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CHICAGO-A scheduled foreclosure auction involving 7.9 million shares of Prime Group Realty Trust stock was cancelled Tuesday by a bankruptcy filing by chairman Michael W. Reschke’s Primestone Investment Partners, L.P. Meanwhile, Cadim Inc. is in position to get 16.8% of the company it recently pursued by buying half the foreclosed Primestone debt for $50 million from Vornado Realty Trust.

Cadim backed out of a deal to buy most of Prime Group Realty Trust’s common stock last month in a deal that would have included Reschke.

The Canadian company Tuesday bought half of the two loans made by Paramus, NJ-based Vornado to Primestone. The two loans, totaling $106 million including interest and fees, are in default and a foreclosure auction was scheduled for Tuesday. However, Primestone has filed for Chapter 11 bankruptcy protection, which automatically stops foreclosure proceedings.

Prime Group Realty Trust officials did not return calls for comment.

A spokeswoman for Vornado says its loan deal with Cadim does not affect the foreclosure proceedings with Primestone. Company officials add in a 13-D filing with the Securities and Exchange Commission that they will study Primestone’s filing but doubt it will prevent a future foreclosure auction.

Meanwhile, the sale gives Cadim the option of buying the remainder of the debt from Vornado before a foreclosure auction.

The loans are collateralized by partnership units in Prime Group Realty, LP, the Prime Group Realty Trust operating partnership controlled by Reschke. Those partnership units were then convertible to more than 7.9 million shares of Prime Group stock, which represents about one-third of the outstanding shares.

The default also required Vornado to have a seat on a board of directors that includes former Illinois Governor James R. Thompson. Although, Prime Group officials said recently they have not heard from the East Coast REIT about its intentions for the seat, Vornado president Michael Fascitelli is the likely choice of the new Cadim-Vornado group, according to the 13-D filing.

While the loan transaction equates to $12.58 per share, Prime Group stock closed at $10.24 Tuesday, up 3.6%. However, Cadim’s bid less than three months ago was at $14.50 per share.

Vornado adds in its 13-D that it believes the letters of resignations by Reschke and Prime Group president Richard S. Curto remain valid despite the pair’s recent recission of them. Their resignations were required under terms of the loans in the event of default.

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