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

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FORM 10-K[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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

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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)Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:  None

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

Indicate by check mark if the disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [x]

Indicate by check mark whether the registrant is an accelerated filer.
Yes    No X

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

Documents incorporated by reference:

Portions of the definitive Proxy Statement of Chelsea Property
Group, Inc. relating to its 2003 Annual Meeting of Shareholders are incorporated
by reference into Part III as set forth herein.

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PART I

Item 1. Business

The OP

CPG Partners, L.P., a Delaware limited partnership, (the
"Operating Partnership" or "OP") is 84.6% owned and managed
by its sole general partner Chelsea Property Group, Inc. (the
"Company"), a self-administered and self-managed real estate
investment trust ("REIT"). The OP specializes in owning, developing,
redeveloping, leasing, marketing and managing upscale and fashion-oriented
manufacturers' outlet centers. As of December 31, 2002, the OP wholly or
partially-owned 58 centers in 30 states and Japan containing approximately 14.4
million square feet of gross leasable area ("GLA") represented by more
than 750 tenants in approximately 3,400 stores. The OP's portfolio is
comprised of 26 premium outlet centers containing 8.4 million square feet of GLA
("Premium Properties") and 32 other retail centers containing 6.0
million square feet of GLA ("Other Properties") (collectively the
"Properties"). The Premium Properties generated approximately 86% of
the OP's retail real estate net operating income for the year ended
December 31, 2002. The Premium Properties generally are located near
metropolitan areas including New York City, Los Angeles, Boston, Washington,
D.C., San Francisco, Sacramento, Cleveland, Atlanta, Dallas, Portland (Oregon),
Tokyo and Osaka, Japan, which have a population of at least one million people
within a 30-mile radius, with average annual household income of greater than
$50,000. Some Premium Properties centers are also located within 20 miles of
major tourist destinations including Palm Springs, the Napa Valley, Orlando, and
Honolulu. During 2002, the OP's domestic Premium Properties generated
weighted average tenant sales of $383 per square-foot, defined as total sales
reported by tenants divided by their gross leasable area weighted by months in
operation.

The OP's executive offices are located at 103 Eisenhower
Parkway, Roseland, New Jersey 07068 (telephone 973-228-6111). The Company's
website can be accessed at www.CPGI.com. A copy of the OP's
10-K's, 10-Q's, and 8-K's can be obtained, free of charge, on the
OP's website.

Recent Developments

In April 2002, the OP became the sole owner of Orlando Premium
Outlets by acquiring Simon Property Group, Inc.'s ("Simon") 50%
undivided ownership interest for $46.6 million in cash and the assumption of
$29.7 million of existing mortgage debt and a related guarantee. In June 2002,
the OP repaid the outstanding debt of $59.4 million and extinguished the
mortgage.

Also in April 2002, the OP acquired a 305,000 square-foot outlet
center, included in Other Properties, located in Edinburgh, Indiana, for $27.0
million in cash.

In June 2002, the OP and Simon entered into a new 50/50 joint
venture to develop and operate Las Vegas Premium Outlets ("Simon-Las
Vegas"), a 435,000 square-foot single-phase premium outlet center located
in Las Vegas, Nevada. The center is scheduled to open in the summer of 2003. In
June 2002, Simon-Las Vegas purchased a 40-acre site and commenced construction.
The OP is responsible for financing its 50% share of development costs, which
are expected to be approximately $48.0 million. As of December 31, 2002, the OP
had contributed $22.8 million.

In July 2002, the OP sold approximately 40% of its holdings in
Value Retail PLC to a third party for $11.4 million, resulting in a gain of
$10.9 million.

In August 2002, the OP became the sole owner of four Premium
Properties by acquiring the remaining 51% undivided ownership interest in the
joint venture F/C Acquisition Holdings, LLC. The OP paid $58.9 million in cash
and assumed $86.5 million, the remaining 51%, of existing mortgage debt.

In August 2002, the OP and Simon entered into a new 50/50 joint
venture to develop and operate Chicago Premium Outlets
("Simon-Chicago"), a 438,000 square-foot single-phase premium outlet
center located in Aurora, Illinois, near Chicago. The center is scheduled to
open in mid-2004. In September 2002, Simon-Chicago purchased a 140-acre site,
including 80 acres of conservation area, and commenced construction. The OP is
responsible for financing its 50% share of the development costs, which are
expected to be approximately $46.0 million. As of December 31, 2002, the OP had
contributed $8.4 million.

In November 2002, the OP acquired two outlet centers included in
Other Properties: a 305,000 square-foot outlet center located in Albertville,
Minnesota, and a 278,000 square-foot outlet center located in Johnson Creek,
Wisconsin, for a total price of $89.5 million. The transaction was financed by
issuing limited partnership units in the OP valued at $44.6 million and the
balance from the senior credit facility.

In December 2002, the OP purchased four outlet centers included
in Other Properties for an all-cash price of $193.0 million. The four properties
total 1.3 million square feet of gross leaseable area and consist of a 292,000
square-foot center located in Jackson, New Jersey; a 391,000 square-foot center
located in Osage Beach, Missouri; a 329,000 square-foot center located in St.
Augustine, Florida; and a 300,000 square-foot center located in Branson,
Missouri.

During 2002, the OP sold five non-core Other Properties and
recognized a gain of approximately $0.3 million.

The OP has been developing and operates an e-commerce technology
platform through its affiliate, Chelsea Interactive, Inc. ("Chelsea
Interactive") with an aggregate funding commitment of up to $60.0 million;
as of December 31, 2002, $52.4 million had been funded. The OP anticipates that
the balance of the funding will be used to further develop the platform and to
finance operating cash shortfalls and potential costs related to the disposal or
discontinuance of the business. The OP currently believes that it will not be
able to recover the net book value of its investment in Chelsea Interactive
through future cash flows unless Chelsea Interactive is able to achieve positive
cash flow before reaching the $60.0 million funding limit. Due to current market
conditions and costs related to securing additional brand users for the
platform, the OP has decided to recognize an impairment loss of $34.4 million,
equal to the net book value of its investment in Chelsea Interactive at December
31, 2002. However, the OP is in active discussions with potential investors to
provide capital to and/or acquire Chelsea Interactive. There can be no assurance
that any of these discussions will be successful or that Chelsea Interactive
will be able to continue as a going concern. Future funding by the OP will be
reported as a loss in the period funding occurs.

The following table sets forth a summary of the additional GLA from expansions,
acquisitions and dispositions from January 1 through December 31, 2002:

`Number
                                                               GLA            of
Property                              % Owned    Date (1)    (Sq. Ft.)      Stores    Tenants (2)
                                      --------  ----------  -------------  ---------- --------------------------
As of January 1, 2002..............                          12,574,000      2,903

Expansions:
Rinku Premium Outlets...............     40       03/02          70,000         40    Benetton, Cole Haan, La
  Izumisano, Japan                                                                    Perla, The North Face,
                                                                                      Tommy Hilfiger
Desert Hills Premium Outlets........    100       12/02          23,000          8    Hugo Boss
  Cabazon, CA
Liberty Village Premium Outlets.....    100       11/02          23,000          2    LL Bean, Liz Claiborne
  Flemington, NJ
Napa Premium Outlets................    100       04/02           9,000          2    Kenneth Cole
  Napa, CA
Other (net).........................                            (17,000)         1
                                                               -------------  ----------
Total expansions ...................                            108,000         53

Acquisitions:
Factory Outlet Village Osage Beach .    100       12/02         391,000        104    Eddie Bauer, Gap, Polo, Tommy
  Osage Beach, MO                                                                     Hilfiger, Liz Claiborne,

St. Augustine Outlet Center.........    100       12/02         329,000         93    Brooks Brothers, Coach, Gap,
  St. Augustine, FL                                                                   Tommy Bahama, Casual Corner,
                                                                                      Reebok

Outlets at Albertville .............    100       11/02         305,000         67    Polo, Old Navy Gap, Tommy
  Albertville, MN                                                                     Hilfiger, Banana Republic

Edinburgh Outlet Center.............    100       04/02         305,000         72    Gap, Nautica, Nike, OshKosh
  Edinburgh, IN                                                                       B'Gosh, Factory Brand Shoes,
                                                                                      Tommy Hilfiger

Factory Merchants Branson...........    100       12/02         300,000         86    Carter's Childrenswear, L'eggs/
  Branson, MO                                                                         Hanes/Bali/Playtex, Lenox

Jackson Outlet Village..............    100       12/02         292,000         71    Casual Corner, Gap, Nike, Reebok,
  Jackson, NJ                                                                         Tommy Hilfiger,

Johnson Creek Outlet Center.........    100       11/02         278,000         62    Gap, Old Navy Clothing Company,
  Johnson Creek, WI                                                                   Nike, Tommy Hilfiger

                                                               -------------  ----------
Total acquisitions:.................                          2,200,000        555
                                                               -------------  ----------

Dispositions:

Factory Stores of America...........    100       06/02        (176,000)       (43)   Bass, Levi's, Van Heusen, West Point
   LaMarque, TX                                                                       Stevens

Factory Stores of America...........    100       07/02        (128,000)       (20)   Book Warehouse, Banister Shoe,
   Tucson, AZ                                                                         Samsonite, VF Factory Outlet

Factory Stores of America...........    100       06/02         (64,000)        (4)   VF Factory Outlet
   Corsicana, TX

Factory Stores of America...........    100       07/02         (64,000)        (4)   VF Factory Outlet
  Livingston, TX

Factory Stores of America...........    100       11/02         (64,000)        (4)   VF Factory Outlet
   Mineral Wells, TX
                                                           -------------  ----------
Total dispositions..................                           (496,000)       (75)

Net additions for 2002..............                          1,812,000        533
                                                           -------------  ----------

Totals as of December 31, 2002......                         14,386,000      3,436
                                                           =============  ==========`

|1) | Expansion, acquisition or disposition date.
|-- | -------------------------------------------

|2) | Consists of tenants who lease at least 5,000 square feet of GLA or have
estimated sales of more than $300 per square-foot. Most tenants pay a fixed base
rent based on square feet leased and also pay a percentage rent based on sales.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Some of the most recent newly acquired or expanded centers are
discussed below:

Rinku Premium Outlets, Izumisano, Japan. Rinku Premium Outlets, a 250,000
square-foot center containing 120 stores, opened its initial phase in November
2000. The Phase II expansion that opened in March 2002 consisted of 70,000
square feet of GLA and 40 stores. The center is located 45 miles south of Osaka
near Kansai International Airport. The populations within a 35-mile and 65-mile
radius are approximately 12.0 million and 19.1 million, respectively.

Factory Outlet Village Osage Beach, Osage Beach, MO- Factory Outlet
Village Osage Beach, a 391,000 square-foot center containing 104 stores was
acquired in December 2002. The center is located in a tourist destination off
Interstate 70 on Highway 54 at the Lake of Ozarks. The populations within a
15-mile, 30-mile and 45-mile radius are 0.1 million, 0.1 million and 0.3
million, respectively. Average household income within a 30-mile radius is
approximately $44,000.

St. Augustine Outlet Center, St. Augustine, FL - St.
Augustine Outlet Center, a 329,000 square-foot center containing 93 stores was
acquired in December 2002. The center is located in a tourist destination off
Interstate 95 in St. Augustine, Florida. The populations within a 15-mile,
30-mile and 45-mile radius are 0.1 million, 0.7 million and 1.2 million,
respectively. Average household income within a 30-mile radius is approximately
$60,000.

Outlets at Albertville, Albertville, MN Outlets at Albertville, a
305,000 square-foot center containing 67 stores was acquired in November 2002.
The center is located approximately 20 miles northwest of Minneapolis-St. Paul
on Interstate 94. The populations within a 15-mile, 30-mile and 45-mile radius
are 0.3 million, 1.9 million and 3.1 million, respectively. Average household
income within a 30-mile radius is approximately $68,000.

Edinburgh Outlet Center, Edinburgh, IN Edinburgh Outlet Center, a
305,000 square-foot center containing 72 stores was acquired in April 2002. The
center is located 40 miles south of downtown Indianapolis at the junction of
Interstate 65 and U.S. Route 31. The populations within a 15-mile, 30-mile and
45-mile radius are 0.1 million, 0.7 million and 1.8 million, respectively.
Average household income within a 30-mile radius is approximately $53,000.

Factory Merchants Branson, Branson, MO Factory Merchants Branson,
a 300,000 square-foot center containing 86 stores was acquired in December 2002.
The center is located in a tourist destination off Highway 76 west on Pat Nash
Drive, 40 miles south of Springfield, Missouri. The populations within a
15-mile, 30-mile and 45-mile radius are 0.1 million, 0.2 million and 0.5
million, respectively. Average household income within a 30-mile radius is
approximately $47,000.

Jackson Outlet Village, Jackson, NJ- Jackson Outlet Village, a 292,000
square-foot center containing 71 stores was acquired in December 2002. The
center is located 50 miles northeast of Philadelphia and 65 miles southwest of
New York City. The populations within a 15-mile, 30-mile and 45-mile radius are
0.5 million, 3.0 million and 10.2 million, respectively. Average household
income within a 30-mile radius is approximately $70,000.

Johnson Creek Outlet Center, Johnson Creek, WI Johnson Creek
Outlet Center, a 278,000 square-foot center containing 62 stores was acquired in
November 2002. The center is located on Interstate 94 at Highway 26, midway
between Madison and Milwaukee, Wisconsin. The populations within a 15-mile,
30-mile and 45-mile radius are 0.1 million, 0.6 million and 2.4 million,
respectively. Average household income within a 30-mile radius is approximately
$62,000.

The OP had been developing and operates an e-commerce technology platform
through its affiliate, Chelsea Interactive, Inc. with an aggregate funding
commitment of up to $60.0 million; as of December 31, 2002, $52.4 million has
been funded. The OP anticipates that the balance of the funding will be used to
further develop the platform and to finance operating cash shortfalls and
potential costs related to the disposal or discontinuance of the business. The
OP currently believes that it will not be able to recover the net book value of
its investment in Chelsea Interactive through future cash flows unless Chelsea
Interactive is able to achieve positive cash flow before reaching the $60.0
million funding limit. Due to current market conditions and costs related to
securing additional brand users for the platform, the OP has decided to
recognize an impairment loss of $34.4 million, equal to the net book value of
its investment in Chelsea Interactive as of December 31, 2002. However, the OP
is in active discussions with potential investors to provide capital to and/or
acquire Chelsea Interactive. There can be no assurance that any of these
discussions will be successful or that Chelsea Interactive will be able to
continue as a going concern. Future funding by the OP will be reported as a loss
in the period funding occurs.

Strategic Alliances and Joint Ventures

In June 1999, the OP entered into an agreement with Mitsubishi Estate Co., Ltd.
and Nissho Iwai Corporation to jointly develop, own and operate premium outlet
centers in Japan. The joint venture, known as Chelsea Japan Co., Ltd.
("Chelsea Japan"), developed its two initial projects, Gotemba Premium
Outlets a 220,000 square-foot center, outside of Tokyo and the second, Rinku
Premium Outlets a 180,000 square-foot center outside Osaka. In March 2002, the
70,000 square-foot second phase of Rinku Premium Outlets opened 100% leased. The
joint venture's third project, the 180,000 square-foot first phase of Sano
Premium Outlets located north of Tokyo in Sano, Japan is scheduled to open in
March 2003. A 170,000 square-foot second phase of Gotemba Premium Outlets is
scheduled to open in July 2003.

During 2002, the OP and Simon agreed to develop two premium outlet centers under
separate 50/50 joint ventures, the 435,000 square-foot Las Vegas Premium Outlets
scheduled to open in summer 2003 and the 438,000 square-foot Chicago Premium
Outlets scheduled to open in mid-2004 ("Simon-Ventures"). Simon is the
largest publicly traded retail real estate company as measured by market
capitalization. At February 2003, Simon was engaged in ownership and management
of income-producing properties primarily regional malls and community centers
and had an interest in and/or managed approximately 183 million square feet of
retail and mixed-use properties in 36 states, Canada and Europe. The original
5-year strategic alliance with Simon to develop and acquire high-end outlet
centers with 500,000 square feet or more in the United States expired on
December 31, 2002. In April 2002, the OP bought out Simon's undivided 50%
interest in Orlando Premium Outlets that opened in May 2000.

In October 1998, the OP sold its interest in and terminated the development of
Houston Premium Outlets, a joint venture project with Simon. Under the terms of
the agreement, the OP received non-compete payments totaling $21.4 million from
The Mills Corporation; $3.0 million was received at closing and all four annual
installments of $4.6 each million were received, including the final January
2002 payment, which was reduced by a $0.3 million legal escrow
reserve.

In May 2002, the OP entered into a 50/50 strategic alliance with Sordo Madaleno
y Asociados and Mr. Carlos Peralta of Mexico City to jointly develop premium
outlet centers in Mexico. Subject to leasing and entitlements, construction on a
200,000 square-foot first phase of an outlet project north of Mexico City is
expected to commence later in 2003 and open in late 2004. The site can support a
second phase containing approximately 165,000 square feet of GLA.

The OP has made several investments through joint ventures with others. Joint
venture investments may involve risks not otherwise present for investments made
solely by the OP, including the possibility its co-venturers might become
bankrupt, its co-venturers might at any time have different interests or goals
than the OP, and that the co-venturers may take action contrary to the OP's
instructions, requests, policies or objectives, including its policy with
respect to maintaining the qualification of the OP as a REIT. Other risks of
joint venture investments include impasse on decisions, such as a sale, because
neither its co-venturer nor the OP would have full control over the joint
venture. There is no limitation under the OP's organizational documents as
to the amount of funds that may be invested in partnerships or joint
ventures.

Organization of the OP

Virtually all of the Properties assets are held by, and all of its business
activities conducted through, the Operating Partnership. The Company is the sole
general partner of the OP (which owned 84.6% in the Operating Partnership as of
December 31, 2002) and has full and complete control over the management of the
OP and each of the Properties, excluding joint ventures.

The Manufacturers' Outlet Business

Manufacturers' outlets are manufacturer-operated retail stores that sell
primarily first-quality, branded goods at significant discounts from regular
department and specialty store prices. Manufacturers' outlet centers offer
numerous advantages to both consumer and manufacturer; by eliminating the third
party retailer, manufacturers are often able to charge customers lower prices
for brand name and designer merchandise; manufacturers benefit by being able to
sell first quality in-season, as well as out-of-season, overstocked or
discontinued merchandise without compromising their relationships with
department stores or the manufacturers' brand name. In addition, outlet stores
enable manufacturers to optimize the size of production runs while maintaining
control of their distribution channels.

Business Strategy

The OP believes its strong tenant relationships, high-quality property portfolio
and managerial expertise give it significant advantages in the
manufacturers' outlet business.

Strong Tenant Relationships. The OP maintains strong tenant relationships
with high-fashion, upscale manufacturers and retailers that have a selective
presence in the outlet industry, such as Armani, Brooks Brothers, Chanel, Coach
Leather, Cole-Haan, Donna Karan, Gap/Banana Republic, Gucci, Nautica, Polo Ralph
Lauren, Tommy Hilfiger and Versace, as well as with national brand-name
manufacturers such as Adidas, Carter's, Nike, Phillips-Van Heusen (Bass,
Izod, Geoffrey Beene, Van Heusen) and Timberland. The OP believes that its
ability to draw from both groups is an important factor in providing broad
customer appeal and higher tenant sales.

High Quality Property Portfolio. The OP's 24 domestic Premium
Properties generated weighted average reported tenant sales during 2002 of $383
per square-foot, the highest among the three publicly traded outlet companies.
As a result, the OP has been successful in attracting some of the world's
most sought-after brand-name designers, manufacturers and retailers and each
year has added new names to the outlet business and its centers. The OP believes
that the quality of its centers gives it significant advantages in attracting
customers and negotiating multi-lease transactions with tenants.

Management Expertise. The OP believes it has a competitive advantage in
the manufacturers' outlet business as a result of its experience in the
business, long-standing relationships with tenants and expertise in the
development and operation of manufacturers' outlet centers. Management developed
a number of the earliest and most successful outlet centers in the industry,
including Liberty Village Premium Outlets (one of the first manufacturers'
outlet centers in the U.S.) in 1981, Woodbury Common Premium Outlets in 1985 and
Desert Hills Premium Outlets in 1990. Since the Company's initial public
offering of its common stock, the OP has added significantly to its senior
management in the areas of development, leasing and property management without
increasing general and administrative expenses as a percentage of total
revenues; additionally, the OP intends to continue to invest in systems and
controls to support the planning, coordination and monitoring of its
activities.

Growth Strategy

The OP seeks growth through increasing rents in its existing centers; developing
new centers and expanding existing centers; and acquiring and re-developing
centers.

Increasing Rents at Existing Centers. The OP's leasing strategy
includes aggressively marketing available space and maintaining a high level of
occupancy; providing for inflation-based contractual rent increases or periodic
fixed contractual rent increases in substantially all leases; renewing leases at
higher base rents per square-foot; re-tenanting space occupied by under
performing tenants; and continuing to sign leases that provide for percentage
rents.

Developing New Centers and Expanding Existing Centers. The OP believes
that there continue to be significant opportunities to develop
manufacturers' outlet centers across the United States and internationally.
The OP intends to undertake such development selectively, and believes that it
will have a competitive advantage in doing so as a result of its development
expertise, tenant relationships and access to capital. The OP expects that the
development of new centers and the expansion of existing centers will continue
to be a substantial part of its growth strategy. The OP believes that its
development experience and strong tenant relationships enable it to determine
site viability on a timely and cost-effective basis. However, there can be no
assurance that any development or expansion projects will be commenced or
completed as scheduled.

International Development.The OP continues to develop, own and operate
premium outlet centers in Japan through its joint venture company, Chelsea
Japan. In 2000, Chelsea Japan developed its first two outlet centers, one in
Gotemba, located outside Tokyo, and the other in Izumisano, outside Osaka,
Japan. A third outlet center in Sano, Japan is expected to open in March
2003.

The OP believes that there are significant opportunities to develop additional
manufacturers' outlet centers in Japan and other countries. The OP intends
to pursue these opportunities as viable sites and local partners are identified.
During 2002, the OP entered into an agreement to jointly develop premium outlets
centers in Mexico.

The OP has minority interests ranging from 3% to 8% in several
outlet centers and outlet development projects in Europe.

Acquiring and Redeveloping Centers. The OP intends to selectively acquire
individual properties and portfolios of properties that meet its strategic
investment criteria as suitable opportunities arise. The OP believes that its
extensive experience in the outlet center business, access to capital markets,
familiarity with real estate markets and advanced management systems will allow
it to evaluate and execute its acquisition strategy successfully. Furthermore,
management believes that the OP will be able to enhance the operation of
acquired properties as a result of its strong tenant relationships with both
national and upscale fashion retailers and development, marketing and management
expertise as a full-service real estate organization. Additionally, the OP may
be able to acquire properties on a tax-advantaged basis through the issuance of
Operating Partnership units. However, there can be no assurance that any
acquisitions will be consummated or, if consummated, will result in an
advantageous return on investment for the OP.

Operating Strategy

The OP's primary business objective is to enhance the value of its
properties and operations by increasing cash flow. The OP plans to achieve these
objectives through continuing efforts to improve tenant sales and profitability,
and to enhance the opportunity for higher base and percentage rents.

Leasing. The OP pursues an active leasing strategy through long-standing
relationships with a broad range of tenants including manufacturers of men's,
women's and children's ready-to-wear, lifestyle apparel, footwear, accessories,
tableware, housewares, linens and domestic goods. Key tenants are placed in
strategic locations to draw customers into each center and to encourage shopping
at more than one store. The OP continually monitors tenant mix, store size,
store location and sales performance, and works with tenants to improve each
center through re-sizing, re-location and joint promotion.

Market and Site Selection. To ensure a sound long-term customer base, the
OP generally seeks to develop sites near densely-populated, high-income
metropolitan areas, and/or at or near major tourist destinations. While these
areas typically impose numerous restrictions on development and require
compliance with complex entitlement and regulatory processes, the OP believes
that these areas provide the most attractive long-term demographic
characteristics. The OP generally seeks to develop sites that can support at
least 400,000 square feet of GLA and that offer the long-term opportunity to
dominate their respective markets through a critical mass of
tenants.

Marketing. The OP pursues an active, property-specific
marketing strategy using a variety of media including newspapers, television,
radio, billboards, regional magazines, guide books and direct mailings. The
centers are marketed to tour groups, conventions and corporations; additionally,
each property participates in joint destination marketing efforts with other
area attractions and accommodations. Virtually all consumer marketing expenses
incurred by the OP are reimbursable by tenants.

Property Design and Management. The OP believes that effective property
design and management are significant factors in the success of its properties
and works continually to maintain or enhance each center's physical plant,
original architectural theme and high level of on-site services. Each property
is designed to be compatible with its environment and is maintained to high
standards of aesthetics, ambiance and cleanliness in order to promote longer
visits and repeat visits by shoppers. The OP has 634 full-time and 180 part-time
employees. Of these employees, 491 full-time and 178 part-time are involved in
on-site maintenance, security, administration and marketing. Centers are
generally managed by an on-site property manager with oversight from a regional
operations director.

Financing

The OP seeks to maintain a strong, flexible financial position by: (i)
maintaining a moderate level of leverage, (ii) extending and sequencing debt
maturity dates, (iii) managing floating interest rate exposure and (iv)
maintaining liquidity. Management believes these strategies will continue to
enable the OP to access a broad array of capital sources, including bank or
institutional borrowings, secured and unsecured debt and equity financings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Competition

The Properties compete for retail consumer spending on the basis of the diverse
mix of retail merchandising and value oriented pricing. Manufacturers' outlet
centers have established a niche capitalizing on consumers' desire for
value-priced goods. The Properties compete for customer spending with other
outlet locations, traditional shopping malls, off-price retailers, and other
retail distribution channels. The OP believes that the Premium Properties
generally are the leading manufacturers' outlet centers in each market. The OP
carefully considers the degree of existing and planned competition in each
proposed market before deciding to build a new center.

Environmental Matters

The OP is not aware of any environmental liabilities relating to the Properties
that would have a material impact on the OP's financial position and results of
operations.

Personnel

As of December 31, 2002, the OP had 634 full-time and 180 part-time employees.
None of the employees are subject to any collective bargaining agreements, and
the OP believes it has good relations with its employees.

Item 2. Properties

As of December 31, 2002, the OP had 58 centers in 30 states and Japan containing
approximately 14.4 million square feet of gross leasable area. Of the 58
centers, 56 are owned 100% (49 in fee and seven under a long-term lease). The OP
owned and operated all 56 of its domestic centers and Chelsea Japan manages the
two centers in Japan.

The OP's Premium Properties consists of 26 upscale, fashion-oriented
manufacturers' outlet centers located in or near New York City, Los
Angeles, Boston, Washington, D.C., San Francisco, Sacramento, Cleveland,
Atlanta, Dallas, Portland (Oregon), Tokyo and Osaka, Japan, or within 20 miles
of major tourist destinations including Palm Springs, the Napa Valley, Orlando,
and Honolulu. The domestic Premium Properties were 99% leased as of December 31,
2002, and contained approximately 2,000 stores with more than 535 different
tenants. The OP's Premium Properties in Japan were 100% leased as of
December 31, 2002, and contained approximately 210 stores. The OP's Other
Properties were 95% leased as of December 31, 2002, and contained approximately
1,200 stores with more than 225 different tenants.

The OP believes the Properties are adequately covered by
insurance.

The OP does not consider any single store lease to be material; no individual
tenant, combining all of its store concepts, accounts for more than 5% of the
OP's gross revenues; and only one tenant occupies more than 5% of the
OP's total domestic GLA at 8%. As a result, and considering the OP's
past success in re-leasing available space, the OP believes the loss of any
individual tenant would not have a significant effect on future
operations.

For the years ended December 31, 2002, 2001, and 2000, respectively, 16%, 21%
and 23% of the OP's total revenues were derived from Woodbury Common
Premium Outlets. The loss of this center or a material decrease in revenues from
the center for any reason might have a material adverse effect on the OP. In
addition, for the years ended December 31, 2002, 2001, and 2000, respectively,
25%, 28% and 28% of the OP's total revenues were derived from the OP's
centers in California.

Woodbury Common Premium Outlets contributed more than 10% of the OP's
aggregate gross revenues during 2002 and had a book value of more than 5% of the
total assets at year-end 2002. No tenant leases more than 10% of the
center's GLA. The following chart shows certain information for Woodbury
Common.

`Avg. Annual
       Fiscal                                Occupancy             Rent
       Year                                     Rate            per sq ft
                                          ---------------    ---------------
       1998........................           100.0%             $33.16
       1999........................            99.5               35.61
       2000........................           100.0               38.55
       2001........................            98.8               38.63
       2002........................           100.0               41.23`

Woodbury Common Premium Outlets opened in four phases in 1985, 1993, 1995 and
1998 and contains 845,000 square feet of GLA. As of December 31, 2002, the
center was leased to 212 tenants. Woodbury Common is located approximately 50
miles north of New York City at the Harriman exit of the New York State Thruway.
The populations within a 30-mile, 60-mile and 100-mile radius are approximately
2.6 million, 17.4 million and 25.3 million, respectively. Average household
income within the 30-mile radius is approximately $92,000.

The following table shows lease expiration data as of December 31, 2002 for
Woodbury Common Premium Outlets for the next ten years (assuming that none of
the tenants exercise renewal options).

`% of Annual
                                                          Contractual                No. of         "CBR"
                                                      Base Rents ("CBR")             Leases      Represented by
Expiration Year                    GLA            per sq ft           Total        Expiring      Expiring Leases
---------------               --------------  ----------------  ---------------- -------------  -------------------
2003....................        126,496           $30.04            $3,785,000        27              12.5%
2004....................         35,051            32.23             1,128,000        10               3.7
2005....................        113,629            35.43             4,027,000        28              13.3
2006....................         33,544            39.38             1,339,000        14               4.4
2007....................         63,336            36.24             2,283,000        18               7.6
2008....................        185,379            35.23             6,517,000        43              21.6
2009....................         44,786            43.16             1,942,000        16               6.4
2010....................         37,875            35.76             1,359,000        11               4.5
2011....................         72,881            42.41             3,096,000        15              10.3
2012....................         77,193            51.75             3,985,000        26              13.2`

Depreciation on Woodbury Common Premium Outlets is calculated using the straight
line method over the estimated useful life of the real property and land
improvements which ranges from 10 to 40 years. At December 31, 2002, the Federal
income tax basis in this center was $120.0 million.

The realty tax rate on Woodbury Common Premium Outlets is approximately $4.68
per $100 of assessed value. Estimated 2003 taxes are $3.9 million.

VF Corporation (Vanity Fair) leases approximately 8% of the OP's total
domestic GLA as of December 31, 2002 and 2001, which constitutes approximately
2% of the OP's total revenues.

Set
forth in the table below is certain property information as of December 31,
2002:

`Year
                                               Opened
                                                  or         GLA       No. of
Name/location                                  Acquired    (Sq. Ft.)    Stores       Selected Tenants
--------------------------------------------  -----------  ---------- ---------  -------------------------------------------------------

Premium Properties:
Woodbury Common Premium Outlets........          1985       845,000      212      Banana Republic, Brooks Brothers,
  Central Valley, NY (New York City area)                                         Coach, Giorgio Armani, Gucci,
                                                                                  Neiman Marcus Last Call, Polo Ralph
                                                                                  Lauren, Salvatore Ferragamo

Wrentham Village Premium Outlets.......          1997       601,000      157      Barneys New York, Burberry, Hugo Boss,
  Wrentham, MA (Boston/Providence area)                                           Kenneth Cole, Nike, Polo Ralph Lauren,
                                                                                  Sony, Versace

Gilroy Premium Outlets.................          1990       577,000      141      Brooks Brothers, Coach, J. Crew, Hugo Boss,
  Gilroy, CA (San Jose area)                                                      Nike, Polo Ralph Lauren, Timberland, Tommy
                                                                                  Hilfiger, Versace,

North Georgia Premium Outlets..........          1996       537,000      132      Coach, Crate & Barrel, Escada, Liz Claiborne,
  Dawsonville, GA (Atlanta metro area)                                            Polo Ralph Lauren, Tommy Hilfiger,
                                                                                  Williams-Sonoma

Desert Hills Premium Outlets...........          1990       499,000      133      Burberry, Coach, Giorgio Armani, Gucci,
  Cabazon, CA (Palm Springs-Los Angeles)                                          Max Mara, Polo Ralph Lauren, Salvatore
                                                                                  Ferragano, Versace, Zegna

Lighthouse Place Premium Outlets.......          1987       484,000      121      Burberry, Coach, Crate & Barrel, Gap,
  Michigan City, IN (Chicago area)                                                Liz Claiborne, Polo Ralph Lauren,
                                                                                  Tommy Hilfiger

Leesburg Corner Premium Outlets........          1998       463,000      103      Barneys New York, Kenneth Cole, Liz
  Leesburg, VA (Washington DC area)                                               Claiborne, Nike, Polo Ralph Lauren,
                                                                                  Williams-Sonoma

Camarillo Premium Outlets..............          1995       454,000      122      Banana Republic, Barneys New York, Coach,
  Camarillo, CA (Los Angeles metro area)                                          Donna Karan, Polo Ralph Lauren, St. John
                                                                                  Knits,Versace

Orlando Premium Outlets................          2000       428,000      114      Barneys New York, Coach, Escada, Giorgio
  Orlando, FL (between Sea World & Epcot)                                         Armani, Hugo Boss, Max Mara, Nike, Polo
                                                                                  Ralph Lauren

Waterloo Premium Outlets...............          1995       392,000       99      Brooks Brothers, Coach, Eddie Bauer, Gap,
  Waterloo, NY (Finger Lakes Region)                                              J. Crew, Jones New York, Liz Claiborne,
                                                                                  Mikasa, Polo Ralph Lauren

Allen Premium Outlets..................          2000       349,000       84      Barneys New York, Brooks Brothers,
  Allen, TX (Dallas metro area)                                                   Cole-Haan, Crate & Barrel, Liz Claiborne,
                                                                                  Polo Ralph Lauren, Tommy Hilfiger

Folsom Premium Outlets.................          1990       299,000       80      Bass, Eddie Bauer, Gap, Kenneth Cole,
  Folsom, CA (Sacramento metro area)                                              Liz Claiborne, Nike, Off 5th-Saks
                                                                                  Fifth Avenue

Aurora Premium Outlets.................          1987       286,000       65      Brooks Brothers, Gap, Liz Claiborne,
  Aurora, OH (Cleveland metro area)                                               Nautica, Off 5th-Saks Fifth Avenue,
                                                                                  Polo Ralph Lauren, Tommy Hilfiger

Clinton Crossing Premium Outlets.......          1996       272,000       66      Barneys New York, Coach, Dooney &
  Clinton CT (I-95/NY-NewEngland                                                  Bourke, Gap, Kenneth Cole, Liz
  corridor)                                                                       Claiborne, Nike, Polo Ralph Lauren

Rinku Premium Outlets..................          2000(1)    250,000      120      Brooks Brothers, Coach, Dolce &
  Rinku, Japan (Osaka metro area) (2)                                             Gabbana, Eddie Bauer, Gap, Nautica,
                                                                                  Nike, Timberland

Gotemba Premium Outlets................          2000(1)    220,000       90      Brooks Brothers, Coach, Eddie Bauer,
  Gotemba, Japan (Tokyo metro area) (2)                                           Gap, J. Crew, L.L.Bean, Nautica, Nike,
                                                                                  Timberland

Waikele Premium Outlets................          1997       213,000       51      Banana Republic, Barneys New York,
  Waipahu, HI (Honolulu area)                                                     Brooks Brothers, Guess, Kenneth Cole,
                                                                                  Max Mara

Petaluma Village Premium Outlets.......          1994       196,000       51      Brooks Brothers, Coach, Gap, Jones
  Petaluma, CA (San Francisco metro area)                                         New York, Liz Claiborne, Off 5th-Saks
                                                                                  Fifth Avenue, Puma

Napa Premium Outlets...................          1994       179,000       51      Barneys New York, J. Crew, Jones New
  Napa, CA (Napa Valley)                                                          York, Kenneth Cole, Nautica, Tommy
                                                                                  Hilfiger, TSE

Liberty Village Premium Outlets........          1981       177,000       57      Ellen Tracy, Jones New York, L.L. Bean,
  Flemington, NJ (New York-Phila. metro area)                                     Polo Ralph Lauren, Tommy Hilfiger,
                                                                                  Timberland, Waterford Wedgwood

Columbia Gorge Premium Outlets.........          1991       164,000       45      Adidas, Bass, Carter's, Gap, Mikasa,
  Troutdale, OR (Portland metro area)                                             Samsonite

Kittery Premium Outlets ...............          1984       150,000       31      Banana Republic, Coach, Crate &
  Kittery, ME (Boston area) (2)                                                   Barrel, J. Crew, Polo Ralph Lauren,
                                                                                  Reebok,

American Tin Cannery Premium Outlets...          1987       135,000       45      Bass, Geoffrey Beene, Nine West,
  Pacific Grove, CA (Monterey Peninsula)(2)                                       Reebok, Samsonite, WestPoint Stevens

Santa Fe Premium Outlets...............          1993       125,000       38      Bose, Brooks Brothers, Coach, Jones
  Santa Fe, NM                                                                    New York, Nautica, Liz Claiborne,
                                                                                  Van Heusen

Patriot Plaza Premium Outlets..........          1986        77,000       11      Lenox, Polo Ralph Lauren, WestPoint
  Williamsburg, VA  (Norfolk-Richmond area)                                       Stevens

St. Helena Premium Outlets.............          1992        23,000        9      Brooks Brothers, Donna Karan, Coach,
  St. Helena, CA (Napa Valley)                                                    Escada

                                                         -----------  ---------
  Total Premium Properties.............                   8,395,000    2,228
                                                         -----------  ---------

Other Properties:
Factory Stores at Vacaville............          2001       447,000      105      Adidas, Carter's, Childrenswear,
  Vacaville, CA                                                                   Coach, Eddie Bauer, Gap, Liz
                                                                                  Claiborne, Mikasa, Nike, OshKosh
                                                                                  B'Gosh, Reebok

Carolina Outlet Center (2).............          2001       440,000       82      Brooks Brothers, Gap, Liz Claiborne
  Smithfield, NC                                                                  Nike, Polo Ralph Lauren, Timberland,
                                                                                  Tommy Hilfiger

Factory Outlet Village Osage Beach.....          2002       391,000      104      Eddie Bauer, Factory Brand Shoes,
  Osage Beach, MO                                                                 Gap, Liz Claiborne, Polo, Ralph
                                                                                  Lauren, Tommy Hilfiger

St. Augustine Outlet Center............          2002       329,000       93      Brooks Brothers, Coach, Casual
  St. Augustine, FL                                                               Corner, Gap, Reebok, Tommy Bahama

Outlets at Albertville,................          2002       305,000       67      Banana Republic, Gap, Old Navy,
  Albertville, MN.                                                                Polo, Tommy Hilfiger

Edinburgh Outlet.......................          2002       305,000       72      Factory Brand Shoes, Gap, Nautica,
  Edinburgh, IN                                                                   Nike, OshKosh B'Gosh, Tommy Hilfiger

Factory Merchants Branson(2)...........          2002       300,000       86      Carter's, Childrenswear, L'eggs/Hanes,
  Branson, MO                                                                     Bali/Playtex, Lenox

Jackson Outlet Village.................          2002       292,000       71      Casual Corner, Gap, Nike, Reebok,
  Jackson, NJ                                                                     Tommy Hilfiger,

Factory Shoppes at Branson Meadows.....          2001       287,000       44      Dress Barn, Easy Spirit, Speigel,
  Branson, MO                                                                     VF Factory Outlet

Johnson Creek Outlet Center............          2002       278,000       62      Gap, Old Navy, Nike, Tommy Hilfiger
  Johnson Creek, WI

Factory Stores at North Bend...........          2001       223,000       50      Adidas, Eddie Bauer, Bass, Carters,
  North Bend, WA                                                                  Childrenswear,  Nike, OshKosh B'Gosh,
                                                                                  Samsonite

Factory Stores of America..............          2001       184,000       31      Adidas, Dress Barn, Samsonite, VF
  Draper, UT                                                                      Factory Outlet

Factory Stores of America..............          2001       177,000       27      Bass, Carolina Pottery, Dress Barn,
  Georgetown, KY                                                                  Levi's, Van Heusen

Factory Stores of America..............          2001       167,000       30      Bass, Dress Barn, Fieldcrest Cannon,
  Mesa, AZ                                                                        Samsonite, VF Factory Outlet

North Ridge Shopping Center............          2001       166,000       33      Ace Hardware, Kerr Drugs, Winn Dixie
  North Ridge, Raleigh, NC

Factory Stores of America..............          2001       151,000       30      Bass, Liz Claiborne, OshKosh B'Gosh,
  Crossville, TN                                                                  Van Heusen, VF Factory Outlet,

Mac Gregor Village.....................          2001       144,000       45      Spa Health Club, Tuesday Morning
  Cary, NC

Factory Stores of America -Tri-Cities..          2001       133,000       16      Carolina Pottery, L'eggs/Hanes/Bali/
  Blountville, TN                                                                 Playtex, Tri-Cities Cinemas

Factory Stores of America (2)..........          2001       131,000       18      Bass, Easy Spirit, VF Factory Outlet,
  Iowa, LA                                                                        Van Heusen

Factory Stores of America..............          2001       129,000       12      Banister Shoes, VF Factory Outlet,
  Tupelo, MS                                                                      Van Heusen

Dare Center (2)........................          2001       115,000       15      Fashion Bug, Food Lion
  Kill Devil Hills, NC

Factory Stores of America..............          2001       112,000       17      Dress Barn, Factory Brand Shoes, VF
  Story City, IA                                                                  Factory Outlet, Van Heusen

Factory Stores of America (2)..........          2001       112,000       18      Banister Shoes, Paper Factory, VF
  Boaz, AL                                                                        Factory Outlet

Factory Stores of America..............          2001        91,000       10      VF Factory Outlet
  West Frankfort, IL

Factory Stores of America..............          2001        90,000       11      Bass, Dress Barn, VF Factory Outlet,
  Arcadia, LA                                                                     Van Heusen

Factory Stores of America..............          2001        90,000       10      Bass, Dress Barn, VF Factory Outlet
  Nebraska City, NE

Factory Stores of America..............          2001        86,000       13      Dress Barn, VF Factory Outlet
  Lebanon, MO

Factory Stores of America..............          2001        84,000       13      Factory Brand Shoes, VF Factory Outlet,
  Graceville, FL                                                                  Van Heusen

Factory Stores of America...............         2001        64,000        4      Banister Shoes, VF Factory Outlet
  Hanson, KY

Factory Stores of America...............         2001        64,000        4      VF Factory Outlet
  Hempstead, TX

Factory Stores of America...............         2001        60,000        4      Bass, VF Factory Outlet
  Union City, TN

Factory Stores of America...............         2001        44,000       11      Levi's, L'eggs/ Hanes/ Bali/ Playtex
  Lake George, NY

                                                         -----------  ---------
  Total Other Properties................                  5,991,000    1,208
                                                         -----------  ---------
    Grand Total.........................                 14,386,000    3,436
                                                         ===========  ==========`

Notes to Property Data:

|1) | 40%-owned through a joint venture with Mitsubishi Estate Co., Ltd. (30%
ownership) and Nissho Iwai Corporation (30% ownership).
|-- | -------------------------------------------------------------------------------------------------------------------------------

|2) | Property held under long term land lease expiring as follows: American Tin
Cannery Premium Outlets, December 2004; Factory Stores of America at Boaz,
January 2007; Kittery Premium Outlets (129,000 sq ft), October 2009; Gotemba
Premium Outlets, October 2019; Rinku Premium Outlets, March 2020; Factory
Merchants Branson, November 2021; Factory Stores of America at Smithfield
(87,000 sq ft), January 2029; Dare Center, September 2058; Factory Stores of
America at Iowa, September 2087.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The OP rents approximately 36,000 square feet of office space in its
headquarters facility in Roseland, New Jersey; approximately 2,000 square feet
at its office in Mission Viejo, California; 5,600 square feet at Chelsea
Interactive's office in Reston, Virginia and 3,500 square feet at its
office in New York.

Item 3.  Legal Proceedings

The OP is not presently involved in any material litigation other than routine
litigation arising in the ordinary course of business and that is either
expected to be covered by liability insurance or to have no material impact on
the OP's financial position and results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant's Common Stock and related Security Matters

None.

Item 6: Selected Financial Data

CPG Partners, L.P.
(In thousands except per unit, and number of centers)

`Year Ended December 31,
                                                  -------------------------------------------------------------------

Operating Data:                                       2002          2001            2000        1999         1998

Rental revenue..................................    $205,689      $145,278        $125,824    $114,485     $99,976
Total revenues..................................     283,214       206,855         179,903     162,618     139,315
Total expenses..................................     198,317       150,640         123,876     114,676      98,449

Income from unconsolidated investments .........       9,802        15,025           6,723         308          -
Loss from and impairment of Chelsea
Interactive ....................................     (47,756)       (5,337)         (2,364)        -            -
Gain (loss) on sale or write-down of assets.....      10,911           617             -          (694)    (15,713)


Net income......................................      57,854        66,520          60,386      47,556      25,436

Preferred distributions.........................      (9,270)      (10,036)        (10,036)     (6,137)     (4,188)

Net income available to common unitholders......     $48,584       $56,484         $50,350     $41,419     $20,903

Net income per common unit(1) (2):..............

General Partner ................................       $1.09         $1.41           $1.30       $1.09       $0.56

Limited Partner ................................       $1.07         $1.39           $1.30       $1.08       $0.55

Ownership Interest: (2)
General Partner.................................      38,245        33,678          31,880      31,484      30,880
Limited Partners................................       6,426         6,358           6,712       6,778       6,862
Weighted average units outstanding..............      44,671        40,036          38,592      38,262      37,742

Balance Sheet Data:
Rental properties before accumulated
  depreciation..................................  $1,837,174    $1,127,906        $908,344    $848,813    $792,726
Total assets....................................   1,703,030     1,099,308         901,314     806,055     773,352
Unsecured and mortgage debt.....................   1,030,820       548,538         450,353     355,684     375,571
Total liabilities  .............................   1,107,756       624,246         528,752     426,198     450,410

Partner's capital ..............................     595,274       475,062         372,562     379,857     322,942
Distributions declared per common unit (2)......       $1.86         $1.56           $1.50       $1.44       $1.38

Other Data:
Funds from operations available to common
unitholders (1) ................................    $131,771      $108,862        $93,556      $79,980     $67,994
Cash flows from:
   Operating activities.........................    $128,222      $121,723       $106,658      $87,502     $78,731
   Investing activities.........................    (404,178)     (112,551)      (121,479)     (77,490)   (119,807)
   Financing activities.........................     273,903        (2,604)        23,995      (10,781)     36,169

GLA at end of period (3)........................      14,386        12,574          8,159        5,216       4,876
Weighted average GLA (4)........................      12,758         9,349          5,703        4,995       4,614
Centers in operation at end of the period.......          58            57             27           19          19
New centers opened..............................        -             -                 4          -             1
Centers expanded ...............................           4             1              3            4           7
Centers sold ...................................           5             1              1            1         -
Centers held for sale...........................           -          -               -              1           2
Centers acquired ...............................           7            31              4          -           -`

Notes to Selected Financial Data:

|1) | 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. See Management's Discussion and Analysis for
definition of FFO.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2) | Assumes that the 2-for-1 stock/unit split on May 28, 2002 had occurred on
January 1, 1998.
|-- | ------------------------------------------------------------------------------------------

|3) | At year-end 2002, includes two 40% owned centers containing 470,000 square feet
of GLA; at year-end 2001 and 2000 includes seven centers containing 2.4 million
square feet of GLA in which the OP had a joint venture interest ranging from 40
to 50%.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4) | GLA weighted by months in operation.
|-- | ------------------------------------

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion should be read in connection with the financial
statements and notes thereto appearing elsewhere in this annual
report.

Certain comparisons between periods have been made on a percentage or weighted
average per square-foot basis. The latter technique adjusts for square-footage
changes at different times during the year.

General Overview

At December 31, 2002, the OP wholly or partially-owned 58 Premium Outlet and
other shopping centers, compared to 57 and 27 at the end of 2001 and 2000,
respectively. During 2002, the OP added a net 1.8 million square feet of GLA to
its portfolio by acquiring seven Other Properties comprising 2.2 million square
feet, expanding three existing wholly-owned centers by 55,000 square feet and
one joint venture center by 70,000 square feet and selling five non-core
wholly-owned Other Properties containing 496,000 square feet. Two previously
acquired premium outlet centers in Kittery, Maine were combined and are now
considered a single center.

During the three-year period ending December 31, 2002, the OP has grown rental
revenue by $90.2 million to $205.7 million. This was achieved by increasing
rents, opening four new centers, expanding eight centers and acquiring 42
centers that was partially offset by rent decreases from selling six non-core
centers. Income from unconsolidated investments aggregated $31.6 million during
the same three-year period ended December 31, 2002, increasing from $0.3 million
in 1999 to $9.8 million in 2002, 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. During 2002, the OP
became the sole owner of five of these outlet centers resulting from the buyouts
of joint venture partners. The operating results of these five centers have been
fully consolidated since their buyouts.

At December 31, 2002, 2001 and 2000, the OP wholly or partially-owned 14.4
million, 12.6 million and 8.2 million square feet of GLA, respectively. Since
January 1, 2000, the OP has added 9.2 million square feet ("sf") of
net GLA and details are as follows:

`Since January 1,
                                                             2000               2002            2001             2000
                                                     -------------------   --------------  -------------    --------------
Changes in GLA (sf in 000's):

New centers developed:
Orlando Premium Outlets  ........................                 428                -              -               428
Gotemba Premium Outlets (40%-owned) .............                 220                -              -               220
Allen Premium Outlets............................                 206                -              -               206
Rinku Premium Outlets (40%-owned) ...............                 180                -              -               180
                                                     -------------------   --------------  -------------    ---------------

Total new centers................................               1,034                -              -             1,034

Centers expanded:
Rinku Premium Outlets (40% owned) ...............                  70               70              -                 -
Desert Hills Premium Outlets.....................                  23               23              -                 -
Liberty Village Premium Outlets..................                  23               23              -                 -
Napa  Premium Outlets............................                   9                9              -                 -
Allen Premium Outlets............................                 146                -            146                 -
Leesburg Corner Premium Outlets..................                 138                -              -               138
Wrentham Village Premium Outlets.................                 127                -              -               127
Folsom Premium Outlets...........................                  54                -              -                54
Other............................................                 (14)             (17)             4                (1)
                                                     -------------------   --------------  -------------    --------------
Total centers expanded...........................                 576              108            150               318

Centers acquired:
Factory Outlet Village Osage Beach...............                 391              391              -                 -
St. Augustine Outlet Center......................                 329              329              -                 -
Edinburgh Outlet Center..........................                 305              305              -                 -
Outlets at Albertville...........................                 305              305              -                 -
Factory Merchants Branson........................                 300              300              -                 -
Jackson Outlet Village...........................                 292              292              -                 -
Johnson Creek Outlet Center......................                 278              278              -                 -
Kittery Premium Outlets II (1)(3)................                  21                -             21                 -
30 Other Properties (2)..........................               4,279                -          4,279                 -
Gilroy Premium Outlets...........................                 577                -              -               577
Lighthouse Place Premium Outlets.................                 491                -              -               491
Waterloo Premium Outlets.........................                 392                -              -               392
Kittery Premium Outlets (I) (3) .................                 131                -              -               131

                                                     -------------------   --------------  -------------    --------------
Total centers acquired...........................               8,091            2,200          4,300             1,591

Centers sold:
Five Other Properties............................               (496)            (496)              -                 -
Mammoth Premium Outlets..........................                (35)            -               (35)                 -
                                                     -------------------   --------------  -------------    --------------
Total centers sold...............................               (531)            (496)           (35)                 -

Net GLA added during the period..................              9,170            1,812          4,415               2,943

Other Data:
GLA at end of period.............................                              14,386         12,574               8,159
Weighted average GLA.............................                              12,758          9,349               5,703
Centers in operation at end of period............                                  58             57                  27
New centers opened...............................                                   -              -                   4
Centers expanded.................................                                   4              1                   3
Centers sold.....................................                                   5              1                   1
Centers acquired.................................                                   7             31                   4`

|1) | Acquired in the September 25, 2001 Konover Property Trust acquisition
transaction and formerly Factory Stores of America at Kittery.
|-- | ------------------------------------------------------------------------------------------------------------------------------------

|2) | Acquired in the September 25, 2001 Konover transaction and excludes Vegas Pointe
Plaza which was repurchased by Konover on December 3, 2001.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------

|3) | Kittery Premium Outlets (I) and Kittery Premium Outlets (II) were combined in
2002 and are now considered a single center.
|-- | --------------------------------------------------------------------------------------------------------------------------

The OP's domestic Premium Properties produced weighted
average reported tenant sales of approximately $383 per square-foot in 2002,
$379 per square-foot in 2001 and $400 per square-foot in 2000. Weighted average
sales is a measure of tenant performance that has a direct effect on base and
percentage rents that can be charged to tenants over time.

One of the OP's centers, Woodbury Common Premium Outlets,
generated approximately 16%, 21% and 23% of the OP's total revenue for the
years 2002, 2001 and 2000, respectively. In addition, approximately 25%, 28% and
28% of the OP's revenues for the years ended December 31, 2002, 2001 and 2000,
respectively, were derived from the OP's centers in California.

The OP does not consider any single store lease to be material;
no individual tenant, combining all of its store concepts, accounts for more
than 5% of the OP's gross revenues. VF Corporation occupied 8% of the
OP's total domestic GLA at December 31, 2002, and was the only tenant that
occupied more than 5% of GLA at year end. In view of these statistics and the
OP's past success in re-leasing available space, the OP believes that the
loss of any individual tenant would not have a significant effect on future
operations.

Comparison of year ended December 31, 2002 to year ended December 31, 2001.

Income before interest, depreciation and amortization increased
$40.3 million, or 24.9%, to $202.3 million in 2002 from $162.0 million in 2001.
This increase was primarily the result of the acquisition of 31 centers in
September 2001, the buyout and consolidation of five centers previously held as
unconsolidated investments, the acquisition of seven centers and higher rents on
releasing and renewals partially offset by higher operating maintenance, general
and administrative, interest and other costs and increased losses from Chelsea
Interactive during 2002. Income before interest expense increased $3.1 million
to $106.5 million in 2002 from $103.4 million in 2001 due to the addition of GLA
while maintaining overhead costs, a gain resulting from the partial sale of an
unconsolidated investment, substantially offset by the impairment loss on
Chelsea Interactive.

Base rents increased $54.5 million, or 42.8%, to $181.7 million
in 2002 from $127.2 million in 2001 due to the acquisition of 38 centers; the
buyouts of ownership interests in five centers in 2002; and higher average rents
as a result of higher rental rates on new leases and renewals. Base rental
revenue per weighted average square-foot in the Premium Properties increased to
$21.30 in 2002 from $20.39 in 2001.

Percentage rents increased $6.0 million, or 33.1%, to $24.0
million in 2002 from $18.0 million in 2001 primarily due to higher tenant sales,
the acquisition of the 38 centers and the buyouts of ownership interests in five
centers during 2002.

Expense reimbursements, representing contractual recoveries from
tenants of certain common area maintenance, operating, real estate tax,
promotional and management expenses, increased $15.2 million, or 30.1%, to $65.8
million in 2002 from $50.6 million in 2001 due to the recovery of operating and
maintenance costs from increased GLA. The average recovery of reimbursable
expenses for the Premium Properties was 90.6% for 2002 and 2001. The average
recovery of reimbursable expenses for the Other Properties improved to 52.6% in
2002 compared to 51.1% in 2001.

Other income increased $0.7 million, or 6.7%, to $11.7 million
in 2002 from $11.0 million in 2001 primarily due to increased ancillary
operating income from the acquisition of the 38 centers; the buyouts of
ownership interests in five centers in 2002; and the gains from sale of five
Other Properties and an out parcel during 2002, partially offset by decreased
interest income from lower interest rates.

Operating and maintenance expenses increased $22.1 million, or
38.3%, to $79.9 million in 2002 from $57.8 million in 2001 primarily due to
costs related to increased GLA and the buyouts of ownership interests in five
centers during 2002. On a weighted average square-foot basis, Premium Properties
operating and maintenance expenses increased to $9.21 in 2002 from $9.16 in
2001.

Depreciation and amortization expense increased $9.7 million, or
20.0%, to $58.3 million in 2002 from $48.6 million in 2001 due to additional
depreciation from the acquisition of the 38 retail centers, the buyouts of
ownership interests in five centers in 2002 and expansions.

General and administrative expense increased $2.5 million, or
53.2%, to $7.1 million in 2002 from $4.6 million in 2001 primarily due to
increased professional fees, head count and deferred compensation accrual.

Other expenses increased $1.5 million, or 54.1%, to $4.3 million
in 2002 from $2.8 million in 2001 due to ground lease expenses assumed with the
acquisition of new centers, legal expenses and increased bad debts.

Income from unconsolidated investments decreased $5.2 million,
or 34.8%, to $9.8 million in 2002 from $15.0 million in 2001 due to buyouts of
ownership interests in five centers that required that operations of these
centers be fully consolidated from the buyout date, partially offset by
higher earnings from Chelsea Japan.

The loss from Chelsea Interactive operations increased $8.1
million, or 150.8%, to $13.4 million in 2002 from $5.3 million in 2001. The
increase was due to increased operating payroll, general and administrative,
depreciation and amortization expense and lack of third party participation in
the losses. The OP also recorded an impairment loss of $34.4 million as of
December 31, 2002.

Gain on sale of unconsolidated investments of $10.9 million in
2002 resulted from the sale of approximately 40% of the OP's partial
interest in Value Retail. The 2001 gain on sale of $0.6 million was also from
the sale of a partial interest in Value Retail offset by the write-off of the
OP's investment in Guam.

Interest in excess of amounts capitalized increased $11.8
million, or 32.1%, to $48.7 million in 2002 from $36.9 million in 2001,
primarily due to higher debt from acquisitions, and joint venture buyouts,
partially offset by lower interest rates.

Comparison of year ended December 31, 2001 to year ended
December 31, 2000.

Income before interest, depreciation and amortization increased
$30.0 million, or 22.7%, to $162.0 million in 2001 from $132.0 million in 2000.
This increase was primarily the result of expansions and new center openings
during the latter part of 2000, higher rents on releasing and renewals during
2001, income from unconsolidated investments that commenced operations in the
latter part of 2000 and the September 25, 2001, acquisition of 31 centers. These
increases were partially offset by the loss from Chelsea Interactive and
increases in interest and operating and maintenance expenses.

Base rents increased $19.1 million, or 17.7%, to $127.2 million
in 2001 from $108.1 million in 2000 due to expansions of wholly-owned centers
and a new center opening in 2000, higher average rents and the acquisition of
the 31 centers in September 2001. Base rental revenue per weighted average
square-foot in the Premium Properties increased to $20.39 in 2001 from $20.23 in
2000 as a result of higher rental rates on new leases and renewals.

Percentage rents increased $0.3 million, or 2.0%, to $18.0
million in 2001 from $17.7 million in 2000 primarily due to the acquisition of
the 31 centers in 2001. Percentage rents per weighted average square-foot on the
OP's wholly-owned centers decreased to $2.60 in 2001 from $3.31 in 2000.
The decrease is due to much lower sales per square-foot from the Other
Properties acquired in September 2001. The OP's wholly-owned Premium
Properties percentage rents per weighted average square-foot decreased to $3.08
in 2001 from $3.31 in 2000 due to changes of some tenants from overage to base
rents and lower sales.

Expense reimbursements, representing contractual recoveries from
tenants of certain common area maintenance, operating, real estate tax,
promotional and management expenses, increased $6.5 million, or 14.6%, to $50.6
million in 2001 from $44.1 million in 2000, due to the recovery of operating and
maintenance costs from increased GLA. Excluding the 31 retail centers acquired
in 2001, on a weighted average square-foot basis, expense reimbursements
increased 0.7% to $8.32 in 2001 from $8.26 in 2000. The average recovery of
reimbursable expenses for the wholly-owned Premium Properties was 90.8% in 2001
compared to 90.0% in 2000. The average recovery of reimbursable expense for the
Other Properties was 51.1% in 2001.

Other income increased $1.0 million, or 10.6%, to $11.0 million
in 2001 from $10.0 million in 2000. The increase was due to increased interest
and ancillary income, partially offset by lower pad sale gains in 2001 versus
2000.

Operating and maintenance expenses increased $8.8 million, or
18.0%, to $57.8 million in 2001 from $49.0 million in 2000. The increase was
primarily due to costs related to increased GLA and the acquisition of the 31
centers. Excluding the 31 centers acquired in 2001, on a weighted average
square-foot basis, operating and maintenance expenses decreased to $9.16 in 2001
from $9.17 in 2000.

Depreciation and amortization expense increased $5.6 million, or
12.9%, to $48.6 million in 2001 from $43.0 million in 2000 due to depreciation
of expansions of wholly-owned and new centers opened in 2000 and the acquisition
of the 31 centers in September 2001.

General and administrative expenses were $4.6 and $4.8 million
in 2001 and 2000, respectively.

Other expenses increased $0.1 million, or 5.8%, to $2.8 million
in 2001 from $2.7 million in 2000. Increased 2001 bad debt and legal expenses
were greater than the non-recurring write-off of development costs related to
inactive projects in 2000.

Income from unconsolidated investments increased $8.3 million,
or 123.5%, to $15.0 million in 2001 from $6.7 million in 2000 as a result of a
full year's results of equity-in-earnings and fees earned from joint
venture investments that were opened or acquired in the latter part of 2000.

The loss from Chelsea Interactive increased $2.9 million, or
125.8%, to $5.3 million in 2001 from $2.4 million in 2000. The increase was due
to a full year of operations in 2001 versus a partial year in 2000.

Gain on sale of unconsolidated investments (net of write-downs)
of $0.6 million in 2001 resulted from the gain generated from a partial sale of
the OP's interest in Value Retail offset by the write-off of the OP's
investment in Guam.

Interest, in excess of amounts capitalized, increased $12.4
million, or 50.7%, to $36.9 million in 2001 from $24.5 million in 2000, due to
higher debt balances from acquisitions and lower construction activity in 2001.

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, 2002 of $128.2 million is expected to increase with a full year of
operations from the five joint venture buyout centers and the 1.8 million square
feet of GLA added during 2002 as well as scheduled openings of approximately
800,000 square feet of new joint venture GLA in 2003. The OP has adequate
funding sources to complete and open all current development projects from
available cash, credit facilities and secured construction financing. The OP
also has access to the public markets through its $800 million debt and the
Company's $800 million equity shelf registrations.

Operating cash flow is expected to provide sufficient funds for
dividends and distributions in accordance with the Company's 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, meet
funding requirements of Chelsea Interactive and partially fund development
projects.

Common distributions declared and recorded in 2002 were $84.5
million, or $1.86 per share or unit. The OP's dividend payout ratio as a
percentage of net income before gain or loss on sale or writedown of assets and
depreciation and amortization (reduced by amortization of deferred financing
costs, depreciation of non-real estate assets and preferred dividends
("FFO")) was 64.1%. The OP's senior unsecured bank line of credit
("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.

The OP's ratio of earnings-to-fixed charges for each of the
three years ended December 31, 2002, 2001 and 2000 was 2.4, 2.6 and 2.6,
respectively. For purposes of computing the ratio, earnings consist of income
from continuing operations after depreciation and fixed charges, exclusive of
interest capitalized and amortization of loan costs capitalized and impairment
losses. Fixed charges consist of interest expense, including interest costs
capitalized, the portion of rent expense representative of interest and total
amortization of debt issuance costs expensed and capitalized.

In July 2002, the OP increased its Senior Credit Facility to
$200 million from $160 million to support its growth. The Senior Credit Facility
expires in March 2005 (unless extended until March 2006), bears interest on the
outstanding balance at an annual rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.05% (2.46% at December 31, 2002) or the prime rate,
at the OP's option and has an annual facility fee of 0.125%. The LIBOR rate
spread ranges from 0.85% to 1.50% depending on the OP's Senior Debt rating.
At December 31, 2002, $98.0 million was outstanding under the Senior Credit
Facility.

During 2002, the OP completed five acquisitions valued at $531.2
million, including: (i) $76.3 million buyout of Simon Property Group's 50%
undivided ownership interest of Orlando Premium Outlets on April 1, 2002; (ii)
$27.0 million acquisition of a 305,000 square-foot center in Edinburgh, Indiana
completed on April 1, 2002; (iii) $145.4 million buyout of Fortress Registered
Investment Trust's 51% ownership interest in four premium outlet centers on
August 20, 2002; (iv) $89.5 million acquisition of two outlet centers located in
Albertville, Minnesota and Johnson Creek, Wisconsin, completed on November 22,
2002; and (v) $193.0 million acquisition of four outlet centers located in
Jackson, New Jersey, Osage Beach, Missouri, St. Augustine, Florida and Branson,
Missouri, completed on December 19, 2002.

Also during 2002, the OP completed several long-term capital
transactions to fund acquisition and development activity and to support future
growth. These transactions included: (i) the issuance of $100 million of 6.875%
ten-year senior unsecured notes due June 15, 2012; (ii) the assumption of $86.5
million of mortgage debt due 2008, bearing interest at 6.99% that was part of
the consideration for the 51% ownership interest buyout of four premium outlet
centers; (iii) the issuance of 3.5 million common shares in a public offering
that yielded net proceeds before expenses of $119.3 million; (iv) the issuance
of 1.3 million limited partnership units (convertible on a one-for-one basis to
common shares of the Company) valued at $44.6 million as partial consideration in the
acquisition of the Albertville, Minnesota and Johnson Creek, Wisconsin outlet
centers; (v) the issuance of $150 million of 6.0% ten-year senior unsecured
notes due January 15, 2013; and (vi) the repayment of two secured construction
loans aggregating $88.9 million, and the extinguishment of mortgages on Orlando
Premium Outlets and Allen Premium Outlets.

A summary of the maturity of OP's contractual debt
obligations (at par) as of December 31, 2002 is as follows (in thousands):

`Less than       1 to 3 Years       4 to 5         After 5
                                 Total           One Year                            Years          Years
                              -------------    --------------    --------------   -----------    ------------
Unsecured bank debt               $103,035              $  -         $103, 035          $  -             $ -
Unsecured notes                    625,000                 -            50,000       125,000         450,000
Mortgage debt                      301,025             4,686            10,934       166,068         119,337
                              -------------    --------------    --------------   -----------    ------------
   Total                        $1,029,060            $4,686          $163,969      $291,068        $569,337
                              =============    ==============    ==============   ===========    ============`

Construction projects underway and expected to open during 2003
include a 180,000 square-foot first phase of Sano Premium Outlets,
located north of Tokyo, Japan, scheduled to open in March 2003; a 170,000
square-foot second phase at Gotemba Premium Outlets, scheduled to open in July
2003; and the 435,000 square-foot Las Vegas Premium Outlets, scheduled to open
mid-2003. The OP is also under construction on the single phase 438,000
square-foot Chicago Premium Outlets located in Aurora, Illinois that is
scheduled to open in mid-2004. The Gotemba and Sano projects are developments of
Chelsea Japan Co., Ltd., the OP's 40% owned Japanese joint venture. The Las
Vegas and Chicago projects are 50/50 joint ventures with Simon. Other projects
in various stages of development are expected to open in 2004 and beyond. There
can be no assurance that these projects 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.

In connection with the Simon joint ventures, the OP has
committed to provide 50% of the development costs, which are expected to be
approximately $48.0 million for Las Vegas Premium Outlets and $46.0 million for
Chicago Premium Outlets. As of December 31, 2002, the OP had contributed $22.8
million and $8.4 million to the Las Vegas and Chicago projects, respectively.

In June 1999, the OP entered into an agreement with Mitsubishi
Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own and operate
premium outlet centers in Japan under the joint venture Chelsea Japan.
Borrowings related to Chelsea Japan for which the Company and the OP have
provided guarantees as of December 31, 2002, are as follows (in thousands):

`Total Facility            |                                  Outstanding
         --------------            |                                  -----------
                         US $      |                         US $              US $         Due       Interest
    Yen               Equivalent   |       Yen            Equivalent        Guarantee      Date        Rate
    ---               ----------   |       ---            ----------        ---------      ----      --------
4.0 billion (1)     $33.7 million  |    1.0 billion       $8.3 million      $8.3 million    2003        1.45%
0.6 billion (2)       5.0 million  |    0.6 billion        4.8 million       1.9 million    2012        1.50%
3.8 billion (2)      32.0 million  |    3.5 billion       29.5 million      11.8 million    2015        2.20%`

|1) | Facility entered into by an equity investee of the OP has a one-year extension
option; amended in November 2002 to allow for one additional year extension.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|2) | Facilities entered into by Chelsea Japan, secured by Gotemba and Rinku and 40%
severally guaranteed by the OP.
|-- | --------------------------------------------------------------------------------------------------------------

In May 2002, the OP, through an affiliated entity, entered into
a 50/50 strategic alliance with Sordo Madaleno y Asociados and Mr. Carlos
Peralta of Mexico City to jointly develop premium outlet centers in Mexico.
Subject to leasing and entitlements, construction on a 200,000 square-foot first
phase of an outlet project north of Mexico City is expected to commence later in
2003 and to open in 2004. The site can support a second phase containing
approximately 165,000 square feet of GLA. Once phase one of the project has been
approved, the OP will be committed to fund approximately $12 million which is
50% of the development costs.

The OP has minority interests ranging from 3% to 8% in several
outlet centers and outlet development projects in Europe operated by Value
Retail. The OP's total investment in Europe as of December 31, 2002, was
$3.6 million. The OP has also agreed to provide up to $22.0 million in limited
debt service guarantees under a standby facility for loans arranged by Value
Retail to construct outlet centers in Europe. The term of the standby facility
for new guarantees expired in November 2001 and these guarantees shall not be
outstanding for longer than five years after project completion. In July 2002,
the OP sold approximately 40% of its holdings in Value Retail to a third party
for $11.4 million, resulting in a gain of approximately $10.9 million.

The OP has been developing and operates an e-commerce technology
platform through its affiliate, Chelsea Interactive, Inc. with an aggregate
funding commitment of up to $60.0 million; as of December 31, 2002, $52.4
million had been funded. The OP anticipates that the balance of the funding will
be used to further develop the platform and to finance operating cash shortfalls
and potential costs related to the disposal or discontinuance of the business.
The OP currently believes that it will not be able to recover the net book value
of its investment in Chelsea Interactive through future cash flows unless
Chelsea Interactive is able to achieve positive cash flow before reaching the
$60.0 million funding limit. Due to current market conditions and costs related
to securing additional brand users for the platform, the OP has decided to
recognize an impairment loss of $34.4 million, equal to the net book value of
its investment in Chelsea Interactive as of December 31, 2002. However, the OP
is in active discussions with potential investors to provide capital to and/or
acquire Chelsea Interactive. There can be no assurance that any of these
discussions will be successful or that Chelsea Interactive will be able to
continue as a going concern. Future funding by the OP will be reported as a loss
in the period funding occurs.

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 continue to 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 was $128.2 million and
$121.7 million for the years ended December 31, 2002, and 2001, respectively.
The increase was primarily due to the growth of the OP's GLA to 14.4
million square feet in 2002 from 12.6 million square feet in 2001 offset by the
payout of the deferred incentive compensation in March 2002. Net cash used in
investing activities increased $291.6 million for the year ended December 31,
2002, compared to the corresponding 2001 period, as a result of increased joint
venture and wholly owned property investing activity, offset by proceeds from
the partial sale of a joint venture investment. For the year ended December 31,
2002, net cash provided by financing activities increased by $276.5 million
compared to the corresponding period in 2001 as a result of increased borrowing
and increased issuance of the Company's common stock as a result of
acquisition and development activities of the OP.

Net cash provided by operating activities was $121.7 million and
$106.7 million for the years ended December 31, 2001, and 2000, respectively.
The increase was primarily due to the growth of the OP's GLA to 12.6
million square feet in 2001 from 8.2 million square feet in 2000. Net cash used
in investing activities decreased $8.9 million for the year ended December 31,
2001, compared to the corresponding 2000 period, as a result of decreased
joint venture investing activity, proceeds from sale of a center and partial
sale of a joint venture investment offset by the acquisition of the 31 centers.
For the year ended December 31, 2001, net cash provided by financing activities
decreased by $26.6 million compared to the corresponding period in 2000 as a
result of reduced borrowing and increased debt repayments offset by issuance of
the Company's common stock.

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. FFO for the year ended December 31, 2002, excludes the Chelsea
Interactive impairment loss of $34.4 million. Since all companies do not
calculate FFO in a similar fashion, the OP's calculation of FFO presented
herein may not be comparable to similarly titled measure as reported by other
companies. 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.

`Year Ended December 31,
                                                                       2002          2001          2000
                                                                   ------------  ------------  -------------

  Income available to common unitholders .................           $48,584       $56,484       $50,350
    Depreciation and amortization-wholly-owned............            58,275        48,554        42,978
    Depreciation and amortization-joint ventures..........             4,166         5,964         2,024
    Amortization of deferred financing costs and  depreciation
     of non-rental real estate assets.....................            (2,401)       (1,807)       (1,796)

  Net gain on sale or write-down of assets................           (11,223)         (333)           -
  Chelsea Interactive impairment loss.....................            34,370            -             -

                                                                   ------------  ------------  -------------
  FFO.....................................................          $131,771      $108,862       $93,556
                                                                   ============  ============  =============
  Average units outstanding (1)...........................            44,671        40,036        38,592
  Distributions declared per unit.........................             $1.86         $1.56         $1.50`

|1) | Assumes 2-for-1 stock/unit split in May 2002 had occurred on January 1, 2000.
|-- | -----------------------------------------------------------------------------

Recent Accounting Pronouncements

In June 2001, the FASB issued Statements of Financial Accounting Standards No.
141 "Business Combinations" ("SFAS 141"), which was
effective for all business combinations initiated after June 30, 2001, and No.
142 "Goodwill and Other Intangible Assets" ("SFAS 142")
which was effective January 1, 2002. SFAS 141 requires that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001. Under SFAS 142, amortization of goodwill, including goodwill recorded in
past business combinations, will discontinue upon adoption of this standard. All
goodwill and intangible assets will be tested for impairment in accordance with
the provisions of the Statement. The OP adopted SFAS 141 and 142 on July 1, 2001
and January 1, 2002, respectively. The adoption of these statements did not have
an impact on the OP's results of operations or its financial
position.

In August 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS 143") which is effective January 1, 2003.
SFAS 143 requires the recording of the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. See note 6 to
financial statements for discussion related to the estimated future costs to be
incurred in connection with the future operations of Chelsea
Interactive.

In October 2001, the FASB issued Statement of Financial Accounting Standard No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144") which was effective and adopted by the OP on January 1,
2002. SFAS 144 provides accounting guidance for financial accounting and
reporting for impairment or disposal of long-lived assets. SFAS 144 supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS 144 retains fundamental
provisions of SFAS 121 related to the recognition and measurement of the
impairment of long-lived assets to be held and used. In addition, SFAS 144
superseded APB Opinion 30, "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." SFAS 144 extended the
reporting of a discontinued operation to a "component of an entity."
Thus, the operations of assets held for sale or assets sold are required to be
presented as discontinued operations in the OP's statement of income. The
initial adoption of FAS 144 did not have a material effect on the financial
position or results of operations of the OP.

In May 2002, the FASB issued SFAS No. 145, "Reporting Gains and Losses from
Extinguishment of Debt", which rescinded SFAS No. 4, No. 44 and No. 64 and
amended SFAS No. 13. The new standard addresses the income statement
classification of gains or losses from the extinguishment of debt and criteria
for classification as extraordinary items. The new standard became effective for
fiscal years beginning after May 15, 2002. The OP adopted this pronouncement on
April 1, 2002. The adoption of this pronouncement did not have a material impact
on the OP's results of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires
certain guarantees to be recorded at fair value, instead of recording a
liability only when a loss is probable and reasonably estimable, as those terms
are defined in FASB Statement No. 5, Accounting for Contingencies. FIN 45 also
requires a guarantor to make significant new disclosures, even when the
likelihood of making any payments under the guarantee is remote. The disclosure
requirements of FIN 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. The OP adopted the disclosure
provisions of FIN 45 effective December 31, 2002. FIN 45's initial
recognition and initial measurement provisions are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The OP is in the
process of determining the impact, if any, on its results of operations or
financial position from the adoption of FIN 45.

In January of 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"). FIN 46 clarifies the
application of existing accounting pronouncements to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
The provisions of FIN 46 will be immediately effective for all variable
interests in variable interest entities created after January 31, 2003, and the
OP will need to apply its provisions to any existing variable interests in
variable interest entities by no later than December 31, 2004. The OP does not
believe that FIN 46 will have a significant impact on the OP's financial
statements.

Critical Accounting Policies and Estimates

The OP's discussion and analysis of its financial condition and results of
operations are based upon the OP's consolidated financial statements which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires the
OP to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. The OP bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The OP believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Bad Debt

The OP maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its tenants to make required rent payments. If
the financial condition of the OP's tenants were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may be
required. The OP's allowance for doubtful accounts included in tenant
accounts receivable totaled $2.6 million and $1.7 million at December 31, 2002
and 2001, respectively.

Valuation of Investments

On a periodic basis, the OP's management team assesses whether there are
any indicators that the value of real estate properties, including joint venture
properties may be impaired. If the carrying amount of the property is greater
than the estimated expected future cash flow (undiscounted and without interest
charges) of the asset, impairment has occurred. The OP will then record an
impairment loss equal to the difference between the carrying amount and the fair
value of the asset. The OP does not believe that the value of any of its rental
properties were impaired at December 31, 2002 and 2001. The OP recorded a $34.4
million impairment loss in 2002 on its investment in Chelsea Interactive and a
$1.2 million loss in 2001 for an impairment write-down of its investment in an
outlet center in Guam.

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 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 7-A. 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 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 rate of 7.2625% on the notional amount until
January 1, 2006.

At December 31, 2002 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 $1.0
million annually.

Following is a summary of the OP's debt obligations at
December 31, 2002 (in thousands):

`Expected Maturity Date
                        ----------------------------------------------------------
                          2003    2004    2005       2006    2007       Thereafter    Total        Fair
                                                                                                   Value
                          ----    ----    ----       ----    ----       ----------    ------       -----
Fixed Rate Debt:          -       -       $49,922      -    $124,841     $685,772    $860,535     $966,224
Average Interest Rate:    -       -          8.38%     -        7.25%        7.22%       7.29%
Variable Rate Debt:       -       -      $103,035      -        -         $67,250    $170,285     $170,285
Average Interest Rate:    -       -          2.46%     -        -            2.88%       2.63%`

Item 8.  Financial Statements and Supplementary Data

The financial statements and financial information of the OP for
the years ended December 31, 2002, 2001 and 2000 and the Report of the
Independent Auditors thereon are included elsewhere herein. Reference is made to
the financial statements and schedules in Item 15.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

None.

PART III

Items 10, 11, 12 and 13.

The Operating Partnership does not have any Directors, executive
officers or stock authorized, issued or outstanding. If the information were
required it would be indentical to the information contained in Items 10, 11, 12
and 13 of the Company's Form 10-K that will appear in the Company's Proxy
Statement furnished to shareholders in connection with the Company's 2003 Annual
Meeting. Such information is incorporated by reference in the Form
10-K.

Item 14. Controls and Procedure

The Company's chief executive officer and chief financial
officer evaluated the effectiveness of our disclosure controls and procedures
(as defined in rule 13A-14 c under the Securities Exchange Act of 1934, as
amended) within 90 days of the filing date of this report (the "Evaluation
Date") and, based on that evaluation, concluded that, as of the Evaluation
Date, we had sufficient controls and procedures for recording, processing,
summarizing and reporting information that is required to be disclosed in our
reports under the Securities Exchange Act of 1934, as amended, within the time
periods specified in the SEC's rules and forms.

Since the Evaluation Date, there have not been any significant
changes to our internal controls including any corrective actions with regard to
significant deficiencies and material weaknesses or other factors that could
significantly affect these controls.

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports
on Form 8-K

(a) 1 and 2. The response to this portion of Item 14 is
submitted as a separate section of this report.

3.     Exhibits

|3.1 | Articles of Incorporation of the Company, as amended, including
Articles Supplementary relating to 8 3/8% Series A Cumulative Redeemable
Preferred Stock and Articles Supplementary relating to 9% Series B Cumulative
Redeemable Preferred Stock. Incorporated by reference to Exhibit 3.1 to Form
10-K of Chelsea Property Group, Inc. for the year ended December 31, 2002.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 | By-laws of the Company. Incorporated by reference to Exhibit 3.2
to Registration Statement filed by the Company on Form S-11 under the Securities Act
of 1933 (file No. 33-67870) ("S-11").
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 | Agreement of Limited Partnership for the Operating Partnership. Incorporated
by reference to Exhibit 3.3 to S-11.
|--- | -----------------------------------------------------------------------------------------------------------------

|3.4 | Amendments No. 1 and No. 2 to Partnership Agreement dated March 31, 1997 and
October 7, 1997. Incorporated by reference to Exhibit 3.4 to Form 10-K for the
year ended December 31, 1997. ("1997 10-K")
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.5 | Amendment No. 3 to Partnership Agreement dated September 3, 1999.
Incorporated by reference to Exhibit 3.5 to 1999 10-K.
|--- | ------------------------------------------------------------------------------------------------------------------------

|4.1 | Form of Indenture among the Company, Chelsea GCA Realty
Partnership, L.P., and State Street Bank and Trust Company, as Trustee.
Incorporated by reference to Exhibit 4.4 to Registration Statement filed by the
Company on Form S-3 under the Securities Act of 1933 (File No. 33-98136).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 | Registration Rights Agreement among the Company and recipients of Units.
Incorporated by reference to Exhibit 4.1 to S-11.
|---- | --------------------------------------------------------------------------------------------------------------------------

|10.2 | Amended and Restated Credit Agreement dated July 31, 2002 among
CPG Partners, L.P. and Fleet National Bank, individually and as an agent, and
other Lending Institutions listed therein. Incorporated by reference to Exhibit
10.1 to Form 10-Q for the period ending September 30, 2002.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Joint Venture Agreement among Chelsea GCA Realty Partnership, L.P.,
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation dated June 16, 1999.
Incorporated by reference to Exhibit 10.9 to 1999 10-K.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 | Agreement for Purchase and Sale of Assets dated December 22, 2000.
Incorporated by reference to Exhibit 2.1 to current report on Form 8-K reporting
on an event which occurred December 22, 2000.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 | Limited Liability Company Agreement of F/C Acquisition Holdings LLC.
Incorporated by reference to Exhibit 2.2 to current report on Form 8-K reporting
on an event which occurred December 22, 2000.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.6 | Agreement for Purchase and Sale of Assets dated July 12, 2001.
Incorporated by reference to Exhibit 2 to current report on Form 8-K reporting
on an event which occurred on September 25, 2001.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 | Purchase Agreement dated November 11, 2002. Incorporated by
reference to Exhibit 2 to current report on Form 8-K reporting on an event which
occurred December 19, 2002.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21 | List of Subsidiaries
|-- | --------------------

|23.1 | Consent of Ernst & Young LLP.
|---- | -----------------------------

|(b) | Reports on Form 8-K. None
|--- | -------------------------

|(c) | Exhibits See (a) 3
|--- | ------------------

|(d) | Financial Statement Schedules - The response to this portion of
Item 15 is submitted as a separate schedule of this report.
|--- | ---------------------------------------------------------------------------------------------------------------------------

Item 8, Item 15(a)(1) and (2) and Item
15(d)

(a)1. Financial Statements

Form 10-K
Report Page

Consolidated Financial StatementsCPG Partners, L.P.

|Report of Independent Auditors | F-1
|------------------------------ | ---

|Consolidated Balance Sheets as of December 31, 2002 and 2001 | F-2
|------------------------------------------------------------ | ---

|Consolidated Statements of Income for the years ended December 31, 2002,
     2001 and 2000 | F-3
|------------------------------------------------------------------------------------------- | ---

|Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 2002, 2001 and 2000 | F-4
|--------------------------------------------------------------------------------------------------------- | ---

|Consolidated Statements of Cash Flows for the years ended December 31, 2002,
     2001 and 2000 | F-5
|----------------------------------------------------------------------------------------------- | ---

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

(a)2 and (d) Financial Statement Schedule

|Schedule III-Consolidated Real Estate and Accumulated Depreciation | F-30
|------------------------------------------------------------------ | ----

All other schedules are omitted since the required information
is not present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
consolidated financial statements and notes thereto.

Report of Independent Auditors

To the Owners
CPG Partners, L.P.

We have audited the accompanying consolidated balance sheets of
CPG Partners, L.P. as of December 31, 2002 and 2001, and the related
consolidated statements of income, partners' capital and cash flows for each of
the three years in the period ended December 31, 2002. Our audits also included
the financial statement schedule listed in the Index as Item 15(a)(2). These
financial statements and schedule are the responsibility of the management of
CPG Partners, L.P. Our responsibility is to express an opinion on the financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CPG Partners, L.P. as of December 31, 2002 and 2001, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/s/Ernst & Young LLP

New York, New York
February 21, 2003

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

`December 31,
                                                                                      2002           2001
                                                                                -------------- --------------
Assets:
Rental properties:
     Land..................................................................     $    266,461    $  160,458
     Depreciable property..................................................        1,570,713       967,448
                                                                                -------------- --------------
Total rental property......................................................        1,837,174     1,127,906
Accumulated depreciation...................................................         (284,239)     (217,462)
                                                                                -------------- --------------
Rental properties, net.....................................................        1,552,935       910,444
Cash and cash equivalents..................................................           22,551        24,604
Restricted cash - escrows..................................................            3,455         3,347
Tenant accounts receivable (net of allowance for doubtful accounts of $2,593 in
    2002 and $1,708 in 2001)...............................................            7,762         7,863
Deferred rent receivable...................................................           18,778        13,038
Investments in unconsolidated affiliates...................................           47,997        93,689
Notes receivable-related parties...........................................            2,746         3,281
Deferred costs, net........................................................           16,706        22,534
Other assets...............................................................           30,100        20,508
                                                                                -------------- --------------
Total assets...............................................................      $ 1,703,030    $1,099,308
                                                                                ============== ==============

Liabilities and partners' capital:
Liabilities:
     Unsecured bank debt...................................................        $ 103,035       $ 5,035
     Unsecured notes.......................................................          621,330       373,294
     Mortgage debt.........................................................          306,455       170,209
     Construction payables.................................................            8,046         8,001
     Accounts payable and accrued expenses.................................           43,570        47,039
     Obligation under capital lease........................................            1,507         2,141
     Accrued distribution payable..........................................            4,927         3,851
     Other liabilities.....................................................           18,886        14,676
                                                                                -------------- --------------
Total liabilities..........................................................        1,107,756       624,246

Commitments and contingencies

Partners' capital:
General partner units outstanding, 41,485 in 2002 and 37,540 in 2001.......        462,127        362,402
Limited partners units outstanding 7,563 in 2002 and 6,300 in 2001.........         77,094         52,825
Preferred partners units outstanding, 1,300 in 2002 and 2001...............         63,315         63,315
Officer loan...............................................................           (488)          -
Accumulated other comprehensive loss ......................................         (6,774)        (3,480)
                                                                                -------------- --------------
Total partners' capital....................................................        595,274        475,062
                                                                                -------------- --------------
Total liabilities and partners' capital....................................     $1,703,030     $1,099,308
                                                                                ============== ==============`

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

CPG Partners, L.P.
Consolidated Statements of Income
(In thousands, except per unit data)

`Year ended December 31,
                                                                  2002               2001              2000
                                                        ----------------   ---------------   ----------------

Revenues:
     Base rent.....................................           $181,672           $127,229          $108,123
     Percentage rent...............................             24,017             18,049            17,701
     Expense reimbursements........................             65,773             50,559            44,116
     Other income..................................             11,752             11,018             9,963
                                                        ----------------   ---------------   ----------------
Total revenues.....................................            283,214            206,855           179,903

Expenses:
     Operating and maintenance......................            79,942             57,791            48,992
     Depreciation and amortization..................            58,275             48,554            42,978
     General and administrative.....................             7,075              4,618             4,784
     Other..........................................             4,332              2,812             2,663
                                                        ----------------   ---------------   ----------------
Total expenses......................................           149,624            113,775            99,417

Income before unconsolidated investments and interest
expense ............................................           133,590             93,080            80,486

Income from unconsolidated investments..............             9,802             15,025             6,723
Loss from  and impairment of
   Chelsea Interactive..............................           (47,756)            (5,337)           (2,364)
Gain on sale of unconsolidated investments,                                                               -
    net of write-down in 2001.......................            10,911                617
Interest expense....................................           (48,693)           (36,865)          (24,459)
                                                        ----------------   ---------------   ----------------

Net income..........................................            57,854             66,520            60,386
Preferred unit requirement..........................            (9,270)           (10,036)          (10,036)
                                                        ----------------   ---------------   ----------------
Net income available to common unitholders..........           $48,584            $56,484           $50,350
                                                        ================   ===============   ================

Net income to common unitholders:
     General partner................................           $41,714            $47,626           $41,592
     Limited partners...............................             6,870              8,858             8,758
                                                        ----------------   ---------------   ----------------
Total...............................................           $48,584            $56,484          $ 50,350
                                                        ================   ===============   ================

Net income per common unit:
     General partner ...............................            $1.09              $1.41             $1.30
     Limited partners...............................            $1.07              $1.39             $1.30

Weighted average units outstanding:
     General partner................................           38,245             33,678            31,880
     Limited partners...............................            6,426              6,358             6,712
                                                        ----------------   ---------------   ----------------
Total...............................................           44,671             40,036            38,592
                                                        ================   ===============   ================`

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

CPG Partners, L.P.
Consolidated Statements of Partners' Capital
(In thousands)

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

Balance December 31, 1999....................    $277,296    $39,246    $63,315      $   -      $   -      $379,857
Net income...................................      45,780     14,606          -          -          -        60,386
Other comprehensive income...................
     Foreign currency translation............           -          -          -          -       (123)         (123)
                                                                                                         ---------------
Total comprehensive income...................                                                                60,263
                                                                                                         ---------------

Common distributions.........................     (47,823)   (10,068)         -          -          -       (57,891)
Preferred distribution.......................      (4,188)    (5,848)         -          -          -       (10,036)
Contributions (net of costs).................         369          -          -          -          -           369
Transfer of a limited partners' interest.....          48        (48)         -          -          -             -
                                              -------------------------------------------------------------------------------
Balance December 31, 2000....................     271,482     37,888     63,315          -       (123)      372,562

Net income...................................      51,814     14,706          -          -          -        66,520
Other comprehensive income...................
     Foreign currency translation............           -          -          -          -       (252)         (252)
     Interest rate swap......................           -          -          -          -     (3,105)       (3,105)
                                                                                                            ---------------
Total comprehensive income...................                                                                62,893
                                                                                                            ---------------

Common distributions.........................     (52,939)    (9,839)         -          -          -       (62,778)
Preferred distribution.......................      (4,188)    (5,848)         -          -          -       (10,036)
Contributions (net of costs).................     112,151          -          -          -          -       112,151
Revaluation of limited partners' interests...     (18,209)    18,209          -          -          -             -
Transfer of a limited partners' interest.....       2,291     (2,291)         -          -          -             -
                                              ----------------------------------------------------------------------------
Balance December 31, 2001....................     362,402     52,825     63,315          -     (3,480)      475,062

Net income...................................      45,136     12,718          -          -          -        57,854
Other comprehensive income...................
     Foreign currency translation............           -          -          -          -        320           320
     Interest rate swap......................           -          -          -          -     (3,614)       (3,614)
                                                                                                           ---------------
Total comprehensive income...................                                                                54,560
                                                                                                           ---------------

Issuance of limited partnership units........           -     44,593          -          -          -        44,593
Common distributions.........................     (72,220)   (12,304)         -          -          -       (84,524)
Preferred distribution.......................      (3,422)    (5,848)         -          -          -        (9,270)
Contributions (net of costs).................     124,995          -          -          -          -       124,995
Redemption of preferred units
     (net of costs)..........................      (9,654)         -          -          -          -        (9,654)
Officer loan.................................           -          -          -       (488)         -          (488)
Revaluation of limited partners' interests...      14,651    (14,651)         -          -          -             -
Transfer of a limited partners' interest.....         239       (239)         -          -          -             -
                                              -------------------------------------------------------------------------
Balance December 31, 2002....................    $462,127    $77,094    $63,315      ($488)   ($6,774)     $595,274
                                              =========================================================================`

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

CPG Partners, L.P.
Consolidated Statements of Cash Flows
(In thousands)

`Year ended December 31,
                                                                     2002            2001               2000
                                                              ---------------   ----------------   ---------------
 Cash flows from operating activities
 Net income..................................................      $57,854           $66,520            $60,386
 Adjustments to reconcile net income to
   net cash provided by operating activities:
      Depreciation and amortization..........................       58,275            48,554             42,978
      Gain on sale of assets.................................      (11,514)             (333)                 -
      Equity in earnings of unconsolidated investments
           in excess of distributions received...............       (2,407)           (2,215)            (1,375)
      Loss from and impairment of Chelsea Interactive........       47,756             5,337              2,364
      Write-off of development costs.........................            -                 -                869
      Proceeds from non-compete receivable...................        4,300             4,600              4,600
      Amortization of non-compete revenue....................       (5,136)           (5,136)            (5,136)
      Additions to deferred lease costs......................       (1,153)           (1,869)            (2,708)
      Other operating activities.............................         (845)             (570)              (531)
      Changes in assets and liabilities:
         Straight-line rent receivable.......................       (3,872)           (1,761)            (1,536)
         Other assets........................................       (3,211)              965             (5,995)
         Deferred compensation pay out.......................      (14,401)
         Due from affiliates.................................         (284)           (1,924)            (2,878)
        Accounts payable and accrued expenses................        2,860             9,555             15,620
                                                              ---------------   ----------------   ---------------
 Net cash provided by operating activities...................      128,222           121,723            106,658

 Cash flows from investing activities
 Additions to rental properties..............................     (385,519)         (103,521)           (59,980)
 Proceeds from sale of centers...............................        7,929             7,100              3,372
 Additions to investments in unconsolidated affiliates.......      (37,855)          (14,763)           (64,837)
 Distributions from investments in unconsolidated
     affiliates in excess of earnings........................          337             5,079                  -
 Proceeds from sale of investment in unconsolidated
     affiliates .............................................       11,293             2,839                  -
 Loans to related parties....................................         (550)           (2,750)                (3)
 Payments from related parties...............................        1,085             1,685                  -
 Additions to deferred development costs.....................         (898)           (8,220)               (31)
                                                              ---------------   ----------------   ---------------
 Net cash used in investing activities.......................     (404,178)         (112,551)          (121,479)

 Cash flows from financing activities
 Debt proceeds...............................................      503,958           177,538            246,526
 Repayments of debt..........................................     (249,540)         (217,318)          (151,750)
 Net proceeds from sale of common stock......................      124,990           112,151                369
 Distributions...............................................      (92,717)          (72,873)           (67,830)
 Redemption of preferred units...............................       (9,654)                -                  -
 Additions to deferred financing costs.......................       (3,134)           (2,102)            (3,320)
                                                              ---------------   ----------------   ---------------
 Net cash provided by (used in) financing activities.........      273,903            (2,604)            23,995

 Net (decrease) increase in cash and cash equivalents........       (2,053)            6,568              9,174
 Cash and cash equivalents, beginning of period..............       24,604            18,036              8,862
                                                              ---------------   ----------------   ---------------
 Cash and cash equivalents, end of period....................      $22,551           $24,604            $18,036
                                                              ===============   ================   ===============`

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

1. Organization and Basis of Presentation

Organization

CPG Partners, L.P., (the "Operating Partnership" or
"OP"), which commenced operations on November 2, 1993 specializes in
owning, developing, leasing, marketing and managing upscale and fashion-oriented
manufacturers' outlet centers. As of December 31, 2002, the OP wholly or
partially owned 58 centers in 30 states and Japan containing approximately 14.4
million square feet of gross leasable area ("GLA"). The OP's
portfolio is comprised of 26 premium outlet centers containing 8.4 million
square feet of GLA (the "Premium Properties") and 32 other retail
centers containing approximately 6.0 million square feet of GLA ("Other
Properties") (collectively the "Properties"). The OP's
Premium Properties generated approximately 86% and 97% of the OP's retail
real estate net operating income for the years ended December 31, 2002, and
2001, respectively. The Premium Properties generally are located near
metropolitan areas including New York City, Los Angeles, Boston, Washington,
D.C., San Francisco, Sacramento, Cleveland, Atlanta, Dallas, Portland (Oregon),
Tokyo and Osaka, Japan. Some Premium Properties are also located within 20 miles
of major tourist destinations including Palm Springs, the Napa Valley, Orlando,
and Honolulu.

The sole general partner of the OP, Chelsea Property Group, Inc.
(the "Company") is a self-administered and self-managed real estate
investment trust.

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, and fulfillment and customer
services. The OP reported an impairment loss of $34.4 million, equal to the net
book value of its investment in Chelsea Interactive at December 31, 2002.

Basis of Presentation

The financial statements contain the accounts of the Operating
Partnership and its majority owned subsidiaries. Such subsidiaries represent
partnerships in which the OP has greater than a 50% ownership interest and the
ability to maintain operational control. All significant intercompany
transactions and accounts have been eliminated in consolidation.

On May 1, 2002, the Company declared a 2-for-1 stock split of
the Company's common shares. The Operating Partnership simultaneously
declared a 2-for-1- split of the OP's Limited Partnership units. The
stock/unit dividend was paid May 28, 2002, to shareholder/unitholders of record
on May 14, 2002. All applicable unit and per unit information in the
accompanying financial statements have been adjusted to reflect the stock/unit
split.

Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 2002 and 2001,
using available market information and appropriate valuation methodologies.
Although management is not aware of any factors that would significantly affect
the reasonable fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since such date and current
estimates of fair value may differ significantly from the amounts presented
herein.

2.  Summary of Significant Accounting
Principles

Rental Properties

Rental properties are presented at cost net of accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets. The OP uses 25-40 year estimated lives for
buildings, and 15 and 5-7 year estimated lives for improvements and equipment,
respectively. Expenditures for ordinary maintenance and repairs are charged to
operations as incurred, while significant renovations and enhancements that
improve and or extend the useful life of an asset are capitalized and
depreciated over the estimated useful life. The OP reviews real estate assets
for impairment wherever events or changes in circumstances indicate that the
carrying value of assets to be held and used may not be recoverable. Impaired
assets are reported at the lower of cost or fair value. Assets to be disposed of
are reported at the lower of cost or fair value less cost to sell. No impairment
write downs of rental properties were required in 2002 or 2001 and no assets
were held for sale at December 31, 2002 and 2001.

Gains and losses from sales of real estate are recorded when
title is conveyed to the buyer, subject to the buyer's financial commitment
being sufficient to provide economic substance to the sale.

Cash and Equivalents

All demand and money market accounts and certificates of deposit
with original terms of three months or less from the date of purchase are
considered cash equivalents. The OP places its cash investments in excess of
insured amounts with high quality financial institutions. At December 31, 2002
and 2001, cash equivalents consisted of repurchase agreements, commercial paper,
U.S. Government agency securities, bank liabilities and other corporate and
municipal obligations that mature between January and March of the following
year. The carrying amount of such investments approximated fair value.

Investment in Unconsolidated Joint Ventures

The OP accounts for its investments in unconsolidated joint
ventures under the equity method of accounting as the OP exercises significant
influence, but does not control these entities. In all the joint ventures, the
rights of the minority investor are both protective as well as participating.
These rights preclude the OP from consolidating these investments. These
investments are recorded initially at cost, as investments in unconsolidated
joint ventures, and subsequently adjusted for equity in earnings (loss) and cash
contributions and distributions. Any difference between the carrying amount of
these investments on the balance sheet of the OP and the underlying equity in
net assets is amortized as an adjustment to equity in earnings (loss) of
unconsolidated joint ventures over the associated rental property's useful life.

Development Costs

Development costs, including interest, taxes, insurance and
other costs incurred in developing new properties, are capitalized. Upon
completion of construction, development costs are amortized on a straight-line
basis over the useful lives of the respective assets. Development costs related
to inactive projects are expensed at such time as the project is deemed
abandoned.

Capitalized Interest

Interest, including the amortization of deferred financing costs
for borrowings used to fund development and construction, is capitalized as
construction in progress and allocated to individual property costs.

2.  Summary of Significant Accounting Principles
(continued)

Foreign Currency Translation

The OP conforms to the requirements of the Statement of
Financial Accounting Standards No. 52 entitled "Foreign Currency
Translation." Accordingly, assets and liabilities of foreign equity
investees are translated at prevailing year-end rates of exchange.

Rental Expense

Rental expense is recognized on a straight-line basis over the
initial term of the lease.

Deferred Lease Costs

Deferred lease costs consist of fees and direct internal costs
incurred to initiate and renew operating leases, and are amortized on a
straight-line basis over the initial lease term or renewal period as
appropriate.

Deferred Financing Costs

Deferred financing costs are amortized as interest costs over
the terms of the respective agreements. Unamortized deferred financing costs are
expensed when the associated debt is retired before maturity.

Revenue Recognition

Leases with tenants are accounted for as operating leases. Base
rent revenue is recognized on a straight-line basis over the lease term
according to the provisions of the lease. The excess of rents recognized over
amounts contractually due and unpaid rents are included in deferred rent
receivable in the accompanying financial statements. Certain lease agreements
contain provisions for rents that are calculated on a percentage of sales and
recorded on the accrual basis. These rents are accrued monthly once the required
thresholds per the lease agreement are exceeded. Virtually all lease agreements
contain provisions for additional rents representing reimbursement of real
estate taxes, insurance, advertising and common area maintenance costs.

Bad Debt Expense

Bad debt expense included in other expense totaled $2.0 million,
$1.2 million and $0.9 million for the years ended December 31, 2002, 2001 and
2000, respectively.

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.

The following summarizes the tax components of the OP's
common distributions declared for the years ended December 31, 2002, 2001 and
2000:

`2002           2001         2000
                                                   ----------     --------     ---------
          Distributions per share.............       $1.86          $1.56        $1.50
          Return of capital...................         -                -        (0.17)
          20% capital gain....................       (0.21)             -           -
          Unrecaptured Section 1250 gain .....       (0.01)             -           -
                                                   ----------     --------     ---------
          Ordinary income.....................       $1.64          $1.56        $1.33
                                                   ==========     ========     =========`

2.  Summary of Significant Accounting
Principles (continued)

Net Income Per 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.

Concentration of OP's Revenue and Credit
Risk

For the years ended December 31, 2002, 2001 and 2000,
respectively, 16%, 21% and 23% of the OP's revenues were derived from
Woodbury Common Premium Outlets. The loss of this center or a material decrease
in revenues from the center for any reason may have a material adverse effect on
the OP. In addition, for the years ended December 31, 2002, 2001 and 2000,
respectively, 25%, 28% and 28% of the OP's revenues were derived from the
OP's centers in California.

Management of the OP
performs ongoing credit evaluations of its tenants and requires certain tenants
to provide security deposits. Although the OP's tenants operate principally
in the retail industry, there is no dependence upon any single tenant.

Use of Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

Other Comprehensive Loss

At December 31, 2002 and 2001, other comprehensive loss
included a reduction to partners' capital related to an interest rate swap
of $6.7 million and $3.1 million, respectively, and losses of $0.1 million and
$0.4 million, respectively, related to a foreign currency exchange rate on
receivables.

Derivative and Financial Instruments

In the normal course of business, the OP uses a variety of
derivative financial instruments to manage, or hedge, interest rate and foreign
currency risk. The OP requires that hedging derivative instruments are effective
in reducing the interest rate or foreign currency risk exposure as they are
designated. This effectiveness is an essential for hedge accounting under
accounting principles generally accepted in the United States. Derivative
instruments may be associated with the hedge of an anticipated transaction. In
those cases, hedge effectiveness criteria also require that it be probable that
the underlying transaction occurs. Instruments that meet these hedging criteria
are formally designated as hedges at the inception of the derivative contract
and recorded on the balance sheet at their fair values with the changes in fair
value reflected in accumulated other comprehensive income (loss). When the terms
of an underlying transaction are modified, or when the underlying hedged item
ceases to exist, all changes in the fair value of the instrument are
marked-to-market with changes in value included in net income each period until
the instrument matures or is terminated or assigned. Any derivative instrument
used for risk management that does not meet the hedging criteria is
marked-to-market each period in net income.

2.  Summary of Significant Accounting
Principles (continued)

Derivative and Financial Instruments (continued)

To determine the fair values of derivative instruments, the OP
uses a variety of methods and assumptions that are based on market conditions
and risks existing at each balance sheet date. For the majority of financial
instruments including most derivatives, long-term investments and long-term
debt, standard market conventions and techniques such as discounted cash flow
analysis, option pricing models, replacement cost, and termination cost are used
to determine fair value. All methods of assessing fair value result in a general
approximation of value, and such value may never actually be
realized.

Recently Issued Accounting Pronouncements

In June 2001, the FASB issued Statements of Financial Accounting
Standards No. 141 "Business Combinations" ("SFAS 141"),
which was effective for all business combinations initiated after June 30, 2001,
and No. 142 "Goodwill and Other Intangible Assets" ("SFAS
142") which was effective January 1, 2002. SFAS 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Under SFAS 142, amortization of goodwill, including
goodwill recorded in past business combinations, will discontinue upon adoption
of this standard. All goodwill and intangible assets will be tested for
impairment in accordance with the provisions of the Statement. The OP adopted
SFAS 141 and 142 on July 1, 2001 and January 1, 2002, respectively. The adoption
of these statements did not have an impact on the OP's results of
operations or its financial position.

In August 2001, FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations"
("SFAS 143") which is effective January 1, 2003. SFAS 143 requires the
recording of the fair value of a liability for an asset retirement obligation in
the period in which it is incurred. See note 6 to financial statements for
discussion related to the estimated future costs to be incurred in connection
with the future operations of Chelsea Interactive.

In October 2001, the FASB issued Statement of Financial
Accounting Standard No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144") which was effective and adopted
by the OP on January 1, 2002. SFAS 144 provides accounting guidance for
financial accounting and reporting for impairment or disposal of long-lived
assets. SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS 144
retains fundamental provisions of SFAS 121 related to the recognition and
measurement of the impairment of long-lived assets to be held and used. In
addition, SFAS 144 superseded APB opinion 30, "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."
SFAS 144 extended the reporting of a discontinued operation to a "component
of an entity." Thus, the operations of assets held for sale or assets sold
are required to be presented as discontinued operations in the OP's
statement of income. The initial adoption of FAS 144 did not have a material
effect on the financial position or results of operations of the OP.

In May 2002, the FASB issued Statement of Financial Accounting
Standards No. 145, "Reporting Gains and Losses from Extinguishment of
Debt", ("SFAS 145") which rescinded SFAS No. 4, No. 44 and No. 64
and amended SFAS No. 13. The new standard addresses the income statement
classification of gains or losses from the extinguishment of debt and criteria
for classification as extraordinary items. The new standard became effective for
fiscal years beginning after May 15, 2002. The OP adopted this pronouncement on
April 1, 2002. The adoption of this pronouncement did not have a material
impact on the OP's results of operations or financial position.

2.  Summary of Significant Accounting Principles
(continued)

In November 2002, the FASB issued No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires
certain guarantees to be recorded at fair value, instead of recording a
liability only when a loss is probable and reasonably estimable, as those terms
are defined in FASB Statement No. 5, Accounting for Contingencies. FIN 45 also
requires a guarantor to make significant new disclosures, even when the
likelihood of making any payments under the guarantee is remote. The disclosure
requirements of FIN 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. The OP adopted the disclosure
provisions of FIN 45 effective December 31, 2002. FIN 45's initial
recognition and initial measurement provisions are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The OP is in the
process of determining the impact, if any, on its results of operations or
financial position from the adoption of FIN 45.

In January of 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities ("FIN 46"). FIN 46
clarifies the application of existing accounting pronouncements to certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. The provisions of FIN 46 will be immediately
effective for all variable interests in variable interest entities created after
January 31, 2003, and the OP will need to apply its provisions to any existing
variable interests in variable interest entities by no later than December 31,
2004. The OP does not believe that FIN 46 will have a significant impact on the
OP's financial statements.

Reclassifications

Certain amounts in the 2001 and 2000 financial statements have
been reclassified to conform to the 2002 presentation.

3.  Acquisitions and Dispositions

Acquisitions

On April 1, 2002, the OP became the sole owner of the Orlando
Premium Outlets ("Simon-Orlando") by acquiring Simon Property Group,
Inc.'s ("Simon") 50% undivided ownership interest for $46.6
million in cash and the assumption of $29.7 million of existing mortgage debt
and the guarantee related thereto. On June 16, 2002, the OP repaid the
outstanding balance of $59.4 million and extinguished the mortgage. After
closing the transaction the operating results and balance sheet of Simon-Orlando
were consolidated in the accompanying financial statements.

On April 1, 2002, the OP purchased a 305,000 square foot outlet
center located in Edinburgh, Indiana for $27.0 million in cash. The center is
classified as Other Properties. After closing the transaction the operating
results and balance sheet of Edinburgh Outlet Center were consolidated in the
accompanying financial statements.

On August 20, 2002, the OP became the sole owner of four premium
outlet centers by acquiring Fortress Registered Investment Trust's
("Fortress") 51% undivided ownership interest in the F/C Acquisition
Holdings, LLC joint venture ("F/C Acquisition"). The OP paid $58.9
million in cash and assumed $86.5 million of existing mortgage debt on the
properties. After closing the transaction the operating results and balance
sheet of the four premium outlet centers including $169.6 million of existing
nonrecourse mortgage debt, were consolidated in the accompanying financial
statements.

On November 22, 2002, the OP purchased two outlet centers from
JMJ Properties, Inc. ("JMJ"); a 305,000 square-foot center located in
Albertville, Minnesota and a 278,000 square foot center located in Johnson
Creek, Wisconsin for a total purchase price of $89.5 million. The OP paid $44.9
million in cash and issued 1.3 million limited partnership units with an
assigned value of $44.6 million. The two outlet centers are classified as Other
Properties. After closing the transaction the operating results and balance
sheets of these properties were consolidated in the accompanying financial
statements.

On December 19, 2002 the OP acquired four outlet centers for an
all cash price of $193.0 million from New Plan Excel Realty Trust, Inc.
("NPXL"). The four properties consist of a 292,000 square foot outlet
center located in Jackson, New Jersey; a 391,000 square foot outlet center
located in Osage Beach, Missouri; a 329,000 square foot outlet center located in
St. Augustine, Florida; and a 300,000 square foot outlet center located in
Branson, Missouri. The four outlet centers are classified as Other Properties.
After closing the transaction the operating results and balance sheets of these
properties were consolidated in the accompanying financial
statements.

On September 25, 2001, the OP acquired 32 shopping centers from
Konover Property Trust, Inc. and its affiliates ("Konover"). The
purchase price was $182.5 million, including the assumption of $131.0 million of
non-recourse debt. This purchase price was preliminarily allocated to each of
the centers. One of these centers was acquired subject to a repurchase agreement
and was sold back to Konover on December 3, 2001, at the established cost basis
of $2.5 million. One of the centers acquired meets the OP's criteria for
classification as a Premium Properties center. The other 30 centers contain 4.3
million square feet and are classified as Other Properties. After closing the
transaction the operating results and balance sheets of these properties were
consolidated in the accompanying financial statements.

The OP intends to account for the 2002 acquisitions listed above
in accordance with SFAS 141 and 142. Management is currently in the process of
analyzing the fair value of the leases of the acquired properties and
consequently, no value has yet been assigned to them. Therefore, the purchase
price allocations are preliminary and subject to change.

The aggregate condensed balance sheet (unaudited) on the date of
acquisition of the acquired properties is as follows (in thousands):

`December 31,
                                        2002            2001
                                    -----------     -------------

  Land                                $100,540        $ 36,589
  Depreciable property                 591,018         157,345
  Accumulated depreciation             (15,977)          -
  Other assets                          19,487          10,186
                                    -----------    --------------
    Total assets                      $695,068        $204,120
                                    ===========    ==============

  Mortgage debt                       $228,025        $137,885
  Other liabilities                      9,884           4,045
                                    -----------    --------------
    Total liabilities                 $237,909        $141,930
                                    ===========    ==============

  Net equity                          $457,159        $ 62,190
                                    ===========    ==============`

The following condensed pro forma (unaudited)
information assumes that the JMJ and NPXL acquisitions, the buyouts of the
remaining 51% interest in F/C Acquisition and 50% interest in Simon-Orlando and
the Konover acquisition had all occurred on January 1, 2001. Additionally, it
assumes that the effect of the sale of 3.5 million shares of the Company's
common stock and issuance of the 6.0% unsecured notes in conjunction with the
NPXL acquisition, the issuance of 1.3 million limited partnership units and
borrowings on the Senior Credit Facility in conjunction with the JMJ
acquisition, the sale of 1.1 million shares of the Company's common stock
in conjunction with the Konover acquisition and the Company's 2-for-1 stock
split in May 2002 have occurred on January 1, 2001:

3.  Acquisitions and Dispositions
(continued)

`Year Ended December 31,
                                                      2002               2001
                                                    --------          ----------

          Total revenue                             $346,423          $344,931

          Net income to common unitholders            63,283            83,206

          Earnings per unit:
          Net income to common unitholders             $1.28             $1.86
          Weighted average common units
          outstanding                                 49,461            44,826`

Dispositions

During June and July 2002, the OP sold four Other
Properties centers and two outparcels generating net proceeds of approximately
$6.8 million, which approximated the net book value of these properties.
Accordingly, no gain or loss on the sales was recognized. The aggregate revenues
and net income of the sold properties were $1.2 million and $0.3 million for the
year ended December 31, 2002, respectively, and $0.6 million and $0.2 million
for the year ended December 31, 2001, respectively.

In November 2002, the OP sold an additional Other
Properties center and an outparcel that generated net proceeds of approximately
$1.1 million, which resulted in a gain of approximately $0.6 million which is
included in other income in the accompanying financial statements. The aggregate
revenues and net income of the sold property were $0.6 million and $0.4 million
for the year ended December 31, 2002, respectively and $0.1 million and $40,000
for the year ended December 31, 2001, respectively.

In October 2001 the OP sold a Premium Properties
center and recognized a loss of approximately $0.3 million which is included in
other income in the accompanying financial statements. The aggregate revenues
and net income of the sold property were immaterial to the operations of the OP
for the years ended December 31, 2001 and 2000.

4.  Rental Properties

The following summarizes the carrying values of rental
properties as of December 31 (in thousands):

`2002           2001
                                                       ------------   -----------
  Land and improvements............................       $460,227      $328,324
  Buildings and improvements.......................      1,351,183       775,309
  Construction-in-progress.........................          6,708         9,356
  Equipment and furniture..........................         19,056        14,917
                                                       ------------   -----------
  Total rental property............................      1,837,174     1,127,906
  Accumulated depreciation and amortization........       (284,239)     (217,462)
                                                       ------------   -----------
  Total rental property, net.......................     $1,552,935      $910,444
                                                       ============   ===========`

4.  Rental Properties (continued)

Interest costs capitalized as part of buildings and
improvements were $2.9 million, $2.0 million and $5.4 million for the years
ended December 31, 2002, 2001 and 2000, respectively.

Commitments for land, new construction, development,
and acquisitions including the OP's 50% share of joint venture activity,
totaled approximately $19.1 million and $6.3 million at December 31, 2002 and
2001, respectively.

Depreciation expense (including amortization of the
capital lease) amounted to $53.1 million, $42.9 million and $38.5 million for
the years ended December 31, 2002, 2001 and 2000, respectively.

5.  Restricted Cash-Escrows

Restricted cash escrows includes $3.5 million and
$1.2 million at December 31, 2002 and 2001, respectively, of escrows and reserve
funds for real estate taxes, property insurance, capital and tenant improvements
and leasing costs established pursuant to certain mortgage financing agreements
and $2.1 million at December 31, 2001 of funds held in escrow pursuant to
certain loan guarantee arrangements with an unconsolidated investee of the OP
which was returned in 2002.

6.  Investments in Affiliates

The OP holds interests in several domestic and
international joint ventures. Non-controlling investments are accounted for
under the equity method. Equity in earnings or losses of these affiliates and
related management advisory, license, leasing and guarantee fees earned are
included in income from unconsolidated investments and loss from and impairment
of Chelsea Interactive in the accompanying financial statements.

As of December 31, 2002, the OP's interests in
joint ventures included a 50% interest in Las Vegas Premium Outlets
("Simon-Las Vegas") and a 50% interest in Chicago Premium Outlets
("Simon-Chicago") with Simon (collectively
"Simon-Ventures"), a 40% interest in Chelsea Japan Co., Ltd.
("Chelsea Japan"), a 50% interest in a strategic alliance with Sordo
Madaleno y Asociados and Mr. Carlos Peralta of Mexico City, minority interests
in various outlet centers and development projects in Europe operated by Value
Retail PLC ("Value Retail") and 100% of the non-voting preferred stock
of Chelsea Interactive and 50% of the non-voting common stock representing 40%
of the total common stock. As of December 31, 2001, the OP's investment in
joint ventures also included a 50% interest in Simon-Orlando and a 49% interest
in F/C Acquisition.

6.  Investments in Affiliates (continued)

In June 2002, the OP and Simon entered into a new
50/50 joint venture to develop and operate SimonLas Vegas, a 435,000
square-foot single-phase premium outlet center located in Las Vegas, Nevada,
scheduled to open in mid-2003. On June 20, 2002, Simon-Las Vegas purchased a
40-acre site and commenced construction. The OP is responsible for financing its
50% share of development costs that are expected to be approximately $48.0
million. As of December 31, 2002, the OP had contributed $22.8
million.

In August 2002, the OP and Simon entered into a new
50/50 joint venture to develop and operate Simon-Chicago, a 438,000 square-foot
single-phase premium outlet center located in Aurora, Illinois, near Chicago.
The center is scheduled to open in mid-2004. On September 23, 2002,
Simon-Chicago purchased a 140-acre site, including 80 acres of conservation
area, and commenced construction. The OP is responsible for financing its 50%
share of the development costs which are expected to be approximately $46.0
million. As of December 31, 2002, the OP had contributed $8.4
million.

In June 1999, the OP entered into an agreement with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own
and operate premium outlet centers in Japan. The OP has a 40% interest in
Chelsea Japan. In conjunction with the agreement, the OP contributed $1.7
million in equity and will provide its share of construction financing and/or
loan guarantees. Chelsea Japan opened its initial project, the 220,000
square-foot first phase of Gotemba Premium Outlets, on July 13, 2000 with its
170,000 square-foot second phase scheduled to open in 2003. Gotemba is located
on the Tomei Expressway, approximately 60 miles west of Tokyo and midway between
Mt. Fuji and the Hakone resort area. Chelsea Japan opened its second project,
the 180,000 square-foot first phase of Rinku Premium Outlets on November 23,
2000, and in March 2002, Rinku opened its 70,000 square foot second phase. The
center is located outside Osaka, the second-largest city in Japan. Chelsea
Japan's third project, the 180,000 square-foot first phase of Sano Premium
Outlets, is scheduled to open in March 2003. Sano is located 40 miles north of
Tokyo.

The OP had minority interests ranging from 3% to 8%
at December 31, 2002 and 5% to 15% at December 31, 2001, in several outlet
centers and outlet development projects in Europe. Five outlet centers,
containing approximately 900,000 square feet of GLA, including Bicester Village,
outside London, England, La Roca Company Stores outside of Barcelona, Spain, Las
Rozas Village outside Madrid, Spain, La Vallee near Disneyland Paris and
Maasmechelen Village in Belgium are currently open and operated by Value Retail
PLC and its affiliates. In July 2002, the OP sold approximately 40% of its
holdings in Value Retail to a third party for $11.4 million, resulting in a gain
of approximately $10.9 million which was recorded as a gain on sale of
unconsolidated investments in the accompanying financial statements. In 2001,
the OP sold a portion of its Bicester Village holding resulting in a gain of
$1.8 million which was included in gain on sale of unconsolidated investments,
net of write-down in the accompanying financial statements.

The OP and Simon entered into a 50/50 joint venture
agreement to develop and operate Simon-Orlando a 428,000 square foot center that
was completed in May 2000 and is located on Interstate 4, midway between Walt
Disney World/EPCOT and Sea World in Orlando. In April 2002, the OP purchased
Simon's 50% undivided ownership interest in the center for $46.6 million in
cash and assumed Simon's $29.7 million pro-rata share of existing mortgage
debt. The operations and balance sheet of the center are consolidated in the
accompanying financial statements from the buyout date.

6.  Investments in Affiliates
(continued)

In December 2000, the OP and Fortress acquired
four outlet centers from a competitor, through F/C Acquisition in which the OP
had a 49% interest. The total purchase price was $240.0 million, including the
assumption of approximately $174.0 million of 6.99% fixed-rate non-recourse
mortgage debt due in 2008. In July 2002, Fortress exercised its option under the
F/C Limited Liability Company Agreement to invoke the "Buy/Sell Right"
which gave the OP the option to sell its 49% ownership interest in F/C
Acquisition or buy the partner's 51% ownership interest. On August 20,
2002, the OP exercised its right to buy the 51% interest for cash of $58.9
million and assumed $86.5 million of existing mortgage debt on the properties.
The operations and balance sheet of the four F/C Acquisition premium outlet
centers have been consolidated in the accompanying financial statements from the
buyout date.

In December 2001, the OP had a 15% minority
interest in a partnership that owns an outlet center located in Guam. The center
had been generating operating losses and the OP did not anticipate recovering
its investment therefore, in December 2001, the OP wrote off its investment in
Guam and recognized a loss of $1.2 million which is included in gain on sale of
unconsolidated investments, net of write-down in 2001 in the accompanying
financial statements. During the year ended December 31, 2002, the OP withdrew
as a partner in the Guam outlet center.

Chelsea Interactive

The OP has been developing and operates an
e-commerce technology platform through its affiliate, Chelsea Interactive with
an aggregate funding commitment of up to $60.0 million; as of December 31, 2002,
$52.4 million had been funded. The OP anticipates that the balance of the
funding will be used to further develop the platform and to finance operating
cash shortfalls and potential costs related to the disposal or discontinuance of
the business. The OP currently believes that it will not be able to recover the
net book value of its investment in Chelsea Interactive through future cash
flows unless Chelsea Interactive is able to achieve positive cash flow before
reaching the $60.0 million funding limit. Due to current market conditions and
costs related to securing additional brand users for the platform, the OP has
decided to recognize an impairment loss of $34.4 million, equal to the net book
value of its investment in Chelsea Interactive as of December 31, 2002. However,
the OP is in active discussions with potential investors to provide capital to
and/or acquire Chelsea Interactive. There can be no assurance that any of these
discussions will be successful or that Chelsea Interactive will be able to
continue as a going concern. Future funding by the OP will be reported as a loss
in the period funding occurs. The OP owns 100% of the non-voting preferred stock
of Chelsea Interactive and 50% of the non-voting common stock representing 40%
of the total common stock.

The following is a summary of investments in and
amounts due from affiliates at December 31, 2002 and 2001 (in
thousands):

`Chelsea    Simon-      Simon-      Chelsea
                                  F/C        Japan     Orlando     Ventures   Interactive    Other    Total
                               ----------  ---------   --------   ----------  -----------  --------   ------

Balance 12/31/00 ...........    $33,114      $6,245     $15,922    $     --     $29,899      $6,449   $91,629

Additional
  investment................      1,528         674          --          --       9,934          --    12,136
Income (loss) from
  unconsolidated
  investments...............      6,522       3,286       5,492                  (5,337)       (275)    9,688
Distributions and
  fees......................     (6,088)     (2,222)    (10,745)                     --          --   (19,055)
Dispositions................         --          --          --                      --      (2,839)   (2,839)
Gain on sale net of
  impairment loss...........         --          --          --                      --         617       617
Advances (net)..............      1,042       1,313        (946)                    360        (256)    1,513
                                 ------       -----       -----      --------    ------       -----    -------
Balance 12/31/01............     36,118       9,296       9,723          --      34,856       3,696    93,689

Additional
investment..................         --         655          --      31,281      13,508         303    45,747
Income (loss) from
unconsolidated
  investments...............      4,331       4,136       1,310          --     (13,386)         25    (3,584)
Distributions
  and fees..................     (2,841)     (2,528)       (250)         --          --          --    (5,619)
Buyout reclassifications....    (36,531)         --      (9,199)         --          --          --   (45,730)
Impairment loss.............         --          --          --          --     (34,370)         --   (34,370)
Disposition.................         --          --          --          --          --        (382)     (382)
Advances (net)..............     (1,077)        912      (1,584)        638        (608)        (35)   (1,754)
                                 ------     --------    -------     -------    --------      ------   --------
Balance 12/31/02>............   $    --       $12,471    $    --     $31,919    $     --      $3,607   $47,997
                               ========     ========    =======     ========   ========      =======  ========`

The OP's share of income before depreciation, depreciation
expense and income from unconsolidated investments for the years ended December
31, 2002, 2001 and 2000 are as follows (in thousands):

`Chelsea              Simon-              Chelsea
                                               F/C       Japan     Orlando    Other      Total   Interactive
For the Year Ended:                         ---------  ---------  --------  ---------  --------  -----------
December 31, 2002

Income (loss) before depreciation..........  $6,178    $5,932     $1,833       $25     $13,968    ($5,115)
Depreciation ..............................   1,847     1,796        523        --       4,166      8,271
Impairment loss............................      --        --         --        --          --    (34,370)
                                             ------    ------     ------      ------    ------   --------
Income (loss) from unconsol. investment....  $4,331    $4,136     $1,310       $25      $9,802   ($47,756)
                                             ======    ======     ======       ===      ======   ========

December 31, 2001
Income (loss) before depreciation..........  $9,214    $4,676     $7,374     ($275)    $20,989    ($2,449)
Depreciation...............................   2,692     1,390      1,882        --       5,964      2,888
                                             ------    ------     ------      ------    ------   --------
Income (loss) from unconsol. investment ...  $6,522    $3,286     $5,492     ($275)    $15,025    ($5,337)
                                             ======    ======     ======     =====     =======    =======

December 31, 2000
Income (loss) before depreciation .........    $259    $3,905     $4,250      $333      $8,747    ($1,719)
Depreciation...............................      71       694      1,259        --       2,024        645
                                             ------    ------     ------      ------    ------   --------
Income (loss) from unconsol. investment....    $188    $3,211     $2,991      $333      $6,723    ($2,364)
                                               ====    ======     ======      ====      ======    =======`

Condensed financial information as of December 31, 2002 and 2001,
and for the years then ended for F/C Acquisition, Chelsea Japan and
Simon-Ventures (which are included in "Retail Real Estate") and
Chelsea Interactive is as follows:

`Retail          Chelsea
                                                 Real Estate     Interactive
                                                 --------------  -------------

Property, plant and equipment (net)
     December 31, 2002..........................    $140,057        $31,409
     December 31, 2001..........................     355,427         29,923

Total assets
     December 31, 2002..........................     190,157         33,295
     December 31, 2001..........................     409,944         34,963

Long term debt (1)
     December 31, 2002..........................      75,139              -
     December 31, 2001..........................     282,057              -

Total liabilities
     December 31, 2002..........................     119,886          1,548
     December 31, 2001..........................     321,854          2,665

Net income (loss)
     December 31, 2002..........................      12,594        (14,247)
     December 31, 2001..........................      20,812        (11,976)

OP's share of net income (loss)
     December 31, 2002..........................       5,795        (13,386)
     December 31, 2001..........................      10,013         (5,337)

Fee income
     December 31, 2002..........................       3,982              -
     December 31, 2001..........................       5,287              -`

|(1) | In 2002, includes long-term debt of $75.1 in Chelsea Japan and in
2001 includes long term debt of $170.5 million in F/C, $58.5 million in Simon
and $53.1 million in Chelsea Japan.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7.  Deferred Costs

The following summarizes the carrying amounts for deferred costs
at December 31, 2002 and 2001, (in thousands):

`2002         2001
                                                  -------       -------

Lease costs...............................       $28,074       $24,152
Financing costs...........................         9,200        16,977
Development costs.........................         1,572         8,349
Other.....................................           871           871
                                                 -------       -------
Total deferred costs......................        39,717        50,349
Accumulated amortization..................       (23,011)      (27,815)
                                                 -------       -------
Total deferred costs, net.................       $16,706       $22,534
                                                 =======       =======`

8.  Non-Compete Agreement

In October 1998 the OP sold its interest in and
terminated the development of Houston Premium Outlets, a joint venture project
with Simon. Under the terms of the agreement, the OP received non-compete
payments totaling $21.4 million from The Mills Corporation; $3.0 million at
closing and four annual installments of $4.6 million, terminating in January
2002. The January 2002 payment had a $0.3 million legal escrow reserve withheld.
The revenue is being recognized on a straight-line basis over the term of the
non-compete agreement and the OP recognized income of $5.1 million during the
years ended December 31, 2002, 2001 and 2000. Such amounts are included in other
income in the accompanying financial statements.

9.  Other Assets

The following summarizes the components of other assets at
December 31 (in thousands):

`2002         2001
                                                            ----         ----
           Sales tax receivable......................     $11,708      $12,585
           Prepaid expenses..........................       9,902        3,181
           Deferred compensation.....................       6,400           -
           Non-compete receivable....................         300        2,769
           Due from equity investees.................         136          764
           Other.....................................       1,654        1,209
                                                            =====        =====
           Total other assets........................     $30,100      $20,508
                                                          =======      =======`

10.  Debt

Unsecured Bank Debt

The OP has a $200.0 million senior unsecured bank
line of credit (the "Senior Credit Facility") that has an expiration
date of March 2005 (unless extended until March 2006). The Senior Credit
Facility bears interest on the outstanding balance, at a rate equal to the
London Interbank Offered Rate ("LIBOR") plus 1.05% (2.46% at December
31, 2002) or the prime rate, at the OP's option and has an annual facility
fee of 0.125%. The LIBOR rate spread ranges from 0.85% to 1.50% depending on the
OP's Senior Debt rating. At December 31, 2002, $98.0 million was
outstanding under the Senior Credit Facility.

The OP also has a $5.0 million term loan that carries
the same interest rate and maturity as the Senior Credit Facility.

Unsecured Notes

A summary of the terms of the unsecured notes
outstanding at December 31, 2002 and 2001, is as follows (in
thousands):

`December 31,           Effective
                                                        2002          2001         Yield(1)
                                                     ----------     ---------      ----------

8.375% Unsecured Notes due August 2005.............     $49,922         $49,892      8.44%
7.25% Unsecured Notes due October 2007.............     124,841         124,809      7.39
8.625% Unsecured Notes due August 2009.............      49,933          49,923      8.76
8.25% Unsecured Notes due February 2011............     148,817         148,670      8.40
6.875% Unsecured Notes due June 2012...............      99,825               -      6.90
6.00% Unsecured Notes due January 2013.............     147,992               -      6.28
                                                     -----------     -----------
 Total unsecured notes                                 $621,330        $373,294
                                                     ===========     ===========`

|(1) | Including discount on the notes
|--- | -------------------------------

10.  Debt (continued)

Unsecured Notes

On June 18, 2002, the OP completed a debt offering
consisting of $100.0 million of 6.875% unsecured term notes due June 2012 that
were priced to yield 6.90% to investors. Proceeds were used to repay borrowings
under the Allen Premium Outlets and Orlando Premium Outlets construction loans
that were to mature in February 2003 and August 2002, respectively, and for
general corporate purposes.

On December 11, 2002, the OP completed a debt
offering consisting of $150.0 million of 6.00% unsecured term notes due January
2013 that were priced to yield 6.18% to investors. Proceeds were used to repay
borrowings under the Senior Credit Facility, fund the NPXL acquisition assets
and for general corporate purposes.

Mortgage Debt

A summary of the terms of the mortgage debt
outstanding at December 31, 2002 and 2001, and the related Net Book Value of
the associated collateral ("NBV") (in thousands) and interest rate at
December 31, 2002, are as follows:

`December 31,                             Interest      NBV
                                        ----------------------                       --------      ----
                                        2002             2001
                                        ----             ----

     Construction Loan (1)........             -          $29,531           -                -            -
     F/C Mortgage Loan(2).........      $167,723                -       July 2008        6.99%     $258,168
     Bank Mortgage Loan (3).......        67,250           68,250      April 2010        7.26%       72,207
     Mortgage Loan (4)............        71,482           72,428     December 2012      7.67%       75,376
                                       ----------       ----------                                ----------
     Total mortgage debt                $306,455         $170,209                                  $405,751
                                       ==========       ==========                                ==========`

|(1) | On June 18, 2002, the OP repaid and extinguished the loan.
|--- | ----------------------------------------------------------

|(2) | The F/C Mortgage Loan was consolidated as part of the August 20,
2002 buyout of Fortress' 51% interest in the F/C Acquisition joint venture. The
mortgage bears interest at 6.99% per annum through July 11, 2008, (the "Optional
Prepayment Date") and thereafter at a rate equal to the greater of 8.4% plus 5%
or the Treasury Rate, as defined, plus 6.5% until the earlier of the date the
mortgage is paid in full or its maturity date of July 11, 2028. The mortgage may
be prepaid in whole or in part at any time after the optional Prepayment Date
without a prepayment penalty. The mortgage calls for a $1.2 million fixed
monthly interest plus principal payment based on a 26-year amortization
schedule. The F/C Mortgage Loan had a face value of $169.6 million and a
carrying amount fair value of $168.7 million on the buyout date. From August 20,
2002, to December 31, 2002, the OP recognized $40,000 in debt discount
amortization that is included in interest expense in the accompanying financial
statements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In April 2000, Chelsea Financing entered into a $70.0 million Bank
Mortgage Loan secured by its four properties. The Bank Mortgage Loan bears
interest equal to LIBOR plus 1.50% (2.88% at December 31, 2002) or prime rate
plus 1.0% and calls for quarterly principal amortization of $0.3 million through
April 2005 and thereafter $0.5 million per quarter until maturity. In December
2000, the OP entered into an interest rate swap agreement effective January 2,
2001, to hedge against unfavorable fluctuations in LIBOR rates by fixing the
interest rate at 7.26% until January 2006. During the years ended December 31,
2002 and 2001, the OP recognized interest expense of $2.7 million and $1.2
million, respectively on the hedge that is included in interest expense in the
accompanying financial statements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The Mortgage Loan was assumed as part of a September 2001
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 beginning December 2012. During the years ended December 31, 2002
and 2001, the OP recognized $0.4 million and $0.1 million, respectively, in debt
premium amortization that is included in interest expense in the accompanying
financial statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10.  Debt (continued)

Following is a schedule of the estimated fair value of the
OP's debt using current broker quotations at December 31, 2002, (in
thousands):

`Carrying         Principal         Estimated
  Description                           Value           Balance         Fair Value
  -------------------------         --------------   ---------------   --------------
  Fixed Rate Debt...........           $860,535         $858,772          $966,224
  Variable Rate Debt........           $170,285         $170,285          $170,285`

Interest paid, excluding amounts capitalized, was $47.5 million,
$34.5 million and $21.7 million for the years ended December 31, 2002, 2001 and
2000, respectively.

Following is a schedule of the OP's debt maturities,
including debt premium amortization, at December 31, 2002, (in
thousands):

`2003............       $5,153
          2004............        5,414
          2005............      159,502
          2006............        7,155
          2007............      132,382
          Thereafter......      721,214
                                -------
                             $1,030,820
                             ==========`

11.  Financial Instruments: Derivatives and
Hedging

In the normal course of business, the OP is exposed to the
effect of interest rate 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
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: from lines of credit, to medium- and long-term financings. To reduce
overall interest cost, the OP uses interest rate instruments, typically interest
rate swaps, to convert a portion of variable rate debt to fixed rate debt, or 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.

11.  Financial Instruments: Derivatives and
Hedging (continued)

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. Unrealized gains and losses in the fair value of
cash flow hedges are reported on the balance sheet with a corresponding
adjustment to Accumulated Other Comprehensive Income 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 Income will be reclassified to earnings. This reclassification
occurs over the same time period in which the hedged items affect earnings. The
OP hedges its exposure to 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 Income. 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.

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 December 31, 2002. It does not represent exposure to credit,
interest rate or market risks. At December 31, 2002 and 2001, the swap was
reported at its fair value and classified as other liabilities in the
accompanying financial statements of $6.7 million and $3.1 million,
respectively. As of December 31 ,2002 and 2001, there were $6.7 million and
$3.1 million in deferred losses, respectively, and recorded in other
comprehensive loss, a partners' capital account. Within the next twelve
months, the OP expects to reclassify to earnings approximately $2.9 million of
the current balance held in accumulated other comprehensive loss related to the
interest rate swap.

`As of December 31, 2002
                                      ------------------------
                 Hedge Type             Notional Value    Rate          Maturity      Fair Value
                 ----------             --------------    ----          --------      -----------
           Swap, Cash Flow                $67.3 mil        5.7625%       1/1/06       ($6.7 mil)`

During 2002, the OP had Japanese yen forward contracts with a
notional value of 255 million yen and a fair value of $10,000 as a hedge against
its yen-denominated receivable due from Chelsea Japan. During the year ended
December 31, 2002, the receivable and yen forward contracts were settled and the
OP received $1.9 million and recognized a $0.1 million foreign exchange loss,
which is included in income from unconsolidated investments in the accompanying
financial statements.

During 2001, the OP entered into 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. During the year ended December 31, 2001
the receivable and yen forward contract were settled and the OP received $1.4
million.

12.  Preferred Units

September 1999, the OP completed a private sale of $65 million
of Series B Cumulative Redeemable Preferred Units ("Preferred Units")
to an institutional investor. The private placement took the form of 1.3 million
Preferred Units at a stated value of $50 each. The Preferred Units may be called
at par on or after September 2004, have no stated maturity or mandatory
redemption and pay a cumulative quarterly dividend at an annualized rate of
9.0%. The Preferred Units are exchangeable into Series B Cumulative Redeemable
Preferred Stock of the Company after ten years.

13.  Preferred Stock

In October 1997, the Company issued 1.0 million shares of
non-voting 8.375% Series A Cumulative Redeemable Preferred Stock (the
"Preferred Stock"), par value $0.01 per share, having a liquidation
preference of $50 per share. The Preferred Stock has no stated maturity and is
not convertible into any other securities of the OP. The Preferred Stock is
redeemable on or after October 15, 2027, at the OP's option.

During the year ended December 31, 2002, the OP redeemed and
retired 136,500 shares of Preferred Stock at a net price of $47 per share and
66,552 shares at a net price of $47.25 per share.

14.  Common Stock

At a special meeting of shareholders held on January 16, 2003,
the Company obtained shareholder approval to amend its articles of incorporation
to increase the authorized shares of the Company's common stock to 100
million shares.

In November 2002, the Company sold 3.5 million shares of common
stock at a price of $34.65 per share, yielding net proceeds after expenses of
$118.8 million, which were used to fund the NPXL acquisition.

On May 1, 2002, the Company declared a 2-for-1 stock split on
the Company's common shares. The stock dividend was paid May 28, 2002, to
shareholders of record on May 14, 2002.

In October 2001, the Company sold 4.0 million shares of common
stock at a price of $22.50 per share, yielding net proceeds of $85.2 million,
which were used to repay borrowings under the Company's Senior Credit
Facility and for general corporate purposes.

In July 2001, the Company completed the sale of 1.1 million
shares of common stock to an institutional investor at a net price of $23 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.

15.  Lease Agreements

The OP is the lessor and sub-lessor of retail stores under
operating leases with term expiration dates ranging from 2002 to 2020. Most
leases are renewable for five years after expiration of the initial term at the
lessee's option. Future minimum lease receipts under non-cancelable
operating leases at December 31, 2002, exclusive of renewal option periods, were
as follows (in thousands):

`2003...........      $212,146
          2004...........       202,089
          2005...........       168,837
          2006...........       134,775
          2007...........       103,513
          Thereafter.....       271,409
                                -------
                             $1,092,769
                             ==========`

15.  Lease Agreements
(continued)

In 1987, a predecessor partnership entered into a lease
agreement for property in California. Land was estimated to be approximately 37%
of the fair market value of the property, and accordingly the portion of the
lease attributed to land is classified as an operating lease. The portion
attributed to building is classified as a capital lease as the present value of
payments related to the building exceeded 90% of its fair value at inception of
the lease. The initial lease term was 25 years with two options of 5 and 4.5
years, respectively. The lease provides for additional rent based on specific
levels of income generated by the property. No additional rental payments were
incurred during 2002, 2001 or 2000. The OP has the option to cancel the lease
upon six months written notice and six months advance payment of the then fixed
monthly rent. If the lease is canceled, the building and leasehold improvements
revert to the lessor. In August 1999, the OP amended its capital lease to reduce
rent payments through December 2004 resulting in a writedown of the asset and
obligation of $2.7 million and $6.0 million, respectively. The difference of
$3.3 million is being recognized on a straight-line basis over the remaining
term of the amended lease that ends December 2004.

Operating Leases

Future minimum rental payments under operating leases for land
and administrative offices at December 31, 2002, are as follows (in
thousands):

`2003...........        $1,473
          2004...........         1,480
          2005...........           916
          2006...........            52
                                 ------
                                 $3,921
                                 ======`

Rental expense amounted to $1.4 million, $0.8 million and $0.6
million for the years ended December 31, 2002, 2001 and 2000,
respectively.

Capital Lease

A leased property included in rental properties at December 31
consists of the following (in thousands):

`2002          2001
                                                            ----          ----

     Building........................................     $6,796        $6,796
     Less accumulated amortization...................     (5,865)       (5,520)
                                                          ------        ------
     Leased property, net............................       $931        $1,276
                                                          ======        ======`

Amortization
expense on capital lease of $0.3 million for the years ended December 31, 2002,
2001 and 2000, is included in depreciation and amortization expense in the
financial statements.

Future minimum payments under the capitalized building lease,
including the present value of net minimum lease payments at December 31, 2002,
are as follows (in thousands):

`2003......................................................    $   819
     2004......................................................        819
     Total minimum lease payments..............................      1,638
                                                                     -----
     Amount representing interest..............................       (131)
                                                                      ----
     Present value of net minimum capital lease payments.......     $1,507
                                                                    ======`

15.  Lease Agreements (continued)

Ground Lease

In connection with the 2002 and 2001 property acquisitions, the
OP acquired six properties subject to ground leases that were assumed by the OP.
These ground leases have termination dates ranging from 2007 to 2087 and allow
for renewal terms of 4 to 30 years.

Future minimum lease payments under ground leases at December
31, 2002, exclusive of renewal option periods were as follows (in
thousands):

`2003............              $812
                    2004............               819
                    2005............               819
                    2006............               822
                    2007............               811
                    Thereafter......            18,915
                                                ------
                                               $22,998
                                               =======`

16.  Commitments and Contingencies

In May 2002, the OP entered into a 50/50 strategic alliance with
Sordo Madaleno y Asociados and Mr. Carlos Peralta of Mexico City to jointly
develop premium outlet centers in Mexico. Subject to leasing and entitlements,
construction on the 200,000 square-foot first phase of the outlet project is
expected to commence later in 2003 and open in late 2004. The site can support a
second phase containing approximately 165,000 square feet of GLA. Once phase one
of the project has been approved, the OP will be committed to fund approximately
$12 million which is 50% of the development costs.

In connection with the Simon-Ventures, the OP has committed to
provide 50% of the development costs of two centers, which are expected to be
approximately $48.0 million to Simon-Las Vegas and $46.0 million to
Simon-Chicago. As of December 31, 2002, the OP had contributed $22.8 million to
Simon-Las Vegas and $8.4 million to Simon-Chicago.

Borrowings related to Chelsea Japan for which the Company and
OP have provided guarantees for repayment of debt as of December 31, 2002, are
as follows (in thousands):

`Total Facility                                         Outstanding
            --------------                                         ------------
                                                                                      Due    Interest
      Yen           US $ Equivalent    Yen         US $ Equivalent   US $ Guarantee   Date    Rate
      ---           ---------------    ---         ---------------   --------------   ----   --------
  4.0 billion (1)  $33.7 million     1.0 billion   $8.3 million       $8.3 million    2003    1.45%
  0.6 billion (2)    5.0 million     0.6 billion    4.8 million        1.9 million    2012    1.50%
  3.8 billion (2)   32.0 million     3.5 billion   29.5 million       11.8 million    2015    2.20%`

|(1) | Facility entered into by an equity investee of the OP and has a
one-year extension option; amended in November 2002 to allow for one additional
year extension.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Facilities entered into by Chelsea Japan, secured by Gotemba and
Rinku and 40% severally guaranteed by the OP.
|--- | --------------------------------------------------------------------------------------------------------------

16.  Commitments and Contingencies (continued)

The OP agreed under a standby facility to provide up to $22.0
million in limited debt service guarantees for loans provided to Value Retail
and affiliates to construct outlet centers in Europe. The term of the standby
facility expired in November 2001 and guarantees shall not be outstanding for
longer than five years after project completion. As of December 31, 2002, the OP
had provided limited debt service guarantees of approximately $22.0 million to
Value Retail.

At December 31, 2002, other assets includes $6.4 million and
accrued expenses and other liabilities include $8.0 million related to the 2002
deferred unit incentive program with certain key officers which may be paid in
2007.

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 incurred by the OP related to any of its
litigation will not be material and have been adequately provided for in the
consolidated financial statements.

17.  Related Party Information

In 1999, the OP established a $6.0 million secured loan facility
that will expire in June 2004 for the benefit of certain unitholders. Each unit
holder borrower issues 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 by
the facility expiration date. At December 31, 2001, loans made to unitholders or
affiliates of management of the OP, totaled $3.2 million. During 2001, the OP
received a $1.2 million repayment of one loan and $0.5 million pay down on the
other loan outstanding at December 31, 2000. In September 2001, the OP advanced
$2.7 million to another unitholder to acquire approximately a 10% non-voting
equity interest in Chelsea Interactive from a non-affiliated joint venture
partner. During the year ended December 31, 2002, the OP received a $0.5 million
payoff of one loan and a $0.6 million pay down on the other loan outstanding.
During March and May of 2002, the OP advanced a total of $1.0 million to another
unitholder, $0.5 million of which was used to exercise Company stock options and
is reflected as a reduction to partners' capital in the accompanying
financial statements. The carrying value of such loans approximated fair value
at December 31, 2002. Effective June 1, 2002, the OP changed its policy to
eliminate new loans to directors and officers.

The OP leased space to related parties of approximately 56,000
square feet during the years ended December 31, 2001 and 2000. Rental income
from those tenants, including reimbursement for taxes, common area maintenance
and advertising, totaled $2.1 million and $1.9 million during the years ended
December 31, 2001 and 2000, respectively.

In August 1997, the OP and one of its directors entered into a
Consulting Agreement pursuant to which the director agreed to perform services
for the OP in connection with the development and operation of
manufacturer's outlet centers in Japan and Hawaii. The agreement provided
for payments to the director of $10,000 per month and was terminated by the OP
in December 1999. During the term of the agreement and for four years after the
termination of the agreement, the director will be entitled to a fee of 1% of
the development costs, up to a maximum amount of $0.5 million per project, on
all projects in which he was involved in Japan or Hawaii. Fees paid under this
agreement totaled $0.5 million for the year ended December 31, 2001. These fees
are included in the investment in affiliates in the accompanying financial
statements.

Certain Directors and unitholders guarantee OP obligations,
which existed prior to the formation of the OP, under leases for one of the
properties. The OP has indemnified these parties from and against any liability
that they may incur pursuant to these guarantees.

18.  Employee Stock Purchase Plan

The Company's Board of Directors and unitholders approved
an Employee Stock Purchase Plan (the "Purchase Plan"), effective July
1, 1998. The Purchase Plan covers an aggregate of 1.0 million shares of common
stock. Eligible employees have been in the employ of the OP or a participating
subsidiary for five months or more and customarily work more than 20 hours per
week. The Purchase Plan excludes employees who are "highly compensated
employees", as defined, or own 5% or more of the voting interest of the
Company's stock. Eligible employees will purchase shares through automatic
payroll deductions up to a maximum of 10% of weekly base pay. The Purchase Plan
will be implemented by consecutive three-month offerings (each an "option
Period"). The price at which shares may be purchased shall be the lower of
(a) 85% of the fair market value of the stock on the first day of the option
Period or (b) 85% of the fair market value of the stock on the last day of the
option Period. As of December 31, 2002, 86 employees were enrolled in the
Purchase Plan and $5,000 in expenses has been incurred and is included in the
OP's general and administrative expense. The Purchase Plan will terminate
after five years unless terminated earlier by the Board of
Directors.

19.  401(k) Plan

The OP maintains a defined contribution 401(k) savings plan (the
"Plan"), which was established to allow eligible employees to make
tax-deferred contributions through voluntary payroll withholdings. All employees
of the OP are eligible to participate in the Plan after completing six months of
service and attaining age 21. Employees who elect to enroll in the Plan may
elect to have from 1% to 15% of their pre-tax gross pay contributed to their
account each pay period. As of January 1, 1998 the Plan was amended to include
an employer discretionary matching contribution which currently excludes certain
officers, in an amount not to exceed 100% of each participant's first 6% of
yearly compensation to the Plan. Matching contributions of approximately $96,000
in 2002, $128,000 in 2001 and $141,000 in 2000 are included in the OP's
general and administrative expense in the accompanying financial
statements.

20.  Quarterly Financial Information (Unaudited)

The following summary represents the results of operations,
expressed in thousands except per share amounts, for each quarter during 2002
and 2001:

`March 31          June 30        September 30      December 31
                                                        --------          -------        ------------      -----------

2002
----
Base rental revenue............................          $38,509          $43,299          $46,968           $52,896
Total revenues.................................           56,681           65,030           71,489            90,014
Net income (loss) available to
  common unitholders...........................           13,880           15,631           28,228            (9,155)
Net income (loss) per weighted average
  common unit..................................            $0.32            $0.35            $0.64            ($0.20)

2001
----
Base rental revenue............................          $28,751          $28,651          $30,528           $39,299
Total revenues.................................           44,824           46,297           49,065            66,669
Net income available to common unitholders.....           10,231           11,321           14,093            20,839
Net income per weighted average
    common unit................................            $0.27            $0.29            $0.36             $0.48`

21.  Segment Information

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: premium domestic, other domestic and international in 2002 and
2001. The OP evaluates real estate performance and allocates resources based on
Net Operating Income ("NOI") defined as total revenue less operating
and maintenance expense. 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:

`For the years ended:                  Premium       Other
(in thousands)                         Domestic      Domestic     International    Other          Total
-------------------------------------------------------------------------------------------------------
                                                         (1)           (2)          (3)
Total revenues
     December 31, 2002...............  $227,876         $49,856               -      $5,482      $283,214
     December 31, 2001...............   187,588          12,196               -       7,071       206,855

Interest income
     December 31, 2002...............     1,169             124               -         358         1,651
     December 31, 2001...............       848              45               -       1,913         2,806

Income (loss) from
unconsolidated investments
     December 31, 2002...............     5,641               -          15,072    (47,756)      (27,043)
     December 31, 2001...............    12,014               -           3,628     (5,337)        10,305

NOI
     December 31, 2002...............   176,001          30,664           7,891    (12,216)       202,340
     December 31, 2001...............   148,570           5,021           6,562       1,849       162,002

Fixed asset additions
     December 31, 2002...............   398,933         309,540               -         795       709,268
     December 31, 2001...............    36,674         181,729               -       1,159       219,562

Total assets
     December 31, 2002............... 1,262,190         394,984          16,077      29,779     1,703,030
     December 31, 2001...............   831,882         194,406          15,092      57,928     1,099,308`

|(1) | Approximately 23% of the GLA is occupied by and approximately 12%
of annual revenue is derived from one tenant.
|--- | ---------------------------------------------------------------------------------------------------------------

|(2) | Principally comprised of the OP's interest in Chelsea Japan.
|--- | ------------------------------------------------------------

|(3) | Includes corporate overhead assets and results from Chelsea
Interactive.
|--- | ------------------------------------------------------------------------

21.  Segment Information (continued)

Following is a reconciliation of net operating income to net
income for the years ended December 31, 2002 and 2001, (in
thousands):

`2002              2001
                                                                 ----------        ----------

Segment NOI..................................................      $202,340         $162,002
Interest expense - consolidated..............................      (48,693)         (36,865)
Interest expense - unconsolidated investments................         (556)            (597)
Depreciation expense - consolidated..........................      (58,275)         (48,554)
Depreciation expense - unconsolidated investments                   (4,166)          (5,964)
Depreciation expense - Chelsea Interactive...................       (8,271)          (2,888)
Impairment loss- Chelsea Interactive.........................      (34,370)                -
Income tax - unconsolidated investments......................       (1,378)            (947)
Gain/(loss) on sale of centers -.............................           312            (284)
Gain on sale, net of writedown - International...............        10,911              617
                                                                    -------          -------
Net income...................................................       $57,854          $66,520
                                                                    =======          =======`

22.  Non-Cash Investing and Financing Activities

In December 2002, 2001 and 2000, the OP declared quarterly
distributions per share of $0.485, $0.39 and $0.375, respectively (assumes May
2002 2-for-1 stock split occurred on January 1, 2000). The limited
partners' distributions were paid in January of each subsequent
year.

In connection with the buyout of Simon's 50% interest in
Simon-Orlando in April 2002, the OP assumed additions of approximately $68.9
million in rental properties, $6.5 million in accumulated depreciation, $8.8
million in other assets, $3.2 million in other liabilities and $59.4 million in
mortgage debt.

In connection with the buyout of Fortress' 51% interest in
F/C Acquisition in August 2002, the OP assumed additions of approximately $207.0
million in rental properties, $9.4 million in accumulated depreciation, $11.7
million in other assets, $5.3 million in other liabilities and $168.7 million in
mortgage debt.

In connection with the purchase of the JMJ properties in
November 2002, the OP issued 1.3 million units with an assigned value of $44.6
million.

In connection with the Konover acquisition in 2001, the OP
assumed approximately $131.0 million in REMIC and mortgage loans
payable.

`CPG Partners, L.P.
                           Schedule III-Consolidated Real Estate and Accumulated Depreciation
                              for the year ended December 31, 2002 (in thousands)






                                                      Cost            Step-Up         Gross
                                                   Capitalized        Related         Amount
                                                  (Disposed of)        to             Carried                              Life
                                 Initial            Subsequent       Acquisition     at Close                              Used
                                  Cost                  to              of          of Period                               to
                                   to              Acquisition       Partnership    December 31,                          Compute
                                  Company         (Improvements)     Interest (1)     2001                                Depre-
                             ----------------- ---------------- ----------------  ------------------                     ciation
                                                                                                                            in
                                  Buildings,       Buildings,        Buildings,      Buildings,         Accumu-    Date   Latest
 Description                      Fixtures         Fixtures          Fixtures        Fixtures           lated       of    Income
Outlet Center         Encum-       and              and                and             and               Depre-    Const-  State-
 Name                brances Land Equipment  Land Equipment   Land  Equipment Land  Equipment   Total    ciation   ruction ment

 Woodbury Common, NY    -   $4,448  $16,073  $4,967  $127,653   $ -    $ -    $9,415  $143,726  $153,141  $51,691 '85,'93,
                                                                                                                   95,'98     40
 Orlando, FL (6)        -    9,946   65,711     300     1,249  7,957  31,829   18,203    98,789   116,992    9,845  '00       40
 Gilroy, CA (6)        (4)  17,053   84,641       2       231  1,812   8,840   18,867    93,712   112,579    4,632  '90,'91,
                                                                                                                    '92,'94,
                                                                                                                    '95       40
 Wrentham, MA           -      157    2,817   3,974    80,118      -       -    4,131    82,935    87,066   20,087  '95,'00   40
 Waikele, HI            -   22,800   54,357       -     2,084      -       -   22,800    56,441    79,241   11,049  '98       40
 Leesburg, VA           -    6,296        -    (811)   71,486      -       -    5,485    71,486    76,971   15,159  '96-'00   40
 Desert Hills, CA       -      975        -   2,376    65,901    830   4,936    4,181    70,837    75,018   27,908  '90,'94
                                                                                                                    -'95,
                                                                                                                    '97,-'98  40
 Michigan City, IN (6) (4)   7,264   60,107       -       578    772   6,243    8,036    66,928    74,964    3,293  '87,'88,
                                                                                                                    '89,
                                                                                                                    '91,'94,
                                                                                                                    '95'97    40
 Camarillo, CA          -    4,000        -  12,431    55,250      -       -   16,431    55,250    71,681   16,178  '94-'99   40
 Osage Beach, MO (6)    -   10,395   58,701       -         -      -       -   10,395    58,701    69,096        -  '87-90    40
 Jackson, NJ (6)        -   10,302   58,178       -         -      -       -   10,302    58,178    68,480        -  '97,'98   40
 Albertville, MN (6)    -   15,794   45,977       -        77      -       -   15,794    46,054    61,848      116  '00,'01   40
 North Georgia, GA      -    2,960   34,726    (223)   21,518      -       -    2,737    56,244    58,981   17,376  '95-'99   40
 Waterloo, NY (6)      (4)   5,258   42,942       -       172    559   4,519    5,817    47,633    53,450    2,365  '95,'96,
                                                                                                                    '97       40
 Clinton, CT            -    4,124   43,656       -     1,748      -       -    4,124    45,404    49,528   16,496  '95-'96   40
 Allen, TX              -    8,938    2,068    (836)   38,883      -       -    8,102    40,951    49,053    4,252   99-'01   40
 Vacaville, CA          -    9,683   38,850      18       249      -       -    9,701    39,099    48,800    1,226  '88,'91,
                                                                                                                    '92       40
 Folsom, CA            (2)   4,169   10,465   2,692    26,410      -       -    6,861    36,875    43,736   11,968  '90,'92,
                                                                                                                    '93,'96-
                                                                                                                    '97'00    40
 Carolina Outlet        -    6,220   24,860       -       347      -       -    6,220    25,207    31,427      813  '87,'95,
  (I), NC                                                                                                           '96,'99   40
 Carolina Outlet       (5)      -     7,862       -       105      -       -       -     7,967     7,967       257  '87,'95,
  (II), NC                                                                                                          '96,'99   40
 Petaluma Village, CA   -    3,735        -   2,959    31,929      -       -    6,694    31,929    38,623   10,678  '93,'95
                                                                                                                    -'96      40
 St. Augustine, FL (6)  -    5,783   32,658       -         -      -       -    5,783    32,658    38,441        -  '90-'92   40
 Liberty Village, NJ    -      345      405   1,499    22,629 11,015   2,195   12,859    25,229    38,088    8,466  '81,'97
                                                                                                                    -'98      30
 Napa, CA              (2)   3,456    2,113   7,908    19,744      -       -   11,364    21,857    33,221    7,502  '62,'93,
                                                                                                                    '95       40
 Kittery (I), ME (6)  (4)(5)  2,143   23,985       6       143    228   2,354    2,377    26,482    28,859    1,394  '86      40
 Kittery (II), ME       -      567    2,265       -        81      -       -      567     2,346     2,913       74  '10,'84,
                                                                                                                    '89,'95   40
 Johnson Creek, WI (6)  -    4,648   26,341       -         -      -       -    4,648    26,341    30,989       67  '98,'99,
                                                                                                                     '01      40
 Aurora, OH             -      637    6,884   1,055    20,661      -       -    1,692    27,545    29,237    9,419  '90,'93,
                                                                                                                    '94,'95   40
 Edinburgh, IN (6)      -    5,415   21,659       -       333      -       -    5,415    21,992    27,407      416  '89,'95   40
 North Bend, WA         -    4,735   18,925     (83)     (383)     -       -    4,652    18,542    23,194      603  '90,'95   40
 Branson, MO (6)        -    2,892   16,332       -         -      -       -    2,892    16,332    19,224        -  '88,'94   40
 Columbia Gorge, OR    (2)     934        -     428    13,622    497   2,647    1,859    16,269    18,128    5,848  '91,'94   40
 Santa Fe, NM           -       74        -   1,300    12,176    491   1,772    1,865    13,948    15,813    4,351  '93,'98   40
 American Tin
  Cannery, CA       $1,507       -    8,621       -     5,458      -       -       -    14,079     14,079   11,461  '87,'98    5
 Patriot Plaza, VA      -      789    1,854     976     4,081      -       -   1,765     5,935      7,700    2,499  '86,'93',
                                                                                                                    '95       40
 Corporate Offices,
   NJ, CA               -        -       60       -     6,478      -       -       -     6,538      6,538    4,141    -        5
 St. Helena, CA        (2)   1,029    1,522     (25)      588     38      78   1,042     2,188      3,230      790  '83       40
 Chicago, IL            -      465        -    (465)        -      -       -       -         -          -        -    -       40
 Las Vegas, NV          -      405        -    (405)        -      -       -       -         -          -        -    -       40
 Other retail        (3)(5) 14,994   62,512  (1,609)   (4,426)     -       -  13,385    58,086     71,471    1,819   various  40
              ------------------------------------------------------------------------------------------------------
        (2)(3)(4)$307,962 $203,828 $878,127 $38,434  $627,173 $24,199 $65,413 $266,461 1,570,713 $1,837,174 $284,239
              =======================================================================================================

The aggregate cost of the land, buildings, fixtures and equipment for federal
tax purposes was approximately $1,596.8 million at December 31, 2002.

 (1) As part of the formation transaction assets acquired for cash have been accounted for as
     a purchase.
     The step-up represents the amount of the purchase price that exceeds the net book value
     of the assets acquired.

 (2) Projects encumbered by mortgage totaling $67.3 million at December 31, 2002.
 (3) Projects encumbered by mortgage totaling $71.5 million at December 31, 2002.
 (4) Projects encumbered by mortgage totaling $167.7 million at December 31, 2002.
 (5) Projects held under long term land lease.
 (6) Purchase price has been tentatively allocated.`

CPG Partners, L.P.
Schedule III-Consolidated Real Estate
and Accumulated Depreciation (continued)
(in thousands)

The changes in total real estate:

`Year ended December 31,
                                                             2002         2001
                                                         ---------      -------

Balance, beginning of period......................      $1,127,906       $908,344
Additions.........................................         719,857        229,339
Dispositions and other............................         (10,589)        (9,777)
                                                        ----------     ----------
Balance, end of period............................      $1,837,174     $1,127,906
                                                        ==========     ==========



The changes in accumulated depreciation:


                                                          Year ended December 31,
                                                             2002         2001
                                                         ---------      -------

Balance, beginning of period......................        $217,462      $175,692
Additions.........................................          53,065        44,071
Consolidation of properties previously held as
investments in unconsolidated affiliates..........          15,977             -
Dispositions and other............................          (2,265)       (2,301)
                                                          ----------    ---------

Balance, end of period............................        $284,239      $217,462
                                                          ==========    =========`

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 19th of March,
2003.

| | CPG Partners, L.P.
By: David C.Bloom
  David C. Bloom   Chief Executive Officer
| | -------------------------------------------------------------------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated:

|Signature | Title | Date
|--------- | ----- | ----

|/s/ David C. Bloom
David C. Bloom | Chairman of the Board 
and Chief Executive Officer | March 19, 2003
|--------------------------------- | -------------------------------------------------- | --------------

|/s/ William D. Bloom
William D. Bloom | Vice Chairman | March 19, 2003
|------------------------------------- | ------------- | --------------

|/s/ Leslie T. Chao
Leslie T. Chao | President | March 19, 2003
|--------------------------------- | --------- | --------------

|/s/ Michael J. Clarke
Michael J. Clarke | Chief Financial Officer | March 19, 2003
|--------------------------------------- | ----------------------- | --------------

|/s/ Brendan T. Byrne
Brendan T. Byrne | Director | March 19, 2003
|------------------------------------- | -------- | --------------

|/s/ Robert Frommer
Robert Frommer | Director | March 19, 2003
|--------------------------------- | -------- | --------------

|/s/ Barry M. Ginsburg
Barry M. Ginsburg | Director | March 19, 2003
|--------------------------------------- | -------- | --------------

|Philip D. Kaltenbacher | Director | March     , 2003
|---------------------- | -------- | ----------------

|/s/ Reuben S. Leibowitz
Reuben S. Leibowitz | Director | March 19, 2003
|------------------------------------------- | -------- | --------------

CERTIFICATION

I,
David C. Bloom, Chief Executive Officer of Chelsea Property Group, Inc., the
sole general partner of CPG Partners, L.P., ("the OP"), certify that:

|1. | I have reviewed this annual report on Form 10-K of the OP;
|-- | ----------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the OP as of, and for, the periods presented in this annual report;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The OP's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the OP and we have:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures to ensure that
material information relating to the OP, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the OP's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The OP's other certifying officers and I have disclosed, based on
our most recent evaluation, to the OP's auditors and the audit committee of the
OP's board of directors (or persons performing the equivalent function):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies in the design or operation of
internal controls which could adversely affect the OP's ability to record,
process, summarize and report financial data and have identified for the OP's
auditors any material weaknesses in internal controls; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or
other employees who have a significant role in the OP's internal controls;
and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------

|6. | The OP's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Date: March 19, 2003
| | --------------------

| | /s/ David C. Bloom
       David C. Bloom
       Chief Executive Officer
| | -----------------------------------------------------------------------

CERTIFICATION

I,
Michael J. Clarke, Chief Financial Officer of Chelsea Property Group, Inc., the
sole general partner of CPG Partners, L.P., ("the OP"), certify that:

|1. | I have reviewed this annual report on Form 10-K of the OP;
|-- | ----------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the OP as of, and for, the periods presented in this annual report;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The OP's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the OP and we have:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures to ensure that
material information relating to the OP, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the OP's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The OP's other certifying officers and I have disclosed, based on
our most recent evaluation, to the OP's auditors and the audit committee of the
OP's board of directors (or persons performing the equivalent function):
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies in the design or operation of
internal controls which could adversely affect the OP's ability to record,
process, summarize and report financial data and have identified for the OP's
auditors any material weaknesses in internal controls; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or
other employees who have a significant role in the OP's internal controls;
and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------

|6. | The OP's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Date: March 19, 2003
| | --------------------

| | /s/ Michael J. Clarke
       Michael J. Clarke
       Chief Executive Officer
| | -----------------------------------------------------------------------------

CERTIFICATION

I, David C. Bloom, Chief Executive Officer of Chelsea Property
Group, Inc., the sole general partner of CPG Partners, L.P. ("the OP"), pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby certify as
follows:

|1. | The annual report on Form 10-K of the OP for the period ended
December 31, 2002 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | The information contained in such Form 10-K fairly presents, in
all material respects, the financial condition and results of operations of the
OP.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------

IN
WITNESS WHEREOF, I have executed this Certification this 19th day of March,
2003.

| | /s/ David C. Bloom
       David C. Bloom
       Chief Executive Officer
| | -----------------------------------------------------------------------

CERTIFICATION

I, Michael J. Clarke, Chief Financial Officer of Chelsea
Property Group, Inc., the sole general partner of CPG Partners, L.P., (the
"OP"), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby
certify as follows:

|1. | The annual report on Form 10-K of the OP for the period ended
December 31, 2002 fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | The information contained in such Form 10-K fairly presents, in
all material respects, the financial condition and results of operations of the
OP.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------

IN WITNESS WHEREOF, I have executed this Certification this 19th
day of March, 2003.

| | /s/ Michael J. Clarke
       Michael J. Clarke
       Chief Executive Officer
| | -----------------------------------------------------------------------------