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

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FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 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. 1-12328

CHELSEA PROPERTY GROUP, INC.(Exact name of registrant as specified in its charter)

|Maryland(State or other jurisdiction
of incorporation or organization) | 22-3251332(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------- | ----------------------------------------------

103 Eisenhower Parkway, Roseland, New Jersey 07068(Address of principal executive offices - zip code)(973) 228-6111(Registrant's telephone number, including area code)

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

The number of shares outstanding of the registrants common
stock, $0.01 par value was 37,959,414 at October 31, 2002.

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Chelsea Property Group, Inc.

Index

Part I. Financial Information

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

| | Condensed Consolidated Balance Sheets
     as of September 30, 2002 and December 31, 2001 | 3
| | ----------------------------------------------------------------------------------------- | -

| | Condensed Consolidated Statements of Income
     for the three and nine months ended September 30, 2002 and 2001 | 4
| | ---------------------------------------------------------------------------------------------------------------- | -

| | Condensed Consolidated Statements of Cash Flows
     for the nine months ended September 30, 2002 and 2001 | 5
| | ---------------------------------------------------------------------------------------------------------- | -

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

|Item 2. | Management's Discussion and Analysis of Financial Condition
     and Results of Operations | 21
|------- | ------------------------------------------------------------------------------------------ | --

|Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 29
|------- | ---------------------------------------------------------- | --

|Item 4. | Controls and Procedures | 29
|------- | ----------------------- | --

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

|Item 6. | Exhibits and Reports on Form 8-K | 30
|------- | -------------------------------- | --

|Signatures | 31
|---------- | --

|Officer Certifications | 32
|---------------------- | --

Item 1. Financial Statements

Chelsea Property Group, Inc.
Condensed Consolidated Balance Sheets(In thousands, except per share data)

`September 30,          December 31,
                                                                                 2002                  2001
                                                                           -----------------     ------------------
                                                                           (Unaudited)
Assets:
Rental properties:
     Land................................................................        $216,763              $160,458
     Depreciable property................................................       1,324,535               967,448
                                                                           -----------------     ------------------
Total rental property....................................................       1,541,298             1,127,906
Accumulated depreciation.................................................        (269,849)             (217,462)
                                                                           -----------------     ------------------
Rental properties, net...................................................       1,271,449               910,444
Cash and cash equivalents................................................          13,693                24,604
Restricted cash-escrows..................................................           4,212                 3,347
Investments in unconsolidated affiliates.................................          74,093                93,689
Notes receivable-related parties.........................................           2,746                 3,281
Deferred costs, net......................................................          15,835                22,534
Other assets.............................................................          48,656                41,409
                                                                           -----------------     -----------------
Total assets.............................................................      $1,430,684            $1,099,308
                                                                           =================     ==================

Liabilities and stockholders' equity:
Liabilities:
     Unsecured bank debt.................................................         $97,035                $5,035
     Unsecured notes.....................................................         472,647               373,294
     Mortgage debt.......................................................         307,677               170,209
     Construction payables...............................................           8,034                 8,001
     Accounts payable and accrued expenses...............................          36,026                47,039
     Accrued dividend and distribution payable...........................          22,711                 3,851
     Other liabilities...................................................          22,676                16,817
                                                                           -----------------     ------------------
Total liabilities........................................................         966,806               624,246

Commitments and contingencies

Minority interest........................................................         114,472               115,639

Stockholders' equity:
     8.375% series A cumulative redeemable preferred stock, $0.01
        par value, authorized 5,000 shares, issued and outstanding
        797 in 2002 and 1,000 in 2001 (aggregate liquidation
        preference of $39,847 in 2002 and $50,000 in 2001) ..............               8                    10
        Common stock, $0.01 par value, authorized 50,000 shares,
         issued and outstanding 37,957 in 2002 and 37,540 in 2001........             380                   380
      Paid-in-capital....................................................         440,317               444,154
      Officer loan.......................................................            (488)                    -
      Distributions in excess of net income .............................         (84,724)              (82,142)
      Accumulated other comprehensive loss...............................          (6,087)               (2,979)
                                                                           -----------------     ------------------
Total stockholders' equity...............................................         349,406               359,423
                                                                           -----------------     ------------------
Total liabilities and stockholders' equity...............................      $1,430,684            $1,099,308
                                                                           =================     ==================`

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

Chelsea Property Group, Inc.
Condensed Consolidated Statements of Income
for the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)(In thousands, except per share data)

`Three Months Ended             Nine Months Ended
                                                                   September 30,                  September 30,
                                                               2002            2001           2002          2001
                                                          -------------- ---------------- -------------- ------------
Revenues:
   Base rent..............................................    $46,968         $30,528       $128,776       $87,930
   Percentage rent...................................           5,402           4,051         12,952         9,851
   Expense reimbursements............................          16,128          11,581         43,265        34,002
   Other income......................................           2,991           2,905          8,207         8,403
                                                          --------------   -------------  ------------  -------------
Total revenues.......................................          71,489          49,065        193,200       140,186
                                                          --------------   -------------  ------------  -------------

Expenses:
   Operating and maintenance.........................          19,389          12,779         53,779        37,505
   Depreciation and amortization.....................          15,045          12,174         42,229        35,479
   General and administrative........................           1,558             622          4,996         3,053
   Other.............................................           1,027             473          3,221         1,713
                                                          --------------   -------------  ------------  -------------
Total expenses.......................................          37,019          26,048        104,225        77,750
                                                          --------------   -------------  ------------  -------------

Income before unconsolidated investments, interest
expense and minority interest........................          34,470          23,017         88,975        62,436

Income from unconsolidated investments...............           2,032           3,953          8,784        10,509
Loss from Chelsea Interactive........................          (3,790)         (1,477)       (10,266)       (3,447)
Gain on sale of unconsolidated investment............          10,911               -         10,911             -
Interest expense.....................................         (13,098)         (8,891)       (33,691)      (26,326)
                                                          --------------   -------------  ------------  -------------
Income before minority interest......................          30,525          16,602         64,713        43,172

Minority interest....................................          (5,467)         (3,717)       (12,607)      (10,213)
                                                          --------------   -------------  ------------  -------------

Net income...........................................          25,058          12,885         52,106        32,959

Preferred dividend...................................           (835)          (1,047)        (2,588)       (3,141)
                                                          --------------   -------------   -----------  --------------

Net income available to common shareholders..........         $24,223        $ 11,838        $49,518       $29,818
                                                          ==============   =============   ===========  ==============

Basic:
Net income per common share..........................           $0.64           $0.36          $1.31         $0.92
                                                          ==============   =============   ===========  ==============

Weighted average common shares outstanding...........          37,950         33,136          37,799        32,538
                                                          ==============   =============   ===========  ==============

Diluted:
Net income per common share..........................           $0.61          $0.34           $1.26         $0.89
                                                          ==============   =============   ===========  ==============

Weighted average common shares outstanding...........          39,610         34,320          39,253        33,534
                                                          ==============   ==============  ===========  ==============`

Chelsea Property Group, Inc.
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 2002 and 2001
(Unaudited)(In thousands)

`2002            2001
                                                                             -----------      ---------
   Cash flows from operating activities
   Net income...............................................................   $52,106          $32,959
   Adjustments to reconcile net income to net cash
      provided by operating activities:
     Depreciation and amortization..........................................    42,229           35,479
     Equity-in-earnings of unconsolidated investments in
         excess of distributions received...................................    (2,148)          (1,956)
     Loss from Chelsea Interactive..........................................    10,266            3,447
     Gain on sale of unconsolidated investment..............................   (10,911)             -
     Minority interest in net income........................................    12,607           10,213
     Proceeds from non-compete receivable...................................     4,300            4,600
     Amortization of non-compete revenue....................................    (3,852)          (3,852)
     Additions to deferred lease costs......................................      (603)            (391)
     Other operating activities.............................................      (641)            (349)
     Changes in assets and liabilities:
        Straight-line rent receivable.......................................    (2,441)          (1,181)
        Due from affiliates.................................................      (806)            (787)
         Other assets.......................................................     3,118            4,670
         Deferred incentive compensation payout...........................     (14,401)             -
         Accounts payable and accrued expenses..............................    (4,747)          (1,310)
                                                                              -----------    -------------
   Net cash provided by operating activities................................    84,076           81,542
                                                                              -----------    -------------

   Cash flows from investing activities
   Additions to rental properties...........................................  (133,502)         (89,572)
   Proceeds from sale of centers............................................     6,873              -
   Additions to investments in unconsolidated affiliates....................   (26,098)         (15,960)
   Proceeds from sale of investment in unconsolidated affiliate.............    11,293              -
   Distributions from investments in
         unconsolidated affiliates in excess of earnings....................       337            5,090
   Additions to deferred development costs..................................      (718)          (6,074)
   Payments from loans to  related parties..................................     1,085            1,725
   Loans to related parties.................................................      (550)          (2,750)
                                                                              -----------      -------------
   Net cash used in investing activities....................................  (141,280)        (107,541)
                                                                              -----------      -------------

   Cash flows from financing activities
   Debt proceeds............................................................   233,324          175,155
   Repayment of debt........................................................  (132,400)        (134,750)
   Net proceeds from sale of common stock...................................     5,089            26,110
   Distributions............................................................   (48,851)         (40,208)
   Redemption of preferred stock............................................    (9,654)             -
   Additions to deferred financing costs....................................    (1,215)          (2,054)
                                                                              -----------      -------------
   Net cash provided by financing activities................................    46,293           24,253
                                                                              -----------      -------------

   Net decrease in cash and cash equivalents................................   (10,911)          (1,746)
   Cash and cash equivalents, beginning of period...........................    24,604           18,036
                                                                              -----------      -------------
   Cash and cash equivalents, end of period.................................   $13,693          $16,290
                                                                              ===========      =============
       Non-cash investing activities:
          Additions to rental properties on consolidation of properties
           previously held as investments in unconsolidated affiliates        $275,960
                                                                              ==========
       Non-cash financing activities:
          Assumption of mortgage loan payable on consolidation of properties
          previously held as investments in unconsolidated affiliates         $228,026
                                                                              ==========`

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

Chelsea Property Group, Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Organization and Basis of Presentation

Chelsea Property Group, Inc. (the Company) is a
self-administered and self-managed real estate investment trust
(REIT). The Company is the managing general partner of CPG Partners,
L.P., (the Operating Partnership or OP), an operating
partnership that specializes in owning, developing, leasing, marketing and
managing upscale and fashion-oriented manufacturers outlet centers. As of
September 30, 2002, the Company wholly or partially owned 54 centers in 28
states and Japan containing approximately 12.5 million square feet of gross
leasable area (GLA). The Companys portfolio is comprised of 27
Premium Outlet Centers containing 8.4 million square feet of GLA, (the
Premium Properties) and 27 other retail centers containing
approximately 4.1 million square feet of GLA (Other Properties)
(collectively the Properties). The Companys Premium Properties
generated 85% of the retail net operating income for the nine months ended
September 30, 2002. These 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, Napa Valley, Orlando, and
Honolulu.

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

Virtually, all of the Companys assets are held by, and all
of its operations conducted through, the Operating Partnership. Due to the
Companys ability, as the sole general partner, to exercise financial and
operational control over the Operating Partnership, the Operating Partnership is
consolidated in the accompanying financial statements. 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 stock dividend was paid May 28, 2002 to
shareholders of record on May 14, 2002. All amounts in the accompanying
financial statements reflect the stock split.

Disclosure about the fair value of financial instruments is
based on pertinent information available to management as of September 30, 2002,
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.

Common ownership of the OP as of September 30, 2002 was
approximately as follows:

| | Company
UnitholdersTotal | 85.8%   14.2%100.0% | 37,957,0006,273,00044,230,000 | units
units | 
| | ------------------------ | ------------------- | ----------------------------- | ----------- | 

The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and notes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Organization and Basis of Presentation (continued)

Operating results for the three and nine month periods ended
September 30, 2002 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002. The balance sheet at December
31, 2001 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. These financial statements should be read in conjunction with the
consolidated financial statements and accompanying notes included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2001.

In October 2001, the FASB issued Statement of Financial
Accounting Standard (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This standard harmonizes the accounting for impaired assets and resolves some of
the implementation issues as originally described in SFAS 121. The new standard
became effective and was adopted by the Company on January 1, 2002. The adoption
of this pronouncement did not have a material impact on the Companys
results of operations or financial position.

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 Company adopted
this pronouncement on April 1, 2002. The adoption of this pronouncement did not
have a material impact on the Companys results of operations or financial
position.

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

2. Acquisitions and Dispositions

Acquisitions

On April 1, 2002, the OP became the sole owner of the Orlando
Premium Outlets (OPO) 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 Company repaid the outstanding balance of
$59.4 million and extinguished the mortgage. After closing the transaction the
operating results and balance sheet of OPO were consolidated in the accompanying
financial statements.

On April 1, 2002, the OP purchased a 305,000 square foot center
located in Edinburgh, Indiana for $27.0 million in cash. The center is
classified as Other Properties.

On August 20, 2002, the OP became the sole owner of four premium
outlets by acquiring Fortress 51% undivided ownership interest in a joint
venture (F/C). 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
outlets, including $169.6 million of existing nonrecourse mortgage debt, were
consolidated in the accompanying financial statements.

On September 27, 2002, the Company signed an agreement to
acquire two outlet centers; 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 approximately $89.5 million. The transaction is
expected to be financed by issuing approximately $45.5 million of limited
partnership units in the OP and the balance from the Companys Senior
Credit Facility. Subject to certain conditions, the transaction is expected to
close before year-end 2002 and there can be no assurance that the transaction
will close.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

2. Acquisitions and Dispositions (continued)

Dispositions

During June and July 2002, the Company sold four Other
Properties 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 sale was recognized.

On November 1, 2002, the Company sold an additional Other
Property that generated net proceeds of approximately $0.7 million, which
resulted in a gain of approximately $0.3 million.

3. Investments in Affiliates

The OP holds interests in domestic and international joint
ventures. Non-controlling investments are accounted for under the equity method.
Income from unconsolidated investments and loss from Chelsea Interactive
includes equity-in-earnings, management, advisory, license, leasing and
guarantee fees earned from these affiliates.

The Company has developed an e-commerce venture through its
affiliate, Chelsea Interactive. The Board of Directors has approved a funding
commitment of up to $60 million. As of September 30, 2002, the Company has
funded $51.6 million and anticipates that the balance of the funding will be
used for development and operating cash shortfalls. The net book value of the
Companys investment as of September 30, 2002 was $35 million. While
management currently believes that it is possible to recover the net book value
of the investment through future cash flows if revenues from existing brands
improve and/or additional brands are secured, there is substantial risk that
Chelsea Interactive will not: (1) generate sufficient future revenues for the
Company to recover its investment; (2) achieve positive cash flow before
reaching the Companys committed funding of $60 million; (3) successfully
complete a satisfactory arrangement with a financial/business investor; or (4)
continue as a going concern. As a result of these risk factors, management may
at any time determine that it is necessary to significantly write down or write
off the Companys $35 million net book value investment. The Company is
actively pursuing and negotiating with potential investors to provide capital
and further develop the business. The Company 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.

As of September 30, 2002, the OPs interests in joint
ventures also included a 40% interest in Chelsea Japan Co., Ltd. (Chelsea
Japan), 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)
and minority interests in various outlet centers and development projects in
Europe operated by Value Retail PLC (Value Retail).

In April 2002, the OP purchased Simons 50% undivided
ownership interest in OPO 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 OPO are consolidated in the accompanying financial statements
from the buyout date.

In June 2002, the OP and Simon entered into a new 50/50 joint
venture to develop and operate SimonLas Vegas, a 430,000 square-foot
single-phase premium outlet center located in Las Vegas, Nevada, scheduled to
open in summer 2003. On June 20, 2002, Simon-Las Vegas purchased a 40-acre site
and commenced construction. The Company will be responsible for financing its
50% share of development costs which are expected to be approximately $48.0
million.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

3. Investments in Affiliates (continued)

In July 2002, the joint venture partner in F/C exercised its
option under the F/C Limited Liability Company Agreement to invoke the
Buy/Sell Right. This gave the Company the option to sell its
49% ownership interest in F/C or buy the partners 51% ownership interest.
On August 20, 2002, the Company exercised its right to buy the 51% interest for
cash of $58.9 million. The operations and balance sheet of the four F/C premium
outlet centers were consolidated in the accompanying financial statements from
the buyout date.

In August 2002, the OP and Simon entered into a new 50/50 joint
venture to develop and operate Simon-Chicago, a 435,000 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 Company will be responsible for financing its 50% share of the
development costs which are expected to be approximately $46.0 million.

In July 2002, the Company 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 investment in the accompanying financial statements.

The following is a summary of investments in and amounts due
from affiliates as of September 30, 2002 (in thousands):

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

Balance 12/31/01........     $36,118      $ 9,296        $9,723      $   -         $ 34,856      $3,696      $93,689

Additional
      investment........         -             13             -        24,410        10,968         303       35,694
Dispositions............     (36,531)           -        (9,199)          -            -           (382)     (46,112)
  Income (loss) from
   unconsolidated
    investments.......         4,331        3,116         1,310           -         (10,266)         27       (1,482)
Distributions and fees..      (2,841)      (1,345)         (250)          -            -           -          (4,436)
Advances (net)..........      (1,077)        (374)       (1,584)          364          (539)         (50)     (3,260)
                             ---------    ----------    ----------   -----------  ------------  ----------   ---------
Balance 9/30/02.........    $    -        $10,706       $     -      $ 24,774      $ 35,019       $3,594     $74,093
                             =========    ==========    ==========   ===========  ============  ==========   =========`

Notes to Condensed Consolidated Financial Statements
(Unaudited)

3. Investments in Affiliates (continued)

The Companys share of
income (loss) before depreciation, depreciation expense and income (loss) from
unconsolidated investments for the three and nine months ended September 30,
2002 and 2001 are as follows (in thousands):

`For the Three Months Ended September 30,
                      --------------------------------------------------------------------------------------------
                                       2002                                           2001
                      --------------------------------------------------------------------------------------------
                                                    Income       |                                    Income
                      Income (loss)               (loss) from    |   Income (loss)                   (loss) from
                      before                       Unconsol.     |      before                         Unconsol.
                      Depreciation     Depr.      Investments    |   Depreciation       Depr.         Investments
                      ------------    ---------  -------------   | ---------------    -----------    --------------
F/C...............      $ 1,369        $  400      $  969        |      $2,345         $   677        $ 1,668
Chelsea                                                          |
  Japan.........          1,532           471       1,061        |       1,214             382            832
Simon-                                                           |
  Orlando.......              -             -           -        |       2,077             569          1,508
Other............             2             -           2        |         (55)              -            (55)
                      ------------    ---------  -----------     | -------------      ----------    ------------
Total..............      $2,903        $  871      $2,032        |      $5,581          $1,628        $ 3,953
Chelsea               ============    =========  ===========     |  =============      ==========    ============
 Interactive......      ($1,594)       $2,196    ($ 3,790)       |     ($  580)         $  897       ($ 1,477)
                      ============    =========  ===========     | =============      ===========   ============



                                                          For the Nine Months Ended September 30,
                      ---------------------------------------------------------------------------------------------
                                       2002                                           2001
                      ---------------------------------------------------------------------------------------------
                                                    Income       |                                     Income
                      Income (loss)               (loss) from    |   Income (loss)                  (loss) from
                      before                       Unconsol.     |      before                         Unconsol.
                      Depreciation     Depr.      Investments    |   Depreciation       Depr.         Investments
                      -------------- ---------    -------------- |   -------------    ---------   ----------------
                                                                 |
F/C................    $  6,178        $1,847    $  4,331        |     $ 6,574          $1,994       $  4,580
Chelsea                                                          |
  Japan............       4,419         1,303       3,116        |       3,389           1,001          2,388
Simon-                                                           |
  Orlando..........       1,833           523       1,310        |       5,272           1,705          3,567
Other..............          27             -          27        |         (26)              -            (26)
                      ------------    ---------  -----------     | -------------      ----------    ------------
Total..............     $12,457        $3,673    $  8,784        |     $15,209          $4,700        $10,509
Chelsea               ============    =========  ===========     | =============      ==========    ============
Interactive........   ($  4,502)       $5,764    ($10,266)       |    ($ 1,497)         $1,950       ($ 3,447)
                      ============    =========  ===========     | =============      ===========   ============`

Notes to Condensed Consolidated Financial Statements
(Unaudited)

3. Investments in Affiliates (continued)

Condensed financial information as of September 30, 2002 and
December 31, 2001 and for the three and nine month periods ended September 30,
2002 and 2001 for F/C, Chelsea Japan, Simon-Orlando and Simon-Ventures (which
are included in Retail) and Chelsea Interactive is as follows (in
thousands):

`Chelsea
                                                            Retail         Interactive
                                                        -------------     -------------

Property, plant and equipment (net)
     September 30, 2002................................... $109,933         $32,910
     December 31, 2001....................................  355,427          29,923

Total assets
     September 30, 2002...................................  151,851          34,109
     December 31, 2001....................................  409,944          34,963

Long term debt (1)
     September 30, 2002...................................   57,393              -
     December 31, 2001....................................  282,057              -

Total liabilities
     September 30, 2002...................................   95,245           1,910
     December 31, 2001....................................  321,854           2,665

Net income (loss)
  Three months ended:
        September 30, 2002................................    2,501          (3,790)
        September 30, 2001................................    5,482          (2,954)

 Nine months ended:
        September 30, 2002................................   11,549         (11,127)
        September 30, 2001................................   13,864          (8,195)

Company's share of net income (loss)
  Three months ended:
        September 30, 2002................................    1,115          (3,790)
        September 30, 2001................................    2,642          (1,477)

  Nine months ended:
        September 30, 2002................................    5,374         (10,266)
        September 30, 2001................................    6,654          (3,447)

Fee income
  Three months ended:
        September 30, 2002................................      915              -
        September 30, 2001................................    1,366              -

  Nine months ended:
        September 30, 2002................................    3,383              -
        September 30, 2001................................    3,881              -`

(1) Long-term debt includes $57.4 million in Chelsea Japan as of
September 30, 2002 and $170.5 million in F/C, $58.5 million in Simon-Orlando and
$53.1 million in Chelsea Japan as of December 31, 2001.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

4. Non-Compete Agreement

The Company recognized income from its non-compete agreement
with The Mills Corporation of $1.3 million during the three months ended
September 30, 2002 and 2001 and $3.9 million during the nine months ended
September 30, 2002 and 2001. Such amounts are included in other income in the
accompanying financial statements.

5. Debt

Unsecured Bank Debt

In July 2002, the Company increased its senior unsecured
revolving bank line of credit to $200.0 million (the Senior Credit
Facility). Under the new terms, the Senior Credit Facilitys
expiration is March 31, 2005, and the Company has the right to extend the
maturity until March 31, 2006. The Senior Credit Facility bears interest on the
outstanding balance, payable monthly, at a rate equal to the London Interbank
Offered Rate (LIBOR) plus 1.05% (2.88% at September 30, 2002) or the
prime rate, at the Companys option. The LIBOR rate spread ranges from
0.85% to 1.50% depending on the Companys Senior Debt rating. A facility
fee of 0.125% on the Senior Credit Facility is payable annually in advance. At
September 30, 2002, $92.0 million was outstanding under the Senior Credit
Facility.

The Company also has a $5.0 million term loan (the 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 as of
September 30, 2002 and December 31, 2001, is as follows (in thousands):

`September 30,      December 31,       Effective
                                                            2002                2001             Yield (1)
                                                         ---------------     --------------    -------------

8.375% Unsecured Notes due August 2005.................   $.49,915            $  49,892           8.44%
7.25% Unsecured Notes due October 2007.................    124,833              124,809           7.29%
8.625% Unsecured Notes due August 2009.................     49,930               49,923           8.66%
8.25% Unsecured Notes due February 2011................    148,780              148,670           8.40%
6.875% Unsecured Notes due June 2012...................     99,189                    -           6.90%
                                                        -----------------    ---------------
   Total                                                  $472,647             $373,294
                                                        =================    ===============`

(1)   Including discount on the notes

On June 18, 2002, the OP completed a $100 million debt offering
consisting of $100 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 OPO construction loans that were to mature
in February 2003 and August 2002, respectively, and for general corporate
purposes.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

5.  Debt (continued)

Mortgage Debt

A summary of the terms of the mortgage debt outstanding as of September 30, 2002
and December 31, 2001 and the related interest rate and Net Book Value ("NBV")
of the associated collateral as of September 30, 2002 are as follows (in
thousands):

`September 30,      December 31,                         Interest
                                 2002               2001            Due Date           Rate            NBV
                           ------------------ ----------------    ---------------    -----------    -------------
Construction Loan (1)         $     -            $29,531                  -                -          $     -
F/C Mortgage Loan (2)          168,448                -              July 2008           6.99%         257,589
Bank Mortgage Loan (3)          67,500            68,250            April 2010           7.26%          72,662
Mortgage Loan (4)               71,729            72,428         December 2012           7.67%          75,711
                           ------------------  --------------                                        ------------
                              $307,677           $170,209                                             $405,962
                           ==================  ==============                                        ============`

|(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 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 of $168.7 million
on the buyout date. During the nine months ended September 30, 2002, the Company
recognized $10,000 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% (3.32% at September 30, 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
Company 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 nine months ended September 30,
2002, the Company recognized interest expense of $2.0 million 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 Company in
the public debt markets. Accordingly the Company 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 nine months ended September 30,
2002, the Company recognized $0.3 million in debt premium amortization that is
included in interest expense in the accompanying financial statements.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Notes to Condensed Consolidated Financial Statements
(Unaudited)

5.  Debt (continued)

Interest and loan costs of approximately $0.8 million and $0.4 million were
capitalized as development costs during the three months ended September 30,
2002 and 2001, respectively; and approximately $2.1 million and $1.5 million
during the nine months ended September 30, 2002 and 2001, respectively.

6.  Financial Instruments: Derivatives and Hedging

The Company employs interest rate and foreign currency forwards or purchased
options to hedge qualifying anticipated transactions. Gains and losses are
deferred and recognized in net income in the same period that the underlying
hedged transaction affects net income, expires or is otherwise terminated or
assigned.

At September 30, 2002 the Company's interest rate swap was reported at its fair
value and classified as an other liability of $6.9 million. As of September 30,
2002, there was $6.9 million in deferred losses that was included in accumulated
other comprehensive loss, and minority interest. Within the next twelve months,
the Company expects to reclassify to earnings approximately $2.1 million of the
current balance.

| | Hedge Type | Notional Value | Rate | Maturity | Fair Value | 
| | ---------- | -------------- | ---- | -------- | ---------- | 

| | Swap, Cash Flow | $67.5 million | 5.7625% | 1/1/06 | ($6.9 million) | 
| | --------------- | ------------- | ------- | ------ | -------------- | 

At March 31, 2002, the Company 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 quarter ended June 30, 2002, the receivable and yen forward contracts were
settled and the Company 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.

The notional value and fair value of the above hedge provides an
indication of the extent of the Companys involvement in financial
derivative instruments at September 30, 2002, but do not represent exposure to
credit, interest rate, foreign exchange or market risk.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

7.   Stockholders' Equity

Following is a statement of
stockholders equity for the nine months ended September 30, 2002 (in
thousands):

`Preferred  Common                            Distrib. in     Accum.          Total
                               Stock At    Stock At   Paid-in-    Officer   Excess of      Other Comp.   Stockholders'
                               Par Value  Par Value   Capital     Loan      Net Income     Income(Loss)      Equity
                              ----------  ---------- ---------   --------  ------------   -------------  -------------

Balance December 31, 2001.....  $10        $190      $444,344    $   -      ($82,142)       ($2,979)        $359,423

Net income....................    -           -             -        -        52,106              -           52,106
Other comprehensive
     income/(loss):
     Foreign currency
     translation..............    -           -             -        -             -            187              187
     Interest rate swap.......    -           -             -        -             -         (3,295)          (3,295)
                                                                                                            ---------
Total comprehensive
     income...................                                                                                48,998
                                                                                                            ---------

2-for-1 stock split...........    -         189          (189)       -             -              -                -
Preferred dividend............    -           -             -        -        (2,587)             -           (2,587)
Redemption of preferred
     stock (net of costs)......  (2)          -        (9,652)       -             -              -           (9,654)

Cash distributions declared
     ($1.38 per common share)..   -           -             -        -       (52,101)             -          (52,101)
Exercise of stock options......   -           1         5,431        -             -              -            5,432
Officer Loan...................   -           -             -     (488)            -              -             (488)
Shares issued in exchange for
     units of the OP...........   -           -           239        -             -              -              239
Shares issued through Employee
     Stock Purchase
     Plan (net of costs).......   -           -           144        -             -              -              144
                               ---------  ---------  ----------  --------   ------------    ----------     ------------
Balance September 30, 2002       $8        $380      $440,317    ($488)      ($84,724)      ($6,087)        $349,406
                               =========  =========  ==========  ========   ============    ==========     ============`

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

During the nine months ended September 30, 2002, the Company
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.

8. Dividends

On September 18, 2002, the Board of Directors of the Company
declared a $0.485 per share dividend to shareholders of record on September 30,
2002. The dividend, totaling $18.4 million, was paid on October 15, 2002. The OP
simultaneously paid a $0.485 per unit cash distribution, totaling $3.0 million,
to its minority unitholders.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

9. Income Taxes

At September 30, 2002, the Company was in compliance with all
REIT requirements under Section 856(c) of the Internal Revenue Code of 1986, as
amended, and as such, was not subject to federal income taxes.

10. Net Income Per Common Share

Basic earnings per common share is computed using the weighted
average number of shares outstanding. Diluted earnings per common share is
computed using the weighted average number of shares outstanding adjusted for
the incremental shares attributed to outstanding options to purchase common
stock of 1.7 million and 1.2 million for the three months ended September 30,
2002 and 2001 and 1.5 million and 1.0 million for the nine months ended
September 30, 2002 and 2001.

The following table sets forth the computation of basic and
diluted earnings per share for the periods indicated and assumes that the
Companys 2-for-1 stock split had occurred on January 1, 2001:

`Three Months              Nine Months
                                                                      Ended September 30,       Ended September 30,
(In thousands, except per share amounts)                              2002         2001         2002         2001
                                                                     ----------  ---------     ---------    --------
Numerator
Numerator for basic and diluted earnings per share -
   Net income available to common shareholders.                       $24,223     $ 11,838      $49,518      $29,818

Denominator
Denominator for basic earnings per share-
   Weighted average shares.......................................      37,950       16,568       37,799       16,269
   Increase in shares due to effect of 2-for-1 stock split.......           -       16,568            -       16,269
                                                                     ----------    ----------   --------    ----------
   Denominator for basic earnings per share......................      37,950       33,136       37,799       32,538

Effect of dilutive securities-
  Stock options...................................................      1,660          592        1,454          498
  Increase in shares due to effect of 2-for-1 stock split.........          -          592            -          498
                                                                     ----------    ----------   ---------   ----------
  Effect of dilutive securities...................................      1,660        1,184        1,454          996

Denominator for diluted earnings per share-
  Adjusted weighted average shares assumed conversions............     39,610       17,160       39,253       16,767
  Increase in shares due to effect of 2-for-1 stock split.........          -       17,160            -       16,767
                                                                     ----------    ----------   ---------   ----------
  Denominator for diluted earnings per share......................     39,610       34,320       39,253       33,534

Per share amounts:
  Net income - basic...............................................     $0.64        $0.36        $1.31        $0.92
  Net income - diluted.............................................     $0.61        $0.34        $1.26        $0.89`

Notes to Condensed Consolidated Financial Statements
(Unaudited)

11. Commitments and Contingencies

On May 15, 2002, the Company entered into a 50/50 joint venture
agreement with Sordo Madaleno y Asociados and Mr. Carlos Peralta of Mexico City
to jointly develop premium outlet centers in Mexico. Subject to entitlements,
site work for the 200,000 square-foot first phase of the outlet project is
scheduled to commence later in 2002, with construction to begin shortly
thereafter. Phase I is expected to open in 2004. The site can support a second
phase containing approximately 175,000 square feet of GLA. To date, the Company
has committed $3.0 million to the joint venture.

In connection with the Simon-Ventures, the Company 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 September 30, 2002, the Company had contributed $17.3
million to Simon-Las Vegas and $7.1 million to Simon-Chicago.

In June 1999, the Company 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 is known as Chelsea Japan Co., Ltd.
("Chelsea Japan").

Borrowings related to Chelsea Japan for which the Company and
the OP have provided guarantees as of September 30, 2002 are as follows (in
thousands):

`Total Facility                                      Outstanding

  Yen             US $ Equivalent    |   Yen        US $ Equivalent    US $ Guarantee    Due Date    Interest Rate
  ---             ---------------    |   ---        ---------------    --------------    --------    -------------
4.0 billion (1)   $32.8 million      | 1.0 billion   $8.5 million        $8.5 million       2003        1.46%
3.8 billion (2)    31.2 million      | 3.7 billion   30.0 million        12.0 million       2015        2.20%
0.6 billion (2)     4.9 million      | 0.6 billion    4.9 million         2.0 million       2012        1.50%`

|(1) | Facility entered into by an equity investee of the Company 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 Company.
|--- | -------------------------------------------------------------------------------------------------------------------

The Company 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 September
30, 2002, the Company had provided limited debt service guarantees of
approximately $18.0 million to Value Retail.

At September 30, 2002, other assets includes $6.9 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 Company is not presently involved in any material litigation
nor, to its knowledge, is any material litigation threatened against the Company
or its properties, other than routine litigation arising in the ordinary course
of business. Management believes the cost incurred by the Company related to any
of its litigation will not be material and have been adequately provided for in
the consolidated financial statements.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

12.   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 Company, totaled $3.2 million. During the nine
months ended September 30, 2002, the Company 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 Company advanced a total of $1.0 million to another
unitholder $0.5 million of which was used to exercise Company stock options. The
carrying value of such loans approximated fair value at September 30, 2002.
Effective June 1, 2002, the Company changed its policy to eliminate new loans to
directors and officers.

13. Stock Option Plan

The Company elected Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB No. 25") and related Interpretations in
accounting for its employee stock options. Under APB No. 25, no compensation
expense is recognized because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant.

The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock price
volatility. Because the Companys employee stock options have
characteristics significantly different from those of traded options, and
changes in the subjective input assumptions can materially affect the fair value
estimate, management believes the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.

Pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 2002
and 2001, respectively: risk-free interest rate of 5% for 2002 and 2001;
volatility factor of the expected market price of the Companys common
stock based on historical results of 0.236 for 2002 and 2001, and dividend yield
of 6% in 2002 and 7% in 2001, respectively, and an expected option life of four
years. On March 13, 2002, the Company granted options to acquire 1,510,000
shares at an exercise price of $26.30 that will expire in 2012.

For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options vesting period.
The Companys pro forma information follows (in thousands except for
earnings per share information):

`Three Months Ended           Nine Months Ended
                                                September 30,                    September 30,
                                             2002            2001             2002           2001
                                          ------------    -----------      -----------    ------------
Pro forma net income                        $23,712        $11,597          $47,956         $29,099
Pro forma earnings per share:
     Basic                                    $0.62         $0.35             $1.27           $0.89
     Diluted                                  $0.60         $0.34             $1.22           $0.87`

14. Segment Information

The Company 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. The Company
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.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

14. Segment Information (continued)

`Premium      Other
(in thousands)                         Domestic      Domestic      International       Other       Total
---------------------------------------------------------------------------------------------------------
                                                        (1)           (2)             (3)
Total revenues
  Three months ended:
        September 30, 2002.........      $58,302     $11,805            $ -          $1,382       $71,489
        September 30, 2001.........       46,696         713              -           1,656        49,065

  Nine months ended:
        September 30, 2002.........      153,489      35,589              -           4,122       193,200
        September 30, 2001.........      134,159         713              -           5,314       140,186

Interest income
  Three months ended:
        September 30, 2002.........          252          76              -             105           433
        September 30, 2001.........          204           -              -             372           576

  Nine months ended:
        September 30, 2002.........          792         140              -             276         1,208
        September 30, 2001.........          617           -              -           1,451         2,068

Income from unconsolidated
      investments
  Three months ended:
        September 30, 2002.........          971           -          1,061          (3,790)       (1,758)
        September 30, 2001.........        3,176           -            777          (1,477)        2,476

  Nine months ended:
        September 30, 2002.........        5,643           -          3,141         (10,266)       (1,482)
        September 30, 2001.........        8,147           -          2,362          (3,447)        7,062

NOI
  Three months ended:
        September 30, 2002.........       45,488      10,350          2,064          (6,546)       51,356
        September 30, 2001.........       37,743         548          1,657             633        40,581

  Nine months ended:
        September 30, 2002.........      122,527      21,297          5,915          (9,109)      140,630
        September 30, 2001.........      108,010         548          4,601            (403)      112,756

Fixed asset additions
  Nine months ended:
        September 30, 2002.........      103,520      28,550              -           1,432       133,502
        September 30, 2001.........       46,849      41,451              -           1,272        89,572

Total assets
        September 30, 2002.........    1,179,977     214,542         14,307          21,858     1,430,684
        December 31, 2001..........      866,738     194,406         15,092          23,072     1,099,308`

|(1) | Approximately 25% of the GLA is occupied by and approximately 13% of annualized
revenue is derived from one tenant.
|--- | -------------------------------------------------------------------------------------------------------------------

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

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

Notes to Condensed Consolidated Financial Statements
(Unaudited)

14.  Segment Information (continued)

`Three Months Ended          Nine Months Ended
                                                                       September 30,              September 30,
                                                                        2002         2001          2002       2001
                                                                 --------------------------   -----------  ------------
    Segment NOI................................................     $51,356       $40,581     $140,630     $112,756
    Interest expense - consolidated............................     (13,098)       (8,891)     (33,691)     (26,326)
    Interest expense - unconsolidated investments..............        (146)         (145)        (413)        (445)
    Depreciation and amortization expense - consolidated.......     (15,045)      (12,174)     (42,229)     (35,479)
    Depreciation and amortization
                 expense - unconsolidated investments..........        (871)       (1,628)      (3,673)      (4,700)
    Depreciation and amortization
                 expense - Chelsea Interactive.................      (2,196)         (897)      (5,764)      (1,950)
    Income tax - unconsolidated investments....................        (386)         (244)      (1,058)        (684)
    Gain on sale of  asset - unconsolidated investments........       10,911             -       10,911            -
    Minority interest..........................................      (5,467)       (3,717)     (12,607)     (10,213)
                                                                 --------------------------   -----------  -----------
    Net income.................................................      $25,058       $12,885      $52,106      $32,959
                                                                 ==========================   ===========  ===========`

15. Subsequent Event

On November 12, 2002, the Company announced that it had signed a
definitive agreement to acquire four outlet centers from New Plan Excel Realty
Trust, Inc. for an all cash aggregate price of $193 million. The four
properties, totaling 1.3 million square feet of GLA, are a 293,000 square-foot
center located in Jackson, New Jersey; a 400,000 square-foot center located in
Osage Beach, Missouri; a 329,000 square-foot center located in St. Augustine,
Florida; and a 317,000 square-foot center located in Branson, Missouri. Subject
to certain conditions, the transaction is expected to close on or about December
31, 2002 and there can be no assurance that the transaction will close.

Chelsea Property Group, Inc.

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

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

General Overview

From October 1, 2001 to September 30, 2002, the Company grew by
increasing rents at its operating centers, expanding three centers, acquiring 32
retail centers and purchasing ownership interests in five centers previously
held as unconsolidated investments. Increasing rents at operating centers
resulted in base rent growth of $2.5 million. The Company re-leased or renewed
approximately 1.0 million square feet of Premium Property GLA during the twelve
months ended September 30, 2002 for which initial contractual cash rents under
new leases were 12% higher than expiring leases. The expansion of two
wholly-owned centers increased base rent by $1.4 million. The acquisition of 32
retail centers increased base rent by $26.4 million. The purchase of ownership
interests in the five centers previously held as unconsolidated investments
resulted in base rent growth of $9.3 million and a decrease in income from
unconsolidated investments of $1.7 million during the nine months ended
September 30, 2002. Income from unconsolidated investments was positively
impacted by the results of Chelsea Japan due to higher earnings, increased fees
and the opening of the expansion of Rinku Premium Outlets during March 2002.

The Company operated GLA of 12.5 million square feet at
September 30, 2002 and 2001. The Companys Premium Properties consisted of
27 wholly or partially owned centers containing 8.4 million square feet of GLA
at September 30, 2002 and 28 wholly or partially owned centers containing 8.2
million square feet of GLA at September 30, 2001. The Companys
wholly-owned Other Properties consisted of 27 centers containing 4.1 million
square feet of GLA at September 30, 2002 and 30 wholly-owned centers containing
4.3 million square feet of GLA at September 30, 2001.

Net GLA added since October 1, 2001 is detailed as follows:

`12 Months Ended      9 Months Ended         3 Months Ended
                                             September 30, 2002   September 30, 2002     December 31, 2001
                                             -------------------  -------------------   --------------------
Changes in GLA (sf in 000's):

Centers expanded:
     Rinku Premium Outlets (40% owned) ......         70                70                      -
     Napa Premium Outlets....................          9                 9                      -
     Allen Premium Outlets...................        115                (4)                    119
     Other...................................         (7)               (4)                     (3)
                                              --------------     --------------         --------------------
Total centers expanded.......................        187                71                     116

Centers acquired:
    Edinburgh Outlets........................        305               305                       -
                                             ---------------     --------------        ---------------------

Centers sold:
     Other Properties........................       (433)             (433)                      -
     Mammoth Premium Outlets.................        (35)                -                     (35)
                                             ----------------    --------------         --------------------
Total centers sold...........................       (468)             (433)                    (35)

Net GLA change during the period.............         24               (57)                     81

GLA at end of period.........................     12,517            12,517                  12,574`

Results of Operations

Comparison of the three months ended September 30, 2002 to
the three months ended September 30, 2001.

Income before minority interest increased $13.9 million, or
83.9%, to $30.5 million for the three months ended September 30, 2002, from
$16.6 million for the three months ended September 30, 2001. This increase was
primarily the result of the acquisition of the 31 retail centers on September
25, 2001, the acquisition of one center in April 2002, the buyout and
consolidation of five centers previously held as unconsolidated investments, a
gain resulting from the partial sale of an unconsolidated investment, and higher
rents on releasing and renewals during 2002, partially offset by higher interest
costs and increased losses from Chelsea Interactive.

Base rentals increased $16.4 million, or 53.9%, to $46.9 million
for the three months ended September 30, 2002, from $30.5 million for the three
months ended September 30, 2001, due to the acquisition of the 32 retail centers
and the buyouts of ownership interests in five centers in 2002, higher average
rents on releasing and renewals and the expansion of a center in late 2001.

Percentage rents increased $1.3 million, or 33.3%, to $5.4
million for the three months ended September 30, 2002, from $4.1 million for the
three months ended September 30, 2001, primarily due to higher tenant sales, the
acquisition of the 32 retail 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 $4.5 million, or 39.3%, to $16.1
million for the three months ended September 30, 2002, from $11.6 million for
the three months ended September 30, 2001, due to the recovery of operating and
maintenance costs from increased GLA. The average recovery of reimbursable
expenses for the Premium Properties was 89.9% for the three months ended
September 30, 2002 compared to 90.6% for the three months ended September 30,
2001. The average recovery of reimbursable expenses for the Other Properties was
57.7% for the three months ended September 30, 2002.

Other income increased $0.1 million, to $3.0 million for the
three months ended September 30, 2002, from $2.9 million for the three months
ended September 30, 2001, primarily due to increased ancillary operating income
from the acquisition of the 32 new retail centers and the buyouts of ownership
interests in five centers in 2002 partially offset by decreased interest income
from lower interest rates and the sale of an outparcel during 2001.

Operating and maintenance expenses increased $6.6 million, or
51.7%, to $19.4 million for the three months ended September 30, 2002, from
$12.8 million for the three months ended September 30, 2001. The increase was
primarily due to costs related to increased GLA and the buyouts of ownership
interests in five centers during 2002.

Depreciation and amortization expense increased $2.8 million, or
23.6%, to $15.0 million for the three months ended September 30, 2002, from
$12.2 million for the three months ended September 30, 2001. The increase was
due to additional depreciation of the acquisition of the 32 retail centers, the
buyouts of ownership interests during 2002 and expansions.

General and administrative expense increased $1.0 million, to
$1.6 million for the three months ended September 30, 2002, from $0.6 million
for the three months ended September 30, 2001, primarily due to increased unit
program accrual and professional fees.

Other expenses increased $0.5 million, to $1.0 million for the
three months ended September 30, 2002, from $0.5 million for the three months
ended September 30, 2001, due to ground lease expenses assumed with the
acquisition of the 31 retail centers, legal expenses and increased reserve for
bad debt.

Income from unconsolidated investments decreased $2.0 million,
to $2.0 million for the three months ended September 30, 2002, from $4.0 million
for the three months ended September 30, 2001, due to the buyouts of ownership
interests in five centers which were previously held as unconsolidated
investments partially offset by higher earnings from Chelsea Japan.

The loss from Chelsea Interactive increased $2.3 million, or
156.6%, to $3.8 million for the three months ended September 30, 2002, from $1.5
million for the three months ended September 30, 2001. The increase was due to
increased payroll, general and administrative, depreciation and amortization
expense and lack of third party participation in the losses.

Gain on sale of unconsolidated investment of $10.9 million for
the three months ended September 30, 2002 resulted from the sale of
approximately 40% of the Companys partial interest in Value Retail.

Interest in excess of amounts capitalized increased $4.2
million, or 47.3%, to $13.1 million for the three months ended September 30,
2002, from $8.9 million for the three months ended September 30, 2001, due to
higher debt balances from acquisitions, debt assumption in the F/C buyout and
bond issue partially offset by lower interest rates.

Comparison of the nine months ended September 30, 2002 to the
nine months ended September 30, 2001.

Income before minority interest increased $21.5 million, or
49.9%, to $64.7 million for the nine months ended September 30, 2002, from $43.2
million for the nine months ended September 30, 2001. This increase was
primarily the result of the acquisition of the 31 retail centers on September
25, 2001, the acquisition of one center in April 2002, the buyout and
consolidation of five centers previously held as unconsolidated investments, a
gain resulting from the partial sale of an unconsolidated investment, and higher
rents on releasing and renewals during 2002, partially offset by higher interest
costs and increased losses from Chelsea Interactive.

Base rentals increased $40.9 million, or 46.5%, to $128.8
million for the nine months ended September 30, 2002, from $87.9 million for the
nine months ended September 30, 2001, due to the acquisition of the 32 retail
centers and the buyouts of ownership interests in five centers in 2002 and
higher average rents on new leases and renewals.

Percentage rents increased $3.1 million or 31.5% to $13.0
million for the nine months ended September 30, 2002, from $9.9 million for the
nine months ended September 30, 2001, primarily due to higher tenant sales,
acquisition of the 32 retail 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 $9.3 million, or 27.2%, to $43.3
million for the nine months ended September 30, 2002, from $34.0 million for the
nine months ended September 30, 2001, due to the recovery of operating and
maintenance costs from increased GLA. The average recovery of reimbursable
expenses for the Premium Properties was 88.4% for the nine months ended
September 30, 2002, compared to 90.7% for the nine months ended September 30,
2001. The average recovery of reimbursable expense for the Other Properties was
55.1% for the nine months ended September 30, 2002.

Other income decreased $0.2 million, to $8.2 million for the
nine months ended September 30, 2002, from $8.4 million for the nine months
ended September 30, 2001. The decrease is primarily the result of decreased
interest income from lower interest rates and the sale of an outparcel in 2001
partially offset by an increase in ancillary income related to the acquisition
of the 32 new retail centers and the buyouts of ownership interests in five
centers during 2002.

Operating and maintenance expenses increased $16.3 million, or
43.4%, to $53.8 million for the nine months ended September 30, 2002, from $37.5
million for the nine months ended September 30, 2001. The increase was primarily
due to costs related to increased GLA, and the buyouts of ownership interests in
five centers during 2002.

Depreciation and amortization expense increased $6.7 million, or
19.0%, to $42.2 million for the nine months ended September 30, 2002, from $35.5
million for the nine months ended September 30, 2001. The increase was due to
additional depreciation of the acquisition of the 32 retail centers and the
buyouts of ownership interests in five centers during 2002 and expansions.

General and administrative expense increased $1.9 million, or
63.6%, to $5.0 million for the nine months ended September 30, 2002, from $3.1
million for the nine months ended September 30, 2001, primarily due to increased
head count, accrual for unit program and professional fees.

Other expenses increased $1.5 million, or 88.0%, to $3.2 million
for the nine months ended September 30, 2002, from $1.7 million for the nine
months ended September 30, 2001. The increase was primarily due to ground lease
expenses assumed with the acquisition of the 31 retail centers, legal expenses
and increased reserve for bad debt.

Income from unconsolidated investments decreased $1.7 million,
to $8.8 million for the nine months ended September 30, 2002, from $10.5 million
for the nine months ended September 30, 2001, due to the buyouts of ownership
interests in five centers which were previously held as unconsolidated
investments, offset by increased earnings from Chelsea Japan, including a one
time leasing fee of $0.2 million from Rinku phase two.

The loss from Chelsea Interactive increased $6.8 million, or
197.8%, to $10.2 million for the nine months ended September 30, 2002, from $3.4
million for the nine months ended September 30, 2001, due to increased
depreciation, administrative and maintenance expenses and lack of third party
participation in the losses.

Gain on sale of unconsolidated investment of $10.9 million for
the nine months ended September 30, 2002 resulted from the sale of approximately
40% of the Companys interest in Value Retail.

Interest in excess of amounts capitalized increased $7.4
million, or 28.0%, to $33.7 million for the nine months ended September 30,
2002, from $26.3 million for the nine months ended September 30, 2001, primarily
due to higher debt balances from acquisitions, debt assumption in the F/C
buyout, lower construction activity and new bond issue partially offset by lower
interest rates.

Liquidity and Capital Resources

The Company 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 in 2001 of $121.7
million is expected to increase with a full year of operations of the 4.4
million square feet of GLA added during 2001, the acquisition of one center, the
buyouts of ownership interests in five centers and scheduled openings of
approximately 127,000 square feet of GLA in 2002. The Company has adequate
funding sources to complete and open all planned acquisition or development
projects, fund committed amounts for Chelsea Interactive and the Simon-Ventures
and to acquire six centers for $282.5 million that are expected to close during
the fourth quarter 2002. These transactions are expected to be accomplished with
available cash of $13.7 million and $108 million available under the increased
Senior Credit Facility, additional bank borrowings, issuing OP units or
accessing the public markets through the Companys $350 million debt shelf
registration and its $185 million equity shelf registration.

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

Common distributions declared and recorded during the nine
months ended September 30, 2002, were $60.7 million, or $1.38 per share or unit.
The Companys common dividend payout ratio as a percentage of net income
before minority interest, depreciation and amortization (exclusive of
amortization of deferred financing costs (FFO)) was 66.8% for the
nine months ended September 30, 2002. The Senior Credit Facility limits
aggregate dividends and distributions to the lesser of (i) 90% of FFO on an
annual basis or (ii) 100% of FFO for any two consecutive quarters.

At September 30, 2002, the Company had a $200.0 million senior
unsecured bank line of credit, (the Senior Credit Facility). Under
the terms, the Senior Credit Facilitys expiration is March 31, 2005, and
the Company has the right to extend the maturity date until March 31, 2006. The
Senior Credit Facility bears interest on the outstanding balance, payable
monthly, at a rate equal to the London Interbank Offered Rate
(LIBOR) plus 1.05% (2.88% at September 30, 2002) or the prime rate,
at the Companys option. The LIBOR rate spread ranges from 0.85% to 1.50%
depending on the Companys Senior Debt rating. A facility fee of 0.125% on
the Senior Credit Facility is payable annually in advance. $108.0 million of the
Senior Credit Facility was available at September 30, 2002.

On August 20, 2002, the OP became the sole owner of the four
premium outlets held in the F/C joint venture by acquiring Fortress 51%
undivided ownership interest for $58.9 million in cash which was funded by
borrowing from the Senior Credit Facility.

On June 18, 2002, the OP completed a $100 million debt offering
consisting of $100 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 OPO construction loans that were to mature
in February 2003 and August 2002, respectively, and for general corporate
purposes.

On April 1, 2002, the OP acquired a 305,000 square foot center
located in Edinburgh, Indiana for $27.0 million in cash. The center is located
40 miles south of downtown Indianapolis and was 98% leased at the acquisition
date. The Company funded the transaction from available cash and the Senior
Credit Facility. Also on April 1, 2002, the OP became the sole owner of the
Orlando Premium Outlets by acquiring Simons 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. The cash portion of
the transaction was funded by borrowing from the Senior Credit Facility. On June
16, 2002, the Company repaid the outstanding balance of $59.4 million and
extinguished the mortgage.

During 2002 the Company redeemed and retired 136,500 shares of
8.375% Series A Cumulative Redeemable Preferred Stock at $47 per share and
66,552 shares at $47.25 per share using available cash.

During June and July 2002, the Company sold four Other
Properties and two outparcels generating net proceeds of approximately $6.8
million, which approximated the net book value of the properties. Accordingly,
no gain or loss on these sales was recognized.

Development activity for real estate operations as of September
30, 2002 includes additional phases of two existing centers, totaling 47,000
square feet scheduled to open in late 2002. Construction is also underway on the
50% joint venture project outside Las Vegas, Nevada scheduled to open in summer
2003, the 175,000 square-foot second phase of Gotemba Premium Outlets scheduled
to open mid2003, and the 50% joint venture project in Chicago, Illinois,
scheduled to open in mid 2004; development is underway on a project in Seattle,
Washington scheduled to open in 2005 and a project north of Tokyo, Japan
scheduled to open in mid-2003. These projects are under development and there
can be no assurance that they will be completed or opened, or that there will
not be delays in opening or completion. All current development activity will be
financed either through project specific secured construction financing, the yen
denominated line of credit, available cash or through the Senior Credit
Facility. The Company will seek to obtain permanent financing once the projects
are completed and income has been stabilized.

On May 15, 2002, the Company entered into a 50/50 joint
venture agreement with Sordo Madaleno y Asociados and Mr. Carlos Peralta of
Mexico City to jointly develop premium outlet centers in Mexico. Subject to
entitlements, site work for the 200,000 square-foot first phase of the outlet
project is scheduled to commence later in the year, with construction to begin
shortly thereafter. Phase I is expected to open in 2004. The site can support a
second phase containing approximately 175,000 square feet of GLA. To date, the
Company has committed $3.0 million to the joint venture.

In connection with the Simon-Ventures, the Company has committed
to provide 50% of the development costs of the centers, which are expected to be
approximately $48.0 million to Simon-Las Vegas and $46.0 million to
Simon-Chicago. As of September 30, 2002, the Company had contributed $17.3
million to Simon-Las Vegas and $7.1 million to Simon-Chicago.

The Company has minority interests ranging from 3% to 8% in
several outlet centers and outlet development projects in Europe operated by
Value Retail. The Companys total investment in Europe as of September 30,
2002 was $3.6 million. The Company 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 Company sold approximately 40% of its holdings in
Value Retail to a third party for $11.4 million that resulted in a gain of
approximately $10.9 million.

In June 1999, the Company 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 is known as Chelsea Japan Co., Ltd.
("Chelsea Japan").

Borrowings related to Chelsea Japan for which the Company and
the OP have provided guarantees as of September 30, 2002, are as follows (in
thousands):

`Total Facility                                      Outstanding

  Yen            US $ Equivalent       Yen        US $ Equivalent    US $ Guarantee    Due Date    Interest Rate
  ---            ---------------       ---        ---------------    --------------    --------    -------------
4.0 billion (1)   $32.8 million     1.0 billion    $8.5 million       $8.5 million       2003        1.46%
3.8 billion (2)    31.2 million     3.7 billion    30.0 million       12.0 million       2015        2.20%
0.6 billion (2)     4.9 million     0.6 billion     4.9 million        2.0 million       2012        1.50%`

|(1) | Facility entered into by an equity investee of the Company 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 Company.
|--- | -------------------------------------------------------------------------------------------------------------------

The Company has developed an e-commerce venture through its
affiliate, Chelsea Interactive. The Board of Directors has approved a funding
commitment of up to $60 million. As of September 30, 2002, the Company has
funded $51.6 million and anticipates that the balance of the funding will be
used for development and operating cash shortfalls. The net book value of the
Companys investment as of September 30, 2002 was $35 million. While
management currently believes that it is possible to recover the net book value
of the investment through future cash flows if revenues from existing brands
improve and/or additional brands are secured, there is substantial risk that
Chelsea Interactive will not: (1) generate sufficient future revenues for the
Company to recover its investment; (2) achieve positive cash flow before
reaching the Companys committed funding of $60 million; (3) successfully
complete a satisfactory arrangement with a financial/technology investor; or (4)
continue as a going concern. As a result of these risk factors, management may
at any time determine that it is necessary to significantly write down or write
off the Companys $35 million investment. The Company is actively pursuing
and negotiating with potential investors to provide capital and further develop
the business.

To achieve planned growth and favorable returns in both the
short and long-term, the Companys financing strategy is to maintain a
strong, flexible financial position by: (i) maintaining a conservative level of
leverage; (ii) extending and sequencing debt maturity dates; (iii) managing
exposure to floating interest rates; and (iv) maintaining liquidity. Management
believes these strategies will enable the Company 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.

The Companys cash balances decreased $10.9 million to
$13.7 million at September 30, 2002 from $24.6 million at December 31, 2001. Net
cash provided by operating activities increased $2.5 million for the nine months
ended September 30, 2002 compared to the corresponding 2001 period. The increase
was primarily due to the increased operating cash flow generated from the growth
of the Companys GLA substantially offset by the payout of the deferred
incentive compensation in March 2002. Net cash used in investing activities
increased $33.7 million for the nine months ended September 30, 2002 compared to
the corresponding 2001 period. The increase was primarily due to the acquisition
of one center and the buyout of ownership interests in five centers partially
offset by proceeds from sale of an unconsolidated investment. Net cash provided
by financing activities increased by $22.0 million compared to the corresponding
period in 2001. The increase was primarily due to increased debt issuance,
partially offset by decreased offerings of the Companys common stock and
retirements of the Companys preferred 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 Company. The White Paper on Funds
from Operations (FFO) 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 Company
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 Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company 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 Company. 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 Companys financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a measure of
the Companys liquidity, nor is it indicative of funds available to fund
the Companys cash needs, including its ability to make cash distributions.

`Three Months Ended              Nine Months Ended
                                                            September 30,                   September 30,
                                                             2002        2001          2002           2001
                                                       -------------  -----------   -----------  ---------------

Net income to common shareholders......................   $24,223      $11,838       $49,518        $29,818
Add (deduct):
Depreciation and amortization - wholly owned...........    15,045       12,174        42,229         35,479
Depreciation and amortization - joint ventures.........       871        1,628         3,673          4,700
Amortization of deferred financing costs and
    depreciation of non-rental real estate assets......      (573)        (480)       (1,741)        (1,326)
Gain on sale of unconsolidated investment..............   (10,911)           -       (10,911)            -
Preferred units distribution...........................    (1,462)      (1,462)       (4,386)        (4,386)
Minority interest......................................     5,467        3,717        12,607         10,213
                                                       -------------  -----------   ------------   ------------
FFO....................................................   $32,660      $27,415       $90,989        $74,498
                                                       =============  ===========   ============   ============
Average diluted shares/units outstanding (1)...........    45,883       40,630        45,538         39,912
Dividends declared per share...........................    $0.485        $0.39        $1.375          $1.17`

(1) Assumes May 28, 2002, 2-for-1 stock split had occurred on January 1, 2001.

Recent Accounting Pronouncements

In October 2001, the FASB issued Statement of Financial
Accounting Standard No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This standard harmonizes the
accounting for impaired assets and resolves some of the implementation issues as
originally described in SFAS 121. The new standard became effective and was
adopted by the Company on January 1, 2002. The adoption of this pronouncement
has not had a material impact on the Companys results of operations or
financial position.

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 Company adopted
this pronouncement on April 1, 2002. The adoption of this pronouncement did not
have a material impact on the Companys results of operations or financial
position.

Critical Accounting Policies and Estimates

The Companys discussion and analysis of its financial
condition and results of operations are based upon the Company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 Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. The Company 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 Company 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 Company 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 Companys tenants were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

Foreign Exchange Exposure

From time to time, the Company may enter into hedging contracts
to protect against fluctuations in foreign exchange rates. Receivables from
Chelsea Japan are recorded in the accompanying financial statements at the
exchange rate on the date of valuation. Significant changes in the exchange rate
may result in changes to the receivable realized.

Valuation of Investments

The Company reviews its investments in unconsolidated affiliates
for impairment wherever events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable.

Economic Conditions

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

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

Item 3. Quantitative and Qualitative Disclosures
about Market Risk

The Company is exposed to changes in interest rates primarily
from its floating rate debt arrangements. In December 2000, the Company
implemented a policy to protect against interest rate and foreign exchange risk.
The Company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 Company 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 interest rate of 7.2625% on the
notional amount until January 1, 2006.

At September 30, 2002 a hypothetical 100 basis point adverse
move (increase) in U.S. Treasury and LIBOR rates applied to unhedged debt would
adversely affect the Companys annual interest cost by approximately $1.0
million annually.

Following is a summary of the Companys debt obligations at
September 30, 2002 (in thousands):

Expected Maturity Date

`2002     2003     2004    2005      2006     Thereafter     Total   Fair Value
                          -------- -------- ------- -------- -------- ------------- --------- ------------
Fixed Rate Debt             -        -        -      49,915     -      662,909       712,824    727,719
Average Interest Rate       -        -        -        7.50%    -         5.82%         7.56%        -
Variable Rate Debt          -        -        -      97,035     -       67,500       164,535    164,535
Average Interest Rate       -        -        -        2.88%    -         3.32%         3.06%        -`

Item 4. Controls and Procedures

The Companys chief executive officer and chief financial
officer, based on their evaluation of the Companys disclosure controls and
procedures within the past 90 days, have concluded that such disclosure controls
and procedures were effective to ensure that material information relating to
the Company and required to be disclosed by the Company has been made known to
them and has been recorded, processed, summarized and reported timely. There
have not been any significant changes in the Companys internal controls or
in other factors that could significantly affect these controls subsequent to
the date of evaluation.

Chelsea Property Group, Inc.

Part II.     
      Other Information

Item 6. Exhibits and Reports on Form 8-K

(a)

|10.1 | 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b) Current Report on Form 8K and 8K/A reporting under Items 2
and 7 on an event that occurred on August 20, 2002.

Chelsea Property Group, Inc.

Signatures

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

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

Date:  November 13, 2002

CERTIFICATION

I, David C. Bloom, Chief Executive Officer of
Chelsea Property Group, Inc. (the "Company"), certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of the Company;
|-- | ------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly 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 quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4. | The Company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 Company and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (b) | evaluated the effectiveness of the Companys disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|5. | The Companys other certifying officers and I have disclosed, based on our
most recent evaluation, to the Companys auditors and the audit committee
of the Company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 Companys ability to record, process,
summarize and report financial data and have identified for the Company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 Company's internal controls; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The Companys other certifying officers and I have indicated in this
quarterly 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: November 13, 2002

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

CERTIFICATION

I, Michael J. Clarke, Chief Financial Officer of Chelsea Property Group, Inc.
(the "Company"), certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of the Company;
|-- | ------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly 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 quarterly
report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4. | The Company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 Company and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | (b) | evaluated the effectiveness of the Companys disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|5. | The Companys other certifying officers and I have disclosed, based on our
most recent evaluation, to the Companys auditors and the audit committee
of the Company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 Companys ability to record, process,
summarize and report financial data and have identified for the Company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 Company's internal controls; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The Companys other certifying officers and I have indicated in this
quarterly 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: November 13, 2002

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

CERTIFICATION

I, David C. Bloom, Chief Executive Officer of Chelsea Property Group, Inc. (the
"Company"), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby
certify as follows:

|1. | The quarterly report on Form 10-Q of the Company for the period ended September 30,
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-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------

IN WITNESS WHEREOF, I have executed this Certification this 13th
day of November 2002.

| | /s/ Michael J. Clarke
     David C. Bloom
     Chief Executive Officer
| | ----------------------------------------------------------------------

CERTIFICATION

I, Michael J. Clarke, Chief Financial Officer of Chelsea Property Group, Inc.
(the "Company"), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do
hereby certify as follows:

|1. | The quarterly report on Form 10-Q of the Company for the period ended September
30, 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-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------

IN WITNESS WHEREOF, I have executed this Certification this 13th day of
November, 2002.

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