Court Upholds Vornado's Claim on Prime Stake

CHICAGO-A Delaware court has ruled in favor of Paramus, NJ-based Vornado Realty Trust, deciding that a foreclosure auction involving a one-third stake in Prime Group Realty Trust was proper. The court also ruled an entity controlled by former Prime Group chairman Michael W. Reschke is on the hook for $49 million, and also dismissed Primestone Investment Partners, LP’s countersuit claiming damages of $150 million, according to a Securities and Exchange Commission filing.

Before the foreclosure auction, Vornado sold 50% of the $104-million debt to Montreal-based Cadim Inc. for $50 million. Because Cadim had joined Reschke in an earlier bid to buy Prime Group Realty Trust, the REIT’s former boss alleged the once partner had negotiated in bad faith while reneging on its deal, then teamed with Vornado to “steal” the REIT.

Since Cadim’s $14.50 per share offer in the summer of 2001, Prime Group Realty Trust shares have fallen to less than $5 per share before a recent uptick.