UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-–Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-–13589

PRIME GROUP REALTY TRUST

(Exact name of registrant as specified in its charter)

MARYLAND (State or other jurisdiction of incorporation or organization)		36-–4173047 (I.R.S. Employer Identification No.)
330 North Wabash Avenue, Suite 2800, Chicago,
330 North Wabash Avenue, Suite 2800, Chicago, Illinois (Address of principal executive offices)		60611 (Zip Code)
Illinois		60611
(Address of principal executive offices)		(Zip Code)

(312) 917-–1300 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-–accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer, non-accelerated filer and smaller reporting company in Rule 12b-–2 of the Exchange Act. (Check One):

Large Accelerated Filer o Accelerated Filer o Non-–Accelerated Filer þ Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-–2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On ~~November~~May 13, ~~2009~~2010, 236,483 of the registrant’s Common Shares of Beneficial Interest were outstanding.

Prime Group Realty Trust Form 10-–Q

INDEX

	PAGE
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008		3
Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009		3
Consolidated Statements of Operations for the Three Months Ended September 30, 2009 and 2008		4
Consolidated Statements of Operations for the Three Months Ended March 31, 2010 and 2009		4
Consolidated Statements of Operations for the Nine Months Ended September 30, 2009 and 2008		5
Consolidated Statement of Changes in (Deficit) Equity for the Three Months Ended March 31, 2010		5
Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2009		6
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009		6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008		7
Notes to Consolidated Financial Statements		8
Notes to Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures About Market Risk		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
Item 4. Controls and Procedures		25
Item 4. Controls and Procedures		33
PART II: OTHER INFORMATION
Item 1. Legal Proceedings		3426
Item 1A. Risk Factors		3528
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3528
Item 3. Defaults Upon Senior Securities		3528
Item 4. Submission of Matters to a Vote of Security Holders		35
Item 4. Removed and Reserved		28
Item 5. Other Information		3528
Item 6. Exhibits		3629
Signatures		3730
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I—–FINANCIAL INFORMATION


Item 1.		Consolidated Financial Statements.

Prime Group Realty Trust

Consolidated Balance Sheets ~~(dollars in thousands, except share and per share amounts) (Unaudited)~~

	September 30,			December 31,
	2009			2008
Assets
Real estate:
Land	$	76,044		$	81,865
Building and improvements		317,324			334,280
Tenant improvements		54,889			57,799
Furniture, fixtures and equipment		1,267			1,159
		449,524			475,103
Accumulated depreciation		(72,277	)		(61,651	)
		377,247			413,452
In-place lease value, net		6,553			10,445
Above-market lease value, net		8,021			11,901
		391,821			435,798
Cash and cash equivalents		9,874			15,419
Investments in unconsolidated joint ventures		—			6
Receivables, net of allowance for doubtful accounts of $1,415 and $846 at September 30, 2009 and December 31, 2008, respectively:
Tenant		668			1,388
Deferred rent		13,648			13,072
Other		534			1,043
Restricted cash escrows		36,570			37,254
Deferred costs, net		14,241			16,859
Other		1,332			819
Total assets	$	468,688		$	521,658
Liabilities and Equity
Mortgage and notes payable	$	342,302		$	447,871
Accrued interest payable		1,764			2,945
Accrued real estate taxes		24,491			18,244
Accrued tenant improvement allowances		1,019			6,884
Accrued environmental remediation liabilities		8,347			7,839
Accounts payable and accrued expenses		7,411			9,409
Liabilities for leases assumed		2,806			3,279
Below-market lease value, net		3,998			5,450
Other		5,465			13,769
Total liabilities		397,603			515,690
Commitments and contingencies
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 shares issued and outstanding		2			2
Additional paid-in capital		243,688			155,396
Retained deficit		(157,294	)		(149,470	)
Total equity — Prime Group Realty Trust		86,436			5,968
Noncontrolling interest		(15,351	)		—
Total equity		71,085			5,968
Total liabilities and equity	$	468,688		$	521,658

(dollars in thousands, except share and per share amounts)
(Unaudited)


	March 31,			December 31,
	2010			2009
Assets
Real estate:
Land	$	58,864		$	60,129
Building and improvements		209,188			212,196
Tenant improvements		32,319			33,391
Furniture, fixtures and equipment		858			858

		301,229			306,574
Accumulated depreciation		(55,056	)		(53,737	)

		246,173			252,837
In–place lease value, net		1,819			2,388
Above–market lease value, net		453			1,227

		248,445			256,452

Property held for sale, net		70,951			73,746

Cash and cash equivalents		11,440			11,876
Investment in unconsolidated joint venture		—			53
Receivables, net of allowance for doubtful accounts of $1,501 at March 31, 2010 and $1,506 at December 31, 2009:
Tenant		359			217
Deferred rent		10,408			10,539
Other		539			488
Restricted cash escrows		25,067			26,239
Deferred costs, net		12,075			12,777
Other		427			797

Total assets	$	379,711		$	393,184


Liabilities and (Deficit) Equity

Mortgage and notes payable	$	276,830		$	280,607
Mortgage note payable – property held for sale		60,862			61,143
Property held for sale		7,485			8,495
Accrued interest payable		4,128			1,520
Accrued real estate taxes		8,308			12,301
Accrued tenant improvement allowances		494			565
Accrued environmental remediation liabilities		9,898			9,676
Accounts payable and accrued expenses		4,182			5,023
Liabilities for leases assumed		1,961			2,709
Below–market lease value, net		2,563			2,819
Other		4,722			4,596

Total liabilities		381,433			389,454


Commitments and contingencies

Shareholders’ (deficit) 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 shares issued and outstanding		2			2
Additional paid–in capital		243,688			243,688
Retained deficit		(157,939	)		(157,891	)

Total equity – Prime Group Realty Trust		85,791			85,839
Noncontrolling interest		(87,513	)		(82,109	)

Total (deficit) equity		(1,722	)		3,730

Total liabilities and (deficit) equity	$	379,711		$	393,184

See notes to consolidated financial statements.

Prime Group Realty Trust

Consolidated Statements of Operations ~~(dollars in thousands, except per share amounts) (Unaudited)~~

	Three months ended
	September 30,
	2009			2008
Revenue:
Rental	$	10,200		$	11,684
Tenant reimbursements		8,109			7,645
Other property revenues		1,173			1,535
Services Company revenue		258			256
Total revenue		19,740			21,120
Expenses:
Property operations		6,358			6,249
Real estate taxes		4,434			2,502
Depreciation and amortization		6,230			5,581
General and administrative		1,451			1,585
Services Company operations		288			344
Loss on tax indemnification		1,799			—
Total expenses		20,560			16,261
Operating (loss) income		(820	)		4,859
Interest and other expense		(17	)		(494	)
Income from investments in unconsolidated joint ventures		—			1
Interest:
Expense		(5,690	)		(7,475	)
Amortization of deferred financing costs		(287	)		(829	)
Distributions and losses to noncontrolling interest in excess of basis		—			(5,852	)
Loss from continuing operations		(6,814	)		(9,790	)
Discontinued operations		8,129			(2,271	)
Net income (loss)		1,315			(12,061	)
Net (income) loss attributable to noncontrolling interest		(1,667	)		3,621
Net loss attributable to Prime Group Realty Trust		(352	)		(8,440	)
Net income allocated to preferred shareholders, net of noncontrolling interest of $2,230 in 2009 and 2008		(20	)		(20	)
Net loss available to common shareholders	$	(372	)	$	(8,460	)
Basic and diluted earnings (loss) attributable to common shareholders per common share:
Loss from continuing operations	$	(1.87	)	$	(35.69	)
Discontinued operations		0.30			(0.08	)
Net loss attributable to common shareholders per common share — basic and diluted	$	(1.57	)	$	(35.77	)

(dollars in thousands, except per share amounts)

(Unaudited)


	Three months ended
	March 31,
	2010			2009
Revenue:
Rental	$	7,392		$	7,891
Tenant reimbursements		4,602			5,930
Other property revenues		960			1,370
Services Company revenue		136			272

Total revenue		13,090			15,463

Expenses:
Property operations		4,483			5,392
Real estate taxes		2,453			3,489
Depreciation and amortization		4,160			4,226
General and administrative		1,291			2,255
Services Company operations		135			304

Total expenses		12,522			15,666

Operating income (loss)		568			(203	)
Interest and other income		415			5,034
Income from investment in unconsolidated joint venture		36			31
Interest:
Expense		(5,922	)		(6,413	)
Amortization of deferred financing costs		(287	)		(2,756	)

Loss from continuing operations		(5,190	)		(4,307	)
Discontinued operations		(262	)		(4,219	)

Net loss		(5,452	)		(8,526	)
Net loss attributable to noncontrolling interest		5,404			4,050

Net loss attributable to Prime Group Realty Trust		(48	)		(4,476	)
Net income allocated to preferred shareholders, net of noncontrolling interest of $2,230		(20	)		(20	)

Net loss available to common shareholders	$	(68	)	$	(4,496	)


Basic and diluted loss attributable to common shareholders per common share:
Loss from continuing operations	$	(0.28	)	$	(18.85	)
Discontinued operations		(0.01	)		(0.16	)

Net loss attributable to common shareholders per common share– basic and diluted	$	(0.29	)	$	(19.01	)

See notes to consolidated financial statements.

Prime Group Realty Trust

Consolidated ~~Statements~~Statement of ~~Operations (dollars~~Changes in ~~thousands, except per share amounts)~~ (~~Unaudited~~Deficit) Equity

	Nine months ended
	September 30,
	2009			2008
Revenue:
Rental	$	31,266		$	33,348
Tenant reimbursements		23,071			24,235
Other property revenues		3,757			4,634
Services Company revenue		764			861
Total revenue		58,858			63,078
Expenses:
Property operations		18,985			20,168
Real estate taxes		11,798			12,063
Depreciation and amortization		21,395			18,141
General and administrative		5,501			4,937
Services Company operations		923			1,087
Loss on tax indemnification		1,799			—
Total expenses		60,401			56,396
Operating (loss) income		(1,543	)		6,682
Interest and other income		4,965			708
Income (loss) from investments in unconsolidated joint ventures		31			(60,344	)
Provision for asset impairment from unconsolidated joint ventures		—			(5,633	)
Interest:
Expense		(20,459	)		(23,886	)
Amortization of deferred financing costs		(3,957	)		(1,409	)
Recovery of distributions and losses to noncontrolling interest in excess of basis		—			14,222
Distributions and losses to noncontrolling interest in excess of basis		—			(13,315	)
Gain on sales of real estate and joint venture interests		—			39,194
Loss from continuing operations		(20,963	)		(43,781	)
Discontinued operations		38			(2,695	)
Net loss		(20,925	)		(46,476	)
Net loss (income) attributable to noncontrolling interest		13,121			(25,439	)
Net loss attributable to Prime Group Realty Trust		(7,804	)		(71,915	)
Net income allocated to preferred shareholders, net of noncontrolling interest of $6,690 in 2009 and 2008		(60	)		(60	)
Net loss available to common shareholders	$	(7,864	)	$	(71,975	)
Basic and diluted earnings (loss) attributable to common shareholders per common share:
Loss from continuing operations	$	(33.25	)	$	(304.25	)
Discontinued operations		—			(0.10	)
Net loss attributable to common shareholders per common share — basic and diluted	$	(33.25	)	$	(304.35	)

For the three months ended March 31, 2010
(dollars in thousands, except for per share amounts)
(Unaudited)


	Series B				Additional					Non-
	Preferred		Common		Paid–In		Retained			controlling
	Shares		Shares		Capital		Deficit			Interest			Total

Balance at January 1, 2010	$	40	$	2	$	243,688	$	(157,891	)	$	(82,109	)	$	3,730
Net loss		—		—		—		(48	)		(5,404	)		(5,452	)

Balance at March 31, 2010	$	40	$	2	$	243,688	$	(157,939	)	$	(87,513	)	$	(1,722	)

See notes to consolidated financial statements.

Prime Group Realty Trust

Consolidated ~~Statement~~Statements of ~~Changes~~Cash ~~in Equity For the nine months ended September 30, 2009 (dollars in thousands, except for per share amounts) (Unaudited)~~Flows

							(Distributions
	Series B				Additional		in Excess of)			Non-
	Preferred		Common		Paid-In		Retained			controlling
	Shares		Shares		Capital		Deficit			Interest			Total
Balance at December 31, 2008	$	40	$	2	$	155,396	$	(149,470	)	$	—		$	5,968
Stock option expense (1)		—		—		106		—			—			106
Net loss		—		—		—		(7,804	)		(13,121	)		(20,925	)
Series B — preferred share dividends declared ($0.5625 per share)		—		—		—		(20	)		(2,230	)		(2,250	)
Contributions from parent company		—		—		88,186		—			—			88,186
Balance at September 30, 2009	$	40	$	2	$	243,688	$	(157,294	)	$	(15,351	)	$	71,085

(dollars in thousands)
(Unaudited)

(1) Grant of options to Prime Group Realty L.P. employee to acquire a 3.5% ownership interest in Prime Office Company LLC.


	Three months ended March 31,
	2010			2009
Operating activities
Net loss	$	(5,452	)	$	(8,526	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of mortgage notes payable		(16	)		(253	)
Amortization of above/below–market lease value (included in rental revenue)		868			986
Amortization of in–place lease value		770			1,881
Provision for doubtful accounts		299			98
Gain on sale of real estate		(46	)		—
Depreciation and amortization		4,893			9,862
Net equity in income from investments in unconsolidated joint ventures		(36	)		(31	)
Net changes in operating assets and liabilities:
Accounts receivable		(483	)		(194	)
Other assets		386			423
Accrued interest payable		2,633			674
Accrued real estate taxes		(5,148	)		(392	)
Accounts payable and accrued expenses		(928	)		108
Other liabilities		434			(5,449	)
Distribution as a return on investment from unconsolidated joint venture		89			37

Net cash used in operating activities		(1,737	)		(776	)

Investing activities
Capital expenditures for real estate and equipment		(297	)		(3,044	)
Proceeds from sales of real estate		4,003			—
Change in restricted cash escrows		2,565			3,384
Leasing costs (includes lease assumption costs and leasing commissions)		(954	)		(202	)

Net cash provided by investing activities		5,317			138

Financing activities
Financing costs		—			(65	)
Repayment of mortgages and notes payable		(4,016	)		(1,946	)
Dividends paid to Series B–preferred shareholders		—			(2,250	)
Contributions from parent company		—			3,614

Net cash used in financing activities		(4,016	)		(647	)

Net decrease in cash and cash equivalents		(436	)		(1,285	)
Cash and cash equivalents at beginning of period		11,876			15,419

Cash and cash equivalents at end of period	$	11,440		$	14,134


Supplemental information:
Interest paid	$	4,166		$	7,385

See notes to consolidated financial statements.

Prime Group Realty Trust

Consolidated Statements of Cash Flows (dollars in thousands) (Unaudited)

	Nine months ended
	September 30,
	2009			2008
Operating activities
Net loss	$	(20,925	)	$	(46,476	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Accretion of mortgage notes payable		(652	)		(853	)
Amortization of above/below-market lease value (included in rental revenue)		2,592			2,249
Amortization of in-place lease value		3,892			3,663
Provision for doubtful accounts		626			94
Gain on sales of real estate and unconsolidated joint venture interests		—			(39,700	)
Gain on earnest deposit from cancellation of sale of real estate		(5,339	)		—
Depreciation and amortization		21,952			16,818
Provision for asset impairment		6,860			1,600
Provision for asset impairment from unconsolidated joint ventures		—			5,633
Gain on extinguishment of debt		(8,323	)		—
Net equity in (income) loss from investments in unconsolidated joint ventures		(31	)		60,344
Recovery of distributions and losses to noncontrolling interest in excess of basis		—			(14,222	)
Distributions and losses to noncontrolling interest in excess of basis		—			13,315
Net changes in operating assets and liabilities:
Accounts receivable		(266	)		(4,869	)
Other assets		(522	)		(457	)
Accrued interest payable		1,586			41
Accrued real estate taxes		6,436			2,936
Accounts payable and accrued expenses, including environmental remediation liabilities		583			(2,027	)
Other liabilities		(2,246	)		(1,219	)
Distribution as a return on investment from unconsolidated joint venture		37			—
Net cash provided by (used in) operating activities		6,260			(3,130	)
Investing activities
Capital expenditures for real estate and equipment		(9,743	)		(16,013	)
Proceeds from sales of real estate and unconsolidated joint venture interests		—			101,099
Change in restricted cash escrows		(2,036	)		(2,812	)
Leasing costs (includes lease assumption costs and leasing commissions)		(870	)		(1,594	)
Net cash (used in) provided by investing activities		(12,649	)		80,680
Financing activities
Financing costs		(172	)		(7,434	)
Proceeds from mortgages and notes payable		—			149,600
Repayment of mortgages and notes payable		(2,820	)		(259,588	)
Dividends paid to Series B-preferred shareholders		(2,250	)		(6,750	)
Dividends paid to common shareholder		—			(160	)
Contributions from parent company		6,086			38,609
Distributions paid to common unit holder		—			(17,841	)
Net cash provided by (used in) financing activities		844			(103,564	)
Net decrease in cash and cash equivalents		(5,545	)		(26,014	)
Cash and cash equivalents at beginning of period		15,419			37,893
Cash and cash equivalents at end of period	$	9,874		$	11,879
Supplemental information:
Interest paid	$	20,712		$	25,500
Income taxes paid		—			25

See notes to consolidated financial statements.

Prime Group Realty Trust
Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)

(continued)

Supplemental cash flow information for net assets sold:

	Nine months ended
	Three months ended
	September 30,
	March 31,
	2009			2008
	2010			2009
Real estate, net	$	—3,830		$	~~33,400~~—
Investments in unconsolidated joint ventures		—			21,759
Deferred costs, net		157			—
Deferred costs, net		—			5
Accrued real estate taxes		(61	)		—
Accrued real estate taxes		—			(1,136	)
Other assets and liabilities, net		31			—
Other assets and (liabilities), net		—			7,371
Net assets sold		3,957			—
Net assets sold		—			61,399
Proceeds from sale of real estate		4,003			—
Proceeds from sale of real estate		—			101,099
Gain on sale of real estate	$	46		$	—
Gain on sales of real estate and unconsolidated joint venture interests	$	—		$	39,700

Supplemental schedule of non-cash activities:

	Nine months ended
	Three months ended
	September 30,
	March 31,
	2009			2008
	2010			2009
Tenant improvement allowances	$	~~141~~120		$	~~1,368~~120
Environmental remediation costs	$	~~901~~—		$	~~5,872~~158
Assignment of interest in unconsolidated joint venture:
Increase in additional paid-in capital	$	82,100		$	—
Decrease in mortgage and notes payable	$	(80,000	)	$	—
Decrease in accounts payable and accrued interest	$	(2,100	)	$	—
Conveyance of real estate in exchange for release from mortgage and notes payable:
Decrease mortgage and notes payable	$	21,251		$	—
Decrease real estate, net		(14,492	)		—
Decrease restricted cash escrows		(1,685	)		—
Decrease accrued interest payable		2,767			—
Other, net		482			—
Gain on early extinguishment of debt	$	8,323		$	—

See notes to consolidated financial statements.

Prime Group Realty Trust

Notes to Consolidated Financial Statements ~~(Unaudited)~~

(Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2009~~2010 are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2009~~2010. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended December 31, ~~2008~~2009 as filed with the United States Securities and Exchange Commission (“SEC”) on ~~March~~April 319, ~~2009~~2010.

On January 1, 2009, we adopted new accounting guidance for noncontrolling interest as issued by the Financial Accounting Standards Board (“FASB”). Application of the new accounting guidance has resulted in the reclassification of amounts previously attributable to minority interest (now referred to as noncontrolling interest) to a separate component of equity on the accompanying consolidated balance sheets. Additionally, net income attributable to noncontrolling interests is shown separately from net income in the consolidated statements of operations.

Prior to the adoption of the new accounting guidance, Prime Group Realty Trust would have been allocated additional losses that now are allocable to noncontrolling interests. As a result of the adoption of the new accounting guidance, losses to noncontrolling interest in excess of basis will no longer be allocated to Prime Group Realty Trust (“PGRT” or the “Company”) but rather will be allocated to Prime Group Realty, L.P. (our “Operating Partnership”) even though the allocation results in a deficit noncontrolling interest balance.

Included in the nine months ended September 30, 2008 consolidated statements of operations prior to the new accounting guidance was effective was $14.2 million in recovery of distributions and losses to noncontrolling interest in excess of basis, which was related to the recovery of losses previously recognized in 2007. Additionally, the $5.9 million and $13.3 million, for the three and nine months ended September 30, 2008, respectively, in distributions and losses to noncontrolling interest in excess of basis represents 2008 losses resulting in a deficit position in the noncontrolling interest balance. At that time, losses in excess of the noncontrolling interest basis were charged to operations as a result of the noncontrolling interest holder having no contractual obligation to return such amounts, to fund operations or to restore any capital deficits.

The following pro forma condensed statements of operation are presented as if the new accounting guidance was not effective during the current period (dollar in thousands, except per share amounts):

	Pro forma
	Three months			Nine months
	ended			ended
	September 30,			September 30,
	2009			2009
Net income (loss) attributable to Prime Group Realty Trust	$	1,315		$	(20,925	)
Net income allocated to preferred shareholders		(2,250	)		(6,750	)
Net loss attributable to common shareholders	$	(935	)	$	(27,675	)
Pro forma earnings attributable to common shareholders per common share — basic and diluted:
Net loss attributable per common share — basic and diluted	$	(3.95	)	$	(117.03	)

1. Basis of Presentation (continued)

We have corrected immaterial prior year errors in the current year financial statements. We believe these corrections do not have a material impact on our current period or prior year financial statements.

Certain amounts in the prior period financial statements presented have been reclassified to conform to the current year presentation.

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

As of ~~September~~March 3031, ~~2009~~2010, we have one primary reportable segment consisting principally of our ongoing ownership and operation of ~~eight~~seven office properties, and a joint venture interest in one office property located in Phoenix, Arizona ~~(which is leased through operating leases to unrelated third parties)~~.

2. Formation and Organization

Prime Group Realty Trust (“PGRT” or the “Company”), a Maryland real estate investment trust (“REIT”), is a self-administered and self-managed REIT as defined in the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, generally we will not be subject to federal income tax to the extent we distribute at least 90% of ~~out~~our REIT taxable income to our shareholders.

As of ~~September~~March 3031, ~~2009~~2010, Prime Office Company LLC (“Prime Office”), a subsidiary of The Lightstone Group (“Lightstone”), owned 100.0%, or 236,483 common shares of PGRT and 99.1%, or 26,488,389 of the outstanding common units in ~~our~~Prime Group Realty, L.P. (our “Operating Partnership”). The ownership of 99.1% represents the noncontrolling interest reflected in the consolidated balance sheets. PGRT owns 0.9%, or 236,483, of the outstanding common units and all of the 4.0 million outstanding preferred units in the Operating Partnership, and remains the sole general partner of the Operating Partnership and thus consolidates the Operating Partnership and its wholly-owned subsidiaries for financial reporting purposes. There are 4.0 million shares outstanding of our Series B Cumulative Redeemable Preferred Shares (the “Series B Shares”) that trade on the New York Stock Exchange (“NYSE”).

~~These~~Each ~~financial~~preferred ~~statements also included PGRT’s wholly-owned subsidiary PGRT ESH, Inc. (“PGRT ESH”). On September 24, 2009,~~ and ~~effective~~common ~~July 16,~~unit ~~2009, PGRT ESH assigned its sole asset, its membership interest in BHAC Capital IV, L.L.C. (“BHAC”) an entity which owns 100%~~ of ~~Extended~~ ~~Stay Hotels, Inc. (“ESH”), to an affiliate of~~ the ~~Company’s~~Operating ~~Chairman~~Partnership ofentitles the ~~Board~~owner ~~and Prime~~thereof ~~Office. In connection with the transaction, PGRT ESH was released from its obligations under~~to ~~the~~receive ~~loan~~distributions from ~~Citicorp USA, Inc. which encumbered~~ the ~~membership~~Operating ~~interest~~Partnership. ~~See~~Dividends ~~Note~~declared 4or —paid ~~Mortgage Notes~~to ~~Payable~~holders —of to our common ~~consolidated~~shares ~~financial~~and ~~statements~~preferred ~~included~~shares inare ~~this~~based ~~report~~upon ~~for further information. For~~ the ~~three~~distributions ~~and~~received ~~nine~~by ~~months~~us ~~ended~~with ~~September 30,~~respect ~~2009 and 2008, amounts included in~~to the ~~consolidated~~common ~~statements~~units ofand ~~operations~~preferred ~~related~~units towe ~~PGRT~~own ~~ESH~~in ~~were~~the ~~losses~~Operating ~~of $366, $7,688, $2,556, and $73,049, respectively~~Partnership.

~~Each~~These ~~preferred~~financial ~~and~~statements ~~common~~also ~~unit~~included ofPGRT’s ~~the~~wholly-owned ~~Operating~~subsidiary ~~Partnership~~PGRT ~~entitles~~ESH, ~~the~~Inc. (“PGRT ~~owners~~ESH”). ~~thereof~~On toSeptember 24, 2009, and effective July 16, 2009, PGRT ESH assigned its sole ~~receive~~asset, ~~distributions~~membership ~~from~~interests ~~the~~in ~~Operating~~BHAC ~~Partnership~~Capital IV, L.L.C. ~~Dividends~~(“BHAC”) ~~declared~~an orentity ~~paid~~which toowns ~~holders~~100% of ~~our~~ ~~common~~Extended ~~shares~~Stay ~~and~~Hotels, ~~preferred~~Inc. ~~shares~~(“ESH”), ~~are~~to ~~based~~an ~~upon~~affiliate of the ~~distributions~~Company’s ~~received~~Chairman byof usthe Board and Prime Office. In connection with ~~respect~~the totransaction, PGRT ESH was released from its obligations under the loan from Citicorp USA, Inc. which encumbered the ~~common~~membership ~~units~~interests. ~~and~~For ~~preferred~~the ~~units~~three wemonths ~~own~~ended March 31, 2009, amounts included in the ~~Operating~~consolidated ~~Partnership~~statements of operations related to PGRT ESH was a loss of $4.4 million.

~~3. Impact of Recently Issued Accounting Standards~~8

In June 2009, the FASB issued the new Accounting Standards Codification (“ASC”) as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with U.S. GAAP for SEC registrants. The ASC is not intended to change or alter existing U.S. GAAP and is effective for financial statements issued for fiscal years and interim periods ending after September 15, 2009. ASC did not have a material impact on our consolidated financial statements.

3. Impact of Recently Issued Accounting Standards ~~(continued)~~

We adopted the provisions of the FASB Staff Position (“FSP”) relating to Fair Value Measurements and Disclosures onas ~~January~~of June 130, 2009. ~~for~~This ~~non-financial~~FSP provides guidance on estimating the fair value of assets and liabilities in the current economic environment and reemphasizes that ~~are~~the ~~recognized~~objective orof ~~disclosed~~a at fair value inmeasurement remains the ~~financial~~price ~~statements~~that onwould be received to sell an asset or paid to transfer a ~~recurring~~liability ~~basis~~at the measurement date. The implementation of this FSP did not have a material impact on our financial position or results of ~~operations~~ ~~other than requiring expanded disclosures~~operations.

The new accounting guidance related to business combinations as issued by the FASB was effective for us for business combinations with an acquisition date on or after January 1, 2009. The new accounting guidance broadens the previous guidance extending its applicability to all transactions and other events in which one entity obtains control over one or more other businesses. The new accounting guidance also broadens the fair value measurement and recognition of assets acquired, liabilities assumed, and interests transferred as a result of business combinations; and acquisition related costs will generally be expensed rather than included as part of the basis of the acquisition. This Statement expands required disclosures to improve the ability to evaluate the nature and financial effects of business combinations. The adoption did not have a material impact on our Company’s financial position or results of operations, but could impact our future financial results to the extent that we acquire significant amounts of real estate, since related acquisition costs will be expensed as incurred compared to prior years’ practice of capitalizing such costs and amortizing them over the estimated useful life of the assets acquired.

We adopted the provisions of a FSP relating to Fair Value Measurements and Disclosures as of June 30, 2009. This FSP provides guidance on estimating the fair value of assets and liabilities in the current economic environment and reemphasizes that the objective of a fair value measurement remains the price that would be received to sell an asset or paid to transfer a liability at the measurement date. The implementation of this FSP did not have a material impact on our financial position or results of operations.

We adopted the provisions of a FSP on Financial Assets as of June 30, 2009. This FSP required disclosures about fair value of financial instruments in interim financial statements, adding to the current requirement to make those disclosures in annual financial statements. This FSP also requires that companies disclose the method or methods and significant assumptions used to estimate the fair value of financial instruments and a discussion of changes, if any, in the method or methods and significant assumptions during the period. The implementation of this FSP did not have a material impact on our financial position or results of operations other than requiring expanded disclosures.

In May 2009, the FASB issued new accounting guidance related to subsequent events. The new accounting guidance is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The new accounting guidance requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The new accounting guidance is effective for the periods ended on and after June 30, 2009. We have adopted the provisions of the new accounting guidance and have provided the new disclosures as required.

4. Mortgage Notes Payable

~~BHAC~~Continental ~~Capital~~Towers IVLoan Default. A subsidiary of the Company, Continental Towers, L.L.C. (“CT ~~On June 29~~LLC”), ~~2007,~~is ~~through~~the ~~our~~owner ~~wholly-owned~~of ~~qualified~~Tower ~~REIT subsidiary PGRT ESH~~I, weTower ~~obtained~~III aand ~~$120.0 million~~the ~~non-recourse~~Commercium ~~loan~~at (the ~~“Citicorp~~Continental ~~Loan”)~~Towers ~~from~~Complex in ~~Citicorp~~Rolling ~~USA~~Meadows, ~~Inc.~~ Illinois (the “~~Citicorp~~CT Property”). The ~~loan~~CT ~~was~~Property ~~interest~~is ~~only~~currently ~~and~~encumbered ~~accrued~~by ~~interest at~~ a ~~variable rate of 4.0%~~ ~~above~~first ~~the~~mortgage ~~London~~loan ~~Interbank~~from ~~Offered~~CWCapital ~~Rate~~LLC (“~~LIBOR~~Lender”) orin ~~1.50%~~the ~~above~~principal ~~Citicorp’s~~amount ~~base~~of ~~interest~~$73.6 million ~~rate, as~~(the ~~selected~~“CT ~~by PGRT ESH from time to time~~Loan”). ~~The~~A ~~loan~~separate ~~had~~subsidiary ~~a maturity date~~ of ~~June 10~~the Company, ~~2008~~Continental ~~and~~Towers ~~was guaranteed~~Associates ~~by an affiliate of Lightstone~~III, ~~Lightstone Holdings~~ LLC (“~~Lightstone Holdings~~CTA III”), ~~and~~is ~~our~~the ~~Chairman~~owner of ~~the Board~~Tower ofII ~~Trustees~~at ~~(“Board”),~~the ~~Mr. David~~Continental ~~Lichtenstein~~Towers Complex (the “~~Guarantors~~CTA III Property”),. ~~both of whom are affiliates~~The ofCTA ~~our~~III ~~parent~~Property ~~company.~~is ~~The~~currently ~~loan~~encumbered ~~was~~by ~~non-recourse~~a tofirst ~~PGRT~~mortgage ~~ESH~~loan ~~and~~from isLender ~~secured~~in ~~by,~~the ~~among other~~principal ~~things,~~amount ~~a pledge~~ of ~~PGRT~~$41.4 million ~~ESH’s~~(the ~~membership~~“CTA ~~interest~~III ~~in BHAC~~Loan”).

11On February 26, 2010, CTA III informed the Lender that it is in default under the CTA III Loan because the cash flow from the CTA III Property is not sufficient to pay the required escrows and debt service payments on the CTA III Loan. On the same day, CT LLC acknowledged to the Lender that the CT Loan is in default because it is cross-defaulted with the CTA III Loan. On March 5, 2010, the Company received notices from the Lender accelerating the maturity dates of both the CT Loan and CTA III Loan. At March 31, 2010, the carrying value of the Continental Towers complex was $64.5 million which is less than the debt balance of $115.0 million. CT LLC and CTA III are currently in discussions with the Lender regarding a possible deed in lieu of foreclosure transaction. If we execute a deed in lieu of foreclosure with the Lender, then the difference between the current loan balance and the carrying value of the property would be recognized as a gain on extinguishment of debt.

The CT Loan and the CTA III Loan are non-recourse to their respective borrowers, subject to customary non-recourse carve-outs, including but not limited to, certain environmental matters, fraud, waste, misapplication of funds, various special purpose entity covenants, the filing of a voluntary bankruptcy and other similar matters, which non-recourse carve-outs have been guaranteed by our Operating Partnership. The Company is currently not aware of the occurrence of any event that would constitute a violation of the non-recourse carve-out provision of either loan.

4. Mortgage Notes Payable (continued)

~~Effective~~Brush ~~June~~Hill Office Court Loan Default. The first mortgage loan on our Brush Hill Office Court property matured on January 101, ~~2008~~2010. This loan is non-recourse, ~~PGRT~~subject ~~ESH~~to ~~extended~~customary non-recourse carve-outs. On January 14, 2010, our subsidiary which owns Brush Hill Office Court was notified by the ~~maturity~~loan ~~date~~servicer ofthat the ~~Citicorp~~loan ~~Loan~~had ~~from June 10,~~matured ~~2008~~and ~~until~~that ~~June~~the borrower is in default. As of March 1531, 2010, ~~2009~~the principal amount of approximately $7.44 million ~~The~~has ~~interest~~not ~~rate~~been ~~for~~paid by the ~~extension~~borrower. ~~was~~This property atis ~~PGRT~~generating ~~ESH’s~~positive ~~election~~cash flow and we continue to make the debt service payments on this (loan. We have reached a~~) one~~ ortentative ~~three-month~~agreement ~~LIBOR~~with ~~plus~~the 6%lender oron ~~(b)~~this loan to extend the maturity date to April 2011 subject to the ~~lender’s~~finalization ~~base~~and ~~rate~~execution ~~plus~~of 4%the ~~per~~loan ~~annum~~extension documents. A default on the Brush Hill Office Court property loan does not cause a default on any of the Company’s other loans.

InNo ~~January~~capitalization of interest occurred in the three months ended March ~~2008~~31, ~~PGRT~~2010 ~~ESH~~and ~~was~~2009. ~~informed~~In addition, ~~that~~Prime ~~BHAC~~Office, ~~was~~through ~~indefinitely~~a ~~suspending~~capital ~~distributions~~contribution on to the ~~membership~~Company, ~~units~~repaid ~~held~~$1.5 million byof principal on the PGRT ESH. ~~After~~loan ~~that~~during ~~time~~the three months ended March 31, ~~the~~2009. ~~debt~~Prime ~~service~~Office also paid $2.1 million in interest and other fees on the ~~non-recourse~~ ~~Citicorp~~PGRT ~~Loan~~ESH ~~were~~loan ~~funded~~for bythe ~~capital~~three ~~contributions~~months ~~from~~ended March 31, ~~our~~2009. ~~parent~~The ~~company,~~Company ~~Prime Office,~~was toreleased from its obligation under the ~~Company~~PGRT ~~and,~~ESH inloan ~~turn~~effective July 16, to2009 ~~PGRT~~(see ~~ESH~~Note 2 — Formation and Organization).

On November 5, 2008, PGRT ESH entered into an amendment to the Citicorp Loan documents dated as of October 31, 2008, modifying various terms of the Citicorp Loan. Pursuant to this amendment, the interest rate of the Citicorp Loan was increased to LIBOR plus 10%. On April 30, 2009, PGRT ESH entered into another amendment to the Citicorp Loan documents modifying certain terms of the Citicorp Loan. Pursuant to this amendment, the date for making any further required principal repayments on the loan was extended from April 30, 2009 until the maturity date of the loan on June 15, 2009. In addition, Citicorp further agreed not to exercise any of its rights and remedies under the Citicorp Loan documents relating to the repayment of the loan and certain specified covenant defaults through July 15, 2009. On June 16, 2009, ESH filed for Chapter 11 bankruptcy protection.

On September 18, 2009, with a transaction effective date of July 16, 2009, PGRT ESH assigned its membership interest in BHAC to LSG-ESH LLC (“LSG-ESH”), an affiliate of the Company’s Chairman of the Board and our parent company, Prime Office. In connection with the transaction, PGRT ESH was released from liability for the obligations under the Citicorp Loan. Due to the related party nature of the transfer of the BHAC interest, including the assumption of the obligations under the Citicorp Loan, this transaction was approved unanimously by our independent trustees and we recorded this transaction as an increase to additional paid-in capital and a reduction of mortgage and notes payable of $80.0 million and a reduction in accrued financing fees included in accounts payable and accrued expenses of $2.1 million.

800-810 Jorie Boulevard. On October 20, 2008, we received a notice of default from the special servicer of the non-recourse mortgage note on our 800-810 Jorie Boulevard property. Due to the property generating negative cash flows, debt service payments were discontinued as of September 1, 2008. The default on the Jorie Boulevard loan did not cause a default on any of the Company’s other loans. On July 28, 2009, we conveyed the Jorie Boulevard property to the lender in exchange for a release of the loan. The Company recorded a gain on extinguishment of $8.3 million which is included in discontinued operations on the consolidated statement of operations in the third quarter of 2009 representing the difference between the extinguished loan balance and accrued interest and the carrying value of the property.

Total interest paid on mortgage notes payable was $20.7 million and $25.5 million for the nine months ended September 30, 2009 and 2008, respectively. No capitalization of interest occurred in the nine months ended September 30, 2009 and 2008. In addition, Prime Office, through a capital contribution to the Company, repaid $1.5 million and $30.0 million of principal on the PGRT ESH loan during the nine months ended September 30, 2009 and 2008, respectively. Prime Office also paid $4.6 million and $8.6 million in interest and other fees on the PGRT ESH loan for the nine months ended September 30, 2009 and 2008, respectively.

5. Discontinued Operations

~~Net~~On ~~income (loss)~~February ~~for~~1, ~~properties~~2010, ~~sold~~the orCompany ~~properties~~completed ~~held~~the ~~for~~ sale ~~are reflected in the consolidated statements~~ of ~~operations~~its as7100 ~~discontinued~~Madison ~~operations~~Avenue inproperty ~~our September 30, 2009 interim consolidated financial statements and~~ for ~~all periods presented. Below is~~ a sales ~~summary~~price of ~~the~~$4.3 million. ~~results of~~We ~~operations~~received ~~for~~$0.5 million ~~our 800-810 Jorie Boulevard property (conveyed to the lender~~ in ~~exchange~~proceeds ~~for~~net ~~a release~~ of ~~the related loan in July~~$3.5 ~~2009),~~million ~~1051~~used ~~North Kirk Road property (which we sold in May~~to ~~2008),~~retire ~~and~~ the ~~residual effects~~ related todebt ~~properties~~and ~~sold~~recognized ina ~~prior~~gain ~~years~~on ~~(dollars~~sale inof ~~thousands):~~$46 thousand.

	Three months ended						Nine months ended
	September 30,						September 30,
	2009			2008			2009			2008
Revenue	$	118		$	302		$	929		$	1,762
Operating expenses		121			608			1,128			2,333
Operating loss		(3	)		(306	)		(199	)		(571	)
Interest expense, net		(191	)		(365	)		(1,226	)		(1,030	)
Gain on extinguishment of debt		8,323			—			8,323			—
Gain on sale of real estate		—			—			—			506
Provision for asset impairment		—			(1,600	)		(6,860	)		(1,600	)
Net gain (loss) from discontinued operations	$	8,129		$	(2,271	)	$	38		$	(2,695	)

Net loss for properties sold and held for sale are reflected in the consolidated statements of operations as discontinued operations in our March 31, 2010 consolidated financial statements and for all periods presented. Below is a summary of the results of operations for our 180 N. LaSalle Street property (classified as held for sale, see Note 7 — Recent Developments — 2010), our 7100 Madison Avenue property (which we sold in February 2010), our 800-810 Jorie Boulevard property (conveyed to the lender in exchange for a release of the related loan in July 2009), and the residual effects related to properties sold in prior years:


	Three months ended
	March 31,
	2010			2009
	(dollars in thousands)
Revenue	$	4,381		$	4,315
Operating expenses		3,819			7,052

Operating income (loss)		562			(2,737	)
Interest expense, net		(870	)		(1,482	)
Gain on sale of real estate		46			—

Net loss from discontinued operations	$	(262	)	$	(4,219	)

6. Debt Covenants

The financial covenants contained in certain of our loan agreements and guarantee agreements with our lenders include minimum ratios for debt service coverage, ~~as well as~~ minimum net worth levels, and ~~numerous~~ other financial and non-financial covenants (such as, timely issuance of financial statements to lenders). As of ~~September~~March 3031, ~~2009~~2010, we are in compliance with the requirements of these financial and non-financial covenants.

7. Recent Developments

~~2009~~2010

~~Dividends~~Delisting from NYSE. On ~~January~~May 76, ~~2009~~2010, ~~our~~we ~~Board~~filed ~~declared~~ a ~~quarterly~~Form ~~dividend~~8-K onwith the SEC announcing that we delivered notice to the NYSE requesting to voluntarily delist our Series B Shares from the NYSE. We intend to file Form 25 with the SEC in approximately ten (10) days from the date of ~~$0.5625~~the ~~per~~filing of ~~share~~the ~~for~~Form 8-K to voluntarily withdraw from listing with the ~~fourth~~NYSE ~~quarter~~and to withdraw from registration under Section 12(b) of ~~2008~~the ~~dividend~~Securities ~~period~~and Exchange Act of 1934, as amended (the “Exchange Act”). ~~The~~We ~~quarterly~~anticipate ~~dividend~~that ~~had~~the Form 25 will be effective and the Series B Shares will be delisted and cease trading on the NYSE approximately ten (10) days after the filing of the Form 25. We also expect to subsequently file a Form 15 with the SEC to deregister the Series B Shares under ~~record~~Section ~~date~~12(g) of ~~January~~Exchange Act, and to suspend our reporting obligations under Section 13(a) of the Exchange Act. These actions are consistent with our previous disclosures and our obligations under the Agreement and Plan of Merger (the “Merger Agreement”) relating to the July 192005 acquisition and delisting of our common shares (the “Acquisition”), ~~2009~~pursuant to which we agreed to voluntarily file reports under the Exchange Act for five (5) years after the closing of the Acquisition. Upon filing Forms 25 and ~~was~~15 ~~paid~~with onthe ~~January~~SEC, we will become a voluntary filer of reports under the Exchange Act through June 30, ~~2009~~2010 in accordance with our obligations under the Merger Agreement. After the voluntarily delisting of the Series B Shares from the NYSE, we expect that the trading of the Series B Shares will be reported on the OTCQB for so long as we remain a voluntary filer and thereafter in the Pink Sheets with Pink OTC Markets Inc. The Company’s Board of Trustees has approved the delisting from the NYSE and deregistration of the Series B Shares under the Exchange Act in order to save significant costs associated with compliance with these regulatory provisions.

On180 ~~April 8,~~North ~~2009,~~LaSalle ~~July 9,~~Street ~~2009~~Sale. ~~and~~On ~~October~~February 625, ~~2009~~2010, wethe ~~announced~~Company’s ~~that~~entered ~~our~~into ~~Board~~a ~~determined not~~purchase toand ~~declare~~sale aagreement ~~quarterly~~to ~~distribution~~sell onthe ~~our~~180 ~~Series B~~North ~~Shares~~LaSalle ~~for~~Street ~~the~~property ~~first,~~to ~~second~~an ~~and~~entity ~~third~~indirectly ~~quarters~~controlled ofby ~~2009,~~Mr. Michael ~~respectively,~~Silberberg ~~and~~of ~~that~~Nanuet, ~~the~~New ~~Board~~York which was ~~unable~~approved toby ~~determine~~the ~~when~~Company’s weBoard ~~will recommence~~of ~~distributions on our Series B Shares~~Directors. The ~~total~~gross ~~arrearage~~purchase inprice ~~payment~~for ofthis ~~dividends~~property ~~on the Series B Shares~~ is $672.7525 million., ~~The~~subject ~~Board~~to iscustomary pro-rations, ~~also~~credits ~~in the process of considering various financing~~ and ~~other~~ ~~capitalization alternatives for the Company~~adjustments.

The ~~Board’s~~closing ~~decision~~of ~~was~~the ~~based~~sale onwas ~~our~~conditioned ~~current~~upon ~~capital~~the ~~resources~~existing ~~and~~first ~~liquidity~~mortgage ~~needs~~lender ~~and~~consenting ~~the~~to ~~overall~~the ~~negative~~assumption ~~state~~ of the ~~economy~~property’s ~~and~~existing ~~capital~~debt ~~markets.~~by ~~The~~the ~~Board~~purchaser, ~~intends~~unless tothe ~~review~~purchaser notifies the ~~suspension~~Company ofthat ~~our~~the ~~Series B~~purchaser ~~Shares~~has ~~distributions~~elected ~~periodically~~not ~~based~~to onassume the ~~Board’s~~existing ~~ongoing~~debt ~~review~~and ~~of our~~will ~~financial~~instead ~~results,~~obtain ~~capital~~new financing ~~resources~~for ~~and~~the ~~liquidity~~acquisition. ~~needs~~On March 26, ~~and~~2010, the ~~condition~~purchaser ofnotified the ~~economy~~Company ~~and~~they were ~~capital~~electing ~~markets.~~not Weto ~~can~~assume ~~give~~the noexisting ~~assurances~~debt. ~~that~~The ~~distributions~~purchaser onhas ~~our~~deposited ~~Series~~$4.0 Bmillion ~~Shares~~in ~~will~~escrow beto ~~resumed~~secure its obligation to purchase this property, orwhich is now nonrefundable except upon the occurrence of certain customary events, such as a default by the Company. The Company currently estimates that ~~any~~after ~~financing~~closing oradjustments ~~other~~and ~~capitalization~~costs, ~~alternatives~~that it will bereceive ~~satisfactorily~~net proceeds of ~~concluded~~approximately $12.8 million. The Company classified this property as held for sale as of March 31, 2010.

13It is currently contemplated that the closing will occur in May or June 2010. In the event that the purchaser defaults on its obligation to purchase this property, the Company’s sole remedy is to receive the $4.0 million deposited in escrow.

Quarterly Distributions. On March 10, 2010, the Company announced that its Board determined not to declare a quarterly distribution on its Series B Shares for the first quarter of 2010, and that the Board is unable to determine when the Company might recommence distributions on the Series B Preferred Shares. As of March 31, 2010, the total arrearage in dividends on the Series B Preferred Shares was $11.25 million. The Board is also in the process of considering various financing, capitalization, asset sales and other alternatives for the Company.

7. Recent Developments (continued)

~~180~~Termination N.of ~~LaSalle~~Management ~~Street Sale~~Agreement. InWe ~~September 2008,~~were wealso ~~entered~~the ~~into~~asset aand ~~purchase~~development ~~and~~manager ~~sale~~for ~~agreement~~an ~~(as~~approximately ~~amended,~~1.1 million ~~the~~square ~~“Agreement”)~~foot ~~with~~office ~~Younan~~building ~~Properties,~~located ~~Inc.~~at ~~(“Purchaser”)~~1407 ~~whereby~~Broadway ~~Purchaser~~Avenue ~~became~~in New York, ~~obligated~~New toYork, ~~purchase~~which ~~180~~is ~~North~~owned ~~LaSalle~~by ~~Street,~~affiliates ~~Chicago,~~of ~~Illinois~~Lightstone. ~~(the~~This ~~“Property”),~~agreement ~~from~~has been terminated by the ~~subsidiary~~relevant ofLightstone ~~the~~affiliate ~~Company~~effective April 4, ~~180 N~~2010. ~~LaSalle~~We ~~II,~~recognized L$0.~~L.C.~~1 million ~~(“180~~in ~~LLC”)~~fees ~~that~~recorded in ~~owns~~other property revenue for the ~~Property~~three months ended March 31, 2010 and 2009.

~~Pursuant to the terms of the Agreement, the Purchaser was obligated to close the transaction and purchase the Property from 180 LLC on February 18,~~ 2009~~. The Purchaser failed to close by that~~ deadline. On February 19, 2009, 180 LLC sent a letter to the Purchaser stating that the Purchaser was in default under the Agreement and that 180 LLC was terminating the Agreement. Because the Purchaser failed to close the transaction and purchase the Property prior to the February 18, 2009 deadline, under the terms of the agreement, 180 LLC is entitled to retain as liquidated damages the $6.0 million of earnest money that the Purchaser previously deposited with 180 LLC. As a result, we have recorded $5.3 million, net of costs, as other income in our consolidated financial statements. In addition, in the first quarter of 2009, we reinstated depreciation and amortization associated with the property related to the period that it was classified as property held for sale in 2008, which was approximately $3.0 million. In accordance with U.S. GAAP, the Company ceases depreciation and amortization when a property is classified as held for sale.

On180 ~~February 13,~~North ~~2009,~~LaSalle ~~the~~Street ~~Purchaser~~Sale. ~~filed~~In aSeptember 2008, ~~lawsuit~~we ~~against~~entered ~~180~~into ~~LLC~~a ~~seeking~~purchase toand ~~rescind the~~sale ~~Agreement~~agreement ~~and~~(as ~~obtain~~amended, the ~~return~~“Agreement”) ofwith ~~the~~Younan ~~earnest~~Properties, ~~money~~Inc. ~~because~~(“Younan”) ~~the~~whereby ~~Purchaser claims it was impossible~~Younan ~~for~~became itobligated to ~~obtain~~purchase ~~financing~~180 ~~for~~North ~~the~~LaSalle ~~acquisition~~Street, ~~due~~Chicago, toIllinois ~~economic conditions at~~ (the ~~time.~~“Property”), Onfrom ~~July 7,~~the ~~2009,~~subsidiary ~~the~~of ~~judge dismissed~~ the ~~Purchaser’s~~Company, ~~lawsuit~~180 ~~with prejudice~~N. ~~The~~LaSalle ~~Purchaser filed an appeal of this decision on July 10~~II, ~~2009~~L.L.C. In(“180 ~~our~~LLC”) ~~opinion, after consultation with legal counsel, we believe the Purchaser’s appeal is without merit and anticipate~~ that weowns ~~will prevail in~~ the ~~appeal~~Property. This ~~Although~~transaction ~~there~~was ~~can~~unrelated beto ~~no assurances about~~ the ~~eventual~~currently ~~outcome,~~pending we2010 ~~believe the ultimate outcome will not have a material adverse effect on our consolidated financial condition or results of operations~~sale.

Pursuant to the terms of the Agreement, Younan was obligated to close the transaction and purchase the Property from 180 LLC on February 18, 2009. Younan failed to close by that deadline. On February 19, 2009, 180 LLC sent a letter to Younan stating that Younan was in default under the Agreement and that 180 LLC was terminating the Agreement. Because Younan failed to close the transaction and purchase the Property prior to the February 18, 2009 deadline, under the terms of the agreement, 180 LLC was entitled to retain as liquidated damages the $6.0 million of earnest money that Younan previously deposited with 180 LLC. As a result, we have recorded $5.3 million, net of costs, as other income in our consolidated financial statements for the three months ended March 31, 2009. In addition, in the first quarter of 2009, we reinstated depreciation and amortization associated with the Property related to the period that it was classified as property held for sale in 2008, which was approximately $3.0 million. In accordance with U.S. GAAP, the Company ceases depreciation and amortization when a property is classified as held for sale.

~~The United Building Sale.~~ On ~~January~~February 713, ~~2008~~2009, weYounan ~~completed~~filed ~~the~~a ~~sale~~lawsuit ofagainst ~~our~~180 ~~50.0%~~LLC ~~common~~seeking ~~joint~~to rescind the Agreement ~~venture~~and ~~interest~~obtain inthe ~~The~~return ~~United~~of ~~Building~~the ~~located~~earnest atmoney 77because ~~West~~Younan ~~Wacker~~claims ~~Drive~~it inwas ~~Chicago,~~impossible ~~Illinois~~for it to ~~our~~obtain ~~joint~~financing ~~venture~~for ~~partner.~~the ~~The~~acquisition ~~sale~~due ~~price~~to ~~was~~economic ~~$50~~conditions at the time.0 On July ~~million~~7, ~~subject~~2009, tothe ~~customary~~judge dismissed ~~pro-rations~~Younan’s ~~and adjustments~~lawsuit with prejudice. WeYounan ~~recognized~~filed aan ~~gain~~appeal of ~~$29.4~~this decision on July ~~million~~10, 2009. In our opinion, after consultation with legal counsel, we believe that this appeal is without merit and that we ~~used~~will ~~$18~~prevail.~~8 million~~ ofAlthough ~~the~~there ~~net~~can ~~proceeds~~be no assurances about the eventual tooutcome, ~~retire~~we believe the ~~outstanding~~ultimate ~~balance~~outcome will not have a material adverse effect on ~~two~~our consolidated ~~Citicorp~~financial ~~USA,~~condition ~~Inc.~~or ~~(“Citicorp”)~~results ~~mezzanine~~of ~~loans~~operations.

~~330 N. Wabash Avenue Hotel Sale. On March 18, 2008, one of our subsidiaries, 330 LLC,~~12 completed the sale of Floors 2 through 13 of our 330 N. Wabash Avenue property to Modern Magic Hotel, LLC (the “Hotel Buyer”) for the purchase price of $46.0 million. The purchase and sale agreement included a covenant by 330 LLC to perform certain asbestos removal, demolition and pre-construction work on the floors subject to the sale. 330 LLC deposited $10.7 million at closing into construction escrows with the title insurance company and $2.1 million with one of the mortgage lenders to be used for such costs. This work has been completed. These obligations were recorded as a liability and charged against the gain when determining the gain on sale of approximately $9.8 million.

On May 2, 2008, we completed the sale of our 1051 North Kirk Road property. The net proceeds from the sale of $4.1 million were used to retire the outstanding debt on the property. We recognized a gain on sale of $0.5 million in the second quarter of 2008.

800-810 Jorie Boulevard Asset Impairment. We recorded an asset impairment of $1.6 million related to the write-down of this property to its estimated fair value in the third quarter of 2008.

8. Earnings Per Share

The following table sets forth the computation of basic and diluted net loss available per common share for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2009~~2010 and ~~2008~~2009 (dollars in thousands, except for per share amounts):

	Three months ended						~~Nine months ended~~
	September 30,						September 30,
	March 31,
	2009			2008			2009			2008
	2010			2009
Numerator:
Loss from continuing operations attributable to Prime Group Realty Trust	$	(~~424~~46	)	$	(84,~~420~~439	)	$	~~(7,804~~	)	$	~~(71,891~~	)
Net income allocated to preferred shareholders net of noncontrolling interest		(20	)		(20	)		~~(60~~	)		~~(60~~	)
Loss from continuing operations attributable to common shareholders		(~~444~~66	)		(84,~~440~~459	)		~~(7,864~~	)		~~(71,951~~	)
Discontinued operations attributable to common shareholders		72(2	)		(2037	)		—			~~(24~~	)
Net loss attributable to common shareholders	$	(~~372~~68	)	$	(84,~~460~~496	)	$	~~(7,864~~	)	$	~~(71,975~~	)
Denominator — basic and diluted
Common shares		236,483			236,483			~~236,483~~			~~236,483~~
Basic and diluted earnings (loss) attributable to common shareholders per common share:
Loss from continuing operations	$	(10.8728	)	$	(3518.6985	)	$	~~(33.25~~	)	$	~~(304.25~~	)
Discontinued operations		(0.3001	)		(0.0816	)		—			~~(0.10~~	)
Net loss attributable to common shareholders per common share — basic and diluted	$	(10.5729	)	$	(3519.7701	)	$	~~(33.25~~	)	$	~~(304.35~~	)

9. Investments in Unconsolidated Joint Ventures

We have an investment in one unconsolidated joint venture which we account for under the equity method of accounting. ~~Additionally, we had an investment in BHAC which was sold during 2009.~~ ~~The following is a summary of the investments and the amounts reflected in our consolidated financial statements related to this investment.~~

Thistle Landing. We own a 23.1% common interest in Plumcor Thistle, L.L.C., (“Plumcor/Thistle JV”) which owns a 101,006 square foot office building located in Phoenix, Arizona, that opened in late 1999. Our interest at ~~September~~March 3031, ~~2009~~2010 and December 31, ~~2008~~2009 was an equity investment of ~~zero~~$0 and ~~approximately~~ $~~6.0~~53 thousand (included in ~~Investments~~Investment in unconsolidated joint ~~ventures~~venture), respectively. Our share of the venture’s operations was income of approximately $~~31.0~~36 thousand and $~~8.0~~31 thousand for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 and ~~2008~~ 2009, respectively (included in Income ~~(loss)~~ from ~~investments~~investment in unconsolidated joint ~~ventures~~venture). We received cash distributions of approximately $89 thousand and $37.0 thousand during the ~~nine~~three months ended ~~September~~ March 3031, ~~2009.~~2010 Noand ~~distributions~~2009, ~~were received in 2008~~respectively.

Extended Stay Hotels. On June 29, 2007, through our wholly-owned subsidiary, PGRT ESH, we purchased a $120.0 million membership interest in BHAC, an entity which owns 100.0% of ESH, from Lightstone Holdings, LLC, an affiliate of Lightstone. The purchase price was fully-funded with a non-recourse loan from Citicorp. ESH and its affiliates own mid-priced extended-stay hotel properties in the United States and Canada. Because the transaction was with affiliates of Lightstone, the acquisition of the membership interest was approved unanimously by our independent trustees. On June 16, 2009, ESH filed for Chapter 11 bankruptcy protection. BHAC did not file for bankruptcy protection.

9. Investments in Unconsolidated Joint Ventures (continued)

Our interest in BHAC at December 31, 2008 was valued at zero (included in Investments in unconsolidated joint ventures). Our share of BHAC’s operations, assuming a hypothetical liquidation, was zero for the nine months ended September 30, 2009, and a non-cash loss of $60.3 million for the nine months ended September 30, 2008. Prior to the sale of BHAC, we had discontinued applying the equity method of accounting and did not record additional losses as we had no obligation or guarantee to fund such losses.

During the second quarter of 2008, we recorded a provision for asset impairment of $5.6 million. This represented the remaining balance of our investment in the membership interest in BHAC as the impairment was deemed to be other than temporary due to past and expected inability to sustain earnings at a level which would justify the carrying value.

The following tables represent the condensed balance sheet and income statement of BHAC on a historical basis for 2008:

	December 31,
	2008
	(dollars in
	thousands)
Real estate, at cost (net):	$	5,406,059
Other assets		1,024,647
Total assets	$	6,430,706
Mortgage notes and other loans payable	$	7,411,073
Other liabilities		100,491
Total members’ deficit		(1,080,858	)
Total liabilities and members’ deficit	$	6,430,706

	For the nine months
	ended
	September 30,
	2008
	(dollars in
	thousands)
Total revenue	$	675,938
Total expenses		(885,585	)
Net loss	$	(209,647	)

10. Commitments and Contingencies

Legal. ~~The sale of our 208 South LaSalle Street property to Prime/Mansur Investment Partners, LLC (“Prime/Mansur”) closed on December 9, 2005.~~ On October 26, 2005, Prime/Mansur exercised its option to acquire our membership interest in the Plumcor/Thistle JV, and the parties subsequently executed athe purchase and sale agreement for the sale. On December 22, 2005, we terminated the purchase and sale agreement relating to the Plumcor/Thistle JV because Prime/Mansur had failed to obtain our joint venture partner’s consent to the transaction by the December 15, 2005 deadline contained in the agreement. Prime/Mansur subsequently sent us a letter disputing our right to terminate the agreement, to which we replied with a letter reaffirming our right to terminate the agreement. On January 31, 2006, Prime/Mansur filed a lawsuit in the Circuit Court of Cook County, Illinois claiming that our termination of the purchase and sale agreement was not justified. Prime/Mansur requested the court to ~~either~~ grant it either specific performance and order us to convey ~~our~~ our joint venture interest in Plumcor Thistle to Prime/Mansur or damages in the amount of $5.0 million. On September 21, 2009, the judge in the case granted our motion for summary judgment and ruled that Prime/Mansur case had no merit. On March 11, 2010, we received from escrow Prime/Mansur’s ~~may~~$0.1 million orof ~~may~~earnest ~~not~~money. ~~appeal~~Prime/Mansur has appealed the decision and ~~if it does,~~ we intend to to vigorously defend the judge’s decision. IfWe ~~Prime/Mansur does appeal the case, we~~ believe the judge’s decision will not be reversed on appeal and the ultimate outcome will not have a material adverse affect on our consolidated financial condition or results of operations.

~~During 2006, the Internal Revenue Service (“IRS”) began an examination of the income tax~~13 returns for our Operating Partnership for the years ended 2003 and 2004 and 180 N. LaSalle, L.L.C. for the year ended 2004. The IRS concluded its 2003 examination and we have been notified that no adjustments were proposed for the Operating Partnership for that tax year. As a result of its examination of the income tax return for 180 N. LaSalle, LLC for the year ended 2004 the IRS has issued a Notice of Proposed Adjustment. The proposed adjustment would not have a cash effect on us but would decrease the amount of capital loss reported and carried forward on the tax return from the sale of its residual interest it held in a REMIC. We have appealed the adjustment and believe that we have legitimate defenses that the basis in the REMIC, as reported on the tax return, was correct.

10. Commitments and Contingencies (continued)

During 2006, the IRS began an examination of the income tax returns for our Operating Partnership for the years ended 2003 and 2004 and 180 N. LaSalle, L.L.C. for the year ended 2004. The IRS concluded its 2003 examination and we have been notified that no adjustments were proposed for the Operating Partnership for that tax year. As a result of its examination of the income tax return for 180 N. LaSalle, L.L.C. for the year ended 2004, the IRS has issued a Notice of Proposed Adjustment. The proposed adjustment would not have a cash effect on us but would decrease the amount of capital loss reported and carried forward on the tax return from the sale of its residual interest it held in a REMIC. We have appealed the adjustment and believe that we have legitimate defenses that the basis in the REMIC, as reported on the tax return, was correct. The IRS examination of the 2004 Operating Partnership income tax return will remain open until the final IRS ruling on the 2004 180 N. LaSalle, L.L.C. income tax return has been resolved.

In May 2007, we terminated the employment of Nancy Fendley, our former Executive Vice President of Leasing. Ms. Fendley has disputed such termination and, on May 29, 2007, filed a lawsuit against us in the Circuit Court of Cook County, Illinois alleging a breach of her employment agreement and seeking approximately $9.0 million in damages. We believe we have valid defenses to her claims and intend to vigorously contest the lawsuit. Although there can be no assurances about the eventual outcome, we believe the ultimate outcome will not have a material adverse affect on our consolidated financial condition or results of operations.

In ~~addition, and as discussed in Note 7 — Recent Developments, in~~ connection with the purchase and sale agreement for the proposed sale of our 180 N. LaSalle Street property that our subsidiary, 180 LLC, entered into in August 2008 and later terminated because of the failure of ~~the~~Younan ~~Purchaser~~ to timely close, one of the purchasers under the agreement (YPI LaSalle Owner, LLC, a subsidiary of ~~the original Purchaser~~Younan) filed a lawsuit on February 13, 2009 against 180 LLC in the Circuit Court of Cook County, Illinois, Chancery Division. In the lawsuit, ~~the~~Younan ~~Purchaser~~claimed ~~claims~~ that the purchase agreement should be rescinded due to the doctrine of impossibility and impracticability and that 180 LLC should return the $6.0 million earnest money to ~~Purchaser~~Younan because it was impossible for ~~Purchaser~~ Younan to obtain financing and that therefore it should be excused from closing, even though the purchase agreement contained no financing contingency. On July 7, 2009, the judge dismissed ~~the Purchaser~~Younan’s lawsuit with prejudice. ~~The~~Younan ~~Purchaser~~ filed an appeal of this decision on July 10, 2009. In our opinion, after consultation with legal counsel, we believe that this appeal is without merit and that we will prevail ~~in it~~. Although there can be no assurances about the ~~eventual~~ eventual outcome, we believe the ultimate outcome will not have a material adverse affect on our consolidated financial condition or results of operations.

17On October 20, 2009, Mr. Dean Konstand filed a shareholder derivative complaint in the Circuit Court of Cook County, Illinois, Chancery Division, against Lightstone, Prime Office and the members of our Board in place immediately after the closing of our acquisition by Lightstone, consisting of David Lichtenstein, Jeffrey A. Patterson, John M. Sabin, Michael M. Schurer, Shawn R. Tominus, Bruno De Vinck and George R. Whittemore. In this case, the plaintiff is alleging that the common dividends declared by the Board in July 2005 and February 2006 constituted a breach of the Board’s duty of loyalty and care, and good faith and fair dealing, to the Company and the holders of the Series B Shares, and that this breach was directed by Lightstone and Prime Office. The plaintiff requests for the benefit of the Company that the court grant a judgment in favor of the Company against all of the other defendants in the amount of $106 million, the amount of the dividends that were declared on the foregoing dates. We are incurring the costs of defense of this action as it relates to the members of our Board under our indemnification obligations with our Board members. The Defendants have filed a Motion to Dismiss this action and briefs have been filed by the parties. The costs of defense of the Board members may be covered in whole or in part by our directors and officers liability insurance, subject to coverage limits and applicable deductibles. Although there can be no assurances about the eventual outcome, we believe after consultation with legal counsel, the ultimate outcome will not have a material adverse affect on our consolidated financial condition or results of operations.

10. Commitments and Contingencies (continued)

On October 20, 2009, Mr. Dean Konstand filed a shareholder derivative complaint in the Circuit Court of Cook County, Illinois, Chancery Division, against us, Lightstone, Prime Office and the members of our Board in place immediately after the closing of our acquisition by Lightstone, consisting of David Lichtenstein, Jeffrey A. Patterson, John M. Sabin, Michael M. Schurer, Shawn R. Tominus, Bruno De Vinck and George R. Whittemore. In this case, the plaintiff is alleging that the common dividends declared by the Board in July 2005 and February 2006 constituted a breach of the Board’s duty of loyalty and care, and good faith and fair dealing, to the Company and the holders of the Series B Shares, and that this breach was directed by Lightstone and Prime Office. The plaintiff requests for the benefit of the Company that the court grant a judgment in favor of the Company against all of the other defendants in the amount of $106 million, the amount of the dividends that were declared on the foregoing dates. This matter could be time consuming and costly to defend but we believe that we have valid defenses to the foregoing claims. In addition, the foregoing claims may be covered in whole or in part by our directors and officers liability insurance, subject to coverage limits and applicable deductibles.

We are a defendant in various other legal actions arising in the normal course of business. We record a provision for a liability when it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Although the outcome of any litigation is uncertain, we believe that such legal actions will not have a material adverse affect on our consolidated financial position or results of operations.

Environmental. In November 2001, at the request of the Department of the Army of the United States of America (the “”DOA”), we granted the DOA a right of entry for environmental assessment and response in connection with our property known as the Atrium located at 280 Shuman Boulevard in Naperville, Illinois. The DOA informed us that the property was located north of a former Nike missile base and that the DOA was investigating whether certain regional contamination of the groundwater by trichloethene (“TCE”) emanated from the base and whether the DOA would be required to restore the environmental integrity of the region under the Defense Environmental Restoration Program for Formerly Used Defense Sites. In December 2001, the results from the tests of the groundwater from the site indicated elevated levels of TCE. It is currently our understanding based on information provided by the DOA and an analysis prepared by its environmental consultants that (i) the source of the TCE contamination did not result from the past or current activities on the Atrium property, and (ii) the TCE contamination is a regional problem that is not confined to the Atrium. Our environmental consultants have advised us that the United States Environmental Protection Agency (the “EPA”) has issued a Statement of Policy towards owners of property containing contaminated aquifers. According to this policy, it is the EPA’s position that where hazardous substances have come to be located on a property solely as a result of subsurface migration in an aquifer from an offsite source, the EPA will not take enforcement actions against the owner of the property. The groundwater underneath this property is relatively deep, and the property obtains its potable water supply from the City of Naperville and not from a groundwater well. Accordingly, we do not anticipate any material liability because of this ~~TCE~~ TCE contamination.

Our 330 N. Wabash Avenue office property currently contains asbestos in the form of spray-on insulation located on the decking and beams of the building. We have been informed by our environmental consultants that the asbestos in 330 N. Wabash Avenue is being properly maintained and no remediation of the asbestos is necessary. However, we have in the past and we may in the future voluntarily decide to remove or otherwise remediate some or all of this asbestos in connection with the releasing and/or redevelopment of this property. Pursuant to the existing accounting rules, a conditional asset retirement obligation is an unconditional legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. Therefore, we are required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. We recorded an asset of $910.02 million and a liability of $89.39 million related to asbestos abatement as of ~~September~~March 3031, ~~2009~~ 2010.

18A conditional asset retirement obligation for the removal of asbestos at our 330 N. Wabash Avenue property was estimated to be $9.7 million as of December 31, 2009. For the three months ended March 31, 2010, this obligation increased by $0.2 million based on the increased present value of anticipated future abatement expenditures as the estimated date of abatement comes closer.

10. Commitments and Contingencies (continued)

A conditional asset retirement obligation for the removal of asbestos at our 330 N. Wabash Avenue property was estimated to be $7.8 million as of December 31, 2008. For the nine months ended September 30, 2009, this obligation increased as follows: (i) an increase in our cost estimate of $0.9 million due to the increased probability of abatement as lease terminations moved closer; (ii) a $0.6 million increase in the liability based on the increased present value of anticipated future abatement expenditures as the estimated date of abatement comes closer; and (iii) payments of $1.0 million were made for asbestos abatement.

We believe that our other properties are in compliance in all material respects with all federal, state and local laws, ordinances and regulations regarding hazardous or toxic substances. We have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to hazardous or toxic substances in connection with any of our other properties. None of the environmental assessments of our properties have revealed any environmental liability that we believe would have a material adverse effect on our financial condition or results of operations taken as a whole, nor are we aware of any such material environmental liability. Nonetheless, it is possible that our assessments do not reveal all environmental liabilities or that there are material environmental liabilities of which we are unaware. Moreover, there can be no assurance that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of our properties will not be affected by tenants, by the condition of land or operations in the vicinity of our properties (such as the presence of underground storage tanks) or by third parties unrelated to us. If compliance with the various laws and regulations, now existing or hereafter adopted, exceeds our budgets for such items, our financial condition could be further adversely affected.

Tax Indemnity Agreements. On December 12, 1997, we purchased and amended a junior mortgage note encumbering the property known as Continental Towers located in Rolling Meadows, Illinois. As part of this transaction (the “Continental Transaction”), our Operating Partnership entered into a Tax Indemnity Agreement pursuant to which we agreed to indemnify the two limited partners of the limited partnership which then owned the property, Mr. Casati and Mr. Heise, for, among other things, the federal and applicable state income tax liabilities that result from the income or gain which they recognize upon refinancing, sale, foreclosure or other action taken by us with respect to the property or the mortgage note.

On January 10, 2006, we and Messrs. Casati and Heise, entered into an Amended Tax Indemnity Agreement in connection with the Continental Transaction, which among other things, reduced the estimated maximum liability of the Operating Partnership in the event of the consummation of a taxable transaction relating to our Continental Towers property, calculated at current tax rates, from approximately $53.2 million to $14.0 million. In connection with the foregoing amendment, we made a payment to Mr. Casati of $4.2 million and Mr. Casati released us from all of our obligations under the Amended Tax Indemnity Agreement relating to Mr. Casati. This payment was recorded as loss on tax indemnification in our consolidated financial statements. The remaining $14.0 million was further reduced to zero on September 16, 2009, when Mr. Heise sold his remaining interest in the entity which owns fee title to a portion of Continental Towers to a subsidiary of the Operating Partnership. In connection with the sale, the Operating Partnership paid $1.8 million to Mr. Heise and he released us from all of our obligations under the Amended Tax Indemnity Agreement relating to Mr. Heise. This payment was recorded as loss on tax indemnification in our consolidated financial statements.

Lease Liabilities. As a part of lease agreements entered into with certain tenants, we assumed certain financial obligations of tenants’ leases at their previous locations and subsequently executed subleases for certain of the assumed lease space.

One of these leases is a lease entered into between the joint venture currently owning the property known as Citadel Center and Citadel Investment Group, LLC (“Citadel”). We have agreed to reimburse the joint venture for its obligation to reimburse Citadel for the financial obligations, consisting of base rent and the pro rata share of operating expenses and real estate taxes, under Citadel’s pre-existing lease (the “Citadel Reimbursement Obligation”) for 161,488 square feet of space at the One North Wacker Drive office building in downtown Chicago, Illinois.

19We have executed subleases at One North Wacker Drive for all of the space to partially mitigate our obligation under the Citadel Reimbursement Obligation, which includes an estimated remaining nominal gross rental obligation of $21.3 million (or net obligations of $1.9 million after applying estimated future sublease recoveries) over the term of the lease. Although we have sold our investment in Citadel Center, we previously retained 100.0% of this liability which will expire in August 2012. Liabilities for leases assumed at March 31, 2010 and December 31, 2009 includes $1.9 million and $2.7 million, respectively, related to the Citadel Reimbursement Obligation.

Effective September 24, 2009, the current owner of Citadel Center (“131 LLC”), terminated the management agreement pursuant to which a subsidiary of our Operating Partnership managed the Citadel Center property. We believe that this termination was wrongful and was in violation of the terms of our management agreement with 131 LLC. We also believe that under Illinois law, by wrongfully terminating the management agreement, 131 LLC has released us from liability for the Citadel Reimbursement Obligation, because the indemnification agreement which provides for such liability was entered into simultaneously with, and as part of the same transaction as, the management agreement. On October 13, 2009, we filed suit in the Circuit Court of Cook County, Illinois against 131 LLC for damages and a declaratory judgment that we no longer have any obligations under the management agreement, the indemnification agreement, and two related escrow agreements, and that the amounts held pursuant to such escrow agreements should be paid to us by 131 LLC immediately. We have been continuing to satisfy the Citadel Reimbursement Obligation while the case is pending although this could change in the future.

10. Commitments and Contingencies (continued)

We have executed subleases at One North Wacker Drive for substantially all of the space to partially mitigate our obligation under the Citadel Reimbursement Obligation, which includes an estimated remaining nominal gross rental obligation of $27.7 million (or net obligations of $2.8 million after applying estimated future sublease recoveries) over the term of the lease. Although we have sold our investment in Citadel Center, we have retained 100.0% of this liability. Liabilities for leases assumed at September 30, 2009 and December 31, 2008 includes $2.8 million and $3.2 million, respectively, related to the Citadel Reimbursement Obligation.

Effective September 24, 2009, the current owner of Citadel Center (“131 LLC”), terminated the management agreement pursuant to which a subsidiary of our Operating Partnership managed the Citadel Center property. We believe that this termination was wrongful and was in violation of the terms of our management agreement with 131 LLC. We also believe that under Illinois law, by wrongfully terminating the management agreement, 131 LLC has released us from liability for the Citadel Reimbursement Obligation, because the indemnification agreement which provides for such liability was entered into simultaneously with, and as part of the same transaction as, the management agreement. On October 13, 2009, we filed suit in the Circuit Court of Cook County, Illinois against 131 LLC for damages and a declaratory judgment that we no longer have any obligations under the management agreement, the indemnification agreement, and two related escrow agreements, and that the amounts held pursuant to such escrow agreements should be paid to us by 131 LLC immediately. We currently intend at this time to continue satisfying the Citadel Reimbursement Obligation while the case is pending and until we receive a ruling that we no longer have any liability for such obligations, although this intention could change in the future.

11. Fair Values of Financial Measurements

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Additionally, the Company, from time to time, may be required to record other assets at fair value on a nonrecurring basis.

The Company groups assets and liabilities at fair value in a three level hierarchy, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

These levels are:

Level 1 Valuation is based upon quoted prices for identical assets or liabilities in active markets.

	Level 1		Valuation is based upon quoted prices for identical assets or liabilities in active markets.

	Level 2		Valuation is based upon quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

	Level 3		Valuation is based on unobservable and significant assumptions to the fair value measurement.

~~Level~~The 2mortgage ~~Valuation~~and isnotes payable carrying amount of our variable rate borrowings approximates their fair value. The fair values of our fixed rate debt agreements are estimated using discounted cash flow analyses based upon ~~quoted~~index ~~prices~~rates, ~~for~~market spreads and incremental borrowing rates for similar ~~assets~~types orof ~~liabilities~~borrowing arrangements. Similar debt instruments are traded in active markets, ~~quoted~~so we ~~prices~~classify ~~for~~our ~~identical~~mortgage orand ~~similar~~notes ~~assets~~payable orto ~~liabilities~~be inclassified ~~markets~~within ~~that~~Level ~~are~~2 ~~not~~of ~~active~~the valuation hierarchy. The estimated current fair value of our mortgage and notes payable is estimated at $255.9 million and $258.7 million as of March 31, 2010 and ~~model-based~~December 31, ~~valuation~~2009, ~~techniques~~respectively. ~~for~~Our recorded ~~which~~carrying ~~all~~value ~~significant~~is ~~assumptions~~$337.7 million ~~are~~and ~~observable~~$341.8 million inas ~~the~~of ~~market~~March 31, 2010 and December 31, 2009, respectively.

~~Level 3 Valuation is based on unobservable and significant assumptions to the fair value measurement.~~17

During the second quarter of 2009, we recorded an asset impairment charge of $6.9 million for our 800-810 Jorie Boulevard property to reduce the net book value of the property to its estimated fair value. We utilized Level 3 assumptions including occupancy, discount rates and capitalization rates in estimating the fair value. In July 2009, we conveyed the property to the lender in exchange for a release of the loan on the property.

11. Fair Values of Financial Measurements (continued)

The mortgage and notes payable carrying amount of our variable rate borrowings approximates their fair value. The fair values of our fixed rate debt agreements are estimated using discounted cash flow analyses based upon index rates, market spreads and incremental borrowing rates for similar types of borrowing arrangements. Similar debt instruments are traded in active markets so we classify our mortgage and notes payable to be classified within Level 2 of the valuation hierarchy. The fair value of our mortgage and notes payable is estimated at $318.7 million and $428.5 million as of September 30, 2009 and December 31, 2008, respectively. Our recorded carrying value is $342.3 million and $447.9 million as of September 30, 2009 and December 31, 2008, respectively.

12. Subsequent Events

Subsequent events have been evaluated through the time of our filing on November 12, 2009.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect management’s current view with respect to future events and financial performance. Such forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those anticipated, and include but are not limited to: risks associated with the current economic crises that has resulted in a substantial loss in the value of office properties in general across the United States and in our portfolio in particular; risks associated with the Chicago metropolitan area economy and the demand for office space; risks associated with domestic and international financial markets that have experienced unusual volatility and uncertainty and have made financing difficult to obtain on satisfactory terms; risks associated with the fact that our operating losses for the last several years have been significant and we project them to continue for the foreseeable future, which has and will in the future significantly impact our ability to continue operating our business; risks associated with the delisting from the NYSE and deregistering from the SEC of our Series B Shares; including any potential adverse effects to the marketability and longevity of our Series B Shares; risks relating to the effects of future events on our financial performance; risks associated with our high level of indebtedness and our ability to to refinance our indebtedness as it becomes due; ~~the~~risks ~~risk~~ that we or our subsidiaries will not be able to satisfy scheduled debt service obligations or will not remain in compliance with existing loan covenants; the effects of future events, including tenant bankruptcies and defaults; risks associated with conflicts of interest that exist with certain members of our Board as a result of such members’ affiliation with our sole common shareholder; the risks related to the office and, to a lesser extent, industrial markets in which our properties compete, including the adverse impact of external factors such as inflation, consumer confidence, unemployment rates and consumer tastes and preferences; the risk of potential increase in market interest rates from current rates; and risks associated with real estate ownership, such as the potential adverse impact of changes in the local and national economic climate on the revenues and the value of our properties as well as our tenants and vendors operations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of ~~September~~March 3031, ~~2009~~2010.

Among the matters about which we have made assumptions in connection with these forward-looking statements are the following:

• future economic and market conditions which may impact the demand for office ~~and industrial~~ space either at current or increased levels; • the extent of any tenant bankruptcies or defaults that may occur; • our continuing ability to conduct our operations in substantially the same manner as we historically have; • our ability or inability to renew existing tenant leases and lease up vacant space; • prevailing interest rates; • the effect of inflation and other factors on operating expenses and real estate taxes; • our ability to minimize various expenses as a percentage of our revenues; and • the availability of, and our ability to consummate financing, refinancing and capital transactions.

In addition, historical results and percentage relationships set forth in this Quarterly Report on Form 10-Q are not necessarily indicative of future operations.

~~OVERVIEW~~18

We are a fully-integrated, self-administered and self-managed REIT which owns, manages, leases, develops, and redevelops office and industrial real estate, primarily in metropolitan Chicago. As of September 30, 2009, our portfolio of properties consists of 8 office properties containing an aggregate of 3.3 million net rentable square feet. In addition, we have a joint venture interest in an office property containing approximately 101,000 net rentable square feet. We lease and manage 3.3 million square feet comprising all of our wholly-owned properties. We are also the asset and development manager for an approximately 1.1 million square foot office building located at 1407 Broadway Avenue in New York, New York, which is owned by affiliates of Lightstone.

~~All of our properties, except one joint venture property, are located in the Chicago~~OVERVIEW metropolitan area in prime business locations within established business communities and account for all of our rental revenue and tenant reimbursements revenue. Our joint venture property is located in Arizona.

~~Our~~We ~~results~~are ~~reflect~~a ~~the~~fully-integrated, ~~general~~self-administered ~~weakness~~and inself-managed ~~the~~REIT ~~office~~which ~~leasing~~owns, ~~market~~manages, leases, indevelops, ~~the~~and ~~Chicago metropolitan~~redevelops ~~area~~office ~~over~~real ~~the~~estate, ~~past~~primarily ~~several~~in ~~years~~metropolitan Chicago. ~~Because~~As of ~~this~~March 31, ~~weakness in the leasing market~~2010, ~~we have~~our ~~been~~portfolio ~~challenged~~of toproperties ~~retain~~consists ~~existing~~of ~~tenants~~7 ~~and~~office ~~locate~~properties ~~new~~containing ~~tenants~~an ~~for~~aggregate ~~our vacant and~~of ~~non-renewing~~3.2 million ~~space~~net atrentable ~~acceptable~~square ~~economic rental rates~~feet. In addition, ~~the~~we ~~supply~~have ofa ~~downtown~~joint ~~Chicago office~~venture ~~space~~interest ~~continues~~in toan ~~grow,~~office property ~~principally~~containing asapproximately a101,000 ~~result~~net ofrentable ~~the~~square ~~construction of new office buildings~~feet. AsWe ~~these~~lease ~~buildings~~and ~~continue~~manage to3.2 million ~~come~~square onfeet ~~line,~~comprising ~~the~~all ~~additional~~of ~~supply~~our ~~may~~wholly-owned ~~add to the challenge~~properties.

~~Our~~All ~~management~~of isour ~~addressing~~properties, ~~this~~except ~~challenge~~our byjoint ~~increasing~~venture ~~our~~property, ~~marketing~~are ~~efforts~~located ~~both~~in ~~through~~the Chicago ~~working~~metropolitan ~~with~~area ~~the~~in ~~office~~prime ~~brokerage~~business ~~community~~locations ~~and~~within inestablished ~~direct~~business ~~marketing~~communities ~~campaigns~~and toaccount for ~~prospective~~all ~~users~~ of ~~office space in~~ our ~~market,~~rental asrevenue ~~well~~and astenant ~~selectively~~reimbursements ~~investing~~revenue. inOur ~~targeted~~joint ~~capital~~venture ~~expenditures~~property tois ~~improve~~located ~~our properties~~ in ~~order~~Phoenix, ~~to enhance our position in our market~~Arizona.

Our ~~income~~results ~~and~~reflect ~~cash~~the ~~flow~~general ~~from~~weakness ~~operations~~in isthe ~~derived~~office ~~primarily~~leasing ~~from~~market ~~rental~~in ~~revenue~~the ~~(including~~Chicago ~~tenant~~metropolitan ~~reimbursements)~~area ~~from our properties. We expect that any revenue growth~~ over the ~~next~~past several years. ~~will~~Due ~~come~~to ~~from~~weakness ~~revenue~~in ~~generated~~the ~~primarily~~leasing ~~through~~market, ~~increased~~we ~~occupancy~~have ~~rates in our~~been ~~portfolio.~~challenged ~~The~~to ~~following~~retain ~~summarizes~~existing ~~our~~tenants ~~portfolio~~and ~~occupancy~~locate atnew ~~the~~tenants ~~end~~for ofour ~~the~~vacant ~~first~~and ~~three~~non-renewing ~~quarters~~space ~~of 2009 and~~ at ~~the~~acceptable ~~end~~economic ofrental ~~each of the last two quarters of 2008, excluding properties sold in subsequent periods~~rates.:

	Portfolio Occupancy
	September 30,			June 30,			March 31,			December 31,			September 30,
	2009			2009			2009			2008			2008
Portfolio Total		81.2	%		79.8	%		78.5	%		78.1	%		79.9	%
Unconsolidated Joint Venture Properties		57.0	%		57.0	%		57.0	%		56.4	%		56.4	%

Our management is addressing this challenge by increasing our marketing efforts both through working with the office brokerage community and in direct marketing campaigns to prospective users of office space in our market, as well as selectively investing in targeted capital expenditures to improve our properties in order to enhance our position in our market. In addition, our Board is also in the process of considering various financing, capitalization, asset sales and other alternatives for the Company.

Our income and cash flow is derived primarily from rental revenue (including tenant reimbursements) from our properties. The following summarizes our portfolio occupancy at the end of the first quarter of 2010 and each of the four quarters of 2009, excluding properties sold in subsequent periods:


	Portfolio Occupancy
	March 31,			December 31,			September 30,			June 30,			March 31,
	2010			2009			2009			2009			2009

Portfolio Total		74.4	%		79.6	%		81.2	%		79.8	%		78.5	%


Unconsolidated Joint Venture Property		54.7	%		54.7	%		54.7	%		54.7	%		54.7	%

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates and assumptions. We believe that the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements. ~~With~~No ~~the exception of the policy mentioned below, no~~ significant changes have been made to our critical accounting policies since December 31, ~~2008~~2009 as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009 filed ~~March~~April 319, ~~2009~~2010.

~~Noncontrolling Interests. On January 1, 2009, we adopted new accounting guidance for~~19 noncontrolling interests as issued by the Financial Accounting Standards Board (“FASB”). The new accounting guidance changes the accounting and reporting for minority interests, which are now reported as noncontrolling interests and classified as a component of equity. Minority interest expense is no longer separately reported as a reduction to net income on the consolidated income statements of operations and is instead shown below net income under the heading “Net (income) loss attributable to noncontrolling interest.” Interests held in consolidated real estate partnerships by limited partners other than the Company are reflected as noncontrolling interest in consolidated real estate partnerships. Prime Office, a subsidiary of Lightstone, represents the noncontrolling interest in our consolidated financial statements. See Note 2 — Formation and Organization — for further discussion. As a result of the adoption of the new accounting guidance, losses to noncontrolling interest in excess of basis will no longer be allocated to PGRT but rather will be allocated to our Operating Partnership even though the allocation results in a deficit noncontrolling interest balance.

Results of Operations

Comparison of the three months ended ~~September~~March 3031, ~~2009~~2010 toand ~~September 30, 2008~~2009

(Dollars in thousands)	~~2009~~2010			~~2008~~2009			$ Change
Property revenues	$	1912,~~482~~954		$	2015,~~864~~191		$	(12,~~382~~237	)
Services Company revenues		~~258~~136			~~256~~272			2(136	)
Total revenues		1913,~~740~~090			2115,~~120~~463			(12,~~380~~373	)
Property operating expenses		106,~~792~~936			8,~~751~~881			2(1,~~041~~945	)
Depreciation and amortization		64,~~230~~160			54,~~581~~226			~~649~~(66	)
General and administrative		1,~~451~~291			12,~~585~~255			(~~134~~964	)
Services Company operations		~~288~~135			~~344~~304			(56169	)
Loss on tax indemnification		1,799			—			1,799
Total expenses		12,522			15,666			(3,144	)
Total expenses		20,560			16,261			4,299
Operating income (loss)		568			(203	)		771
Operating (loss) income		(820	)		4,859			(5,679	)
Interest and other income		415			5,034			(4,619	)
Interest and other expense		(17	)		(494	)		477
Income from investments in unconsolidated joint ventures		36			31			5
Income from investments in unconsolidated joint ventures		—			1			(1	)
Interest:
Expense		(5,~~690~~922	)		(76,~~475~~413	)		~~1,785~~491
Amortization of deferred financing costs		(287	)		(~~829~~2,756	)		~~542~~2,469
Distributions and losses to noncontrolling interest in excess of basis		—			(5,852	)		5,852
Loss from continuing operations		(5,190	)		(4,307	)		(883	)
Loss from continuing operations		(6,814	)		(9,790	)		2,976
Discontinued operations		(262	)		(4,219	)		3,957
Discontinued operations		8,129			(2,271	)		10,400
Net loss	$	(5,452	)	$	(8,526	)	$	3,074
Net income (loss)		1,315			(12,061	)		13,376
Net (income) loss attributable to noncontrolling interest		(1,667	)		3,621			(5,288	)
Net loss attributable to Prime Group Realty Trust	$	(352	)	$	(8,440	)	$	8,088

Property Revenues. The decrease of $12.42 million in property revenue was primarily due to an ~~early~~lower ~~lease~~occupancy ~~termination~~at ~~fee~~some ~~received~~of inour ~~2008~~properties ~~from~~mainly aContinental ~~former~~Towers ~~tenant~~as ata ~~our~~result ~~180~~of N.AON ~~LaSalle Street~~Consulting ~~property,~~not ~~reduced~~renewing ~~rental~~their ~~rates~~lease ~~associated~~that ~~with~~expired, alower ~~lease~~tenant ~~amendment~~reimbursements ~~executed~~due ~~with~~to adecreased ~~tenant~~occupancy ~~at our~~and ~~Continental~~operating ~~Towers~~expenses ~~property~~ and ~~lower~~decreased ~~occupancy~~management atfee ~~some~~income due to termination of ~~our~~management ~~properties~~contracts.

Property Operating Expenses. The ~~increase~~decrease of $21.09 million in property operating expenses was primarily due to alower ~~cumulative~~ real estate tax ~~expense~~assessments ~~true-up~~at insome ~~2008~~ of ~~estimates~~our ~~which~~properties ~~did~~and ~~occur~~reduced expenses inrelated ~~2009~~to lower occupancy.

~~Depreciation~~General and ~~Amortization~~Administrative. The ~~increase~~decrease of $01.60 million in ~~depreciation~~general and ~~amortization was~~administrative was primarily due to ~~the~~decreased ~~reinstatement~~employee ofbonuses, ~~the~~decrease ~~depreciation and amortization~~ in ~~2009~~salaries ~~associated~~due ~~with our 180 North LaSalle Street property related~~ to ~~the~~personnel ~~period that it was classified as property held for sale in 2008. In accordance with U.S. GAAP~~reductions, ~~depreciation~~ and ~~amortization ceases when a~~ ~~property~~decreased isstrategic ~~classified~~alternative ~~as held for sale~~costs.

24Interest and Other Income. The decrease of $4.6 million in interest and other expense was primarily due to an earnest money deposit recorded as income in 2009 related to the termination of a sale agreement on our 180 North LaSalle Street property.

Amortization of Deferred Financing Costs. The decrease of $2.5 million in amortization of deferred financing costs was primarily due to a decrease in non-cash accrued finance charges related to the exit and restructuring fees on the Citicorp Loan associated with our investment in ESH. We assigned our membership interest in BHAC and transferred the related Citicorp Loan in the third quarter of 2009.

~~Loss~~Discontinued onOperations. ~~Tax~~Discontinued ~~Imdemnification.~~operations ~~The~~include ~~increase~~the results of ~~$1.8~~operations of our 180 North LaSalle Street property, classified as held for sale at March ~~million~~31, 2010; our 7100 Madison Avenue property, which we sold in ~~loss~~February 2010; onour ~~tax~~800-810 ~~imdenification reflects~~Jorie aBoulevard ~~payment~~property, which was conveyed to ~~terminate~~the lender in exchange for a ~~tax~~release ~~indemification~~from ~~agreement~~the onrelated ~~our~~loan ~~Continental~~in ~~Towers~~July 2009; ~~property~~and the ~~(see~~residual ~~Note~~effects ~~10)~~related to properties sold in prior years.

Interest and Other Expense. The decrease of $0.5 million in interest and other expense was primarily due to a change in the leasing assumptions related to the Citadel Reimbursement Obligation in 2008.

Interest Expense. The decrease of $1.8 million in interest expense was primarily due to the assignment of our membership interest in BHAC and transfer of the related Citicorp Loan in the third quarter of 2009.

Amortization of Deferred Financing Costs. The decrease of $0.5 million in amortization of deferred financing costs was primarily due to the 2008 amortization of debt issue costs related to the restructuring of the Citicorp Loan associated with our investment in BHAC. These debt issue costs were fully amortized at June 30, 2009.

Distributions and Losses to Noncontrolling Interest in Excess of Basis. The decrease of $5.9 million in distributions and losses to noncontrolling interest in excess of basis represents 2008 losses resulting in a deficit position in the noncontrolling interest balance. Losses in excess of the noncontrolling interest basis were charged to operations under U.S. GAAP in 2008, as a result of the noncontrolling interest holder having no contractual obligation to return such amounts, to fund operations or restore any capital deficits. Under U.S. GAAP in 2009, distributions and losses to noncontrolling interest in excess of basis will no longer be allocated to PGRT.

Discontinued Operations. Discontinued operations include the results of operations of our 800-810 Jorie Boulevard property, which was conveyed to the lender in exchange for a release from the related loan in July 2009; 1051 North Kirk Road property, which was sold in May 2008; and the residual effects related to properties sold in prior years.

Comparison of the nine months ended September 30, 2009 to September 30, 2008

The table below represents selected operating information for our portfolio. Property revenues include rental revenues, tenant reimbursements and other property operating revenues. Property operating expenses include real estate taxes, utilities and other property operating expenses. The results for 2009 include correction of errors that relate to prior periods. The Company believes these corrections will not have a material impact on our current or prior years or any quarterly results of operations or financial position.

(Dollars in thousands)	2009			2008			$ Change
Property revenues	$	58,094		$	62,217		$	(4,123	)
Services Company revenues		764			861			(97	)
Total revenues		58,858			63,078			(4,220	)
Property operating expenses		30,783			32,231			(1,448	)
Depreciation and amortization		21,395			18,141			3,254
General and administrative		5,501			4,937			564
Services Company operations		923			1,087			(164	)
Loss on tax indemnification		1,799			—			1,799
Total expenses		60,401			56,396			4,005
Operating (loss) income		(1,543	)		6,682			(8,225	)
Interest and other income		4,965			708			4,257
Income (loss) from investments in unconsolidated joint ventures		31			(60,344	)		60,375
Provision for asset impairment from unconsolidated joint ventures		—			(5,633	)		5,633
Interest:
Expense		(20,459	)		(23,886	)		3,427
Amortization of deferred financing costs		(3,957	)		(1,409	)		(2,548	)
Recovery of distributions and losses to noncontrolling interest in excess of basis		—			14,222			(14,222	)
Distributions and losses to noncontrolling interest in excess of basis		—			(13,315	)		13,315
Gain on sales of real estate and joint venture interests		—			39,194			(39,194	)
Loss from continuing operations		(20,963	)		(43,781	)		22,818
Discontinued operations		38			(2,695	)		2,733
Net loss		(20,925	)		(46,476	)		25,551
Net loss (income) attributable to noncontrolling interest		13,121			(25,439	)		38,560
Net loss attributable to Prime Group Realty Trust	$	(7,804	)	$	(71,915	)	$	64,111

Property Revenues. The decrease of $4.1 million in property revenues was primarily due to decreased recovery revenues resulting from reduced property operating expenses, the sale of Floors 2 through 13 at our 330 N. Wabash Avenue property in March 2008, decreased occupancy at some of our properties, early termination fee income in 2008 at our 180 N. LaSalle Street property, decreased parking garage revenues at our 330 N. Wabash Avenue property and the reinstatement of the amortization of the above and below-market lease values in 2009 associated with our 180 N. LaSalle Street property related to the period that it was classified as property held for sale in 2008. In accordance with U.S. GAAP, depreciation and amortization ceases when a property is classified as held for sale.

Property Operating Expenses. The decrease of $1.4 million in property operating expenses was primarily due to decreased utility expenses as a result of favorable weather conditions and lower occupancy at some of our properties, lower bad debt expense for our 330 N. Wabash Avenue property and adjustments to the estimated real estate taxes for our properties.

Depreciation and Amortization. The increase of $3.3 million in depreciation and amortization was primarily due to the reinstatement of the depreciation and amortization in 2009 associated with our 180 North LaSalle Street property related to the period that it was classified as property held for sale in 2008. In accordance with U.S. GAAP, depreciation and amortization ceases when a property is classified as held for sale.

General and Administrative. The increase of $0.6 million in general and administrative expense is primarily due to increased strategic alternative costs, employee severance costs due to personnel reductions, and increased audit, consulting and compliance fees due to the restatement of prior period financial statements in 2009.

Loss on Tax Imdemnification. The increase of $1.8 million in loss on tax imdenification reflects a payment to terminate a tax indemification agreement on our Continental Towers property (see Note 10).

Interest and Other Income. The increase of $4.3 million in interest and other income was primarily due to an earnest money deposit recorded as income due to the termination of the sale of our 180 N. LaSalle Street property. This increase was partially offset by decreases in interest income due to a decrease in both the investment rates and investment account balances.

Income (loss) from Investments in Unconsolidated Joint Ventures. The decrease of $60.4 million in loss from investments in unconsolidated joint ventures was primarily due to the non-cash allocation of losses from our investment in ESH in 2008.

Provision for Asset Impairment from Unconsolidated Joint Ventures. The $5.6 million provision for asset impairment in the second quarter of 2008 represents the write-down of the investment balance in ESH as the impairment was deemed to be other than temporary due to past and expected inability to sustain earnings at a level which would justify the carrying value.

Interest Expense. The decrease of $3.4 million in interest expense was primarily due to the assignment of our membership interest in BHAC and transfer of the related Citicorp Loan in the third quarter of 2009 and a reduction in interest expense on our 330 N. Wabash Avenue property due to the March 2008 sale of a portion of the property and partial repayment and simultaneous refinancing of the debt.

Amortization of Deferred Financing Costs. The increase of $2.5 million in amortization of deferred financing costs was primarily due to an increase in deferred finance charges related to the exit and restructuring fees on the Citicorp Loan associated with our investment in ESH. We assigned our membership interest in BHAC and transferred the related Citicorp Loan in the third quarter of 2009.

Recovery of Distributions and Losses to Noncontrolling Interest in Excess of Basis. The decrease of approximately $14.2 million in recovery of distributions and losses to noncontrolling interest in excess of basis relates to the recovery in 2008 of losses previously recognized in 2007.

Distributions and Losses to Noncontrolling Interest in Excess of Basis. The decrease of $13.3 million in distributions and losses to noncontrolling interest in excess of basis represents 2008 losses resulting in a deficit position in the noncontrolling interest balance. Losses in excess of the noncontrolling interest basis were charged to operations under U.S. GAAP in 2008, as a result of the noncontrolling interest holder having no contractual obligation to return such amounts, to fund operations or restore any capital deficits. Under U.S. GAAP in 2009, distributions and losses to noncontrolling interest in excess of basis will no longer be allocated to PGRT.

Gain on Sales of Real Estate and Joint Venture Interests. The decrease of $39.2 million in gain on sales of real estate and joint venture interests was primarily due to the sale of our 50% joint venture interest in The United Building ($29.4 million) and the sale of Floors 2 through 13 of our 330 N. Wabash Avenue property ($9.8 million) during the first quarter of 2008.

Discontinued Operations. Discontinued operations include the results of operations of our 800-810 Jorie Boulevard property; which was conveyed to the lender in exchange for a release of the related loan in July 2009; 1051 North Kirk Road property, which was sold in May 2008; and the residual effects related to properties sold in prior years.

Liquidity and Capital Resources

We require cash to pay our operating expenses, make capital expenditures, fund tenant improvements and leasing costs, pay distributions/dividends and service our debt and other short-term and long-term liabilities. Cash on hand and net cash provided from ~~operations~~assets ~~represent~~sales, such as the pending sale of our 180 North LaSalle Street property, represent our primary sources of liquidity to fund these expenditures. In assessing our liquidity, key components include our net income adjusted for non-cash and non-operating items, and current assets and liabilities, in particular accounts receivable, accounts payable and accrued expenses. For the longer term, our debt and long-term liabilities are also considered key to assessing our liquidity.

Our anticipated cash flows from operations combined with cash on hand (including restricted cash escrows) are expected to be sufficient to fund our anticipated short-term capital needs ~~over~~ during the ~~next 12 months~~year. ~~For~~During ~~the remainder of 2009~~2010, we ~~may~~anticipate the need to fund significant capital expenditures to retenant and/or redevelop space that has been previously vacated, or is anticipated to be vacated, such as Jenner & Block, which accounted for 16.4% of our 2009 total revenue, or renew leases which are expiring during the year. In order to fund these and our other short-term and long-term capital needs, we expect to utilize available funds from cash on hand, available borrowing capacity with certain of our lenders, cash generated from our operations and existing or future escrows with lenders and ~~the~~cash ~~amounts available~~generated tofrom becapital ~~funded~~events, ~~under~~including ~~the~~asset ~~redevelopment loan relating to our 330 N~~sales. ~~Wabash Avenue property.~~ In addition, we may enter into additional capital transactions, which could include additional asset sales, ~~debt~~refinancings ~~or equity financings~~ and modifications or extensions of existing loans. There can be no ~~assurance~~assurances that any capital transactions will occur or, if they do occur, that they will yield adequate proceeds to fund our long-term capital needs or will be on terms favorable to us. In the event that any of our properties generate insufficient cash flow to fund such property’s debt service and operating expenses, we may not fund any such shortfalls and in the absence of a loan restructuring may instead convey the property to the relevant property lender pursuant to a deed in lieu of foreclosure transaction or allow the property to be foreclosed on by the lender.

Cash Flows from Operating Activities. Net cash ~~provided by (~~used in) operating activities was $61.37 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010, compared to ($30.1) 8 million for the ~~nine~~ three months ended ~~September~~ March 3031, ~~2008~~2009 — an increase of $90.49 million. This change was primarily due to: a $104.81 million increase ~~decrease~~ in real estate ~~taxes~~tax payments in 2010 primarily due to ~~the~~ timing of the payments; ~~for our properties,~~ a $21.5 3 million ~~decrease~~reduction in ~~interest~~property ~~payments~~revenues ~~due~~associated towith aour ~~reduction~~Continental inTowers ~~mortgage~~and ~~notes~~330 ~~payable~~North ~~primarily~~Wabash Avenue properties due to ~~refinancing~~lower ~~the~~occupancy; ~~debt~~a ~~associated~~$0.5 million ~~with~~reduction ~~our~~in ~~330~~other N.income ~~Wabash~~due ~~Avenue~~to ~~property~~the inloss of ~~March 2008,~~third-party management contracts; and a $1.0 .2 million ~~decrease~~reduction inof ~~property~~parking ~~operating~~revenues ~~expenses~~at ~~primarily~~our ~~resulting~~330 ~~from~~N. Wabash ~~lower~~Avenue ~~occupancy~~property. ~~These increases~~The ~~were~~increase was partially offset by a $2.07 million ~~reduction~~decrease in ~~property~~interest payments ~~revenues~~primarily ~~resulting~~due ~~from lower~~to ~~occupancy~~the atrelease ~~our~~and ~~properties,~~assignment aof ~~$1.8 million~~the ~~payment~~loan tofrom ~~terminate~~Citicorp aUSA, ~~tax~~Inc. ~~indemnification~~in July ~~agreement~~2009 ~~related~~and todefault ~~our~~interest on Continental Towers ~~property,~~and aBrush ~~$0.5 million~~Hill ~~reduction~~Office ofCourt ~~parking~~loans ~~revenues at~~that ~~our~~has ~~330~~been accrued N.but ~~Wabash~~not ~~Avenue~~yet ~~property~~paid; ~~and~~ a $0.48 million reduction ofin ~~property~~employee ~~revenues~~bonuses; ~~resulting from~~a ~~the~~$0.7 million ~~sale~~reduction ofin property ~~Floors~~operating 2expenses ~~through~~associated 13with at our 330 N. Wabash Avenue ~~property~~and inContinental ~~March~~Towers properties due to lower occupancy; and a $0.7 ~~2008~~million reduction in general and administrative expenses.

Cash Flows from Investing Activities. Net cash provided by ~~(used in)~~ investing activities was ( $125.6 3 million) for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 compared to $800.71 million for the ~~nine months~~three months ended ~~September~~March 3031, ~~2008~~2009 — aan ~~decrease~~increase of $935.32 million. During the first ~~nine~~quarter ~~months~~ of ~~2008~~ 2010, we received $~~101~~4.10 million in proceeds from the sale of ~~real~~7100 ~~estate~~Madison ~~and joint venture interests ($51~~Avenue.~~1 million~~ ~~received~~In ~~from~~addition, ~~the~~we ~~sale~~had ofa ~~our~~decrease ~~joint~~in capital ~~venture~~expenditures ~~interest~~ in ~~The~~2010 ~~United Building,~~of $452.97 million ~~from~~compared ~~the~~to ~~partial~~2009, ~~sale~~primarily ofdue ~~our~~to ~~330~~additional N.tenant improvements, ~~Wabash~~building ~~Avenue~~improvements ~~property~~ and ~~$4.1 million from~~asbestos ~~the~~abatement ~~sale~~at of our ~~former~~330 ~~1051~~ N. ~~Kirk~~Wabash ~~Road~~Avenue property). ~~We had a decrease~~ in ~~capital expenditures~~ ~~of $6~~2009.~~3 million,~~ aThese ~~decrease~~items inwere ~~deposits~~partially ~~made~~offset ~~into~~by ~~our~~increased ~~restricted~~costs ~~cash~~associated ~~and~~with ~~escrow~~new ~~accounts~~leasing ~~of $0.8 million and a decrease~~ in ~~leasing~~2010 ~~costs~~ of $0.78 million ~~for the first nine months of 2009 compared to the same period in 2008~~.

~~Cash Flows from Financing Activities. Net cash provided by (used in) financing activities was~~21 $0.8 million for the nine months ended September 30, 2009 compared to ($103.6 million) for the nine months ended September 30, 2008 — an increase of $104.4 million. During the first nine months of 2008, (i) we refinanced the existing $195.0 million in loans collateralized by our 330 N. Wabash Avenue property with a new $138.0 million loan; (ii) we retired a $14.5 million outstanding first mortgage loan cross-collateralized by two of our properties and replaced it with an $11.6 million first mortgage on our 4343 Commerce Court property; and (iii) retired the outstanding balance of $18.8 million on two Citicorp mezzanine loans and paid $7.4 million in financing costs related to these transactions. Affiliates of Lightstone funded $6.1 million and $38.6 million to pay down principal, interest and other fees on the PGRT ESH Citicorp Loan in the first nine months of 2009 and 2008, respectively. We paid dividends totaling $2.3 million in the first nine months of 2009 compared to $24.8 million in the first nine months of 2008.

InCash ~~order~~Flows tofrom ~~qualify~~Financing asActivities. aNet ~~REIT~~cash ~~for~~used ~~federal~~in ~~income~~financing ~~tax~~activities ~~purposes,~~was ~~we must distribute 90~~$4.0~~% of our~~ million ~~taxable~~for ~~income (excluding capital gains) annually. At this time, we are not current on~~ the ~~payment of~~three ~~dividends~~months onended ~~our Series~~March B31, ~~Shares.~~2010 ~~Our~~compared ~~Board’s decision not~~ to ~~make~~$0.6 million ~~any quarterly dividend payments~~ for the ~~first~~ three ~~quarters~~months ofended ~~2009 was based~~March 31, ~~among~~2009 ~~other~~— ~~things,~~an onincrease ~~our~~of ~~current~~$3.4 million. ~~capital resources~~During ~~and liquidity needs and~~ the ~~overall~~first ~~negative~~quarter ~~state~~ of ~~the~~2010, ~~economy~~in ~~and~~conjunction ~~capital~~with ~~markets.~~the ~~There~~sale ~~can~~of be7100 noMadison ~~assurances~~Avenue, ~~as to~~ the ~~timing~~Company ~~and~~paid ~~amounts~~off ofthe ~~any~~debt ~~future~~that ~~dividends~~encumbered onthis ~~our~~property ~~Series B~~of $3.6 ~~Shares~~million. ~~Our~~In ~~management~~2009 ~~and~~our ~~Board~~parent ~~review~~company ~~our~~made ~~current~~a capital ~~resources~~contribution ~~and~~of ~~liquidity~~$3.6 million ~~needs,~~to the ~~status~~ ofCompany ~~any~~to pay ~~pending~~principal ~~capital events, debt levels~~ and ~~our~~interest ~~requirements~~on ~~for~~the ~~cash~~Citicorp ~~reserves~~Loan ~~each quarter prior~~ to ~~making~~PGRT ~~any decision with respect to paying distributions/dividends~~ESH. ~~Dividends~~This ~~on our~~loan ~~common~~was ~~shares~~assigned ~~may~~to ~~not be made until all accrued dividends on~~ our ~~Series B Shares are declared~~parent ~~and~~company ~~paid~~in ~~or set apart for payment~~July 2009. The ~~payment~~above ofitems ~~future~~were ~~distributions/dividends~~partially ~~will~~offset ~~depend~~by on$2.3 million ~~our actual~~in ~~cash~~dividends ~~available~~paid ~~for distribution, our financial condition, our current and future capital~~to ~~requirements,~~ the ~~completion~~preferred ofshareholders ~~any~~in ~~capital transactions, including refinancings, asset sales and/or acquisitions,~~ the ~~annual~~first ~~distribution~~quarter ~~requirements under the REIT provisions~~ of ~~the Code and such other factors as our Board deems relevant~~2009.

~~The~~In ~~financial~~order ~~covenants~~to ~~contained~~qualify inas ~~some~~a REIT for federal income tax purposes, we must distribute 90.0% of our taxable ~~loan~~income ~~agreements~~(excluding ~~and~~capital ~~guarantee~~gains) ~~agreements~~annually. ~~with~~As of the first quarter of 2010, we are not current on the payment of dividends on our ~~lenders~~Series B ~~include~~Shares ~~minimum~~with ~~ratios~~a ~~for~~total ~~debt~~arrearage ~~service~~in ~~coverage~~payment of $11.25 million. Our management and Board review our cash position, ~~minimum~~the ~~net~~status ~~worth~~of potential capital events, debt levels and ~~minimum~~requirements for cash reserves and market conditions each quarter prior to ~~liquidity~~making ~~levels~~any asdecision ~~well~~with asrespect ~~other~~to ~~financial~~paying ~~covenants~~distributions/dividends. AsDividends on our common shares may not be made until all accrued dividends on our Series B Shares are declared and paid or set apart for payment. Future distributions/dividends, including distributions to be paid to the holders of ~~September~~the Series 30B Shares upon the redemption of such shares, ~~2009~~will depend on the actual cash available for distribution, weour ~~are~~financial incondition, current and future capital requirements, the ~~compliance~~completion ~~with~~or status of any capital transactions, including refinancings and asset sales, the annual distribution requirements ofunder ~~all~~the REIT provisions of the Code and such other factors as our ~~financial~~Board ~~covenants~~deems relevant.

AsThe afinancial ~~requirement~~covenants contained in some of our ~~lenders,~~loan weagreements ~~maintain~~and ~~escrow~~guarantee ~~accounts~~agreements ~~and~~with our ~~restricted~~lenders ~~cash~~include ~~balances~~minimum ratios for ~~particular~~ ~~uses.~~debt Atservice ~~September 30~~coverage, ~~2009,~~minimum ~~these~~net ~~accounts~~worth ~~totaled~~levels ~~$36.6 million.~~and ~~These escrows~~minimum ~~consist~~liquidity oflevels ~~$5.1 million~~as ~~for~~well ~~capital~~as ~~and~~other ~~tenant~~financial ~~improvements, $4~~covenants.~~4 million~~ ~~for~~As ~~lease~~of ~~obligations, $15.9~~March ~~million~~31, ~~for real estate taxes and insurance~~2010, ~~$6.2 million~~we ~~for~~are ~~depository~~in ~~accounts, $0.2~~compliance ~~million~~with ~~for~~the ~~environmental~~requirements ~~remediation~~of ~~and~~all ~~asbestos~~of ~~abatement,~~our ~~and~~financial $4covenants.~~8 million for various other~~ ~~purposes.~~

WeAs ~~believe~~a ~~that~~requirement ~~the~~of ~~operating~~our ~~plan~~lenders, we ~~have~~maintain ~~developed for the future year will, if executed successfully, provide sufficient liquidity to finance the Company’s anticipated working capital,~~ escrow accounts and ~~capital~~restricted ~~expenditure~~cash ~~requirements~~balances for particular ~~the~~uses. ~~next~~At 12March ~~months~~31, ~~and~~2010, ~~maintain~~these ~~compliance~~accounts ~~with~~totaled ~~our debt covenants for the next 12~~$25.1 ~~months~~million. InThese ~~addition,~~escrows weare ~~intend~~ used to ~~continue~~fund ~~our ongoing efforts to improve the Company’s cash flows and improve the Company’s working~~ capital ~~position by re-examining all aspects of the Company’s business for areas of improvement~~ and ~~focusing~~tenant on minimizing the Company’s property operating expenses so that our operations are responsive to market conditions and we can remain competitive in the leasing of our properties. Our assumptions underlying our operating plan anticipate stabilized net operating income estimated on a consistent basis from the prior year and does not anticipate any catastrophic events such as major tenants defaulting on their leases with us or any material negative resolutions with regard to the contingencies we have disclosed in our financial statements. Should such events occurimprovements, welease ~~may not have sufficient cash on hand to satisfy such~~ obligations ~~or find replacement tenants in a time period sufficient to fund operations. Additionally~~, ~~any~~real ~~inability~~estate ontaxes ~~our~~and ~~part to comply with our financial covenants~~insurance, ~~obtain~~ ~~waivers~~depository ~~for non-compliance or obtain alternative financing to replace the current agreements could have a material adverse effect on our financial position~~accounts, ~~results~~environmental ofremediation ~~operations~~ and ~~cash~~various ~~flows~~other purposes.

~~Given~~We ~~our~~believe that the operating plan we have developed for the current ~~level~~year ofwill, if executed successfully, provide sufficient liquidity to finance the Company’s anticipated working capital, escrow and capital expenditure requirements for the current year and maintain compliance with our debt covenants for the year. In addition, ~~limited~~we ~~availability~~intend to continue our ongoing efforts to improve the Company’s cash flows and improve the Company’s working capital position by re-examining all aspects of ~~unencumbered~~the ~~collateral~~Company’s business for areas of improvement and focusing on minimizing the Company’s property operating expenses so that our operations are responsive to market conditions and we can ~~current~~remain ~~financing~~competitive ~~arrangements~~in the leasing of our properties. Our assumptions underlying our operating plan anticipate stabilized net operating income estimated on a consistent basis from the prior year and does not anticipate any catastrophic events such as a major tenant defaulting on their leases with us or any material negative resolutions with regard to the contingencies we have disclosed in our financial statements. Should such events occur, we may not behave ~~able~~sufficient cash on hand to ~~obtain~~satisfy such ~~additional~~obligations ~~debt~~or ~~financing~~find replacement tenants in a time period sufficient to fund operations and we may need to sell one or more assets. Additionally, any inability on our part to comply with our financial covenants, obtain waivers for non-compliance or obtain alternative financing to replace ~~negotiate~~the ~~terms~~current ~~that~~agreements wecould ~~believe~~have ~~are~~a ~~fair~~material adverse effect on our financial position, results of operations and ~~reasonable~~cash flows.

29Given our current level of debt, limited availability of unencumbered collateral and our current financing arrangements, we may not be able to obtain additional debt financing, refinance or extend our existing financings or, if we are able to do the foregoing, negotiate terms that are fair and reasonable.

The following tables disclose our contractual obligations and commercial commitments as of ~~September~~March 3031, ~~2009~~2010:

	Payments Due by Period
	(dollars in thousands)
			Remainder		2011/		2013/		~~2012/~~2015 and		~~2014 and~~
Contractual Obligations (A)	Total		2009		2010		2011		2013		Thereafter
	Total		of 2010		2012		2014		Thereafter
Mortgage notes payable (B)	$	342,130	$	457	$	12,725	$	153,806	$	60,142	$	115,000
Contractual Obligations (A)
Interest expense on mortgage notes payable		78,530		5,420		20,634		13,069		19,452		19,955
Mortgage notes payable (B)	$	337,657	$	123,709	$	154,223	$	59,725	$	—
Operating lease obligations		2,141		62		236		224		442		1,177
Interest expense on mortgage notes payable		26,379		13,402		11,422		1,555		—
Tenant improvement allowances (C)		1,019		1,019		—		—		—		—
Operating lease obligations		2,025		178		450		441		956
Liabilities for leases assumed and lease reimbursement obligations (D)		27,724		3,214		8,953		9,233		6,324		—
Tenant improvement allowances (C)		698		698		—		—		—
Total contractual cash obligations	$	451,544	$	10,172	$	42,548	$	176,332	$	86,360	$	136,132
Liabilities for leases assumed and lease reimbursement obligations (D)		21,313		6,470		14,843		—		—
Total contractual cash obligations	$	388,072	$	144,457	$	180,938	$	61,721	$	956

(A) We anticipate funding these obligations from operations, cash on hand, escrowed funds, ~~proceeds of equity~~ and debt or asset sale(s) transaction(s). (B) These totals represent the face value of our mortgage notes payable. The 2010 obligations include $115.0 million due on two loans relating to our Continental Towers property which loans were in default in January 2010. The Lender accelerated the debt maturity to be due immediately on March 5, 2010 (see Note 4 — Mortgage Notes Payable). The 2011/2012 obligations include: $88.0 million due on our 330 N. Wabash Avenue property in 2011, for which we have two one-year extension options, and $60.0 million due on our 180 N. LaSalle Street property. 180 N. LaSalle Street property is currently under contract to be sold (see Note 7 — Recent Developments). On January 14, 2010, we received a notice of maturity date default from the special servicer of the non-recourse mortgage note on our Brush Hill Office Court property (see Note 4 — Mortgage Notes Payable). The loan matured on January 1, 2010 and was not paid off. This loan is non-recourse, subject to customary non-recourse carve-outs. We have reached a tentative agreement with the lender on this loan to extend the maturity date to April 2011 subject to the finalization and execution of the loan extension documents. Since the Brush Hill Office Court loan extension has not been finalized the principal amount of this mortgage note payable, approximately $7.4 million, is included as a 2010 obligation. The only other remaining 2011 maturity assuming the one-year extension option on 330 N. Wabash Avenue is exercised by the Company is a $5.5 million loan on Enterprise Center II. (C) We have escrows of $0.85 million that may be utilized to fund these obligations. (D) These obligations ~~would~~are be offset by any receipts from subleasing of the related space. We currently have executed subleases that we estimate will provide subleasing receipts of $2419.24 million consisting of base rent and the pro-rata share of operating expenses and real estate taxes. In addition, we have escrowed reserves totaling $43.47 million to fund a portion of this contractual amount at ~~September~~March 3031, ~~2009~~2010.

	Amount of Commitment Expiration Per Period
	(dollars in thousands)
	Total
Other Commercial	Amounts											2012-			2014 and
Commitments	Committed		2009			2010			2011			2013			Thereafter
Environmental remediation (A)	$	8,347	$	3		$	7,275		$	648		$	102		$	319
Series B Shares (B)		6,750		(B	)		(B	)		(B	)		(B	)		(B	)
Total commercial commitments	$	15,097	$	3		$	7,275		$	648		$	102		$	319

(A)		This represents a liability for asbestos abatement at our 330 N. Wabash Avenue property. See Note 10 — Commitments and Contingencies — Environmental to our consolidated financial statements included in this report for further information.
(B)		Dividends are cumulative and payable at a 9.0% annual rate each quarter that our Series B Shares remain outstanding. On January 7, 2009, our Board declared and set apart for payment a quarterly dividend on our Series B Shares of $0.5625 per share for the fourth quarter of 2008 dividend period. The quarterly dividend had a record date of January 19, 2009 and was paid on January 30, 2009. Our Board decided not to declare any quarterly dividends for the first three quarters of 2009. The total arrearage in payment of dividends on the Series B Shares is $6.75 million as of September 30, 2009.
		With respect to the payment of the dividends referred to above, there can be no assurance as to the timing and amounts of any future dividends. Management and our Board review the Company’s cash position, the status of potential capital events, debt levels and the Company’s requirements for cash reserves each quarter prior to making any decision with respect to paying dividends.
		The holders of our Series B Shares have the right to elect two additional members to our Board if six consecutive quarterly dividends on our Series B Shares are not made. The term of any trustees elected by the Series B shareholders will expire whenever all dividends in arrears on the Series B Shares have been paid and current dividends declared and set apart for payment.


	Amount of Commitment Expiration Per Period
	(dollars in thousands)
Other Commercial	Total					2011/			2013/			2015 and
Commitments	Committed		2010			2012			2014			Thereafter
Environmental remediation (A)	$	9,898	$	9,250		$	253		$	89		$	306
Series B Shares (B)		11,250		(B	)		(B	)		(B	)		(B	)

Total commercial commitments	$	21,148	$	9,250		$	253		$	89		$	306


(A)		This represents a liability for asbestos abatement at our 330 N. Wabash Avenue property. See Note 10 — Commitments and Contingencies -for further information.

(B)		Dividends are cumulative and payable at a 9.0% annual rate each quarter that our Series B Shares remain outstanding. Our Board decided not to declare any quarterly dividends for 2009 and the first quarter of 2010. The total arrearage in payment of dividends on the Series B Shares is $11.25 million at March 31, 2010.

		With respect to the payment of the dividends referred to above, there can be no assurance as to the timing and amounts of any future dividends. Management and our Board review the Company’s cash position, the status of potential capital events, market conditions, debt levels and the Company’s requirements for cash reserves each quarter prior to making any decision with respect to paying dividends.

		The holders of our Series B Shares have the right to elect two additional members to our Board if six consecutive quarterly dividends on our Series B Shares are not made. The term of any trustees elected by the Series B shareholders will expire whenever all dividends in arrears on the Series B Shares have been paid and current dividends declared and set apart for payment.

Preferred Shares. Our Series B Shares rank senior to our common shares as to the payment of dividends. Our Series B Shares may be redeemed at our option at a redemption price of $25.00 per share plus accrued and unpaid dividends. The redemption price is payable solely out of the proceeds from our sale of other capital shares of beneficial interest.

Indebtedness. Our aggregate indebtedness ~~as recorded~~ had a carrying value and face value of $~~342~~337.37 million at ~~September~~at March 3031, ~~2009~~2010. ~~This~~Our indebtedness not including indebtedness currently in default (see Note 4 - Mortgage Notes Payable) had a weighted average maturity of 31.75 years and bore interest at a weighted average interest rate of 6.23% per annum. At ~~September~~March 3031, ~~2009~~2010, $~~331~~326.28 million, or 96.8% of such indebtedness, bore interest at fixed rates, and $1110.19 million, or 3.2% of such indebtedness, bore interest at variable rates.

Debt Activity. We paid $10.35 million of amortized principal debt service during the first ~~nine~~ three months of ~~2009.~~2010 ~~This~~and ~~amount~~repaid ~~is exclusive of~~ $13.56 million of principal ~~payments~~related ~~made~~to onthe ~~behalf~~sale of ~~the~~ ~~Company~~our by7100 ~~Lightstone on the PGRT ESH loan through a capital contribution by Prime Office to~~Madison ~~the~~Avenue ~~Company~~property ~~and,~~on ~~in turn~~February 1, ~~to PGRT ESH~~2010.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements with any unconsolidated investments or joint ventures that we believe have or are reasonably likely to have a material effect on our financial condition, results of operations, liquidity or capital resources.

As part of our ongoing business, we have not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As of ~~September~~March 3031, ~~2009~~ 2010, we are not involved in any unconsolidated SPE transactions.

Inflation

Substantially all of our leases require tenants to pay, as additional rent, a portion of real estate taxes and operating expenses. In addition, many of our leases provide for fixed increases in base rent or indexed escalations (based on the Consumer Price Index or other measures). We believe that inflationary increases in expenses will be offset, in part, by the expense reimbursements and contractual rent increases described above.

As of ~~September~~March 3031, ~~2009~~2010, approximately $1110.19 million of our outstanding indebtedness was ~~subject~~ subject to interest at variable rates. Future indebtedness may also be subject to variable rate interest. Inflation, and its impact on variable interest rates, could affect the amount of interest ~~payments~~ payments due on such indebtedness.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk.

The following table provides information about our financial instruments that are sensitive to changes in interest rates. For our mortgage notes payable, the table presents principal cash flows, including principal amortization, and related weighted-average interest rates by expected maturity dates as of ~~September~~March 3031, ~~2009~~2010.

	Interest Rate Sensitivity
	Principal (Notional) Amount by Expected Maturity
	Average Interest Rate
	2009			2010			2011			2012			2013			Thereafter			Total
	2010			2011			2012			2013			Total
	(dollars in millions)
Liabilities
Mortgage notes payable (1):
Fixed rate amount — Face Value	$	0123.4		$	12153.34		$	~~153.4~~—		$	—50.0		$	50326.08		$	~~115.0~~		$	~~331.1~~
Weighted-average interest rate — Face Value		611.0	%		85.38	%		~~5.8~~—	%		—8.0	%		~~8.0~~—	%		~~5.9~~	%		—
Fixed rate amount — Carrying Value	$	0.4		$	12.4		$	153.4		$	—		$	50.0		$	115.0		$	331.2
Variable rate amount — Face Value	$	0.3		$	0.4		$	0.4		$	9.8		$	10.9
Weighted-average interest rate — Carrying Value		6.6	%		8.4	%		5.8	%		—			8.0	%		5.9	%		—
Weighted-average interest rate		4.5	%		4.5	%		4.5	%		4.5	%		—
Variable rate amount	$	0.1		$	0.4		$	0.4		$	0.4		$	9.8		$	—		$	11.1
Weighted-average interest rate		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%		—			—

(1) Based upon the rates in effect at ~~September~~March 3031, ~~2009~~2010, the weighted-average interest rates on our mortgage notes payable at ~~September~~March 3031, ~~2009~~2010 was 68.20%. If interest rates on our variable rate debt increased by one percentage point, our annual interest incurred would increase by $0.1 million. The face value of our mortgage notes payable approximated the carrying value at March 31, 2010.


Item 4.		Controls and Procedures.

(a)

Evaluation of disclosure controls and procedures

~~Our~~As previously disclosed, management previously assessed the effectiveness of our internal controls over financial reporting and determined that as of the end of each calendar quarter of 2008 and as of December 31, 2007 in connection with the previously disclosed restatements of our financial statements for such periods, that we had material weaknesses in our internal controls over financial reporting as of those dates as described in our prior filings relating to such periods. Currently our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and our Executive Vice President—Capital Markets, the officer ~~currently~~ currently performing the function of our principal financial officer, the effectiveness of our ~~disclosure~~ disclosure controls and procedures as of ~~September~~March 3031, ~~2009~~2010. Based on that evaluation, our Chief Executive Officer and Executive Vice President—Capital Markets concluded that, as of ~~September 30~~March 31, ~~2009~~2010, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under ~~the~~ the Securities Exchange Act of 1934), were effective.

~~As we reported in our December 31, 2008 Form 10-K, our management previously determined that~~25 we had a material weakness as of December 31, 2008 in our internal controls over financial reporting because our monthly close process did not utilize sufficient technical expertise to allow it to identify the proper accounting treatment of certain transactions. The Company’s remediation plan included reviewing and assessing our internal controls, processes and procedures, to timely and properly monitor, evaluate and record complex tax and accounting matters in accordance with U.S. GAAP. In cases where complex accounting issues occur, we have been consulting with external financial reporting and accounting consultants to review and support our conclusions. In addition, the Company has implemented a coordinated review process including the Company’s financial and accounting management. It includes a formal and detailed review of the monthly financial statements and all significant accounting transactions. The status of these remediation plans will be monitored by management and reviewed by the Audit Committee periodically.

(b) Changes in internal controls over financial reporting

Except as described in Item 4(a) above, there was no change in our internal control over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~PART~~(b) ~~II—OTHER~~Changes ~~INFORMATION~~ in Internal Control over Financial Reporting.

There was no change in our internal control over financial reporting during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II–OTHER INFORMATION


Item 1.		Legal Proceedings.

Except as described below, neither we nor any of our properties are presently subject to any material litigation or legal proceeding, nor, to our knowledge, is any material litigation or legal proceeding threatened against us, other than routine litigation arising in the ordinary course of business, some of which is expected to be covered by liability insurance and all of which collectively is not expected to have a material adverse effect on our consolidated financial statements.

On October 26, 2005, Prime/Mansur exercised its option to acquire our membership interest in the Plumcor/Thistle JV, and the parties subsequently executed the purchase and sale agreement for the sale. On December 22, 2005, we terminated the purchase and sale agreement relating to the Plumcor/Thistle JV because Prime/Mansur had failed to obtain our joint venture partner’s consent to the transaction by the December 15, 2005 deadline contained in the agreement. Prime/Mansur subsequently sent us a letter disputing our right to terminate the agreement, to which we replied with a letter reaffirming our right to terminate the agreement. On January 31, 2006, Prime/Mansur filed a lawsuit in the Circuit Court of Cook County, Illinois claiming that our termination of the purchase and sale agreement was not justified. Prime/Mansur requested the court to grant it either specific performance and order us to convey our joint venture interest in Plumcor Thistle to Prime/Mansur or damages in the amount of $5.0 million. On September 21, 2009, the judge in the case granted our motion for summary judgment and ruled that Prime/Mansur case had no merit. On March 11, 2010, we received from escrow Prime/Mansur’s ~~may~~$0.1 million orof ~~may~~earnest ~~not~~money. ~~appeal~~Prime/Mansur has appealed the decision and ~~if it does,~~ we intend to vigorously defend the judge’s decision. IfWe ~~Prime/Mansur does appeal the case, we~~ believe the judge’s decision will not be reversed on appeal and the ultimate outcome will not have a material adverse affect on our consolidated financial condition or results of operations.

During 2006, the IRS began an examination of the income tax returns for our Operating Partnership for the years ended 2003 and 2004 and 180 N. LaSalle, L.L.C. for the year ended 2004. The IRS concluded its 2003 examination and we have been notified that no adjustments were proposed for the Operating Partnership for that tax year. As a result of its examination of the income tax return for 180 N. LaSalle, L.L.C. for the year ended 2004, the IRS has issued a Notice of Proposed Adjustment. The proposed adjustment would not have a cash effect on us but would decrease the amount of ~~short-term~~ capital loss reported and carried forward on the tax return from the sale of its residual interest it held in a REMIC. We have appealed the adjustment and believe that we have ~~legitimate~~ legitimate defenses that the basis in the REMIC, as reported on the tax return, was correct. The IRS examination of the 2004 Operating Partnership income tax return will remain open until the final IRS ruling on the 2004 180 N. LaSalle, L.L.C. income tax return has been resolved.

~~In addition, and as discussed in Note 7 — Recent Developments to our consolidated financial~~26 statements included in this report, our subsidiary that owns the 180 N. LaSalle Street property, 180 N. LaSalle II, L.L.C. (“180 LLC”), entered into a purchase agreement, which it later terminated because of the failure of the purchaser to timely close, for the proposed sale of our 180 N. LaSalle Street property. On February 13, 2009, an assignee of the original purchaser under the agreement, YPI LaSalle Owner, LLC, filed a lawsuit against 180 LLC in the Circuit Court of Cook County, Illinois, Chancery Division, claiming that the purchase agreement should be rescinded due to the doctrine of impossibility and impracticability and that 180 LLC should the return the $6.0 million in earnest money to purchaser. In the lawsuit, the purchaser alleges that it was impossible for it to obtain financing and that therefore it should be excused from closing, even though the purchase agreement contains no financing contingency. On July 7, 2009, the judge dismissed the Purchaser’s lawsuit with prejudice. The Purchaser filed an appeal of this decision on July 10, 2009. In our opinion, after consultation with legal counsel, we believe that this appeal is without merit and that we will prevail in it.

OnIn ~~October 20,~~connection ~~2009,~~with ~~Mr. Dean~~the ~~Konstand~~purchase ~~filed~~and asale ~~shareholder~~agreement ~~derivative~~for ~~complaint in~~ the ~~Circuit Court~~proposed sale of ~~Cook~~our ~~County,~~180 ~~Illinois,~~N. ~~Chancery~~LaSalle Street ~~Division,~~property ~~against~~that usour subsidiary, ~~Lightstone~~180 LLC, ~~Prime~~entered ~~Office~~into in August 2008 and ~~the~~later terminated ~~members~~because of ~~our~~the ~~Board~~failure inof ~~place~~Younan ~~immediately~~to ~~after~~timely ~~the~~close, ~~closing~~one of ~~our~~the ~~acquisition~~purchasers byunder ~~Lightstone~~the agreement (YPI LaSalle Owner, LLC, a ~~consisting~~subsidiary of ~~David~~Younan) ~~Lichtenstein,~~filed ~~Jeffrey~~a A.lawsuit ~~Patterson~~on February 13, ~~John~~2009 M.against ~~Sabin,~~180 ~~Michael~~LLC M.in ~~Schurer,~~the ~~Shawn R.~~Circuit ~~Tominus,~~Court ~~Bruno~~of DeCook ~~Vinck~~County, ~~and~~Illinois, ~~George~~Chancery RDivision. ~~Whittemore.~~ In ~~this~~the ~~case~~lawsuit, ~~the~~Younan ~~plaintiff~~claimed ~~is alleging~~ that the ~~common~~purchase ~~dividends~~agreement ~~declared~~should bybe ~~the~~rescinded ~~Board~~due into ~~July 2005~~the ~~and~~doctrine ~~February 2006~~of ~~constituted~~impossibility aand ~~breach of the~~impracticability ~~Board’s~~and ~~duty~~that of180 ~~loyalty~~LLC ~~and~~should ~~care,~~return ~~and~~the ~~good~~$6.0 million ~~faith~~earnest ~~and~~money ~~fair dealing,~~ to ~~the~~Younan ~~Company~~because ~~and~~it ~~the~~was ~~holders~~impossible offor ~~the~~Younan ~~Series B~~to ~~Shares,~~obtain financing and that ~~this~~therefore ~~breach~~it ~~was~~should ~~directed~~be byexcused ~~Lightstone~~from ~~and~~closing, ~~Prime~~even ~~Office. The~~though ~~plaintiff requests for~~ the ~~benefit~~purchase ofagreement ~~the~~contained ~~Company~~no ~~that~~financing ~~the~~contingency. ~~court~~On ~~grant~~July 7, a2009, ~~judgment~~the injudge ~~favor of the~~dismissed ~~Company~~Younan’s ~~against~~lawsuit ~~all~~with ofprejudice. ~~the~~Younan ~~other~~filed ~~defendants~~an inappeal ~~the~~of ~~amount~~this ofdecision ~~$106~~on July ~~million~~10, ~~the~~2009. ~~amount~~In ~~of the~~our ~~dividends~~opinion, ~~that~~after ~~were~~consultation ~~declared~~with onlegal ~~the~~counsel, ~~foregoing~~we ~~dates.~~believe ~~This~~that ~~matter~~this ~~could~~appeal beis ~~time~~without ~~consuming~~merit and ~~costly~~that towe ~~defend~~will ~~but~~prevail wein ~~believe~~it. ~~that~~Although wethere ~~have~~can ~~valid~~be ~~defenses~~no toassurances about the ~~foregoing~~eventual ~~claims. In addition~~outcome, we believe the ~~foregoing~~ultimate ~~claims~~outcome ~~may~~will benot ~~covered~~have ina ~~whole~~material oradverse inaffect ~~part~~on by our ~~directors~~consolidated ~~and officers liability~~financial ~~insurance,~~condition ~~subject~~or toresults ~~coverage~~of ~~limits and applicable deductibles~~operations.

On October 20, 2009, Mr. Dean Konstand filed a shareholder derivative complaint in the Circuit Court of Cook County, Illinois, Chancery Division, against us, Lightstone, Prime Office and the members of our Board in place immediately after the closing of our acquisition by Lightstone, consisting of David Lichtenstein, Jeffrey A. Patterson, John M. Sabin, Michael M. Schurer, Shawn R. Tominus, Bruno De Vinck and George R. Whittemore. In this case, the plaintiff is alleging that the common dividends declared by the Board in July 2005 and February 2006 constituted a breach of the Board’s duty of loyalty and care, and good faith and fair dealing, to the Company and the holders of the Series B Shares, and that this breach was directed by Lightstone and Prime Office. The plaintiff requests for the benefit of the Company that the court grant a judgment in favor of the Company against all of the other defendants in the amount of $106 million, the amount of the dividends that were declared on the foregoing dates. We are incurring the costs of defense of this action as it relates to the members of our Board under our indemnification obligations with our Board members. The Defendants have filed a Motion to Dismiss this action and briefs are being filed by the parties. The costs of defense of the Board members may be covered in whole or in part by our directors and officers liability insurance, subject to coverage limits and applicable deductibles. Although there can be no assurances about the eventual outcome, we believe the ultimate outcome will not have a material adverse affect on our consolidated financial condition or results of operations.


Item 1A.		Risk Factors.

Information regarding risk factors appears under the caption “Forward-Looking Statements” Part I — Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q and in Part I — Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.

None.


Item 3.		Defaults Upon Senior Securities.

We are currently in arrears in the payment of dividends on our Series B Shares ~~for the first, second and third quarters of 2009~~. As of the date of filing of this Form 10-Q, the total arrearage in payment of dividends on the Series B Shares ~~was~~is four quarters in 2009 and the first quarter of 2010 for a total of $611.7525 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” for a discussion of our current policy with respect to dividends on our outstanding shares of beneficial interest.

Item 4. ~~Submission~~[Removed ofand ~~Matters to a Vote of Security Holders.~~ Reserved]

None.


Item 5.		Other Information.

~~Effective May 4, 2009, the Company moved its corporate headquarters from 77 West Wacker Drive, Suite 3900, Chicago, Illinois to 330 North Wabash Avenue, Suite 2800, Chicago, Illinois 60611~~None. ~~Our~~ ~~general phone number of 312-917-1300 remains unchanged, as well as individual e-mail addresses and phone and facsimile numbers.~~

3528


Item 6.		Exhibits

	10.1			~~Assignment~~180 ~~and~~N. ~~Assumption~~LaSalle ~~effective~~Purchase asand ofSale ~~July~~Agreement ~~16,~~between ~~2009,~~180 byN. ~~PGRT~~LaSalle ~~ESH~~II, ~~Inc~~L.L.C., and ~~LSG-ESH~~180 N. LaSalle Realty LLC effective as of February 25, 2010.
	31.1			Rule 13a-14(a) Certification of Jeffrey A. Patterson, President and Chief Executive Officer of Registrant.
	31.2			Rule 13a-14(a) Certification of Paul G. Del Vecchio, Executive Vice President¾Capital Markets of Registrant.
	32.1			Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Jeffrey A. Patterson, President and Chief Executive Officer of Registrant.
	32.2			Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Paul G. Del Vecchio, Executive Vice President¾Capital Markets of Registrant.

3629

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PRIME GROUP REALTY TRUST Registrant
Date: November 12, 2009	/s/ Jeffrey A. Patterson
Date: May 13, 2010	/s/ Jeffrey A. Patterson
	Jeffrey A. Patterson
	President and Chief Executive Officer (Duly Authorized Officer)

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