CHICAGO-Stamford, CT-based Five Mile Capital Partners LLC will acquire Prime Group Realty Trust, which had owned three local office buildings of about 1.4 million square feet, it was announced late Monday night. The purchase is being made through $5 per share for the trust’s 9% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest.

Earlier in the day, Lakewood, NJ-based Lightstone Group said in a statement that it would relinquish ownership of all the issued and outstanding common shares. Lightstone executives said they were stepping down from the trust’s board.

In 2005, Lightstone took over Prime Group for about $889 million, paying $725 in cash for the common share and limited partner units of Prime Group, assuming some $595.4 million in debt. A Lightstone spokesman did not return a call for comment Monday.

According to a trust statement Monday, the board has approved the merger agreement and intends to submit the merger for approval by the holders of the Series B Preferred Shares. Following completion of the transaction, which is expected to occur in the second quarter of 2011, the company’s Series B Preferred Shares will cease to be traded as an over-the-counter security.

Shares of the trust’s “pink sheet” B shares closed at $6 on Monday, falling from almost $7 per share even before the official announcement.

In a further complication, affiliates of both Prime Group and Five Mile have created a joint venture to own, manage and operate 330 N. Wabash, known as the former IBM Building. Prime Group owns most of the 52-story tower, which has struggled after losing its former namesake. Langham Hotels International owns floors two through 13 of the tower, with plans for a hotel at the property.

The Prime Group/Five Mile affiliate joint venture entered into amendments to its financing documents with the existing lenders at the property providing, among other things, the pay down of $20 million of principal and the additional reduction of the principal by $20 million, the extension of the maturity date to Jan. 31, 2016, (the reduction of the loan commitment to $128 million (of which $30 million remains available to be drawn for tenant improvement, building redevelopment and other costs) and providing certain additional contingent interest to the lenders not to exceed $20 million. Five Mile also agreed to provide up to $75 million of additional capital to the joint venture.

Jeffrey Patterson, Prime Group’s president and CEO, said that the joint venture will have no impact on the Five Mile takeover. “The Series B Shares have been thinly traded and we are happy to provide a cash offer that allows all of the holders to receive this price,” Patterson said in a statement. “The joint venture with Five Mile for the 330 N. Wabash property provides the capital resources necessary to lease up the property to stabilization.” He did not return a call for comment.

Five Mile has recently been involved in several loan-to-own recapitalizations, distressed property acquisitions and corporate restructurings, including a venture with Crocker Partners in Houston to purchase the 1.2-million-square-foot Lakes on Post Oak office complex in January. In December, Five Mile sold the John Hancock Tower in Boston for $930 million, after increasing occupancy from 78% to 96% over an 18-month period.

Winston & Strawn LLP provided legal advice to the trust for this action. Goodwin Procter LLP represented Five Mile.