
_________________________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-3
<PAGE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
James M. Kane 13,606 $ 191,594
Connemara Farm
61 E. Palatine Road
South Barrington, IL 60010
Gloria I. Kane 13,606 $ 191,594
Connemara Farm
61 E. Palatine Road
South Barrington, IL 60010
</TABLE>
<TABLE>
<CAPTION>
Number of Capital
Limited Partners Common Units Contribution
- ---------------- ------------ ------------
<S> <C> <C>
Prime Group Realty Trust 2,000,000 **
77 West Wacker Drive Convertible Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
Prime Group Realty Trust 4,000,000 **/
77 West Wacker Drive Series B Preferred Units
Suite 3900
Chicago, IL 60601
Attn: Richard S. Curto
James F. Hoffman
</TABLE>
____________________________
** This amount shall be inserted by the Managing General Partner.
EXHIBIT A-4
<PAGE>
EIGHTH AMENDMENT TO CREDIT AGREEMENT
This Eighth Amendment to Credit Agreement is made as of the 31st day of
March, 2000 by and among PRIME GROUP REALTY, L.P., a Delaware limited
partnership (the "Borrower"), PRIME GROUP REALTY TRUST, a Maryland trust (the
"Company") and FLEET NATIONAL BANK (F/K/A BANKBOSTON, N.A.), a national banking
association ("Fleet"), CIBC INC., a Delaware corporation ("CIBC"), the other
lending institutions which are from time to time listed on Schedule 1,
(collectively, with Fleet and CIBC, the "Lenders") and FLEET NATIONAL BANK
(F/K/A BANKBOSTON, N.A.), as agent for itself and such other lending
institutions (the "Agent").
WHEREAS, the parties hereto are parties to that certain Credit
Agreement dated as of November 17, 1997 as amended by First Amendment to Credit
Agreement dated as of December 15, 1997 and by Second Amendment to Credit
Agreement dated as of March 16, 1998, as amended and restated by Third Amendment
to Credit Agreement dated as of March 30, 1998 as amended by Fourth Amendment to
Credit Agreement dated as of April 24, 1998, as amended by Fifth Amendment to
Credit Agreement dated as of October 1, 1998, as amended and restated by Sixth
Amendment to Credit Agreement dated as of February 4, 1999 and as amended by
Seventh Amendment to Credit Agreement dated as of October 22, 1999 (the
"Existing Agreement"); and
WHEREAS, the parties have agreed to amend the Existing Agreement so as
to effect certain changes in the Existing Agreement.
NOW, THEREFORE, the parties hereby agree that effective upon the
Effective Date hereof (as determined pursuant to Paragraph 8 below) the Existing
Agreement is amended as follows:
1. DEFINITIONS: Section 1.1 of the Existing Agreement is amended to
provide that the following terms shall have the following meanings and, to the
extent that any of the following terms are already defined in the Existing
Agreement, such definitions shall be deemed to be amended and restated by the
following definitions:
Bank One Excluded Unconsolidated Entity. As of any date, any Person
which is within the definition of Unconsolidated Entity set forth in this
Agreement but which is not within the definition of Unconsolidated Entity set
forth in the Bank One Guaranties.
Bank One Guaranties. Those certain documents referred to as Guaranty
(limited amount) and Guaranty (limited recourse) from Borrower to Bank One,
Illinois, NA relating to the obligations of ceratin of Borrower's Subsidiaries
with respect to Letter of Credit Agreements dated February 17, 1998 relating to
letter of credit facilities in the aggregate amount of $48,809,587, such
Guaranties being dated February 17, 1998 as modified on November 30, 1998,
August 31, 1999 and February 21, 2000, and as the same may be further modified
from time to time.
Each place in the Agreement where there is a reference to BankBoston such
reference shall be
<PAGE>
deemed to be replaced with a reference to Fleet so as to reflect the change in
name from BankBoston, N.A. to Fleet National Bank which became effective on
March 1, 2000.
2. DELETION OF SECTION 7.23. Section 7.23 of the Agreement is hereby
deleted.
3. ADDITION OF SECTION 9.7. A new Section 9.7 is hereby added to the
Agreement immediately following Section 9.6 as follows:
Section 9.7. Total Liabilities to Total Adjusted Assets
Excluding Bank One Excluded Unconsolidated Entities . The Borrower will
not at any time permit Total Liabilities at the end of any fiscal
quarter to exceed sixty-five percent (65%) of Total Adjusted Assets
with the computations of this covenant to be done in the same manner as
in Section 9.3 above except that each place where the definitions of
EBITDA or Total Liabilities require the computations to include items
related to Unconsolidated Entities, such computations shall be adjusted
to exclude all items relating to all Bank One Excluded Unconsolidated
Entities. Each Compliance Certificate delivered hereunder will include
an additional schedule in substantially the form attached as Exhibit A
to this Amendment listing the Bank One Excluded Unconsolidated Entities
as of the date of such Certificate and setting forth in detail the
adjustments made with respect to the computations required by this
Section 9.7. It is the intent of the parties in adding this Section 9.7
to create a new financial covenant which is equally as stringent as the
financial covenant (the "Bank One Covenant") set forth in paragraph
9.2(a) of the Bank One Guaranties, as the Bank One Covenant may be
amended, and in effect, from time to time. For the avoidance of doubt,
the parties agree that the Borrower shall not be required to obtain the
consent of the Lenders or the Agent to any amendment of the Bank One
Covenant which does not make such covenant more stringent than the
existing Bank One Covenant, and that if the Bank One Covenant ceases to
be in effect at any time, whether by reason of amendment to the Bank
One Guaranties, refinancing of the indebtedness to which the Bank One
Guaranties relates, or otherwise, then this Section 9.7 shall terminate
and be of no further force and effect.
4. UPDATED SCHEDULES TO CREDIT AGREEMENT. The following Schedules to
the Credit Agreement are hereby updated, supplemented or replaced as follows:
(a) Schedule 1 is replaced by Schedule 1 attached hereto.
(b) Schedule 1.1 is replaced by Schedule 1.1 attached hereto.
(c) Schedule 1.2 is replaced by Schedule 1.2 attached hereto.
(d) Schedule 1.3 is replaced by Schedule 1.3 attached hereto.
(e) Schedule 8.1(f) is replaced by Schedule 8.1(f) attached
hereto.
5. REPRESENTATIONS AND WARRANTIES. The Borrower and the Company
represent and
2
<PAGE>
warrant that each of the representations and warranties contained in Section6 is
true, correct and complete in all material respects as of the date hereof to the
same extent as though made on such date and that no Default or Event of Default
has occurred and is continuing on the date hereof.
6. EFFECTIVENESS OF LOAN DOCUMENTS. The Borrower hereby confirms that
each of the Security Documents shall continue to secure the payment and
performance of all of the Obligations under the Existing Agreement as amended
hereby and the Borrower's obligations under the Security Documents shall
continue to be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Every reference contained in the
Loan Documents to the Credit Agreement shall mean and be a reference to the
Existing Agreement as amended hereby and as the Credit Agreement may be further
amended. Except as specifically amended by this Amendment, the Existing
Agreement and each of the Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
7. MISCELLANEOUS. This Amendment shall be governed by, interpreted
and construed in accordance with all of the same provisions applicable under
the Existing Agreement including, without limitation, all definitions set
forth in Section 1.1, the rules of interpretation set forth in Section 1.2,
the provisions relating to governing law set forth in Section 20, the
provisions relating to counterparts in Section 22 and the provision relating
to severability in Section 26.
8. CONDITIONS TO EFFECTIVENESS. This Eighth Amendment to Credit
Agreement shall become effective on the earliest date (the "Effective Date")
that each of the following conditions precedent have been satisfied:
(a) Documents . Each of (i) this Eighth Amendment to Credit Agreement,
and (ii) the Eighth Amendment to the Guaranty, shall have been duly executed and
delivered by the respective parties thereto, shall be in full force and effect
and shall be in form and substance satisfactory to each of the Lenders.
(b) Certified Copies of Amendments of Organization Documents . The
Agent shall have received a Certificate of the Company to which there shall be
attached complete copies of any amendments to the Borrower's Limited Partnership
Agreement, Borrower's Certificate of Limited Partnership the Company's
Declaration of Trust or the Company's Bylaws which have become effective since
the complete certified copies of such documents which were previously delivered
to the Agent.
(c) Resolutions . All action on the part of the Borrower and each
Guarantor necessary for the valid execution, delivery and performance by the
Borrower and each Guarantor of this Amendment and the Eighth Amendment to the
Guaranty shall have been duly and effectively taken, and evidence thereof
satisfactory to the Agent shall have been provided to the Agent. The Agent shall
have received from the Company true copies of the resolutions adopted by its
Board of Directors authorizing the transactions described herein, certified by
its secretary to be true and complete and in effect on the Effective Date.
(d) Opinions of Counsel . Each of the Lenders and the Agent shall have
received
3
<PAGE>
favorable opinions addressed to the Lenders and the Agent and dated as of the
Effective Date, substantially in the same form as, or with appropriate
provisions incorporating by reference, the opinions from Borrower's counsel
previously delivered to the Lenders and the Agent, copies of which are attached
as Exhibit E to the Credit Agreement. Such opinion may rely on opinions from
other law firms approved by the Agent as to matters of law applicable in the
various states.
In the event that the Effective Date has not occurred on or before
March 31, 2000 then this instrument shall be void and the Existing Agreement
shall remain in effect as though this instrument had never been executed.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment
as a sealed instrument as of the date first set forth above.
PRIME GROUP REALTY TRUST
By: [s] Louis G. Conforti
--------------------------------
Its: Executive Vice President
----------------------------
PRIME GROUP REALTY, L.P.
By: PRIME GROUP REALTY TRUST,
its managing general partner
By: [s] Louis G. Conforti
-----------------------------
Its: Executive Vice President
FLEET NATIONAL BANK (f/k/a
BANKBOSTON, N.A.), as Agent
By: [s] Illegible
--------------------------------
Its:
-----------------------------
WITNESS: FLEET NATIONAL BANK (f/k/a
BANKBOSTON, N.A.)
______________________________ By: [s] Lori Litow
--------------------------
Lori Y. Litow
Its Vice President
4
<PAGE>
Commitment: $17,500,000
Commitment Percentage: 50%
Notice Address: Fleet National Bank
100 Federal Street
Boston, MA 02110
Attn: Real Estate Department
With a copy to:
Fleet National Bank
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, GA 30346
Attn: Lori Y. Litow, Vice President
Fax: (770)390-8434 or 391-9811
5
<PAGE>
WITNESS: CIBC INC.
By: /s/ Illegible
- ------------------------------ -----------------------
Commitment: $17,500,000
Commitment Percentage: 50%
Notice Address:
CIBC Inc.
c/o CIBC World Markets Corp.
200 West Madison Street, Suite 2610
Chicago, Illinois 60606
Attn: Joel Gershkon, Executive Director
Phone: (312)855-3243
Fax: (312)855-3235
with a copy to:
CIBC Inc.
c/o CIBC World Markets Corp.
2 Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30326
Attn: Beverly Bowman
Phone: (770) 319-4824
Fax: (770) 319-4950
6
<PAGE>
Exhibit A
Compliance Certificate Schedule for Bank One Covenant
A. The following is a list of all of the Bank One Excluded Unconsolidated
Entities as of the date of this Compliance Certificate:
77 Fitness Center, L.P.
PGT Construction Co.
PRS Corporate Real Estate Services, Inc.
Prime Services Holding, Inc.
Prime Group Realty Services, Inc.
B. Calculation of Bank One Covenant:
Total Liabilities [from line 3(g) of Compliance Certificate] $________
Portion of Total Liabilities consisting of the Unconsolidated
Entity Percentage of the Indebtedness of the Bank One
Excluded Unconsolidated Entities $________
Total Liabilities per Bank One Covenant $________
Annualized EBITDA [from line 3(z) of Compliance Certificate] $________
Portion of annualized EBITDA consisting of the Unconsolidated
Entity Percentage of the annualized EBITDA of the Bank One
Excluded Unconsolidated Entities $________
Annualized EBITDA per Bank One Covenant $________
Annualized EBITDA per Bank One Covenant divided by 0.0975 $________
Total Adjusted Assets per Bank One Covenant [Add lines 3(h) and 3(i)] $________
Ratio of Total Liabilities to Total Adjusted Assets per Bank One Covenant =
_____, which is less than 65%
7
<PAGE>
SCHEDULE 1
Lenders; Domestic and Eurodollar Lending Offices
<TABLE>
<CAPTION>
Domestic and Eurodollar Lending Offices: Notice Address:
- ---------------------------------------- ---------------
<S> <C>
Fleet National Bank Fleet National Bank
100 Federal Street 100 Federal Street
Boston, MA 02110 Boston, MA 02110
(Domestic and Eurodollar) Attn: Real Estate Department
With a copy to:
Fleet National Bank
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, GA 30346
Attn: Lori Y. Litow, Vice President
Fax: (770)390-8434 or 391-9811
CIBC Inc. CIBC Inc.
c/o CIBC World Markets Corp. c/o CIBC World Markets Corp.
200 West Madison Street, Suite 2610 200 West Madison Street, Suite 2610
Chicago, Illinois 60606 Chicago, Illinois 60606
(Domestic and Eurodollar)
Attn: Joel Gershkon, Executive
Director
Phone: (312)855-3243
Fax: (312)855-3235
with a copy to:
CIBC Inc.
c/o CIBC World Markets Corp.
2 Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30326
Attn: Beverly Bowman
Phone: (770) 319-4824
Fax: (770) 319-4950
</TABLE>
8
<PAGE>
SCHEDULE 1.1
<TABLE>
<CAPTION>
Mortgaged Properties Fee Owner
-------------------- ---------
<S> <C>
1. Hilton Parking Garage, Knoxville, TN Triad Parking Company, Ltd.
2. SunTrust Bank Bldg., 201 4th Ave., N.,
Nashville, TN Nashville Office Building I, Ltd.
3. The Weston, 4823 Kingston Pike,
Knoxville, TN Old Kingston Properties, Ltd.
4. One Centre Square, 620 Market St.,
Knoxville, TN Professional Plaza, Ltd.
5. Two Centre Square, 625 Gay St.,
Knoxville, TN Centre Square II, Ltd.
6. Salt Creek Office Center and Sun Annex, 1990 Algonquin Road, L.L.C.
1990-2060 Algonquin Road, Schaumburg, IL 2010 Algonquin Road, L.L.C.
7. Enterprise Drive Office Center,
2205-2255 Enterprise Drive, Westchester, IL Enterprise Drive, L.L.C.
8. 4849-4851 Groveport Pike, Obetz, Ohio Prime Columbus Industrial, L.L.C.
9. 2160 McGaw Road, Obetz, Ohio Prime Columbus Industrial, L.L.C.
10. 2400-2410 McGaw Road, Obetz, Ohio Prime Columbus Industrial, L.L.C.
11. 5160-5168 Paul G. Blazer Memorial Parkway, Prime Columbus Industrial, L.L.C.
Dublin, Ohio
12. 600 London Road, Delaware, Ohio Prime Columbus Industrial, L.L.C.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1.2
Commitments
-----------
- ------------------------------------------------------------------
LENDER COMMITMENT COMMITMENT %
- ------------------------------------------------------------------
<S> <C> <C>
Fleet National Bank $17,500,000.00 50%
- ------------------------------------------------------------------
CIBC Inc. $17,500,000.00 50%
- ------------------------------------------------------------------
Total $35,000,000.00 100%
- ------------------------------------------------------------------
</TABLE>
10
<PAGE>
MARCH 31, 2000
SCHEDULE 1.3
GUARANTOR SUBSIDIARIES, RELATED COMPANIES AND UNCONSOLIDATED ENTITIES
GUARANTOR SUBSIDIARIES
- -----------------------
NASHVILLE OFFICE BUILDING I, LTD.
OLD KINGSTON PROPERTIES, LTD.
PROFESSIONAL PLAZA, LTD.
CENTRE SQUARE II, LTD.
TRIAD PARKING COMPANY, LTD.
1990 ALGONQUIN ROAD, L.L.C.
2010 ALGONQUIN ROAD, L.L.C.
ENTERPRISE DRIVE, L.L.C.
PRIME COLUMBUS INDUSTRIAL, L.L.C.
RELATED COMPANIES
- -----------------
PRIME GROUP REALTY TRUST
PRIME GROUP REALTY, L.P.
1990 ALGONQUIN ROAD, L.L.C.
2010 ALGONQUIN ROAD, L.L.C.
555 HUEHL ROAD, L.L.C.
1699 E. WOODFIELD ROAD, L.L.C.
475 SUPERIOR AVENUE, L.L.C.
ENTERPRISE DRIVE, L.L.C.
ENTERPRISE DRIVE II, L.L.C.*
280 SHUMAN BLVD., L.L.C.
77 WEST WACKER LIMITED PARTNERSHIP
ENTERPRISE CENTER I, L.P.
ENTERPRISE CENTER II, L.P.
ENTERPRISE CENTER III, L.P.
ENTERPRISE CENTER IV, L.P.
ENTERPRISE CENTER V, L.P.
ENTERPRISE CENTER VI, L.P.
ENTERPRISE CENTER VII, L.P.
ENTERPRISE CENTER VIII, L.P.
ENTERPRISE CENTER XI, L.P.
ENTERPRISE CENTER X, L.P.
ARLINGTON HEIGHTS I, L.P.
ARLINGTON HEIGHTS II, L.P.
ARLINGTON HEIGHTS, III, L.P.
EAST CHICAGO ENTERPRISE CENTER LIMITED PARTNERSHIP
HAMMOND ENTERPRISE CENTER LIMITED PARTNERSHIP
NASHVILLE OFFICE BUILDING I, LTD.
OLD KINGSTON PROPERTIES, LTD.
PROFESSIONAL PLAZA, LTD.
CENTRE SQUARE II, LTD.
11
<PAGE>
*NAME IS BEING CHANGED TO 2305 ENTERPRISE DRIVE, L.L.C.
12
<PAGE>
SCHEDULE 1.3 (CONTINUED)
TRIAD PARKING COMPANY, LTD.
LIBERTYVILLE TECH WAY, L.L.C.
3818 GRANDVILLE, L.L.C.
306 ERA DRIVE, L.L.C
1301 RIDGEVIEW DRIVE, L.L.C.
515 HUEHL ROAD, L.L.C
455 ACADEMY DRIVE, L.L.C
801 TECHNOLOGY WAY, L.L.C
PRIME COLUMBUS INDUSTRIAL, L.L.C.
KEMPER/PRIME INDUSTRIAL PARTNERS
1051 N. KIRK ROAD, L.L.C.
4211 MADISON STREET, L.L.C
200 E. FULLERTON, L.L.C.
350 RANDY ROAD, L.L.C.
4300 MADISON STREET, L.L.C.
370 CAROL LANE, L.L.C.
388 CAROL LANE, L.L.C.
941 WEIGEL DRIVE, L.L.C.
342 CAROL LANE, L.L.C.
343 CAROL LANE, L.L.C.
371 N. GARY AVENUE, L.L.C.
2000 YORK ROAD, L.L.C.
1600 167TH STREET, L.L.C.
` E. TOWER ROAD, L.L.C.
4343 COMMERCE COURT, L.L.C.
11039 GAGE AVENUE, L.L.C.
11045 GAGE AVENUE, L.L.C.
1401 S. JEFFERSON, L.L.C.
4100 MADISON STREET, L.L.C.
4160 MADISON STREET, L.L.C.
550 KEHOE BLVD., L.L.C.
2675 N. MAYFAIR ROAD, L.L.C.
33 N. DEARBORN, L.L.C.
33 N. DEARBORN SPC, INC.
WILKE-VENTURA, L.L.C.
PGR FINANCE I, INC.
PGR FINANCE II, INC.
PGR FINANCE III, INC.
PGR FINANCE IV, INC.
PGR FINANCE V, INC.
PGR FINANCE VI, INC.
PGR FINANCE VII, INC.
PGR FINANCE VIII, INC.
13
<PAGE>
SCHEDULE 1.3 (CONTINUED)
PGR FINANCE IX, INC.
PGR FINANCE X, INC.
PGR FINANCE XI, INC.
PGR FINANCE XII, INC.
PGR FINANCE XIII, INC.
PGR FINANCE XIV, INC.
PGR FINANCE XV, L.L.C.
LASALLE-ADAMS, L.L.C.
MICHIGAN-ADAMS, L.L.C.
6400 SHAFER COURT, L.L.C.
DEKALB BUSINESS PARK, L.L.C.
TWO CENTURY CENTRE, L.L.C.
OAK BROOK BUSINESS CENTER, L.L.C.
PRIME ROLLING MEADOWS, L.L.C.
PRIME AURORA, L.L.C.
2000 USG DRIVE, L.L.C.
LIBERTYVILLE CORPORATE OFFICE PARK, L.L.C.
300 CRAIG PLACE, L.L.C.
PRIME/BEITLER DEVELOPMENT COMPANY, L.L.C.
180 N. LASALLE, L.L.C.
2100 SWIFT DRIVE, L.L.C.
330 N. WABASH AVENUE, L.L.C.
33 W. MONROE, L.L.C.
BRE/CITY CENTER, L.L.C.
MONROE-WACKER, L.L.C.
MONROE-WACKER OFFICE, L.L.C.
KIMBERLY EAST, L.L.C.
901 TECHNOLOGY WAY, L.L.C.
180 KEHOE BLVD., L.L.C.
800 JORIE BLVD., L.L.C.
PHOENIX OFFICE, L.L.C.
43 HINTZ ROAD, L.L.C.
LIBERTYVILLE CORPORATE OFFICE PARK II, L.L.C.
330 N. WABASH MEZZANINE, L.L.C.
BRUSH HILL OFFICE CENTER, L.L.C.
33 W. MONROE I, L.L.C.
KIMBERLY WEST, L.L.C.
UNCONSOLIDATED ENTITIES
- ------------------------
77 WEST WACKER DRIVE, L.L.C.
77 FITNESS CENTER, L.P.
PGT CONSTRUCTION CO.
PRS CORPORATE REAL ESTATE SERVICES, INC.
PRIME SERVICES HOLDING, INC.
PRIME GROUP REALTY SERVICES, INC.
14
<PAGE>
SCHEDULE 8.1(F)
<TABLE>
<CAPTION>
RECOURSE INDEBTEDNESS AS OF 3/31/001
LENDER PROPERTY/LOAN LOAN AMOUNT
- ------ ------------- -----------
<S> <C> <C>
RECOURSE AMOUNT
LaSalle National Bank(2) Line of Credit $11,500,000
$11,500,000
Bank One, NA(3) Bond Letters of Credit $48,809,587
$10,000,000
CIGNA(3) Continental Towers $75,000,000
$4,809,3114
LaSalle National Bank(3) Dearborn Center $13,500,000
$3,500,000
Capital Company of America(3) 180 North LaSalle $20,000,000
$10,000,000
Corus Bank(3) 43 Hintz Road $6,000,000
$1,500,000
Corus Bank(3) 27 and 77 S. Wacker $4,000,000
$4,000,000
Corus Bank(3) 300 West Monroe $24,000,000
$24,000,000
Corus Bank(3) Libertyville Corporate $18,083,000
$18,083,000
Corus Bank(3) 2000 USG Drive $6,310,000
$6,310,000
Corus Bank(3) 320 Fullerton Avenue $8,050,000
$8,050,000
LASALLE NATIONAL BANK(3) 6700 TOUHY $2,968,000
- -------------------------------------------------------------------------
$1,484,000
- ---------------
TOTAL
$103,236,311 $238,220,587
</TABLE>
- -------------------------
(1) Excludes the BankBoston Line of Credit
(2) Prime Group Realty, L.P. is the borrower
(3) Prime Group Realty, L.P. is a guarantor
(4) This amount is reduced annually by $887,873.
15
<PAGE>
Exhibit 12.1
Prime Group Realty Trust and The Predecessor
Statements Regarding Computation of Ratios of Earnings
to Combined Fixed Charges and Preferred Share Distributions
(Dollars in Thousands)
<TABLE>
<CAPTION>
Prime Group Realty Trust - Historical
------------------------- -----------------------------------------
Three Months Period from
ended Year ended November 17,
March 31, December 31, 1997 through
------------------------- -------------------------- December 31,
2000 1999 1999 1998 1997
------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before preferred share
distributions and minority
interests per the consolidated
financial statements $ 7,794 $ 8,068 $ 33,567 $30,866 $1,427
Interest expense 12,986 10,378 42,648 30,901 1,680
Amortization of debt issuance costs 921 474 2,424 1,230 140
----------------------- -----------------------------------------
Earnings $21,701 $18,920 $ 78,639 $62,997 $3,247
========================= =========================================
Fixed charges:
Interest expense $12,986 $10,378 $ 42,648 $30,901 $1,680
Capitalization of interest expense 2,924 1,117 7,986 2,498 --
Amortization of debt issuance costs 921 474 2,424 1,230 140
Preferred share distributions 3,037 3,000 12,103 7,971 345
----------------------- -----------------------------------------
Total fixed charges $19,868 $14,969 $ 65,161 $42,600 $2,165
========================= =========================================
Ratio of earnings to combined fixed charges
and preferred share distributions 1.09 1.26 1.21 1.48 1.50
========================= =========================================
Excess of earnings to combined fixed charges
and preferred share distributions $ 1,833 $ 3,951 $ 13,478 $20,397 $1,082
========================= =========================================
Funds from operations:
Funds from operations (1) $15,314 $12,646 $ 53,983 $47,996 $3,439
Interest expense 12,986 10,378 42,648 30,901 1,680
Amortization of debt issuance costs 921 474 2,424 1,230 140
Preferred share distributions 3,037 3,000 12,103 7,971 345
----------------------- -----------------------------------------
Adjusted funds from operations $32,258 $26,498 $111,158 $88,098 $5,604
========================= =========================================
Fixed charges:
Interest expense $12,986 $10,378 $ 42,648 $30,901 $1,680
Capitalization of interest expense 2,924 1,117 7,986 2,498 -
Amortization of debt issuance costs 921 474 2,424 1,230 140
Preferred share distributions 3,037 3,000 12,103 7,971 345
----------------------- -----------------------------------------
Total fixed charges $19,868 $14,969 $ 65,161 $42,600 $2,165
========================= =========================================
Ratio of funds from operations to combined fixed
charges and preferred share distributions 1.62 1.77 1.71 2.07 2.59
========================= =========================================
Excess of funds from operations to
combined fixed charges and
preferred share distributions $12,390 $11,529 $ 45,997 $44,264 $3,619
========================= =========================================
</TABLE>
(1) Funds from operations for the three months ended March 31, 2000 and
1999, for the years ended December 31, 1999 and 1998, and for the period
from November 17, 1997 through December 31, 1997 have been restated in
accordance with standards established by the Board of Governors of NAREIT
in its 1999 White Paper, which results in the exclusion of certain non
recurring items and the inclusion of the effects of straight line rental
revenue. Years and periods prior to November 17, 1997 have not been
restated due to the unavailability of certain required information.
1
<PAGE>
Exhibit 12.1
Prime Group Realty Trust and The Predecessor
Statements Regarding Computation of Ratios of Earnings
to Combined Fixed Charges and Preferred Share Distributions
(Dollars in Thousands)
<TABLE>
<CAPTION>
Predecessor - Historical
-----------------------------------------------
Period from
January 1,
1999
through Year ended
November December 31,
16 -------------------------------
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Earnings:
Loss before preferred share distributions
and minority interests per the combined
financial statements $(29,050) $(31,417) $(29,576)
Interest expense 34,417 37,217 36,234
Amortization of debt issuance costs 630 594 1,148
-----------------------------------------------
Earnings $ 5,997 $ 6,394 $ 7,806
===============================================
Fixed charges:
Interest expense $ 34,417 $ 37,217 $ 36,234
Capitalization of interest expense -- -- --
Amortization of debt issuance costs 630 594 1,148
Preferred share distributions -- -- --
-----------------------------------------------
Total fixed charges $ 35,047 $ 37,811 $ 37,382
===============================================
Ratio of earnings to combined fixed charges
and preferred share distributions -- -- --
===============================================
Deficit of earnings to combined fixed charges
and preferred share distributions $(29,050) $(31,417) $(29,576)
===============================================
Funds from operations:
Funds from operations (1) $(14,461) $(17,367) $(12,733)
Interest expense 34,417 37,217 36,234
Amortization of debt issuance costs 630 594 1,148
Preferred share distributions -- -- --
-----------------------------------------------
Adjusted funds from operations $ 20,586 $ 20,444 $ 24,649
===============================================
Fixed charges:
Interest expense $ 34,417 $ 37,217 $ 36,234
Capitalization of interest expense -- -- --
Amortization of debt issuance costs 630 594 1,148
Preferred share distributions -- -- --
===============================================
Total fixed charges $ 35,047 $ 37,811 $ 37,382
===============================================
Ratio of funds from operations to
combined fixed charges and preferred
share distributions -- -- --
===============================================
Deficit of funds from operations to combined
fixed charges and preferred share
distributions $(14,461) $(17,367) $(12,733)
===============================================
</TABLE>
(1) Funds from operations for the three months ended March 31, 2000 and
1999, for the years ended December 31, 1999 and 1998, and for the
period from November 17, 1997 through December 31, 1997 have been
restated in accordance with standards established by the Board of
Governors of NAREIT in its 1999 White Paper, which results in the
exclusion of certain non recurring items and the inclusion of the
effects of straight line rental revenue. Years and periods prior to
November 17, 1997 have not been restated due to the unavailability
of certain required information.
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,995
<SECURITIES> 0
<RECEIVABLES> 108,673
<ALLOWANCES> 0
<INVENTORY> 82,969<F1>
<CURRENT-ASSETS> 0
<PP&E> 1,303,123
<DEPRECIATION> (45,750)
<TOTAL-ASSETS> 1,466,010
<CURRENT-LIABILITIES> 263,207<F2>
<BONDS> 869,976
0
40
<COMMON> 153
<OTHER-SE> 332,634
<TOTAL-LIABILITY-AND-EQUITY> 1,466,010
<SALES> 0
<TOTAL-REVENUES> 56,671
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 37,115<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,986
<INCOME-PRETAX> 6,570
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,570
<EPS-BASIC> .23
<EPS-DILUTED> .23
<FN>
<F1>Amount includes restricted cash escrows ($41,853), net deferred costs
($27,140), and other assets ($13,976).
<F2>Amount includes accrued interest payable ($3,881) accrued real estate taxes
($31,740), accounts payable and accrued expenses ($34,779), liabilities for
leases assumed ($2,957), dividends payable ($8,154), other liabilities ($10,481)
and minority interests of ($171,215).
<F3>Amount includes property operations ($12,810), real estate taxes ($10,389),
depreciation and amortization ($9,232), general and administrative expenses
($2,264), and minority interests allocation ($2,420).
</FN>
</TABLE>
