Prime Group Realty Trust – ‘8-K’ for 5/6/04 – EX-99.2

On:  Friday, 5/7/04, at 4:40pm ET   ·   For:  5/6/04   ·   Accession #:  1157523-4-4579   ·   File #:  1-13589

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Prime Group Realty Trust 8-K Document                  3     11K 
 2: EX-99.1     Supplemental Data                                     26     86K 
 3: EX-99.2     Press Release                                          7±    30K 

EX-99.2   —   Press Release

                                                                    Exhibit 99.2

Prime Group Realty Trust Reports First Quarter 2004 Results                     

CHICAGO--(BUSINESS WIRE)--May 6, 2004--Prime Group Realty Trust         
(NYSE:PGE) (the "Company") announced its results today for the quarter          
ended March 31, 2004. Net loss available to common shareholders was             
$7.3 million or $0.31 per diluted share for the first quarter of 2004,          
as compared to net income of $12.6 million or $0.80 per diluted share           
reported for the first quarter of 2003. Funds From Operations ("FFO")           
available to common shareholders for the first quarter of 2004 totaled          
$0.13 per diluted share, as compared to $1.21 per diluted share for             
the first quarter of 2003.                                                      
The loss for the quarter included $2.4 million or $0.10 per             
diluted share of losses from the Company's 33 West Monroe Street                
property (the former Arthur Andersen headquarters), which has since             
been sold, and $2.9 million or $0.12 per diluted share of an equity             
accounting allocation of loss related to the Company's joint venture            
interest in Bank One Center.                                                    
Revenue for the first quarter was $35.7 million, a decrease of          
$37.5 million from first quarter 2003 revenue of $73.2 million. The             
decrease was principally a result of lease termination fee income in            
2003 ($29.7 million) and subsequent reduction of revenues ($1.6                 
million) related to the termination of Arthur Andersen's leases at the          
33 West Monroe Street and IBM Plaza properties, revenue earned in 2003          
($4.0 million) from the National City Center office property which was          
sold in June 2003, and revenue earned in 2003 for Bank One Center               
($6.4 million) in which we subsequently sold a 70% joint venture                
interest and no longer consolidate its revenues.                                
The net loss for the first quarter 2004 as compared to the net          
income for the first quarter of 2003 was principally a result of the            
termination fee earned in 2003 from the Arthur Andersen lease                   
terminations, earnings from the operations of Bank One Center and               
National City Center in the 2003 quarter and the Company's share of             
equity accounting loss from its investment in the Bank One Center               
joint venture in the 2004 quarter.                                              
The decrease in FFO is principally due to the reasons discussed         
above for the change in GAAP loss, with the exception of real estate            
depreciation and amortization, which is excluded from expense when              
computing FFO. In addition, for the purposes of computing FFO                   
available to common shareholders per diluted share, the Company                 
included outstanding common shares and common units in its operating            
partnership in arriving at weighted average shares of beneficial                
interest. FFO is a non-GAAP financial measure. The Company believes             
that net income (loss) is the most directly comparable GAAP financial           
measure to FFO and has included a reconciliation of this measure to             
GAAP net income (loss) with this press release.                                 
"We have continued the momentum that we gained in 2003 into this        
first quarter of 2004," states Stephen J. Nardi, the Company's                  
Chairman. "We successfully dealt with the maturing indebtedness on our          
180 North LaSalle Street office building and acquired the fee simple            
title to the property. We also entered into a contract for the sale of          
our 33 West Monroe Street property, which has been a substantial drag           
on our earnings, FFO and cash flow since the termination of the Arthur          
Andersen lease. In conjunction with the sale, which was closed in               
April 2004, we were able to repay the first mortgage debt in full and           
our mezzanine lender agreed to move its security interest in the 33             
West Monroe Street property to our 180 North LaSalle Street property.           
In the first quarter, we continued our leasing successes as executed            
and commenced leases totaled 860,880 rentable square feet--a very busy          
quarter. This included 415,095 rentable square feet of new office               
leases, 109,453 rentable square feet of office lease expansions,                
80,526 rentable square feet of office lease renewals and 23,184                 
rentable square feet of renewed industrial leases. All of these leases          
commence during 2004. It also included 232,622 rentable square feet of          
office renewals and expansions which commence in 2005 or beyond."               

Conference Call Information                                             

Prime Group Realty Trust has scheduled an investor conference call      
for Tuesday, May 11, 2004 at 10:00 a.m. (CDT) to discuss the Company's          
results for the quarter ended March 31, 2004. Investors and interested          
parties may listen to the call via a live webcast accessible on the             
Company's web site at www.pgrt.com. To listen, please register and              
download audio software on the site at least fifteen minutes prior to           
the start of the call. The webcast will be archived on the site until           
June 10, 2004.                                                                  
To participate via teleconference, please call 877-297-1612 at          
least five minutes prior to the beginning of the call. If you are               
calling from outside North America, please call 706-679-7562. A replay          
of the call will be available through Thursday, June 10, 2004 by                
calling 800-642-1687 or 706-645-9291 and referencing Conference ID              
#9164871.                                                                       
In addition to the information provided in this press release, the      
Company publishes a quarterly "Supplemental Financial and Operating             
Statistics" package. The supplemental information package and the               
information contained in this press release can be found on the                 
Company's web site under "Investor Information," and as part of a               
current report on Form 8-K furnished to the Securities and Exchange             
Commission.                                                                     

About the Company                                                       

Prime Group Realty Trust is a fully integrated, self-administered,      
and self-managed real estate investment trust (REIT) that owns,                 
manages, leases, develops, and redevelops office and industrial real            
estate, primarily in metropolitan Chicago. The Company owns 12 office           
properties containing an aggregate of approximately 4.7 million net             
rentable square feet and 30 industrial properties containing a total            
of approximately 3.9 million net rentable square feet. In addition,             
the Company owns 217.4 acres of developable land and joint venture              
interests in three office properties containing an aggregate of 2.8             
million net rentable square feet.                                               

This press release contains certain forward-looking statements          
within the meaning of the Private Securities Litigation Reform Act of           
1995 that reflect management's current views with respect to future             
events and financial performance. The words "will be", "believes",              
"expects", "anticipates" "estimates" and similar words or expressions           
are generally intended to identify forward-looking statements. Actual           
results may differ materially from those expected because of various            
risks and uncertainties, including, but not limited to, changes in              
general economic conditions, adverse changes in real estate markets as          
well as other risks and uncertainties included from time to time in             
the Company's filings with the Securities and Exchange Commission.              

Prime Group Realty Trust          
Consolidated Statements of Operations         
(Dollars in thousands, except per share data)         
(Unaudited)         

                                            Three Months
                                           ended
                                            March 31
                                           2004     2003
                                           -----------------
Revenue:                                                                        
Rental                                               $20,126  $26,218           
Lease termination fees                                   436   29,712           
Tenant reimbursements                                 12,873   15,382           
Other property revenues                                  988    1,488           
Services Company revenue                               1,270      366           
                                           -----------------
Total revenue                                         35,693   73,166           

Expenses:                                                                       
Property operations                                   10,093   11,735           
Real estate taxes                                      8,472   10,180           
Depreciation and amortization                          7,519    9,482           
General and administrative                             2,479    2,320           
Services Company expenses                              1,266      560           
Strategic alternative costs                                -       53           
                                           -----------------
Total expenses                                        29,829   34,330           
                                           -----------------

Operating income                                       5,864   38,836           
Other (expense) income                                (2,633)     642           
Interest:                                                                   
Expense                                           (8,526) (15,299)      
Amortization of deferred financing costs            (564)  (1,622)      
                                           -----------------
(Loss) income from continuing operations before                                 
minority interests                                   (5,859)  22,557          
Minority interests                                       877   (8,358)          
                                           -----------------
(Loss) income from continuing operations              (4,982)  14,199           
Discontinued operations, net of minority interests                              
of $(474) in 2003                                         -      672          
                                           -----------------
(Loss) income before loss on sales of real estate     (4,982)  14,871           
Loss on sales of real estate, net of minority                                   
interests of $2 in 2004                                 (18)       -          
                                           -----------------
Net (loss) income                                     (5,000)  14,871           
Net income allocated to preferred shareholders        (2,250)  (2,250)          
                                           -----------------
Net (loss) income available to common shareholders   $(7,250) $12,621           
                                           =================

Basic and diluted earnings available to common shares                           
per weighted-average common share:                                            
(Loss) income from continuing operations              $(0.31)   $0.76           
Discontinued operations, net of minority interests         -     0.04           
Loss on sales of real estate, net of minority                                   
interests                                                 -        -          
                                           -----------------
Net (loss) income available per weighted-average                                
common share of beneficial interest-basic and                                 
diluted                                              $(0.31)   $0.80          
                                           =================

Prime Group Realty Trust          
GAAP Reconciliation         
of Net (Loss) Income to Funds From Operations (FFO)         
Available to Common Share/Unit Holders          
(Dollars in thousands, except per share data)         
(Unaudited)         

                                            Three Months
                                           Ended
                                            March 31
                                           2004     2003
                                            ----------------
Net (loss) income                                    $(5,000) $14,871           
Adjustments to reconcile to Funds from Operations:                              
Real estate depreciation and amortization           7,187    9,121        
Amortization of costs for leases assumed               72      320        
Share of joint venture adjustments                  4,388      854        
Adjustments for discontinued operations:                                        
Real estate depreciation and amortization              -      555       
Minority interests                                     -      474       
Minority interests                                      (877)   8,358           
                                            ----------------
FFO(1)                                                $5,770  $34,553           
Income allocated to preferred shareholders            (2,250)  (2,250)          
                                            ----------------
FFO available to common share/unit holders            $3,520  $32,303           
                                            ================

FFO available to common share/unit holders per                                  
share/unit of beneficial interest:                                            
Basic and Diluted                               $0.13    $1.21    
                                            ================

Weighted average shares/units of beneficial interest:                           
Common shares                                      23,665   15,675        
Nonvested employee stock grants                         -        6        
Operating Partnership units                         3,076   11,028        
                                            ----------------
Basic                                          26,747   26,747    
                                            ================
Common shares                                      23,671   15,713        
Nonvested employee stock grants                         -        6        
Employee stock options                                 20        -        
Operating Partnership units                         3,076   11,028        
                                            ----------------
Diluted                                        26,767   26,747    
                                            ================

(1) Funds from Operations is a non-GAAP financial measure. Funds        
from Operations ("FFO") is defined as net income (loss), computed in            
accordance with generally accepted accounting principles ("GAAP") plus          
real estate depreciation and amortization, excluding gains (or losses)          
from sales of operating properties, and after comparable adjustments            
for unconsolidated joint ventures and discontinued operations. Funds            
from Operations includes results from discontinued operations,                  
including related revenues, property operations expense, real estate            
taxes expense, provisions for impairment and interest expense. The              
Company computes FFO in accordance with standards established by the            
National Association of Real Estate Investment Trusts ("NAREIT"),               
which may not be comparable to FFO reported by other REITs that do not          
define the term in accordance with the current NAREIT definition or             
that interpret the current NAREIT definition differently than the               
Company.                                                                        
The Company utilizes FFO as a performance measure. The Company          
believes that FFO provides useful information to investors regarding            
the Company's performance as FFO provides investors with additional             
means of comparing the Company's operating performance with the                 
operating performance of its competitors. FFO is not representative of          
cash flow from operations, is not indicative that cash flows are                
adequate to fund all cash needs and should not be considered as an              
alternative to cash flows as a measure of liquidity. The Company                
believes that net income (loss) is the most directly comparable GAAP            
financial measure to FFO.                                                       

Prime Group Realty Trust          
Consolidated Balance Sheets         
(Dollars in thousands, except share data)         
(Unaudited)         

                                       March 31  December 31
                                     2004       2003
                                      ----------------------
Assets                                                                          
Real estate, at cost:                                                           
Land                                             $141,190   $146,805          
Building and improvements                         578,147    624,745          
Tenant improvements                                78,950     85,153          
Furniture, fixtures and equipment                  10,249     10,318          
                                      ----------------------
                                        808,536    867,021
Accumulated depreciation                         (123,776)  (129,381)         
                                      ----------------------
                                        684,760    737,640
Property held for development                      18,958     18,955          
                                      ----------------------
                                        703,718    756,595
Property held for sale (including $19,998 of                                    
restricted cash escrow)                            69,757          -          
Investments in unconsolidated entities              39,557     42,778           
Cash and cash equivalents                           32,732     32,608           
Receivables, net of allowance of $1,077 and $852                                
at March 31, 2004 and December 31, 2003,                                      
respectively:                                                                 
Tenant                                            1,673      2,031        
Deferred rent                                    20,105     19,758        
Other                                             1,256        410        
Restricted cash escrows                             44,017     69,890           
Deferred costs, net                                 19,176     21,079           
Other                                                2,144      3,632           
                                      ----------------------
Total assets                                      $934,135   $948,781           
                                      ======================
Liabilities and Shareholders' Equity                                            
Mortgages and notes payable                       $494,256   $547,920           
Mortgage note payable related to property held                                  
for sale                                           59,250          -          
Bonds payable                                       24,900     24,900           
Liabilities related to property held for sale        2,566          -           
Accrued interest payable                             2,108      1,719           
Accrued real estate taxes                           24,711     31,629           
Accrued tenant improvement allowances                4,776     10,973           
Accounts payable and accrued expenses               10,639     13,067           
Liabilities for leases assumed                      12,470     13,792           
Deficit investment in unconsolidated entity          5,135      5,168           
Dividends payable                                    2,250          -           
Other                                               13,289     14,472           
                                      ----------------------
Total liabilities                                  656,350    663,640           
Minority interests:                                                             
Operating Partnership                              20,924     21,803          
Shareholders' equity:                                                           
Preferred Shares, $0.01 par value; 30,000,000                                 
shares authorized:                                                          
Series B - Cumulative Redeemable Preferred                                
Shares, 4,000,000 shares designated, issued                             
and outstanding                                     40         40       
Common Shares, $0.01 par value; 100,000,000                                   
shares authorized; 23,671,996 and 23,670,522                                
shares issued and outstanding at                                            
March 31, 2004 and December 31, 2003,                                       
respectively                                         236        236         
Additional paid-in capital                        381,273    381,273          
Accumulated other comprehensive loss               (2,016)    (2,917)         
Distributions in excess of earnings              (122,672)  (115,294)         
                                      ----------------------
Total shareholders' equity                         256,861    263,338           
                                      ----------------------
Total liabilities and shareholders' equity        $934,135   $948,781           
                                      ======================

CONTACT: Prime Group Realty Trust                                       
Stephen J. Nardi (Chairman of the Board)              
Richard M. FitzPatrick (Chief Financial Officer)      
312-917-1300                                          

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing		Date		Other Filings
		6/10/04		S-11/A
		5/11/04
Filed on:		5/7/04		10-Q
For Period End:		5/6/04
		3/31/04		10-Q
		12/31/03		10-K
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