United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549


                                    FORM 10-Q

[X]      Quarterly  Report  Pursuant  to  Section 13 or 15(d) of  the Securities
         Exchange Act of 1934 for the Quarterly Period Ended March 31, 2003

                                                              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 number                 001-13301
                                                        ------------------------

                               PRIME RETAIL, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Maryland                                    38-2559212
------------------------------------        ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


          100 East Pratt Street
          Nineteenth Floor
          Baltimore, Maryland                                 21202
--------------------------------------------           -------------------------
(Address of principal executive offices)                    (Zip Code)


                                 (410) 234-0782
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
--------------------------------------------------------------------------------
(Former name, former address, or former fiscal year, if changed since last
report)

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  periods that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes   X           No
    -----            ------

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

As of May 14,  2003,  the issuer  had  outstanding  43,577,916  shares of Common
Stock, $.01 par value per share.
<PAGE>
                                   Page - (2)

                               Prime Retail, Inc.
                                    Form 10-Q


                                      INDEX


PART I:  FINANCIAL INFORMATION                                            PAGE
                                                                          ----


Item 1.  Financial Statements (Unaudited)

     Consolidated Balance Sheets as of March 31, 2003 and
       December 31, 2002...............................................      1

     Consolidated Statements of Operations for the three
       months ended March 31, 2003 and 2002............................      2

     Consolidated Statements of Cash Flows for the three
       months ended March 31, 2003 and 2002............................      3

     Notes to the Consolidated Financial Statements....................      5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations.........................     23

Item 3.  Quantitative and Qualitative Disclosures of Market Risk.......     43

Item 4.  Controls and Procedures.......................................     44

PART II:  OTHER INFORMATION

Item 1.  Legal Proceedings.............................................     45

Item 2.  Changes in Securities.........................................     46

Item 3.  Defaults Upon Senior Securities...............................     46

Item 4.  Submission of Matters to a Vote of Security Holders...........     46

Item 5.  Other Information.............................................     46

Item 6.  Exhibits and Reports on Form 8-K..............................     46

Signatures.............................................................     47

Certifications of Chief Executive Officer and Chief Financial Officer..     48
<PAGE>
                                   Page - (3)

                               PRIME RETAIL, INC.

                      Unaudited Consolidated Balance Sheets

                (Amounts in thousands, except share information)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   March 31,            December 31,
                                                                                                      2003                    2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>                     <C>
Assets
Investment in rental property:
     Land                                                                                         $  100,246              $ 101,546
     Buildings and improvements                                                                      739,972                740,024
     Furniture and equipment                                                                          13,514                 13,292
                                                                                                  ----------              ---------
                                                                                                     853,732                854,862
     Accumulated depreciation                                                                       (220,230)              (213,604)
                                                                                                  ----------              ---------
                                                                                                     633,502                641,258
Cash and cash equivalents                                                                              8,236                  6,908
Restricted cash                                                                                      105,674                107,037
Accounts receivable, net                                                                               1,024                  3,049
Deferred charges, net                                                                                  3,256                  3,766
Investment in unconsolidated joint ventures                                                           50,664                 49,889
Other assets                                                                                           6,183                  6,181
                                                                                                  ----------              ---------
          Total assets                                                                            $  808,539              $ 818,088
                                                                                                  ==========              =========

Liabilities and Shareholders' Equity
Bonds payable                                                                                     $   22,451              $  22,495
Notes payable, including $41,601 in default in 2003                                                  509,273                511,443
Defeased notes payable                                                                                74,509                 74,764
Accrued interest                                                                                       4,107                  3,984
Real estate taxes payable                                                                              3,398                  3,484
Accounts payable and other liabilities                                                                38,231                 43,059
                                                                                                  ----------              ---------
     Total liabilities                                                                               651,969                659,229

Minority interests                                                                                     1,487                  1,487

Shareholders' equity:
  Shares of preferred stock, 24,315,000 shares authorized:
     10.5% Series A Senior Cumulative Preferred Stock,
          $0.01 par value (liquidation preference of $77,877),
          2,300,000 shares issued and outstanding                                                         23                     23
     8.5% Series B Cumulative Participating Convertible
          Preferred Stock, $0.01 par value (liquidation preference
          of $251,845), 7,828,125 shares issued and outstanding                                           78                     78
  Shares of common stock, 150,000,000 shares authorized:
     Common stock, $0.01 par value, 43,577,916 shares
          issued and outstanding                                                                         436                    436
  Additional paid-in capital                                                                         709,373                709,373
  Distributions in excess of earnings                                                               (554,827)              (552,538)
                                                                                                  ----------              ---------
      Total shareholders' equity                                                                     155,083                157,372
                                                                                                  ----------              ---------
          Total liabilities and shareholders' equity                                              $  808,539              $ 818,088
                                                                                                  ==========              =========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (4)

                               PRIME RETAIL, INC.

                 Unaudited Consolidated Statements of Operations

              (Amounts in thousands, except per share information)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,                                                            2003                   2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                    <C>
Revenues
Base rents                                                                            $ 18,993               $ 24,309
Percentage rents                                                                           977                  1,320
Tenant reimbursements                                                                   10,958                 12,834
Interest and other                                                                       4,012                  2,860
                                                                                      --------               --------
  Total revenues                                                                        34,940                 41,323

Expenses
Property operating                                                                       9,955                 10,211
Real estate taxes                                                                        2,984                  3,666
Depreciation and amortization                                                            7,280                 10,208
Corporate general and administrative                                                     4,466                  3,419
Interest                                                                                11,856                 17,729
Other charges                                                                              688                  2,472
                                                                                      --------               --------
  Total expenses                                                                        37,229                 47,705
                                                                                      --------               --------
Loss before gain on sale of real estate                                                 (2,289)                (6,382)
Gain on sale of real estate                                                                  -                 16,793
                                                                                      --------               --------
Income (loss) from continuing operations                                                (2,289)                10,411
Discontinued operations, including loss of $9,623
  on dispositions in 2002                                                                    -                 (8,730)
                                                                                      --------               --------
Net income (loss)                                                                       (2,289)                 1,681
Allocations to preferred shareholders                                                   (5,668)                (5,668)
                                                                                      --------               --------
Net loss applicable to common shares                                                  $ (7,957)              $ (3,987)
                                                                                      ========               ========

Basic and diluted earnings per common share:
Income (loss) from continuing operations                                               $ (0.18)              $   0.11
Discontinued operations                                                                      -                  (0.20)
                                                                                      --------               --------
  Net loss                                                                             $ (0.18)              $  (0.09)
                                                                                      ========               ========

Weighted-average common shares
  outstanding - basic and diluted                                                       43,578                 43,578
                                                                                      ========               ========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (5)

                               PRIME RETAIL, INC.
                 Unaudited Consolidated Statements of Cash Flows
                             (Amounts in thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,                                                                         2003                    2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>                     <C>

Operating Activities
Income (loss) from continuing operations                                                         $ (2,289)               $ 10,411
Adjustments to reconcile income (loss) from continuing
  operations to net cash provided by operating activities:
     Gain on sale of real estate                                                                        -                 (16,793)
     Equity in earnings of unconsolidated joint ventures                                           (1,126)                   (153)
     Depreciation and amortization                                                                  7,280                  10,208
     Amortization of deferred financing costs                                                         426                   1,683
     Amortization of debt premiums                                                                   (519)                   (496)
     Bad debt expense                                                                                 536                   2,344
     Discontinued operations                                                                            -                   3,299
Changes in operating assets and liabilities:
     Decrease in accounts receivable                                                                1,489                     432
     Decrease in restricted cash                                                                    1,363                   3,275
     Decrease in other assets                                                                         282                     334
     Decrease in accounts payable and other liabilities                                            (4,828)                 (8,155)
     Decrease in real estate taxes payable                                                            (86)                 (2,277)
     Increase in accrued interest                                                                     123                     556
                                                                                                 --------                --------
       Net cash provided by operating activities                                                    2,651                   4,668
                                                                                                 --------                --------

Investing Activities
Additions to investment in rental property                                                           (769)                   (983)
Distributions from unconsolidated joint ventures                                                      311                       -
Proceeds from sales of operating properties and land                                                1,085                  11,559
                                                                                                 --------                --------
       Net cash provided by investing activities                                                      627                  10,576
                                                                                                 --------                --------

Financing Activities
Principal repayments on notes payable                                                              (1,950)                (16,691)
                                                                                                 --------                --------
       Cash used in financing activities                                                           (1,950)                (16,691)
                                                                                                 --------                --------

Increase (decrease) in cash and cash equivalents                                                    1,328                  (1,447)
Cash and cash equivalents at beginning of period                                                    6,908                   7,537
                                                                                                 --------                --------
Cash and cash equivalents at end of period                                                       $  8,236                $  6,090
                                                                                                 ========                ========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (6)

                               PRIME RETAIL, INC.
           Unaudited Consolidated Statements of Cash Flows (continued)
                             (Amounts in thousands)


Supplemental Disclosure of Non-cash Investing and Financing Activities

The  following  assets and  liabilities  were  disposed in  connection  with the
disposition of properties during the periods indicated:

--------------------------------------------------------------------------------
Three Months Ended March 31,                                            2002
--------------------------------------------------------------------------------
Book value of net assets disposed                                    $  71,276
Notes payable paid                                                     (11,052)
Notes payable assumed by buyer                                         (46,862)
Notes payable transferred to lender                                    (15,621)
Investment in unconsolidated joint ventures                             (2,975)
Gain on sale of real estate                                             16,793
                                                                     ---------
  Cash received, net                                                 $  11,559
                                                                     =========
================================================================================

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (7)

                               Prime Retail, Inc.
              Notes to Unaudited Consolidated Financial Statements
            (Amounts in thousands, except share and unit information)


Note 1 - Interim Financial Presentation

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States ("GAAP") for interim financial information and 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 GAAP for complete financial statements.
In the opinion of  management,  all  adjustments,  consisting  only of recurring
accruals,  considered  necessary  for a fair  presentation  have been  included.
Operating results for such interim periods are not necessarily indicative of the
results that may be expected for a full fiscal  year.  For further  information,
refer to the  consolidated  financial  statements and notes thereto  included in
Prime  Retail,  Inc.'s (the  "Company")  Annual Report on Form 10-K for the year
ended December 31, 2002.

     Unless the context otherwise requires,  all references to "we," "us," "our"
or the Company  herein  mean Prime  Retail,  Inc.  and those  entities  owned or
controlled by Prime Retail,  Inc.,  including Prime Retail, L.P. (the "Operating
Partnership").

     The consolidated  financial statements include the accounts of the Company,
the Operating  Partnership  and the  partnerships  in which it has a controlling
financial  interest.  Profits and losses are  allocated in  accordance  with the
terms of the agreement of limited partnership of the Operating Partnership.  The
preparation of financial  statements in conformity with GAAP requires us to make
estimates  and  assumptions  that affect the (i) reported  amounts of assets and
liabilities,  (ii)  disclosure  of  contingent  liabilities  at the  date of the
financial  statements and (iii) reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

     Investments  in  unconsolidated  joint ventures are accounted for under the
equity method of accounting.  Income (loss) applicable to minority interests and
common  shares as presented in the  consolidated  statements  of  operations  is
allocated  based  on  income  (loss)  before  minority  interests  after  income
allocated to preferred shareholders.

     Significant inter-company accounts and transactions have been eliminated in
consolidation.  Certain prior period financial information has been reclassified
to conform to the current period  presentation,  which did not have an impact on
our results of operations or financial position.

Note 2 - Recent Accounting Pronouncements

     In October,  2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  ("FAS") No. 144,  "Accounting for
Impairment of Disposal of  Long-lived  Assets." FAS No. 144  supercedes  FAS No.
121, however it retains the fundamental  provisions of that statement as related
to the recognition and measurement of the impairment of long-lived  assets to be
"held  and  used."  In  addition,  FAS No.  144 (i)  provides  further  guidance
regarding the estimation of cash flows in the  performance  of a  recoverability
test, (ii) requires that a long-lived asset to be disposed of other than by sale
(e.g.,  abandoned) be classified as "held and used" until it is disposed of, and
(iii)  established more  restrictive  criteria to classify an asset as "held for
sale."  Effective  January 1, 2002,  we adopted FAS No. 144. Our adoption of FAS
No. 144 effective  January 1, 2002 did not have a material impact on our results
of operations or financial position.

<PAGE>
                                   Page - (8)

     In accordance with the  requirements of FAS No. 144, we have classified the
operating  results,  including  gains and  losses  related to  disposition,  for
certain  properties  either  disposed of or  classified  as assets held for sale
during  2002  as  discontinued  operations  in the  Consolidated  Statements  of
Operations for all periods presented.  See Note 3 - "Property  Dispositions" for
additional information.

     In  December  2002,  the  FASB  issued   Interpretation   ("FIN")  No.  45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of Others." FIN No. 45 elaborates on the
disclosures to be made by a guarantor in interim and annual financial statements
about the obligations under certain guarantees. FIN No. 45 also clarifies that a
guarantor  is required to  recognize,  at the  inception  of the  guarantee,  an
initial liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN No. 45 are effective for financial
statements  of interim or annual  periods  ending after  December  15, 2002.  We
adopted the disclosure provisions of FIN No. 45 effective December 31, 2002. The
initial  recognition  and  initial  measurement  provisions  of FIN  No.  45 are
applicable  on a  prospective  basis to  guarantees  issued  or  modified  after
December 31, 2002.  We did not issue or modify any  guarantees  during the three
months ended March 31, 2003. See  "Guarantees  and Guarantees of Indebtedness of
Others" contained in Note 4 - "Debt" for additional information.

     In January  2003,  the FASB issued FIN No. 46,  "Consolidation  of Variable
Interest  Entities." FIN No. 46 clarifies the application of existing accounting
pronouncements  to certain  entities in which  equity  investors do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties. The provisions of FIN No. 46
were  immediately  effective  for all variable  interests  in variable  interest
entities  created  after  January  31,  2003,  and we  will  need to  apply  the
provisions of FIN No. 46 to any existing variable interests in variable interest
entities by no later than July 1, 2003. We did not create any variable  interest
entities during the three months ended March 31, 2003 and we do not believe that
FIN No. 46 will have a significant impact on our financial statements.

Note 3 - Property Dispositions

     We disposed of certain properties through various  transactions  (including
sale, joint venture  arrangements,  foreclosure and transfer of ownership to the
respective   lender)  during  2002.  The  following   table   summarizes   these
dispositions:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Gain/      Provision
                                                                                                                (Loss)        for
                                 Date of       Property                     Sales      Reduction      Net       on Sale/      Asset
                               Disposition       Type            GLA        Price      of Debt      Proceeds  Disposition Impairment
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>            <C>                <C>          <C>         <C>           <C>         <C>       <C>
Year 2002
Continuing Operations:
Hagerstown Center             January 2002    Outlet Center     487,000    $ 80,500    $ (57,914)    $12,113    $ 16,793   $     -
Bellport Outlet Center
 - Phases II/III                April 2002    Outlet Center     197,000       6,500            -         522        (703)        -
Bridge Properties                July 2002   Outlet Centers   1,304,000     118,650     (111,009)          -     (10,288)        -
                                                              ---------    --------    ---------    --------     -------   -------
  Subtotal                                                    1,988,000     205,650     (168,923)     12,635       5,802         -
                                                              ---------    --------    ---------    --------     -------   -------

Discontinued Operations:
Conroe Center                 January 2002    Outlet Center     282,000           -      (15,621)       (554)          -         -
Edinburgh Center                April 2002    Outlet Center     305,000      27,000      (16,317)      9,551      (9,623)        -
Western Plaza                    June 2002 Community Center     205,000       9,500       (9,467)        688       2,121         -
Jeffersonville II              August 2002    Outlet Center     314,000           -      (17,938)          -      17,121         -
Vero Beach                  September 2002    Outlet Center     326,000           -      (25,126)          -           -    12,200
Melrose Place                 October 2002 Community Center      27,000       2,500       (1,935)        555         990         -
Puerto Rico Center           December 2002    Outlet Center     176,000      36,500      (19,202)     13,958           -    15,557
Colorado Properties          December 2002    Outlet Center     808,000      96,000      (74,849)     12,628      15,543         -
                                                              ---------    --------    ---------    --------     -------   -------
  Subtotal                                                    2,443,000     171,500     (180,455)     36,826      26,152    27,757
                                                              ---------    --------    ---------    --------     -------   -------

Total                                                         4,431,000    $377,150    $(349,378)    $49,461    $ 31,954   $27,757
                                                              =========    ========    =========     =======    ========   =======
====================================================================================================================================
</TABLE>

<PAGE>
                                   Page - (9)

2002 Dispositions - Continuing Operations

     The  operating  results  for  certain  properties  that  were sold to joint
venture  partnerships  during  2002 and in which  we  still  have a  significant
continuing  involvement  are not  classified as  discontinued  operations in the
Consolidated  Statements of Operations.  Such properties  and/or their operating
results  through  the dates of their  respective  disposition  are  collectively
referred  to as the "2002  Joint  Venture  Properties".  The 2002 Joint  Venture
Properties  consist  of our  sales  of (i)  Prime  Outlets  at  Hagerstown  (the
"Hagerstown  Center")  and  six  outlet  centers   (collectively,   the  "Bridge
Properties").   The   following   discussion   summarizes   the  terms  of  such
dispositions.

Hagerstown Center

     On January 11, 2002, we completed  the sale of the  Hagerstown  Center,  an
outlet center located in Hagerstown,  Maryland,  for aggregate  consideration of
$80,500 to an existing joint venture  partnership (the  "Prime/Estein  Venture")
between one of our affiliates and an affiliate of Estein & Associates  USA, Ltd.
("Estein"),  a real estate investment company. Our affiliate and Estein have 30%
and 70% ownership  interests,  respectively,  in the  Prime/Estein  Venture.  In
connection with the sale  transaction,  the  Prime/Estein  Venture assumed first
mortgage indebtedness of $46,862 on the Hagerstown Center (the "Hagerstown First
Mortgage");  however,  our guarantee of the Hagerstown First Mortgage remains in
place.

     Under  the  terms of the  transaction,  we  manage,  market  and  lease the
Hagerstown Center for a fee on behalf of the Prime/Estein Venture.

     The operating results of the Hagerstown Center are reflected in our results
from continuing  operations through the date of disposition.  In connection with
the sale of the Hagerstown Center, we recorded a gain on the sale of real estate
of  $16,793  during  the  first  quarter  of  2002.  Effective  on the  date  of
disposition,  we have accounted for our 30% ownership interest in the Hagerstown
Center in accordance with the equity method of accounting.

Bellport Center II/III

     On April  19,  2002,  we  completed  the sale of  Phases  II and III of the
Bellport Outlet Center (the "Bellport Outlet Center"),  an outlet center located
in Bellport,  New York.  We had a 51%  ownership  interest in the joint  venture
partnership  that  owned  the  Bellport  Outlet  Center  and  accounted  for our
ownership  interest in  accordance  with the equity  method of  accounting.  The
Bellport Outlet Center was sold to Sunrise Station,  L.L.C., an affiliate of one
of our joint venture  partners,  for cash  consideration of $6,500.  At closing,
recourse first mortgage indebtedness of $5,500, which was scheduled to mature on
May 1, 2002,  was repaid in full.  In  connection  with the sale of the Bellport
Outlet Center,  we recorded a loss on the sale of real estate of $703 during the
second quarter of 2002.

Bridge Properties

     On July 26, 2002, we completed the sale the Bridge Properties for aggregate
consideration  of $118,650 to affiliates of PFP Venture LLC, a new joint venture
(the "PFP Venture") (i) 30.4% owned by PWG Prime  Holdings LLC ("PWG"),  a third
party,  and (ii) 69.6% owned by FP  Investment  LLC ("FPI").  FPI is a new joint
venture between (i) FRIT PRT Bridge Acquisition LLC ("FRIT"), a third party, and
(ii) an  affiliate  of ours.  Through FPI,  FRIT and we  indirectly  had initial
ownership interests of 51.4% and 18.2%, respectively, in the PFP Venture. PWG is
the  managing  member of the PFP Venture.  FPI and PWG have  certain  protective
rights over the operations of the Bridge  Properties,  which are pari passu. The
Bridge  Properties  are  located  in  Anderson,  California;  Calhoun,  Georgia;
Gaffney, South Carolina; Latham, New York; Lee, Massachusetts and Lodi, Ohio.

<PAGE>
                                  Page - (10)

     Under the terms of the transaction,  we manage, market and lease the Bridge
Properties for a fee on behalf of the PFP Venture.

     The operating results of the Bridge Properties are reflected in our results
from continuing  operations through the date of disposition.  In connection with
the sale of the Bridge Properties, we recorded a loss on the sale of real estate
of  $10,288  during  the  second  quarter  of 2002.  This loss  represented  the
write-down  of our carrying  value of the Bridge  Properties to their fair value
less  estimated  costs to  dispose,  based on the  terms of the sale  agreement.
Because  PWG is the  managing  member of the PFP Venture and because of the pari
passu  nature  of the  protective  rights of FPI and PWG,  we are not  deemed in
control  of the  PFP  Venture.  Accordingly,  we  commenced  accounting  for our
indirect  ownership  interest in the PFP Venture in  accordance  with the equity
method of accounting  effective on the date of disposition.  We record our share
of the  operations  of  the  Bridge  Properties  using  an  assumed  book  value
liquidation model because both FPI and the PFP Venture have specific allocations
for distribution.

     For the three months ended March 31, 2002 combined revenues were $6,694 and
combined  expenses  were  $7,902  for  the  Hagerstown  Center  and  the  Bridge
Properties as reflected in our results from continuing  operations through their
respective dates of disposition.  For the three months ended March 31, 2002, our
equity in losses  (included  in interest  and other  income in the  Consolidated
Statements of Operations) for the Bellport Outlet Center was $218.

2002 Dispositions - Discontinued Operations

     We have  classified  the  operating  results,  including  gains and  losses
related to disposition,  for certain properties either disposed of or classified
as  assets  held  for  sale  during  2002  as  discontinued  operations  in  the
Consolidated  Statements  of  Operations  for the  2002  period.  The  following
discussion summarizes the terms of such dispositions.

Conroe Center

     During 2001,  certain of our  subsidiaries  suspended  regularly  scheduled
monthly debt service  payments on two  non-recourse  mortgage  loans held by New
York Life  Insurance  Company  ("New York Life") at the time of the  suspension.
These non-recourse mortgage loans were cross-defaulted and  cross-collateralized
by Prime Outlets at Conroe (the "Conroe Center"),  located in Conroe, Texas, and
Prime Outlets at Jeffersonville II (the "Jeffersonville II Center"),  located in
Jeffersonville, Ohio.

     Effective  January 1, 2002,  New York Life  foreclosed on the Conroe Center
and its related assets and liabilities,  including $554 of cash and our carrying
value of the  indebtedness  of $15,621  (principal  outstanding  of $15,467  and
unamortized  debt premium of $154),  were  transferred  from our subsidiary that
owned the Conroe Center to New York Life.  The  foreclosure of the Conroe Center
did not have a  material  impact  on our  results  of  operations  or  financial
condition. See "Jeffersonville II Center" below for additional information.

     The operating  results of the Conroe Center are classified as  discontinued
operations in the  Consolidated  Statements  of  Operations  through the date of
disposition for the 2002 period. No gain or loss was recorded in connection with
the foreclosure of the Conroe Center.

Edinburgh Center

     On April 1, 2002, we completed the sale of Prime Outlets at Edinburgh  (the
"Edinburgh  Center"),  an  outlet  center  located  in  Edinburgh,  Indiana  and
additional undeveloped land. The Edinburgh Center was sold to CPG Partners, L.P.
for cash  consideration  of $27,000.  The net cash  proceeds  from the sale were
$9,551,  after (i)  repayment  in full of $16,317  of  existing  first  mortgage
indebtedness  on the  Edinburgh  Center and (ii)  prorations,  closing costs and
fees.

<PAGE>
                                  Page - (11)

     The  operating  results  of  the  Edinburgh  Center  through  the  date  of
disposition  are  classified  as  discontinued  operations  in the  Consolidated
Statements of Operations for the 2002 period.  During the first quarter of 2002,
we  recorded  a loss on the  sale of real  estate  of  $9,623  representing  the
write-down of our carrying  value of the Edinburgh  Center to its estimated fair
value less estimated costs to dispose, based on the terms of the sale agreement.

Western Plaza

     On June 17,  2002,  we  completed  the sale of the Shops at  Western  Plaza
("Western Plaza"), a community center located in Knoxville,  Tennessee.  Western
Plaza was sold to WP General  Partnership for cash  consideration of $9,500. The
net proceeds  from the sale were $688,  after (i)  repayment of $9,467 (of which
$2,467  was  scheduled  to mature on  October  31,  2002) of  existing  recourse
mortgage indebtedness on Western Plaza, (ii) prorations,  closing costs and fees
and (iii) release of certain escrowed funds.

     The operating  results of Western Plaza through the date of disposition are
classified  as  discontinued   operations  in  the  Consolidated  Statements  of
Operations for the 2002 period. In connection with the sale of Western Plaza, we
recorded a gain on the sale of real estate of $2,121  during the second  quarter
of 2002.

Jeffersonville II Center

     Effective   July  18,  2002,  New  York  Life  sold  its  interest  in  the
Jeffersonville  II Center loan. On August 13, 2002, we transferred our ownership
interest  in the  Jeffersonville  II Center to New York Life's  successor.  As a
result of the  transfer  of our  ownership  interest  in the  Jeffersonville  II
Center,  we recorded a non-recurring  gain of $17,121  (included in discontinued
operations)  during  the third  quarter  of 2002,  representing  the  difference
between  our  carrying  value of the  Jeffersonville  II Center and its  related
assets and  liabilities,  including our carrying  value of the  indebtedness  of
$17,938 (principal outstanding of $17,768 and unamortized debt premium of $170),
as of the date of  transfer.  The  transfer  of our  ownership  interest  in the
Jeffersonville  II  Center  did not have a  material  impact on our  results  of
operations or financial condition.

     The operating  results of the  Jeffersonville  II Center are  classified as
discontinued operations in the Consolidated Statements of Operations through the
date of  disposition  for  the  2002  period.  See  "Conroe  Center"  above  for
additional information.

Vero Beach Center

     During  August of 2002,  certain of our  subsidiaries  suspended  regularly
scheduled monthly debt service payments on two non-recourse mortgage loans which
were  cross-collateralized  by Prime  Outlets at Vero  Beach  (the  "Vero  Beach
Center"),  located in Vero Beach,  Florida,  and Prime  Outlets at Woodbury (the
"Woodbury  Center"),  located in Woodbury,  Minnesota  (collectively,  the "John
Hancock  Properties").  These  non-recourse  mortgage  loans  were  held by John
Hancock Life Insurance Company ("John Hancock").

<PAGE>
                                  Page - (12)

     During  the second  quarter of 2002,  we  incurred  a  provision  for asset
impairment  of $12,200 to adjust our carrying  value of the Vero Beach Center to
its  estimated  fair value in  accordance  with the  provisions  of FAS No. 144.
Effective  September 9, 2002,  John Hancock  foreclosed on the Vero Beach Center
and its related  assets and  liabilities,  including  our carrying  value of the
indebtedness of $25,126  (principal  outstanding of $24,497 and unamortized debt
premium  of  $629),  were  transferred  to John  Hancock.  Additionally,  we are
currently  negotiating  a transfer of our  ownership  interest  in the  Woodbury
Center to John  Hancock.  Foreclosure  on the Vero Beach Center did not, and the
expected  transfer  of our  ownership  interest in the  Woodbury  Center is not,
expected to have a material  impact on our results of  operations  or  financial
condition. The carrying value of the Woodbury Center was $15,615 as of March 31,
2003.   Such  value  is  exceeded  by  our  carrying  value  of  the  associated
indebtedness of $16,682_ (principal  outstanding of $16,331 and unamortized debt
premium of $351) as of March 31,  2003.  If we were to  transfer  our  ownership
interest in the Woodbury Center to John Hancock, we would record a non-recurring
gain for the difference  between the carrying  value of the Woodbury  Center and
its related net assets and the carrying value of the indebtedness as of the date
of transfer.

     The  operating   results  of  the  Vero  Beach  Center  are  classified  as
discontinued operations in the Consolidated Statements of Operations through the
date of  disposition  for the  2002  period.  No gain or loss  was  recorded  in
connection  with the  foreclosure of the Vero Beach Center.  See Note 4 - "Debt"
for additional information.

Melrose Place

     On October 30, 2002,  we completed the sale of Melrose  Place,  a community
center located in Knoxville,  Tennessee. Melrose Place was sold to Melrose Place
Tennessee General Partnership for cash consideration of $2,500. The net proceeds
from the sale were $555,  after (i)  repayment  of $1,935 of  existing  recourse
mortgage indebtedness on Melrose Place, (ii) prorations,  closing costs and fees
and (iii) release of certain escrowed funds.

     The  operating  results of Melrose  Place are  classified  as  discontinued
operations in the Consolidated  Statements of Operations for the 2002 period. In
connection  with the sale of  Melrose,  we  recorded  a gain on the sale of real
estate of $990 during the fourth quarter of 2002.

Puerto Rico Center

     On December 6, 2002,  we completed  the sale of (i) Prime Outlets of Puerto
Rico,  an outlet  center  located in  Barceloneta,  Puerto Rico and (ii) certain
adjacent   parcels  of  land  being   developed   for   non-outlet   retail  use
(collectively,  the "Puerto Rico Center"). The Puerto Rico Center was sold to PR
Barceloneta,  LLC for cash  consideration of $36,500.  The net proceeds from the
sale were  $13,958,  after (i) repayment of $19,202 of existing  first  mortgage
indebtedness  on the Puerto Rico Center,  (ii)  pro-rations,  closing  costs and
fees,  (iii)  establishment  of certain  escrows at closing and (iv)  release of
certain escrowed funds. At the closing of the sale of the Puerto Rico Center, we
were required to fund $2,800 into an escrow account which will be returned to us
only upon  satisfaction  of certain  conditions no later than December 31, 2004.
The escrow  account is included in restricted  cash and an  offsetting  deferred
liability  is  included  in  accounts  payable  and  other  liabilities  in  the
Consolidated  Balance  Sheet  as of  March  31,  2003.  Under  the  terms of the
transaction, we will continue to manage, market and lease the Puerto Rico Center
for a fee on behalf of PR Barceloneta, LLC.

     The  operating  results  of the  Puerto  Rico  Center  through  the date of
disposition  are  classified  as  discontinued  operations  in the  Consolidated
Statements of Operations for the 2002 period.  During the third quarter of 2002,
we recorded an impairment  loss of $15,557  representing  the  write-down of our
carrying value of the Puerto Rico Center to its fair value less estimated  costs
to sell, based on the terms of the sale agreement.

<PAGE>
                                  Page - (13)

Colorado Properties

     On December 6, 2002, we completed the sale of two outlet centers (together,
the  "Colorado  Properties")  to TGS (U.S.)  Realty,  Inc.  for  aggregate  cash
consideration  of $96,000.  The Colorado  Properties are located in Castle Rock,
Colorado and Loveland,  Colorado. The net proceeds from the sale of the Colorado
Properties  were $12,628,  after (i) required  defeasance of $74,849 of mortgage
indebtedness  and the costs related to such  defeasance  (see Note 4 - "Debt for
additional information),  (ii) prorations,  closing costs and fees and (iii) the
release of certain escrowed funds.

     The  operating  results  of the  Colorado  Properties  through  the date of
disposition  are  classified  as  discontinued  operations  in the  Consolidated
Statements of Operations for the 2002 period. In connection with the sale of the
Colorado  Properties,  we  recorded a gain on the sale of real estate of $15,543
(also included in discontinued operations) during the fourth quarter of 2002.

     The following  summary  presents the operating  results of those properties
disposed of during 2002 whose results are classified as discontinued  operations
in the Consolidated Statements of Operations:

--------------------------------------------------------------------------------
Three Months Ended March 31,                                            2002
--------------------------------------------------------------------------------
Revenues
Base rents                                                           $  6,097
Percentage rents                                                          215
Tenant reimbursements                                                   2,817
Interest and other                                                        198
                                                                     --------
  Total revenues                                                        9,327

Expenses
Property operating                                                      2,194
Real estate taxes                                                         973
Depreciation and amortization                                           2,015
Interest                                                                2,932
Other charges                                                             320
                                                                     --------
  Total expenses                                                        8,434
                                                                     --------
Income before loss on
  sale of real estate                                                     893
Loss on sale of real estate                                            (9,623)
                                                                     --------
Discontinued operations                                              $ (8,730)
                                                                     ========
================================================================================

2003 Disposition

     On March 31, 2003,  the PFP Venture  completed the sale of Prime Outlets at
Latham (the "Latham Center"),  an outlet center located in Latham, New York. The
Latham  Center,  which  was one of the  Bridge  Properties,  was sold to 400 Old
Loudon Road Realty,  LLC for cash consideration of $2,200. The net cash proceeds
from the sale were $184,  after (i)  repayment  of $1,870 of  existing  mortgage
indebtedness  on the Bridge  Properties and (ii)  prorations,  closing costs and
fees. In connection with the sale of the Latham Center, the PFP Venture recorded
a gain on the sale of real estate of $117 during the first  quarter of 2003.  As
previously  discussed,  the Company  accounts for its  investment  in the Bridge
Properties in accordance with the equity method of accounting.

<PAGE>
                                  Page - (14)

Note 4 - Debt

     We have fixed rate tax-exempt  revenue bonds  collateralized  by properties
located in Chattanooga,  Tennessee (the  "Chattanooga  Bonds") which contain (i)
certain  covenants,  including a minimum  debt-service  coverage ratio financial
covenant (the  "Financial  Covenant")  and (ii)  cross-default  provisions  with
respect to certain of our other credit  agreements.  Based on the  operations of
the collateral properties, we were not in compliance with the Financial Covenant
for the quarters ended June 30, September 30 and December 31, 2002. In the event
of  non-compliance  with the Financial  Covenant or default,  the holders of the
Chattanooga Bonds (the "Bondholders") had the ability to put such obligations to
us at a price  equal to par plus  accrued  interest.  On January  31,  2003,  we
entered into an agreement (the  "Forbearance  Agreement")  with the Bondholders.
The Forbearance  Agreement provides  amendments to the underlying loan and other
agreements that enable us to be in compliance with various financial  covenants,
including  the  Financial  Covenant.  So long as we  continue to comply with the
provisions of the Forbearance  Agreement and are not otherwise in default of the
underlying  loan and other  documents  through  December 31,  2004,  the revised
financial  covenants  will  govern.   Additionally,   certain  quarterly  tested
financial covenants and other covenants become effective June 30, 2004. Pursuant
to the terms of the Forbearance Agreement,  we were required to fund $1,000 into
an escrow  account to be used for  conversion  of certain of the retail space in
the  collateral  properties  to office space and agreed that an event of default
with respect to the other debt  obligations  related to the property  would also
constitute a default under the Chattanooga Bonds. We funded this required escrow
in February 2003.

     Notes payable included unamortized debt premiums of $7,355 in the aggregate
at March 31, 2003.  Our debt premiums are being  amortized over the terms of the
related debt  instruments  in  accordance  with the effective  interest  method.
Amortization of debt premiums  (included in interest expense in the Consolidated
Statements of Operations) was $519 and $496 for the three months ended March 31,
2003 and 2002, respectively.

Defaults on Certain Non-recourse Mortgage Indebtedness

     During 2001,  certain of our  subsidiaries  suspended  regularly  scheduled
monthly  debt  service  payments  on  non-recourse  mortgage  loans  which  were
cross-collateralized  by the  Jeffersonville II Center and the Conroe Center. At
the time of suspension,  these non-recourse mortgage loans were held by New York
Life.  Effective January 1, 2002, New York Life foreclosed on the Conroe Center.
Effective July 18, 2002,  New York Life sold its interest in the  Jeffersonville
II Center loan. On August 13, 2002, we transferred our ownership interest in the
Jeffersonville  II Center to New York Life's  successor.  See Note 3 - "Property
Dispositions" for additional information.

     During  August  2002,  certain  of  our  subsidiaries  suspended  regularly
scheduled  monthly debt service  payments on  non-recourse  mortgage loans which
were  cross-collateralized  by the Vero Beach  Center and the  Woodbury  Center.
These non-recourse mortgage loans were held by John Hancock. Effective September
9, 2002, John Hancock foreclosed on the Vero Beach Center. Additionally,  we are
currently  negotiating  a transfer of our  ownership  interest  in the  Woodbury
Center to John Hancock.  The aggregate carrying value of the Woodbury Center was
$15,615 as of March 31, 2003. Such amount is exceeded by the aggregate  carrying
value of the  non-recourse  mortgage loan of $16,682 as of March 31, 2003.  Upon
the  transfer  of the  Woodbury  Center to John  Hancock,  we expect to record a
non-recurring gain for the difference between the carrying value of the property
and its  related  net  assets  and the  outstanding  loan  balance  and  related
liabilities. See Note 3 - "Property Dispositions" for additional information.

<PAGE>
                                  Page - (15)

     In December 2002, we notified the servicer of certain non-recourse mortgage
loans  (cross-collateralized  by Prime  Outlets at Bend,  Prime  Outlets at Post
Falls and Prime  Outlets at Sedona)  totaling  $24,919 as of March 31, 2003 that
the net cash flow from the  properties  securing the loans was  insufficient  to
fully pay the  required  monthly  debt  service.  At that  time,  certain of our
subsidiaries  suspended the regularly  scheduled  monthly debt service payments.
Subsequent  to our  notification  to the servicer,  we have been  remitting on a
monthly basis all available cash flow from the  properties,  after a reserve for
monthly operating expenses,  as partial payment of the debt service. The failure
to pay the full amount due constitutes a default under the loan agreements which
allows  the  lender to  accelerate  the loan and to  exercise  various  remedies
contained in the loan  agreements,  including  application of escrow balances to
delinquent  payments  and,  ultimately,  foreclosure  on  the  properties  which
collateralize  the loans. The lender has notified us that it has accelerated the
loans.  Since that time we have initiated  discussions  with the servicer of the
loans regarding  restructuring of the loans. There can be no assurance that such
discussions will result in any modification to the terms of the loans.  However,
any action by the lender with  respect to these  properties  is not  expected to
have a material  impact on our  results of  operations  or  financial  condition
because we are currently only remitting  available cash flow. These non-recourse
mortgage loans require the monthly funding of escrow accounts for the payment of
real estate taxes,  insurance  and capital  improvements.  Such escrow  accounts
totaled $364 as of March 31, 2003,  which is included in restricted  cash in the
Consolidated Balance Sheet. The aggregate carrying value of these properties was
$21,719  as of  March  31,  2003.  Such  amount  is  exceeded  by the  aggregate
outstanding  balance of the  non-recourse  mortgage loans of $24,919 as of March
31, 2003.  If the lender were to foreclose on the  collateral  properties  or we
were to transfer our  ownership  interest in the  collateral  properties  to the
lender,  we would record a  non-recurring  gain for the  difference  between the
carrying  value  of  the  properties  and  their  related  net  assets  and  the
outstanding loan balances and related liabilities.

Defeased Notes Payable

     On December 6, 2002,  we  completed  the sale of our  Colorado  Properties,
which were part of the 15 properties contained in the collateral pool securing a
first  mortgage  and  expansion  loan (the "Mega Deal  Loan"),  which had a then
outstanding balance of $338,940.  In connection with the release of the Colorado
Properties from the collateral  pool, we were required to partially  defease the
Mega Deal Loan. Therefore, the Mega Deal Loan was bifurcated into (i) a defeased
portion in the amount of $74,849  (the  "Defeased  Notes  Payable")  and (ii) an
undefeased portion in the amount of $264,091,  which is still referred to as the
Mega Deal Loan.  Both the Defeased Notes Payable and the Mega Deal Loan (i) bear
interest at a fixed-rate of 7.782%,  (ii) require monthly  payments of principal
and  interest  pursuant to a 30-year  amortization  schedule and (iii) mature on
November  11,  2003.  The Mega  Deal Loan is now  secured  by the  remaining  13
properties  contained  in the  collateral  pool.  We used  $79,257  of the gross
proceeds  from the sale of the  Colorado  Properties  to  purchase  US  Treasury
Securities,  which were placed into a trustee escrow (the "Trustee Escrow"). The
Trustee  Escrow is used to make the  scheduled  monthly debt  service  payments,
including the payment of the then outstanding  principal  amount,  together with
all accrued and unpaid interest on the maturity date of November 11, 2003, under
the Defeased Notes Payable. As of March 31, 2003, the outstanding balance of the
Defeased  Notes  Payable was  $74,509 and the balance of the Trustee  Escrow was
$77,365  (included in restricted cash in the  Consolidated  Balance Sheet).  See
Note 3 - "Property  Dispositions" for additional  information.  Furthermore,  in
connection with the partial defeasance of the Mega Deal Loan we amended the Mega
Deal Loan so that (i) we are required to fund 10 monthly payments of $500 into a
lender escrow to be used as additional  cash  collateral and (ii) release prices
for the remaining 13 properties in the  collateral  pool were amended to provide
for a more orderly refinancing of the Mega Deal Loan.

<PAGE>
                                  Page - (16)

Debt Service Obligations

     The scheduled principal  maturities of our debt,  excluding (i) unamortized
debt  premiums of $7,435 and (ii)  $41,250 of  aggregate  non-recourse  mortgage
indebtedness  in  default  (see  "Defaults  on  Certain  Non-recourse   Mortgage
Indebtedness"  above), and related average contractual interest rates by year of
maturity as of March 31, 2003 are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                    Bonds Payable
                                 (including sinking                                     Defeased
                                   fund payments)           Notes Payable              Notes Payable              Total Debt
                            --------------------------  -----------------------  -----------------------  ------------------------
                                Average                   Average                    Average                   Average
                               Interest    Principal     Interest     Principal     Interest    Principal     Interest    Principal
Years Ended December 31,          Rates   Maturities        Rates    Maturities        Rates   Maturities        Rates   Maturities
------------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>             <C>       <C>             <C>       <C>             <C>      <C>
2003                              6.46%     $    636        7.79%     $ 265,009       7.78%     $ 74,509        7.78%    $ 340,154
2004                              6.34%          726        7.97%         4,571                                 7.75%        5,297
2005                              6.34%          773        8.58%        11,574                                 8.44%       12,347
2006                              6.34%          820        8.83%       120,437                                 8.81%      121,257
2007                              6.34%          878        7.60%         1,002                                 7.02%        1,880
Thereafter                        6.52%       18,618        7.59%        57,995                                 7.33%       76,613
                                  ----      --------        ----      ---------       ----      --------        ----     ---------
                                  6.49%     $ 22,451        8.06%     $ 460,588       7.78%     $ 74,509        7.96%    $ 557,548
                                  ====      ========        ====      =========       ====      ========        ====     =========
====================================================================================================================================
</TABLE>

     Such indebtedness in the amount of $557,548 had a weighted-average maturity
of 2.3 years and bore contractual  interest at a weighted-average  rate of 7.96%
per annum.  At March 31, 2003, all of such  indebtedness  bore interest at fixed
rates.  Our  remaining   scheduled  principal  payments  during  2003  for  such
indebtedness  aggregated $340,154.  In addition to regularly scheduled principal
payments,  the remaining 2003 scheduled  principal payments also reflect balloon
payments  of (i)  $260,681  for the Mega Deal Loan and (ii)  $73,882 due for the
Defeased Notes  Payable.  Both the Mega Deal Loan and the Defeased Notes Payable
are  scheduled to mature on November  11,  2003.  All debt service due under the
Defeased Notes Payable,  including the balloon payment due at maturity,  will be
made from the Trustee Escrow. See "Going Concern" for additional information.

Interest Expense

     Interest costs are summarized as follows:

--------------------------------------------------------------------------------
Three Months Ended March 31,                           2003               2002
--------------------------------------------------------------------------------
Interest incurred                                   $ 10,460          $ 16,542
Amortization of deferred financing costs                 426             1,683
Amortization of debt premiums                           (519)             (496)
Interest expense - defeased debt                       1,489                 -
                                                    --------          --------
  Total                                             $ 11,856          $ 17,729
                                                    ========          ========
================================================================================

Defaults on Certain Non-recourse Mortgage Indebtedness of Unconsolidated
Partnerships

     Two mortgage loans related to projects in which we,  through  subsidiaries,
indirectly  own joint  venture  interests  have matured and are in default.  The
mortgage loans,  at the time of default,  were (i) a $10,389 first mortgage loan
on Phase I of the Bellport  Outlet  Center,  held by Union Labor Life  Insurance
Company  ("Union  Labor");  and (ii) a  $13,338  first  mortgage  loan on Oxnard
Factory Outlet, an outlet center located in Oxnard, California, held by Fru-Con.
An affiliate of ours has a 50% ownership interest in the partnership, which owns
Phase I of the Bellport Outlet Center.  Fru-Con and us are each a 50% partner in
the partnership that owns the Oxnard Factory Outlet.

<PAGE>
                                  Page - (17)

     Union Labor filed for  foreclosure on Phase I of the Bellport Outlet Center
and a  receiver  was  appointed  March  27,  2001 by the court  involved  in the
foreclosure action. Effective May 1, 2001, a manager hired by the receiver began
managing  and leasing  Phase I of the  Bellport  Outlet  Center.  A judgment for
foreclosure  was  entered on January  25,  2003 in the  amount of  $12,711.  The
foreclosure  occurred on March 17, 2003 with Union Labor  acquiring the property
for $5,100.  We continue to negotiate  the terms of a transfer of our  ownership
interest in Oxnard Factory  Outlet to Fru-Con.  We do not manage or lease Oxnard
Factory Outlet.

     We  believe  neither  of these  mortgage  loans is  recourse  to us.  It is
possible,  however,  that either or both of the respective  lenders will,  after
completing its foreclosure action, file a lawsuit seeking to collect from us the
difference  between the value of the mortgaged property and the amount due under
the loan. If such an action is brought, the outcome, and our ultimate liability,
if any, cannot be predicted at this time.

     In addition,  we are currently not receiving,  directly or indirectly,  any
cash flow from Oxnard  Factory  Outlet and were not receiving any cash flow from
Phase I of the  Bellport  Outlet  Center  prior to the loss of  control  of such
project.  We account for our  interests in (i) Phases I of the  Bellport  Outlet
Center and (ii) the Oxnard Factory  Outlet in accordance  with the equity method
of accounting. As of March 31, 2003, we had no carrying value for our investment
in these properties.

2002 Debt Transactions

     We disposed of certain properties through various  transactions,  including
sale, joint venture arrangements, foreclosure and transfer to lender, during the
year ended December 31, 2002. In connection with these dispositions,  we reduced
our indebtedness by $349,378, including the partial defeasance of $74,849 of the
Mega Deal Loan.  This  reduction  also  included (i) the repayment of associated
mortgage indebtedness  aggregating $168,982,  (ii) debt assumed by the purchaser
of $46,862 and (iii) debt associated with  foreclosure or transfer of properties
aggregating  $58,685.  See  Note  3 -  "Property  Dispositions"  for  additional
information.

     At the beginning of 2002, our mezzanine loan (the "Mezzanine  Loan") had an
outstanding balance of $62,079. During 2002 we repaid the Mezzanine Loan in full
through (i) regularly  scheduled monthly principal payments  aggregating $9,295,
(ii) additional principal payments aggregating $45,467 made with excess proceeds
from our  asset  sales  (see Note 3 -  "Property  Dispositions"  for  additional
information)  and (iii) a payoff of $7,317 with cash from escrows and  operating
cash.  In connection  with the early  extinguishment  of the Mezzanine  Loan, we
incurred a non-recurring loss of $525 in the fourth quarter of 2002 representing
the write-off of remaining  unamortized  deferred financing costs. The Mezzanine
Loan was  obtained in December  2000 in the  original  amount of $90,000 and was
scheduled to mature on September 30, 2003.  Through a series of  amendments  and
modifications  to its terms, the Mezzanine Loan bore interest at a fixed-rate of
19.75% at the time of the retirement.

<PAGE>
                                  Page - (18)

Guarantees and Guarantees of Indebtedness of Others

HGP Guarantees

     On July 15, 2002, Horizon Group Properties, Inc. and its affiliates ("HGP")
announced they had refinanced a secured credit facility (the "HGP Secured Credit
Facility")  through  a series  of new loans  aggregating  $32,500.  Prior to the
refinancing,  we were a guarantor  under the HGP Secured Credit  Facility in the
amount of $10,000. In connection with the refinancing, our guarantee was reduced
to a maximum  of  $4,000 as  security  for a $3,000  mortgage  loan and a $4,000
mortgage loan  (collectively,  the "HGP Monroe  Mortgage Loan") secured by HGP's
outlet shopping center located in Monroe, Michigan. The HGP Monroe Mortgage Loan
has a 3-year term,  bears  interest at the prime lending rate plus 2.50% (with a
minimum of 9.90%) and requires monthly  interest-only  payments.  The HGP Monroe
Mortgage Loan may be prepaid without penalty after two years. Our guarantee with
respect to the HGP Monroe  Mortgage Loan will be  extinguished  if the principal
amount of such obligation is reduced to $5,000 or less through repayments.

     Additionally,   we  are  a  guarantor  with  respect  to  certain  mortgage
indebtedness  (the "HGP Office  Building  Mortgage")  in the amount of $2,129 on
HGP's corporate office building and related  equipment located in Norton Shores,
Michigan.  The HGP  Office  Building  Mortgage  matures on May 31,  2003,  bears
interest at LIBOR plus 5.50%, and requires monthly debt service payments.

     On October 11, 2001,  HGP announced  that it was in default under two loans
with an aggregate  principal  balance of approximately  $45.5 million secured by
six of its other outlet centers.  Such defaults do not constitute defaults under
the HGP Monroe  Mortgage Loan or the HGP Office  Building  Mortgage nor did they
constitute a default under the HGP Secured Credit Facility. We have not recorded
any liability related to these guarantees and no claims have been made under our
guarantees  with  respect  to the HGP  Monroe  Mortgage  Loan or the HGP  Office
Building  Mortgage.  HGP  is a  publicly  traded  company  that  was  formed  in
connection with our merger with Horizon Group, Inc. ("Horizon") in June 1998.

Prime/Estein Venture Guarantees

     Pursuant to Prime/Estein  Venture-related  documents to which affiliates of
ours  are  parties,  we  are  obligated  to  provide  to,  or  obtain  for,  the
Prime/Estein  Venture  fixed-rate  financing  at an  annual  rate of 7.75%  (the
"Interest  Rate Subsidy  Agreement")  for Prime Outlets at Birch Run (the "Birch
Run Center"),  Prime Outlets at Williamsburg (the "Williamsburg Center") and the
Hagerstown Center.

     In August 2001, we, through affiliates,  completed a refinancing of $63,000
of first  mortgage loans secured by the Birch Run Center.  The  refinanced  loan
(the "Birch Run First Mortgage") (i) has a term of 10-years, (ii) bears interest
at an effective rate of 8.12% and (iii) requires  monthly  payments of principal
and  interest  pursuant  to a 25-year  amortization  schedule.  Pursuant  to the
Interest  Rate Subsidy  Agreement,  we are  required to pay to the  Prime/Estein
Venture the  difference  between the cost of the financing at an assumed rate of
7.75% and the actual  cost of such  financing  at the annual  rate of 8.12% (the
"Interest Rate Subsidy Obligation").  The net present value of the Interest Rate
Subsidy  Obligation  (included in accounts payable and other  liabilities in the
Consolidated Balance Sheet) was $1,437 as of March 31, 2003.

<PAGE>
                                  Page - (19)

     In October 2001, we,  through  affiliates,  completed the  refinancing of a
$32,500 first mortgage loan secured by the  Williamsburg  Center.  The new first
mortgage loan (the  "Williamsburg  First  Mortgage") (i) has a term of 10-years,
(ii) bears interest at a fixed-rate of 7.69% and (iii) requires monthly payments
of principal and interest pursuant to a 25-year amortization schedule.  Pursuant
to the Interest Rate Subsidy Agreement,  the Prime/Estein Venture is required to
pay to us the difference between the cost of the financing at an assumed rate of
7.75% and the actual cost of such financing at the annual rate of 7.69%.

     On January 11,  2002,  we sold the  Hagerstown  Center to the  Prime/Estein
Venture.  In connection  with the sale,  the  Prime/Estein  Venture  assumed the
Hagerstown  First Mortgage in the amount of $46,862;  however,  our guarantee of
such indebtedness remains in place. Additionally,  we are obligated to refinance
the Hagerstown First Mortgage on behalf of the Prime/Estein Venture on or before
June 1, 2004, the date on which such  indebtedness  matures.  Additionally,  the
Prime/Estein Venture's cost of the Hagerstown First Mortgage and any refinancing
of it are  fixed at an annual  rate of 7.75%  for a period  of 10 years.  If the
actual  cost of such  indebtedness  should  exceed  7.75% at any time during the
10-year period,  we will be obligated to pay the difference to the  Prime/Estein
Venture.  If the actual cost of such indebtedness is less than 7.75% at any time
during the 10-year period,  however,  the Prime/Estein Venture will be obligated
to pay the difference to us. The actual cost of the Hagerstown First Mortgage is
30-day LIBOR plus 1.50%,  or 2.84% as of March 31, 2003.  Because the Hagerstown
First  Mortgage  bears interest at a variable rate, we are exposed to the impact
of interest  rate  changes.  We have not recorded any  liability  related to our
guarantee of the Hagerstown First Mortgage; however, in connection with the sale
of the Hagerstown  Center,  we  established a reserve for estimated  refinancing
costs in the amount of $937,  which is included  in  accounts  payable and other
liabilities in the Consolidated Balance Sheet as of March 31, 2003. See Note 3 -
"Property  Dispositions" of the Notes to Consolidated  Financial  Statements for
additional information.

Mandatory Redemption Obligation

     On July 26, 2002,  we sold the Bridge  Properties  to the PFP  Venture.  In
connection  with the sale, we guaranteed FRIT (i) a 13% return on its $17,236 of
invested  capital and (ii) the full return of its  invested  capital by December
31, 2003. As of March 31, 2003, our Mandatory Redemption Obligation with respect
to the full return of FRIT's invested capital was $16,356  (included in accounts
payable and other  liabilities in the Consolidated  Balance Sheet).  On April 4,
2003,  we made an additional  payment with respect to the  Mandatory  Redemption
Obligation  of $1,085  with the net  proceeds  from the  March 31,  2003 sale of
certain  excess  land.  See  Note 3 -  "Property  Dispositions"  for  additional
information with respect to the sale of the Bridge Properties.

Going Concern

     Our liquidity  depends on cash provided by operations and potential capital
raising  activities  such as funds  obtained  through  borrowings,  particularly
refinancing of existing debt, and cash generated  through asset sales.  Although
we believe that  estimated  cash flows from  operations  and  potential  capital
raising  activities will be sufficient to satisfy our scheduled debt service and
other  obligations and sustain our operations for the next year, there can be no
assurance  that we will be successful in obtaining the required  amount of funds
for these items or that the terms of the potential  capital raising  activities,
if they should  occur,  will be as  favorable  as we have  experienced  in prior
periods.

<PAGE>
                                  Page - (20)

     During 2003, our Mega Deal Loan matures on November 11, 2003. The Mega Deal
Loan,  which is secured by a 13 property  collateral  pool,  had an  outstanding
principal  balance of $262,890  as of March 31, 2003 and will  require a balloon
payment of $260,681 at maturity.  Based on our initial  discussions with various
prospective  lenders,  we are currently  projecting a potential  shortfall  with
respect  to  refinancing  the Mega Deal  Loan.  Nevertheless,  we  believe  this
shortfall may be alleviated  through  potential asset sales and/or other capital
raising activities,  including the placement of mezzanine level debt. We caution
that our assumptions are based on current market conditions and, therefore,  are
subject to  various  risks and  uncertainties,  including  changes  in  economic
conditions  which may  adversely  impact our ability to refinance  the Mega Deal
Loan at  favorable  rates or in a timely  and  orderly  fashion  and  which  may
adversely impact our ability to consummate  various asset sales or other capital
raising activities.

     In connection  with the completion of the sale of the Bridge  Properties in
July 2002,  we  guaranteed  to FRIT (i) a 13% return on its  $17,236 of invested
capital,  and (ii) the full return of the  Mandatory  Redemption  Obligation  by
December 31, 2003.  As of March 31, 2003,  the Mandatory  Redemption  Obligation
(included in accounts payable and other liabilities in the Consolidated  Balance
Sheet)  was  $16,356.  See  Note  3 -  "Property  Dispositions"  for  additional
information.  On April 4, 2003, we made an additional payment of $1,085 with net
proceeds  from the March 31, 2003 sale of certain  excess land which reduced the
balance of the Mandatory Redemption Obligation to $15,271.  Although we continue
to seek to  generate  additional  liquidity  to repay the  Mandatory  Redemption
Obligation  through  (i) the sale of FRIT's  ownership  interest  in the  Bridge
Properties  and/or (ii) the placement of additional  indebtedness  on the Bridge
Properties,  there can be no  assurance  that we will be able to  complete  such
capital  raising  activities  by December 31, 2003 or that such capital  raising
activities, if they should occur, will generate sufficient proceeds to repay the
Mandatory  Redemption  Obligation  in  full.  Failure  to  repay  the  Mandatory
Redemption  Obligation  by December 31, 2003 would  constitute a default,  which
would enable FRIT to exercise its rights with respect to the collateral  pledged
as security to the guarantee, including some of our partnership interests in the
13 property collateral pool under the aforementioned Mega Deal Loan. Because the
Mandatory Redemption  Obligation is secured by some of our partnership interests
in the 13 property  collateral pool under the Mega Deal Loan, we may be required
to repay the Mandatory Redemption  Obligation before, or in connection with, the
refinancing of the Mega Deal Loan.

     These conditions raise substantial doubt about our ability to continue as a
going  concern.  The financial  statements  contained  herein do not include any
adjustment  to reflect the possible  future  effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of these uncertainties.

Note 5 - Shareholders' Equity

     To qualify as a real estate  investment  trust  ("REIT") for federal income
tax purposes,  we are required to pay  distributions to our common and preferred
shareholders  of at  least  90%  of our  REIT  taxable  income  in  addition  to
satisfying  other  requirements.  Although we intend to make  distributions,  if
necessary,  to remain  qualified  as a REIT  under the Code,  we also  intend to
retain such amounts as we consider  necessary  from time to time for our capital
and liquidity needs.

     Our policy  remains to pay  distributions  only to the extent  necessary to
maintain our status as a REIT for federal  income tax purposes.  During 2002, we
were not required to pay any  distributions in order to maintain our status as a
REIT and based on our current federal income tax  projections,  we do not expect
to pay any distributions during 2003. We are currently in arrears on 14 quarters
of  preferred  stock  distributions  due February 15, 2000 through May 15, 2003,
respectively.

<PAGE>
                                  Page - (21)

     We may not make distributions to our common  shareholders or our holders of
common  units of limited  partnership  interests  in the  Operating  Partnership
unless  we  are  current  with  respect  to   distributions   to  our  preferred
shareholders. As of March 31, 2003, unpaid dividends for the period beginning on
November  16,  1999  through  March 31,  2003 on our Series A Senior  Cumulative
Preferred  Stock  ("Series A Senior  Preferred  Stock") and Series B  Cumulative
Convertible  Participating  Preferred  Stock  ("Series B  Convertible  Preferred
Stock") aggregated $20,377 and $56,142,  respectively.  The annualized dividends
on our 2,300,000  shares of Series A Senior Preferred Stock and 7,828,125 shares
of Series B Convertible  Preferred  Stock  outstanding  as of March 31, 2003 are
$6,037 ($2.625 per share) and $16,635 ($2.125 per share), respectively.

Note 6 - Legal Proceedings

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

     The  Company  and its  affiliates  were  defendants  in a lawsuit  filed by
Accrued  Financial  Services ("AFS") on August 10, 1999 in the Circuit Court for
Baltimore  City. The lawsuit was removed to United States District Court for the
District of Maryland (the "U.S. District Court") on August 20, 1999. AFS claimed
that  certain  tenants  had  assigned to AFS their  rights to make claims  under
leases such  tenants  had with  affiliates  of the Company and alleged  that the
Company and its affiliates  overcharged such tenants for common area maintenance
("CAM")  charges and promotion fund charges.  The U.S.  District Court dismissed
the lawsuit on June 19, 2000. AFS appealed the U.S. District Court's decision to
the United States Court of Appeals for the Fourth Circuit. Briefs were submitted
and oral argument before a panel of judges of the United States Court of Appeals
for the Fourth  Circuit was held on October 30, 2001,  during which the panel of
judges  requested  further  briefing of certain  issues.  On July 29, 2002,  the
Fourth Circuit affirmed the dismissal. AFS filed a request for further review by
the Fourth  Circuit  which  request was  denied.  In January  2003,  AFS filed a
petition  for a writ of  certiorari  by the  United  States  Supreme  Court (the
"Supreme  Court") and the Company filed its opposition on February 24, 2003. The
Supreme Court  subsequently  denied the writ of certiorari  and the parties have
agreed to dismiss any remaining claims, thereby terminating the AFS lawsuit.

     In addition,  certain tenants in the Company's and its  affiliates'  outlet
centers have made or may make  allegations  concerning  overcharging for CAM and
promotion fund charges  because of varying  clauses in their leases  pursuant to
which they claim under various  circumstances that they were not required to pay
some or all of the  pass-through  charges.  Such  claims if  asserted  and found
meritorious,  could have a material affect on the Company's financial condition.
Determination  of whether  liability  would exist to the Company would depend on
interpretation  of various lease clauses  within a tenant's lease and all of the
other leases at each center  collectively.  To date such issues have been raised
and resolved with Dinnerware Plus Holdings, Inc. ("Mikasa"),  Melru Corporation,
Designs,  Inc. and Brown Group Retail, Inc., all of which at one time or another
were in litigation,  or threatened  litigation  with the Company.  Additionally,
during the first quarter of 2003, Gap Inc. notified the Company that it believes
it is  entitled  to a refund  of  certain  pass-through  charges  as a result of
certain clauses in its leases.

<PAGE>
                                  Page - (22)

     In the second quarter of 2002, the Company recorded a non-recurring  charge
to establish a reserve in the amount of $3,000 for  resolution of these matters,
in addition to the Mikasa matter  referred to above.  This reserve was estimated
in accordance  with our  established  policies and  procedures  concerning  loss
contingencies  for  additional  information).  The balance of the unused reserve
(which  is  included  in the  accounts  payable  and  other  liabilities  in the
Consolidated  Balance Sheet) is $2,240 as of March 31, 2003.  Based on presently
available information, the Company believes it is probable the remaining reserve
will be utilized over the next several years in resolving claims relating to the
pass-through and promotional fund provisions contained in its leases,  inclusive
of amounts  that may be owed,  if any,  to the Gap Inc.  The  Company  cautions,
however,   that  given  the  inherent   uncertainties   of  litigation  and  the
complexities  associated  with a  large  number  of  leases  and  other  factual
questions  at issue,  actual  costs may vary from this  estimate.  No other such
tenant, however, has filed a suit or indicated to the Company that it intends to
file a suit. Nevertheless, it is too early to make any predictions as to whether
the Company or its affiliates may be found liable with respect to other tenants,
or to predict damages should liability be found.

     Affiliates of the Company  routinely file lawsuits to collect past rent due
from, and to evict,  tenants which have defaulted under their leases.  There are
currently dozens of such actions pending.  In addition to defending  against the
Company's   affiliates'   claims  and  eviction   actions,   some  tenants  file
counterclaims  against  the  Company's  affiliates.  A tenant  who files  such a
counterclaim typically claims that the Company's affiliate which owns the outlet
center in question  defaulted under the tenant's  lease,  overcharged the tenant
for CAM and promotion fund charges, made  misrepresentations  during the leasing
process,  or failed to  maintain  or market the  outlet  center in  question  as
required by the lease.  One such case involves a collections and eviction action
in Puerto Rico captioned Outlet Village of Puerto Rico Limited Partnership, S.E.
v. WEPA,  Inc.,  and another,  for instance,  involves a collection  case in San
Marcos,  Texas,  captioned,  San Marcos Factory Stores, Ltd. v. SM Collectibles,
Inc. d/b/a Country  Clutter.  Usually such  counterclaims  are without merit. In
response to such  counterclaims  the Company's  affiliates  usually  continue to
pursue   their   collection   or  eviction   actions  and  defend   against  the
counterclaims. Despite the fact that the Company and its affiliates believe such
counterclaims are without merit and defend against them vigorously,  the outcome
of all such counterclaims,  and, thus, the liability, if any, of the Company and
its affiliates, cannot be predicted at this time.

<PAGE>
                                  Page - (23)

     Several entities (the "eOutlets  Plaintiffs")  filed or stated an intention
to file lawsuits (collectively, the "eOutlets Lawsuits") against the Company and
its affiliates  arising out of the Company's on-line venture,  primeoutlets.com.
inc.,  also  known as  eOutlets,  an  affiliate  of the  Company.  The  eOutlets
Plaintiffs seek to hold the Company and its affiliates responsible under various
legal theories for liabilities incurred by primeoutlets.com, inc., including the
theories that the Company  guaranteed  the  obligations of eOutlets and that the
Company was the  "alter-ego"  of eOutlets.  The Company  believes that it is not
liable to eOutlets Plaintiffs as there was no privity of contract between it and
the  various  eOutlets  Plaintiffs.  In the case  captioned  Convergys  Customer
Management Group, Inc. v. Prime Retail,  Inc. and  primeoutlets.com  inc. in the
Court of Common Pleas for Hamilton  County  (Ohio),  the Company  prevailed in a
motion to  dismiss  the  plaintiff's  claim  that the  Company  was  liable  for
primeoutlets.com inc.'s breach of contract based on the doctrine of piercing the
corporate  veil.  In another  matter,  J. Walter  Thompson,  USA,  Inc. v. Prime
Retail,  L.P.  and Prime  Retail,  Inc.  the  Company  succeeded  in having  the
corporate veil piercing and alter ego claims dismissed and settled the remaining
claims in February  2003.  primeoutelts.com,  inc.  filed for  protection  under
Chapter 7 of the United  States  Bankruptcy  Code in  November of 2000 under the
name  E-Outlets  Resolution  Corp.  (the  "Debtor").  On November  5, 2002,  the
bankruptcy trustee for the Debtor brought suit against Prime Retail, L.P., Prime
Retail,  Inc., and Prime Retail E-Commerce,  Inc. (the "Entity  Defendants") and
certain  former  directors  of the Debtor  (the  "Individual  Defendants").  The
Trustee  has  asserted  claims  of alter  ego,  promissory  estoppel,  breach of
contract,  breach of fiduciary  duty,  tortious  interference  with  prospective
business  advantage,  unjust  enrichment  and quantum  meruit against the Entity
Defendants  and  breach of  fiduciary  duty and  gross  negligence  against  the
individual defendants.  The Company has tendered the suit, both as to the Entity
Defendants and Individual  Defendants,  to its Directors' and Officers'  ("D&O")
insurance  carrier.  Motions  to  dismiss  the  suit  have  been  filed  by  all
Defendants.  All  Defendants  believe  the  suit is  without  merit  and plan on
defending it  vigorously.  Nevertheless,  the outcome of this  lawsuit,  and the
ultimate liability of the Company, if any, cannot be predicted at this time.

     In May 2001, the Company,  through  affiliates,  filed suit against Fru-Con
Construction,  Inc.  ("FCC"),  the lender on Prime  Outlets  at New River  ("New
River") as a result of FCC's foreclosure of New River upon the maturation of the
loan. The Company and its affiliates  allege that they have been damaged because
of FCC's  failure to  dispose of the  collateral  in a  commercially  reasonable
manner and as a result of a violation of federal  trademark  laws.  The Company,
through  affiliates,  has also filed suit  against  The Fru-Con  Projects,  Inc.
("Fru-Con"),  a partner in Arizona Factory Shops Partnership and an affiliate of
FCC. The Company and its affiliates allege that Fru-Con failed to use reasonable
efforts to assist in obtaining  refinancing.  Fru-Con has claims pending against
the  Company and its  affiliates,  as part of the same suit,  alleging  that the
Company and its affiliates  breached their contract with Fru-Con by not allowing
Fru-Con to  participate  in an outlet  project in Sedona,  Arizona  (the "Sedona
Project")  and  breached a  management  and leasing  agreement  by managing  and
leasing the Sedona  Project.  The Company  believes its  affiliates and it acted
property  and FCC did not act  properly.  The  Company and its  affiliates  will
vigorously  defend the claims filed  against them and  prosecute the claims they
filed. Nevertheless,  the ultimate outcome of the suit, including the liability,
if any, of the Company and its affiliates, cannot be predicted at this time.

<PAGE>
                                  Page - (24)

Note 7 - Investment in Unconsolidated Partnerships

     We  account  for  our  investment  in  unconsolidated   joint  ventures  in
accordance  with the equity  method of  accounting  as we  exercise  significant
influence,  but do not  control  these  entities.  In all of our  joint  venture
arrangements,  the  rights  of the  investors  are  both  protective  as well as
participating.   Therefore,   these   participating   rights  preclude  us  from
consolidating  our  investments.  Our investments are recorded  initially at our
cost  and  subsequently  adjusted  for  equity  in  earnings  (losses)  and cash
contributions and distributions.

     As of March 31, 2003 our interests in joint venture  partnerships  included
(i)  three  outlet  centers  owned by the  Prime/Estein  Venture  and (ii)  five
properties owned by the PFP Venture. The Prime/Estein Venture owns the Birch Run
Center,  the  Williamsburg  Center and the  Hagerstown  Center which  contain an
aggregate  1,485,000  square  feet  of GLA.  The PFP  Venture  owns  the  Bridge
Properties (Prime Outlets at Anderson,  Prime Outlets at Calhoun,  Prime Outlets
at Gaffney,  Prime  Outlets at Lee and Prime  Outlets at Lodi) which  contain an
aggregate 1,261,000 square feet of GLA.

     During the three  months ended March 31, 2003 and 2002,  respectively,  our
equity in earnings  (loss) of  unconsolidated  joint  venture  partnerships  was
$1,126 and $153, respectively, which is included in interest and other income in
the Consolidated Statements of Operations.

     The following summarizes unaudited condensed financial  information for our
investment in unconsolidated joint venture partnerships:

--------------------------------------------------------------------------------
Three Months Ended March 31,                         2003               2002
--------------------------------------------------------------------------------
Total revenues                                     $ 15,510           $ 8,749
Total expenses                                       13,925             8,764
                                                   --------           -------
  Net income (loss)                                $  1,585           $   (15)
                                                   ========           =======
================================================================================

<PAGE>
                                  Page - (25)

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

          (Amounts in thousands, except share, unit and square foot information)


     The  following  discussion  in  "Management's  Discussion  and  Analysis of
Financial  Condition  and  Results of  Operations"  and other  sections  of this
Quarterly Report on Form 10-Q contain certain forward-looking  statements within
the  meaning of the  Private  Securities  Litigation  Reform Act of 1995,  which
reflect  management's  current views with respect to future events and financial
performance.  In  addition,  we may make  forward-looking  statements  in future
filings with the  Securities and Exchange  Commission  and in written  material,
press   releases   and  oral   statements   issued  by  us  or  on  our  behalf.
Forward-looking  statements include statements regarding the intent,  belief, or
current  expectations of us or our officers,  including  statements preceded by,
followed by, or including  forward-looking  terminology  such as "may,"  "will,"
"should," believe," "expect,"  "anticipate,"  "estimate," "continue," "predict,"
or similar expressions with respect to various matters.

     These  statements  are subject to potential  risks and  uncertainties  and,
therefore, actual results may differ materially. Such forward-looking statements
are subject to certain risks and uncertainties,  including,  but not limited to,
the risk associated with our high level of leverage and our ability to refinance
such  indebtedness  as it  becomes  due;  the risk that we or one or more of our
subsidiaries are not able to satisfy scheduled debt service  obligations or will
not remain in  compliance  with existing  loan  covenants;  the risk of material
adverse affects of future events,  including tenant  bankruptcies,  abandonments
and the non-payment by tenants of contractual rents and additional rents, on our
financial  performance;  the risk  related to the retail  industry  in which our
outlet  centers  compete,  including  the potential  adverse  impact of external
factors, such as inflation, consumer confidence, unemployment rates and consumer
tastes and preferences;  the risk associated with our potential asset sales; the
risk of potential  increases in market interest rates from current  levels;  the
risk associated with real estate ownership, such as the potential adverse impact
of  changes  in local  economic  climate  on the  revenues  and the value of our
properties;  the risk associated with  litigation;  and the risk associated with
competition from web-based and catalogue retailers.

     All  forward-looking  statements  in this  report are based on  information
available  to us on the date of this report.  We do not  undertake to update any
forward-looking  statements  that  may be  made by us or on our  behalf  in this
report or otherwise.

Introduction

     Unless the context otherwise requires,  all references to "we," "us," "our"
or the "company"  herein mean Prime  Retail,  Inc. and those  entities  owned or
controlled by Prime Retail,  Inc.,  including Prime Retail, L.P. (the "Operating
Partnership").

     The  following  discussion  and  analysis  of  our  consolidated  financial
condition  and  results of  operations  should be read in  conjunction  with the
Consolidated  Financial Statements and Notes thereto appearing elsewhere in this
Quarterly  Report on Form  10-Q.  Our  operations  are  substantially  conducted
through the Operating  Partnership.  As of March 31, 2003, we had an 80% general
partnership interest in the Operating Partnership with full and complete control
over its  management,  not  subject to removal by the limited  partners.  We are
dependent  upon  the   distributions   or  other  payments  from  the  Operating
Partnership to meet our financial obligations. Historical results and percentage
relationships  set  forth  herein  are  not  necessarily  indicative  of  future
operations.

<PAGE>
                                  Page - (26)

Critical Accounting Policies and Estimates

     Our  discussion  and  analysis of our  financial  condition  and results of
operations  are  based  upon our  Consolidated  Financial  Statements  and Notes
thereto  appearing  elsewhere  in this  Quarterly  Report  on Form  10-Q.  These
Consolidated  Financial  Statements  and Notes  thereto  have been  prepared  in
accordance with accounting  principles  generally accepted in the United States.
The  preparation of such  statements  requires us to make certain  estimates and
judgments that affect the reported amounts of assets, liabilities,  revenues and
expenses, and the related disclosure of contingent liabilities.  We evaluate our
estimates  on  an  on-going  basis;  including  those  related  to  (i)  revenue
recognition,  (ii)  provisions  for  bad  debt  on  accounts  receivable,  (iii)
potential  impairment of the carrying value of rental  properties  held for use,
(iv) capitalization and depreciation of significant renovations and improvements
and (v) contingencies for debt guarantees and litigation.  We base our estimates
on  historical  trends  and  certain  other  assumptions  that  we  believe  are
reasonable under the particular  circumstances.  These estimates ultimately form
the basis for  making  judgments  about the  carrying  values of our  assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

     To assist you in  understanding  our  financial  condition and results from
operations,  we have identified our critical  accounting  policies and discussed
them below. These accounting policies are most important to the portrayal of our
financial  condition  and  results  from  operations,   either  because  of  the
significance  of the financial  statement  items to which they relate or because
they require our management's most difficult, subjective or complex judgments.

Revenue Recognition

     Leases with tenants are accounted for as operating  leases.  Minimum rental
income is  recognized  on a  straight-line  basis over the term of the lease and
unpaid  rents are  included  in  accounts  receivable,  net in the  accompanying
Consolidated Balance Sheets. Certain lease agreements contain provisions,  which
provide for rents based on a  percentage  of sales or based on a  percentage  of
sales  volume  above a  specified  threshold.  These  contingent  rents  are not
recognized until the required  thresholds are exceeded.  In addition,  the lease
agreements  generally  provide  for  the  reimbursement  of real  estate  taxes,
insurance,   advertising  and  certain  common  area  maintenance  costs.  These
additional  rents and tenant  reimbursements  are  accounted  for on the accrual
basis.

Bad Debt Expense

     We regularly  review our accounts  receivable  to determine an  appropriate
amount for the allowance for doubtful accounts based upon the impact of economic
conditions on ours tenants' ability to pay, past collection  experience and such
other factors which, in our judgment,  deserve current  recognition.  In turn, a
provision for uncollectible  accounts receivable ("bad debt expense") is charged
against the allowance to maintain the allowance  level within this range. If the
financial condition of our tenants were to deteriorate,  resulting in impairment
in their ability to make payments due under their leases,  additional allowances
may be required.

<PAGE>
                                  Page - (27)

Impairment of Rental Property

     We monitor our  Properties  for  indicators  of  impairment  on an on-going
basis.  We record a provision for impairment  when we believe certain events and
circumstances  have  occurred  which  indicate  that the  carrying  value of our
Properties  might  have  experienced  a  decline  in value  that is  other  than
temporary  and the  undiscounted  cash flows  estimated to be generated by those
assets are less than the carrying amounts of those assets. Impairment losses are
measured as the  difference  between the carrying  value and the estimated  fair
value for assets held in the portfolio.  For assets held for sale, impairment is
measured as the  difference  between  the  carrying  value and fair value,  less
estimated  costs  to  dispose.  Fair  value is based  on  estimated  cash  flows
discounted  at a  risk-adjusted  rate  of  return.  Adverse  changes  in  market
conditions or deterioration  in the operating  results of our outlet centers and
other  rental  properties  could result in losses or an inability to recover the
current carrying value of such assets. Such potential losses or the inability to
recover the  current  carrying  value may not be  reflected  in our  Properties'
current carrying value,  thereby possibly  requiring an impairment charge in the
future.

Capitalization and Depreciation of Significant Renovations and Improvements

     Depreciation  is calculated on the  straight-line  basis over the estimated
useful  lives of the  assets,  based upon  management's  estimates.  Significant
renovations  and  improvements,  which improve  and/or extend the useful life of
assets are capitalized and depreciated over their estimated useful lives,  based
upon management's estimates.

Contingencies

     We are  subject  to  proceedings,  lawsuits,  and other  claims  related to
various  matters  (see  Note  6 -  "Legal  Proceedings"  of  the  Notes  to  the
Consolidated Financial Statements for additional information).  Additionally, we
have guaranteed certain indebtedness of others (see Note 4 - "Debt" of the Notes
to Consolidated Financial Statements for additional  information).  With respect
to these  contingencies,  we assess the  likelihood of any adverse  judgments or
outcomes to these  matters  and, if  appropriate,  potential  ranges of probable
losses.  A determination of the amount of reserves  required,  if any, for these
contingencies are made after careful analysis of each individual  issue.  Future
reserves  may be  required  because  of (i) new  developments  or changes to the
approach in which we deal with each matter or (ii) if unasserted claims arise.

Outlet Center Portfolio

Portfolio GLA and Occupancy

     Our outlet center  portfolio size reflects (i) our past  development  (both
new outlet centers and expansions to outlet centers) and acquisition  activities
and (ii) our more recent disposition activities. Our outlet portfolio (including
properties owned through joint venture partnerships)  consisted of 36 properties
totaling 10,226,000 square feet of gross leasable area ("GLA") at March 31, 2003
compared to 44 properties  totaling  12,388,000  square feet of GLA at March 31,
2002.  The  change in our outlet  center  GLA is  because  of  certain  property
dispositions,  which are discussed  below. Our outlet center portfolio was 86.7%
and 87.2%  occupied as of March 31, 2003 and 2002,  respectively.  Additionally,
our  outlet  center  portfolio  was  87.8%  leased  as of March  31,  2003.  The
weighted-average  occupancy  of our outlet  center  portfolio  (excluding  those
properties  disposed of whose results are included in  discontinued  operations)
during  the three  months  ended  March 31,  2003 and 2002 was 87.5% and  87.7%,
respectively.

     We disposed of certain properties through various  transactions  (including
sale, joint venture  arrangements,  foreclosure and transfer of ownership to the
applicable lender). These transactions have had a significant impact on the size
of our portfolio for the periods presented and are summarized below.

<PAGE>
                                  Page - (28)

     During 2002, we completed  transactions involving 17 properties aggregating
4,431,000 square feet of GLA. These transactions  included (i) the sale of seven
outlet  centers  aggregating  1,791,000  square  feet of GLA into joint  venture
arrangements,  (ii) the sale of five (including one consisting of 197,000 square
feet of GLA that we owned 51% through an  unconsolidated  joint venture)  outlet
centers  aggregating  1,486,000  square feet of GLA to unrelated  third parties,
(iii) the foreclosure  sale and/or transfer of three outlet centers  aggregating
922,000  square  feet of GLA to the  applicable  lender and (iv) the sale of two
community  centers  aggregating  232,000  square feet of GLA to unrelated  third
parties.

     The seven  centers sold into joint  venture  arrangements  consisted of two
separate transactions involving (i) Prime Outlets at Hagerstown (the "Hagerstown
Center"),  which  was  sold  to  an  existing  joint  venture  partnership  (the
"Prime/Estein Venture"),  and (ii) six outlet centers (collectively,  the Bridge
Properties").  Such properties are  collectively  referred to as the "2002 Joint
Venture Properties".  Commencing on the date of disposition,  we account for our
ownership  interest in the 2002 Joint Venture  Properties in accordance with the
equity method of  accounting.  The  operating  results of the 2002 Joint Venture
Properties  are  reflected in our results  from  continuing  operations  for all
periods presented through their respective dates of disposition. Their operating
results have not been  classified to discontinued  operations  because we have a
significant  continuing involvement in these properties.  Additionally,  we sold
Phases II and III of the Bellport Outlet Center.  We accounted for our ownership
interest in the Bellport  Outlet Center in accordance  with the equity method of
accounting through its date of disposition.

     The  operating  results  of the  remaining  disposed  properties  have been
classified  as  discontinued   operations  in  the   accompanying   Consolidated
Statements of Operations for all periods presented.

     On March  31,  2003,  we  completed  the sale of Prime  Outlets  at  Latham
consisting of 43,000 square feet of GLA. This property was owned through a joint
venture  partnership.  See  Note 3 -  "Property  Dispositions"  to the  Notes to
Consolidated Financial Statements.

     Effective  January 1, 2002,  we adopted  Statement of Financial  Accounting
Standards  ("FAS")  No.  144,  "Accounting  for the  Impairment  or  Disposal of
Long-Lived  Assets." In accordance with the requirements of FAS No. 144, we have
classified  the  operating  results,  including  gains  and  losses  related  to
disposition,  for certain  properties either disposed of or classified as assets
held  for  sale  during  2002 as  discontinued  operations  in the  accompanying
Consolidated  Statements of Operations for all periods presented.  The operating
results for  properties  that were sold into joint venture  partnerships  during
2002 have not been  classified to  discontinued  operations in the  accompanying
Consolidated  Statements  of  Operations  because we still retain a  significant
continuing  involvement  in  their  operations.  Such  properties  and/or  their
operating  results  through  the  dates  of  their  respective  disposition  are
collectively  referred to as the "2002 Joint Venture Properties".  The following
discussion and tables regarding operating results for the comparable periods are
reflective of the  classification  requirements  under FAS No. 144 and relate to
operating results from continuing operations unless otherwise indicated.

<PAGE>
                                  Page - (29)

     The table set forth below  summarizes  certain  information with respect to
our  outlet  centers  as of March 31,  2003 (see Note 4 - "Debt" of the Notes to
Consolidated  Financial Statements  contained herein for additional  information
with respect to indebtedness on our Properties):

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Grand              GLA             Occupancy
Outlet Centers                                                                  Opening Date        (Sq. Ft.)        Percentage (1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                     <C>                   <C>
Prime Outlets at Fremont-- Fremont, Indiana                                     October 1985          229,000               86%

Prime Outlets at Birch Run (2)-- Birch Run, Michigan                          September 1986          724,000               91

Prime Outlets at Williamsburg (2)-- Williamsburg, Virginia                        April 1988          274,000               97

Prime Outlets at Pleasant Prairie-- Kenosha, Wisconsin                        September 1988          269,000               95

Prime Outlets at Burlington-- Burlington, Washington                                May 1989          174,000               89

Prime Outlets at Queenstown-- Queenstown, Maryland                                 June 1989          221,000               96

Prime Outlets at Hillsboro-- Hillsboro, Texas                                   October 1989          359,000               88

Prime Outlets at Oshkosh-- Oshkosh, Wisconsin                                  November 1989          260,000               97

Prime Outlets at Warehouse Row (4)-- Chattanooga, Tennessee                    November 1989           95,000               77

Prime Outlets at Perryville-- Perryville, Maryland                                 June 1990          148,000               93

Prime Outlets at Sedona-- (5) Sedona, Arizona                                    August 1990           82,000               92

Prime Outlets at San Marcos-- San Marcos, Texas                                  August 1990          549,000               91

Prime Outlets at Anderson-- (3) Anderson, California                             August 1990          165,000               90

Prime Outlets at Post Falls-- (5) Post Falls, Idaho                                July 1991          179,000               61

Prime Outlets at Ellenton-- Ellenton, Florida                                   October 1991          481,000               95

Prime Outlets at Morrisville-- Raleigh - Durham, North Carolina                 October 1991          187,000               77

Prime Outlets at Naples-- Naples/Marco Island, Florida                         December 1991          146,000               84

Prime Outlets at Niagara Falls USA-- Niagara Falls, New York                       July 1992          534,000               88

Prime Outlets at Woodbury-- (6) Woodbury, Minnesota                                July 1992          250,000               65

Prime Outlets at Calhoun-- (3) Calhoun, Georgia                                 October 1992          254,000               85

Prime Outlets at Bend-- (5) Bend, Oregon                                       December 1992          132,000               93

Prime Outlets at Jeffersonville I-- Jeffersonville, Ohio                           July 1993          407,000               92

Prime Outlets at Gainesville-- Gainesville, Texas                                August 1993          316,000               69

Prime Outlets at Grove City-- Grove City, Pennsylvania                           August 1994          533,000               97

Prime Outlets at Huntley-- Huntley, Illinois                                     August 1994          282,000               68

Prime Outlets at Florida City-- Florida City, Florida                         September 1994          208,000               68

Prime Outlets at Pismo Beach-- Pismo Beach, California                         November 1994          148,000               98

Prime Outlets at Tracy-- Tracy, California                                     November 1994          153,000               89

Prime Outlets at Odessa-- Odessa, Missouri                                         July 1995          296,000               69
</TABLE>

<PAGE>
                                  Page - (30)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                    Grand              GLA             Occupancy
Outlet Centers                                                                  Opening Date        (Sq. Ft.)        Percentage (1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                 <C>                      <C>
Prime Outlets at Darien (7)-- Darien, Georgia                                      July 1995          307,000               60%

Prime Outlets at Gulfport (8)-- Gulfport, Mississippi                          November 1995          306,000               87

Prime Outlets at Lodi--  (3)Burbank, Ohio                                      November 1996          313,000               84

Prime Outlets at Gaffney (3) (7)--  Gaffney, South Carolina                    November 1996          305,000               90

Prime Outlets at Lee-- (3) Lee, Massachusetts                                      June 1997          224,000               95

Prime Outlets at Lebanon--  Lebanon, Tennessee                                    April 1998          229,000               95

Prime Outlets at Hagerstown (2)--  Hagerstown, Maryland                          August 1998          487,000               98
                                                                                                   ----------               --
Total Outlet Centers (9)                                                                           10,226,000               87%
                                                                                                   ==========               ==
====================================================================================================================================
</TABLE>
Notes:
(1)    Percentage  reflects  occupied space as of March 31, 2003 as a percent of
       available square feet of GLA.
(2)    Through affiliates, we have a 30% ownership interest in the joint venture
       partnership that owns this outlet center.
(3)    Through affiliates,  we  have  an  18.2%  ownership interest in the joint
       venture partnership that owns this outlet center.
(4)    We  own  a  2%  partnership  interest as the sole general partner in this
       property, but are entitled  to  99% of the property's operating cash flow
       and net proceeds from a sale or  refinancing.  This mixed-use development
       also  includes  approximately  154,000  square  feet of office space, not
       included in this table, which was 95% occupied as of March 31, 2003.
(5)    Non-recourse  mortgage  loans  cross-collateralized  by  Prime Outlets at
       Bend,  Prime  Outlets  at  Post  Falls  and  Prime  Outlets at Sedona are
       currently in default and we  are in the process of negotiating a transfer
       of  our  ownership  interests  in these outlet centers to the lender. See
       Note 4 - "Debt"  of  the  Notes  to Consolidated Financial Statements for
       additional information.
(6)    Non-recourse  mortgage  loans  on  Prime  Outlets at Vero Beach and Prime
       Outlets at Woodbury  were cross-collateralized.  The lender foreclosed on
       Prime  Outlets  at  Vero  Beach  on September 9, 2002.  We  are currently
       negotiating  the  transfer  of our ownership interest in Prime Outlets at
       Woodbury   with  the  lender.   See  Note  4 - "Debt"  of  the  Notes  to
       Consolidated Financial Statements for additional information.
(7)    We operate this outlet center pursuant to a long-term ground lease under
       which we receive the  economic  benefit of a 100% ownership interest.
(8)    The real  property on which this outlet center is located is subject to a
       long-term ground lease.
(9)    Excludes Oxnard Factory Outlet. Through an affiliate, we have a 50% legal
       ownership interest in the joint venture partnership that owns this outlet
       center. However, we are currently receiving no economic  benefit from the
       Oxnard Factory Outlet.

<PAGE>
                                  Page - (31)

Results of Operations

Table 1 - Consolidated Statements of Operations

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                2003 vs. 2002
                                                                                                        ----------------------------
Three Months Ended March 31,                                              2003               2002             Change        Change
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                <C>                <C>          <C>
Revenues
Base rents                                                              $ 18,993           $ 24,309           $ (5,316)     -21.9%
Percentage rents                                                             977              1,320               (343)     -26.0%
Tenant reimbursements                                                     10,958             12,834             (1,876)     -14.6%
Interest and other                                                         4,012              2,860              1,152       40.3%
                                                                        --------           --------           --------     -------
  Total revenues                                                          34,940             41,323             (6,383)     -15.4%

Expenses
Property operating                                                         9,955             10,211               (256)      -2.5%
Real estate taxes                                                          2,984              3,666               (682)     -18.6%
Depreciation and amortization                                              7,280             10,208             (2,928)     -28.7%
Corporate general and administrative                                       4,466              3,419              1,047       30.6%
Interest                                                                  11,856             17,729             (5,873)     -33.1%
Other charges                                                                688              2,472             (1,784)     -72.2%
                                                                        --------           --------           --------     -------
  Total expenses                                                          37,229             47,705            (10,476)     -22.0%
                                                                        --------           --------           --------     -------
Loss before gain on sale of real estate                                   (2,289)            (6,382)             4,093      -64.1%
Gain on sale of real estate, net                                               -             16,793            (16,793)        n/m
                                                                        --------           --------           --------     -------
Income (loss) from continuing operations                                  (2,289)            10,411            (12,700)    -122.0%
Discontinued operations, including loss of $9,623
  on dispositions in 2002                                                      -             (8,730)             8,730         n/m
                                                                        --------           --------           --------     -------
Net income (loss)                                                         (2,289)             1,681             (3,970)    -236.2%
Allocations to preferred shareholders                                     (5,668)            (5,668)                 -        0.0%
                                                                        --------           --------           --------     -------
Net loss applicable to common shares                                    $ (7,957)          $ (3,987)          $ (3,970)      99.6%
                                                                        ========           ========           ========     =======

Basic and diluted earnings per common share:
Income (loss) from continuing operations                                $  (0.18)          $   0.11
Discontinued operations                                                        -              (0.20)
                                                                        --------           --------
  Net loss                                                              $  (0.18)          $  (0.09)
                                                                        ========           ========

Weighted-average common shares
  outstanding - basic and diluted                                         43,578             43,578
                                                                        ========           ========
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (32)

Comparison  of  the  three months ended March 31, 2003 to the three months ended
March 31, 2002

Summary

     We  reported  income  (loss) from  continuing  operations  of $(2,289)  and
$10,411 for the three  months ended March 31, 2003 and 2002,  respectively.  For
the three  months ended March 31, 2003,  the net loss  applicable  to our common
shareholders  was $7,957,  or $0.18 per common share. For the three months ended
March 31, 2002, the net loss applicable to our common  shareholders  was $3,987,
or $0.09 per common share.

     During the three  months  ended  March 31,  2002,  we  reported a loss from
discontinued  operations of $8,730,  or $0.20 per common  share.  This loss from
discontinued operations included a loss related to dispositions of $9,623.

Revenues

     Total  revenues  were  $34,940  for the three  months  ended March 31, 2003
compared to $41,323 for the same period in 2002, a decrease of $6,383, or 15.4%.
Base rents decreased $5,316, or 21.9%, to $18,993 in 2003 compared to $24,309 in
2002. These decreases are primarily due to (i)  transactions  involving the 2002
Joint Venture  Properties,  (ii) changes in economic rental rates and (iiii) the
slight   reduction  in  outlet   center   occupancy   during  the  2003  period.
Straight-line rent expense, included in base rent was $138 and $33 for the three
months ended March 31, 2003 and 2002, respectively.

     Percentage  rents,  which  represent  rents based on a percentage  of sales
volume above a specified threshold, decreased $343, or 26.0%, to $977 during the
three  months  ended  March 31,  2003  compared to $1,320 for the same period in
2002.  This decrease was primarily  due to (i)  transactions  involving the 2002
Joint Venture Properties and (ii) changes in economic rental rates.

     Tenant  reimbursements,  which  represent  the  contractual  recovery  from
tenants of certain operating expenses, decreased by $1,876, or 14.6%, to $10,958
during the three  months  ended March 31, 2003  compared to $12,834 for the same
period in 2002. This decline is primarily due to (i) transactions  involving the
2002 Joint Venture  Properties,  (ii) changes in economic rental rates and (iii)
the slightly reduced aggregate outlet center  weighted-average  occupancy during
the 2003 period.

     As shown in TABLE 2, tenant  reimbursements  as a percentage of recoverable
property  operating  expenses  and real estate  taxes was 84.7% during the three
months ended March 31, 2003  compared to 92.5% for the same period in 2002.  The
decline  in  tenant  reimbursements  as a  percentage  of  recoverable  property
operating  expenses  and real estate  taxes was  primarily  attributable  to the
aforementioned changes in economic rental rates and weighted-average occupancy.

Table 2 - Tenant Recoveries as a Percentage of Total Recoverable Expenses

--------------------------------------------------------------------------------
Three Months Ended March 31,                       2003                   2002
--------------------------------------------------------------------------------
Tenant reimbursements                           $ 10,958               $ 12,834

Recoverable Expenses:
Property operating                              $  9,955               $ 10,211
Real estate taxes                                  2,984                  3,666
                                                --------               --------
  Total recoverable expenses                    $ 12,939               $ 13,877
                                                ========               ========

Tenant reimbursements as a percentage
  of total recoverable expenses                     84.7%                  92.5%
                                                ========               ========
================================================================================

<PAGE>
                                  Page - (33)

     Interest and other income  increased by $1,152,  or 40.3%, to $4,012 during
the three months ended March 31, 2003  compared to $2,860 for the same period in
2002. The increase was primarily  attributable  to (i) higher equity in earnings
of  unconsolidated  joint  ventures  of $973 and (ii) an  increase  in all other
income of $179.  The  increase  in equity in earnings  of  unconsolidated  joint
ventures is primarily associated with the transactions  involving the 2002 Joint
Venture Properties.

Expenses

     Property  operating  expenses  decreased by $256, or 2.5%, to $9,955 during
the three months ended March 31, 2003 compared to $10,211 for the same period in
2002.  Real estate taxes expense  decreased by $682, or 18.6%,  to $2,984 during
the three months ended March 31, 2003  compared to $3,666 for the same period in
2002. The decrease in property  operating  expenses is primarily  because of the
transactions  involving the 2002 Joint Venture  Properties  partially  offset by
higher marketing costs during the 2003 period. The decrease in real estate taxes
expense  is  primarily  because  of the  transactions  involving  the 2002 Joint
Venture Properties.

     As shown in TABLE 3,  depreciation  and amortization  expense  decreased by
$2,982,  or 28.7%,  to $7,280  during  the three  months  ended  March 31,  2003
compared to $10,208 for the same period in 2002.  This  decrease  was  primarily
attributable to the depreciation and amortization of assets  associated with the
transactions involving the 2002 Joint Venture Properties.

Table 3  - Components of Depreciation and Amortization Expense

     The  components  of  depreciation  and  amortization  expense for the three
months ended March 31, 2003 and 2002 are summarized as follows:

--------------------------------------------------------------------------------
Three Months Ended March 31,                   2003                    2002
--------------------------------------------------------------------------------
Building and improvements                    $ 3,447                $  5,363
Land improvements                                938                   1,102
Tenant improvements                            2,242                   3,028
Furniture and fixtures                           598                     642
Leasing commissions                               55                      73
                                             -------                --------
  Total                                      $ 7,280                $ 10,208
                                             =======                ========
================================================================================

     As shown in TABLE 4, interest  expense  decreased by $5,873,  or 33.1%,  to
$11,856 during the three months ended March 31, 2003 compared to $17,729 for the
same period in 2002.  This  decrease  reflects  (i) lower  interest  incurred of
$6,082,  (ii) a decrease in amortization  of deferred  financing costs of $1,257
and (iii) higher  amortization  of debt  premiums of $23.  Partially  offsetting
these items was interest expense of $1,489 associated with certain mortgage debt
that  was  defeased  in  December  2002.  See Note 4 -  "Debt"  of the  Notes to
Consolidated Financial Statements for additional information.

     The  decrease  in  interest  incurred is  primarily  attributable  to (i) a
reduction of approximately  $123,216 in our  weighted-average  debt outstanding,
excluding debt  premiums,  during the three months ended March 31, 2003 compared
to the  same  period  in  2002  and  (ii)  a  decrease  in the  weighted-average
contractual  interest rate on our debt for the three months ended March 31, 2003
compared  to the same period in 2002.  The  decrease  in  weighted-average  debt
outstanding   was   primarily   attributable   to   asset   dispositions.    The
weighted-average  contractual  interest rates for the 2003 and 2002 periods were
approximately 8.09% and 9.32%, respectively.

<PAGE>
                                  Page - (34)

Table 4 - Components of Interest Expense

     The  components  of interest  expense for the three  months ended March 31,
2003 and 2002 are summarized as follows:

--------------------------------------------------------------------------------
Three Months Ended March 31,                       2003                  2002
--------------------------------------------------------------------------------
Interest incurred                               $ 10,460             $ 16,542
Amortization of deferred financing costs             426                1,683
Amortization of debt premiums                       (519)                (496)
Interest expense - defeased debt                   1,489                    -
                                                --------             --------
  Total                                         $ 11,856             $ 17,729
                                                ========             ========
================================================================================

     Other charges  decreased by $1,784,  or 72.2%, to $688 for the three months
ended  March 31,  2003  compared  to $2,472  for the same  period in 2002.  This
decrease  was  primarily  attributable  to lower  bad  debt  expense  of  $1,808
partially  offset by an increase in all other  expenses of $24.  The decrease in
bad debt expense  resulted from (i) resolution of certain  disputes with tenants
and (ii) reduced tenant bankruptcies, abandonments and store closings during the
2003 period.

Merchant Sales

     For the three months ended March 31, 2003,  same-store  sales in our outlet
center portfolio decreased 7.5% compared to the same period in 2002. "Same-store
sales" is defined as the  weighted-average  sales per square  foot  reported  by
merchants for stores open since January 1, 2002. The weighted-average  sales per
square foot reported as reported by our  merchants  were $245 for the year ended
December 31, 2002.

Liquidity and Capital Resources

Sources and Uses of Cash

     For the three months ended March 31, 2003,  net cash  provided by operating
activities  was $2,651,  net cash provided by investing  activities was $627 and
net cash used in financing activities was $1,950.

     The net cash provided by investing activities during the three months ended
March 31, 2003  consisted  of $1,085 of net  proceeds  from the  disposition  of
excess  land  and  $311  of  distributions  from  unconsolidated  joint  venture
partnerships  partially  offset by $769 of  additions  to rental  property.  The
additions  to  rental  property  included  costs  incurred  in  connection  with
re-leasing space to new merchants and costs associated with renovations.  During
the three  months  ended March 31,  2003,  we did not engage in any  significant
development  activities,  however,  we continue to engage in certain  consulting
activities in Europe.  Such  activities do not have a significant  impact on our
liquidity or financial condition.

     The gross uses of cash for  financing  activities  of $1,950  during  three
months ended March 31, 2003  consisted of scheduled  principal  amortization  on
debt.

<PAGE>
                                  Page - (35)

Guarantees and Guarantees of Indebtedness of Others

HGP Guarantees

     On July 15, 2002, Horizon Group Properties, Inc. and its affiliates ("HGP")
announced they had refinanced a secured credit facility (the "HGP Secured Credit
Facility")  through  a series  of new loans  aggregating  $32,500.  Prior to the
refinancing,  we were a guarantor  under the HGP Secured Credit  Facility in the
amount of $10,000. In connection with the refinancing, our guarantee was reduced
to a maximum  of  $4,000 as  security  for a $3,000  mortgage  loan and a $4,000
mortgage loan  (collectively,  the "HGP Monroe  Mortgage Loan") secured by HGP's
outlet shopping center located in Monroe, Michigan. The HGP Monroe Mortgage Loan
has a 3-year term,  bears  interest at the prime lending rate plus 2.50% (with a
minimum of 9.90%) and requires monthly  interest-only  payments.  The HGP Monroe
Mortgage Loan may be prepaid without penalty after two years. Our guarantee with
respect to the HGP Monroe  Mortgage Loan will be  extinguished  if the principal
amount of such obligation is reduced to $5,000 or less through repayments.

     Additionally,   we  are  a  guarantor  with  respect  to  certain  mortgage
indebtedness (the "HGP Office Building Mortgage") in the amount of $2,129 (as of
March 31, 2003) on HGP's corporate office building and related equipment located
in Norton Shores,  Michigan. The HGP Office Building Mortgage matures on May 31,
2003,  bears  interest at LIBOR plus 5.50%,  and  requires  monthly debt service
payments.

     On October 11, 2001,  HGP announced  that it was in default under two loans
with an aggregate  principal  balance of approximately  $45.5 million secured by
six of its other outlet centers.  Such defaults do not constitute defaults under
the HGP Monroe  Mortgage Loan or the HGP Office  Building  Mortgage nor did they
constitute a default under the HGP Secured Credit Facility. We have not recorded
any liabilities  related to these  guarantees and no claims have been made under
our  guarantees  with respect to the HGP Monroe  Mortgage Loan or the HGP Office
Building  Mortgage.  HGP  is a  publicly  traded  company  that  was  formed  in
connection with our merger with Horizon Group, Inc. ("Horizon") in June 1998.

Prime/Estein Venture Guarantees

     We  own  three  outlet  centers  through  the  Prime/Estein   Venture.  The
Prime/Estein  Venture is an unconsolidated joint venture partnership between one
of our affiliates and an affiliate of Estein & Associates USA, Ltd.  ("Estein"),
a real  estate  investment  company.  Pursuant to  Prime/Estein  Venture-related
documents to which  affiliates of ours are parties,  we are obligated to provide
to, or obtain for, the Prime/Estein  Venture  fixed-rate  financing at an annual
rate of 7.75% (the "Interest Rate Subsidy  Agreement") for the Birch Run Center,
the Prime Outlets at Williamsburg (the "Williamsburg Center") and the Hagerstown
Center.

     In August 2001, we, through affiliates,  completed a refinancing of $63,000
of first  mortgage loans secured by the Birch Run Center.  The  refinanced  loan
(the "Birch Run First Mortgage") (i) has a term of 10-years, (ii) bears interest
at an effective rate of 8.12% and (iii) requires  monthly  payments of principal
and  interest  pursuant  to a 25-year  amortization  schedule.  Pursuant  to the
Interest  Rate Subsidy  Agreement,  we are  required to pay to the  Prime/Estein
Venture the  difference  between the cost of the financing at an assumed rate of
7.75% and the actual  cost of such  financing  at the annual  rate of 8.12% (the
"Interest  Rate  Subsidy  Obligation").  The net present  value of the  Interest
Subsidy  Obligation  (included in accounts payable and other  liabilities in the
accompanying Consolidated Balance Sheet) was $1,437 as of March 31, 2003.

<PAGE>
                                  Page - (36)

     In October 2001, we,  through  affiliates,  completed the  refinancing of a
$32,500 first mortgage loan secured by the  Williamsburg  Center.  The new first
mortgage loan (the  "Williamsburg  First  Mortgage") (i) has a term of 10-years,
(ii) bears interest at a fixed-rate of 7.69% and (iii) requires monthly payments
of principal and interest pursuant to a 25-year amortization schedule.  Pursuant
to the Interest Rate Subsidy Agreement,  the Prime/Estein Venture is required to
pay to us the difference between the cost of the financing at an assumed rate of
7.75% and the actual cost of such financing at the annual rate of 7.69%.

     On January 11,  2002,  we sold the  Hagerstown  Center to the  Prime/Estein
Venture.  In connection  with the sale,  the  Prime/Estein  Venture  assumed the
Hagerstown  First Mortgage in the amount of $46,862;  however,  our guarantee of
such indebtedness remains in place. Additionally,  we are obligated to refinance
the Hagerstown First Mortgage on behalf of the Prime/Estein Venture on or before
June 1, 2004, the date on which such  indebtedness  matures.  Additionally,  the
Prime/Estein Venture's cost of the Hagerstown First Mortgage and any refinancing
of it are  fixed at an annual  rate of 7.75%  for a period  of 10 years.  If the
actual  cost of such  indebtedness  should  exceed  7.75% at any time during the
10-year period,  we will be obligated to pay the difference to the  Prime/Estein
Venture.  If the actual cost of such indebtedness is less than 7.75% at any time
during the 10-year period,  however,  the Prime/Estein Venture will be obligated
to pay the difference to us. The actual cost of the Hagerstown First Mortgage is
30-day LIBOR plus 1.50%,  or 2.84% as of March 31, 2003.  Because the Hagerstown
First  Mortgage  bears interest at a variable rate, we are exposed to the impact
of interest  rate  changes.  We have not recorded any  liability  related to our
guarantee of the Hagerstown First Mortgage; however, in connection with the sale
of the Hagerstown  Center,  we  established a reserve for estimated  refinancing
costs in the amount of $937,  which is included  in  accounts  payable and other
liabilities in the accompanying Consolidated Balance Sheet as of March 31, 2003.
See Note 3 -  "Property  Dispositions"  of the Notes to  Consolidated  Financial
Statements for additional information.

Mandatory Redemption Obligation

     In  connection  with our sale of the Bridge  Properties  in July  2002,  we
guaranteed  FRIT PRT Bridge  Acquisition  LLC  ("FRIT")  (i) a 13% return on its
$17,236 of invested  capital and (ii) the full  return of its  invested  capital
(the "Mandatory Redemption Obligation") in FPI by December 31, 2003. As of March
31, 2003, our Mandatory Redemption Obligation with respect to the full return of
FRIT's  invested  capital was $16,356  (included  in accounts  payable and other
liabilities in the accompanying  Consolidated  Balance Sheet). On April 4, 2003,
we  made  an  additional  payment  with  respect  to  the  Mandatory  Redemption
Obligation  of $1,085  with the net  proceeds  from the  March 31,  2003 sale of
certain  excess  land.  See Note 3 -  "Property  Dispositions"  of the  Notes to
Consolidated Financial Statements for additional information.

Defaults on Certain Non-recourse Mortgage Indebtedness

     During 2001,  certain of our  subsidiaries  suspended  regularly  scheduled
monthly debt service  payments on two  non-recourse  mortgage  loans held by New
York Life  Insurance  Company  ("New York Life") at the time of the  suspension.
These non-recourse mortgage loans were cross-defaulted and  cross-collateralized
by Prime Outlets at Conroe (the "Conroe Center"),  located in Conroe, Texas, and
Prime Outlets at Jeffersonville II (the "Jeffersonville II Center"),  located in
Jeffersonville, Ohio. Effective January 1, 2002, New York Life foreclosed on the
Conroe  Center.  Effective July 18, 2002, New York Life sold its interest in the
Jeffersonville  II Center loan. On August 13, 2002, we transferred our ownership
interest in the Jeffersonville II Center to New York Life's successor.  See Note
3 - "Property Dispositions" for additional information.

<PAGE>
                                  Page - (37)

     The  foreclosure of the Conroe Center did not have a material impact on our
results of operations or financial condition because during 2001 all excess cash
flow from the  operations  of the Conroe Center was utilized for debt service on
its  non-recourse  mortgage  loan.  Additionally,  the transfer of our ownership
interest in the  Jeffersonville  II Center did not have a material impact on our
results of operations or financial condition because during 2001 and through the
transfer  date in  2002,  all  excess  cash  flow  from  the  operations  of the
Jeffersonville  II Center was  utilized  for debt  service  on the  non-recourse
mortgage loan.

     During  August of 2002,  certain of our  subsidiaries  suspended  regularly
scheduled monthly debt service payments on two non-recourse mortgage loans which
were  cross-collateralized  by Prime  Outlets at Vero  Beach  (the  "Vero  Beach
Center"),  located in Vero Beach,  Florida,  and Prime  Outlets at Woodbury (the
"Woodbury  Center"),  located in Woodbury,  Minnesota  (collectively,  the "John
Hancock  Properties").  These  non-recourse  mortgage  loans  were  held by John
Hancock Life Insurance  Company ("John Hancock").  Effective  September 9, 2002,
John Hancock foreclosed on the Vero Beach Center. Additionally, we are currently
negotiating a transfer of our ownership  interest in the Woodbury Center to John
Hancock. Foreclosure on the Vero Beach Center did not, and the expected transfer
of our  ownership  interest in the  Woodbury  Center is not,  expected to have a
material  impact on our results of  operations  or financial  condition  because
during  2002,  all  excess  cash flow from the  operations  of the John  Hancock
Properties was utilized for debt service on their non-recourse mortgage loans.

     In December 2002, we notified the servicer of certain non-recourse mortgage
loans  (cross-collateralized  by Prime  Outlets at Bend,  Prime  Outlets at Post
Falls and Prime  Outlets at Sedona)  totaling  $24,919 as of March 31, 2003 that
the net cash flow from the  properties  securing the loans was  insufficient  to
fully pay the  required  monthly  debt  service.  At that  time,  certain of our
subsidiaries  suspended the regularly  scheduled  monthly debt service payments.
Subsequent  to our  notification  to the servicer,  we have been  remitting on a
monthly basis all available cash flow from the  properties,  after a reserve for
monthly operating expenses,  as partial payment of the debt service. The failure
to pay the full amount due constitutes a default under the loan agreements which
allows the  lenders to  accelerate  the loan and to  exercise  various  remedies
contained in the loan  agreements,  including  application of escrow balances to
delinquent  payments  and,  ultimately,  foreclosure  on  the  properties  which
collateralize  the loans. The lender has notified us that it has accelerated the
loan.  Since that time we have  initiated  discussions  with the servicer of the
loans regarding  restructuring of the loans. There can be no assurance that such
discussions will result in any modification to the terms of the loans.  However,
any action by the lender with  respect to these  properties  is not  expected to
have a material  impact on our  results of  operations  or  financial  condition
because we are currently only remitting available cash flow.

<PAGE>
                                  Page - (38)

Defeasance of Mega Deal Loan

     On December 6, 2002, we completed the sale of two outlet centers (together,
the "Colorado  Properties"),  which were part of the 15 properties  contained in
the collateral pool securing a first mortgage and expansion loan (the "Mega Deal
Loan"), which had a then outstanding balance of $338,940. In connection with the
release of the Colorado Properties from the collateral pool, we were required to
partially  defease  the  Mega  Deal  Loan.  Therefore,  the Mega  Deal  Loan was
bifurcated  into (i) a defeased  portion in the amount of $74,849 (the "Defeased
Notes Payable") and (ii) an undefeased portion in the amount of $264,091,  which
is still referred to as the Mega Deal Loan.  Both the Defeased Notes Payable and
the Mega Deal Loan (i) bear  interest at a  fixed-rate  of 7.782%,  (ii) require
monthly  payments of principal and interest  pursuant to a 30-year  amortization
schedule  and  (iii)  mature on  November  11,  2003.  The Mega Deal Loan is now
secured by the remaining 13 properties contained in the collateral pool. We used
$79,257  of the  gross  proceeds  from the sale of the  Colorado  Properties  to
purchase US Treasury  Securities,  which were placed into a trustee  escrow (the
"Trustee Escrow"). The Trustee Escrow is used to make the scheduled monthly debt
service  payments,  including  the  payment  of the then  outstanding  principal
amount,  together  with all accrued and unpaid  interest on the maturity date of
November 11, 2003,  under the Defeased Notes Payable.  As of March 31, 2003, the
outstanding balance of the Defeased Notes Payable was $74,509 and the balance of
the Trustee Escrow was $77,365  (included in restricted cash in the accompanying
Consolidated  Balance Sheet). See Note 3 - "Property  Dispositions" of the Notes
to Consolidated Financial Statements for additional information. Furthermore, in
connection with the partial defeasance of the Mega Deal Loan we amended the Mega
Deal Loan so that (i) we are required to fund 10 monthly payments of $500 into a
lender escrow to be used as additional  cash  collateral and (ii) release prices
for the remaining 13 properties in the  collateral  pool were amended to provide
for a more orderly refinancing of the Mega Deal Loan.

Debt Service Obligations

     The scheduled principal  maturities of our debt,  excluding (i) unamortized
debt  premiums of $7,435 and (ii)  $41,250 of  aggregate  non-recourse  mortgage
indebtedness  in  default  (see  "Defaults  on  Certain  Non-recourse   Mortgage
Indebtedness"  above), and related average contractual interest rates by year of
maturity as of March 31, 2003 are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                    Bonds Payable
                                 (including sinking                                     Defeased
                                   fund payments)           Notes Payable              Notes Payable              Total Debt
                              ------------------------  ------------------------  ------------------------   -----------------------
                                Average                   Average                    Average                   Average
                               Interest    Principal     Interest     Principal     Interest    Principal     Interest    Principal
Years Ended December 31,          Rates   Maturities        Rates    Maturities        Rates   Maturities        Rates   Maturities
------------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>       <C>             <C>       <C>             <C>       <C>             <C>      <C>
2003                              6.46%     $    636        7.79%     $ 265,009       7.78%     $ 74,509        7.78%    $ 340,154
2004                              6.34%          726        7.97%         4,571                                 7.75%        5,297
2005                              6.34%          773        8.58%        11,574                                 8.44%       12,347
2006                              6.34%          820        8.83%       120,437                                 8.81%      121,257
2007                              6.34%          878        7.60%         1,002                                 7.02%        1,880
Thereafter                        6.52%       18,618        7.59%        57,995                                 7.33%       76,613
                                  ----      --------        ----      ---------       ----      --------        ----     ---------
                                  6.49%     $ 22,451        8.06%     $ 460,588       7.78%     $ 74,509        7.96%    $ 557,548
                                  ====      ========        ====      =========       ====      ========        ====     =========
====================================================================================================================================
</TABLE>

     Such indebtedness in the amount of $557,548 had a weighted-average maturity
of 2.3 years and bore contractual  interest at a weighted-average  rate of 7.96%
per annum.  At March 31, 2003, all of such  indebtedness  bore interest at fixed
rates.  Our  remaining   scheduled  principal  payments  during  2003  for  such
indebtedness  aggregated $340,154.  In addition to regularly scheduled principal
payments,  the remaining 2003 scheduled  principal payments also reflect balloon
payments  of (i)  $260,681  for the Mega Deal Loan and (ii)  $73,882 due for the
Defeased Notes  Payable.  Both the Mega Deal Loan and the Defeased Notes Payable
are  scheduled to mature on November  11,  2003.  All debt service due under the
Defeased Notes Payable,  including the balloon payment due at maturity,  will be
made from the Trustee Escrow. See "Going Concern" for additional information.

<PAGE>
                                  Page - (39)

Going Concern

     Our liquidity  depends on cash provided by operations and potential capital
raising  activities  such as funds  obtained  through  borrowings,  particularly
refinancing of existing debt, and cash generated  through asset sales.  Although
we believe that  estimated  cash flows from  operations  and  potential  capital
raising  activities will be sufficient to satisfy our scheduled debt service and
other  obligations and sustain our operations for the next year, there can be no
assurance  that we will be successful in obtaining the required  amount of funds
for these items or that the terms of the potential  capital raising  activities,
if they should  occur,  will be as  favorable  as we have  experienced  in prior
periods.

     During 2003, our Mega Deal Loan matures on November 11, 2003. The Mega Deal
Loan,  which is secured by a 13 property  collateral  pool,  had an  outstanding
principal  balance of $262,890  as of March 31, 2003 and will  require a balloon
payment of $260,681 at maturity.  Based on our initial  discussions with various
prospective  lenders,  we are currently  projecting a potential  shortfall  with
respect to refinancing  the Mega Deal Loan.  However,  we believe this shortfall
may be alleviated  through  potential  asset sales and/or other capital  raising
activities, including the placement of mezzanine level debt. We caution that our
assumptions are based on current market conditions and,  therefore,  are subject
to various risks and  uncertainties,  including  changes in economic  conditions
which may  adversely  impact  our  ability  to  refinance  the Mega Deal Loan at
favorable  rates or in a timely  and  orderly  fashion,  or which may  adversely
impact our ability to consummate  various  asset sales or other capital  raising
activities.

     In connection  with the completion of the sale of the Bridge  Properties in
July 2002,  we  guaranteed  to FRIT (i) a 13% return on its  $17,236 of invested
capital,  and  (ii) the full  return  the  Mandatory  Redemption  Obligation  by
December 31, 2003.  As of March 31, 2003,  the Mandatory  Redemption  Obligation
(included  in  accounts  payable  and  other  liabilities  in  the  accompanying
Consolidated Balance Sheet) was $16,356. On April 4, 2003, we made an additional
payment  of $1,085  with net  proceeds  from the March 31,  2003 sale of certain
excess land which reduced the balance of the Mandatory Redemption  Obligation to
$15,271.  Although we continue to seek to generate additional liquidity to repay
the Mandatory  Redemption  Obligation  through (i) the sale of FRIT's  ownership
interest  in the Bridge  Properties  and/or  (ii) the  placement  of  additional
indebtedness on the Bridge Properties, there can be no assurance that we will be
able to complete  such capital  raising  activities by December 31, 2003 or that
such capital raising activities,  if they should occur, will generate sufficient
proceeds to repay the Mandatory Redemption  Obligation in full. Failure to repay
the  Mandatory  Redemption  Obligation  by December 31, 2003 would  constitute a
default,  which would  enable FRIT to  exercise  its rights with  respect to the
collateral  pledged  as  security  to  the  guarantee,  including  some  of  our
partnership   interests   in  the  13   property   collateral   pool  under  the
aforementioned  Mega Deal Loan. Because the Mandatory  Redemption  Obligation is
secured by some of our partnership  interests in the 13 property collateral pool
under the Mega Deal Loan, we may be required to repay the  Mandatory  Redemption
Obligation before, or in connection with, the refinancing of the Mega Deal Loan.

     These conditions raise substantial doubt about our ability to continue as a
going  concern.  The financial  statements  contained  herein do not include any
adjustment  to reflect the possible  future  effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of these uncertainties.

<PAGE>
                                  Page - (40)

Defaults on Certain Non-recourse Mortgage Indebtedness of Unconsolidated
Partnerships

     Two mortgage loans related to projects in which we,  through  subsidiaries,
indirectly  own joint  venture  interests  have matured and are in default.  The
mortgage loans,  at the time of default,  were (i) a $10,389 first mortgage loan
on Phase I of the Bellport  Outlet  Center,  held by Union Labor Life  Insurance
Company  ("Union  Labor");  and (ii) a  $13,338  first  mortgage  loan on Oxnard
Factory Outlet, an outlet center located in Oxnard, California, held by Fru-Con.
An affiliate of ours has a 50% ownership interest in the partnership, which owns
Phase I of the Bellport Outlet Center.  Fru-Con and us are each a 50% partner in
the partnership that owns the Oxnard Factory Outlet.

     Union Labor filed for  foreclosure on Phase I of the Bellport Outlet Center
and a  receiver  was  appointed  March  27,  2001 by the court  involved  in the
foreclosure action. Effective May 1, 2001, a manager hired by the receiver began
managing  and leasing  Phase I of the  Bellport  Outlet  Center.  A judgment for
foreclosure  was  entered on January  25,  2003 in the  amount of  $12,711.  The
foreclosure  occurred on March 17, 2003 with Union Labor  acquiring the property
for $5,100.  We continue to negotiate  the terms of a transfer of our  ownership
interest in Oxnard Factory  Outlet to Fru-Con.  We do not manage or lease Oxnard
Factory Outlet.

     We  believe  neither  of these  mortgage  loans is  recourse  to us.  It is
possible,  however,  that either or both of the respective  lenders will,  after
completing its foreclosure action, file a lawsuit seeking to collect from us the
difference  between the value of the mortgaged property and the amount due under
the loan. If such an action is brought, the outcome, and our ultimate liability,
if any, cannot be predicted at this time.

     In addition,  we are currently not receiving,  directly or indirectly,  any
cash flow from Oxnard  Factory  Outlet and were not receiving any cash flow from
Phase I of the  Bellport  Outlet  Center  prior to the loss of  control  of such
project.  We account for our  interests in (i) Phases I of the  Bellport  Outlet
Center and (ii) the Oxnard Factory  Outlet in accordance  with the equity method
of  accounting.  As of March 31, 2003,  the carrying  value of our investment in
these properties was $0.

Dividends and Distributions

     To qualify as a REIT for federal  income tax  purposes,  we are required to
pay  distributions  to our common and preferred  shareholders of at least 90% of
our REIT taxable income in addition to satisfying other  requirements.  Although
we intend to make  distributions,  if necessary,  to remain  qualified as a REIT
under the Code,  we also intend to retain such amounts as we consider  necessary
from time to time for our capital and liquidity needs.

     Our policy  remains to pay  distributions  only to the extent  necessary to
maintain our status as a REIT for federal  income tax purposes.  During 2002, we
were not required to pay any  distributions in order to maintain our status as a
REIT and based on our current federal income tax  projections,  we do not expect
to pay any distributions  during 2003. On May 15, 2003, we will be in arrears on
14 quarters of preferred stock  distributions  due February 15, 2000 through May
15, 2003, respectively.

     We may not make distributions to our common  shareholders or our holders of
common  units of limited  partnership  interests  in the  Operating  Partnership
unless  we  are  current  with  respect  to   distributions   to  our  preferred
shareholders. As of March 31, 2003, unpaid dividends for the period beginning on
November 16, 1999 through March 31, 2003 on our Series A Senior  Preferred Stock
and  Series B  Convertible  Preferred  Stock  aggregated  $20,377  and  $56,142,
respectively.  The  annualized  dividends  on our  2,300,000  shares of Series A
Senior  Preferred Stock and 7,828,125  shares of Series B Convertible  Preferred
Stock outstanding as of March 31, 2003 are $6,037 ($2.625 per share) and $16,635
($2.125 per share), respectively.

<PAGE>
                                  Page - (41)

Strategic Alternatives

     We have  engaged  Houlihan  Lokey  Howard & Zukin  Capital  to assist us in
exploring  recapitalization,   restructuring,   financing  and  other  strategic
alternatives  designed to  strengthen  our  financial  position  and address our
long-term  capital  requirements.  There can be no  assurance  as to the timing,
terms  or  completion  of  any  transaction.  Costs  incurred  related  to  such
activities are reflected in corporate general and administrative  expense in the
accompanying Consolidated Statements of Operations.

Settlement of Tenant Matters

     During 2002, we entered into settlement  agreements with respect to certain
tenant matters providing for aggregate payments of $2,760.  Through December 31,
2002, we made approximately $2,607 of such required payments.  The 2002 payments
were  principally made from certain funds escrowed under a mezzanine loan, which
was repaid in full in December 2002.  The remaining  payment of $153 was made in
January 2003 with cash from operations. These settlement agreements did not have
a material impact on our financial condition or our results from operations.  We
had previously  established  reserves  aggregating  $5,000 for the settlement of
such matters.

Development Activities and Capital Expenditures

     During  2003,   we  will  continue  to  explore   potential   international
opportunities and will selectively  consider  expansion and/or  redevelopment of
certain  of our  existing  outlet  centers.  We do  not  currently  expect  such
activities to have a significant impact on our liquidity or financial condition.

     Additionally,  we expect to incur costs during the remainder of 2003 (i) in
connection  with  releasing  space  to new  tenants  and (ii)  for  repairs  and
maintenance of our properties.  However,  we do not expect such  expenditures to
have a  significant  impact on our  liquidity  or  financial  condition  because
reserves for such costs are paid monthly into escrow  accounts under many of our
loans.

Recent Accounting Pronouncements

     In October,  2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  ("FAS") No. 144,  "Accounting for
Impairment of Disposal of  Long-lived  Assets." FAS No. 144  supercedes  FAS No.
121, however it retains the fundamental  provisions of that statement as related
to the recognition and measurement of the impairment of long-lived  assets to be
"held  and  used."  In  addition,  FAS No.  144 (i)  provides  further  guidance
regarding the estimation of cash flows in the  performance  of a  recoverability
test, (ii) requires that a long-lived asset to be disposed of other than by sale
(e.g.,  abandoned) be classified as "held and used" until it is disposed of, and
(iii)  established more  restrictive  criteria to classify an asset as "held for
sale."  Effective  January 1, 2002,  we adopted FAS No. 144. Our adoption of FAS
No. 144 effective  January 1, 2002 did not have a material impact on our results
of operations or financial position.

     In accordance with the  requirements of FAS No. 144, we have classified the
operating  results,  including  gains and  losses  related to  disposition,  for
certain  properties  either  disposed of or  classified  as assets held for sale
during  2002  as  discontinued  operations  in the  Consolidated  Statements  of
Operations for all periods presented.  See Note 3 - "Property  Dispositions" for
additional information.

<PAGE>
                                  Page - (42)

     In January  2003,  the FASB issued FIN No. 46,  "Consolidation  of Variable
Interest  Entities." FIN No. 46 clarifies the application of existing accounting
pronouncements  to certain  entities in which  equity  investors do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties. The provisions of FIN No. 46
were  immediately  effective  for all variable  interests  in variable  interest
entities  created  after  January  31,  2003,  and we  will  need to  apply  the
provisions of FIN No. 46 to any existing variable interests in variable interest
entities by no later than July 1, 2003. We did not create any variable  interest
entities during the three months ended March 31, 2003 and we do not believe that
FIN No. 46 will have a significant impact on our financial statements.

Risk Management Activities

     We are subject to various market risks and  uncertainties,  including,  but
not limited to, the effects of current and future economic  conditions,  and the
resulting impact on our tenants' sales and our revenue; the effects of increases
in market interest rates from current levels (see below);  the risks  associated
with existing vacancy rates or potential  increases in vacancy rates because of,
among other factors,  tenant bankruptcies and store closures,  and the resulting
impact on our revenue;  and risks  associated with  refinancing our current debt
obligations  or obtaining new financing  under terms less favorable than we have
experienced in prior periods.

Interest Rate Risk

     In the  ordinary  course  of  business,  we are  exposed  to the  impact of
interest rate changes.  We employ established  policies and procedures to manage
our exposure to interest rate changes. Historically, we have used a mix of fixed
and  variable-rate  debt to (i) limit the impact of interest rate changes on our
results  from  operations  and cash flows and (ii) lower our  overall  borrowing
costs. In certain cases, we have used derivative  financial  instruments such as
interest rate protection agreements to manage interest rate risk associated with
variable-rate  indebtedness.  Nevertheless,  as of March  31,  2003,  all of our
outstanding   indebtedness   bore  interest  at  fixed  rates.   See  Item  3  -
"Quantitative  and Qualitative  Disclosures  About Material Risk" for additional
information.  Also see  "Guarantees  of Debt and  Indebtedness  of  Others"  for
additional information.

Economic Conditions

     In general,  the leases  relating to our outlet centers have terms of three
to five years and most contain  provisions that somewhat  mitigate the impact of
inflation.  Such provisions include clauses providing for increases in base rent
and clauses  enabling us to receive  percentage rents for annual sales in excess
of certain  thresholds  based on  merchants'  gross sales.  In  addition,  lease
agreements generally provide for (i) the recovery of a merchant's  proportionate
share of actual  costs of  common  area  maintenance  ("CAM"),  refuse  removal,
insurance,  and real estate  taxes,  (ii) a  contribution  for  advertising  and
promotion and (iii) an administrative fee. CAM includes items such as utilities,
security, parking lot cleaning,  maintenance and repair of common areas, capital
replacement  reserves,   landscaping,   seasonal  decorations,  public  restroom
maintenance  and certain  administrative  expenses.  We continually  monitor our
lease provisions in light of current and expected economic  conditions and other
factors.  In this regard,  we may consider  alternative  lease provisions (e.g.,
fixed CAM) where appropriate.

<PAGE>
                                  Page - (43)

Funds from Operations

     Industry  analysts  generally  consider funds from operations  ("FFO"),  as
defined by the National Association of Real Estate Investment Trusts ("NAREIT"),
an  alternative  non-GAAP  measure of  performance  of an equity REIT.  In 1991,
NAREIT  adopted its  definition of FFO. This  definition  was clarified in 1995,
1999 and  2002.  FFO is  currently  defined  by  NAREIT  as net  income  or loss
(computed in accordance  with GAAP),  excluding  gains or losses from provisions
for  asset  impairment  and  sales  of  depreciable  operating  property,   plus
depreciation and  amortization  (other than  amortization of deferred  financing
costs and  depreciation  of non-real  estate  assets) and after  adjustment  for
unconsolidated  partnerships and joint ventures and discontinued operations. FFO
includes   non-recurring   events,   except  for  those  that  are   defined  as
"extraordinary  items" in accordance with GAAP. FFO excludes the earnings impact
of  "cumulative  effects of  accounting  changes" as defined by GAAP.  Effective
January  1,  2002,  FFO  related  to  assets  held for sale,  sold or  otherwise
transferred  and included in results of  discontinued  operations (in accordance
with the requirements of FAS No. 144) should continue to be included in FFO.

     We believe that FFO is an important and widely used non-GAAP measure of the
operating  performance of REITs,  which provides a relevant basis for comparison
to other REITs. Therefore, FFO is presented to assist investors in analyzing our
performance.  Our FFO is not  comparable  to FFO reported by other REITs that do
not define the term using the current  NAREIT  definition or that  interpret the
current NAREIT definition differently than we do. Therefore, we caution that the
calculation of FFO may vary from entity to entity and, as such the  presentation
of FFO by us may not be comparable to other  similarly  titled measures of other
reporting companies.  We believe that to facilitate a clear understanding of our
operating  results,  FFO  should be  examined  in  conjunction  with net  income
determined in accordance  with GAAP.  FFO does not represent cash generated from
operating  activities in accordance with GAAP and should not be considered as an
alternative  to net income as an indication of our  performance or to cash flows
as a measure of liquidity or ability to make distributions.

     FFO was $5,154 for the three months ended March 31, 2003 compared to $6,963
for the same period in 2002. The first quarter of 2003 FFO results  include $964
of net interest expense attributable to mortgage  indebtedness that was defeased
in December 2002. This net interest  expense had no impact on our operating cash
flow during 2003 because such  payments  were made from  previously  established
escrows. FFO adjusted ("Adjusted FFO") to exclude the impact of the net interest
expense attributable to the defeased indebtedness was $6,118.

     The decrease in our Adjusted FFO results  during the first  quarter of 2003
compared to our FFO results for the same period in 2002 reflects (i) the reduced
weighted-average  portfolio  occupancy  during the 2003 period,  (ii) changes in
economic rental rates and (iii) the loss of net operating  income resulting from
the   dispositions  of  properties,   partially   offset  by  interest   savings
attributable to the repayment of indebtedness.

<PAGE>
                                  Page - (44)

     TABLE  5  provides  a  reconciliation  of  income  (loss)  from  continuing
operations to FFO and Adjusted FFO for the three months ended March 31, 2003 and
2002.

Table 5 - Funds from Operations

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended March 31,                                                               2003               2002
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                <C>
Income (loss) from continuing operations                                               $ (2,289)          $ 10,411
Adjustments:
  Gain on sale of real estate                                                                 -            (16,793)
  Depreciation and amortization                                                           7,280             10,208
  Non-real estate depreciation and amortization                                            (532)              (554)
  Unconsolidated joint ventures' adjustments                                                695                783
  Discontinued operations                                                                     -              2,908
                                                                                       --------           --------
FFO per NAREIT Definition                                                                 5,154              6,963
  Defeased debt adjustment(1)                                                               964                  -
                                                                                       --------           --------
Adjusted FFO                                                                           $  6,118           $  6,963
                                                                                       ========           ========

Other Data:
Net cash provided by operating activities                                              $  2,962           $  4,668
Net cash provided by investing activities                                                   316             10,576
Net cash used in financing activities                                                    (1,950)           (16,691)
====================================================================================================================================
</TABLE>
Note:
(1)  In December  2002,  we partially  defeased our Mega Deal Loan in connection
     with  the  sale  of  the  Colorado  Properties.   In  connection  with  the
     defeasance, we purchased US Treasury Securities,  which are maintained in a
     Trustee  Escrow.  All debt  service due under the  Defeased  Notes  Payable
     during the three  months  ended  March 31,  2003 was made from the  Trustee
     Escrow.  During the three months ended March 31, 2003, the interest  income
     earned on the  Trustee  Escrow  was $525 and the  interest  expense  on the
     Defeased  Notes Payable was $1,489,  which are included in our results from
     operations in the accompanying Consolidated Statements of Operations. These
     items had no impact on our operating cash flow during 2003 because the cash
     settlement with respect to the Defeased Notes Payable  occurred during 2002
     and the payments made in 2003 were from restricted  cash.  Accordingly,  we
     believe  it  is  appropriate  to  adjust  for  them  in  our  Adjusted  FFO
     calculation.

<PAGE>
                                  Page - (45)

Item 3.  Quantitative and Qualitative Disclosures of Market Risk


Market Risk Sensitivity

     We are subject to various market risks and  uncertainties,  including,  but
not limited to, the effects of current and future economic  conditions,  and the
resulting  impact on our revenue;  the effects of  increases in market  interest
rates from  current  levels (see  below);  the risks  associated  with  existing
vacancy  rates or potential  increases in vacancy  rates because of, among other
factors, tenant bankruptcies and store closures, and the resulting impact on our
revenue;  and risks  associated with refinancing our current debt obligations or
obtaining new financing  under terms less favorable than we have  experienced in
prior periods.

Interest Rate Risk

     In the  ordinary  course  of  business,  we are  exposed  to the  impact of
interest rate changes.  We employ established  policies and procedures to manage
our exposure to interest rate changes. Historically, we have used a mix of fixed
and  variable-rate  debt to (i) limit the impact of interest rate changes on our
results  from  operations  and cash flows and (ii) lower our  overall  borrowing
costs.  Nevertheless,  as of March 31, 2003, all of our outstanding indebtedness
bore  interest  at fixed  rates.  The  following  table  provides  a summary  of
principal cash flows, excluding (i) unamortized debt premiums of $7,435 and (ii)
non-recourse  mortgage  indebtedness  aggregating  $41,250 on certain properties
which  is  in  default   (see   "Defaults  on  Certain   Non-recourse   Mortgage
Indebtedness" within "Liquidity and Capital Resources" of Item 2 - "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  for
additional  information),  and related contractual interest rates by fiscal year
of  maturity.  See  Note 4 -  "Debt"  of the  Notes  to  Consolidated  Financial
Statements contained herein for additional information with respect to the terms
of our debt instruments.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                Year of Maturity
------------------------------------------------------------------------------------------------------------------------------------
                                        2003           2004          2005          2006           2007     Thereafter         Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>              <C>          <C>          <C>              <C>           <C>          <C>
Bonds Payable
Principal                          $     636        $   726      $    773     $     820        $   878       $ 18,618     $  22,451
Average interest rate                   6.46%          6.34%         6.34%         6.34%          6.34%          6.52%         6.49%

Notes Payable
Principal                          $ 265,009        $ 4,571      $ 11,574     $ 120,437        $ 1,002       $ 57,995     $ 460,588
Average interest rate                   7.79%          7.97%         8.58%         8.83%          7.60%          7.59%         8.06%

Defeased Notes Payable
Principal                          $  74,509                                                                              $  74,509
Average interest rate                   7.78%                                                                                  7.78%
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (46)

     Additionally, we sold Prime Outlets at Hagerstown (the "Hagerstown Center")
on January 11, 2002 to an existing joint venture  partnership (the "Prime/Estein
Venture").  In connection  with the sale, the  Prime/Estein  Venture assumed the
first mortgage loan on the Hagerstown  Center (the "Hagerstown  First Mortgage")
in the amount of $46,862; however, our guarantee of such indebtedness remains in
place. Additionally, we are obligated to refinance the Hagerstown First Mortgage
on behalf of the  Prime/Estein  Venture on or before  June 1, 2004,  the date on
which such indebtedness matures.  Additionally,  the Prime/Estein Venture's cost
of the  Hagerstown  First  Mortgage  and any  refinancing  of it are fixed at an
annual  rate of 7.75%  for a period  of 10  years.  If the  actual  cost of such
indebtedness  should exceed 7.75% at any time during the 10-year period, we will
be obligated to pay the difference to the  Prime/Estein  Venture.  If the actual
cost of such  indebtedness  is less than 7.75% at any time  during  the  10-year
period,  however,  the  Prime/Estein  Venture  will  be  obligated  to  pay  the
difference  to us. The actual cost of the  Hagerstown  First  Mortgage is 30-day
LIBOR plus 1.50%,  or 2.84% as of March 31, 2003.  Because the Hagerstown  First
Mortgage  bears  interest  at a variable  rate,  we are exposed to the impact of
interest rate changes. At March 31, 2003, a hypothetical 100 basis point move in
the LIBOR  rate would  impact  our  guarantee  by $469.  See Note 3 -  "Property
Dispositions" of the Notes to Consolidated  Financial  Statements for additional
information.

Item 4.  Controls and Procedures

(a)      Evaluation of Disclosure Controls and Procedures

         Within  the  90  days  prior to the date of this Form 10-Q, the Company
         carried   out  an  evaluation,  under  the  supervision  and  with  the
         participation  of  the  Company's  management,  including the Company's
         Chairman   and   Chief  Executive  Officer  along  with  the  Company's
         President,  Chief Financial Officer and Treasurer, of the effectiveness
         of  the  design  and operation of the Company's disclosure controls and
         procedures.  Based  upon  that  evaluation,  the Company's Chairman and
         Chief  Executive  Officer  along  with  the  Company's President, Chief
         Financial Officer and Treasurer concluded that the Company's disclosure
         controls and procedures are effective.

(b)      Changes in Internal Controls

         There  have  been  no  significant  changes  in  the Company's internal
         controls or in other factors which  could significantly affect internal
         controls subsequent to the date the Company carried out its evaluation.

<PAGE>
                                  Page - (47)

                           PART II: OTHER INFORMATION

Item 1.           Legal Proceedings

For a description of legal proceedings involving the Company and its properties,
please see Part I, Item 3 - "Legal  Proceedings" of the Company's  Annual Report
on Form K for the year ended December 31, 2002 and Note 6 - "Legal  Proceedings"
of  the  Notes  to  Consolidated  Financial  Statements  contained  herein.  The
following information updates such disclosure.

The Company and its  affiliates  were  defendants  in a lawsuit filed by Accrued
Financial Services ("AFS") on August 10, 1999 in the Circuit Court for Baltimore
City.  The lawsuit was removed to United States  District Court for the District
of Maryland  (the "U.S.  District  Court") on August 20, 1999.  AFS claimed that
certain  tenants had  assigned to AFS their  rights to make claims  under leases
such tenants had with affiliates of the Company and alleged that the Company and
its  affiliates  overcharged  such tenants for common area  maintenance  ("CAM")
charges and  promotion  fund  charges.  The U.S.  District  Court  dismissed the
lawsuit on June 19, 2000. AFS appealed the U.S. District Court's decision to the
United States Court of Appeals for the Fourth Circuit. Briefs were submitted and
oral argument before a panel of judges of the United States Court of Appeals for
the Fourth  Circuit  was held on October  30,  2001,  during  which the panel of
judges  requested  further  briefing of certain  issues.  On July 29, 2002,  the
Fourth Circuit affirmed the dismissal. AFS filed a request for further review by
the Fourth  Circuit  which  request was  denied.  In January  2003,  AFS filed a
petition  for a writ of  certiorari  by the  United  States  Supreme  Court (the
"Supreme  Court") and the Company filed its opposition on February 24, 2003. The
Supreme Court  subsequently  denied the writ of certiorari  and the parties have
agreed to dismiss any remaining claims, thereby terminating the AFS lawsuit.

As previously disclosed by the Company, certain tenants in the Company's and its
affiliates'  outlet  centers  have  made  or  may  make  allegations  concerning
overcharging  for CAM and promotion fund charges  because of varying  clauses in
their leases pursuant to which they claim under various  circumstances that they
were not required to pay some or all of the pass-through charges. Such claims if
asserted and found  meritorious,  could have a material  affect on the Company's
financial  condition.  Determination  of whether  liability  would  exist to the
Company  would  depend on  interpretation  of  various  lease  clauses  within a
tenant's lease and all of the other leases at each center collectively.  To date
such issues have been raised and resolved with  Dinnerware  Plus Holdings,  Inc.
("Mikasa"),  Melru Corporation,  Designs, Inc. and Brown Group Retail, Inc., all
of which at one time or another were in  litigation,  or  threatened  litigation
with the  Company.  Additionally,  during the first  quarter  of 2003,  Gap Inc.
notified  the  Company  that it  believes  it is entitled to a refund of certain
pass-through charges as a result of certain clauses in its leases.

In the second quarter of 2002, the Company  recorded a  non-recurring  charge to
establish  a reserve  in the  amount of $3.0  million  for  resolution  of these
matters,  in addition to the Mikasa matter  referred to above.  This reserve was
estimated in accordance with our established policies and procedures  concerning
loss  contingencies  for  additional  information).  The  balance  of the unused
reserve (which is included in the accounts payable and other  liabilities in the
Consolidated  Balance Sheet) is approximately $2.2 million as of March 31, 2003.
Based on presently  available  information,  the Company believes it is probable
the remaining  reserve will be utilized over the next several years in resolving
claims relating to the pass-through and promotional fund provisions contained in
its leases,  inclusive of amounts that may be owed,  if any, to the Gap Inc. The
Company cautions,  however, that given the inherent  uncertainties of litigation
and the complexities  associated with a large number of leases and other factual
questions  at issue,  actual  costs may vary from this  estimate.  No other such
tenant, however, has filed a suit or indicated to the Company that it intends to
file a suit. Nevertheless, it is too early to make any predictions as to whether
the Company or its affiliates may be found liable with respect to other tenants,
or to predict damages should liability be found.

<PAGE>
                                  Page - (48)

Item 2.           Changes in Securities

None

Item 3.           Defaults Upon Senior Securities

The Company is currently in arrears in the payment of distributions on its 10.5%
Series A Senior  Cumulative  Preferred Stock ("Series A Senior Preferred Stock")
and 8.5% Series B Cumulative Participating  Convertible Preferred Stock ("Series
B Convertible  Preferred Stock").  As of March 31, 2003, the aggregate arrearage
on the Series A Senior  Preferred  Stock and the Series B Convertible  Preferred
Stock  was  approximately   $20.4  million  and  approximately   $56.1  million,
respectively.

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

None

Item 5.           Other Information

None

Item 6.           Exhibits and Reports on Form 8-K

(a)      The  following  exhibits  are included in this Quarterly Report on Form
         10-Q:

         Exhibit 99.1      Certification by Chief Executive Officer  pursuant to
                           18  U.S.C.  Section  1350,  as  adopted  pursuant  to
                           Section 906 of the Sarbanes-Oxley Act of 2002.

         Exhibit 99.2      Certification by Chief Financial Officer  pursuant to
                           18  U.S.C.  Section  1350,  as  adopted  pursuant  to
                           Section 906 of the Sarbanes-Oxley Act of 2002.

         Reports on Form 8-K:

         None

<PAGE>
                                  Page - (49)

                                   SIGNATURES



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



                                PRIME RETAIL, INC.
                                Registrant



Date: May 14, 2003              /s/ Robert A. Brvenik
                                --------------------------------------------
                                Robert A. Brvenik
                                President, Chief Financial Officer and Treasurer

<PAGE>
                                  Page - (50)

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Glenn D. Reschke, Chairman and Chief Executive Officer of Prime Retail, Inc.,
certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Prime Retail, Inc.;

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  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant'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 registrant and we have:

         a)       designed  such  disclosure  controls  and procedures to ensure
                  that   material   information   relating  to  the  registrant,
                  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 registrant'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 registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant'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
                  registrant's ability to record,  process, summarize and report
                  financial  data  and  have  identified  for  the  registrant'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
                  registrant's internal controls; and

6.   The  registrant'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: May 14, 2003                     /s/ Glenn D. Reschke
                                            --------------------
                                            Glenn D. Reschke
                                            Chairman and Chief Executive Officer

<PAGE>
                                  Page - (51)

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Robert A. Brvenik,  President, Chief Financial Officer and Treasurer of Prime
Retail, Inc., certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Prime Retail, Inc.;

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  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant'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 registrant and we have:

         a)       designed  such  disclosure  controls  and procedures to ensure
                  that   material   information   relating  to  the  registrant,
                  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 registrant'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 registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant'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
                  registrant's ability to record, process, summarize  and report
                  financial  data  and  have  identified  for  the  registrant'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
                  registrant's internal controls; and

6.   The  registrant'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: May 14, 2003         /s/ Robert A. Brvenik
                                ---------------------
                                Robert A. Brvenik
                                President, Chief Financial Officer and Treasurer