Prime Group Realty Trust Reports Fourth Quarter and Year 2007 Results

CHICAGO--(Business Wire)--
Prime Group Realty Trust (NYSE:PGEPRB) (the "Company") announced
its results today for the fourth quarter and year ended
December 31, 2007. Net loss available to common shareholders, after
the allocation of $2.25 million in quarterly dividends to the
preferred shareholders, was $53.6 million or $226.55 per share for the
fourth quarter of 2007 as compared to net income of $56,000 or $0.24
per share for the fourth quarter of 2006. Excluding the non-cash
allocation of losses from the June 2007 investment in a membership
interest in an entity that owns extended-stay hotel properties, fourth
quarter 2007 net loss was $89,000 or $0.38 per share.

Revenue for the fourth quarter of 2007 was $20.5 million, a
decrease of $4.1 million compared to fourth quarter 2006 revenue of
$24.6 million, primarily due to reduced rental income as a result of
the expiration of leases at certain of our properties.

The results of the Company's operations compared to the fourth
quarter of 2006, before minority interest, were affected by:

-- a $50.2 million increase in the non-cash allocation of losses
from investments in unconsolidated joint ventures, primarily
due to the investment in the entity that owns extended-stay
hotel properties,

and the foregoing was partially offset by:

-- a $3.1 million decrease in interest expense primarily due to
the retirement of debt in 2006;

-- a $1.9 million decrease in the amortization of deferred
financing fees attributable to the realization of all deferred
financing costs at the time of debt retirement in 2006; and

-- a $1.4 million decrease in real estate tax expense.

Net loss available to common shareholders, after the allocation of
$9.0 million in annual dividends to the preferred shareholders, was
$53.8 million or $227.48 per share for the year 2007, as compared to
$317,000 or $1.34 per share for the year 2006. Excluding the non-cash
allocation of losses from the investment in the entity that owns
extended-stay hotel properties, net loss was $311,000 or $1.32 per
share.

Revenue for calendar year 2007 was $91.0 million, a decrease of
$6.4 million from 2006 revenue of $97.4 million, primarily due to
reduced rental income as a result of the expiration of two leases at
our 330 N. Wabash Avenue property.

The results of the Company's operations compared to the year 2006,
before minority interest, were affected by:

-- a $40.5 million increase in the non-cash allocation of losses
from investments in unconsolidated joint ventures, primarily
due to the investment in the entity that owns extended-stay
hotel properties,

and the foregoing was partially offset by:

-- a $5.6 million decrease in interest expense in 2007 primarily
due to the retirement of debt in 2006;

-- a $2.2 million decrease in the amortization of deferred
financing fees; and

-- a $1.9 million decrease in depreciation and amortization in
2007 primarily due to the expiration of leases in 2006 at
which time the tenant related assets became fully depreciated.

About Prime Group Realty Trust

Owned by one of the largest private real estate owners in the
country, The Lightstone Group, Prime Group Realty Trust is a
fully-integrated, self-administered, and self-managed real estate
investment trust (REIT) which owns, manages, leases, develops, and
redevelops office and industrial real estate, primarily in
metropolitan Chicago. The Company currently owns 9 office properties
containing an aggregate of 3.4 million net rentable square feet, a
joint venture interest in one office property comprised of
approximately 101,000 net rentable square feet and a membership
interest in an unconsolidated entity which owns 552 extended-stay
hotel properties in operation in 43 U.S. states consisting of
approximately 59,000 rooms and three hotels in operation in Canada
consisting of 500 rooms. It leases and manages approximately
3.4 million square feet comprising all of the wholly-owned properties.
In addition, the Company is also the managing and leasing agent for
the approximately 959,000 square foot property known as The United
Building located at 77 West Wacker Drive in Chicago, Illinois, and the
approximately 1.5 million square foot Citadel Center office building
located at 131 South Dearborn Street in Chicago, Illinois. For more
information about Prime Group Realty Trust, contact the company's
Chicago headquarters at (312) 917-1300 or visit its website at
www.pgrt.com.

About the Lightstone Group

The Lightstone Group is one of the country's largest privately
held real estate companies with interests in residential, office,
retail, hospitality, and industrial real estate assets. The company,
principally through its related operating entities, Prime Retail,
Extended Stay Hotels, and Prime Group Realty Trust, owns a diversified
portfolio of over 687 hotels, 18,000 residential units and
approximately 29 million square feet of office, industrial and retail
properties in 46 states, the District of Columbia, Canada and Puerto
Rico. Headquartered in New York, The Lightstone Group employs
approximately 14,000 staff and professionals and maintains regional
offices in Maryland, South Carolina, Illinois and New Jersey. For more
information on The Lightstone Group, call 800-347-4078 or visit
www.lightstonegroup.com.

Certain statements contained in this press release may constitute
"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.

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PRIME GROUP REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)

Three months Three months
ended ended
December 31 December 31
2007 2006
---------------------------
Revenue:
Rental $ 11,054 $ 13,022
Tenant reimbursements 6,498 8,259
Other property revenues 1,808 2,043
Services Company revenue 1,148 1,247
---------------------------
Total revenue 20,508 24,571

Expenses:
Property operations 7,552 6,640
Real estate taxes 3,459 4,933
Depreciation and amortization 7,700 7,861
General and administrative 1,321 1,306
Services Company operations 853 1,168
---------------------------
Total expenses 20,885 21,908
---------------------------
Operating (loss) income (377) 2,663
(Loss) income from investments in
unconsolidated joint ventures (48,274) 1,949
Interest and other (expense) income (2,309) 839
Interest:
Expense (10,263) (13,330)
Amortization of deferred financing costs (229) (2,146)
---------------------------
Loss from continuing operations before
minority interests (61,452) (10,025)
Minority interests 10,127 12,167
---------------------------
(Loss) income from continuing operations (51,325) 2,142
Discontinued operations, net of minority
interests of $48 and $123 in 2007 and
2006, respectively - (1)
---------------------------
(Loss) income before gain on sales of real
estate and joint venture interests (51,325) 2,141
Gain on sales of real estate and joint
venture interests, net of minority
interests of $(18,651) for 2006 - 165
---------------------------
Net (loss) income (51,325) 2,306
Net income allocated to preferred
shareholders (2,250) (2,250)
---------------------------
Net (loss) income available to common
shareholders $ (53,575) $ 56
===========================

Basic and diluted earnings available to
common shares per weighted-average common
share:
Loss from continuing operations after
minority interests and allocation to
preferred shareholders $ (226.55) $ (0.45)
Discontinued operations, net of minority
interests - -
Gain on sales of real estate and joint
venture interests, net of minority
interests - 0.69
---------------------------
Net (loss) income available per weighted-
average common share of beneficial
interest - basic and diluted $ (226.55) $ 0.24
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PRIME GROUP REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)

Year Year
ended ended
December 31 December 31
2007 2006
---------------------------
Revenue:
Rental $ 49,019 $ 53,067
Tenant reimbursements 31,683 34,480
Other property revenues 6,952 7,043
Services Company revenue 3,359 2,806
---------------------------
Total revenue 91,013 97,396

Expenses:
Property operations 29,892 26,985
Real estate taxes 17,888 20,255
Depreciation and amortization 32,700 34,598
General and administrative 6,210 6,393
Services Company operations 2,835 3,972
---------------------------
Total expenses 89,525 92,203
---------------------------
Operating income 1,488 5,193
Loss from investments in unconsolidated
joint ventures (49,687) (9,145)
Interest and other income 2,961 2,850
Interest:
Expense (36,610) (42,183)
Amortization of deferred financing costs (910) (3,146)
---------------------------
Loss from continuing operations before
minority interests (82,758) (46,431)
Minority interests 37,936 54,943
---------------------------
(Loss) income from continuing operations (44,822) 8,512
Discontinued operations, net of minority
interests of $(2,919) and $45 in 2007 and
2006, respectively 26 -
---------------------------
(Loss) income before gain on sales of real
estate and joint venture interests (44,796) 8,512
Gain on sales of real estate and joint
venture interests, net of minority
interests of $(19,289) for 2006 - 171
---------------------------
Net (loss) income (44,796) 8,683
Net income allocated to preferred
shareholders (9,000) (9,000)
---------------------------
Net loss available to common shareholders $ (53,796) $ (317)
===========================

Basic and diluted earnings available to
common shares per weighted-average common
share:
Loss from continuing operations after
minority interests and allocation to
preferred shareholders $ (227.59) $ (2.06)
Discontinued operations, net of minority
interests 0.11 -
Gain on sales of real estate and joint
venture interests, net of minority
interests - 0.72
---------------------------
Net loss available per weighted-average
common share of beneficial interest -
basic and diluted $ (227.48) $ (1.34)
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PRIME GROUP REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)

December 31 December 31
Assets 2007 2006
---------------------------
Real estate:
Land $ 89,661 $ 90,936
Building and improvements 351,782 345,463
Tenant improvements 60,709 49,662
Furniture, fixtures and equipment 1,098 586
---------------------------
503,250 486,647
Accumulated depreciation (52,857) (31,481)
---------------------------
450,393 455,166
In-place lease value, net 15,035 25,493
Above-market lease value, net 16,396 23,265
---------------------------
481,824 503,924

Property held for sale 3,691 3,740
Investments in unconsolidated entities 87,741 23,658
Cash and cash equivalents 37,893 60,111
Receivables, net of allowance for doubtful
accounts of $1,074 and $402 at December
31, 2007 and 2006, respectively:
Tenant 402 1,018
Deferred rent 9,857 6,200
Other 1,204 2,202
Restricted cash escrows 41,696 43,998
Deferred costs, net 10,939 7,837
Other 639 1,410
---------------------------
Total assets $ 675,886 $ 654,098
===========================

Liabilities and Shareholders' Equity
(Deficit)
Mortgage notes payable $ 564,877 $ 450,547
Mortgage notes payable related to property
held for sale 3,033 3,148
Liabilities related to property held for
sale 165 110
Accrued interest payable 2,106 2,173
Accrued real estate taxes 19,871 21,302
Accrued tenant improvement allowances 10,337 8,849
Accounts payable and accrued expenses 13,102 9,822
Liabilities for leases assumed 3,958 4,962
Below-market lease value, net 7,442 11,868
Dividends payable 2,250 4,500
Other 8,418 7,587
---------------------------
Total liabilities 635,559 524,868
Minority interests:
Operating Partnership 65,040 100,147
Shareholders' equity (deficit):
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
shares issued and outstanding 2 2
Additional paid-in capital 109,039 107,639
Distributions in excess of earnings (133,794) (78,598)
---------------------------
Total shareholders' equity (deficit) (24,713) 29,083
---------------------------
Total liabilities and shareholders' equity
(deficit) $ 675,886 $ 654,098
===========================
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Prime Group Realty Trust
Jeffrey A. Patterson
President and Chief Executive Officer
312/917-1300
or
Paul G. Del Vecchio
Executive Vice President--Capital Markets
312/917-1300

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