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, 2001

                                       or

[ ]      Transition Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934, for the Transition Period From        to
                                                              -----    -----

                        Commission file 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, 2001,  the  issuer  had  outstanding 43,577,916 shares of Common
Stock, $.01 par value per share.
<PAGE>
                               Prime Retail, Inc.
                                    Form 10-Q


                                      INDEX





PART I:  FINANCIAL INFORMATION                                         PAGE


Item 1.  Financial Statements (Unaudited)

     Consolidated Balance Sheets as of March 31, 2001 and
       December 31, 2000................................................  1

     Consolidated Statements of Operations for the three
       months ended March 31, 2001 and 2000.............................  2

     Consolidated Statements of Cash Flows for the three
       months ended March 31, 2001 and 2000.............................  3

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

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations.......................... 11

Item 3.  Quantitative and Qualitative Disclosures of Market Risk........ 23

PART II: OTHER INFORMATION

Item 1.  Legal Proceedings.............................................. 24

Item 2.  Changes in Securities.......................................... 26

Item 3.  Defaults Upon Senior Securities................................ 26

Item 4.  Submission of Matters to a Vote of Security Holders............ 26

Item 5.  Other Information.............................................. 26

Item 6.  Exhibits or Reports on Form 8-K................................ 26

Signatures.............................................................. 27

<PAGE>
<TABLE>
                                                         PRIME RETAIL, INC.

                                                     Consolidated Balance Sheets

                                          (Amounts in thousands, except share information)
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                                        March 31, 2001         December 31, 2000
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>                       <C>
Assets
Investment in rental property:
     Land                                                                                    $ 151,974                 $ 151,941
     Buildings and improvements                                                              1,326,892                 1,322,368
     Property under development                                                                  3,575                     3,573
     Furniture and equipment                                                                    15,254                    15,225
                                                                               ------------------------  ------------------------
                                                                                             1,497,695                 1,493,107
     Accumulated depreciation                                                                 (230,796)                 (217,569)
                                                                               ------------------------  ------------------------
                                                                                             1,266,899                 1,275,538
Cash and cash equivalents                                                                        5,689                     8,906
Restricted cash                                                                                 41,381                    54,920
Accounts receivable, net                                                                        11,804                    13,480
Deferred charges, net                                                                           17,353                    19,533
Assets held for sale                                                                             8,460                    43,230
Due from affiliates, net                                                                         2,727                     2,432
Investment in partnerships                                                                      20,944                    22,372
Other assets                                                                                    22,259                    21,610
                                                                               ------------------------  ------------------------
          Total assets                                                                     $ 1,397,516               $ 1,462,021
                                                                               ========================  ========================

Liabilities and Shareholders' Equity
Bonds payable                                                                                 $ 32,455                  $ 32,455
Notes payable                                                                                  959,236                   997,698
Accrued interest                                                                                 7,553                     5,267
Real estate taxes payable                                                                        7,713                     8,555
Construction costs payable                                                                         176                     1,850
Accounts payable and other liabilities                                                          40,031                    60,213
                                                                               ------------------------  ------------------------
     Total liabilities                                                                       1,047,164                 1,106,038

Minority interests                                                                               1,494                     1,495

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 $65,802), 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 $218,576),
          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 net income                                                       (361,052)                 (355,422)
                                                                               ------------------------  ------------------------
      Total shareholders' equity                                                               348,858                   354,488
                                                                               ------------------------  ------------------------
          Total liabilities and shareholders' equity                                       $ 1,397,516               $ 1,462,021
                                                                               ========================  ========================

=================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
                                                         PRIME RETAIL, INC.

                                                Consolidated Statements of Operations

                                        (Amounts in thousands, except per share information)
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31,                                                                 2001                      2000
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>                       <C>
REVENUES
Base rents                                                                                 $ 36,932                  $ 44,248
Percentage rents                                                                                717                     1,487
Tenant reimbursements                                                                        17,724                    22,012
Interest and other                                                                            2,744                     5,094
                                                                            ------------------------  ------------------------
  Total revenues                                                                             58,117                    72,841

EXPENSES
Property operating                                                                           14,133                    17,532
Real estate taxes                                                                             5,226                     5,731
Depreciation and amortization                                                                13,675                    16,237
Corporate general and administrative                                                          3,301                     5,433
Interest                                                                                     24,443                    24,023
Other charges                                                                                 3,702                     1,529
Loss on eOutlets.com                                                                              -                    12,964
Loss on Designer Connection                                                                       -                     1,079
                                                                            ------------------------  ------------------------
  Total expenses                                                                             64,480                    84,528
                                                                            ------------------------  ------------------------

LOSS BEFORE GAIN ON SALE OF REAL ESTATE                                                      (6,363)                  (11,687)
Gain on sale of real estate                                                                     732                         -
                                                                            ------------------------  ------------------------
LOSS BEFORE MINORITY INTERESTS                                                               (5,631)                  (11,687)
(Income) loss allocated to minority interests                                                     1                       (32)
                                                                            ------------------------  ------------------------
NET LOSS                                                                                     (5,630)                  (11,719)
Income allocated to preferred shareholders                                                   (5,668)                   (5,668)
                                                                            ------------------------  ------------------------

NET LOSS APPLICABLE TO COMMON SHARES                                                      $ (11,298)                $ (17,387)
                                                                            ========================  ========================

BASIC AND DILUTED LOSS PER COMMON SHARE                                                     $ (0.26)                  $ (0.40)
                                                                            ========================  ========================

WEIGHTED-AVERAGE BASIC AND DILUTED
  COMMON SHARES OUTSTANDING                                                                  43,578                    43,379
                                                                            ========================  ========================
==============================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
                                                         PRIME RETAIL, INC.

                                                Consolidated Statements of Cash Flows

                                                       (Amounts in thousands)

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31,                                                                   2001                      2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                      <C>
Operating Activities
Net loss                                                                                    $ (5,630)                $ (11,719)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
     Income (loss) allocated to minority interests                                                (1)                       32
     Gain on sale of real estate                                                                (732)                        -
     Depreciation                                                                             13,559                    16,070
     Amortization of deferred financing costs and
        interest rate protection contracts                                                     2,014                       845
     Amortization of debt premiums                                                              (812)                     (778)
     Amortization of leasing commissions                                                         116                       167
     Provision for uncollectible accounts receivable                                           3,071                     1,028
     Loss on eOutlets.com                                                                          -                    12,964
     Loss on Designer Connection                                                                   -                     1,079
     Gain on sale of land                                                                          -                    (2,472)
Changes in operating assets and liabilities:
     Increase in accounts receivable                                                          (1,582)                     (322)
     (Increase) decrease in restricted cash                                                   13,478                      (624)
     Increase in other assets                                                                   (551)                   (2,603)
     Decrease in accounts payable and other liabilities                                      (17,020)                   (7,273)
     Increase (decrease) in real estate taxes payable                                           (236)                    1,990
     Increase in accrued interest                                                              2,286                       600
                                                                                            --------                 ---------
       Net cash provided by operating activities                                               7,960                     8,984
                                                                                            --------                 ---------

Investing Activities
Additions to investment in rental property                                                    (5,626)                  (21,663)
Payments made for eOutlets.com                                                                (1,375)                   (7,057)
Proceeds from sale of land                                                                         -                     4,622
Proceeds from sales of operating properties                                                   33,547                    11,063
                                                                                            --------                 ---------
       Net cash provided by (used in) investing activities                                    26,546                   (13,035)
                                                                                            --------                 ---------
Financing Activities
Proceeds from notes payable                                                                      199                     9,066
Principal repayments on notes payable                                                        (37,849)                  (11,507)
Deferred financing fees                                                                          (73)                      (75)
                                                                                            --------                 ---------
       Net cash used in financing activities                                                 (37,723)                   (2,516)
                                                                                            --------                 ---------

Decrease in cash and cash equivalents                                                         (3,217)                   (6,567)
Cash and cash equivalents at beginning of period                                               8,906                     7,343
                                                                                            --------                 ---------
Cash and cash equivalents at end of period                                                   $ 5,689                     $ 776
                                                                                            ========                 =========

====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>


                               PRIME RETAIL, INC.

                Consolidated Statements of Cash Flows (continued)

                             (Amounts in thousands)



Supplemental Disclosure of Noncash Investing and Financing Activities:

The  following  assets  and liabilities were sold in connection with the sale of
Prime Outlets at Williamsburg on February 23, 2000:

    Book value of assets disposed, net................................ $ 53,563
    Cash received.....................................................  (11,063)
    Promissory note received..........................................  (10,000)
                                                                       --------
    Debt disposed..................................................... $ 32,500
                                                                       ========

================================================================================
See accompanying notes to financial statements.
<PAGE>


                               Prime Retail, Inc.
                   Notes to 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 generally accepted  accounting  principles  ("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 footnotes 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 footnotes included in Prime Retail, Inc.'s
(the "Company") Annual Report on Form 10-K for the year ended December 31, 2000.

        Unless  the  context  requires  otherwise, all references to 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 the Company has operational
control.  Profits and  losses are allocated  in accordance with the terms of the
agreement  of  limited partnership of the Operating Partnership.  Investments in
partnerships  in  which  the  Company  does  not  have  operational  control 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.

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

Note 2 -- Dispositions

        On  February 2, 2001,  the  Company  sold  Northgate  Plaza, a community
center  located  in  Lombard,  Illinois  to  Arbor Northgate, Inc. for aggregate
consideration of  $7,050. After the repayment of mortgage indebtedness of $5,966
and closing costs,  the  net  cash  proceeds  from the Northgate Plaza sale were
$510.  On  March 16, 2001, the Company  sold  Prime  Outlets at Silverthorne, an
outlet center  located  in  Silverthorne, Colorado c onsisting of 257,000 square
feet of GLA, to Silverthorne  Factory Stores, LLC for aggregate consideration of
$29,000.  The  net cash  proceeds from the sale of Prime Outlets at Silverthorne
were $8,993, after  the repayment of certain mortgage indebtedness of $18,078 on
Prime  Outlets  at  Lebanon  (see below)  and  closing  costs  and fees. The net
proceeds  from these  sales of were used to prepay an aggregate of $9,137 of the
Company's outstanding  mezzanine loan  (the "Mezzanine Loan") in accordance with
the  terms of such loan agreement.  In connection  with these sales, the Company
recorded an aggregate gain on the sale of real estate of $732 during the quarter
ended March 31, 2001.  The operating results of these properties are included in
the Company's results of operations through the respective dates of disposition.
At December 31, 2000,  these  properties were classified as assets held for sale
in the Consolidated Balance Sheet with an aggregate carrying value of $34,770.
<PAGE>
        In  conjunction  with  the  sale  of  Prime Outlets at Silverthorne, the
Company  substituted  Prime  Outlets  at Lebanon into the cross-collateral asset
pool  of  its  first  mortgage  and  expansion  loan  pursuant to the collateral
substitution  provisions  contained  in  the  loan  agreement.  Prime Outlets at
Silverthorne  was  previously  one of fifteen properties in the cross-collateral
asset pool.

Note 3 -- Bonds and Notes Payable

Debt Transactions

        In  connection  with  the  sales of Northgate Plaza and Prime Outlets at
Silverthorne  during the three  months  ended March 31, 2001, the Company repaid
mortgage indebtedness of $5,966 and $18,078, respectively. In addition, net cash
proceeds from these property sales were used to prepay an aggregate of $9,137 of
the Company's outstanding Mezzanine Loan.  As of March 31, 2000, the outstanding
principal balance of the Mezzanine Loan was $78,863. See Note 2 - "Dispositions"
for additional information.

Debt Service Obligations

        The   Company's   aggregate  indebtedness,  excluding  unamortized  debt
premiums, was $978,359 at  March 31, 2001.  At March 31, 2001, such indebtedness
had a weighted-average maturity of 4.11 years and bore contractual interest at a
weighted-average rate of 9.12% per annum. At March 31, 2001, $820,474, or 83.9%,
of  such  indebtedness  bore  interest at fixed rates and $157,885, or 16.1%, of
such  indebtedness  bore  interest  at  variable  rates.  The  Company  utilizes
derivative  financial  instruments  to  manage its interest rate risk associated
with variable rate debt. As of March 31, 2001, the Company's remaining scheduled
principal  payments  for  2001  were $43,693. These scheduled principal payments
include first mortgages on Prime Outlets at Edinburgh aggregating $16,402 due on
June 10, 2001  and  a first mortgage  of $6,527 on land in Camarillo, California
due on November 1, 2001.

        The  Company  plans  to  either  refinance or extend the maturity of its
mortgage  indebtedness  maturing during 2001. In the event the Company is unable
to refinance  or extend  the maturity of such indebtedness, it will consider the
repayment of the outstanding  balance  through  proceeds from potential sales of
property or may  give the property  back to the mortgage lender. There can be no
assurance that the  Company will be successful in  obtaining the required amount
of funds for the  maturing indebtedness or that the terms of the refinancings or
extensions  of  maturities, if  they  should occur, will  be as favorable as the
Company has experienced  in prior periods.

        As of  March 31, 2001, the Company is a guarantor or otherwise obligated
with respect  to  an  aggregate  of $12,522 of the indebtedness of Horizon Group
Properties,  Inc.  and  its  affiliates  including  a $10,000 obligation under a
secured  credit  facility  which  bears  a rate of interest of LIBOR plus 1.90%,
matures  in  July 2001,  and  is  collateralized  by  seven  properties  located
throughout  the  United  States.  As of  March 31, 2001, no claims had been made
against the Company's guaranty by the lender.
<PAGE>
Debt Compliance

     As of March 31, 2001, the Company was in compliance with all financial debt
covenants under its recourse loan agreements. However, there can be no assurance
that the Company will be in  compliance  with its  financial  debt  covenants in
future periods since the Company's  future  financial  performance is subject to
various risks and uncertainties,  including,  but not limited to, the effects of
increases in market  interest rates from current  levels,  the risk of potential
increases in vacancy  rates and the resulting  impact on the Company's  revenue,
and risks associated with refinancing the Company's  current debt obligations or
obtaining new financing  under terms as favorable as the Company has experienced
in prior periods.

Defaults on Certain Non-recourse Mortgage Indebtedness

        Subsidiaries of  the Company  have suspended regularly scheduled monthly
debt service  payments  on two  non-recourse  mortgage loans aggregating $33,697
which are cross-collateralized by Prime Outlets at Jeffersonville II, located in
Jeffersonville, Ohio, and Prime Outlets at Conroe, located in Conroe, Texas. The
Company  remains  in discussions with the holder of the mortgage loans regarding
potential restructuring  of their existing terms. There can be no assurance that
such  discussions  will lead  to  any modification  to the terms of the mortgage
loans  and  that the  two  properties  will  not be foreclosed.  Because the two
mortgage  loans  are  non-recourse, the  Company  does not  believe the existing
defaults or  any related  foreclosure will have a material impact on its results
of operations or financial position.

        Various  mortgage  loans,  related  to  projects  in  which the Company,
through  subsidiaries, indirectly owns joint venture interests, have matured and
are  in  default.  The  mortgage  loans are (i) a $10,389 first mortgage loan on
Phase I  of  the  outlet  center in Bellport, New York, held by Union Labor Life
Insurance Company  ("Union Labor");  (ii)  mortgage loans aggregating $29,436 on
Prime  Outlets  at  New River located  in  New  River, Arizona,  held by Fru-Con
Development Corporation  ("Fru-Con"); and (iii) a $13,539 first mortgage loan on
the outlet center in  Oxnard, California, also held by  Fru-Con. Fru-Con and the
Company are each 50.0% partners in both the New River and Oxnard outlet centers.

     Union Labor has filed for  foreclosure  on Phase I of the  Bellport  Outlet
Center.  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 Phase I of the Bellport Outlet Center. Fru-Con completed on May 8, 2001
the  foreclosure  sale of Prime Outlets at New River.  The Company  continues to
negotiate the terms of a transfer of its ownership interest in the Oxnard outlet
center to Fru-Con. The Company believes none of these mortgage loans is recourse
to the Company.  In addition,  the Company and its affiliates had been receiving
none of the net operating  income from Phase I of the Bellport Outlet Center and
Prime  Outlets  at New  River  prior to the  loss of  control  of the  projects.
Therefore,  the Company does not believe the existing defaults under these loans
or any related  foreclosures  on the mortgaged  properties  will have a material
impact on its results of operations or financial position.
<PAGE>
     The  Company,  through  affiliates,  holds a 51%  interest  in the owner of
Phases II and III of an outlet  center in Bellport,  New York on which the first
mortgage loan of $7,795  matured on May 1, 2001.  The Company,  on behalf of the
owner, is currently in discussion with the lender to modify the terms and extend
the maturity of this mortgage  indebtedness.  In the event the Company is unable
to modify  the terms and  extend  the  maturity  of such  indebtedness,  it will
consider the  repayment  of the  outstanding  balance  through  proceeds  from a
potential sale of the property.  There can be no assurance that the Company will
be  successful  in  obtaining  the  required  amount  of funds  for the  matured
indebtedness  or  that  the  terms  of the  modification  and  extension  of the
maturity,  if it  should  occur,  will  be  as  favorable  as  the  Company  has
experienced  in prior  periods.  Although  this loan is  recourse,  the  Company
believes  that any  default  or  foreclosure  under  this  loan  will not have a
material impact on its results of operations or financial position.

Note 4 - Shareholders' Equity

     In order to qualify as a real estate  investment trust ("REIT") for federal
income tax purposes,  the Company is required to pay distributions to its common
and  preferred  shareholders  of at least  90% of its  REIT  taxable  income  in
addition to satisfying other requirements.  Although the Company intends to make
distributions  in accordance with the  requirements of the Internal Revenue Code
of 1986, as amended, necessary to remain qualified as a REIT, it also intends to
retain such amounts as it considers  necessary from time to time for capital and
liquidity needs of the Company.

     The Company's  current  policy is to pay  distributions  only to the extent
necessary  to  maintain  its status as a REIT for federal  income tax  purposes.
Based on the Company's  current federal income tax projections for 2001, it does
not  expect to pay any  distributions  on its 10.5%  Series A Senior  Cumulative
Preferred   Stock  ("Senior   Preferred   Stock"),   8.5%  Series  B  Cumulative
Participating  Convertible  Preferred  Stock  ("Series B  Convertible  Preferred
Stock"),  common  stock or common units of limited  partnership  interest in the
Operating Partnership during 2001.

     The Company is  currently  in arrears on six  quarters of  preferred  stock
distributions  due February  15, 2000  through May 15, 2001.  The holders of the
Senior Preferred Stock and Series B Convertible Preferred Stock, voting together
as a single class,  will have the right to elect two  additional  members to the
Company's  Board  of  Directors  so long as the  equivalent  of six  consecutive
quarterly  dividends on these series of preferred stock remain in arrears.  Each
of such  directors  would be  elected  to serve  until  the  earlier  of (i) the
election and qualification of such director's successor,  or (ii) payment of the
dividend arrearage.

     The Company is prohibited from paying dividends or distributions  except to
the  extent  necessary  to  maintain  its REIT  status  under  the  terms of its
Mezzanine Loan. In addition, the Company may make no distributions to its common
shareholders or its holders of common units of limited  partnership  interest in
the Operating  Partnership unless it is current with respect to distributions to
its  preferred  shareholders.  As of March 31, 2001,  unpaid  dividends  for the
period  November 16, 1999 through March 31, 2001 on the Senior  Preferred  Stock
and  Series  B  Convertible  Preferred  Stock  aggregated  $8,302  and  $22,873,
respectively.  The annual dividends on the Company's  2,300,000 shares of Senior
Preferred Stock and 7,828,125 shares of Series B Convertible Preferred Stock are
$6,038 ($2.625 per share) and $16,636 ($2.125 per share), respectively.
<PAGE>
Note 5-- Risk Management Activities

        In June 2000,  the  Financial  Accounting Standards Board ("FASB" issued
SFAS  No. 138,  "Accounting  for  Certain  Derivative  Instruments  and  Certain
Hedging  Activities,"  which  amends SFAS No. 133,  "Accounting  for  Derivative
Instruments  and  Hedging  Activities." SFAS No. 133 was  previously amended  by
SFAS   No.   137,   "Accounting   For    Derivative   Instruments  and   Hedging
Activities--Deferral  of the Effective  Date  of  FASB Statement No. 133," which
deferred the  effective  date of SFAS No. 133 to fiscal  years  beginning  after
June 15, 2000.   The Company  adopted SFAS  No. 138  and SFAS  No. 133 effective
January 1, 2001 and such  adoption did not have a material impact on its results
of operations or financial position.

Note 6 -- Legal Proceedings

     On October  13, 2000 and  thereafter,  eight  complaints  were filed in the
United States  District  Court for the District of Maryland  against the Company
and four individual  defendants.  The four individual defendants are: William H.
Carpenter,  Jr., the former President and Chief Operating  Officer and a current
director of the Company;  Abraham Rosenthal,  the former Chief Executive Officer
and a former director of the Company; Michael W. Reschke, the former Chairman of
the Board and a current  director of the Company;  and Robert P. Mulreaney,  the
former  Executive Vice President - Chief Financial  Officer and Treasurer of the
Company.  The complaints  were brought by alleged  stockholders  of the Company,
individually   and   purportedly  as  class  actions  on  behalf  of  all  other
stockholders  of  the  Company.   The  complaints  allege  that  the  individual
defendants  made  statements  about the Company  that were in  violation  of the
federal  securities  laws. The  complaints  seek  unspecified  damages and other
relief.  Lead plaintiffs and lead counsel were recently  appointed.  The Company
expects  a  consolidated  complaint  to be filed  within  the next 15 days.  The
Company  believes  that the  complaints  are without merit and intends to defend
against  them  vigorously.  The  outcome  of these  lawsuits,  and the  ultimate
liability of the defendants, if any, cannot be predicted.

     The Company and its affiliates were defendants in a lawsuit filed on August
10, 1999 in the Circuit Court for  Baltimore  City and removed to U. S. District
Court for the  District of Maryland  (the "U.S.  District  Court") on August 20,
1999.  The  plaintiff   alleged  that  the  Company  and  its  related  entities
overcharged  tenants for common area  maintenance  charges  and  promotion  fund
charges.  The U.S.  District  Court  dismissed the lawsuit on June 19, 2000. The
plaintiff  has  filed a notice  of its  appeal  from the U.S.  District  Court's
decision  and a  briefing  schedule  has been  issued by the  Court.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously.  The outcome of this  lawsuit,  and the  ultimate  liability  of the
defendants, if any, cannot be predicted.
<PAGE>
     Several  entities (the  "Plaintiffs")  have filed or stated an intention to
file lawsuits (the  "Lawsuits")  against the Company and its affiliates in which
the Plaintiffs are seeking to hold them responsible under various legal theories
for  liabilities  incurred by  primeoutlets.com,  inc.,  also known as eOutlets,
including the theory that the Company guaranteed the obligations of eOutlets and
the theory that the Company was the alter ego of eOutlets. primeoutlets.com inc.
is also a defendant in some, but not all, of the Lawsuits.  The Company believes
that it is not liable to the  Plaintiffs  as there was no  privity  of  contract
between  it and the  various  Plaintiffs.  The  Company  intends  to defend  all
Lawsuits vigorously.  primeoutlets.com inc. filed for protection under Chapter 7
of the  United  States  Bankruptcy  Code  during  November  2000  under the name
E-Outlets  Resolution  Corp.  The trustee for  E-Outlets  Resolution  Corp.  has
notified the Company that he is  contemplating an action against the Company and
the Operating Partnership in which he may assert that E-Outlets Resolution Corp.
was the "alter-ego" of the Company and the Operating  Partnership and that, as a
result,  the Company and the Operating  Partnership  are liable for the debts of
E-Outlets  Resolution  Corp. If the trustee pursues such an action,  the Company
and the Operating  Partnership will defend  themselves  vigorously.  In the case
captioned  Convergys Customer  Management Group, Inc. v. Prime Retail,  Inc. and
primeoutlets.com  inc.,  currently  pending  in the  Court of  Common  Pleas for
Hamilton County (Ohio), the Company prevailed in a motion to dismiss 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.  The outcome of these
Lawsuits,  and  the  ultimate  liability  of the  Company,  if  any,  cannot  be
predicted.

     Dinnerware Plus Holdings, Inc., which operates under the trade name Mikasa,
and affiliates filed on March 29, 2001 a lawsuit against the Company and various
affiliates.  The  plaintiffs  allege that the Company  and its  affiliates  have
breached  various  provisions  in  the  plaintiffs'  leases  and,  as a  result,
overcharged  the  plaintiffs for common area  maintenance  charges and promotion
fund charges at various  centers where the plaintiffs  are tenants.  The Company
has not filed its response to the  complaint.  The outcome of this lawsuit,  and
the ultimate liability of the defendants, if any, cannot be predicted.

     The New York  Stock  Exchange  ("NYSE")  and the  Securities  and  Exchange
Commission have notified the Company that they are reviewing transactions in the
stock of the Company  prior to the  Company's  January  18,  2000 press  release
concerning financial matters.

     The Company has  received  notification  from the NYSE that it believes the
Company is "below  criteria"  for  continued  listing of its common stock on the
NYSE.  In order to avoid  delisting of its common stock,  the Company  currently
intends to seek  shareholder  approval  for a reverse  stock split at its annual
meeting of shareholders to be held in the summer of 2001.
<PAGE>
Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations

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


Introduction

     The  following  discussion  and  analysis  of  the  consolidated  financial
condition and results of operations of the Company should be read in conjunction
with the Consolidated Financial Statements and Notes thereto appearing elsewhere
in this Quarterly  Report on Form 10-Q.  The Company's  operations are conducted
through  the  Operating   Partnership.   The  Company   controls  the  Operating
Partnership as its sole general partner and is dependent upon the  distributions
or  other  payments  from  the  Operating  Partnership  to  meet  its  financial
obligations.  Historical  results and percentage  relationships set forth herein
are not necessarily indicative of future operations.
Cautionary Statements

     The  following  discussion  in  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations" contains 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.  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, risks associated with the Company's high level of
leverage and its ability to refinance such  indebtedness  as it becomes due; the
risk that the Company or its  subsidiaries  will not remain in  compliance  with
existing loan covenants; the effects of future events on the Company's financial
performance;  risks related to the retail industry in which the Company's outlet
centers  compete,  including the potential  adverse impact of external  factors,
such as inflation,  consumer confidence,  unemployment rates and consumer tastes
and preferences;  risks associated with tenant bankruptcies,  store closings and
the  non-payment  of  contractual  rents;  risks  associated  with the Company's
potential asset sales;  the risk of potential  increase in market interest rates
from current levels;  risks associated with real estate  ownership,  such as the
potential  adverse impact of changes in local  economic  climate on the revenues
and the value of the Company's properties; risks associated with litigation; and
risks associated with competition from web-based and catalogue retailers.
Outlet Center Portfolio

Portfolio GLA and Occupancy

     The Company's outlet center portfolio  consisted of 47 properties  totaling
13,239,000  square  feet of gross  leasable  area  ("GLA")  at March  31,  2001,
compared to 48 properties totaling 13,497,000 square feet of GLA at December 31,
2000 and 51 properties totaling 14,767,000 square feet of GLA at March 31, 2000.
The  changes in the  Company's  outlet  center GLA are due to certain  (i) sales
transactions  during 2001 and 2000 and (ii) development  activities during 2000.
Such  changes  are  discussed  below  and are  collectively  referred  to as the
"Portfolio GLA Activity".
<PAGE>
     The Company's outlet center portfolio was 89.9% and 90.7% occupied on March
31,  2001  and  2000,  respectively.  For the  quarter  ended  March  31,  2001,
weighted-average occupancy in the outlet center portfolio was 90.2%, compared to
91.0% for the same period in 2000. The 2001 period  decline in  weighted-average
and  period-end   occupancy  was  primarily   attributable   to  certain  tenant
bankruptcies, abandonments and store closings

2001 Sales Transactions

     On March 16,  2001,  the  Company  completed  the sale of Prime  Outlets at
Silverthorne,  an outlet center located in Silverthorne,  Colorado consisting of
257,000 square feet of GLA, to Silverthorne  Factory Stores,  LLC. The operating
results of Prime Outlets at Silverthorne  are included in the Company's  results
of operations through the date of disposition.

2000 Development Activities

     During 2000, the Company  completed the  development of 390,000 square feet
of GLA  consisting of the opening of (i) Prime Outlets of Puerto Rico, the first
outlet center in Puerto Rico,  which  contains  176,000  square feet of GLA, and
(ii) four expansions to outlet centers totaling 214,000 square feet of GLA.

2000 Sales Transactions

     On December 22, 2000, the Company completed the sale of four outlet centers
aggregating  1,592,000  square  feet  of  GLA  to a  joint  venture  partnership
comprised of Chelsea Property Group, Inc. and Fortress  Investment Group, L.L.C.
The four  outlet  centers  which were sold are  located  in Gilroy,  California,
Michigan City, Indiana, Waterloo, New York and Kittery, Maine.

     On February 23, 2000, the Company sold Prime Outlets at Williamsburg, which
contains  274,000  square  feet of  GLA,  to a joint  venture  partnership  (the
"Prime/Estein  Venture").  The Company owns a 30%  interest in the  Prime/Estein
Venture.  Commencing on the date of  disposition,  the Company  accounts for the
operating  results of this outlet center in accordance with the equity method of
accounting.
<PAGE>

     The  following  table sets forth  certain  information  with respect to the
Company's outlet center portfolio as of March 31, 2001.
<TABLE>
<CAPTION>
                                                                                           Grand            GLA           Occupancy
Outlet Centers                                                                         Opening Date       (Sq. Ft.)       Percentage
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                 <C>                   <C>
Prime Outlets at Fremont-- Fremont, Indiana.....................................        October 1985        229,000              91%

Prime Outlets at Birch Run (2)-- Birch Run, Michigan............................      September 1986        724,000              93

Prime Outlets at Latham-- Latham, New York......................................         August 1987         43,000              88

Prime Outlets at Williamsburg (3)-- Williamsburg, Virginia......................          April 1988        274,000              99

Prime Outlets at Pleasant Prairie-- Kenosha, Wisconsin..........................      September 1988        269,000              91

Prime Outlets at Edinburgh-- Edinburgh, Indiana.................................      September 1989        298,000              97

Prime Outlets at Burlington-- Burlington, Washington ...........................            May 1989        174,000              91

Prime Outlets at Queenstown-- Queenstown, Maryland..............................           June 1989        221,000              99

Prime Outlets at Hillsboro-- Hillsboro, Texas...................................        October 1989        359,000              94

Prime Outlets at Oshkosh-- Oshkosh, Wisconsin...................................       November 1989        260,000              94

Prime Outlets at Warehouse Row (4)-- Chattanooga, Tennessee.....................       November 1989         95,000              91

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

Prime Outlets at Sedona-- Sedona, Arizona ......................................         August 1990         82,000             100

Prime Outlets at San Marcos-- San Marcos, Texas.................................         August 1990        549,000              94

Prime Outlets at Anderson-- Anderson, California................................         August 1990        165,000              91

Prime Outlets at Post Falls-- Post Falls, Idaho ................................           July 1991        179,000              74

Prime Outlets at Ellenton-- Ellenton, Florida...................................        October 1991        481,000             100

Prime Outlets at Morrisville-- Raleigh - Durham, North Carolina.................        October 1991        187,000              91

Prime Outlets at Naples-- Naples/Marco Island, Florida..........................       December 1991        146,000              90

Prime Outlets at Conroe-- Conroe, Texas.........................................        January 1992        282,000              92

Bellport Outlet Center (5)-- Bellport, New York--  Phase I......................            May 1992         95,000              87
Bellport Outlet Center (5)-- Bellport, New York--  Phases II/III................       November 1996        197,000              69
                                                                                                         ----------             ---
                                                                                                            292,000              75

Prime Outlets at Niagara Falls USA-- Niagara Falls, New York....................           July 1992        534,000              90

Prime Outlets at Woodbury-- Woodbury, Minnesota.................................           July 1992        250,000              78

Prime Outlets at Calhoun-- Calhoun, Georgia.....................................        October 1992        254,000              88

Prime Outlets at Castle Rock-- Castle Rock, Colorado............................       November 1992        480,000              94

Prime Outlets at Bend-- Bend, Oregon............................................       December 1992        132,000              98

Prime Outlets at Jeffersonville II-- Jeffersonville, Ohio.......................          March 1993        314,000              52

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Grand             GLA           Occupancy
Outlet Centers                                                                         Opening Date       (Sq. Ft.)       Percentage
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                <C>                    <C>

Prime Outlets at Jeffersonville I-- Jeffersonville, Ohio........................           July 1993        407,000              90%

Prime Outlets at Gainesville-- Gainesville, Texas...............................         August 1993        316,000              83

Prime Outlets at Loveland-- Loveland, Colorado..................................            May 1994        328,000              89

Oxnard Factory Outlet (6)-- Oxnard, California..................................           June 1994        148,000              75

Prime Outlets at Grove City-- Grove City, Pennsylvania..........................         August 1994        533,000              98

Prime Outlets at Huntley-- Huntley, Illinois....................................         August 1994        282,000              82

Prime Outlets at Florida City-- Florida City, Florida...........................      September 1994        208,000              77

Prime Outlets at Pismo Beach-- Pismo Beach, California..........................       November 1994        148,000              92

Prime Outlets at Tracy-- Tracy, California......................................       November 1994        153,000              90

Prime Outlets at Vero Beach-- Vero Beach, Florida...............................       November 1994        326,000              95

Prime Outlets at Odessa-- Odessa, Missouri......................................           July 1995        296,000              81

Prime Outlets at Darien (7)-- Darien, Georgia...................................           July 1995        307,000              81

Prime Outlets at New River (8)-- Phoenix, Arizona...............................      September 1995        326,000              91

Prime Outlets at Gulfport (9)-- Gulfport, Mississippi...........................       November 1995        306,000              84

Prime Outlets at Lodi-- Burbank, Ohio...........................................       November 1996        313,000              94

Prime Outlets at Gaffney (9)-- Gaffney, South Carolina..........................       November 1996        305,000              91

Prime Outlets at Lee-- Lee, Massachusetts.......................................           June 1997        224,000             100

Prime Outlets at Lebanon--  Lebanon, Tennessee..................................          April 1998        229,000              98

Prime Outlets at Hagerstown-- Hagerstown, Maryland..............................         August 1998        487,000              94

Prime Outlets of Puerto Rico-- Barceloneta, Puerto Rico.........................           July 2000        176,000              88
                                                                                                         ----------             ---

Total Outlet Centers (10)                                                                                13,239,000              90%
                                                                                                         ==========             ===

====================================================================================================================================
</TABLE>
Notes:
(1)    Percentage  reflects  occupied space as of March 31, 2001 as a percent of
       available square feet of GLA.
(2)    The Company owns 30% of this outlet center in a joint venture
       partnership.
(3)    On February 23, 2000,  the Company sold this outlet  center to a joint
       venture  partnership  in which the Company owns a 30.0% interest.
(4)    The Company owns a 2% partnership interest as the sole general partner in
       Phase I of this property but is entitled to 99% of the property's
       operating cash flow and net proceeds from a sale or refinancing. This
       mixed-use development includes 154,000 square feet of office space, not
       included in this table, which was 95% occupied as of March 31, 2001.
(5)    The Company  through  affiliates owns 50% of Phase I and 51% of Phases II
       and III of this outlet center in joint venture partnerships.
(6)    The Company owns 50% of this outlet center in a joint venture
       partnership.
(7)    The Company operates this outlet center pursuant to a long-term ground
       lease under which the Company receives the economic benefit of a 100%
       ownership interest.
(8)    As of  March 31, 2001  the  Company  owned 50% of this outlet center in a
       joint  venture partnership.   On  May 8, 2001 the lender, an affiliate of
       the Company's partner, completed a foreclosure sale of this outlet
       center.  The Company no longer has an interest in this outlet center.
(9)    The real property on which this outlet center is located is subject to a
       long-term ground lease.
(10)   The Company owns two community  centers,  not included in this table,
       containing  219,000  square feet of GLA in the aggregate that were 83%
       occupied as of March 31, 2001.
<PAGE>
Results of Operations

Comparison  of the three  months  ended March 31, 2001 to the three months ended
March 31, 2000

Summary

     The Company  reported net losses of $5,630 and $11,719 for the three months
ended March 31, 2001 and 2000,  respectively.  For the three  months ended March
31, 2001, the net loss applicable to common  shareholders was $11,298,  or $0.26
per common share on a basic and diluted basis.  For the three months ended March
31, 2000, the net loss applicable to common  shareholders was $17,387,  or $0.40
per common share on a basic and diluted basis.

     The 2001 results  include a  non-recurring  aggregate gain on the sale real
estate of $732. The 2000 results reflect certain non-recurring items,  including
(i) a gain on the sale of  outparcel  land of $2,472  included in  interest  and
other income,  (ii) general and administrative  expenses consisting of severance
and other compensation costs aggregating $1,750, (iii) a loss on eOutlets.com of
$12,964 and (iv) a loss on Designer Connection of $1,079.

Revenues

     Total  revenues  were  $58,117  for the three  months  ended March 31, 2001
compared to $72,841 for the three  months  ended March 31,  2000,  a decrease of
$14,724,  or 20.2%.  Base rents decreased by $7,316, or 16.5%, to $36,932 during
the three  months ended March 31, 2001 from $44,248 for the same period in 2000.
These  decreases  are  primarily  due to the  Portfolio  GLA  Activity  and  the
reduction in outlet center occupancy during the 2001 period.  Straight-line rent
expense,  included in base rent,  was $200 and $406 for the three  months  ended
March 31, 2001 and 2000, respectively.

     Percentage  rents,  which  represent  rents based on a percentage  of sales
volume above a specified threshold,  decreased by $770, or 51.8%, to $717 during
the three  months  ended March 31, 2001 from $1,487 for the same period in 2000.
This decline was primarily due to the Portfolio GLA Activity.

     Tenant  reimbursements,  which  represent  the  contractual  recovery  from
tenants of certain operating expenses, decreased by $4,288, or 19.5%, to $17,724
in 2001 from $22,012 in 2000.  This decline was  primarily  due to the Portfolio
GLA  Activity  and the  reduction  in outlet  center  occupancy  during the 2001
period.

     Tenant  reimbursements  as a percentage of recoverable  property  operating
expenses and real estate taxes was 91.6% during the three months ended March 31,
2001  compared to 94.6% for the same period in 2000.  This  decline is partially
attributable to the reduction in outlet center occupancy during the 2001 period.

     Interest and other income  decreased by $2,350,  or 46.1%, to $2,744 during
the three  months  ended March 31, 2001 from $5,094 for the same period in 2000.
The  decease  was  primarily  attributable  to a  non-recurring  gain on sale of
outparcel land of $2,472 during the 2000 period.

Expenses

     Property  operating  expenses  decreased  by $3,399,  or 19.4%,  to $14,133
during the three months ended March 31, 2001 from $17,532 for the same period in
2000. Real estate taxes expense decreased by $505, or 8.8%, to $5,226 during the
three months ended March 31, 2001 from $5,731 for the same period in 2000. These
decreases are primarily due to the Portfolio GLA Activity.
<PAGE>
     As shown in TABLE 1,  depreciation  and amortization  expense  decreased by
$2,562,  or 15.8%,  to $13,675 during the three months ended March 31, 2001 from
$16,237 for the same period in 2000. This decrease results from the depreciation
of assets associated with the Portfolio GLA Activity.

Table 1--Components of Depreciation and Amortization Expense

        The components of depreciation and amortization expense are summarized
as follows:

 -------------------------------------------------------------------------------
 Three months ended March 31,                                2001          2000
 -------------------------------------------------------------------------------

 Building and improvements...............................   $6,889        $8,798
 Land improvements.......................................    1,536         1,400
 Tenant improvements.....................................    4,374         5,453
 Furniture and fixtures..................................      760           419
 Leasing commissions.....................................      116           167
                                                           -------       -------

       Total.............................................  $13,675       $16,237
                                                           =======       =======

================================================================================

     As shown in  TABLE 2,  interest  expense  increased  by $420,  or 1.7%,  to
$24,443  during the three  months ended March 31, 2001 from $24,023 for the same
period in 2000.  This  increase  reflects  (i) an  increase in  amortization  of
deferred  financing costs of $1,155,  (ii) a reduction in the amount of interest
capitalized  in  connection  with  development  projects  of $1,100 and (iii) an
increase in amortization of interest rate protection contracts of $14. Partially
offsetting  these  items was (i) lower  interest  incurred of $1,816 and (ii) an
increase in amortization of debt premiums of $33.

     The decrease in interest incurred is primarily  attributable to a reduction
of $231,137 in the Company's  weighted average debt outstanding,  excluding debt
premiums,  during the three  months  ended March 31,  2001  compared to the same
period in 2000. The effect of the reduction in weighted-average debt outstanding
was partially offset by an increase of 1.15% in the weighted-average contractual
interest rate on outstanding  indebtedness  for the three months ended March 31,
2001  compared  to the same  period in 2000.  The  weighted-average  contractual
interest rates for the 2001 and 2000 periods were 9.36% and 8.21%, respectively.

Table 2--Components of Interest Expense

        The components of interest expense are summarized as follows:

 -------------------------------------------------------------------------------
 Three months ended March 31,                               2001          2000
 -------------------------------------------------------------------------------

 Interest incurred....................................... $23,240       $25,056
 Amortization of debt premiums...........................    (811)         (778)
 Interest capitalized....................................       -        (1,100)
 Amortization of deferred financing costs................   1,979           824
 Amortization of interest rate protection contracts......      35            21
                                                          -------       -------
       Total..........................................    $24,443       $24,023
                                                          =======       =======

 ===============================================================================

     Other  charges  increased  by $2,137,  or  139.8%,  to $3,702 for the three
months  ended  March  31,  2001 from  $1,529  for the same  period in 2000.  The
increase is  primarily  attributable  to a higher  provision  for  uncollectible
accounts   receivable   of  $2,043   resulting  in  part  from  certain   tenant
bankruptcies,  abandonments  and store  closings  during the three  months ended
March 31, 2001.

     The operating results for the Company's  Designer  Connection outlet stores
are reflected in loss on Designer  Connection in the Consolidated  Statements of
Operations  for all periods  presented.  The Company  ceased  operations  of its
Designer Connection outlet stores in 2000.
<PAGE>
     On April  12,  2000,  the  Company  announced  that it had been  unable  to
conclude an  agreement  to transfer  ownership  of its  wholly-owned  e-commerce
subsidiary,   primeoutlets.com   inc.,   also  known  as   eOutlets.com,   to  a
management-led  investor group comprised of eOutlets.com  management and outside
investors.  Effective April 12, 2000,  eOutlets.com ceased all operations and on
November 6, 2000 filed for  bankruptcy  under Chapter 7. In connection  with the
discontinuance  of eOutlets.com,  the Company  incurred a non-recurring  loss of
$12,964 which included (i) the write-off of $3,497 of costs  capitalized  during
1999 and (ii) $9,467 of costs  incurred  during the three months ended March 31,
2000.

     In connection with re-leasing space to new merchants,  the Company incurred
$2,428 and $224 in capital  expenditures during the three months ended March 31,
2001 and 2000, respectively.

Merchant Sales

     For the  three  months  ended  March  31,  2001,  same-space  sales  in the
Company's outlet center portfolio  decreased 2.1% compared to the same period in
2000.  "Same-space  sales" is defined as the  weighted-average  sales per square
foot reported by merchants  for space open since January 1, 2000.  For the three
months ended March 31, 2001,  same-store sales decreased by 3.9% compared to the
same period in 2000. "Same-store sales" is defined as the weighted-average sales
per square foot reported by merchants for stores opened and operated by the same
merchant  since  January 1, 2000.  The  weighted-average  sales per square  foot
reported by all merchants was $245 for the year ended December 31, 2000.

Liquidity and Capital Resources

Sources and Uses of Cash

     For the three months ended March 31, 2001,  net cash  provided by operating
activities was $7,960, net cash provided by investing activities was $26,546 and
net cash used in financing activities was $37,723.

     The gross cash  provided by  investing  activities  during the three months
ended March 31, 2001 was $33,547 which  consisted of (i) $27,071 of net proceeds
from the sale of Prime Outlets at Silverthorne on March 16, 2001 and (ii) $6,476
of net proceeds  from the February 2, 2001 sale of  Northgate  Plaza.  Partially
offsetting  theses sources were gross uses of cash totaling $7,001  comprised of
(i) $5,626 of additions to rental  property and (ii) $1,375 of payments  related
to eOutlets.com.  The additions to rental property are primarily attributable to
the payment of  remaining  construction  costs for Prime  Outlets of Puerto Rico
that opened on July 27, 2000.

     The gross uses of cash for financing activities of $37,922 during the three
months ended March 31, 2001 consisted of (i) scheduled principal amortization on
notes payable of $5,668, (ii) repayment in full of certain mortgage indebtedness
aggregating  $24,044,   (iii)  principal  prepayments  totaling  $9,137  on  the
Company's  mezzanine  loan (the  "Mezzanine  Loan") and (ii) deferred  financing
costs of $73. Partially offsetting these items were proceeds from new borrowings
of $199.

     Although  the Company  believes  that cash flow from (i)  operations,  (ii)
lender escrow reserves,  (iii) refinancing of certain maturing debt and (iv) the
potential sale of certain properties will be sufficient to sustain its operating
cash needs, satisfy its required debt service obligations and fund its remaining
development   costs   (associated  with  2000  openings)  and  expected  capital
expenditure  costs for the next year, there can be no assurance that the Company
will be successful in obtaining the required  amount of funds for these items or
that the terms of capital  raising  activities,  if any, will be as favorable as
the Company has experienced in prior periods.
<PAGE>
2001 Sales Transactions

     On February 2, 2001, the Company sold Northgate  Plaza, a community  center
located  in  Lombard,   Illinois  to  Arbor   Northgate,   Inc.  for   aggregate
consideration of $7,050. After the repayment of mortgage  indebtedness of $5,966
and closing  costs,  the net cash proceeds  from the  Northgate  Plaza sale were
$510.  On March 16, 2001,  the Company sold Prime  Outlets at  Silverthorne,  an
outlet center  located in  Silverthorne,  Colorado  consisting of 257,000 square
feet of GLA, to Silverthorne Factory Stores, LLC for aggregate  consideration of
$29,000.  The net cash proceeds  from the sale of Prime Outlets at  Silverthorne
were $8,993, after the repayment of certain mortgage  indebtedness of $18,078 on
Prime  Outlets  at  Lebanon  (see  below) and  closing  costs and fees.  The net
proceeds  from these sales of were used to prepay an  aggregate of $9,137 of the
Company's  outstanding  mezzanine loan (the "Mezzanine Loan") in accordance with
the terms of such loan agreement.  In connection  with these sales,  the Company
recorded an aggregate gain on the sale of real estate of $732 during the quarter
ended March 31, 2001. The operating  results of these properties are included in
the Company's results of operations through the respective dates of disposition.
At December 31, 2000,  these  properties were classified as assets held for sale
in the Consolidated Balance Sheet with an aggregate carrying value of $34,770.

     In conjunction with the sale of Prime Outlets at Silverthorne,  the Company
substituted Prime Outlets at Lebanon into the cross-collateral asset pool of its
first  mortgage  and  expansion  loan  pursuant to the  collateral  substitution
provisions  contained in the loan agreement.  Prime Outlets at Silverthorne  was
previously one of fifteen properties in the cross-collateral asset pool.

Dividends and Distributions

     In order to qualify as a real estate  investment trust ("REIT") for federal
income tax purposes,  the Company is required to pay distributions to its common
and  preferred  shareholders  of at least  90% of its  REIT  taxable  income  in
addition to satisfying other requirements.  Although the Company intends to make
distributions  in accordance with the  requirements of the Internal Revenue Code
of 1986, as amended, necessary to remain qualified as a REIT, it also intends to
retain such amounts as it considers  necessary from time to time for capital and
liquidity needs of the Company.

     The Company's  current  policy is to pay  distributions  only to the extent
necessary  to  maintain  its status as a REIT for federal  income tax  purposes.
Based on the Company's  current federal income tax projections for 2001, it does
not  expect to pay any  distributions  on its 10.5%  Series A Senior  Cumulative
Preferred   Stock  ("Senior   Preferred   Stock"),   8.5%  Series  B  Cumulative
Participating  Convertible  Preferred  Stock  ("Series B  Convertible  Preferred
Stock"),  common  stock or common units of limited  partnership  interest in the
Operating Partnership during 2001.

     The Company is  currently  in arrears on six  quarters of  preferred  stock
distributions  due February  15, 2000  through May 15, 2001.  The holders of the
Senior Preferred Stock and Series B Convertible Preferred Stock, voting together
as a single class,  will have the right to elect two  additional  members to the
Company's  Board  of  Directors  so long as the  equivalent  of six  consecutive
quarterly  dividends on these series of preferred stock remain in arrears.  Each
of such  directors  would be  elected  to serve  until  the  earlier  of (i) the
election and qualification of such director's successor,  or (ii) payment of the
dividend arrearage.
<PAGE>
     The Company is prohibited from paying dividends or distributions  except to
the  extent  necessary  to  maintain  its REIT  status  under  the  terms of its
Mezzanine Loan. In addition, the Company may make no distributions to its common
shareholders or its holders of common units of limited  partnership  interest in
the Operating  Partnership unless it is current with respect to distributions to
its  preferred  shareholders.  As of March 31, 2001,  unpaid  dividends  for the
period  November 16, 1999 through March 31, 2001 on the Senior  Preferred  Stock
and  Series  B  Convertible  Preferred  Stock  aggregated  $8,302  and  $22,873,
respectively.  The annual dividends on the Company's  2,300,000 shares of Senior
Preferred Stock and 7,828,125 shares of Series B Convertible Preferred Stock are
$6,038 ($2.625 per share) and $16,636 ($2.125 per share), respectively.

Debt Transactions

     In  connection  with the sales of  Northgate  Plaza and  Prime  Outlets  at
Silverthorne  during the three months ended March 31, 2001,  the Company  repaid
mortgage indebtedness of $5,966 and $18,078, respectively. In addition, net cash
proceeds from these property sales were used to prepay an aggregate of $9,137 of
the Company's  outstanding Mezzanine Loan. As of March 31, 2000, the outstanding
principal balance of the Mezzanine Loan was $78,863. See Note 2 - "Dispositions"
for additional information.

Debt Service Obligations

     The Company's aggregate indebtedness,  excluding unamortized debt premiums,
was  $978,359 at March 31,  2001.  At March 31, 2001,  such  indebtedness  had a
weighted-average  maturity  of 4.11  years and bore  contractual  interest  at a
weighted-average rate of 9.12% per annum. At March 31, 2001, $820,474, or 83.9%,
of such  indebtedness  bore interest at fixed rates and $157,885,  or 16.1%,  of
such  indebtedness  bore  interest  at  variable  rates.  The  Company  utilizes
derivative  financial  instruments  to manage its interest rate risk  associated
with variable rate debt. See "Interest Rate Risk" for additional information. As
of March 31, 2001, the Company's remaining scheduled principal payments for 2001
were $43,692.  These  scheduled  principal  payments  include first mortgages on
Prime Outlets at Edinburgh  aggregating $16,402 due on June 10, 2001 and a first
mortgage of $6,527 on land in Camarillo, California due on November 1, 2001.

     The  Company  plans to either  refinance  or  extend  the  maturity  of its
mortgage  indebtedness  maturing during 2001. In the event the Company is unable
to refinance or extend the maturity of such  indebtedness,  it will consider the
repayment of the outstanding  balance  through  proceeds from potential sales of
property or may give the property back to the mortgage  lender.  There can be no
assurance  that the Company will be successful in obtaining the required  amount
of funds for the maturing  indebtedness or that the terms of the refinancings or
extensions  of  maturities,  if they should  occur,  will be as favorable as the
Company has experienced in prior periods.

     As of March 31, 2001,  the Company is a guarantor  or  otherwise  obligated
with  respect to an aggregate of $12,522 of the  indebtedness  of Horizon  Group
Properties,  Inc.  and its  affiliates  including a $10,000  obligation  under a
secured  credit  facility  which  bears a rate of  interest of LIBOR plus 1.90%,
matures  in  July  2001,  and is  collateralized  by  seven  properties  located
throughout  the United  States.  As of March 31,  2001,  no claims had been made
against the Company's guaranty by the lender.
<PAGE>
Debt Compliance

     As of March 31, 2001, the Company was in compliance with all financial debt
covenants under its recourse loan agreements. However, there can be no assurance
that the Company will be in  compliance  with its  financial  debt  covenants in
future periods since the Company's  future  financial  performance is subject to
various risks and uncertainties,  including,  but not limited to, the effects of
increases in market  interest rates from current  levels,  the risk of potential
increases in vacancy  rates and the resulting  impact on the Company's  revenue,
and risks associated with refinancing the Company's  current debt obligations or
obtaining new financing  under terms as favorable as the Company has experienced
in prior periods.

Defaults on Certain Non-recourse Mortgage Indebtedness

     Subsidiaries of the Company have suspended regularly scheduled monthly debt
service payments on two non-recourse  mortgage loans  aggregating  $33,697 which
are  cross-collateralized  by Prime  Outlets at  Jeffersonville  II,  located in
Jeffersonville, Ohio, and Prime Outlets at Conroe, located in Conroe, Texas. The
Company  remains in discussions  with the holder of the mortgage loans regarding
potential  restructuring of their existing terms. There can be no assurance that
such  discussions  will lead to any  modification  to the terms of the  mortgage
loans  and  that the two  properties  will not be  foreclosed.  Because  the two
mortgage  loans are  non-recourse,  the Company  does not  believe the  existing
defaults or any related  foreclosure  will have a material impact on its results
of operations or financial position.

     Various mortgage loans,  related to projects in which the Company,  through
subsidiaries,  indirectly owns joint venture interests,  have matured and are in
default.  The mortgage loans are (i) a $10,389 first mortgage loan on Phase I of
the outlet  center in  Bellport,  New York,  held by Union Labor Life  Insurance
Company  ("Union  Labor");  (ii)  mortgage  loans  aggregating  $29,436 on Prime
Outlets at New River located in New River,  Arizona, held by Fru-Con Development
Corporation  ("Fru-Con");  and (iii) a $13,539 first mortgage loan on the outlet
center in Oxnard, California,  also held by Fru-Con. Fru-Con and the Company are
each 50.0% partners in both the New River and Oxnard outlet centers.

     Union Labor has filed for  foreclosure  on Phase I of the  Bellport  Outlet
Center.  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 Phase I of the Bellport Outlet Center. Fru-Con completed on May 8, 2001
the  foreclosure  sale of Prime Outlets at New River.  The Company  continues to
negotiate the terms of a transfer of its ownership interest in the Oxnard outlet
center to Fru-Con. The Company believes none of these mortgage loans is recourse
to the Company.  In addition,  the Company and its affiliates had been receiving
none of the net operating  income from Phase I of the Bellport Outlet Center and
Prime  Outlets  at New  River  prior to the  loss of  control  of the  projects.
Therefore,  the Company does not believe the existing defaults under these loans
or any related  foreclosures  on the mortgaged  properties  will have a material
impact on its results of operations or financial position.
<PAGE>
     The  Company,  through  affiliates,  holds a 51%  interest  in the owner of
Phases II and III of an outlet  center in Bellport,  New York on which the first
mortgage loan of $7,795  matured on May 1, 2001.  The Company,  on behalf of the
owner, is currently in discussion with the lender to modify the terms and extend
the maturity of this mortgage  indebtedness.  In the event the Company is unable
to modify  the terms and  extend  the  maturity  of such  indebtedness,  it will
consider the  repayment  of the  outstanding  balance  through  proceeds  from a
potential sale of the property.  There can be no assurance that the Company will
be  successful  in  obtaining  the  required  amount  of funds  for the  matured
indebtedness  or  that  the  terms  of the  modification  and  extension  of the
maturity,  if it  should  occur,  will  be  as  favorable  as  the  Company  has
experienced  in prior  periods.  Although  this loan is  recourse,  the  Company
believes  that any  default  or  foreclosure  under  this  loan  will not have a
material impact on its results of operations or financial position.

Development Activity

     As of March 31, 2001,  the Company had $1,520 of lender escrow  reserves to
fund the remaining expected development costs for Prime Outlets of Puerto, which
opened on July 27, 2000.

Interest Rate Risk

     In the ordinary course of business, the Company is exposed to the impact of
interest  rate  changes  and,  therefore,   employs  established   policies  and
procedures to manage its exposure to interest  rate changes.  The Company uses a
mix of fixed and  variable  rate debt to (i) limit the impact of  interest  rate
changes on its results from operations and cash flows and (ii) lower its overall
borrowing costs.

     The Company also uses derivative  financial  instruments to manage interest
rate risk associated with certain of its debt. Generally,  the Company purchases
interest  rate  protection  agreements,  such as caps,  which are  designated as
hedges for underlying variable rate debt obligations.  The Company does not hold
derivative financial instruments for trading purposes.

     The  Company  is  exposed  to credit  losses  in the event of  counterparty
nonperformance,   but  does  not   anticipate  any  such  losses  based  on  the
creditworthiness of the counterparties.

     On December 22, 2000, the Company purchased an interest rate cap to $90,000
to hedge its Mezzanine  Loan that was funded on the same date. The interest rate
cap has a three-year  term with a strike  price of 8.00% based on 30-day  LIBOR.
The  notional  amount  of this  interest  rate cap  amortizes  monthly  based on
estimated principal repayments on the Mezzanine Loan. Additionally,  on December
22, 2000, the Company also purchased an interest rate cap with a notional amount
of $20,000  to hedge  it's a $20,000  first  mortgage  loan on Prime  Outlets of
Puerto  Rico  that was  funded on the same  date.  The  interest  rate cap has a
three-year term with a strike price of 8.00% based on 30-day LIBOR. In addition,
the Company held an additional  undesignated interest rate protection cap with a
notional amount of $41,000 with a strike price of 7.00%,  based on 30-day LIBOR,
which matures in November  2001.  The notional  amount of this interest rate cap
amortizes $1,000 monthly.

     Although derivative financial instruments are an important component of the
Company's interest rate management program, their incremental effect on interest
expense for the three months ended March 31, 2001 and 2000 was not material.
<PAGE>
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  measure of  performance  of an equity  REIT.  FFO is  currently
defined by NAREIT as net income (loss)  determined in accordance with accounting
principles generally accepted in the United States ("GAAP"),  excluding gains or
losses  from  provisions  for  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 partnership and joint ventures.

     Management believes that FFO is an important and widely used 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 the
performance  of the Company.  The  Company's FFO may not be comparable to FFO as
reported  by other  REITs that do not define the term using the  current  NAREIT
definition or that interpret the current NAREIT definition differently than does
the Company.  Therefore,  the Company  cautions that the  calculation of FFO may
vary from  entity to entity and as such the  presentation  of FFO by the Company
may not be  comparable to other  similarly  titled  measures of other  reporting
companies.   The  Company   believes   that  in  order  to  facilitate  a  clear
understanding  of its 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 the Company's
performance  or to cash  flows as a measure  of  liquidity  or  ability  to make
distributions.

     TABLE 3  provides  a  reconciliation  of the  loss  before  allocations  to
minority interests and preferred  shareholders to FFO for the three months ended
March 31,  2001 and 2000.  FFO was $7,299 for the three  months  ended March 31,
2001  compared  to $18,995  for the same  period in 2000.  The 2000 FFO  results
include net  non-recurring  items totaling $722 (a gain on the sale of outparcel
land of $2,472  partially  offset by  severance  and  other  compensation  costs
aggregating $1,750).  Excluding the net impact of these non-recurring items, FFO
was $18,273 for the three months ended March 31, 2000.

     The decrease in FFO for the 2001 period compared to the same period in 2000
is primarily attributable to the following factors:

|X|  the December 2000 sale of four outlet centers,  including the assumption of
     mortgage indebtedness by the purchaser, which resulted in a decrease in net
     operating income of $6,796 partially offset by interest savings of $3,151;

|X|  higher interest expense of $3,571 reflecting (i) higher borrowing costs and
     (ii) reduced capitalized interest on development projects;

|X|  an increase in the  provision  for  uncollectible  accounts  receivable  of
     $2,043 resulting in part from certain tenant bankruptcies, abandonments and
     store-closings;

|X|  reduced average  occupancy in the outlet center  portfolio (90.2% and 91.0%
     for the 2001 and 2000 periods, respectively); and

|X|  the February 2000 sale of a 70% joint venture  interest in Prime Outlets at
     Williamsburg which resulted in a decrease in net operating income of $1,020
     partially offset by decreased interest expense of $390.
<PAGE>
Table 3--Funds from Operations

--------------------------------------------------------------------------------
Three Months Ended March 31,                               2001            2000
--------------------------------------------------------------------------------
Loss before minority interests.......................  $ (5,631)       $(11,687)
FFO adjustments:
  Gain on sale of real estate........................      (732)              -
  Depreciation and amortization......................    13,675          16,237
  Non-real estate depreciation and amortization......      (568)           (184)
  Unconsolidated joint venture adjustments...........       555             586
  Discontinued operations - eOutlets.com.............         -          12,964
  Discontinued operations - Designer Connection......         -           1,079
                                                       --------        --------
FFO before allocations to minority interests and
  preferred shareholders.............................  $  7,299        $ 18,995
                                                       ========        ========
Other Data:
Net cash provided by operating activities............  $  7,960          $8,984
Net cash provided by (used in)  investing activities.    26,546         (13,035)
Net cash provided used in financing activities.......   (37,723)         (2,516)
================================================================================

Item 3.   Quantitative and Qualitative Disclosures of Market Risk

Market Risk Sensitivity

Interest Rate Risk

     In the ordinary course of business, the Company is exposed to the impact of
interest rate changes.  The Company employs established  policies and procedures
to manage its exposure to interest  rate changes.  See  "Interest  Rate Risk" of
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations  for additional  information.  The Company uses a mix of fixed and
variable  rate debt to (i) limit the  impact of  interest  rate  changes  on its
results from  operations and cash flows and (ii) to lower its overall  borrowing
costs.  The  following  table  provides  a summary of  principal  cash flows and
related contractual interest rates by fiscal year of maturity. Variable interest
rates  are based on the  weighted-average  rates of the  portfolio  at March 31,
2001.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                      Year of Maturity
------------------------------------------------------------------------------------------------------------------------------------
                                            2001        2002        2003          2004        2005    Thereafter         Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>        <C>             <C>        <C>          <C>            <C>
Fixed rate:
Principal...........................     $33,566     $41,367    $453,784        $6,256     $50,330      $235,171       $820,474
Average interest rate...............        9.87%       9.18%       9.06%         7.98%       8.05%         8.16%          8.77%
Variable rate:
Principal...........................     $10,127     $23,220     $72,185       $52,353                                 $157,885
Average interest rate...............       13.86%      13.65%      12.71%         6.68%                                   10.51%

====================================================================================================================================
</TABLE>

Economic Conditions

     Most of the merchants' leases contain provisions that somewhat mitigate the
impact of inflation.  Such provisions include clauses providing for increases in
base rent and clauses enabling the Company to receive  percentage  rentals based
on merchants'  gross sales.  Most of the leases  require  merchants to pay their
proportionate   share  of  all  operating   expenses,   including   common  area
maintenance,  real estate taxes and  promotion,  thereby  reducing the Company's
exposure to increased costs and operating expenses resulting from inflation.
<PAGE>
                           PART II: OTHER INFORMATION

Item 1.   Legal Proceedings

     On October  13, 2000 and  thereafter,  eight  complaints  were filed in the
United States  District  Court for the District of Maryland  against the Company
and four individual  defendants.  The four individual defendants are: William H.
Carpenter,  Jr., the former President and Chief Operating  Officer and a current
director of the Company;  Abraham Rosenthal,  the former Chief Executive Officer
and a former director of the Company; Michael W. Reschke, the former Chairman of
the Board and a current  director of the Company;  and Robert P. Mulreaney,  the
former  Executive Vice President - Chief Financial  Officer and Treasurer of the
Company.  The complaints  were brought by alleged  stockholders  of the Company,
individually   and   purportedly  as  class  actions  on  behalf  of  all  other
stockholders  of  the  Company.   The  complaints  allege  that  the  individual
defendants  made  statements  about the Company  that were in  violation  of the
federal  securities  laws. The  complaints  seek  unspecified  damages and other
relief.  Lead plaintiffs and lead counsel were recently  appointed.  The Company
expects  a  consolidated  complaint  to be filed  within  the next 15 days.  The
Company  believes  that the  complaints  are without merit and intends to defend
against  them  vigorously.  The  outcome  of these  lawsuits,  and the  ultimate
liability of the defendants, if any, cannot be predicted.

     The Company and its affiliates were defendants in a lawsuit filed on August
10, 1999 in the Circuit Court for  Baltimore  City and removed to U. S. District
Court for the  District of Maryland  (the "U.S.  District  Court") on August 20,
1999.  The  plaintiff   alleged  that  the  Company  and  its  related  entities
overcharged  tenants for common area  maintenance  charges  and  promotion  fund
charges.  The U.S.  District  Court  dismissed the lawsuit on June 19, 2000. The
plaintiff  has  filed a notice  of its  appeal  from the U.S.  District  Court's
decision  and a  briefing  schedule  has been  issued by the  Court.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously.  The outcome of this  lawsuit,  and the  ultimate  liability  of the
defendants, if any, cannot be predicted.

     Several  entities (the  "Plaintiffs")  have filed or stated an intention to
file lawsuits (the  "Lawsuits")  against the Company and its affiliates in which
the Plaintiffs are seeking to hold them responsible under various legal theories
for  liabilities  incurred by  primeoutlets.com,  inc.,  also known as eOutlets,
including the theory that the Company guaranteed the obligations of eOutlets and
the theory that the Company was the alter ego of eOutlets. primeoutlets.com inc.
is also a defendant in some, but not all, of the Lawsuits.  The Company believes
that it is not liable to the  Plaintiffs  as there was no  privity  of  contract
between  it and the  various  Plaintiffs.  The  Company  intends  to defend  all
Lawsuits vigorously.  primeoutlets.com inc. filed for protection under Chapter 7
of the  United  States  Bankruptcy  Code  during  November  2000  under the name
E-Outlets  Resolution  Corp.  The trustee for  E-Outlets  Resolution  Corp.  has
notified the Company that he is  contemplating an action against the Company and
the Operating Partnership in which he may assert that E-Outlets Resolution Corp.
was the "alter-ego" of the Company and the Operating  Partnership and that, as a
result,  the Company and the Operating  Partnership  are liable for the debts of
E-Outlets  Resolution  Corp. If the trustee pursues such an action,  the Company
and the Operating  Partnership will defend  themselves  vigorously.  In the case
captioned  Convergys Customer  Management Group, Inc. v. Prime Retail,  Inc. and
primeoutlets.com  inc.,  currently  pending  in the  Court of  Common  Pleas for
Hamilton County (Ohio), the Company prevailed in a motion to dismiss 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.  The outcome of these
Lawsuits,  and  the  ultimate  liability  of the  Company,  if  any,  cannot  be
predicted.
<PAGE>
     Dinnerware Plus Holdings, Inc., which operates under the trade name Mikasa,
and affiliates filed on March 29, 2001 a lawsuit against the Company and various
affiliates.  The  plaintiffs  allege that the Company  and its  affiliates  have
breached  various  provisions  in  the  plaintiffs'  leases  and,  as a  result,
overcharged  the  plaintiffs for common area  maintenance  charges and promotion
fund charges at various  centers where the plaintiffs  are tenants.  The Company
has not filed its response to the  complaint.  The outcome of this lawsuit,  and
the ultimate liability of the defendants, if any, cannot be predicted.

     The New York  Stock  Exchange  ("NYSE")  and the  Securities  and  Exchange
Commission have notified the Company that they are reviewing transactions in the
stock of the Company  prior to the  Company's  January  18,  2000 press  release
concerning financial matters.

     The Company has  received  notification  from the NYSE that it believes the
Company is "below  criteria"  for  continued  listing of its common stock on the
NYSE.  In order to avoid  delisting of its common stock,  the Company  currently
intends to seek  shareholder  approval  for a reverse  stock split at its annual
meeting of shareholders to be held in the summer of 2001.
<PAGE>
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 ("Senior  Preferred Stock") and 8.5%
Series  B  Cumulative  Participating  Convertible  Preferred  Stock  ("Series  B
Convertible  Preferred Stock"). As of March 31, 2001, the aggregate arrearage on
the Senior  Preferred  Stock and the Series B  Convertible  Preferred  Stock was
$8,302 and $22,873, respectively.

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

None

Item 5.   Other Information

None

Item 6.   Exhibits or Reports on Form 8-K

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

         Exhibit 12.1 - Ratio of Earnings to Fixed Charges and Preferred Stock
         Distributions and Dividends

(b)      Reports on Form 8-K:

     On January 8, 2001,  the Company  filed a Current  Report on Form 8-K dated
December 22, 2000  announcing the Company  closed on a major  refinancing of its
assets and the sale of four outlet centers through a series of transactions. The
filing  included  (i)  unaudited  pro forma  financial  information  pursuant to
Article 11 of Regulation S-X and (ii) the press release issued by the Company on
December 22, 2000  regarding (a) closing of loans  totaling  $120  million,  (b)
completion of the sale of four outlet  centers and (c) extension of the terms of
two other loans.  On January 25, 2001,  the Company  filed an Amended  Report on
Form 8-K/A dated  December 22, 2000 that included The Agreement for Purchase and
Sale,  dated  December 22,  2000,  by and between  Finger  Lakes Outlet  Center,
L.L.C.,  The Prime  Outlets at  Michigan  City  Limited  Partnership,  The Prime
Outlets at Gilroy  Limited  Partnership  and Outlet  Village of Kittery  Limited
Partnership  as seller and F/C  Waterloo  Development  LLC,  F/C  Michigan  City
Development LLC, F/C Gilroy Development LLC, F/C Kittery Development LLC and F/C
Michigan Parking LLC as buyer.
<PAGE>



                                   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 15, 2001                         /s/ Robert A. Brvenik
      ------------                         -------------------------------------
                                           Robert A. Brvenik
                                           Executive Vice President,
                                           Chief Financial Officer and Treasurer