The move was one of several options, including joint ventures and mergers, being explored by the board and its investment bankers in an attempt to increase shareholder value. The largest property in the package would be the three-building, 925,822-sf Continental Towers in Rolling Meadows, adjacent to the Northwest Tollway.

If the suburban office and industrial portfolio sale goes through, the REIT could remain a going concern with its 5.5-million-sf Central Business District office portfolio and developments, Reschke says, which include the $350-million Dearborn Center in the Loop here. That project is 63% pre-leased 18 months before completion, he adds.

Despite reporting a 12% decrease in funds from operations to $1.91 per share, Prime Group Realty Trust stock was up $0.11 to $14.01 per share Monday. Although revenue was up 13.5% for the year, the decrease in FFO was the result of higher interest costs, a $7.7-million loss resulting from the sale of land at Wacker Drive and Monroe Street to a joint venture that will develop a 60-story office tower that will serve as Hyatt Corp.'s new headquarters.

"The Chicago real estate market remains very vibrant, and we expect the local economy to continue to expand," says CEO Richard S. Curto. "Rents will remain stable or increase slightly despite the current downturn. That downturn will affect Chicago less than other markets" because of the market's size and diverse employment base, Curto adds. Rent increases were 21.2% on Central Business District renewals, Curto says, while suburban renewals were at 14.2% increases.

Meanwhile, a potential buyer is conducting its due diligence of Prime Group Realty Trust's suburban office and industrial portfolio, Reschke says. It was one of several offers the board received, he added.

The REIT's largest suburban tenant is Schaumburg-based Motorola, which is in an aggressive cost-cutting mode caused by slumping sales. Motorola is Prime Group Realty Trust's fifth-largest tenant at 317,300 sf, paying annual rent of approximately $4.6 million.

The REIT sold seven office and nine industrial properties in 2000 for $170 million, including 122 S. Michigan Ave. and 33 N. Dearborn St. Downtown. Those sales netted Prime Group Realty Trust $71.5 million.

Instant Insights /

Prime Group Realty Trust Close to Selling 8-Mil-SF Suburban Office, Industrial Portfolio

Related Stories

Recommended For You