---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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

For the quarterly period ended September 30, 2001

or

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

For the transition period from _________ to __________.

Commission File No. 33-98136

CPG PARTNERS, L.P.(Exact name of registrant as specified in its charter)

| | Delaware
  (State or other jurisdiction
of incorporation or organization) | 22-3258100
(I.R.S. Employer
Identification No.) | 
| | ------------------------------------------------------------------------- | ----------------------------------------------- | 

103 Eisenhower Parkway, Roseland, New Jersey 07068(Address of principal executive offices - zip code)(973) 228-6111(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 X No
.

There are no outstanding shares of Common Stock or voting securities.

---

CPG Partners, L.P.
Index

Part I.  Financial Information

|Item 1.  Financial Statements (Unaudited) | Page
|----------------------------------------- | ----

| | Condensed Consolidated Balance Sheets
      as of September 30, 2001 and December 31, 2000 | 3
| | ------------------------------------------------------------------------------------------ | -

| | Condensed Consolidated Statements of Income
     for the three and nine months ended September 30, 2001 and 2000 | 4
| | ---------------------------------------------------------------------------------------------------------------- | -

| | Condensed Consolidated Statements of Cash Flows
     for the nine months ended September 30, 2001 and 2000 | 5
| | ---------------------------------------------------------------------------------------------------------- | -

| | Notes to Condensed Consolidated Financial Statements | 6
| | ---------------------------------------------------- | -

|Item 2. Management's Discussion and Analysis of Financial Condition
               
and Results of Operations | 17
|------------------------------------------------------------------------------------------------------------- | --

|Item 3.  Quantitative and Qualitative Disclosures about Market Risk | 24
|------------------------------------------------------------------- | --

|Part II.   Other Information
Item 6.  Exhibits and Reports on Form 8-K
Signatures | 25
26
|--------------------------------------------------------------------------------- | -----

Item 1.  Financial Statements

CPG Partners, L.P.
Condensed Consolidated Balance Sheets(In thousands)

`September 30,       December 31,
                                                                                2001                 2000
                                                                              -------------      -------------
Assets                                                                         (Unaudited)           (Note 1)
Rental properties:
     Land...................................................................    $ 151,029           $ 118,238
     Depreciable property...................................................      953,700             790,106
                                                                              -------------      --------------
Total rental property.......................................................    1,104,729             908,344
Accumulated depreciation....................................................     (205,544)           (175,692)
                                                                              -------------      --------------
Rental properties, net......................................................      899,185             732,652
Properties held for sale....................................................       14,736                   -
Cash and cash equivalents...................................................       16,290              18,036
Restricted cash-escrows.....................................................       10,185                   -
Investments in affiliates...................................................       97,193              91,629
Deferred costs, net.........................................................       19,957              14,886
Notes receivable-related parties............................................        3,241               2,216
Other assets................................................................       30,536              41,895
                                                                              ------------       --------------
Total assets................................................................   $1,091,323           $ 901,314
                                                                              =============      ==============

Liabilities and partners' capital
Liabilities:
     Unsecured bank debt....................................................     $ 22,035            $ 35,035
     Unsecured Notes due 2001 - 2011........................................      373,239             324,542
     Mortgage debt..........................................................      233,499              90,776
     Construction payables..................................................        6,063              10,001
     Accounts payable and accrued expenses..................................       37,752              43,507
     Obligation under capital lease.........................................        2,284               2,714
     Accrued dividend and distribution payable..............................       16,909               3,910
     Other liabilities......................................................       15,177              18,267
                                                                              -------------      --------------
Total liabilities...........................................................      706,958             528,752

Commitments and contingencies

Partners' capital:
     General partner units outstanding, 16,736 in 2001 and 15,936 in 2000...      291,348             271,482
     Limited partners units outstanding, 3,155 in 2001 and 3,357 in 2000....       34,097              37,888
     Preferred partners units outstanding, 1,300 in 2001 and 2000...........       63,315              63,315
     Accumulated other comprehensive loss...................................       (4,395)               (123)
                                                                              --------------      --------------
Total partners' capital.....................................................      384,365             372,562
                                                                              --------------      --------------
Total liabilities and partners' capital.....................................  $ 1,091,323           $ 901,314
                                                                              ==============      ==============`

The accompanying notes are an integral part of the
financial statements.

CPG Partners, L.P.
Condensed Consolidated Statements of Income
for the Three and Nine Months Ended September 30, 2001 and 2000
(Unaudited)(In thousands, except per unit data)

`Three Months                   Nine Months
                                                     Ended September 30,            Ended September 30,
                                                     2001            2000           2001         2000
                                                   ------------ -------------- -------------- --------------

Revenues:
   Base rent...................................     $30,528         $26,867        $87,930        $79,726
   Percentage rent.............................       4,051           4,063          9,851          9,812
   Expense reimbursements......................      11,581          10,582         34,002         29,587
   Other income................................       2,905           3,054          8,403          7,086
                                                   ----------    ------------   ------------   -----------
Total revenues.................................      49,065          44,566        140,186        126,211
                                                   ----------    ------------   ------------   -----------

Expenses:
   Operating and maintenance...................      12,779          11,793         37,505         33,132
   Depreciation and amortization...............      12,174          10,616         35,479         31,823
   General and administrative..................         634             857          2,842          2,597
   Other.......................................         461           1,159          1,924          2,324
                                                   -----------   ------------   ------------    ----------
Total expenses.................................      26,048          24,425         77,750         69,876
                                                   ------------  -------------  ------------    ----------

Income before unconsolidated investments and
interest expense...............................      23,017          20,141         62,436         56,335

   Income from unconsolidated investments......       3,953           2,199         10,509          2,644
   Loss from Chelsea Interactive...............      (1,477)           (530)        (3,447)          (805)
   Interest expense............................      (8,891)         (6,113)       (26,326)       (17,481)
                                                   ------------  -------------  -------------   -----------

Net income.....................................      16,602          15,697         43,172         40,693
Preferred unit requirement.....................      (2,509)         (2,509)        (7,527)        (7,527)
                                                   ------------  -------------  -------------   -----------
Net income to common unitholders...............     $14,093         $13,188        $35,645        $33,166
                                                   ============  =============  =============   ===========

Net income to common unitholders:
     General partner............................    $11,838         $10,894        $29,818        $27,395
     Limited partners...........................      2,255           2,294          5,827          5,771
                                                   ------------  -------------  -------------   ------------
Total...........................................    $14,093         $13,188        $35,645        $33,166
                                                   ============  =============  =============   ============

Net income per common unit:
     General partner............................      $0.71           $0.68          $1.83          $1.72
     Limited partners...........................      $0.71           $0.68          $1.83          $1.72

Weighted average units outstanding:
     General partner............................     16,568          15,942         16,269         15,937
     Limited partners...........................      3,155           3,357          3,189          3,357
                                                   ------------ --------------  -------------   -------------
Total...........................................     19,723          19,299         19,458         19,294`

The accompanying notes are an integral part of the financial statements.

CPG Partners, L.P.
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2001 and 2000
(Unaudited)(In thousands)

`2001             2000
                                                                             --------------     -----------
   Cash flows from operating activities
   Net income.......................................................           $43,172            $40,693
   Adjustments to reconcile net income to net cash
      provided by operating activities:
       Depreciation and amortization................................            35,479             31,823
       Equity-in-earnings of unconsolidated investments
          in excess of distributions received.......................            (1,956)            (1,788)
       Loss from Chelsea Interactive................................             3,447                805
       Proceeds from non-compete receivable.........................             4,600              4,600
       Amortization of non-compete revenue..........................            (3,852)            (3,852)
       Additions to deferred lease costs............................              (391)              (210)
       Other operating activities...................................              (349)               208
       Changes in assets and liabilities:
         Straight-line rent receivable..............................            (1,181)            (1,048)
         Other assets...............................................             4,670              5,355
         Due from affiliates........................................              (787)            (2,566)
         Accounts payable and accrued expenses......................            (1,310)             2,166
                                                                              ----------        -----------
   Net cash provided by operating activities........................            81,542             76,186
                                                                              ----------        -----------

   Cash flows used in investing activities
   Additions to rental properties...................................           (89,572)           (52,699)
   Additions to investments in affiliates...........................           (15,960)           (20,354)
   Distributions from investments in affiliates in
       excess of earnings...........................................             5,090                -
   Additions to deferred development costs..........................            (6,074)               (91)
   Proceeds from sale of center.....................................               -                3,372
   Loans to parties.................................................            (2,750)               -
   Payments from related parties....................................             1,725                -
                                                                              ----------        ------------
   Net cash used in investing activities............................          (107,541)           (69,772)
                                                                              ----------        ------------

   Cash flows used in financing activities
   Distributions....................................................           (40,208)           (39,001)
   Debt proceeds....................................................           175,155            210,008
   Repayments of debt...............................................          (134,750)          (151,250)
   Additions to deferred financing costs............................            (2,054)            (3,201)
   Net proceeds from sale of common stock...........................            26,110                245
                                                                              -----------        -----------
   Net cash used in financing activities............................            24,253             16,801
                                                                              -----------        -----------

   Net increase (decrease) in cash and cash equivalents.............            (1,746)            23,215
   Cash and cash equivalents, beginning of period...................            18,036              8,862
                                                                              -----------        -----------
   Cash and cash equivalents, end of period.........................           $16,290             $32,077
                                                                              ===========        ===========`

The accompanying notes are an integral part of the financial statements.

CPG Partners, L.P.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.      Organization and Basis of Presentation

CPG Partners, L.P. (the Operating Partnership or
OP), which commenced operations on November 2, 1993, is engaged in
the development, ownership, acquisition and operation of upscale and
fashion-oriented manufacturers outlet centers (Premium Portfolio) and
other retail centers. As of September 30, 2001, the OP had interests in 58
properties in 28 states and Japan (the Properties) that contained
approximately 12.5 million square feet of gross leasable area (GLA).
The OPs premium portfolio included interests in 28 properties containing
8.2 million square feet of GLA near New York City, Los Angeles, Boston,
Washington, D.C., San Francisco, Sacramento, Cleveland, Atlanta, Dallas,
Portland (Oregon), Tokyo and Osaka, Japan, or at or near tourist destinations
including Palm Springs, the Napa Valley, Orlando, and Honolulu. The OPs
other retail portfolio was comprised of 30 centers acquired from a competitor on
September 25, 2001 containing approximately 4.3 million square feet of GLA. The
sole general partner in the Operating Partnership, Chelsea Property Group, Inc.
(the "Company"), is a self-administered and self-managed Real Estate Investment
Trust.

During 2000 the OP developed a technology-based e-commerce
platform through an unconsolidated affiliate, Chelsea Interactive, Inc.
(Chelsea Interactive). This platform provides fashion and other
retail brands with their own customized direct-to-the-consumer Internet online
stores, incorporating e-commerce design, development, fulfillment and customer
services.

On September 25, 2001 the OP acquired 31 shopping centers
(excluding Vegas Pointe Plaza which is to be repurchased in December 2001) from
Konover Property Trust, Inc. and its affiliates (Konover)
pursuant to the provisions of an Agreement for Sale dated July 12, 2001. The
centers contain a total of approximately 4.3 million square feet of gross
leasable area. The total purchase price for the centers was approximately $182.5
million, including the assumption of approximately $131 million of non-recourse
mortgage debt. The accompanying financial statements include six days of
operations from the acquired properties.

Common ownership of the OP as of September 30, 2001 was
approximately as follows:

`General Partner            84.1%             16,736,000  units
          Limited Partners           15.9%              3,155,000  units
                                   -----------        ------------
                      Total         100.0%             19,891,000`

The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States 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 notes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
Operating results for the three and nine month periods ended September 30, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. The balance sheet at December 31, 2000 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. These financial
statements should be read in conjunction with the consolidated financial
statements and accompanying notes included in the OPs Annual Report on
Form 10-K for the year ended December 31, 2000.

In October 2001, the Financial Accounting Standards Board issued
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 provides accounting guidance for financial accounting and reporting
for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes
SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. It also supersedes the accounting and
reporting of APB Opinion No. 50 Reporting the Results of Operations-
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions related to the
disposal of a segment of a business. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. Management does not anticipate that its
adoption will have a material effect on the financial position or results of
operations of the Company.

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

2.      Accounting Changes: Standards Implemented
and Transition Adjustment

On January 1, 2001, the OP adopted SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities. SFAS No. 133, as amended, establishes
accounting and reporting standards for derivative instruments. Specifically SFAS
No. 133 requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and to measure those
instruments at fair value. Additionally, the fair value adjustments will affect
either stockholders equity or net income depending on whether the
derivative instrument qualifies as a hedge for accounting purposes and, if so,
the nature of the hedging activity.

The OP uses derivative instruments to protect against the risk
of adverse price or interest rate movements on the value of certain firm
commitments and liabilities or on future cash flows. The FASB continues to issue
interpretive guidance that could require changes in the OPs application of
the standard and adjustments to the transition amounts. SFAS No. 133 may
increase or decrease reported net income and stockholders equity
prospectively, depending on future levels of interest rates and other variables
affecting the fair values of derivative instruments and hedged items, but will
have no effect on cash flows.

As of January 1, 2001, the adoption of the new standard resulted
in derivative instruments reported on the balance sheet as assets of $33,000 and
an adjustment of $33,000 to accumulated other comprehensive loss.

3.      Acquisitions

On September 25, 2001 the OP acquired 31 shopping centers
(excluding Vegas Pointe Plaza which is to be repurchased in December 2001) from
Konover Property Trust, Inc. and its affiliates (Konover)
pursuant to the provisions of an Agreement for Sale dated July 12, 2001. The
centers contain a total of approximately 4.3 million square feet of gross
leasable area. The total purchase price for the centers was approximately $182.5
million, including the assumption of approximately $131 million of non-recourse
mortgage debt. The accompanying financial statements include six days of
operations from the acquired properties.

Following is a list of the retail centers acquired from Konover:

`Name of Property                                              GLA

Kittery Premium Outlets, formerly Factory Stores of
America at Kittery, Kittery, ME                           (1)           21,000
Factory Stores of America at:
   Vacaville, CA                                          (1)          447,000
   Smithfield (I), NC                                     (1)          356,000
   Smithfield (II), NC                                  (2), (3)        87,000
   Branson, MO                                            (1)          287,000
   North Bend, WA                                         (1)          223,000
   Draper, UT                                             (1)          184,000
   Georgetown, KY                                         (1)          177,000
   LaMarque, TX                                           (1)          176,000
   Mesa, AZ                                               (1)          167,000
   Crossville, TN                                         (1)          151,000
   Tri-Cities, TN                                         (2)          133,000
   Iowa, LA                                             (1), (3)       131,000
   Tupelo, MS                                             (2)          129,000
   Tucson, AZ                                             (1)          127,000
   Story City, IA                                         (1)          112,000
   Boaz, AL                                             (1), (3)       105,000
   West Frankfort, IL                                     (1)           91,000
   Arcadia, LA                                            (1)           90,000
   Nebraska City, NE                                      (1)           90,000
   Lebanon, MO                                            (1)           86,000
   Graceville, FL                                         (1)           84,000
   Corsicana, TX                                          (1)           64,000
   Hanson, KY                                             (1)           64,000
   Hempstead, TX                                          (2)           64,000
   Livingston, TX                                         (1)           64,000
   Mineral Wells, TX                                      (1)           64,000
   Union City, TN                                         (1)           60,000
   Lake George, NY                                        (1)           44,000

Community Centers:
   MacGregor Village, Cary NC                             (1)          142,000
   Dare Center , Kill Devil, NC                         (1), (3)       115,000
   North Ridge, Raleigh, NC                               (1)          165,000
                                                                    ------------
    Total                                                            4,300,000
                                                                    ============`

|(1)
(2)
(3) | encumbered
unencumbered
subject to ground leases with termination dates ranging from 2007 to 2058.
Certain ground leases allow for renewal terms from 4 to 30 years.
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following condensed pro forma (unaudited) information
assumes the acquisition had occurred on January 1, 2000:

`Nine Months ended
                                                            September 30,
                                                      -----------------------------
                                                         2001           2000
                                                      -----------    -----------

          Total revenue............................     $176,057       $162,793

          Net income to common unitholders.........       37,566         35,003

          Earnings per share:
          Basic:
               Net income to common unitholders....        $2.25          $2.12

          Diluted:
               Net income to common unitholders....        $2.19          $2.10`

4.      Investments in Affiliates

The OP holds interests in domestic and international joint
ventures including a 49% interest in F/C Acquisition Holdings, LLC
(F/C), a 40% interest in Chelsea Japan Co., Ltd. (Chelsea
Japan), a 50% interest in Orlando Premium Outlets with Simon Property
Group, Inc. (Simon) and minority interests in outlet centers and
development projects in Europe operated by Value Retail PLC (Value
Retail). The OP owns 40% of the common stock and 100% of the preferred
stock of Chelsea Interactive.

Non-controlling investments are accounted for under the equity
method. Income from unconsolidated investments and loss from Chelsea Interactive
includes equity-in-earnings, management advisory, license and guarantee fees
earned from these affiliates.

The following is a summary of investments in and amounts due
from affiliates during the nine months ended September 30, 2001 (in
thousands):

`Chelsea                     Chelsea        Value
                            F/C       Japan         Simon       Interact.       Retail     Other      Total
                          --------- ----------    ----------    -----------    ---------  --------  ---------

Balance 12/31/00...        $33,114    $ 6,245    $15,922      $ 29,899         $4,742   $ 1,707     $ 91,629
Additional
investment..                 1,528        561         -         9,447             318       (80)      11,774
Income (loss) from
   unconsolidated
    investments ..           4,580      2,388      3,567        (3,447)           165      (191)       7,062
Distributions
     and fees               (3,315)    (1,670)    (9,074)            -             -         -       (14,059)
Other                          325      1,038       (791)          217                      (2)          787
                          ---------   ---------  ---------    ---------      ---------  ---------   ---------
Balance 9/30/01           $ 36,232    $ 8,562     $9,624      $ 36,116         $5,225   $ 1,434     $ 97,193
                          =========   =========  ==========   ==========     =========  =========   =========`

The OPs share of income before depreciation, depreciation
expense and income from unconsolidated investments for the three months ended
September 30, 2001 and 2000 are as follows (in thousands):

`For the Three Months Ended September 30,
                                 2001                                                2000
                   ------------------------------------------       -----------------------------------------
                      Inc.                       Inc. (loss)             Inc.                     Inc. (loss)
                    (loss)                         from                (loss)                        from
                    Before                       Unconsol.             Before                      Unconsol.
                     Depr.        Depr.           Inv.                  Depr.         Depr.         Inv.
                   -----------    ---------    --------------      ---------------   ----------  ------------
F/C                 $ 2,345        $ 677          $1,668             $   -            $  -       $   -
Chelsea Japan         1,214          382             832               1,728             280      1,448
Simon                 2,077          569           1,508               1,168             585        583
Other                   (55)         -               (55)                168              -         168
                   ---------      ---------    ------------        -------------     --------    ---------
   Total            $ 5,581       $1,628         $ 3,953             $ 3,064          $ 865      $2,199
                   =========      =========    ============        =============     ========    =========
Chelsea Interactive  ($ 580)       $ 897        ($ 1,477)              ($450)         $  80       ($530)
                   ===========    =========    ==============      =============     ========    =========`

The OPs share of income before depreciation, depreciation
expense and income from unconsolidated investments for the nine months ended
September 30, 2001 and 2000 are as follows (in thousands):

`For the Nine Months Ended September 30,
                                    2001                                            2000
                     ----------------------------------------      ---------------------------------------------
                       Inc.                  Inc. (loss)             Inc.                      Inc. (loss)
                      (loss)                    from                (loss)                        from
                      Before                  Unconsol.             Before                      Unconsol.
                       Depr.      Depr.         Inv.                 Depr.            Depr.        Inv.
                     ----------  ---------   ------------          ------------     ----------  -----------

F/C                  $6,574       $1,994          $4,580            $    -            $  -       $    -
Chelsea Japan         3,389        1,001           2,388               1,728            280       1,448
Simon                 5,272        1,705           3,567               1,502            585         917
Other                   (26)         -              (26)                 279             -          279
                    ---------    ---------    -----------          -----------       ---------  ---------
   Total            $15,209       $4,700        $10,509              $3,509            $865      $2,644
                    =========    =========    ===========          ===========       =========  ==========

Chelsea Interactive ($1,497)      $1,950     ($3,447)                 ($642)           $163       ($805)
                    =========    =========    ==============       ===========       ========== ==========`

5.      Properties held for sale

As of September 30, 2001 properties held for sale represents the
fair value, less estimated costs to sell of the following properties:

`Carrying Value
                                                           GLA      (in thousands)
                                                           ---      ---------------
    Mammoth Premium Outlets (1)                           35,000        $ 4,852
    Factory Stores of America  at  LaMarque (2)          176,000          5,087
    Vegas Pointe Plaza (2)                               230,000          2,537
    Factory Stores of America at Tucson (2)              127,000          1,700
    Factory Stores of America at West Frankfort (2)       91,000            560
                                                         -------      ----------
                                                         659,000         $14,736
                                                         =======      ==========`

(1) On October 9, 2001 the OP sold Mammoth Premium Outlets for a
net sales price approximating the carrying value.

(2) The OP has executed a purchase and sale agreement or is
actively marketing these properties which were acquired in the Konover
transaction. It is expected that each sale will take place within one year and
that the sales proceeds will approximate carrying value.

For the three months and nine month ended September 30, 2001 and
2000 the centers held for sale accounted for less than 1% of OP revenues and net
operating income.

6.      Non-Compete Agreement

The OP recognized income from its non-compete agreement with The
Mills Corporation of $3.9 million during the nine months ended September 30,
2001 and 2000. Such amounts are included in other income.

7.      Debt

The OP has a $160 million senior unsecured bank line of credit
(the Senior Credit Facility) and has an annual right to request a
one-year extension which may be granted at the option of the lenders. The
OPs lenders have agreed to extend the Facility until March 30, 2004. The
Senior Credit Facility bears interest on the outstanding balance, payable
monthly, at a rate equal to the London Interbank Offered Rate
(LIBOR) plus 1.05% (3.72% at September 30, 2001) or the prime rate,
at the OPs option. The LIBOR rate spread ranges from 0.85% to 1.25%
depending on the OPs Senior Debt rating. A fee on the unused portion of
the Senior Credit Facility is payable quarterly at rates ranging from 0.15% to
0.25% depending on the balance outstanding. At September 30, 2001, $17.0 million
was outstanding.

The OP also has a $5 million term loan (the Term
Loan) which carries the same interest rate and maturity as the Senior
Credit Facility.

A summary of the terms of the Unsecured Notes outstanding as of
September 30, 2001 and December 31, 2000 is as follows:

`September 30,       December 31,     Effective
                                                       2001                 2000       Yield (1)
                                                ----------------     -------------    ------------

7.75% Unsecured Notes due January 2001.....     $    -                $99,987           7.85%
8.375% Unsecured Notes due August 2005.....       49,888               49,877           8.44%
7.25% Unsecured Notes due October 2007.....      124,801              124,776           7.29%
8.625% Unsecured Notes due August 2009.....       49,917               49,902           8.66%
8.25% Unsecured Notes due February 2011....      148,633                  -             8.40%
                                                ---------            ----------
   Total                                        $373,239             $324,542
                                                =========            ==========`

(1)    Including discount on the notes

A summary of the terms of the mortgage debt outstanding as of
September 30, 2001 and December 31, 2000 and the related Net Book Value of the
associated collateral ("NBV") and interest rate as of September 30, 2001 are as
follows:

`September 30,  December 31,                 Interest
                                  2001        2000           Due Date      Rate      NBV
                             ------------   ------------  -------------  -------   ----------
REMIC Loan (1)                  $65,229     $ -            Dec. 2001      3.71%     $105,045
Construction Loan (2)            27,148      21,526        Feb. 2003      4.36%       39,733
Bank Mortgage Loan (3)           68,500      69,250       April 2010      7.26%       74,591
Mortgage Loan (4)                72,622        -          March 2013      7.67%       75,049
                             -----------   ----------                              ----------
                               $233,499     $90,776                                $ 294,418
                             ===========   ==========                              ==========`

|(1) | REMIC Loans were assumed as part of the September 25, 2001, Konover acquisition
and include Class A, B and C Loans, that have a blended stated fixed interest
rate of 7.85%. The OP received a $0.5 million interest rate spread credit at
closing reducing the annual interest effective rate to 3.71% until the loans are
prepaid on December 3, 2001.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Construction Loan bears interest equal to LIBOR plus
1.375% or 4.36% at September 30,2001.
|--- | ------------------------------------------------------------------------------------------

|(3) | Bank Mortgage Loan bears interest equal to LIBOR plus 1.50% (5.08% at September
30, 2001) or prime rate plus 1.0%. In December 2000, the OP entered into an
interest swap agreement to hedge against unfavorable fluctuation in the LIBOR
rates by fixing the interest rate at 7.26% until January 2006. As of September
30, 2001, the OP recognized net interest expense of $0.6 million on the hedge
which is included in interest expense. The loan terms call for quarterly
principal amortization of $0.3 million through April 2005 and $0.5 million per
quarter until maturity.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mortgage Loan was assumed as part of the September 25,
2001 Konover acquisition. The stated interest rate of 9.1% was greater than that
available to the OP in the public debt markets. Accordingly the OP recorded a
$6.9 million debt premium that will be amortized over the period of the loan and
which reduces the effective interest rate to 7.67%. The loan calls for fixed
monthly debt service payments of $0.5 million for interest plus principal based
on a 26-year amortization schedule. The Mortgage loan matures in March 2028 but
can be prepaid in March 2013.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Interest and loan costs of approximately $0.4 million and $1.4
million were capitalized as development costs during the three months ended
September 30, 2001 and 2000, respectively; and approximately $1.5 million and
$3.6 million during the nine months ended September 30, 2001 and 2000,
respectively.

8.      Financial Instruments: Derivatives and Hedging

In the normal course of business, the OP is exposed to the
effect of interest rate and foreign currency changes. The OP limits these risks
by following established risk management policies and procedures including the
use of derivatives. For interest rate exposures, derivatives are used primarily
to align rate movements between interest rates associated with the OPs
leasing income and other financial assets with interest rates on related debt,
and manage the cost of borrowing obligations. For foreign currency exposures,
derivatives are used primarily to align movements between currency rates to
protect forecasted returns of fees to the U.S.

The OP has a policy of only entering into contracts with major
financial institutions based upon their credit ratings and other factors. When
viewed in conjunction with the underlying and offsetting exposure that the
derivatives are designed to hedge, the OP has not sustained a material loss from
those instruments nor does it anticipate any material adverse effect on its net
income or financial position in the future from the use of derivatives.

To manage interest rate and foreign currency risk, the OP may
employ options, forwards, interest rate swaps, caps and floors or a combination
thereof depending on the underlying exposure. The OP undertakes a variety of
borrowings including lines of credit, medium- and long-term financings. To
reduce overall interest cost, the OP may use interest rate instruments,
typically interest rate swaps, to convert some or all of its variable rate debt
to fixed rate debt, or even a portion of its fixed-rate debt to variable rate.
Interest rate differentials that arise under these swap contracts are recognized
in interest expense over the life of the contracts. The resulting cost of funds
is usually lower than that which would have been available if debt with matching
characteristics was issued directly.

The OP employs interest rate and foreign currency forwards or
purchased options to hedge qualifying anticipated transactions. Gains and losses
are deferred and recognized in net income in the same period that the underlying
hedged transaction affects net income, expires or is otherwise terminated or
assigned. As of September 30, 2001, there was $4.3 million in deferred losses
included in other comprehensive loss.

The following table summarizes the notional values and fair
values of the OPs derivative financial instruments.

`At September 30, 2001
      ------------------ -----------------------------------------------------
         Hedge Type       Notional Value  Rate         Maturity    Fair Value
         ----------       -------------                --------    ----------

      1) Swap, Cash Flow    $68.5 mil      5.7625%       1/1/06     ($4.3 mil)`

The notional value and fair value of the swap provide an
indication of the extent of the OPs involvement in financial derivative
instruments at September 30, 2001 but do not represent exposure to credit,
interest rate or market risks.

On September 30, 2001, the derivative instrument was reported at
its fair value as other liabilities of $4.3 million.

At March 31, 2001, the OP had a yen forward contract with a
notional value of $1.4 million and a fair value of $0.04 million as a hedge
against its yen denominated receivable. On June 21, 2001 the receivable and yen
forward contract were settled and the OP received $1.4 million.

Interest rate swaps that are designated as cash flow hedges
hedge the future cash outflows on debt. Interest rate swaps that convert
variable payments to fixed payments, interest rate caps, floors, collars, and
forwards are cash flow hedges. The unrealized gains/losses in the fair value of
cash flow hedges are reported on the balance sheet with a corresponding
adjustment to accumulated other comprehensive loss to the extent they are
offsetting and otherwise qualify in the period for cash flow hedge accounting.
Over time, the unrealized gains and losses held in accumulated other
comprehensive loss will be reclassified to earnings. This reclassification
occurs over the same time period in which the hedge items affect earnings.
Within the next twelve months, the OP expects to reclassify to earnings
approximately $1.0 million of the current balance held in accumulated other
comprehensive loss.

The OP hedges its exposure to the variability in future cash
flows for forecasted transactions other than those associated with existing
floating rate debt over a maximum period of 12 months. During the forecast
period, unrealized gains and losses in the hedging instrument will be reported
in accumulated other comprehensive loss. Once the hedged transaction takes
place, the hedge gains and losses will be reported in earnings during the same
period in which the hedged item is recognized in earnings.

9.     Partners' Capital

Following is a statement of
partners capital for the nine months ended September 30, 2001 (in
thousands):

`General       Limited      Preferred     Accum. Other      Total
                                         Partner's     Partners'     Partner's        Comp.        Partners'
                                          Capital       Capital       Capital          Loss         Capital
                                       ------------------------------------------ -----------------------------

Balance December 31, 2000.............    $271,482       $37,888       $63,315          ($123)      $372,562

Net income.............................     32,959        10,213             -              -         43,172
Other comprehensive loss:
     Foreign currency translation......          -             -             -             16             16
     Interest rate swap................          -             -             -         (4,288)        (4,288)
                                                                                                 --------------
Total comprehensive income.............                                                               38,900

Common distributions...................    (38,297)       (7,383)            -              -        (45,680)
Preferred distribution.................     (3,141)       (4,386)            -              -         (7,527)
Contributions (net of costs)...........     26,110             -             -              -         26,110
Transfer of limited partners' interest.      2,235        (2,235)            -              -              -
                                       -------------  -------------  ------------ --------------  -------------
Balance September 30, 2001............    $291,348       $34,097       $63,315        ($4,395)      $384,365
                                       =============  =============  ============ ==============  =============`

On July 30, 2001, the Company completed the sale of 545,000
shares of common stock to an institutional investor at a net price of $46 per
share, yielding net proceeds of $24.8 million that were used to partially fund
the acquisition of the Konover assets and for general corporate purposes.

In October 2001, the Company sold two million shares of common
stock at a price of $45 per share, yielding net proceeds of $85.0 million, which
were used to repay borrowings under the Companys Senior Credit Facility
and for general corporate purposes.

10.      Distributions

On September 30, 2001, the Board of Directors of the OP declared
a $0.78 per unit distribution to unitholders of record on September 30, 2001.
The distribution, totaling $15.5 million, was paid on October 15, 2001.

11.      Income Taxes

No provision has been made for income taxes in the accompanying
consolidated financial statements since such taxes, if any, are the
responsibility of the individual partners.

12.      Net Income Per Common Partnership Unit

Net income per partnership unit is determined by allocating net
income to the general partner (including the general partners preferred
unit allocation) and the limited partners based on their weighted average
partnership units outstanding during the respective periods presented.

13.      Commitments and Contingencies

The 50/50 Orlando Premium Outlets (OPO) joint
venture with Simon has a $66.0 million construction loan that is due in March
2002 and has two one year extensions. The loan bears interest at LIBOR plus
1.30% (4.65% at September 30, 2001) and is 10% guaranteed by each of the OP and
Simon and as of September 30, 2001, $58.4 million was outstanding. Changes in
debt service coverage ratio provide for a guarantee ranging from 10% to 25% per
guarantor and a LIBOR interest rate spread ranging from 130 to 150 basis points.

In October 1999, an equity investee of the OP entered into a 4
billion yen (approximately US $33.5 million) line of credit guaranteed by the
Company and OP to fund its share of Chelsea Japans construction costs. The
line of credit bears interest at yen LIBOR plus 1.35% (1.4106% at September 30,
2001) is due April 2002 and has two one year extensions. At September 30, 2001,
1.32 billion yen (approximately US $11.0 million) was outstanding under the
loan. In March 2000, Chelsea Japan entered into a 3.8 billion yen (approximately
US $31.8 million) loan with a bank to fund construction costs. As of September
30, 2001, the entire facility was outstanding and bears interest at 2.20%. The
loan is secured by the two operating properties and is 40% guaranteed by the OP.

The OP has agreed under a standby facility to provide up to
$22.0 million in limited debt service guarantees for loans provided to Value
Retail PLC and affiliates, to construct outlet centers in Europe. The term of
the standby facility is three years and guarantees shall not be outstanding for
longer than five years after project completion. As of September 30, 2001, the
OP had provided limited debt service guarantees of approximately $17.0 million
to Value Retail PLC. In October 2001, the guarantee was increased to $24.1
million until April 2002 at which time it will revert to $22.0 million.

Accrued expenses and other liabilities include $14.4 million and
$10.5 million at September 30, 2001 and December 31, 2000, respectively, related
to a deferred unit incentive program with certain key officers to be paid in
2002. Included in other assets is $2.8 million and $7.4 million at September 30,
2001 and December 31, 2000, respectively, related to the present value of future
payments to be received from The Mills Corporation under the Houston non-compete
agreement.

The OP is not presently involved in any material litigation nor,
to its knowledge, is any material litigation threatened against the OP or its
properties, other than routine litigation arising in the ordinary course of
business. Management believes the costs, if any, incurred by the OP related to
any of this litigation will not materially affect the financial position,
operating results or liquidity of the OP.

14.      Related Party Information

During the nine months ended September 30, 2001 the OP received
a $1.2 million payoff for one of the loans outstanding to unit holders and a
$0.5 million pay down on the other unit holder loan. On September 28, 2001 the
OP advanced $2.7 million to a unit holder to acquire approximately 10%
non-voting equity interest in Chelsea Interactive. The unit holder issued a note
that is secured by OP units, bears interest at a rate of LIBOR plus 200 basis
points per annum, payable quarterly, and is due June 2004. At September 30, 2001
and 2000, $3.2 million and $2.2 million was due from the unit holders,
respectively.

15.      Reportable Segments

The OP is principally engaged in the development, ownership,
acquisition and operation of manufacturers outlet centers and has
determined that under SFAS No.131 Disclosures About Segments of an
Enterprise and Related Information it has three reportable retail real
estate segments: domestic premium, domestic other and international. The OP
evaluates real estate performance and allocates resources based on Net Operating
Income (NOI). The primary sources of revenue are generated from
tenant base rents, percentage rents and reimbursement revenue. Operating
expenses primarily consist of common area maintenance, real estate taxes and
promotional expenses. The retail real estate business segments meet the
quantitative threshold for determining reportable segments.

`Retail         Retail
                                 Domestic       Domestic          Retail
                                  Premium         Other       International     Other (1)       Total
------------------------------ -------------- -------------- ----------------- ------------- -------------
Three months ended September
30, 2001:
  NOI                                $36,921           $447            $1,657        $1,556      $40,581
------------------------------ -------------- -------------- ----------------- -------------  -------------

Nine months ended September
30, 2001:
  NOI                               $106,571           $447            $4,682        $1,056     $112,756
  Total assets                      $858,646       $198,907           $13,787       $19,983   $1,091,323`

(1)      Includes results of corporate assets and
Chelsea Interactive.

The OP operated in one segment in 2000.

Following is a reconciliation of net operating income to net
income for the three and nine months ended September 30, 2001 (in
thousands):

`Three months       Nine months
                                      Ended Sept. 30    Ended Sept. 30
                                           2001              2001
                                     ------------------------------------
Segment NOI                               $40,581          $112,756
Interest expense - consolidated           (8,891)          (26,326)
Interest expense - unconsol. inv.           (145)             (445)
Depreciation expense - consolidated      (12,174)          (35,479)
Depreciation expense - unconsol. Inv.     (2,525)           (6,650)
Income tax - unconsol. Inv.                 (244)             (684)
                                     -------------------------------
Net income                                $16,602           $43,172
                                     ===============================`

16.      Non-Cash Investing and Financing Activities

In connection with the acquisition of the 31 retail centers from
Konover on September 25, 2001, the OP assumed $131.0 million of nonrecourse
first mortgage loans.

CPG Partners, L.P.

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

The following discussion should be read in conjunction with the
accompanying unaudited condensed consolidated financial statements and notes
thereto. These financial statements include all adjustments which, in the
opinion of management, are necessary to reflect a fair statement of results for
the interim periods presented, and all such adjustments are of a normal
recurring nature.

General Overview

From October 1, 2000 to September 30, 2001, the OP grew by
increasing rents at its operating centers, opening three new centers, expanding
three centers and acquiring 35 centers. Increasing rents at comparable centers
resulted in base rent growth of $1.5 million. The opening of one wholly-owned
new center and expansion of three wholly-owned centers increased base rent by
$2.5 million and $3.5 million, respectively. The acquisition of 31 wholly-owned
centers increased base rent by $0.6 million. Income from unconsolidated
investments increased by $7.9 million primarily as a result of opening three new
centers developed by joint ventures during 2000 and by acquiring a 49% interest
in four centers through a joint venture in December 2000.

The OP operated gross leasable area (GLA) at
September 30, 2001 of 12.5 million square feet including wholly and
partially-owned GLA compared to 6.0 million square feet at September 30, 2000
and had an interest in 58 manufacturers outlet centers at September 30,
2001 compared to 21 at the end of the same quarter in the prior year. The
OPs premium portfolio included interests in 28 properties containing 8.2
million square feet of GLA. The OPs other retail portfolio was comprised
of 30 centers acquired from a competitor on September 25, 2001 containing
approximately 4.3 million square feet of GLA. The accompanying financial
statements include six days of operations from the acquired properties.

Net GLA added since October 1, 2000 is detailed as follows:

`12 mos       9 mos            3 mos
                                                                 ended        ended            ended
                                                                September    September 30,   December
                                                                30, 2001        2001          31, 2000
                                                             -------------------------------------------
       Changes in GLA (sf in 000's):

       New centers developed:
           Allen Premium Outlets......................            206             -              206
           Rinku Premium Outlets (40% owned)..........            180             -              180
                                                             ------------   ---------------   -----------
       Total new centers..............................            386             -              386

       Centers expanded:
           Wrentham Premium Outlets....................           127             -              127
           Leesburg Premium Outlets.....................          104             -              104
          Allen Premium Outlets.........................           34            34                -
          Other (net)...................................            1             -                1
                                                             -------------  --------------    ------------
       Total centers expanded                                     266            34              232

       Centers acquired:
          Gilroy Premium Outlets(49% owned).............          577             -              577
          Lighthouse Place(49% owned)...................          491             -              491
          Waterloo Premium Outlets (49% owned)..........          392             -              392
          Kittery Premium Outlets I (49% owned).........          131             -              131
          Kittery Premium Outlets, II (1)...............           21            21                -
          Other Retail Centers  acquired from Konover (2).      4,279         4,279                -

        Total centers acquired                                  5,891         4,300            1,591

       Net GLA added during the period....................      6,543         4,334            2,209

       GLA at end of period...............................     12,493        12,493            8,159`

---

(1) Acquired in the September 25, 2001, Konover transaction and
formerly known as Factory Stores of America at Kittery

(2) Excludes Vegas Pointe Plaza acquired as part of the
September 25, 2001 acquisition, which is under option and management contracts
and is to be repurchased on December 3, 2001.

Results of Operations

Comparison of the three months ended September 30, 2001 to
the three months ended September 30, 2000.

Net income increased $0.9 million to $16.6 million for the three
months ended September 30, 2001 from $15.7 million for the three months ended
September 30, 2000. Increases in revenues, primarily the result of new center
development, expansions, higher rents on releasing and renewals, the third
quarter 2001 acquisition of the Konover properties and net earnings from
unconsolidated investments that commenced operations in the second, third and
fourth quarters of 2000 were partially offset by the loss from Chelsea
Interactive and increases in operating, maintenance, depreciation and
amortization and interest expenses.

Base rentals increased $3.6 million, or 13.6%, to $ 30.5 million
for the three months ended September 30, 2001 from $26.9 million for the three
months ended September 30, 2000 due to the fourth quarter 2000 opening of Allen
Premium Outlets, expansions and higher average rents on new leases and renewals
and the third quarter 2001 acquisition of the Konover properties.

Percentage rents remained flat at $4.1 million in 2001 and 2000.

Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $ 1.0 million, or 9.4%, to $11.6 million for the
three months ended September 30, 2001 from $10.6 million for the three months
ended September 30, 2000, due to the recovery of operating and maintenance costs
from increased GLA. The average recovery of reimbursable expenses was 90.6% in
the third quarter of 2001, compared to 89.7% in the third quarter of 2000.

Other income decreased $0.2 million to $2.9 million for the three months ended
September 30, 2001, from $3.1 million for the three months ended September 30,
2000. The decrease is primarily due to the pad sale gains in the third quarter
of 2000.

Operating and maintenance expenses increased $1.0 million, or 8.4%, to $12.8
million for the three months ended September 30, 2001 from $11.8 million for the
three months ended September 30, 2000. The increase was primarily due to costs
related to expansions, the new center opening and higher insurance costs on the
existing centers.

Depreciation and amortization expense increased $1.6 million, or 14.7%, to $12.2
million for the three months ended September 30, 2001 from $10.6 million for the
three months ended September 30, 2000. The increase was due to depreciation of
expansions and the new center opening.

General and administrative expense decreased $0.3 million to $0.6 million for
the three months ended September 30, 2001 from $0.9 million for the three months
ended September 30, 2000 primarily due to a lower accrual for deferred incentive
compensation.

Other expenses decreased $0.7 million to $0.5 million for the three months ended
September 30, 2001 from $1.2 million for the three months ended September 30,
2000 primarily due to write-off of development costs related to inactive
projects in the third quarter of 2000.

Income from unconsolidated investments increased $1.8 million to $4.0 million
for the three months ended September 30, 2001 from $2.2 million for the three
months ended September 30, 2000. This resulted from equity-in-earnings and fees
earned from the OP's unconsolidated investments that commenced operations during
the fourth quarter of 2000 offset by one time consulting fees earned in the
third quarter of 2000.

The loss from Chelsea Interactive increased $1.0 million to $1.5 million for the
three months ended September 30, 2001 from $0.5 million for the three months
ended September 30, 2000 due to increased depreciation, selling, general,
administrative and maintenance expenses.

Interest in excess of amounts capitalized increased $2.8 million to $8.9 million
for the three months ended September 30, 2001 from $6.1 million for the three
months ended September 30, 2000 primarily due to higher debt balances and less
construction activity.

Comparison of the nine months ended September 30, 2001 to the nine months ended
September 30, 2000.

Net income increased $2.5 million to $43.2 million for the nine months ended
September 30, 2001 from $40.7 million for the nine months ended September 30,
2000. Increases in revenues, primarily the result of new center development,
expansions, higher rents on releasing and renewals, the third quarter 2001
acquisition of the Konover properties, and net earnings from unconsolidated
investments that commenced operations in the second, third and fourth quarters
of 2000 were partially offset by the loss from Chelsea Interactive and increases
in operating, maintenance, depreciation and amortization and interest expenses.

Base rentals increased $8.2 million, or 10.3%, to $87.9 million for the nine
months ended September 30, 2001 from $79.7 million for the nine months ended
September 30, 2000 due to the fourth quarter 2000 opening of Allen Premium
Outlets, expansions and higher average rents on new leases and renewals and the
third quarter 2001 acquisition of the Konover properties.

Percentage rents increased $0.1 million or 1.0% to $9.9 million for the nine
months ended September 30, 2001 from $9.8 million for the nine months ended
September 30, 2000.

Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $4.4 million, or 14.9%, to $34.0 million for the
nine months ended September 30, 2001 from $29.6 million for the nine months
ended September 30, 2000, due to the recovery of operating and maintenance costs
from increased GLA. The average recovery of reimbursable expenses was 90.7% for
the nine months ended September 30, 2001, compared to 89.3% for the nine months
ended September 30, 2000.

Other income increased $1.3 million to $8.4 million for the nine months ended
September 30, 2001, from $7.1 million for the nine months ended September 30,
2000. The increase is primarily the result of increased interest income offset
by higher pad sale gains for the nine months ended September 30, 2000.

Operating and maintenance expenses increased $4.4 million, or 13.2%, to $37.5
million for the nine months ended September 30, 2001 from $33.1 million for the
nine months ended September 30, 2000. The increase was primarily due to costs
related to expansions, the new center opening and higher insurance costs on the
existing centers.

Depreciation and amortization expense increased $3.7 million, or 11.5%, to $35.5
million for the nine months ended September 30, 2001 from $31.8 million for the
nine months ended September 30, 2000. The increase was due to depreciation of
expansions and the new center opening.

General and administrative expense increased $0.2 million to $2.8 million for
the nine months ended September 30, 2001 from $2.6 million for the nine months
ended September 30, 2000 primarily due to increased salaries.

Other expenses decreased $0.4 million to $1.9 million for the nine months ended
September 30, 2001 from $2.3 million for the nine months ended September 30,
2000. The decrease was primarily due to a 2000 write-off of deferred site
expense offset by increases in bad debt in 2001.

Income from unconsolidated investments increased $7.9 million to $10.5 million
for the nine months ended September 30, 2001 from $2.6 million for the nine
months ended September 30, 2000. This resulted from equity-in-earnings and fees
earned from the OP's unconsolidated investments that commenced operations during
the second half of 2000.

The loss from Chelsea Interactive increased $2.6 million to $3.4 million for the
nine months ended September 30, 2001 from $0.8 million for the nine months ended
September 30, 2000 due to increased depreciation, administrative and maintenance
expenses.

Interest in excess of amounts capitalized increased $8.8 million to $26.3
million for the nine months ended September 30, 2001 from $17.5 million for the
nine months ended September 30, 2000 primarily due to higher debt balances and
lower construction balances.

Liquidity and Capital Resources

The OP believes it has adequate financial resources to fund operating expenses,
distributions, and planned development, construction and acquisition activities
over the short-term, which is less than 12 months and the long-term, which is 12
months or more. Operating cash flow for the year ended December 31, 2000 of
$104.5 million is expected to increase with a full year of operations of the 2.9
million square feet of GLA added during 2000, scheduled openings of
approximately 145,000 square feet in 2001, representing additional phases of
Allen Premium Outlets and the third quarter 2001 acquisition of the 31 Konover
properties. As of September 30, 2001, the OP has adequate funding sources to
complete and open all current development projects, including those of its
e-commerce affiliate, Chelsea Interactive, Inc. and pay off the assumed REMIC
loan due in December 2001. This will be accomplished with available cash of
$16.3 million, net proceeds of $85.0 million from the two million common shares
issued in October 2001 by the Company and approximately $143 million available
under the Senior Credit Facility. The OP also has the ability to access the public
markets through its $450 million debt shelf registration and the Company's $185 million
equity shelf registration.

Operating cash flow is expected to provide sufficient funds for dividends and
distributions in accordance with REIT federal income tax requirements. In
addition, the OP anticipates retaining sufficient operating cash to fund
re-tenanting and lease renewal tenant improvement costs, as well as capital
expenditures to maintain the quality of its centers, and meet funding
requirements for Chelsea Interactive.

Common distributions declared and recorded during the nine months ended
September 30, 2001 were $45.7 million, or $2.34 per share or unit. The OP's
dividend payout ratio as a percentage of net income before depreciation and
amortization (exclusive of amortization of deferred financing costs ("FFO")) was
61.3% for the nine months ended September 30, 2001. The Senior Credit Facility
limits aggregate dividends and distributions to the lesser of (i) 90% of FFO on
an annual basis or (ii) 100% of FFO for any two consecutive quarters.

In October 2001, the OP sold Mammoth Premium Outlets for a net
sale price approximating the carrying value.

During the eighteen month period ended October 2001, the OP completed four new
debt financing transactions totaling $360 million, both secured and unsecured
and the Company's sale of common stock totaling $115 million. These transactions
strengthened the OP's financial flexibility and liquidity by extending and
sequencing debt maturities and significantly reducing floating interest rate
exposure at favorable rates.

In October 2001, the Company sold two million shares of common stock at a price
of $45 per share, yielding net proceeds of $85.0 million, which were used to
repay borrowings under the OP's Senior Credit Facility and for general corporate
purposes.

In July 2001, the Company completed the sale of 545,000 shares of common stock
to an institutional investor at a net price of $46 per share, yielding proceeds
of $24.8 million that were used to partially fund the acquisition of the Konover
properties and for general corporate purposes.

On September 25, 2001, the OP acquired a portfolio of 31 retail centers from
Konover for a purchase price of approximately $182.5 million including the
assumption of debt of approximately $131.0 million. Proceeds from the 545,000
share common stock equity offering, cash on hand and $17 million from the Senior
Credit Facility were used to fund the balance of the purchase price.

In January 2001, the OP completed a $150 million offering of 8.25% unsecured
term notes due February 2011 (the "8.25% Notes"). The 8.25% Notes were priced to
yield 8.396% to investors. Net proceeds from the offering were used to repay
$100 million of 7.75% unsecured notes due January 26, 2001, to repay all
borrowings outstanding under the OP's Senior Credit Facility and for general
corporate purposes.

Development activity as of September 30, 2001 includes an additional phase of
Allen Premium Outlets, totaling 120,000 square feet scheduled to open during the
fourth quarter 2001, the 71,000 square foot second phase of Rinku Premium
Outlets, located outside Osaka, Japan, scheduled to open during the first
quarter of 2002 and Chelsea Interactive. The OP is also in the predevelopment
stage of projects outside Chicago, IL; Las Vegas, NV; and Seattle, WA that are
expected to open in 2003 and beyond. These projects are under development and
there can be no assurance that they will be completed or opened, or that there
will not be delays in opening or completion. All current development activity is
fully financed either through project specific secured construction financing,
the yen denominated line of credit, available cash or through the Senior Credit
Facility. The OP will seek to obtain permanent financing once the projects are
completed and income has been stabilized.

The OP has minority interests ranging from 5% to 15% in several outlet centers
and outlet development projects in Europe. Outlet centers, outside of London,
England, Barcelona and Madrid, Spain and Paris, France are currently open and
operated by Value Retail PLC and its affiliates. Two new European projects and
expansions of the two existing centers are in various stages of development and
are expected to open within the next two years. The OP's total investment in
Europe as of September 30, 2001 was $5.2 million. The OP has also agreed under a
standby facility to provide up to $22.0 million in limited debt service
guarantees for loans provided to Value Retail PLC and affiliates, to construct
outlet centers in Europe. The term of the standby facility is three years and
guarantees shall not be outstanding for longer than five years after project
completion. As of September 30, 2001, the OP had provided limited debt service
guarantees of $17.0 million for three projects. In October 2001 the guarantee
was increased to $24.1 million until April 2002 at which time it will revert to
$22.0 million.

To achieve planned growth and favorable returns in both the short and long term,
the OP's financing strategy is to maintain a strong, flexible financial position
by: (i) maintaining a conservative level of leverage; (ii) extending and
sequencing debt maturity dates; (iii) managing exposure to floating interest
rates; and (iv) maintaining liquidity. Management believes these strategies will
enable the OP to access a broad array of capital sources, including bank or
institutional borrowings and secured and unsecured debt and equity offerings,
subject to market conditions.

Net cash provided by operating activities increased $5.4 million for the nine
months ended September 30, 2001 compared to the corresponding 2000 period,
primarily due to increased GLA offset by a reduction of trade accounts payable.
Net cash used in investing activities increased $37.8 million for the nine
months ended September 30, 2001 compared to the corresponding 2000 period, as a
result of the acquisition of the Konover portfolio and increased development
costs offset by decreased construction activity, increased distributions from
joint venture investments, the equity requirements of Chelsea Interactive and
proceeds from sale of a center in 2000. Net cash provided by financing
activities increased by $7.5 million for the nine months ended September 30,
2001 primarily due to the common stock offering proceeds in July 2001 and
reduced debt repayment offset by reduced debt proceeds.

Funds from Operations

Management believes that funds from operations ("FFO") should be considered in
conjunction with net income, as presented in the statements of operations
included elsewhere herein, to facilitate a clearer understanding of the
operating results of the OP. The White Paper on Funds from Operations approved
by the Board of Governors of NAREIT in October 1999 defines FFO as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The OP believes that FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flow from operating
activities, financing activities and investing activities, it provides investors
with an indication of the ability of the OP to incur and service debt, to make
capital expenditures and to fund other cash needs. The OP computes FFO in
accordance with the current standards established by NAREIT which may not be
comparable to FFO reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the OP. FFO does not represent cash generated
from operating activities in accordance with GAAP and should not be considered
as an alternative to net income (determined in accordance with GAAP) as an
indication of the OP's financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of the OP's
liquidity, nor is it indicative of funds available to fund the OP's cash needs,
including its ability to make cash distributions.

`Three Months Ended             Nine Months Ended
                                                            September 30,                  September 30,
                                                            2001           2000           2001           2000
                                                     ------------   -------------  -------------  -------------

Net income to common unitholders.....................   $14,093        $13,188        $35,645        $33,166
Add (deduct):
  Depreciation and amortization - wholly owned.......    12,174         10,616         35,479         31,823
  Depreciation and amortization - joint ventures          1,628            865          4,700            865
  Amortization of deferred financing costs and
    depreciation of non-rental real estate assets....      (480)          (423)        (1,326)        (1,360)
                                                     ------------   -------------  -------------  -------------
FFO..................................................   $27,415        $24,246        $74,498        $64,494
                                                     ============   =============  =============  =============
Average diluted shares/units outstanding.............    19,723         19,299         19,457         19,294
Distributions declared per share.....................     $0.78          $0.75          $2.34          $2.25`

Recent Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board issued
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 provides accounting guidance for financial accounting and reporting
for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes
SFAS No. 121 Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. It also supersedes the accounting and
reporting of APB Opinion No. 50 Reporting the Results of Operations-
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions related to the
disposal of a segment of a business. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. Management does not anticipate that its
adoption will have a material effect on the financial position or results of
operations of the Company.

Economic Conditions

Substantially all leases contain provisions, including
escalations of base rents and percentage rentals calculated on gross sales, to
mitigate the impact of inflation. Inflationary increases in common area
maintenance and real estate tax expenses are substantially all reimbursed by
tenants.

Virtually all tenants have met their lease obligations and the
OP continues to attract and retain quality tenants. The OP intends to reduce
operating and leasing risks by continually improving its tenant mix, rental
rates and lease terms, and by pursuing contracts with creditworthy upscale and
national brand-name tenants.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The OP is exposed to changes in interest rates primarily from
its floating rate debt arrangements. In December 2000, the OP implemented a
policy to protect against interest rate and foreign exchange risk. The OPs
primary strategy is to protect against this risk by using derivative
transactions as appropriate to minimize the variability that floating rate
interest and foreign currency fluctuations could have on cash flow.

In December 2000, a wholly-owned subsidiary of the OP entered
into an interest rate swap agreement effective January 2, 2001 with a major
financial institution for a notional amount of $69.3 million amortizing to $64.1
million to hedge against unfavorable fluctuations in the LIBOR rates of its
secured mortgage loan facility. The hedge effectively produces a fixed interest
rate of 7.2625% on the notional amount until January 1, 2006.

The derivative risk related to the settlement of this agreement
is deemed to be immaterial as it involves a major financial institution.

At September 30, 2001 a hypothetical 100 basis point adverse
move (increase) in US Treasury and LIBOR rates applied to unhedged debt would
adversely affect the OPs annual interest cost by approximately $0.5
million annually.

Following is a summary of the OPs debt obligations at
September 30, 2001 (in thousands):

`Expected Maturity Date
                             -----------------------------------------------------------------
                                                                                                              Fair
                                2001      2002       2003      2004       2005    Thereafter     Total       Value
                             -------     ------    -------   -------   --------   ---------     --------   ---------
Fixed Rate Debt:             $65,229       -          -                 $49,888    $395,973     $511,090    $516,796
Average Interest Rate:          3.71%      -          -                    8.38%%      7.88%        7.92%       -
Variable Rate Debt:                -       -       $27,148   $22,035        -       $68,500(1)  $117,683    $117,683
                                                             22,035
Average Interest Rate:             -       -          4.36%    3.72%                  5.56%        4.94%        -`

(1) Mortgage hedged to produce a fixed interest rate of 7.26%
until January 2006.

Chelsea Property Group, Inc.

|Part II. | Other Information
|-------- | -----------------

|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------

Current Report on Form 8-K, reporting under Items 2 and 7 on an
event which occurred September 25, 2001.

Chelsea Property Group, Inc.

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.

| | CHELSEA PROPERTY GROUP, INC.
By: /s/ Michael J. Clarke
       Michael J. Clarke
       Chief Financial Officer
| | --------------------------------------------------------------------------------------------------------------

Date:  November 14, 2001