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Prime Group Realty Trust Reports Third Quarter 2005 Results.

CHICAGO -- Prime Group Realty Trust (NYSE:PGEPRB) (the "Company") announced its results today for the quarter ended September 30, 2005. Net loss available to common shareholders, after the allocation of $2.25 million to the preferred shareholders, was $0.1 million or $0.34 per share for the third quarter of 2005, as compared to a net loss of $5.1 million or $0.22 per share reported for the third quarter of 2004. Funds From Operations ("FFO") available to common shareholders was $0.12 per share for the third quarter of 2005 as compared to $0.14 per share for the third quarter of 2004.

Revenue for the third quarter was $23.7 million, a decrease of $0.6 million from third quarter 2004 revenue of $24.3 million, principally due to the amortization of the above-market and below-market lease values resulting from the acquisition of the Company on July 1, 2005 by an affiliate of The Lightstone Group (the "Acquisition").

The $5.0 million decrease in net loss was principally the result of the allocation of gains and losses to our parent company, via minority interest, as a result of our recent Acquisition.

The results of our operations, before minority interest, were affected by:

--a $4.7 million increase in depreciation and amortization primarily attributable to the revaluation of our tangible and intangible assets as the result of the Acquisition;

--a $2.0 million increase in property operating expenses primarily due to increased real estate taxes and repairs and maintenance; and

--a $0.7 million increase in the non-cash allocation of losses from investments in unconsolidated joint ventures which are primarily attributable to increased depreciation and amortization related to the revaluation of assets as a result of the Acquisition.

Partially offset by:

--a $1.3 million decrease in strategic alternative costs primarily due to the completion of the Acquisition; and

--a $1.1 million decrease in general and administrative costs as a result of lower salaries and benefits expense and legal costs.

The decrease in FFO results are principally due to the reasons discussed above for the change in GAAP loss, with the exception of (i) real estate depreciation and amortization and (ii) the gain on sale of real estate, both of which are excluded from expense when computing FFO. In addition, for the purposes of computing FFO available to common shareholders per share, after the allocation of $2.25 million to the preferred shareholders, the Company included outstanding common shares and common units in its operating partnership in arriving at the 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.

About the Company

Owned by the Lightstone Group, headquartered in Lakewood, New Jersey, 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 11 office properties containing an aggregate of 4.6 million net rentable square feet, one industrial property comprised of approximately 120,000 square feet, three joint venture interests in office properties totaling 2.8 million net rentable square feet, and approximately 6.3 acres of land suitable for new construction. To learn more, visit the company website at http://www.pgrt.com .

Founded in 1988, the Lightstone Group is ranked among the 25 largest real estate companies in the industry with a diversified portfolio of more than 20,000 residential units as well as office, industrial and retail properties totaling approximately 27 million square feet of space in 28 states and Puerto Rico. The Lightstone Group and its affiliates employ more than 1,000 professionals and maintain regional offices in New York, Maryland, Illinois, Virginia and California. The Lightstone Group has acquired in excess of $2 billion in real estate over approximately the past 20 months.

The 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, "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 amounts)
 (Unaudited)

 Three Months Ended
 September 30
 2005 2004
 ----------------------
Revenue:
Rental $ 13,055 $ 14,098
Tenant reimbursements 8,873 8,474
Other property revenues 946 933
Services Company revenue 814 817
 ----------------------
Total revenue 23,688 24,322

Expenses:
Property operations 6,809 6,157
Real estate taxes 5,682 4,309
Depreciation and amortization 9,540 4,834
General and administrative 1,383 2,507
Services Company operations 474 909
Severance costs 187 337
Strategic alternative costs - 1,316
 ----------------------
Total expenses 24,075 20,369

Operating (loss) income (387) 3,953
Interest and other income 755 539
Loss from investments in unconsolidated
 joint ventures (2,762) (3,449)
Interest:
 Expense (6,529) (6,418)
 Amortization of deferred financing costs - (443)
 Accretion of mortgage notes payable 481 -
 ----------------------
Loss from continuing operations before minority
 interests (8,442) (5,818)
Minority interests 10,599 985
 ----------------------
Income (loss) from continuing operations 2,157 (4,833)
Discontinued operations, net of minority
 interests of $(1,402) and $(261) in 2005 and
 2004, respectively 12 2,001
 ----------------------
Income (loss) before loss on sales of real
 estate 2,169 (2,832)
Loss on sales of real estate, net of minority
 interests of $32 and $2 in 2005 and 2004,
 respectively (1) (17)
 ----------------------
Net income (loss) 2,168 (2,849)
Net income allocated to preferred shareholders (2,250) (2,250)
 ----------------------
Net loss available to common shareholders $ (82) $ (5,099)
 ======================

Basic and diluted earnings available to common
 shares per weighted-average common share:
Loss from continuing operations $ (0.39) $ (0.30)
Discontinued operations, net of minority
 interests 0.05 0.08
Loss on sales of real estate, net of minority
 interests - -
 ----------------------
Net loss available per weighted-average
 common share of beneficial interest -basic
 and diluted $ (0.34) $ (0.22)
 ======================



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

 Nine Months Ended
 September 30
 2005 2004
 ----------------------
Revenue:
Rental $ 39,731 $ 41,332
Tenant reimbursements 26,453 27,204
Other property revenues 2,875 2,747
Services Company revenue 2,807 2,952
 ----------------------
Total revenue 71,866 74,235

Expenses:
Property operations 19,578 18,746
Real estate taxes 16,819 15,823
Depreciation and amortization 19,459 14,367
General and administrative 6,150 7,725
Services Company operations 2,943 2,944
Severance costs 363 337
Strategic alternative costs 10,288 1,316
 ----------------------
Total expenses 75,600 61,258

Operating (loss) income (3,734) 12,977
Interest and other income 2,080 1,542
Loss from investments in unconsolidated
 joint ventures (8,786) (11,297)
Interest:
 Expense (18,571) (19,140)
 Amortization of deferred financing costs (1,267) (1,202)
 Accretion of mortgage notes payable 481 -
 ----------------------
Loss from continuing operations before minority
 interests (29,797) (17,120)
Minority interests 13,572 2,731
 ----------------------
Loss from continuing operations (16,225) (14,389)
Discontinued operations, net of minority
 interests of $(68) and $(218) in 2005 and 2004,
 respectively (10,251) 1,674
 ----------------------
Loss before gain (loss) on sales of real estate (26,476) (12,715)
Gain (loss) on sales of real estate, net of
 minority interests of $(1,148) and $11 in 2005
 and 2004, respectively 9,073 (96)
 ----------------------
Net loss (17,403) (12,811)
Net income allocated to preferred shareholders (6,750) (6,750)
 ----------------------
Net loss available to common shareholders $ (24,153) $ (19,561)
 ======================

Basic and diluted earnings available to common
 shares per weighted-average common share:
Loss from continuing operations $ (1.45) $ (0.89)
Discontinued operations, net of minority
 interests (0.65) 0.06
Gain (loss) on sales of real estate, net of
 minority interests 0.57 -
 ----------------------
Net loss available per weighted-average
 common share of beneficial interest -basic
 and diluted $ (1.53) $ (0.83)
 ======================


The following table represents the unaudited GAAP Reconciliation of
Net Loss to Funds from Operations for the three and nine months ended
September 30, 2005 and 2004 (in thousands, except share and per share
amounts):


 Three Months Ended Nine Months Ended
 September 30 September 30
 2005 2004 2005 2004
 --------------------------------------------

Net income (loss) (1) $ 2,168 $ (2,849) $ (17,403) $ (12,811)
Adjustments to reconcile
 to Funds from Operations
 available to common
 shareholders:
 Real estate depreciation
 and amortization (2) 8,998 4,511 18,265 13,377
 Amortization of costs
 for leases assumed 56 72 194 216
 Joint venture
 adjustments 3,526 4,487 12,618 13,365
 Loss (gain) on sale of
 operating property, net
 of minority interests 1 15 (9,073) 85
Adjustment for
 discontinued operations:
 Real estate
 depreciation and
 amortization (3) - 519 833 5,308
 Loss (gain) on sale
 (included in discontinued
 operations) 3 3 (706) (53)
 Minority interests 1,402 261 68 218
Minority interests (10,599) (985) (13,572) (2,731)
 --------------------------------------------
Funds from Operations (1) 5,555 6,034 (8,776) 16,974
 Income allocated to
 preferred shareholders (2,250) (2,250) (6,750) (6,750)
 --------------------------------------------
Funds from Operations
 available to
 common shareholders $ 3,305 $ 3,784 $ (15,526) $ 10,224
 ============================================

FFO available to common
 share/unit holders
 per share/unit of
 beneficial interest:
Basic and Diluted $ 0.12 $ 0.14 $ (0.58) $ 0.38
 ============================================

Weighted average
 shares/units of
 beneficial interest:
 Common shares 236 23,672 15,851 23,671
 Nonvested employee
 stock grants - 9 4 7
 Operating Partnership
 units 26,488 3,076 10,880 3,076
 --------------------------------------------
 Basic 26,724 26,757 26,735 26,754
 ============================================

 Common shares 236 23,672 15,851 23,671
 Nonvested employee
 stock grants - 9 4 7
 Employee stock options - 8 19 12
 Operating Partnership
 units 26,488 3,076 10,880 3,076
 --------------------------------------------
 Diluted 26,724 26,765 26,754 26,766
 ============================================


(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. FFO includes results from discontinued
 operations, including revenues, property operations expense, real
 estate taxes expense and interest expense. We compute 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 us. We
 utilize FFO as a performance measure. We believe that FFO provides
 useful information to investors regarding our performance as FFO
 provides investors with additional means of comparing our
 operating performance with the operating performance of our
 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. We believe that net income
 (loss) is the most directly comparable GAAP financial measure to
 FFO.

(2) Depreciation and amortization expense for the three months and
 nine months ended September 30, 2005 increased $4.5 million and
 $4.9 million, respectively, due to the increase in the value of
 real estate assets as a result of purchase accounting related to
 the Acquisition.

(3) The real estate depreciation and amortization for discontinued
 operations for the nine months ended September 30, 2005 relates to
 our 208 South LaSalle Street property held for sale. The real
 estate depreciation and amortization for discontinued operations
 for the three and nine months ended September 30, 2004 relates to
 the 208 South LaSalle Street property held for sale, the 33 West
 Monroe Street property that was sold April 16, 2004 and the
 industrial portfolio sold in October and November 2004.

In accordance with SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," net income and gain/(loss) on sales of
real estate for properties sold are reflected in the consolidated
statements of operations as "Discontinued Operations" for all periods
presented.



 Prime Group Realty Trust
 Consolidated Balance Sheets
 (dollars in thousands, except share and per share amounts)
 (Unaudited)

 September 30 December 31
Assets 2005 2004
 ----------------------------
Real estate:
 Land $ 93,719 $ 111,770
 Building and improvements 334,497 443,066
 Tenant improvements 37,923 54,325
 Furniture, fixtures and equipment 520 9,898
 ----------------------------
 466,659 619,059
 Accumulated depreciation (5,460) (94,252)
 ----------------------------
 461,199 524,807
 In-place lease value, net 29,644 -
 Above/below-market lease value, net 26,240 -
 Property under development 1,501 1,588
 ----------------------------
 518,584 526,395

Properties held for sale 52,088 67,133
Investments in unconsolidated entities 116,693 26,088
Cash and cash equivalents 16,269 71,731
 Receivables, net of allowance for
 doubtful accounts of $1,032 and $1,985
 at September 30, 2005 and December 31,
 2004, respectively:
 Tenant 1,606 593
 Deferred rent 896 16,809
 Other 1,261 2,161
Restricted cash escrows 45,343 40,232
Deferred costs, net 10,483 13,441
Other 2,329 2,780
 ----------------------------
Total assets $ 765,552 $ 767,363
 ============================

Liabilities and Shareholders' Equity
Mortgage notes payable $ 398,715 $ 384,855
Mortgage notes payable related to
 properties held for sale 46,248 42,590
Liabilities related to properties held
 for sale 7,889 6,188
Accrued interest payable 1,597 1,324
Accrued real estate taxes 27,579 22,458
Accrued tenant improvement allowances 10,203 4,266
Accounts payable and accrued expenses 5,778 8,695
Liabilities for leases assumed 7,679 9,957
Deficit investment in unconsolidated
 entity - 4,087
Dividends payable - 2,250
Other 7,374 16,115
 ----------------------------
Total liabilities 513,062 502,785
Minority interests:
 Operating Partnership 152,813 19,154
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; 236,483
 and 23,671,996 shares issued and
 outstanding at September 30, 2005 and
 December 31, 2004, respectively 2 236
 Additional paid-in capital 259,455 381,293
 Accumulated other comprehensive income
 (loss) 10 (468)
 Distributions in excess of earnings (159,830) (135,677)
 ----------------------------
Total shareholders' equity 99,677 245,424
 ----------------------------
Total liabilities and shareholders'
 equity $ 765,552 $ 767,363
 ----------------------------
COPYRIGHT 2005 Business Wire
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