CHICAGO-The Prime Group Realty Trust, based here, has purchased a $120 million membership interest in Extended Stay Hotels. The Lightstone Group, based in Lakewood, NJ, acquired the Extended Stay Hotels last month for $8 billion from affiliates of the Blackstone Group. The acquisition included 687 hotels with approximately 76,000 rooms in 44 states and Canada.

Prime Group, an affiliate of The Lightstone Group, has a 12% preferred dividend rate per annum that is payable monthly, is entitled to receive a 15.1% residual profits interest and had a liquidation preference of $120 million, according to a press release from Prime Group. Representatives from Prime Group did not return phone calls seeking comment. Prime Group received a $120 million non-recourse loan from Citicorp USA Inc. The loan is until June 10, 2008 and has an interest rate of 4% above LIBOR or 1.5% above Citicorp’s base interest rate.

Equity investors involved in the acquisition in June of Extended Stay Hotels included Arbor Realty Trust, based in Uniondale, NY, and affiliates of seller Blackstone. Arbor Realty Trust is reducing the amount of equity that it will have in the hotels. Approximately $7.4 billion of mortgage and mezzanine financing was secured from Wachovia Bank, National Association and Bear Stearns Commercial Mortgage. There was $210 million of senior preferred equity and approximately $420 million of subordinated equity in two offerings, according to a press release from Arbor Realty Trust. Arbor had originally provided the $210 million of senior preferred equity but is selling off $105 million of it. Arbor will receive 15% interest from the $105 million interest that it is retaining. Arbor had previously received 12% preferred dividend rate per annum on the $210 million equity. Arbor may decide to sell off another $30 million in equity at a later date, according to the released statement. Arbor did not return phone calls seeking comment.

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