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 September 30, 2000

                                       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 ___  No _X_

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

As of November 14, 2000, 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 September 30, 2000 and
  December 31, 1999 ...................................................       1

 Consolidated Statements of Operations for the three and
  nine months ended September 30, 2000 and 1999........................       2

 Consolidated Statements of Cash Flows for the nine
  months ended September 30, 2000 and 1999.............................       3

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


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations...........................      13

PART II:  OTHER INFORMATION

Item 1.  Legal Proceedings.............................................      34

Item 2.  Changes in Securities.........................................      34

Item 3.  Defaults Upon Senior Securities...............................      35

Item 4.  Submission of Matters to a Vote of Security Holders...........      36

Item 5.  Other Information.............................................      36

Item 6.  Exhibits or Reports on Form 8-K...............................      36

Item 7A. Quantitative and Qualitative Disclosures About Market Risk....      37

Signatures.............................................................      38


<PAGE>



<TABLE>
<CAPTION>
                               PRIME RETAIL, INC.

                           Consolidated Balance Sheets

                (Amounts in thousands, except share information)


 -----------------------------------------------------------------------------------------------------------------------------------
                                                                                       September 30, 2000    December 31, 1999
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                 <C>

 Assets

 Investment in rental property:
    Land                                                                                     $  192,707          $  181,854
    Buildings and improvements..................................................              1,660,379           1,560,710
    Property under development..................................................                 20,814              66,581
    Furniture and equipment.....................................................                 15,447              17,406
                                                                                             ----------          ----------
                                                                                              1,889,347           1,826,551
    Accumulated depreciation....................................................               (232,111)           (183,954)
                                                                                             ----------          ----------
                                                                                              1,657,236           1,642,597
 Cash and cash equivalents......................................................                  5,987               7,343
 Restricted cash................................................................                 25,500              28,131
 Accounts receivable, net.......................................................                 16,575              18,926
 Deferred charges, net..........................................................                 11,307              13,503
 Assets held for sale...........................................................                  6,640              97,639
 Due from affiliates, net.......................................................                  3,109               4,140
 Investment in partnerships.....................................................                 21,384              18,941
 Other assets...................................................................                 23,789              24,838
                                                                                             ----------          ----------
          Total assets..........................................................             $1,771,527          $1,856,058
                                                                                             ==========          ==========
 Liabilities and Shareholders' Equity

 Bonds payable..................................................................             $   32,900          $   32,900
 Notes payable (See Note 4).....................................................              1,181,625           1,227,770
 Accrued interest...............................................................                  6,969               8,033
 Real estate taxes payable......................................................                 12,299              10,700
 Construction costs payable.....................................................                  4,189               5,123
 Accounts payable and other liabilities.........................................                 75,719              73,340
                                                                                             ----------           ---------
          Total liabilities.....................................................              1,313,701           1,357,866

 Minority interests.............................................................                  1,498               1,505
 Shareholders' equity:
    Shares of preferred stock, 24,315,000 shares authorized:
       10.5% Series A Senior Cumulative Preferred Stock, $.01 par value
        (liquidation preference of $62,783), 2,300,000 shares issued and
        outstanding.                                                                                 23                  23
       8.5% Series B Cumulative Participating Convertible
        Preferred Stock, $.01 par
         value (liquidation preference of $210,259), 7,828,125 shares issued
         and outstanding........................................................                     78                  78
    Shares of common stock, 150,000,000 shares authorized:
       Common stock, $.01 par value, 43,577,916 and 43,368,620 shares issued and
         outstanding, respectively..............................................                    436                 434
    Additional paid-in capital..................................................                709,373             709,122
    Distributions in excess of net income.......................................               (253,582)           (212,970)
                                                                                             ----------          ----------
          Total shareholders' equity............................................                456,328             496,687
                                                                                             ----------          ----------
          Total liabilities and shareholders' equity............................             $1,771,527          $1,856,058
                                                                                             ==========          ==========

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

See accompanying notes to financial statements.


<PAGE>


                               Prime Retail, Inc.
                      Consolidated Statements of Operations
                  (in thousands, except per share information)
<TABLE>
<CAPTION>


                                                                                 Three months                        Nine months
                                                                                ended September 30               ended September 30
                                                                             ---------------------             --------------------
                                                                                2000          1999               2000          1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>           <C>                 <C>          <C>
Revenues
Base rents.......................................................           $ 46,133       $49,178            $134,842     $146,836
Percentage rents.................................................              1,754         1,956               4,347        5,996
Tenant reimbursements............................................             21,232        22,144              63,612       68,441
Interest and other...............................................              2,289         3,624              10,032        9,546
                                                                            --------       -------            --------     --------
   Total revenues................................................             71,408        76,902             212,833      230,819

Expenses
Property operating...............................................             17,204        17,781              50,694       53,918
Real estate taxes................................................              5,575         5,753              16,813       17,046
Depreciation and amortization....................................             17,679        19,344              49,699       56,168
Corporate general and administrative.............................              4,067         2,189              17,519        7,776
Interest.........................................................             25,430        24,289              73,167       68,014
Provision for asset impairment...................................                  -             -               8,538            -
Loss on eOutlets.com.............................................                424             -              14,703            -
Loss (gain) on Designer Connection...............................               (274)          119               1,811        1,007
Other charges....................................................              5,654           975              11,686        3,463
                                                                            --------       -------           ---------     --------
   Total expenses................................................             75,759        70,450              44,630      207,392
                                                                            --------       -------           ---------     --------

Income (loss) before loss on sale of real estate,
   minority interests and extraordinary loss....................              (4,351)        6,452             (31,797)      23,427
Loss on sale of real estate.....................................              (9,550)            -              (9,550)           -
                                                                            --------       -------           ---------     --------
Income (loss) before minority interests and
   extraordinary loss...........................................             (13,901)        6,452             (41,347)      23,427
(Income) loss allocated to minority interests...................                 767            78                 735         (456)
                                                                            --------       -------           ---------     --------
Income (loss) before extraordinary loss.........................             (13,134)        6,530             (40,612)      22,971
Extraordinary loss on early extinguishment of debt,
   net of minority interests of $534............................                   -             -                   -       (2,106)
                                                                            --------       -------           ---------     --------
Net income (loss)...............................................             (13,134)        6,530             (40,612)      20,865
Income allocated to preferred shareholders......................              (5,668)       (6,048)            (17,004)      (4,294)
                                                                            --------       -------           ---------     -------

Net income (loss) applicable to common shares...................            $(18,802)      $ 6,934           $ (57,616)    $ 16,571
                                                                            ========       =======           =========     ========

Basic earnings per common share:
   Income (loss) before extraordinary loss......................            $  (0.43)      $  0.01           $   (1.32)    $   0.43
   Extraordinary loss...........................................                   -             -                   -        (0.05)
                                                                            --------       -------           ---------     --------
   Net income (loss)............................................            $  (0.43)      $  0.01           $   (1.32)    $   0.38
                                                                            ========       =======           =========     ========
Diluted earnings per common share:
   Income (loss) before extraordinary loss......................            $  (0.43)      $  0.01           $   (1.32)    $   0.10
   Extraordinary loss...........................................                   -             -                   -        (0.04)
                                                                            --------       -------           ---------     --------
   Net income (loss)............................................            $  (0.43)      $  0.01           $   (1.32)    $   0.06
                                                                            ========       =======           =========     ========
Weighted-average common shares outstanding:
   Basic........................................................              43,578        43,286              43,497       43,142
                                                                            ========       =======           =========     ========
   Diluted......................................................              43,578        43,286              43,497       55,557
                                                                            ========       =======           =========     ========
Distributions declared per common share.........................            $      -       $ 0.295           $       -     $  0.885
                                                                            ========       =======           =========     ========


====================================================================================================================================
See accompanying notes to financial statements.

</TABLE>
<PAGE>



                               PRIME RETAIL, INC.

                      Consolidated Statements of Cash Flows

                             (Amounts in thousands)

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30,                                                                          2000              1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                   <C>                <C>

Operating Activities
Net income (loss)...............................................................                      $(40,612)          $ 20,865
Adjustments to reconcile net income (loss) to net cash provided by operating
  activities:
   Income (loss) allocated to minority interests................................                           735                (78)
   Depreciation.................................................................                        49,225             55,567
   Amortization of deferred financing costs and interest rate protection
    contracts...................................................................                         2,564              2,427
   Amortization of leasing commissions..........................................                           474                601
   Provision for uncollectible accounts receivable..............................                         5,095              1,396
   Provision for asset impairment...............................................                         8,538                  -
   Loss on sale of real estate..................................................                         9,550                  -
   Loss on eOutlets.com.........................................................                        14,703                  -
   Loss on Designer Connection..................................................                         1,811              1,007
   Gain on sale of land.........................................................                        (2,472)                 -
Changes in operating assets and liabilities:
   Increase in accounts receivable..............................................                        (4,343)            (5,125)
   (Increase) decrease in other assets..........................................                         4,153             (4,093)
   Increase (decrease) in other liabilities.....................................                           744                (24)
   Increase in accrued interest.................................................                           336              4,594
                                                                                                        ------             ------
      Net cash provided by operating activities.................................                        50,501             77,137
                                                                                                        ------             ------
Investing Activities
Additions to investment in rental property......................................                       (42,828)           (56,166)
Payments made for eOutlets.com..................................................                       (10,227)            (1,765)
Proceeds from sale of land......................................................                         4,622                  -
Proceeds from sale of outlet center.............................................                        11,063                  -
                                                                                                       -------            -------
      Net cash used in investing activities.....................................                       (37,370)           (57,931)
                                                                                                       -------            -------

Financing Activities
Proceeds from notes payable.....................................................                       13,039            190,684
Principal repayments on notes payable...........................................                      (26,684)           (95,709)
Deferred financing fees.........................................................                         (842)            (4,696)
Series C preferred stock redemption.............................................                            -            (45,054)
Distributions and dividends paid................................................                            -            (57,100)
Distributions to minority interests.............................................                            -             (9,712)
                                                                                                      -------            -------
      Net cash used in financing activities.....................................                      (14,487)           (21,587)
                                                                                                      -------            -------

Decrease in cash and cash equivalents...........................................                       (1,356)            (2,381)
Cash and cash equivalents at beginning of period................................                        7,343              5,765
                                                                                                      -------            -------
Cash and cash equivalents at end of period......................................                      $ 5,987            $ 3,384
                                                                                                      =======            =======


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

See accompanying notes to financial statements.

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

Redemption of 3,300,000 shares of Series C Preferred Stock in exchange for
issuance of  note payable on March 31, 1999....................        $ 33,000
                                                                       ========


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

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  which 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, 1999.

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  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.  Certain prior period financial information has been reclassified
to conform with the current period presentation.

Note 2 -- Recently Issued Accounting Standards

In June 2000, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting  Standards  ("SFAS")  138,  "Accounting  for  Certain
Derivative  Instruments and Certain Hedging  Activities," which amends SFAS 133,
"Accounting  for Derivative  Instruments and Hedging  Activities."  SFAS 133 was
previously  amended  by SFAS 137  "Accounting  for  Derivative  Instruments  and
Hedging  Activities - Deferral of the  Effective  Date of FASB  Statement  133,"
which  deferred the effective date of SFAS 133 to fiscal years  beginning  after
June 15,  2000.  The  Company  expects to adopt SFAS 138 and SFAS 133  effective
January 1, 2001. SFAS 133 and SFAS 138 will require the Company to recognize all
derivatives on the balance sheet at fair value.  Derivatives that are not hedges
must be adjusted to fair value  through  income.  If the  derivative is a hedge,
depending on the nature of the hedge,  changes in the fair value of  derivatives
will  either be offset  against  the change in fair value of the hedged  assets,
liabilities,  or firm  commitments  through  earnings  or  recognized  in  other
comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion of a  derivative's  change in fair value will be recognized
immediately in earnings.  The Company does not  anticipate a material  impact on
its results of operations and financial position.

In December  1999, the Securities  and Exchange  Commission  (the  "Commission")
issued Staff Accounting  Bulletin No. 101 ("SAB 101"),  "Revenue  Recognition in
Financial  Statements." SAB 101 summarizes  certain of the Commission's views in
applying  generally  accepted  accounting  principles to revenue  recognition in
financial statements.  In June 2000, the Commission issued SAB 101B to defer the
effective date of  implementation  of SAB 101 to the fourth quarter of 2000. The
Company does not  anticipate a material  impact on its results of operations and
financial position.

Note 3 -- Earnings Per Share

Basic earnings per share ("EPS") is calculated by dividing net income  available
to common  shareholders  by the weighted  average  number of shares  outstanding
during the period. Diluted EPS includes the potentially dilutive effect, if any,
which would occur if  outstanding  (i)  options to  purchase  Common  Stock were
exercised,  (ii) Common Units were converted into shares of Common Stock,  (iii)
shares of Series C Preferred  Stock were  converted into shares of Common Stock,
and (iv) shares of Series B  Convertible  Preferred  Stock were  converted  into
shares of Common Stock.  For the three and nine months ended  September 30, 2000
and the three months ended  September 30, 1999,  the effect of all exercises and
conversions  was  anti-dilutive  and,  therefore,  dilutive EPS is equivalent to
basic EPS.  For the nine months  ended  September  30,  1999,  (i) a  redemption
discount and dividends  aggregating $13,647 related to the Company's  repurchase
of its Series C Preferred  Stock and income  allocated to Common  Unitholders of
$534 were excluded from the numerator and (ii) incremental shares of 12,415 were
included  in the  denominator,  related to the  assumed  conversion  of Series C
Preferred  Stock and Common Units,  of the  computation  of diluted EPS. For the
nine months ended  September  30, 1999,  the effect of all other  exercises  and
conversions was anti-dilutive, and, therefore, was excluded from the computation
of diluted EPS.

Note 4 -- Notes Payable

The maturity of the  Company's  $25,000 line of credit was extended  from August
30, 2000 to December  31, 2000.  See  "Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations - Debt Financing  Transaction and
Debt Facility Compliance" for additional information.

The  Company  is  in  default  of a  $20,000  subordinated  loan  (the  "$20,000
Subordinated  Loan")  that  matured on August 14,  2000.  The  Company  has been
advised by the lender that the loan is due and payable and  interest on the loan
will accrue at the default rate until the loan is repaid.

The Company's  $3,540 first mortgage,  collateralized  by property in Knoxville,
TN, matured on October 31, 2000. The Company and the holder of the mortgage loan
have entered into a non-binding  letter  agreement  which  provides  that,  upon
satisfaction of certain underwriting  guidelines by the lender and completion of
its due diligence,  the lender would consider  extending the loan to October 31,
2001. Although the Company and the lender are currently working to finalize this
extension, there can be no assurance that such an extension will be achieved.

The  Company  exercised  its option to extend the  maturity  of a $19,633  first
mortgage,  collateralized by property in Lebanon,  TN, from December 31, 2000 to
December 31, 2001.  The holder of the first  mortgage has rejected the Company's
extension  based on  certain  cross-default  provisions  in the loan  documents.
Although  the Company has taken the  position  that the  Company's  extension is
effective,  there can be no  assurances  that its position  would be upheld in a
court of law.

These loan maturities  raise  substantial  doubt about the Company's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustment  to reflect the possible  future  effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of this uncertainty.

The Company has  announced  that it has agreed in  principle  with a third party
(the  "Mezzanine  Lender") to obtain up to $71,000 in mezzanine  financing  (the
"Mezzanine  Financing").  The Mezzanine  Financing will be secured by pledges of
equity  interests in certain outlet  centers.  As part of the  transaction,  the
Company  has agreed in  principle  to sell to the  Mezzanine  Lender four of its
outlet centers, with the net proceeds from the sale expected to be approximately
$54,000.  The Company is in discussions  with various lenders  regarding a first
mortgage  loan for the  Company's  outlet  center  located in Puerto Rico in the
amount of  $25,000  or more,  which  loan  must  close  simultaneously  with the
Mezzanine  Financing to be provided by, and the sale of four outlet  centers to,
the Mezzanine  Lender.  The Mezzanine  Financing to be provided by the Mezzanine
Lender and the sale of the four outlet  centers to the Mezzanine  Lender,  along
with the first mortgage loan for the Company's outlet center in Puerto Rico, are
collectively  referred  to  herein  as the  "Debt  Financing  Transaction".  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  - Debt  Financing  Transaction  and Debt  Facility  Compliance"  for
additional information.

The proceeds from the Debt Financing  Transaction  will be used to pay off up to
$117,000 of short-term debt,  including some of the debt described  above,  with
the  remainder  to be used  for  general  corporate  purposes.  There  can be no
assurance as to whether or when the Debt Financing Transaction will close.

Debt Contingencies

As of September 30, 2000, the Company is a guarantor or otherwise obligated with
respect  to an  aggregate  of  $12,545  of the  indebtedness  of  Horizon  Group
Properties, Inc. and its affiliates ("HGP") including a $10,000 obligation under
HGP's  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.

On April 1, 1998, Horizon Group, Inc. ("Horizon")  consummated an agreement with
Castle  &  Cooke  Properties,  Inc.  which  released  Horizon  from  its  future
obligations  under its  long-term  lease of the Dole  Cannery  outlet  center in
Honolulu,  Hawaii,  in  connection  with the  formation of a joint  venture with
certain  affiliates of Castle & Cooke,  Inc.  ("Castle & Cooke") to operate such
property. Under the terms of the agreement, Castle & Cooke Properties, Inc., the
landlord of the project and an  affiliate  of Castle & Cooke,  released  Horizon
from any  continuing  obligations  under the lease,  which  expires in 2045,  in
exchange  for  Horizon's  conveyance  to the joint  venture  of its  rights  and
obligations  under such lease. The agreement also provided that Horizon transfer
to such joint venture  substantially  all of Horizon's  economic interest in its
outlet center in Lake Elsinore,  California  together with legal title to vacant
property  located  adjacent to the center.  Prior to August 15, 2000 the Company
held a small  minority  interest in the joint  venture but had no  obligation or
commitment  with  respect to the  post-closing  operations  of the Dole  Cannery
project.  Mortgage  indebtedness  with an  outstanding  balance  of  $28,837  at
September  30,  2000,  for which one of the  Company's  subsidiary  partnerships
remains legally  responsible,  is collateralized by a first mortgage on the Lake
Elsinore  outlet  center.  The  joint  venture,  as a  limited  partner  in such
subsidiary  partnership,  is  obligated  to make  capital  contributions  to the
partnership  to pay debt  financing,  operating and other expenses under certain
conditions.  The subsidiary partnership will remain legally responsible for such
expenses in case of any  shortfalls  by the joint  venture  with respect to such
capital  contributions.  Castle  &  Cooke  has  provided  the  Company  with  an
unconditional guaranty with respect to any such shortfalls.

Debt Facility Compliance

As a result of its financial  results for the quarters  ended December 31, 1999,
March 31, 2000,  June 30, 2000 and  September  30,  2000,  the Company is not in
compliance  with financial  covenants  contained in certain  credit  facilities.
Non-compliance  with  these  covenants  as well as the  Company's  default  with
respect to the $20,000 Subordinated Loan and other loan facilities has triggered
cross-default provisions with respect to several other debt facilities.  None of
these loans has been  accelerated  nor has notice of any  lender's  intention to
accelerate been received by the Company.  The Company is in discussions with the
affected lenders regarding either paying off these loans in their entirety using
proceeds  from the Debt  Financing  Transaction,  or  modifying  the  terms  and
financial  covenants so that the Company will be in  compliance  at the time the
Debt Financing Transaction closes.

If the Company is unable to close the Debt Financing  Transaction,  it will look
to  obtain  alternative  financing  from  other  financial  institutions  or the
potential  sale of certain  properties  as sources of cash to repay the  amounts
outstanding under such loans. This condition also raises substantial doubt about
the Company's ability to continue as a going concern.  The financial  statements
do not include any  adjustment  to reflect the  possible  future  effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

Although  the Company  continues to maintain its  regularly  scheduled  interest
payments  under all of its  indebtedness,  there can be no assurance that one or
all of the affected  lenders will not attempt to accelerate  the maturity of its
indebtedness  or pursue other remedies under their  respective  loan  documents.
Additionally,  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.

The Company,  through  affiliates,  holds 50%  interests in the owners of (i) an
outlet center in Oxnard,  CA, (ii) an outlet  center in New River,  AZ and (iii)
phase one of an outlet  center in Bellport,  NY. First  mortgage  loans on these
three properties have matured and are currently in default. To date, the holders
of the first  mortgage loans on these  properties  have been unwilling to extend
the loans on terms  acceptable to the Company.  The holder of the first mortgage
loan on Phase I of the Bellport  project has  commenced an action in the Supreme
Court of the State of New York, County of Suffolk seeking foreclosure, the right
to appoint a receiver, and the right to pursue a deficiency judgment against the
borrower,  an  affiliate  of the  Company.  There can be no  assurance  that the
holders of these mortgage loans will not seek, and succeed in their attempts, to
foreclose on these properties,  have receivers appointed,  and obtain deficiency
judgments against the Company.  The Company accounts for its ownership interests
in these properties in accordance with the equity method of accounting.

The Company, through affiliates,  holds a 51% interest in the owner of Phases II
and III in an outlet  center in Bellport,  NY. The owner failed to make a $3,000
principal  payment  when due on November 1, 2000.  The Company and the holder of
the first mortgage loan are currently in discussions regarding a modification of
the loan payment  terms and an agreement by the lender to forebear from pursuing
remedies under the applicable loan documents.  Although the Company has made the
inital payment of $250 required under the modified loan payment term,  there can
be no assurance that such  discussions  will lead to a modification of the first
mortgage  loan or that the first  mortgage  lender will not pursue its  remedies
under the loan documents.  The Company  accounts for its ownership  interests in
this property in accordance with the equity method of accounting. The payment of
the amount due under the loan has been guaranteed by the Company.

Note 5 - Prime/Estein Joint Venture Transaction

On August 6, 1999,  the Company  entered  into an agreement  (the  "Prime/Estein
Joint Venture  Agreement") to sell three factory outlet  centers,  including two
future  expansions,  to a joint venture (the "Venture")  between an affiliate of
Estein & Associates USA, Ltd. ("Estein"),  a real estate investment company, and
the Company.  The  Prime/Estein  Joint  Venture  Agreement  provided for a total
purchase  price of  $274,000,  including  (i) the  assumption  of  approximately
$151,500 of first mortgage  indebtedness,  (ii) an $8,000 payment to the Company
for a ten-year covenant-not-to-compete and (iii) a $6,000 payment to the Company
for a ten-year  licensing  agreement with the Venture to continue the use of the
"Prime Outlets" brand name.

On November 19,  1999,  the Company  completed  the initial  installment  of the
Prime/Estein Joint Venture Agreement  consisting of the sale of Prime Outlets at
Birch Run to the Venture for aggregate  consideration  of $117,000,  including a
$64,500 "wrap-around" first mortgage provided by the Company. In connection with
the sale of Prime  Outlets at Birch Run, the Company  received  cash proceeds of
$33,303,  net of  transaction  costs,  and  recorded  a loss on the sale of real
estate of $9,326.  Effective November 19, 1999, the Company commenced accounting
for its 30.0%  ownership  interest in Prime  Outlets at Birch Run in  accordance
with the equity method of accounting.  The "wrap-around" first mortgage provided
by the Company to the Venture has a ten-year  term at a fixed  interest  rate of
7.75% requiring monthly payments of principal and interest pursuant to a 25-year
amortization  schedule.  The Company's net investment in the "wrap-around" first
mortgage as of September 30, 2000 and December 31, 1999 was $10,733 and $10,745,
respectively,  which is included  in other  assets in the  Consolidated  Balance
Sheet.  Additionally,  the  Venture  assumed  $53,755  of  outstanding  mortgage
indebtedness.  Included  in the  aggregate  consideration  is a  $5,500  payment
related  to the  covenant-not-to-compete  and a $3,000  payment  related  to the
licensing agreement. The payments to the Company for the covenant-not-to-compete
and  the  licensing  agreement  are  included  in  accounts  payable  and  other
liabilities in the Consolidated  Balance Sheet and will be amortized into income
over their ten-year lives.

During the fourth  quarter of 1999,  the Company  recorded a loss on the sale of
real estate of $5,827  related to the  write-down of the carrying value of Prime
Outlets at  Williamsburg  based on the terms of the  Prime/Estein  Joint Venture
Agreement. On February 23, 2000, the Company completed the second installment of
the Prime/Estein Joint Venture Agreement consisting of the sale of Prime Outlets
at Williamsburg to the Venture for aggregate consideration of $59,000, including
(i) the assumption of mortgage  indebtedness  of $32,500,  (ii) a $1,250 payment
related to the covenant-not-to-compete and (iii) a $1,500 payment related to the
licensing   agreement.   In  connection  with  the  sale  of  Prime  Outlets  at
Williamsburg,  the  Company  received  (i)  cash  proceeds  of  $11,063,  net of
transaction  costs, and (ii) a promissory note in the amount of $10,000 from the
Venture (of which Estein's  obligation is $7,000).  The promissory note requires
the  monthly  payment of  interest in arrears at an annual rate of 7.75% and the
outstanding  principal  amount is payable on or before December 15, 2000. If the
Company fails to refinance or convert the  Venture's  mortgage  indebtedness  of
$32,500 to a permanent  loan at a fixed rate of interest,  the December 15, 2000
maturity date of the $10,000 promissory note will be extended until such time as
such  refinancing  or  conversion  has  been  obtained.   In  addition,  if  the
refinancing  or conversion  does not occur on or before  December 15, 2000,  the
Company  will be  obligated  to pay  Estein  $250  and the  Company  will not be
entitled to receive  operating  distributions  arising  out of Prime  Outlets at
Williamsburg until such refinancing or conversion occurs.

Under the Prime/Estein Joint Venture Agreement,  as amended, the outside closing
date for the sale of Prime Outlets at Hagerstown,  including an expansion  which
opened during 2000  (together,  the "Hagerstown  Center"),  was August 31, 2000.
Estein terminated the Prime/Estein  Joint Venture Agreement as it applied to the
sale of the  Hagerstown  Center when the closing did not occur by the  specified
closing date.

In  connection  with the  discontinuance  of the  proposed  sales of a 70% joint
venture interest in (i) the Hagerstown  Center and (ii) a proposed  expansion to
Prime  Outlets at  Williamsburg  (the  "Williamsburg  Expansion"),  the  Company
incurred  a loss  on the  sale  of real  estate  of  $9,550  and  other  charges
aggregating  $1,100 during the third  quarter of 2000.  The loss on sale of real
estate is attributable to the remaining  proceeds that will not be received as a
result of the  termination  of the  Prime/Estein  Joint Venture  Agreement.  The
$1,100 of other charges include (i) a $600 fee payable to Estein  resulting from
failure to close the sale of the Hagerstown  Center on or before August 31, 2000
and (ii) a $500 fee  payable to Estein for  non-completion  of the  Williamsburg
Expansion by December 15, 2000, which the Company will not meet.

As of September 30, 2000,  the Company  reclassified  $61,908  representing  the
aggregate  carrying value of the Hagerstown  Center from assets held for sale to
investment in rental property in the  Consolidated  Balance Sheet. In connection
with the  reclassification,  the Company  recorded  $1,967 of  depreciation  and
amortization  expense  related to the  Hagerstown  Center  for the  period  from
January 1 through September 30, 2000 in the third quarter of 2000.

As of  December  31,  1999,  the Company  classified  $97,639  representing  the
aggregate  carrying value of Prime Outlets at Williamsburg  and Prime Outlets at
Hagerstown as assets held for sale in its Consolidated Balance Sheet.

Note 6 - 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  95.0% 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 with respect to common stock  distributions  is to
only make payments 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,  it does not expect to pay any distributions on its common stock or
common units of limited partnership interest in Prime Retail, L.P. during 2000.

With respect to distributions on the Company's 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"),  the Board of Directors did not declare the quarterly  distributions on
such  preferred  stock due February 15, 2000,  May 15, 2000 and August 15, 2000,
respectively.  The Board of Directors  announced on July 24, 2000 that, based on
the Company's  current  financial  situation and the Company's  current  federal
income tax  projections,  the Company does not  anticipate  paying any quarterly
distributions  on the  Senior  Preferred  Stock  and the  Series  B  Convertible
Preferred  Stock  during the  remainder  of 2000.  The Company is  currently  in
arrears on its preferred stock distributions due February 15, 2000, May 15, 2000
and August 15, 2000.  Non-payment of the quarterly preferred stock distributions
due November 15, 2000 will  represent the fourth  consecutive  quarter that such
dividends are in arrears. The holders of the Senior Preferred Stock and Series B
Convertible  Preferred  Stock have the right to elect two additional  members to
the Company's Board of Directors if the equivalent of six consecutive  quarterly
dividends on these series of  preferred  stock are in arrears.  Each of such two
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  currently  prohibited  under the terms of more than one of its
credit  agreements  from  paying  dividends  or  distributions  as a  result  of
non-compliance with a financial covenant.  In addition,  the Company may make no
distributions  to its common  shareholders  unless it is current with respect to
distributions to its preferred  shareholders.  As of September 30, 2000,  unpaid
dividends  for the period  November 16, 1999 through  September  30, 2000 on the
Senior  Preferred  Stock and Series B  Convertible  Preferred  Stock  aggregated
$5,283 and $14,556,  respectively.  Annualized dividends on the Company's Senior
Preferred  Stock and Series B  Convertible  Preferred  Stock  outstanding  as of
September 30, 2000 are $6,038 and $16,636, respectively.

Note 7 - Special Charges

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  $14,703  which
includes (i) the write-off of $3,497 of costs  capitalized  during 1999 and (ii)
$11,206 of costs incurred during the nine months ended September 30, 2000.

During the second quarter of 2000, management  established a formal plan to sell
two of its properties and,  accordingly,  reclassified their respective carrying
values to assets held for sale in the Consolidated  Balance Sheet as of June 30,
2000. In accordance with the  requirements of Statement of Financial  Accounting
Standards No. 121,  "Accounting  for the  Impairment  of  Long-Lived  Assets and
Long-Lived Assets to be Disposed of", the Company incurred a provision for asset
impairment of $8,538 to reduce the carrying  value of these  properties to their
estimated  sales value,  less cost to dispose.  The aggregate  carrying value of
these properties as of September 30, 2000 was $6,640.

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.  When accounting for the fourth quarter of
1999,  the  Company  decided  to  discontinue  the  operations  of its  Designer
Connection  outlet  stores.  The  operations of the Designer  Connection  outlet
stores ceased during July of 2000.

Note 8 - Commitments and Contingencies

The Company was required,  pursuant to a real estate purchase  agreement and two
ground  leases in which it is the  ground  lessee,  to  purchase  for $6,809 the
unowned 50% interests in parcels of land  underlying  Phases III and IV of Prime
Outlets  at Gilroy  in  Gilroy,  California.  The  Company  did not close on the
scheduled  closing date.  The seller has several  rights and remedies  under the
relevant  documents,  including  amending the base rent under the ground leases,
amending the purchase price, and seeking specific performance. On August 9, 2000
the seller  notified  the  Company  that it has  exercised  its right  under the
relevant  documents to require the Company to close within 180 days.  The seller
also reserved its other remedies under the relevant  documents.  The seller does
not have the right to  terminate  the ground  leases as a remedy.  On August 29,
2000, the seller  brought an action in the Superior Court of California,  County
of Santa Clara alleging  breach of contract and seeking the  declaratory  relief
and compensatory damages.

Note 9 - Legal Proceedings

On October 13, 2000 and thereafter,  various complaints were filed in the United
States  District Court for the District of Maryland  against Prime Retail,  Inc.
(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 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.  The Company  believes that the complaints are without merit and intends
to defend 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.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously. While any litigation contains an element of uncertainty, the Company
believes the losses,  if any,  resulting from this case will not have a material
adverse effect on the consolidated financial statements of the Company.

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.  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.  While any  litigation  contains an
element of uncertainty,  the Company believes the losses, if any, resulting from
the  Lawsuits  will not  have a  material  adverse  effect  on the  consolidated
financial statements of the Company.

The New York Stock  Exchange 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.


<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 Prime Retail,  Inc. (the "Company")  should be read
in conjunction with the Consolidated Financial Statements and Notes thereto. The
Company's  operations are conducted  through Prime Retail,  L.P. (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,  the risk that the  Company  may be unable  to  obtain  waivers  or
amendments  to the  provisions  of its credit  agreements  that are presently in
default or to refinance the  indebtedness  outstanding  under such agreements in
the event they are  accelerated;  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 the Company's  planned
asset  sales;   risks  associated  with  the  Company's   property   development
activities,  such as the  potential  for cost  overruns,  delays and the lack of
predictability  with  respect to the  financial  returns  associated  with these
development activities;  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 retailers.

Outlet Portfolio

The Company grew to its present size, a process largely  completed by the end of
1999, by  developing  and  acquiring  outlet  centers and expanding its existing
outlet  centers.  As  summarized  in  TABLE 1, the  Company's  outlet  portfolio
consisted of 52 outlet centers totaling 15,089,000 square feet of gross leasable
area ("GLA") at  September  30,  2000,  compared to 51 operating  manufacturers'
outlet centers totaling 14,699,000 square feet of GLA at September 30, 1999.

On  November  19,  1999,  the  Company  sold Prime  Outlets at Birch Run,  which
contains  724,000  square feet of GLA, to a joint  venture  partnership  with an
unrelated party, (the  "Prime/Estein  Venture").  Additionally,  on February 23,
2000, the Company sold Prime Outlets at  Williamsburg,  which  contains  274,000
square feet of GLA, to the Prime/Estein Venture. The Company owns a 30% interest
in the Prime/Estein Venture. Commencing on the dates of disposition, the Company
accounts for the operating  results of these outlet  centers in accordance  with
the  equity  method  of  accounting.  The  sales of  these  outlet  centers  are
collectively referred to as the "Prime/Estein Transaction."

During 1999,  the Company (i) opened two  expansions to existing  outlet centers
totaling  85,000  square  feet of GLA (of which  21,000  square  feet and 64,000
square  feet  opened in the first and  third  quarters,  respectively)  and (ii)
acquired in September 1999 from Horizon Group Properties, Inc. ("HGP") ownership
interests in the Bellport Outlet Center which consists of 292,000 square feet of
GLA.  During the nine months ended  September  30, 2000,  the Company (i) opened
four expansions to existing centers  aggregating  214,000 square feet of GLA and
(ii) opened a new outlet center in Puerto Rico which  consists of 176,000 square
feet of GLA (the "Portfolio Expansion").

The Company's  outlet center portfolio was 92% and 94% occupied on September 30,
2000 and 1999,  respectively.  For the three and nine months ended September 30,
2000,  weighted-average  occupancy  in the  outlet  center  portfolio  was  91%,
compared  to 93% for the  same  periods  in  1999.  The  decline  was  primarily
attributable to certain tenant bankruptcies and abandonments.



<PAGE>


<TABLE>
                             Portfolio of Properties
                               September 30, 2000

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                                                              Grand            GLA      Percentage
Outlet Centers                                                          Phase          Opening Date      (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>                <C>                 <C>
Prime Outlets at Kittery  - Kittery Maine..............................     I            April 1984         25,000             100%
                                                                           II              May 1984         78,000              99
                                                                          III           August 1989         18,000              95
                                                                           IV              May 1998         10,000             100
                                                                                                           -------             ---
                                                                                                           131,000              99

Prime Outlets at Fremont - Fremont, Indiana............................     I          October 1985        118,000              95
                                                                           II         November 1993         51,000             100
                                                                          III          October 1994         60,000              98
                                                                                                           -------             ---
                                                                                                           229,000              97

Prime Outlets at Birch Run (2) - Birch Run, Michigan................... I-XVI               Various        591,000              96
                                                                           XVII-
                                                                        XVIII                  1997        133,000              87
                                                                                                           -------             ---
                                                                                                           724,000              95

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

Prime Outlets at Michigan City - Michigan City, Indiana................     I         November 1987        199,000             100
                                                                           II              May 1988        130,000              94
                                                                          III             July 1991         36,000              95
                                                                           IV             July 1994         42,000             100
                                                                            V         December 1994         26,000              98
                                                                           VI              May 1995         58,000              96
                                                                                                           -------             ---
                                                                                                           491,000              98

Prime Outlets at Williamsburg (3) - Williamsburg, Virginia.............     I            April 1988         67,000              96
                                                                           II         November 1988         60,000             100
                                                                          III          October 1990         49,000             100
                                                                           IV                  1995         98,000             100
                                                                                                           -------             ---
                                                                                                           274,000              99

Prime Outlets at Kenosha - Kenosha, Wisconsin..........................     I        September 1988         89,000              94
                                                                           II             July 1989         65,000             100
                                                                          III              May 1990        115,000             100
                                                                                                           -------             ---
                                                                                                           269,000              98

Prime Outlets at Silverthorne - Silverthorne, Colorado.................     I         November 1988         95,000              93
                                                                           II         November 1990         75,000              89
                                                                          III         November 1993         88,000              83
                                                                                                           -------             ---
                                                                                                           258,000              88

Prime Outlets at Edinburgh - Edinburgh, Indiana........................     I                  1988        156,000             100
                                                                           II         November 1994        142,000              98
                                                                                                           -------             ---
                                                                                                           298,000              99

Prime Outlets at Burlington - Burlington, Washington ..................     I              May 1989         89,000              84
                                                                           II          October 1989         36,000             100
                                                                          III            April 1993         49,000              97
                                                                                                           -------             ---
                                                                                                           174,000              91

Prime Outlets at Queenstown - Queenstown, Maryland.....................     I             June 1989         67,000              97
                                                                           II             June 1990         55,000             100
                                                                          III          January 1991         16,000              97
                                                                           IV             June 1992         14,000              97
                                                                            V           August 1993         69,000             100
                                                                                                           -------             ---
                                                                                                           221,000              99

</TABLE>
<PAGE>
<TABLE>

                       Portfolio of Properties (continued)
                               September 30, 2000
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand            GLA      Percentage
Outlet Centers                                                          Phase          Opening Date      (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>           <C>                 <C>                  <C>
Prime Outlets at Hillsboro - Hillsboro, Texas..........................     I          October 1989         95,000             100%
                                                                           II          January 1992        101,000              97
                                                                          III              May 1995        163,000              93
                                                                                                           -------             ---
                                                                                                           359,000              96

Prime Outlets at Oshkosh - Oshkosh, Wisconsin..........................     I         November 1989        215,000              93
                                                                           II             July 1991         45,000              99
                                                                                                           -------             ---
                                                                                                           260,000              94

Prime Outlets at Warehouse Row (4) - Chattanooga, Tennessee............     I         November 1989         95,000              85

Prime Outlets at Gilroy - Gilroy, California...........................     I          January 1990         94,000             100
                                                                           II           August 1991        109,000              98
                                                                          III          October 1992        137,000              96
                                                                           IV             July 1994        170,000             100
                                                                            V         November 1995         69,000             100
                                                                                                           -------             ---
                                                                                                           579,000              99

Prime Outlets at Perryville - Perryville, Maryland.....................     I             June 1990        148,000              87

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

Prime Outlets at San Marcos - San Marcos, Texas........................     I           August 1990        177,000              99
                                                                           II           August 1991         70,000              95
                                                                          III           August 1993        117,000              97
                                                                         IIIB         November 1994         20,000              91
                                                                         IIIC         November 1995         35,000             100
                                                                         IIID              May 1998         18,000             100
                                                                           VA           August 1999         64,000              99
                                                                           VB              May 2000         17,000             100
                                                                           VC              May 2000         31,000             100
                                                                                                           -------             ---
                                                                                                           549,000              98

Prime Outlets at Anderson - Anderson, California.......................     I           August 1990        165,000             100

Prime Outlets at Post Falls - Post Falls, Idaho .......................     I             July 1991        111,000              67
                                                                           II             July 1992         68,000              90
                                                                                                           -------             ---
                                                                                                           179,000              75

Prime Outlets at Ellenton - Ellenton, Florida..........................     I         October 1991         187,000             100
                                                                           II          August 1993         123,000             100
                                                                          III         October 1996          30,000             100
                                                                           IV        November 1998         141,000              97
                                                                                                           -------             ---
                                                                                                           481,000              99

Prime Outlets at Morrisville - Raleigh - Durham, North Carolina........     I         October 1991         181,000              93
                                                                           II            July 1996           6,000             100
                                                                                                           -------             ---
                                                                                                           187,000              94

Prime Outlets at Naples - Naples/Marco Island, Florida.................     I        December 1991          94,000              89
                                                                           II        December 1992          32,000              96
                                                                          III           March 1998          20,000              98
                                                                                                           -------             ---
                                                                                                           146,000              92

Prime Outlets at Conroe - Conroe, Texas................................     I         January 1992          93,000              92
                                                                           II            June 1994         163,000              97
                                                                          III         October 1994          26,000              79
                                                                                                           -------             ---
                                                                                                           282,000              94

Prime Outlets at Bellport (5) - Bellport, New York.....................     I              May 1992         95,000              82
                                                                           II         November 1996        126,000              80
                                                                          III          October 1997         71,000              51
                                                                                                           -------             ---
                                                                                                           292,000              70

</TABLE>
<PAGE>
<TABLE>



                       Portfolio of Properties (continued)
                               September 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                              Grand            GLA      Percentage
Outlet Centers                                                          Phase          Opening Date      (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>                <C>                  <C>

Prime Outlets at Niagara Falls USA - Niagara Falls, New York...........     I             July 1992        300,000              99%
                                                                           II           August 1995        234,000              88
                                                                                                           -------             ---
                                                                                                           534,000              94

Prime Outlets at Woodbury - Woodbury, Minnesota........................     I            July 1992         129,000              77
                                                                           II        November 1993         100,000              90
                                                                          III          August 1994          21,000             100
                                                                                                           -------             ---
                                                                                                           250,000              84

Prime Outlets at Calhoun - Calhoun, Georgia............................     I         October 1992         123,000              94
                                                                           II         October 1995         131,000              89
                                                                                                           -------             ---
                                                                                                           254,000              91

Prime Outlets at Castle Rock - Castle Rock, Colorado...................     I        November 1992         181,000              98
                                                                           II          August 1993          94,000              98
                                                                          III        November 1993          95,000             100
                                                                           IV          August 1997         110,000             100
                                                                                                           -------             ---
                                                                                                           480,000              99

Prime Outlets at Bend - Bend, Oregon...................................     I        December 1992          97,000              97
                                                                           II       September 1998          35,000              99
                                                                                                           -------             ---
                                                                                                           132,000              97

Prime Outlets at Jeffersonville II - Jeffersonville, Ohio..............     I           March 1993         126,000              64
                                                                           II          August 1993         123,000              35
                                                                          III         October 1994          65,000              74
                                                                                                           -------             ---
                                                                                                           314,000              55

Prime Outlets at Jeffersonville I - Jeffersonville, Ohio...............     I            July 1993         186,000              93
                                                                           II        November 1993         100,000             100
                                                                          IIB        November 1994          13,000              94
                                                                         IIIA          August 1996          35,000              97
                                                                         IIIB           March 1997          73,000             100
                                                                                                           -------             ---
                                                                                                           407,000              96

Prime Outlets at Gainesville - Gainesville, Texas......................     I           August 1993        210,000              88
                                                                           II         November 1994        106,000              79
                                                                                                           -------             ---
                                                                                                           316,000              85

Prime Outlets at Loveland - Loveland, Colorado.........................     I              May 1994        139,000              95
                                                                           II         November 1994         50,000              88
                                                                          III              May 1995        114,000              91
                                                                           IV              May 1996         25,000              60
                                                                                                           -------             ---
                                                                                                           328,000              90

Prime Outlets at Oxnard (6) - Oxnard, California.......................     I             June 1994        148,000              92

Prime Outlets at Grove City - Grove City, Pennsylvania.................     I           August 1994        235,000             100
                                                                           II         November 1994         95,000              97
                                                                          III         November 1995         85,000              99
                                                                           IV         November 1996        118,000              99
                                                                                                           -------             ---
                                                                                                           533,000              99

Prime Outlets at Huntley - Huntley, Illinois...........................     I           August 1994        192,000              94
                                                                           II         November 1995         90,000              61
                                                                                                           -------             ---
                                                                                                           282,000              83


Prime Outlets at Florida City - Florida City, Florida..................     I        September 1994        208,000              79

</TABLE>
<PAGE>


<TABLE>


                       Portfolio of Properties (continued)
                               September 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                              Grand            GLA      Percentage
Outlet Centers                                                          Phase          Opening Date      (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>           <C>                 <C>                  <C>

Prime Outlets at Pismo Beach  - Pismo Beach, California................     I         November 1994        148,000              90%

Prime Outlets at Tracy  - Tracy, California............................     I         November 1994        153,000              92

Prime Outlets at Vero Beach  - Vero Beach, Florida.....................     I         November 1994        210,000              96
                                                                           II           August 1995        116,000              89
                                                                                                           -------             ---
                                                                                                           326,000              94

Prime Outlets at Waterloo - Waterloo, New York.........................     I            March 1995        208,000              97
                                                                           II        September 1996        115,000              94
                                                                          III            April 1997         68,000             100
                                                                                                           -------             ---
                                                                                                           391,000              97

Prime Outlets at Odessa - Odessa, Missouri.............................     I             July 1995        191,000              83
                                                                           II         November 1996        105,000              78
                                                                                                           -------             ---
                                                                                                           296,000              81

Prime Outlets at Darien (7) - Darien, Georgia..........................     I             July 1995        238,000              80
                                                                          IIA         November 1995         49,000              99
                                                                          IIB             July 1996         20,000             100
                                                                                                           -------             ---
                                                                                                           307,000              84

Prime Outlets at New River (6) - Phoenix, Arizona......................     I        September 1995        217,000              95
                                                                           II        September 1996        109,000              83
                                                                                                           -------             ---
                                                                                                           326,000              91

Prime Outlets at Gulfport (8) - Gulfport, Mississippi..................     I         November 1995        228,000              89
                                                                          IIA         November 1996         40,000              94
                                                                          IIB         November 1997         38,000              84
                                                                                                           -------             ---
                                                                                                           306,000              89

Prime Outlets at Lodi - Burbank, Ohio..................................     I         November 1996        205,000              90
                                                                          IIA              May 1998         33,000             100
                                                                          IIB         November 1998         75,000              91
                                                                                                           -------             ---
                                                                                                           313,000              92

Prime Outlets at Gaffney - Gaffney, South Carolina.....................     I         November 1996        235,000              93
                                                                           II             July 1998         70,000              92
                                                                                                           -------             ---
                                                                                                           305,000              93

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

Prime Outlets at Lebanon -  Lebanon, Tennessee.........................     I            April 1998        208,000              98
                                                                          IIA            March 1999         21,000             100
                                                                                                           -------             ---
                                                                                                           229,000              98

Prime Outlets at Hagerstown - Hagerstown, Maryland.....................     I           August 1998        218,000             100
                                                                           II         November 1998        103,000             100
                                                                          IIIA           March 2000         68,000              98
                                                                          IIIB           April 2000         98,000              83
                                                                                                        ----------             ---
                                                                                                           487,000              96

Prime Outlets at Puerto Rico - Barceloneta, Puerto Rico................     I             July 2000        176,000              90
                                                                                                        ----------             ---

Total Outlet Centers (9)                                                                                15,089,000              92%
                                                                                                        ==========             ===

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

<PAGE>

Notes:
(1)  Percentage  reflects  fully  executed  leases as of September 30, 2000 as a
     percent of square feet of GLA.
(2)  On  November  19,  1999,  the Company  sold this  outlet  center to a joint
     venture partnership with an unrelated party in which the Company owns a 30%
     interest.
(3)  On  February  23,  2000,  the Company  sold this  outlet  center to a joint
     venture partnership with an unrelated party in which the Company owns a 30%
     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 which was 99%
     leased as of September 30, 2000.
(5)  On September 1, 1999, the Company  acquired from HGP 50% of Phase I and 45%
     (though it  simultaneously  acquired  another 6% from the other  partner)of
     Phases II and III of this  outlet center which it  owns  in  joint  venture
     partnerships with unrelated parties.
(6)  The Company owns 50% of this outlet center in a joint  venture  partnership
     with an unrelated third party.
(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)  The real  property on which this  outlet  center is located is subject to a
     long-term ground lease.
(9)  The Company  also owns three  community  centers not included in this table
     containing 424,000 square feet of GLA in the aggregate that were 83% leased
     as of September 30, 2000.


<PAGE>


Results of Operations

Comparison  of the three  months  ended  September  30, 2000 to the three months
ended September 30, 1999

Summary

The Company  reported net income  (loss) of  $(13,134)  and $6,530 for the three
months ended  September  30, 2000 and 1999,  respectively.  For the three months
ended   September  30,  2000,  the  net  income  (loss)   applicable  to  common
shareholders  was $(18,802),  or $(0.43) per common share on a basic and diluted
basis. For the three months ended September 30, 1999, the net income  applicable
to common  shareholders  was  $482,  or $0.01  per  common  share on a basic and
diluted basis.

The 2000 results  include (i) a loss on the sale of real estate of $9,550,  (ii)
other charges of $1,100  incurred in connection with the termination of the sale
of joint venture interests in certain  properties,  (iii) a loss on eOutlets.com
of $424 and (iv) a gain on Designer Connection of $274. The 1999 results include
a loss on Designer Connection of $119.

Revenues

Total  revenues  were  $71,408 for the three  months  ended  September  30, 2000
compared to $76,902 for the three months ended September 30, 1999, a decrease of
$5,494, or 7.1%. Base rents decreased $3,045, or 6.2%, in 2000 compared to 1999.
Straight-line  rent  income  (included  in base rents) were $92 and $335 for the
three months ended  September 30, 2000 and 1999,  respectively.  These decreases
are primarily due to the Prime/Estein  Transaction and the decrease in portfolio
occupancy, partially offset by the Portfolio Expansion.

Percentage  rents,  which  represent rents based on a percentage of sales volume
above a specified  threshold,  decreased $202, or 10.3%, during the three months
ended  September 30, 2000 compared to the same period in 1999.  This decline was
primarily attributable to the Prime/Estein  Transaction.  Tenant reimbursements,
which  represent  the  contractual  recovery  from tenants of certain  operating
expenses,  decreased  by  $912,  or  4.1%,  primarily  due to  the  Prime/Estein
Transaction  and a decrease  in  portfolio  occupancy,  partially  offset by the
Portfolio Expansion.

Interest and other income  decreased by $1,335,  or 36.8%,  to $2,289 during the
three months ended  September  30, 2000  compared to $3,624 for the three months
ended  September 30, 1999. The decrease  reflects (i) lower equity earnings from
investment in  partnerships  of $679, (ii) a reduction in lease buyout income of
$553,  (iii)  lower  temporary  tenant  income  of  $394  (iv)  lower  municipal
assistance income of $143 and (v) decrease in all other miscellaneous  income of
$343.  These  decreases were partially  offset by (i) higher  interest income of
$304, (ii)  amortization  of deferred fees of $281 and (iii) increased  property
management fees of $192.

Expenses

Property operating expenses decreased by $577, or 3.2%, to $17,204 for the three
months ended September 30, 2000 compared to $17,781 for the same period in 1999.
Real estate  taxes  decreased by $178,  or 3.1%,  to $5,575 for the three months
ended September 30, 2000 from $5,753 in the same period in 1999. The decrease in
property  operating  expenses is primarily due to the  Prime/Estein  Transaction
partially offset by the Portfolio  Expansion.  The decrease in real estate taxes
is primarily attributable to the Prime/Estein  Transaction,  partially offset by
increased  assessments  and the  Portfolio  Expansion.  As  shown  in  TABLE  2,
depreciation  and amortization  expense  decreased by $1,665 or 8.6%, to $17,679
for the three months ended  September  30, 2000 compared to $19,344 for the same
period in 1999. This decrease is primarily due to the Prime/Estein  Transaction,
partially offset by the Portfolio  Expansion and the  reclassification  of Prime
Outlets  at  Hagerstown  from  assets  held for  sale to  investment  in  rental
property. In connection with the  reclassification,  the Company recorded $1,967
of depreciation  and amortization  expense related to the Hagerstown  Center for
the period from  January 1 through  September  30, 2000 in the third  quarter of
2000.

TABLE 2 -- Components of Depreciation and Amortization Expense

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

--------------------------------------------------------------------------------
Three months ended September 30,                             2000         1999
--------------------------------------------------------------------------------
Building and improvements                                 $ 9,370       $10,228
Land improvements                                           1,767         1,442
Tenant improvements                                         5,689         6,841
Furniture and fixtures                                        710           637
Leasing commissions                                           143           196
                                                          -------       -------
      Total                                               $17,679       $19,344
                                                          =======       =======
================================================================================


<PAGE>

TABLE 3 -- Components of Interest Expense

The components of interest expense are summarized as follows:

--------------------------------------------------------------------------------
Three months ended September 30,                           2000           1999
--------------------------------------------------------------------------------

Interest incurred                                       $25,302        $24,480
Interest capitalized                                       (727)        (1,168)
Amortization of deferred financing costs                    838            974
Amortization of interest rate protection contracts           17              3
                                                        -------       --------
         Total                                          $25,430       $ 24,289
                                                        =======       ========

================================================================================
As shown in TABLE 3, interest  expense for the three months ended  September 30,
2000 increased by $1,141,  or 4.7%, to $25,430  compared to $24,289 for the same
period in 1999.  This increase  reflects (i) higher  interest  incurred of $822,
(ii) a  decrease  in the  amount of  interest  capitalized  in  connection  with
development  projects of $441 and (iii) an increase in  amortization of interest
rate  protection  contracts  of $14.  Partially  offsetting  these  items  was a
decrease in amortization of deferred financing costs of $136.

The increase in interest  incurred is primarily  attributable  to an increase in
the weighted average interest rate for the three months ended September 30, 2000
compared to the same period in 1999.  The weighted  average  interest rates were
8.24% and 7.47% for the 2000 and 1999  periods,  respectively.  The  increase is
partially  offset  by a  decrease  of  $83,311  in the  Company's  average  debt
outstanding  during the three months ended  September  30, 2000  compared to the
same period in 1999.

Other charges for the three months ended September 30, 2000 increased by $4,679,
or 479.9%,  to $5,654  compared to $975 for the same period in 1999.  One of the
causes of this  increase were costs of $1,100  incurred in  connection  with the
discontinuance  of the proposed  sale of a 70% joint  venture  interest in Prime
Outlets at Hagerstown  and a future  expansion to Prime Outlets at  Williamsburg
(see Liquidity and Capital Resources - Prime/Estein  Joint Venture  Transaction"
for additional  information).  In addition,  this increase reflects (i) a higher
provision for uncollectible accounts receivable of $1,420 resulting in part from
certain tenant bankruptcies and abandonments,  (ii) higher marketing expenses of
$1,462, and (iii) an increase in all other miscellaneous charges of $697.

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. The Company  incurred a  non-recurring  loss of
$424  during  the three  months  ended  September  30,  2000 in  respect of this
discontinuance of operations.

In connection  with  re-leasing  space to new  merchants,  the Company  incurred
$2,221  and  $1,392  in  capital  expenditures  during  the three  months  ended
September 30, 2000 and 1999, respectively.

Comparison of the nine months ended  September 30, 2000 to the nine months ended
September 30, 1999

Summary

The Company  reported net income  (loss) of  $(40,612)  and $20,865 for the nine
months  ended  September  30, 2000 and 1999,  respectively.  For the nine months
ended   September  30,  2000,  the  net  income  (loss)   applicable  to  common
shareholders  was $(57,616),  or $(1.32) per common share on a basic and diluted
basis.  For the nine months ended September 30, 1999, the net income  applicable
to common  shareholders  was  $16,571,  or $0.38 and $0.06 per common share on a
basic and diluted basis, respectively.

The 2000 results include (i) a loss on  eOutlets.com of $14,703,  (ii) a loss on
the sale of real estate of $9,550,  (iii) a provision  for asset  impairment  of
$8,538,  (iv) general and  administrative  expenses  consisting of severance and
other  compensation  costs  aggregating  $2,421 and professional  fees of $1,455
related to refinancing  activities,  (v) a loss on Designer Connection of $1,811
and (vi) other charges of $1,100  incurred in connection with the termination of
the sale of joint  venture  interests  in certain  properties.  The 1999 results
include (i) an extraordinary  loss of $2,106 (net of minority interests of $534)
relating to the early  extinguishment  of certain long-term debt and (ii) a loss
on Designer Connection of $1,007.

Revenues

Total  revenues  were  $212,833  for the nine months  ended  September  30, 2000
compared to $230,819 for the nine months ended September 30, 1999, a decrease of
$17,986,  or 7.8%.  Base rents decreased  $11,994,  or 8.2%, in 2000 compared to
1999.  Straight-line  rent  (expense)  income  (included  in  base  rents)  were
$(288)and  $765  for  the  nine  months  ended  September  30,  2000  and  1999,
respectively.  These decreases are primarily due to the Prime/Estein Transaction
and a  decrease  in  portfolio  occupancy,  partially  offset  by the  Portfolio
Expansion.

Percentage  rents,  which  represent rents based on a percentage of sales volume
above a specified threshold,  decreased $1,649, or 27.5%, during the nine months
ended  September 30, 2000 compared to the same period in 1999.  This decline was
primarily attributable to the Prime/Estein  Transaction.  Tenant reimbursements,
which  represent  the  contractual  recovery  from tenants of certain  operating
expenses,  decreased  by  $4,829  or  7.1%,  primarily  due to the  Prime/Estein
Transaction  and the decrease in portfolio  occupancy,  partially  offset by the
Portfolio Expansion.

Interest and other income increased by $486, or 5.1%, to $10,032 during the nine
months  ended  September  30, 2000  compared to $9,546 for the nine months ended
September 30, 1999. This increase reflects (i) a nonrecurring first quarter 2000
gain on sale of outparcel land in Camarillo,  CA of $2,471, (ii) higher property
management  fee income of $581,  (iii) an increase in  amortization  of deferred
fees of $846 and (iv) higher interest  income of $419.  These were offset by (i)
reduction in equity  earnings from  investment in  partnerships  of 2,365,  (ii)
lower  temporary  tenant  income of  $1,122  and  (iii)  decreases  in all other
miscellaneous income of $344.

Expenses

Property operating expenses decreased by $3,224 or 6.0%, to $50,694 for the nine
months ended September 30, 2000 compared to $53,918 for the same period in 1999.
Real estate  taxes  decreased by $233,  or 1.4%,  to $16,813 for the nine months
ended  September 30, 2000 from $17,046 in the same period in 1999.  The decrease
in property operating expenses is primarily due to the Prime/Estein Transaction,
partially offset by the Portfolio  Expansion.  The decrease in real estate taxes
is primarily attributable to the Prime/Estein  Transaction,  partially offset by
increased  assessments  and the  Portfolio  Expansion.  As  shown  in  TABLE  4,
depreciation and amortization  expense decreased by $6,469, or 11.5%, to $49,699
for the nine months ended  September  30, 2000  compared to $56,168 for the same
period in 1999. This decrease is primarily due to the  Prime/Estein  Transaction
and the reclassification of certain properties to assets held for sale partially
offset by the Portfolio Expansion.

TABLE 4 -- Components of Depreciation and Amortization Expense

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

--------------------------------------------------------------------------------
Nine months ended September 30,                             2000          1999
--------------------------------------------------------------------------------

Building and improvements                                 $26,826       $30,465
Land improvements                                           4,532         4,272
Tenant improvements                                        16,149        19,423
Furniture and fixtures                                      1,718         1,407
Leasing commissions                                           474           601
                                                          -------       -------
      Total                                               $49,699       $56,168
                                                          =======       =======
================================================================================

TABLE 5 -- Components of Interest Expense

The components of interest expense are summarized as follows:

--------------------------------------------------------------------------------
Nine months ended September 30,                              2000          1999
--------------------------------------------------------------------------------

Interest incurred                                         $73,690       $68,974
Interest capitalized                                       (3,087)       (3,387)
Amortization of deferred financing costs                    2,508         2,364
Amortization of interest rate protection contracts             56            63
                                                          -------       -------
         Total                                            $73,167       $68,014
                                                          =======       =======

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

As shown in TABLE 5,  interest  expense for the nine months ended  September 30,
2000 increased by $5,153,  or 7.6%, to $73,167  compared to $68,014 for the same
period in 1999. This increase  reflects (i) higher interest  incurred of $4,716,
(ii) a decrease in the amount of interest  capitalized  in  connection  with the
development  projects of $300 and (iii) an increase in  amortization of deferred
financing  costs of $144.  Partially  offsetting  these  items was a decrease in
amortization of interest rate protection contracts of $7.

The increase in interest  incurred is primarily  attributable  to an increase in
the weighted  average interest rate for the nine months ended September 30, 2000
compared to the same period in 1999.  The weighted  average  interest rates were
8.00 % and 7.38% for the 2000 and 1999  periods,  respectively.  The increase is
partially  offset  by a  decrease  of  $34,214  in the  Company's  average  debt
outstanding during the nine months ended September 30, 2000 compared to the same
period in 1999.

Other charges for the nine months ended  September 30, 2000 increased by $8,223,
or 237.5%, to $11,686 compared to $3,463 for the same period in 1999. One of the
causes of this  increase  were costs of $1,100  incurred in the third quarter in
connection with the  discontinuance  of the proposed sale of a 70% joint venture
interest in Prime Outlets at Hagerstown and a future  expansion to Prime Outlets
at Williamsburg.  In addition,  the increase reflects (i) a higher provision for
uncollectible  accounts  receivable  of $3,700  resulting  in part from  certain
tenant bankruptcies and abandonments,  (ii) higher marketing expenses of $1,778,
(iii)  increased  pre-development  costs of $598,  (iv) an increase in all other
miscellaneous charges of $1,047.

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  $14,703  which
includes (i) the write-off of $3,497 of costs  capitalized  during 1999 and (ii)
$11,206 of costs incurred during the nine months ended September 30, 2000.

During the second quarter of 2000, management  established a formal plan to sell
two of its properties and,  accordingly,  reclassified their respective carrying
values to assets held for sale in the Consolidated  Balance Sheet as of June 30,
2000. In accordance with the  requirements of Statement of Financial  Accounting
Standards No. 121,  "Accounting  for the  Impairment  of  Long-Lived  Assets and
Long-Lived Assets to be Disposed of", the Company incurred a provision for asset
impairment of $8,538 to reduce the carrying  value of these  properties to their
estimated  sales value,  less cost to dispose.  The aggregate  carrying value of
these properties as of September 30, 2000 was $6,640.

In connection  with  re-leasing  space to new  merchants,  the Company  incurred
$2,730 and $509 in capital  expenditures  during the nine months ended September
30, 2000 and 1999, respectively.

Sales

For the three and nine month periods ended September 30, 2000,  same-space sales
in centers owned by the Company increased 2% and 2%,  respectively,  compared to
the same periods in 1999.  "Same-space sales" is defined as the weighted average
sales per square foot  reported  by  merchants  for space open since  January 1,
1999. For the three and nine month periods ended September 30, 2000,  same-store
sales  decreased  by 2% and 2%,  respectively,  compared to the same  periods in
1999.  "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, 1999.  The weighted  average sales per square foot reported by
all merchants was $257 for the year ended December 31, 1999.



<PAGE>


Liquidity and Capital Resources

Sources and Uses of Cash

For the nine months ended  September  30, 2000,  net cash  provided by operating
activities was $50,501,  net cash used in investing  activities was $37,370, and
net cash used in financing activities was $14,487.

The uses of cash for investing activities during the nine months ended September
30,  2000  included  (i)  $42,828  of  costs  associated  with  development  and
construction of Prime Outlets of Puerto Rico which opened July 27, 2000 and four
expansions to existing centers aggregating  approximately 389,000 square feet of
GLA which opened during the six months ended June 30, 2000,  and (ii) $10,227 of
costs related to eOutlets.com.  Partially  offsetting these uses were $11,063 of
net proceeds  from the sale of Prime Outlets at  Williamsburg  and $4,622 of net
proceeds from the sale of outparcel land in Camarillo, CA.

The gross uses of cash for  financing  activities  during the nine months  ended
September 30, 2000 included (i) principal repayments on notes payable of $26,684
and (ii) deferred financing costs of $842. Partially offsetting these items were
proceeds from new borrowings of $13,039.

Although  the  Company  believes  that cash flow from (i)  operations,  (ii) new
borrowings,  (iii)  refinancing of certain  existing debt and (iv) the potential
sale of certain  properties  will be sufficient  to satisfy its  scheduled  debt
service  obligations and to sustain its operations 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. At
September 30, 2000, unused commitments  available for borrowings were $507. (See
"Debt  Financing  Transaction  and  Debt  Facility  Compliance"  for  additional
information.)

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  95.0% 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 with respect to common stock  distributions  is to
only make payments 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,  it does not expect to pay any distributions on its common stock or
common units of limited partnership interest in Prime Retail, L.P. during 2000.

With respect to distributions on the Company's 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"), the Board of Directors did not declare a quarterly distribution on such
preferred  stock due  February  15,  2000,  May 15,  2000 and August  15,  2000,
respectively.  The Board of Directors  announced on July 24, 2000 that, based on
the Company's  current  financial  situation and the Company's  current  federal
income tax  projections,  the Company does not  anticipate  paying any quarterly
distributions  on the  Senior  Preferred  Stock  and the  Series  B  Convertible
preferred  Stock  during the  remainder  of 2000.  The Company is  currently  in
arrears on its Preferred Stock distributions due February 15, 2000, May 15, 2000
and August 15, 2000, respectively.  Non-payment of the quarterly preferred stock
distributions  due  November  15,  2000 will  represent  the fourth  consecutive
quarter that such dividends are in arrears.  The holders of the Senior Preferred
Stock and Series B Convertible Preferred Stock, each series voting separately as
a class,  have the right to elect two additional  members to the Company's Board
of Directors if the equivalent of six consecutive  quarterly  dividends on these
series of preferred  stock are in arrears.  Each of such two 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  currently  prohibited  under the terms of more than one of its
credit  agreements  from  paying  dividends  or  distributions  as a  result  of
non-compliance with a financial covenant.  In addition,  the Company may make no
distributions  to its common  shareholders  unless it is current with respect to
distributions to its preferred  shareholders.  As of September 30, 2000,  unpaid
dividends  for the period  November 16, 1999 through  September  30, 2000 on the
Senior  Preferred  Stock and Series B  Convertible  Preferred  Stock  aggregated
$5,283 and $14,556,  respectively.  Annualized dividends on the Company's Senior
Preferred  Stock and Series B  Convertible  Preferred  Stock  outstanding  as of
September 30, 2000 are $6,038 and $16,636, respectively.

Debt Repayments

The Company's aggregate  indebtedness was $1,214,525 and $1,260,670 at September
30, 2000 and December  31,  1999,  respectively.  At  September  30, 2000,  such
indebtedness had a weighted average maturity of 4.5 years and bore interest at a
weighted  average  interest  rate of 7.90% per annum.  At  September  30,  2000,
$928,163,  or 76.4%,  of such  indebtedness  bore  interest  at fixed  rates and
$286,362  or 23.6%,  of such  indebtedness  bore  interest  at  variable  rates.
Scheduled principal  repayments are $53,601 and $244,247 during the remainder of
2000 and 2001, respectively.  (See "Debt Financing Transaction and Debt Facility
Compliance" for additional information).

The maturity of the  Company's  $25,000 line of credit was extended  from August
30, 2000 to December  31, 2000.  See  "Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations - Debt Financing  Transaction and
Debt Facility Compliance" for additional information.

The  Company  is  in  default  of a  $20,000  subordinated  loan  (the  "$20,000
Subordinated  Loan")  that  matured on August 14,  2000.  The  Company  has been
advised by the lender that the loan is due and payable and  interest on the loan
will accrue at the default rate until the loan is repaid.

The Company's  $3,540 first mortgage,  collateralized  by property in Knoxville,
TN, matured on October 31, 2000. The Company and the holder of the mortgage loan
have entered into a non-binding  letter  agreement  which  provides  that,  upon
satisfaction of certain underwriting  guidelines by the lender and completion of
its due diligence,  the lender would consider  extending the loan to October 31,
2001. Although the Company and the lender are currently working to finalize this
extension, there can be no assurance that such an extension will be achieved.

The  Company  exercised  its option to extend the  maturity  of a $19,633  first
mortgage,  collateralized by property in Lebanon,  TN, from December 31, 2000 to
December 31, 2001.  The holder of the first  mortgage has rejected the Company's
extension  based on  certain  cross-default  provisions  in the loan  documents.
Although  the Company has taken the  position  that the  Company's  extension is
effective,  there can be no  assurances  that its position  would be upheld in a
court of law.

These loan maturities  raise  substantial  doubt about the Company's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustment  to reflect the possible  future  effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of this uncertainty.

Debt Financing Transaction and Debt Facility Compliance

The Company has  announced  that it has agreed in  principle  with a third party
(the  "Mezzanine  Lender") to obtain up to $71,000 in mezzanine  financing  (the
"Mezzanine  Financing").  The Mezzanine  Financing will be secured by pledges of
equity  interests in certain outlet  centers.  As part of the  transaction,  the
Company  has agreed in  principle  to sell to the  Mezzanine  Lender four of its
outlet centers, with the net proceeds from the sale expected to be approximately
$54,000.  The Company is in discussions  with various lenders  regarding a first
mortgage  loan for the  Company's  outlet  center  located in Puerto Rico in the
amount of  $25,000  or more,  which  loan  must  close  simultaneously  with the
Mezzanine  Financing to be provided by, and the sale of four outlet  centers to,
the Mezzanine  Lender.  The Mezzanine  Financing to be provided by the Mezzanine
Lender and the sale of the four outlet  centers to the Mezzanine  Lender,  along
with the first mortgage loan for the Company's outlet center in Puerto Rico, are
collectively  referred  to  herein  as the  "Debt  Financing  Transaction".  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations  - Debt  Financing  Transaction  and Debt  Facility  Compliance"  for
additional information.

The proceeds from the Debt Financing  Transaction  will be used to pay off up to
$117,000 of short-term debt,  including some of the debt described  above,  with
the  remainder  to be used  for  general  corporate  purposes.  There  can be no
assurance as to whether or when the Debt Financing Transaction will close.

Debt Contingencies

As of September 30, 2000, the Company is a guarantor or otherwise obligated with
respect  to an  aggregate  of  $12,545  of the  indebtedness  of  Horizon  Group
Properties, Inc. and its affiliates ("HGP") including a $10,000 obligation under
HGP's  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.

On April 1, 1998, Horizon Group, Inc. ("Horizon")  consummated an agreement with
Castle  &  Cooke  Properties,  Inc.  which  released  Horizon  from  its  future
obligations  under its  long-term  lease of the Dole  Cannery  outlet  center in
Honolulu,  Hawaii,  in  connection  with the  formation of a joint  venture with
certain  affiliates of Castle & Cooke,  Inc.  ("Castle & Cooke") to operate such
property. Under the terms of the agreement, Castle & Cooke Properties, Inc., the
landlord of the project and an  affiliate  of Castle & Cooke,  released  Horizon
from any  continuing  obligations  under the lease,  which  expires in 2045,  in
exchange  for  Horizon's  conveyance  to the joint  venture  of its  rights  and
obligations  under such lease. The agreement also provided that Horizon transfer
to such joint venture  substantially  all of Horizon's  economic interest in its
outlet center in Lake Elsinore,  California  together with legal title to vacant
property located  adjacent to the center.  As of September 30, 2000, the Company
held a small  minority  interest in the joint  venture but has no  obligation or
commitment  with  respect to the  post-closing  operations  of the Dole  Cannery
project.  Mortgage  indebtedness  with an  outstanding  balance  of  $28,837  at
September  30,  2000,  for which one of the  Company's  subsidiary  partnerships
remains legally  responsible,  is collateralized by a first mortgage on the Lake
Elsinore  outlet  center.  The  joint  venture,  as a  limited  partner  in such
subsidiary  partnership,  is  obligated  to make  capital  contributions  to the
partnership  to pay debt  financing,  operating and other expenses under certain
conditions.  The subsidiary partnership will remain legally responsible for such
expenses in case of any  shortfalls  by the joint  venture  with respect to such
capital  contributions.  Castle  &  Cooke  has  provided  the  Company  with  an
unconditional guaranty with respect to any such shortfalls.

Debt Facility Compliance

As a result of its financial  results for the quarters  ended December 31, 1999,
March 31, 2000,  June 30, 2000 and  September  30,  2000,  the Company is not in
compliance  with financial  covenants  contained in certain  credit  facilities.
Non-compliance  with  these  covenants  as well as the  Company's  default  with
respect to the $20,000 Subordinated Loan and other loan facilities has triggered
cross-default provisions with respect to several other debt facilities.  None of
these loans has been  accelerated  nor has notice of any  lender's  intention to
accelerate been received by the Company.  The Company is in discussions with the
affected lenders regarding either paying off these loans in their entirety using
proceeds  from the Debt  Financing  Transaction,  or  modifying  the  terms  and
financial  covenants so that the Company will be in  compliance  at the time the
Debt Financing Transaction closes.

If the Company is unable to close the Debt Financing  Transaction,  it will look
to  obtain  alternative  financing  from  other  financial  institutions  or the
potential  sale of certain  properties  as sources of cash to repay the  amounts
outstanding under such loans. This condition also raises substantial doubt about
the Company's ability to continue as a going concern.  The financial  statements
do not include any  adjustment  to reflect the  possible  future  effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

Although  the Company  continues to maintain its  regularly  scheduled  interest
payments  under all of its  indebtedness,  there can be no assurance that one or
all of the affected  lenders will not attempt to accelerate  the maturity of its
indebtedness  or pursue other remedies under their  respective  loan  documents.
Additionally,  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.

The Company,  through  affiliates,  holds 50%  interests in the owners of (i) an
outlet center in Oxnard,  CA, (ii) an outlet  center in New River,  AZ and (iii)
phase one of an outlet  center in Bellport,  NY. First  mortgage  loans on these
three properties have matured and are currently in default. To date, the holders
of the first  mortgage loans on these  properties  have been unwilling to extend
the loans on terms  acceptable to the Company.  The holder of the first mortgage
loan on Phase I of the Bellport  project has  commenced an action in the Supreme
Court of the State of New York, County of Suffolk seeking foreclosure, the right
to appoint a receiver, and the right to pursue a deficiency judgment.  There can
be no  assurance  that the holders of these  mortgage  loans will not seek,  and
succeed in their  attempts,  to foreclose on these  properties,  have  receivers
appointed,  and obtain  deficiency  judgments  against the Company.  The Company
accounts for its ownership  interests in these properties in accordance with the
equity method of accounting.

The Company, through affiliates,  holds a 51% interest in the owner of Phases II
and III in an outlet  center in Bellport,  NY. The owner failed to make a $3,000
principal  payment  when due on November 1, 2000.  The Company and the holder of
the first mortgage loan are currently in discussions regarding a modification of
the loan payment  terms and an agreement by the lender to forebear from pursuing
remedies under the  applicable  loan  documents.  There can be no assurance that
such  discussions will lead to a modification of the first mortgage loan or that
the first mortgage lender will not pursue its remedies under the loan documents.
The Company accounts for its ownership  interests in this property in accordance
with the equity  method of  accounting.  The payment of the amount due under the
loan has been guaranteed by the Company.

Prime/Estein Joint Venture Transaction

On August 6, 1999,  the Company  entered  into an agreement  (the  "Prime/Estein
Joint Venture  Agreement") to sell three factory outlet  centers,  including two
future  expansions,  to a joint venture (the "Venture")  between an affiliate of
Estein & Associates USA, Ltd. ("Estein"),  a real estate investment company, and
the Company.  The  Prime/Estein  Joint  Venture  Agreement  provided for a total
purchase  price of  $274,000,  including  (i) the  assumption  of  approximately
$151,500 of first mortgage  indebtedness,  (ii) an $8,000 payment to the Company
for a ten-year covenant-not-to-compete and (iii) a $6,000 payment to the Company
for a ten-year  licensing  agreement with the Venture to continue the use of the
"Prime Outlets" brand name.

On November 19,  1999,  the Company  completed  the initial  installment  of the
Prime/Estein Joint Venture Agreement  consisting of the sale of Prime Outlets at
Birch Run to the Venture for aggregate  consideration  of $117,000,  including a
$64,500 "wrap-around" first mortgage provided by the Company. In connection with
the sale of Prime  Outlets at Birch Run, the Company  received  cash proceeds of
$33,303,  net of  transaction  costs,  and  recorded  a loss on the sale of real
estate of $9,326.  Effective November 19, 1999, the Company commenced accounting
for its 30.0%  ownership  interest in Prime  Outlets at Birch Run in  accordance
with the equity method of accounting.  The "wrap-around" first mortgage provided
by the Company to the Venture has a ten-year  term at a fixed  interest  rate of
7.75% requiring monthly payments of principal and interest pursuant to a 25-year
amortization  schedule.  The Company's net investment in the "wrap-around" first
mortgage as of September 30, 2000 and December 31, 1999 was $10,733 and $10,745,
respectively,  which is included  in other  assets in the  Consolidated  Balance
Sheet.  Additionally,  the  Venture  assumed  $53,755  of  outstanding  mortgage
indebtedness.  Included  in the  aggregate  consideration  is a  $5,500  payment
related  to the  covenant-not-to-compete  and a $3,000  payment  related  to the
licensing agreement. The payments to the Company for the covenant-not-to-compete
and  the  licensing  agreement  are  included  in  accounts  payable  and  other
liabilities in the Consolidated  Balance Sheet and will be amortized into income
over their ten-year lives.

During the fourth  quarter of 1999,  the Company  recorded a loss on the sale of
real estate of $5,827  related to the  write-down of the carrying value of Prime
Outlets at  Williamsburg  based on the terms of the  Prime/Estein  Joint Venture
Agreement. On February 23, 2000, the Company completed the second installment of
the Prime/Estein Joint Venture Agreement consisting of the sale of Prime Outlets
at Williamsburg to the Venture for aggregate consideration of $59,000, including
(i) the assumption of mortgage  indebtedness  of $32,500,  (ii) a $1,250 payment
related to the covenant-not-to-compete and (iii) a $1,500 payment related to the
licensing   agreement.   In  connection  with  the  sale  of  Prime  Outlets  at
Williamsburg,  the  Company  received  (i)  cash  proceeds  of  $11,063,  net of
transaction  costs, and (ii) a promissory note in the amount of $10,000 from the
Venture (of which Estein's  obligation is $7,000).  The promissory note requires
the  monthly  payment of  interest in arrears at an annual rate of 7.75% and the
outstanding  principal  amount is payable on or before December 15, 2000. If the
Company fails to refinance or convert the  Venture's  mortgage  indebtedness  of
$32,500 to a permanent  loan at a fixed rate of interest,  the December 15, 2000
maturity date of the  promissory  note will be extended  until such time as such
refinancing  has been obtained.  In addition,  if the  refinancing or conversion
does not occur on or before  December 15, 2000, the Company will be obligated to
pay Estein  $250 and the  Company  will not be  entitled  to  receive  operating
distributions   arising  out  of  Prime  Outlets  at  Williamsburg   until  such
refinancing or conversion occurs.

Under the Prime/Estein Joint Venture Agreement,  as amended, the outside closing
date for the sale of Prime Outlets at Hagerstown,  including an expansion  which
opened during 2000  (together,  the "Hagerstown  Center"),  was August 31, 2000.
Estein terminated the Prime/Estein  Joint Venture Agreement as it applied to the
sale of the  Hagerstown  Center when the closing did not occur by the  specified
closing date.

In  connection  with the  discontinuance  of the  sales of a 70%  joint  venture
interest in (i) the  Hagerstown  Center and (ii) a proposed  expansion  to Prime
Outlets at Williamsburg (the "Williamsburg  Expansion"),  the Company incurred a
loss on the sale of real estate of $9,550 and other charges  aggregating  $1,100
during  the  third  quarter  of  2000.  The  loss  on sale  of  real  estate  is
attributable to the remaining  proceeds that will not be received as a result of
the termination of the Prime/Estein Joint Venture Agreement. The $1,100 of other
charges include (i) a $600 fee payable to Estein resulting from failure to close
the sale of the  Hagerstown  Center on or before August 31, 2000 and (ii) a $500
fee  payable to Estein  for  non-completion  of the  Williamsburg  Expansion  by
December 15, 2000, which the Company will not meet.

As of September 30, 2000,  the Company  reclassified  $61,908  representing  the
aggregate  carrying value of the Hagerstown  Center from assets held for sale to
investment in rental property in the  Consolidated  Balance Sheet. In connection
with the  reclassification,  the Company  recorded  $1,967 of  depreciation  and
amortization  expense  related to the  Hagerstown  Center  for the  period  from
January 1 through September 30, 2000 in the third quarter of 2000.

As of  December  31,  1999,  the Company  classified  $97,639  representing  the
aggregate  carrying value of Prime Outlets at Williamsburg  and Prime Outlets at
Hagerstown as assets held for sale in its Consolidated Balance Sheet.

The Venture has agreed to retain the Company as its sole and exclusive  managing
and leasing  agent for a property  management  fee equal to 4.0% of gross rental
receipts.  The Venture also will pay a monthly asset  management and partnership
administration  fee to an  affiliate  of Estein equal to 3.0% of the monthly net
operating income from the centers.

Commitments and Contingencies

The Company was required,  pursuant to a real estate purchase  agreement and two
ground  leases in which it is the  ground  lessee,  to  purchase  for $6,809 the
unowned 50% interests in parcels of land  underlying  Phases III and IV of Prime
Outlets  at Gilroy  in  Gilroy,  California.  The  Company  did not close on the
scheduled  closing date.  The seller has several  rights and remedies  under the
relevant  documents,  including  amending the base rent under the ground leases,
amending the purchase price, and seeking specific performance. On August 9, 2000
the seller  notified  the  Company  that it has  exercised  its right  under the
relevant  documents to require the Company to close within 180 days.  The seller
also reserved its other remedies under the relevant  documents.  The seller does
not have the right to  terminate  the ground  leases as a remedy.  On August 29,
2000, the seller  brought an action in the Superior Court of California,  County
of Santa Clara alleging  breach of contract and seeking the  declaratory  relief
and compensatory damages.

Development

Prime  Outlets of Puerto  Rico,  the first outlet  center in Puerto Rico,  which
contains 176,000 square feet of GLA, opened on July 27, 2000. Additionally,  the
Company  opened two expansions  aggregating  166,000 square feet of GLA at Prime
Outlets at Hagerstown in March and April 2000.  Furthermore,  the Company opened
two expansions  aggregating 48,000 square feet at Prime Outlets at San Marcos in
May of 2000. At September 30, 2000, the remaining expected capital  expenditures
for these projects aggregated $8,251.

Although the Company  expects to fund the  remaining  development  cost of these
projects from (i) retained cash flow from operations,  (ii) construction  loans,
(iii) the Debt  Financing  Transaction,  and (iv) the potential  sale of certain
properties,  there can be no assurance  that the Company will be  successful  in
obtaining the required amount of money to fund the remaining development costs.

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.

Recently Issued Accounting Standards

In June 2000, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting  Standards  ("SFAS")  138,  "Accounting  for  Certain
Derivative  Instruments and Certain Hedging  Activities," which amends SFAS 133,
"Accounting  for Derivative  Instruments and Hedging  Activities."  SFAS 133 was
previously  amended  by SFAS 137  "Accounting  for  Derivative  Instruments  and
Hedging  Activities - Deferral of the  Effective  Date of FASB  Statement  133,"
which  deferred the effective date of SFAS 133 to fiscal years  beginning  after
June 15,  2000.  The  Company  expects to adopt SFAS 138 and SFAS 133  effective
January 1, 2001. SFAS 133 and SFAS 138 will require the Company to recognize all
derivatives on the balance sheet at fair value.  Derivatives that are not hedges
must be adjusted to fair value  through  income.  If the  derivative is a hedge,
depending on the nature of the hedge,  changes in the fair value of  derivatives
will  either be offset  against  the change in fair value of the hedged  assets,
liabilities,  or firm  commitments  through  earnings  or  recognized  in  other
comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion of a  derivative's  change in fair value will be recognized
immediately in earnings.  The Company does not  anticipate a material  impact on
its results of operations and financial position.

In December  1999, the Securities  and Exchange  Commission  (the  "Commission")
issued Staff Accounting  Bulletin No. 101 ("SAB 101"),  "Revenue  Recognition in
Financial  Statements." SAB 101 summarizes  certain of the Commission's views in
applying  generally  accepted  accounting  principles to revenue  recognition in
financial statements.  In June 2000, the Commission issued SAB 101B to defer the
effective date of  implementation  of SAB 101 to the fourth quarter of 2000. The
Company does not  anticipate a material  impact on its results of operations and
financial position.

Funds from Operations

Industry analysts  generally  consider Funds from Operations,  as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), an alternative
measure of performance  of an equity REIT. In October 1999,  NAREIT issued a new
white paper  statement and redefined  how funds from  operations is  calculated,
effective January 1, 2000. Funds from Operations is now defined by NAREIT as net
income (loss)  determined in accordance  with GAAP,  excluding gains (or losses)
from 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 is not comparable to FFO reported
by other REITs that do not define the term using the current  NAREIT  definition
or that  interpret  the  current  NAREIT  definition  differently  than 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 6 provides a  reconciliation  of income  before  allocations  to  minority
interests and preferred  shareholders to FFO for the three and nine months ended
September 30, 2000 and 1999. FFO decreased $12,339, or 47.0%, to $13,893 for the
three  months ended  September  30, 2000 from $26,232 for the three months ended
September 30, 1999.  FFO decreased  $45,094,  or 55.6%,  to $35,977 for the nine
months ended September 30, 2000 from $81,071 for the nine months ended September
30, 1999.

The 2000 FFO results  include the following  non-recurring  items:  (i) a second
quarter  provision  for  asset  impairment  of $8,538  for two of the  Company's
properties  in  accordance  with the  requirements  of  Statement  of  Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-Lived
Assets and for  Long-Lived  Assets to be Disposed of", (ii)  severance and other
compensation costs aggregating $2,421 ($671 in the second quarter), (iii) second
quarter  professional  fees of $1,455,  (iv) a first quarter gain on the sale of
outparcel land in Camarillo,  CA. of $2,471 (v) third quarter costs  aggregating
$1,100 incurred in connection with the previously  announced  discontinuance  of
the sale of a 70%  joint  venture  interest  in  Prime  Outlets  at  Hagerstown,
including an expansion  which opened  during 2000,  and a proposed  expansion to
Prime Outlets at  Williamsburg.  Excluding these  non-recurring  items,  FFO was
$14,993, for the three months ended September 30, 2000, and $47,020 for the nine
months ended September 30, 2000.

The  change  in FFO for the three  and nine  months  ended  September  30,  2000
compared to the same periods in 1999 is primarily  attributable to the following
factors:

o    the loss of net operating  income offset by decreased  interest expense due
     to the sale of a 70% joint  venture  interest in Prime Outlets at Birch Run
     in November 1999 and Prime Outlets at Williamsburg in February 2000;

o    reduced  occupancy in the outlet center  portfolio (91.2% and 91.0% for the
     three and nine months ended September 30, 2000,  respectively,  compared to
     93.1% and 93.3% for the three and nine months  ended  September  30,  1999,
     respectively);

o    higher interest expense  resulting from increased  short-term  indebtedness
     and higher financing costs;

o    increased  corporate general and  administrative  expenses  attributable to
     lower   capitalization  of  overhead  costs  due  to  reduced   development
     activities;

o    an  increase  in  the  provision  for  uncollectible   accounts  receivable
     resulting in part from certain tenant bankruptcies and abandonments.


<PAGE>


TABLE 6 -- Funds from Operations

--------------------------------------------------------------------------------
                                           Three months ended  Nine months ended
                                              September 30      September 30
                                            -----------------   ----------------
                                             2000     1999      2000       1999
--------------------------------------------------------------------------------

Income (loss) before minority interests    $(13,901)  $6,452  $(41,347) $23,427
FFO adjustments:
Loss on sale of real estate                   9,550        -      9,550       -
Depreciation and amortization                17,679   19,344     49,699  56,168
Unconsolidated joint venture adjustments        915      473      2,629     902
Non-real estate depreciation and               (500)    (156)    (1,068)   (433)
 amortization                              --------   ------    -------  ------
FFO before discontinued operations           13,743   26,113     19,463  80,064
Discontinued operations - eOutlets.com          424        -     14,703       -
Discontinued operations - Designer
  Connection                                   (274)     119      1,811   1,007
                                           --------   ------    -------  ------
FFO before allocations to minority
 interests and preferred shareholders      $ 13,893  $26,232    $35,977 $81,071
                                           ========   ======    ======= =======

================================================================================
<PAGE>

PART II:  OTHER INFORMATION

Item 1.   Legal Proceedings

On October 13, 2000 and thereafter,  various complaints were filed in the United
States  District Court for the District of Maryland  against Prime Retail,  Inc.
(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 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.  The Company  believes that the complaints are without merit and intends
to defend 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.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously. While any litigation contains an element of uncertainty, the Company
believes the losses,  if any,  resulting from this case will not have a material
adverse effect on the consolidated financial statements of the Company.

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.  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.  While any  litigation  contains an
element of uncertainty,  the Company believes the losses, if any, resulting from
the Lawsuits will not have a material adverse effect on the consolidated
financial statements of the Company.

The New York Stock  Exchange 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.

Item 2.    Changes in Securities

None

Item 3.    Defaults Upon Senior Securities

As a result of its financial  results for the quarters  ended December 31, 1999,
March 31, 2000,  June 30, 2000 and  September  30,  2000,  the Company is not in
compliance with financial covenants contained in certain credit facilities.  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 September 30, 2000, the aggregate arrearage
on the Senior  Preferred Stock and the Series B Convertible  Preferred Stock was
$5,283 and $14,556, respectively.



<PAGE>

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 10.1  Employment  Agreement dated June 11, 2000 between the Company
     and Robert A. Brvenik

     Exhibit 10.2 Employment Agreement dated May 3, 2000 between the Company and
     C. Alan Schroeder

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

     Exhibit 27.1 - Financial Data Schedule (EDGAR filing only)

(b)  Reports on Form 8-K:

     None



<PAGE>


Item 7A.   Quantitative and Qualitative Disclosures About 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. 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  interest  rates by  fiscal  year of  maturity,  excluding  acceleration
provisions.  Variable  interest rates are based on the weighted average rates of
the portfolio at September 30, 2000.


<TABLE>

                                                        Year of Maturity
------------------------------------------------------------------------------------------------------------------------------------
                                    2000         2001        2002        2003         2004        2005   Thereafter        Total
------------------------------ ------------ ----------- ----------- ----------- ------------ ----------- ----------- ---------------
<S>                            <C>          <C>         <C>         <C>         <C>          <C>         <C>             <C>

Fixed rate:
Principal......................   $27,228    $ 36,668     $46,529    $348,761    $17,049      $56,402     $395,505       $928,163
Average interest rate..........     13.71%       8.02%       7.04%       7.76%      7.75%        6.98%        7.11%          7.58%
Variable rate:
Principal......................   $27,175    $210,633     $   637    $  1,152    $46,765            -            -       $286,362

Average interest rate..........      9.46%       9.13%       8.12%       8.12%      8.12%           -            -           8.99%


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

<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: November 14, 2000                          /s/ Robert A. Brvenik
      -----------------                          ---------------------
                                                 Robert A. Brvenik
                                                 Executive Vice President,
                                                 Chief Financial Officer
                                                  and Treasurer