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CHICAGO-With all but two industrial assets sold, Prime Group Realty Trust is aiming to lease 30,000 sf of retail space at its Bank One Corporate Center before the end of the year. The company, which is repositioning itself as a city and suburban office REIT, recently closed on the sale of five industrial properties totaling 310,225 sf as well as a 50,400-sf Schaumburg office building to CenterPoint Properties Trust.

President and chief executive officer Jeffrey A. Patterson says the REIT is finishing a lease deal with a tenant that would take 30,000 sf of retail space at 131 S. Dearborn St., which would bring occupancy of the retail portion of the building to 50%. In addition, the new tenant would take 20,000 sf of office space in the 1.5-million-sf building, which is 73% occupied.

CenterPoint Properties Trust, the largest industrial property owner in the market, paid $26.4 million for three industrial buildings in Elmhurst, as well as one each in Carol Stream and Hillside, along with the office building at 1301 Tower Rd. Previously, Prime Group Realty Trust sold 3.4 million sf of industrial assets to CenterPoint Properties Trust for $98.7 million. In the most recent deal, CenterPoint Properties Trust assumes $14.5 million in debt, while Prime Group Realty Trust gets $11.4 in net proceeds.

The sale of most of the industrial portfolio–Prime Group Realty Trust still owns two buildings in Batavia and Willowbrook totaling 170,000 sf–gave the REIT $45.8 million in net proceeds, more than half of it going to pay off mezzanine debt, while the rest is squirreled away to pay for tenant improvements.

Grilled about making up five quarters of unpaid preferred stock dividends, Patterson said in a recent earnings conference call the REIT prefers to have cash on hand for tenant improvements expected when IBM vacates 280,000 sf at 330 N. Wabash Ave. The computer giant, which pays $9.5 million a year in rent, is expected to move in 2006.

“We need to find a way to lease that building, and we need to have the reserves to do it,” Patterson says. “We are in the business of paying dividends, but we want to get into a position of paying them out of cash flow from the properties.”

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