However, Prime Group ended the year with less than $6.6 million in cash on its books.
"These conditions raise substantial doubt about the company's ability to continue as a going concern," says Ernst & Young LLP, Prime Group's auditors. Coupled with an earnings report that saw funds from operations fall 7% in the fourth quarter and off 18% for 2001 to $1.59 per share, Prime Group share prices plummeted 16% in heavy volume to $7.66.
Meanwhile, Prime Group's board of directors continues reviewing various proposals that in total, add up to $600 million in asset sales or finance deals, says chief executive officer Richard S. Curto reported during a conference call Thursday.
"The bottom line is we have to complete a significant capital transaction that will net our company at least $60 million of net proceeds," says chairman Michael Reschke, adding he is confident it can be accomplished within the next 60 days.
While raising equity through a stock offering as well as additional borrowing are options, Reschke says the board's top priority remains sales of all or part of its 7.8-million-sf office and 3.9-million-sf industrial holdings, as well as land held for development. "We intend to fund these capital requirements with asset sales," Reschke says. The REIT has been trying to sell the 758,260-sf building at 180 N. LaSalle St., which it bought in 2000 for about $103 million and have a $60 million mortgage on it.
However, Reschke indicates another possibility may be the sale of the 1.36-million-sf IBM Plaza at 330 N. Wabash Ave., which Prime Group bought in 1999 for $248.5 million and is financed by a $153.2-million mortgage. Although that would solve the REIT's current financial crunch in one deal, the building's 95.9% occupancy rate is suspect given embattled accounting firm Andersen is a main tenant.
Security Capital Group has been able to call in its $40-million preferred stock block upon 10 days notice since January, but has been persuaded not to with an increase in the dividend from 7.5% to 11%, with additional escalations that could raise the rate to 12.75%.
"The folks at Security Capital are prudent," Reschke says. "I don't think their intent is to put the company in harm's way."
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