Cadim inc. and The Prime Group, Inc., the latter being an affiliate with Prime Group Realty Trust chairman Michael W. Reschke, is offering $14 per share for the REIT's common stock, which closed at $12.80 Thursday before soaring 12% Friday to $14.34.
However, the $219-million offer is viewed by some as too low, considering the REIT's most recent book value was $19.36. Prime Group Realty's portfolio includes Dearborn Center, a $350-million joint venture development more than 60% pre-leased a year before its scheduled completion, that is expected to come on line next year, boosting potential for future growth.
K Capital Partners, LLC sent a letter to Prime Group trustees calling the offer "grossly insufficient."
"The board should not rush to accept a bid fromits chairman, Michael Reschke, and Cadim Inc. that reflects a 25% discount to the company's most recently reported net asset value," the letter adds. "The independent trustees should immediately put the company up for sale to achieve the highest possible price for the company's shareholders, regardless of whether chairman Reschke is a member of the bidding group."
Southeastern Asset Management, Inc. ($43 million), Longleaf Partners Realty Fund ($36 million) and Morgan Stanley Dean Witter & Company ($33 million) are the largest shareholders of the REIT.
Cadim is an affiliate of Quebec-based CDP Capital.
Prime Group Realty Trust's board of trustees must approve the offer, which also is subject to a 30-day due diligence period.
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