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


                                    FORM 10-Q

[X]      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the Quarterly Period Ended March 31, 1999

                                       or

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

                         Commission file number 001-13301
                                                ---------

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

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


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


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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such shorter  periods that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes   X           No      
     ---

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

As of May 3, 1999, the issuer had outstanding 43,217,152 shares of Common Stock,
$.01 par value per share.

<PAGE>

                               Prime Retail, Inc.
                                    Form 10-Q


                                      INDEX

PART I:  FINANCIAL INFORMATION                                              PAGE


Item 1.  Financial Statements (Unaudited)
 
     Consolidated Balance Sheets as of March 31, 1999 and
     December 31, 1998 ....................................................... 1

     Consolidated Statements of Operations for the three months
     ended March 31, 1999 and 1998 ........................................... 2

     Consolidated Statements of Cash Flows for the three
     months ended March 31, 1999 and 1998..................................... 3

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

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations...............................  8

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.......... 22

PART II:  OTHER INFORMATION

Item 1.  Legal Proceedings................................................... 23

Item 2.  Changes in Securities............................................... 23

Item 3.  Defaults Upon Senior Securities..................................... 23

Item 4.  Submission of Matters to a Vote of Security Holders................  23

Item 5.  Other Information..................................................  23

Item 6.  Exhibits or Reports on Form 8-K....................................  23
 
Signatures..................................................................  24
<PAGE>
PART I:  FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)
<TABLE>

                               Prime Retail, Inc.
                           Consolidated Balance Sheets
                    (in thousands, except share information)
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                   March 31, 1999             December 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                           <C>    

Assets
Investment in rental property:                                                                                     
     Land                                                             $  206,707                    $  206,386
     Buildings and improvements                                        1,766,155                     1,753,641
     Property under development                                           47,144                        45,068
     Furniture and equipment                                              11,449                        10,627
                                                                       ---------                    ----------
                                                                       2,031,455                     2,015,722
     Accumulated depreciation                                           (145,556)                     (127,747)
                                                                       ---------                    ----------
                                                                       1,885,899                     1,887,975
Cash and cash equivalents                                                    330                         5,765
Restricted cash                                                           33,008                        34,969
Accounts receivable, net                                                  24,758                        21,233
Deferred charges, net                                                     12,725                        12,518
Due from affiliates, net                                                   1,381                           988
Investment in partnerships                                                 8,965                         8,386
Other assets                                                               5,402                         4,630
                                                                      ----------                    ----------
     Total assets                                                     $1,972,468                   $ 1,976,464
                                                                      ==========                    ==========
Liabilities and Shareholders' Equity
Bonds payable                                                           $ 32,900                      $ 32,900
Notes payable                                                          1,232,594                     1,184,607
Accrued interest                                                           8,140                         7,878
Real estate taxes payable                                                 14,818                        11,229
Construction costs payable                                                   267                         3,754
Accounts payable and other liabilities                                    64,134                        69,879
Dividends and distributions payable                                        5,668                             -
                                                                       ---------                    ----------
     Total liabilities                                                 1,358,521                     1,310,247

Minority interests                                                        14,716                        22,483
Series C Cumulative Convertible Redeemable Preferred Stock,
     1,063,636 shares issued and outstanding at March 31, 1999            10,636                             -
Shareholders' equity:
Shares of preferred stock, 24,315,000 shares authorized:                               
     10.5% Series A Senior Cumulative Preferred Stock, $0.01
        par value (liquidation preference of $57,500), 2,300,000
        shares issued and outstanding                                         23                            23
     8.5% Series B Cumulative Participating Convertible Preferred
        Stock, $0.01 par value (liquidation preference of $195,703)
        7,828,125 shares issued and outstanding                               78                            78
     Series C Cumulative Participating Convertible Redeemable
        Preferred Stock, $.01 par value (liquidation preference
        $60,000), 4,363,636 shares issued and outstanding
        at December 31, 1998                                                   -                            44
Shares of common stock, 150,000,000 shares authorized:
     Common stock, $0.01 par value, 43,041,709 and 42,736,742
     shares issued and outstanding, respectively                             430                           427
Additional paid-in capital                                               705,271                       759,105
                                                                       ---------                    ----------
Distributions in excess of net income                                   (117,207)                     (115,943)
     Total shareholders' equity                                          588,595                       643,734
                                                                      ----------                    ----------
     Total liabilities and shareholders' equity                       $1,972,468                   $ 1,976,464
                                                                      ==========                    ==========
====================================================================================================================================
</TABLE>

See accompanying notes to financial statements.
<PAGE>
<TABLE>
                               Prime Retail, Inc.
                      Consolidated Statements of Operations
                  (in thousands, except per share information)
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31,                                                1999                         1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                         <C>    

Revenues
Base rents                                                               $49,302                     $ 23,083
Percentage rents                                                           2,062                          865
Tenant reimbursements                                                     23,671                       10,743
Interest and other                                                         3,549                        2,817
                                                                         -------                     --------
     Total revenues                                                       78,584                       37,508

Expenses
Property operating                                                        18,921                        8,353
Real estate taxes                                                          5,567                        2,856
Depreciation and amortization                                             18,357                        7,823
Corporate general and administrative                                       2,787                        1,692
Interest                                                                  21,262                        8,374
Other charges                                                              2,392                          959
                                                                         -------                     --------
     Total expenses                                                       69,286                       30,057
                                                                         -------                     --------
Income before minority interests                                           9,298                        7,451
Income allocated to minority interests                                         -                        5,461
                                                                         -------                     --------
Net income                                                                 9,298                        1,990
(Income) loss allocated to preferred shareholders                          7,800                       (4,166)
                                                                         -------                     --------
Net income (loss) applicable to common shares                           $ 17,098                     $ (2,176)
                                                                         =======                     ========
Earnings per common share:
     Basic                                                              $   0.40                      $ (0.08)
                                                                         =======                     ========
     Diluted                                                            $   0.06                      $ (0.08)
                                                                         =======                     ========
Weighted average common shares outstanding
     Basic                                                                42,951                       27,295
                                                                         =======                     ========
     Diluted                                                              58,376                       27,295
                                                                         =======                     ========
Distributions declared per common share                                 $  0.295                      $ 0.295
                                                                         =======                     ========
====================================================================================================================================
</TABLE>

See accompanying notes to financial statements.
<PAGE>
<TABLE>
                               Prime Retail, Inc.
                      Consolidated Statements of Cash Flows
                                 (in thousands)
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
Three months ended March 31,                                                1999                 1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                  <C>    

Operating Activities
Net income                                                               $ 9,298              $ 1,990
Adjustments to reconcile net income to
    net cash provided by operating activities:
      Income allocated to minority interests                                   -                5,461
      Depreciation                                                        18,172                7,511
      Amortization of deferred financing costs and
         interest rate protection contracts                                  650                  509
      Amortization of leasing commissions                                    185                  312
      Provision for uncollectible accounts receivable                      1,054                  306
Changes in operating assets and liabilities:
      (Increase) decrease in accounts receivable                          (4,579)                 110
      (Increase) decrease in due from affiliates, net                       (393)                 639
      Decrease in other assets                                               499               13,425
      Increase in accrued interest                                           262                  117
      Decrease in accounts payable and other liabilities                  (2,567)              (4,802)
                                                                         -------               ------
         Net cash provided by operating activities                        22,581               25,578

Investing Activities
Purchase of buildings and improvements                                   (10,462)              (4,247)
Increase in property under development                                    (9,197)             (23,155)
                                                                         -------              -------
         Cash used in investing activities                               (19,659)             (27,402)

Financing Activities
Proceeds from notes payable                                               34,587               32,611
Principal repayments on notes payable                                    (19,600)             (22,102)
Deferred financing fees                                                     (444)                 (85)
Distributions and dividends paid                                         (19,650)             (11,498)
Distributions to minority interests                                       (3,250)              (2,952)
                                                                          ------              -------
         Net cash provided by (used in) financing activities              (8,357)              (4,026)
                                                                          ------              -------
Decrease in cash and cash equivalents                                     (5,435)              (5,850)
Cash and cash equivalents at beginning of period                           5,765                6,373
                                                                          ------              -------
Cash and cash equivalents at end of period                               $   330              $   523
                                                                          ======              =======

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

See accompanying notes to financial statements.
<PAGE>
<TABLE>
                              Prime Retail, Inc.
                  Consolidated Statements of Cash Flows (continued)
                                 (in thousands)

Supplemental Disclosure of Noncash Investing and Financing Activities:
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------

Three months ended March 31,                                                1999                1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                   <C>    

Series C Preferred Stock redeemed in exchange for issuance
     of note payable                                                     $33,000               $      -

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

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, 1998.

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.  

Note 2 - Earnings Per Share

The Company  reports  earnings per share ("EPS") in accordance with Statement of
Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  per Share" which
specifies the method of computation,  presentation, and disclosure. SFAS No. 128
requires the  presentation of basic EPS and diluted EPS. Basic 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)  Series B  Convertible
Preferred Stock were converted into shares of Common Stock. For the three months
ended  March 31,  1999,  (i) a  redemption  discount  of $13,782  related to the
Company's  agreement to  repurchase  its Series C Preferred  Stock (see Note 5 -
"Redeemable  Equity"  of the  Notes to  Consolidated  Financial  Statements)  is
included in the computation of basic EPS and (ii)  incremental  shares of 15,425
are included in the computation of diluted EPS. For the three months ended March
31,  1998,  diluted  EPS is  equivalent  to  basic  EPS as the  effect  of these
exercises and conversions was anti-dilutive.
 <PAGE>

Note 3 - Minority Interests

In prior periods,  cash distributions and losses allocated to minority interests
reduced the  minority  interests  balance to zero.  After  reducing the minority
interests  balance  to zero,  additional  distributions  and  losses  of  $4,342
incurred  during  the three  months  ended  March 31,  1998 that were  otherwise
allocable to minority  interests were allocated to common  shareholders.  During
the three months ended March 31, 1999,  the cumulative  amount of  distributions
and losses  that were  allocable  to  minority  interests  that were  previously
allocated to common shareholders was reduced by $3,819 and the remaining balance
at March 31, 1999 was $10,810.

Note 4 - Notes Payable

As of March 31, 1999,  the Company is a guarantor or  otherwise  obligated  with
respect  to an  aggregate  of  $35,383  of the  indebtedness  of  Horizon  Group
Properties,  Inc. and its  affiliates.  As of March 31, 1999,  the components of
such  indebtedness  included (i) a mortgage loan with an outstanding  balance of
$11,793 which bears  interest at a rate of prime,  matures in June 1999,  and is
collateralized  by a first mortgage on Phases II and III of property  located in
Patchogue, New York; (ii) a mortgage loan with an outstanding balance of $10,684
which  bears  interest  at a rate  of  10.25%,  matures  in  July  2018,  and is
collateralized  by a first mortgage on Phase I of property located in Patchogue,
New York;  (iii) a mortgage  loan with an  outstanding  balance of $2,629  which
bears  interest at a rate of LIBOR plus 2.50%,  matures in December 2002, and is
collateralized by a first mortgage on an office building in Muskegon,  Michigan;
(iv) a secured loan with an outstanding  balance of $277 which bears interest at
a rate of prime, matures in December 2000 and is collateralized by furniture and
fixtures;  and (v) an unsecured  revolving  credit  facility with an outstanding
balance  of $3,000  which  bears a rate of  interest  of prime and was repaid on
April  30,  1999.  In  addition,  the  Company  is a  guarantor  of  $10,000  of
obligations  under HGP's $108,205  secured credit facility which bears a rate of
interest of LIBOR plus 1.90%,  matures in July 2001, and is collateralized by 13
properties  located  throughout  the United  States.  The Company is pursuing an
agreement with HGP pursuant to which it would purchase HGP's and its affiliates'
general  and  limited  partnership  interests  and a portion of a third  party's
limited  partnership  interest in the  Bellport  Outlet  Center and  undeveloped
parcels located in Patchogue,  New York. If the agreement is consummated,  it is
expected that the aggregate  indebtedness  of HGP for which the Company  remains
contingently liable as a guarantor would be reduced to $12,906.
 <PAGE>

Note 5 -Redeemable Equity

On March 31, 1999,  the Company  entered into an agreement  pursuant to which it
will  repurchase all of its  outstanding  shares of Series C Preferred Stock for
$43,636 or $10.00 per share. The agreement  provides for the repurchase to occur
in two stages.  In the first stage,  on March 31, 1999, the Company  repurchased
3,300,000 shares of the Series C Preferred Stock in exchange for the issuance of
a $33,000  unsecured  promissory  note.  The  unsecured  promissory  note  bears
interest at a rate of 12.0% per annum,  matures on September 30, 1999,  requires
monthly  interest-only  payments  and may be prepaid by the  Company at any time
without  penalty.  Second,  the Company will repurchase the remaining  1,063,636
shares of its  Series C  Preferred  Stock  for an  aggregate  purchase  price of
$10,636 on or before  September  30, 1999.  In addition,  the sole holder of the
Series C Preferred Stock irrevocably  waived the Company's  obligation to comply
with the financial  covenants  contained in its charter relating to the Series C
Preferred  Stock, as well as the rights of such holder to require the Company to
repurchase the Series C Preferred Stock in certain circumstances at its original
issuance price of $13.75 per share, plus accrued but unpaid distributions.

Additionally,  on March 31, 1999 the remaining  1,063,636  outstanding shares of
Series C  Preferred  Stock  were  reclassified  to  redeemable  equity  at their
aggregate repurchase price of $10,636 in the Consolidated Balance Sheets.

Note 6 - Legal Proceedings

In the  ordinary  course of  business  the  Company is subject to certain  legal
actions.  While any litigation  contains an element of  uncertainty,  management
believes the losses, if any,  resulting from such matters,  including the matter
described  below,  will not have a material  adverse effect on the  consolidated
financial statements of the Company.

The  Company  is  defendant  in a  lawsuit  filed on July  27,  1998 in the U.S.
District  Court for the Central  District of  California  whereby the  plaintiff
alleges that the Company and its related entities overcharged tenants for common
area maintenance expenditures. The outcome of, and the ultimate liability of the
Company,  if any, from, this lawsuit cannot  currently be predicted.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously.
<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.  The words "believes",  "expects",  "anticipates",  "estimates" and
similar words or expressions are generally intended to identify  forward-looking
statements.  These statements  contain  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 effects of future events on the Company's  financial  performance;  the risk
that  the  Company  may  be  unable  to  finance  its  planned  acquisition  and
development  activities;  risks  related  to the  retail  industry  in which the
Company's manufacturers' 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
property  acquisitions,  such as the  lack of  predictability  with  respect  to
financial  returns;  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;  and risks associated with the impact
of the Year 2000 issue on the  processing of  date-sensitive  information by the
Company's computerized  information systems as well as the Company's tenants and
vendors.

Merger with Horizon Group, Inc.

On June 15, 1998, the merger and other transactions  (collectively,  the "Merger
Transactions")  between the Company and Horizon  Group,  Inc.  ("Horizon")  were
consummated for an aggregate consideration of $1,134,682,  including liabilities
assumed and related  transaction  costs. The merger has been accounted for using
the purchase  method of  accounting  and the purchase  price of  $1,134,682  was
allocated to the assets acquired and the liabilities  assumed based on estimates
of their respective fair values.  Accordingly,  the operating  results of the 22
properties   acquired   from  Horizon  have  been   included  in  the  Company's
consolidated  results of operations  commencing on June 15, 1998. See "Liquidity
and Capital Resources - Business Combination" for further information.

Portfolio Growth

The Company has grown by developing and acquiring  manufacturers' outlet centers
and  expanding  certain  of  its  existing  manufacturers'  outlet  centers.  As
summarized in TABLE 1, the Company's  manufacturers'  outlet portfolio consisted
of 50  manufacturers'  outlet centers totaling  14,369,000 square  feet of gross
leasable area ("GLA") at March 31, 1999, compared to 28 operating manufacturers'
outlet centers totaling 7,237,000 square feet of GLA at March 31, 1998.
<PAGE>
During the three months ended March 31, 1999, the Company opened an expansion to
an existing  manufacturers' outlet center totaling 21,000 square feet of GLA. In
connection with the Merger Transactions,  the Company acquired and integrated 22
of Horizon's  manufacturers'  outlet centers into its existing portfolio on June
15, 1998 adding 6,626,000 square feet of GLA in the aggregate.  Additionally, in
connection  with the Merger  Transactions,  the Company sold two  manufacturers'
outlet centers to Horizon Group Properties, Inc. ("HGP") totaling 426,000 square
feet  of GLA on  June  15,  1998.  During  1998,  the  Company  opened  two  new
manufacturers'   outlet   centers   and  added  nine   expansions   to  existing
manufacturers'  outlet  centers  totaling  931,000  square  feet  of  GLA in the
aggregate (of which one expansion to an existing  factory outlet center totaling
20,000  square feet of GLA opened during the three months ended March 31, 1998).
The significant increase in the number of the Company's operating properties and
total GLA since March 31, 1998 are  collectively  referred to as the  "Portfolio
Expansion and the Horizon Merger".
<PAGE>
<TABLE>
                             Portfolio of Properties
                                 March 31, 1999

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand         GLA         Percentage
Manufacturers' 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             100
                                                                           IV              May 1998         10,000             100
                                                                                                           -------             ---
                                                                                                           131,000             100

Prime Outlets at Fremont (2) - Fremont, Indiana........................     I          October 1985        118,000             100
                                                                           II         November 1993         51,000              92
                                                                          III          October 1994         60,000             100
                                                                                                           -------             ---
                                                                                                           229,000              98

Prime Outlets at Birch Run (2) - Birch Run, Michigan................... I-XVI               Various        591,000              98
                                                                   XVII-XVIII                  1997        133,000              98
                                                                                                           -------             ---
                                                                                                           724,000              99

Prime Outlets at Latham - Latham, New York.............................     I           August 1987         43,000              98

Prime Outlets at Michigan City (2) - Michigan City, Indiana............     I         November 1987        199,000             100
                                                                           II              May 1988        130,000              97
                                                                          III             July 1991         36,000              90
                                                                           IV             July 1994         42,000              93
                                                                            V         December 1994         26,000              98
                                                                           VI              May 1995         58,000              99
                                                                                                           -------             ---
                                                                                                           491,000              98

Prime Outlets at Williamsburg (2) - Williamsburg, Virginia.............     I            April 1988         67,000             100
                                                                           II         November 1988         60,000             100
                                                                          III          October 1990         49,000             100
                                                                           IV                  1995         98,000             100
                                                                                                           -------             ---
                                                                                                           274,000             100

Prime Outlets at Kenosha (2) - Kenosha, Wisconsin......................     I        September 1988         89,000              97
                                                                           II             July 1989         65,000              97
                                                                          III              May 1990        115,000              96
                                                                                                           -------             ---
                                                                                                           269,000              97

Prime Outlets at Silverthorne (2) - Silverthorne, Colorado.............     I         November 1988         95,000              92
                                                                           II         November 1990         75,000              92
                                                                          III         November 1993         88,000              86
                                                                                                           -------             ---
                                                                                                           258,000              90

Prime Outlets at Edinburgh (2) - Edinburgh, Indiana....................     I                  1988        156,000             100
                                                                           II         November 1994        142,000             100
                                                                                                           -------             ---
                                                                                                           298,000             100

Prime Outlets at Burlington (2) - Burlington, Washington ..............     I              May 1989         89,000              88
                                                                           II          October 1989         36,000              94
                                                                          III            April 1993         49,000              97
                                                                                                           -------             ---
                                                                                                           174,000             100

Prime Outlets at Queenstown (2) - Queenstown, Maryland.................     I             June 1989         67,000             100
                                                                           II             June 1990         55,000              99
                                                                          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)
                                 March 31, 1999
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand         GLA         Percentage
Manufacturers' Outlet Centers                                           Phase          Opening Date      (Sq. Ft.)        Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>           <C>                 <C>                 <C>  

Prime Outlets at Hillsboro (2) - Hillsboro, Texas......................     I          October 1989         95,000             90%
                                                                           II          January 1992        101,000             97
                                                                          III              May 1995        163,000             93
                                                                                                           -------            ---
                                                                                                           359,000             93

Prime Outlets at Oshkosh (2) - Oshkosh, Wisconsin......................     I         November 1989        215,000             93
                                                                           II             July 1991         45,000             99
                                                                                                           -------            ---
                                                                                                           260,000             94

Prime Outlets at Warehouse Row (3) - Chattanooga, Tennessee............     I         November 1989         95,000             95
                                                                           II           August 1993         26,000             94
                                                                                                           -------            ---
                                                                                                           121,000             95

Prime Outlets at Gilroy (2) - Gilroy, California.......................     I          January 1990         94,000            100
                                                                           II           August 1991        109,000            100
                                                                          III          October 1992        137,000             97
                                                                           IV             July 1994        170,000             96
                                                                            V         November 1995         69,000            100
                                                                                                           -------            ---
                                                                                                           579,000             98

Prime Outlets at Perryville (2) - Perryville, Maryland.................     I             June 1990        148,000             94

Prime Outlets at Sedona - Sedona, Arizona .............................     I           August 1990         82,000             92

Prime Outlets at San Marcos - San Marcos, Texas........................     I           August 1990        177,000            100
                                                                           II           August 1991         70,000            100
                                                                          III           August 1993        117,000             98
                                                                         IIIB         November 1994         20,000             91
                                                                         IIIC         November 1995         35,000            100
                                                                         IIID              May 1998         18,000            100
                                                                                                           -------            ---
                                                                                                           437,000             99

Prime Outlets at Anderson - Anderson, California.......................     I           August 1990        165,000             93

Prime Outlets at Post Falls - Post Falls, Idaho .......................     I             July 1991        111,000             82
                                                                           II             July 1992         68,000             88
                                                                                                           -------            ---
                                                                                                           179,000             84

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             91
                                                                                                           -------            ---
                                                                                                           481,000             97

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

Prime Outlets at Naples - Naples/Marco Island, Florida.................     I        December 1991          94,000             96
                                                                           II        December 1992          32,000            100
                                                                          III           March 1998          20,000             98
                                                                                                           -------            ---
                                                                                                           146,000             97

Prime Outlets at Conroe (2) - Conroe, Texas............................     I         January 1992          93,000             88
                                                                           II            June 1994         163,000             96
                                                                          III         October 1994          26,000             79
                                                                                                           -------            ---
                                                                                                           282,000             91

Prime Outlets at Niagara Falls USA - Niagara Falls, New York...........     I             July 1992        300,000             99
                                                                           II           August 1995        234,000             90
                                                                                                           -------            ---
                                                                                                           534,000             95
</TABLE>
<PAGE>
<TABLE>

                       Portfolio of Properties (continued)
                                 March 31, 1999
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand         GLA         Percentage
Manufacturers' Outlet Centers                                           Phase          Opening Date      (Sq. Ft.)        Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>           <C>                  <C>               <C>    

Prime Outlets at Woodbury (2) - Woodbury, Minnesota....................     I            July 1992         129,000             91%
                                                                           II        November 1993         100,000             93
                                                                          III          August 1994          21,000            100
                                                                                                           -------            ---
                                                                                                           250,000             93

Prime Outlets at Calhoun (2) - Calhoun, Georgia........................     I         October 1992         123,000            100
                                                                           II         October 1995         131,000             92
                                                                                                           -------            ---
                                                                                                           254,000             96

Prime Outlets at Castle Rock - Castle Rock, Colorado...................     I        November 1992         181,000             98
                                                                           II          August 1993          94,000             94
                                                                          III        November 1993          95,000             97
                                                                           IV          August 1997         110,000             97
                                                                                                           -------            ---
                                                                                                           480,000             97

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 (2) - Jeffersonville, Ohio..........     I           March 1993         126,000             97
                                                                           II          August 1993         123,000             96
                                                                          III         October 1994          65,000             77
                                                                                                           -------            ---
                                                                                                           314,000             93

Prime Outlets at Jeffersonville I - Jeffersonville, Ohio...............     I            July 1993         186,000             91
                                                                           II        November 1993         100,000             81
                                                                          IIB        November 1994          13,000             64
                                                                         IIIA          August 1996          35,000            100
                                                                         IIIB           March 1997          73,000            100
                                                                                                           -------            ---
                                                                                                           407,000             90

Prime Outlets at Gainesville - Gainesville, Texas......................     I           August 1993        210,000             87
                                                                           II         November 1994        106,000             99
                                                                                                           -------            ---
                                                                                                           316,000             91

Prime Outlets at Loveland - Loveland, Colorado.........................     I              May 1994        139,000             98
                                                                           II         November 1994         50,000            100
                                                                          III              May 1995        114,000             91
                                                                           IV              May 1996         25,000            100
                                                                                                           -------            ---
                                                                                                           328,000             96

Prime Outlets at Oxnard (4) - Oxnard, California.......................     I             June 1994        148,000             92

Prime Outlets at Grove City - Grove City, Pennsylvania.................     I           August 1994        235,000             99
                                                                           II         November 1994         95,000             98
                                                                          III         November 1995         85,000             96
                                                                           IV         November 1996        118,000             99
                                                                                                           -------            ---
                                                                                                           533,000             98

Prime Outlets at Huntley - Huntley, Illinois...........................     I           August 1994        192,000             96  
                                                                           II         November 1995         90,000             89
                                                                                                           -------            ---
                                                                                                           282,000             89
                                                                                                                               

Prime Outlets at Florida City - Florida City, Florida..................     I        September 1994        208,000             94

Prime Outlets at Pismo Beach (2) - Pismo Beach, California.............     I         November 1994        148,000             98

Prime Outlets at Tracy  (2) - Tracy, California........................     I         November 1994        153,000             92
   
Prime Outlets at Vero Beach (2) - Vero Beach, Florida..................     I         November 1994        210,000             98
                                                                           II           August 1995        116,000             95
                                                                                                           -------            ---
                                                                                                           326,000             97
</TABLE>                                                                        

<PAGE>
                                                                                
<TABLE>

                       Portfolio of Properties (continued)
                                 March 31, 1999
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand             GLA      Percentage
Manufacturers' Outlet Centers                                           Phase          Opening Date       (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>          <C>                    <C>               <C>  

Prime Outlets at Waterloo (2) - Waterloo, New York.....................     I            March 1995         208,000           100%
                                                                           II        September 1996         115,000           100
                                                                          III            April 1997          68,000            94
                                                                                                            -------           ---
                                                                                                            391,000            99

Prime Outlets at Odessa - Odessa, Missouri.............................     I            July 1995          191,000            91
                                                                           II        November 1996          105,000            58
                                                                                                            -------           --- 
                                                                                                            296,000            79

Prime Outlets at Darien (5) - Darien, Georgia..........................     I             July 1995         238,000            84
                                                                          IIA         November 1995          49,000            99
                                                                          IIB             July 1996          20,000           100
                                                                                                           -------            ---   
                                                                                                            307,000            88

Prime Outlets at New River (4) - Phoenix, Arizona......................     I        September 1995         217,000            90
                                                                           II        September 1996         109,000            90
                                                                                                            -------           ---
                                                                                                            326,000            90

Prime Outlets at Gulfport (5) - Gulfport, Mississippi..................     I         November 1995         228,000            99
                                                                          IIA         November 1996          40,000            73
                                                                          IIB         November 1997          38,000           100
                                                                                                            -------           ---
                                                                                                            306,000            96

Prime Outlets at Lodi - Burbank, Ohio..................................     I         November 1996         205,000            95
                                                                          IIA              May 1998          33,000            92
                                                                          IIB         November 1998          75,000            82
                                                                                                            -------           ---
                                                                                                            313,000            92

Prime Outlets at Gaffney - Gaffney, South Carolina.....................     I         November 1996         235,000            99
                                                                           II             July 1998          70,000            88
                                                                                                            -------           ---
                                                                                                            305,000            97

Prime Outlets at Lee (2) - 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            67
                                                                                                            -------           ---
                                                                                                            229,000            96

Prime Outlets at Hagerstown - Hagerstown, Maryland.....................     I           August 1998         218,000           100
                                                                           II         November 1998         103,000            81
                                                                                                            321,000            94
                                                                                                            -------           ---
Total Manufacturers' Outlet Centers (6)................................                                  14,369,000            95%
                                                                                                         ==========            ==   
====================================================================================================================================
</TABLE>

Notes:
(1)  Percentage reflects fully executed leases as of March 31, 1999 as a percent
     of square feet of GLA.
(2)  The Company acquired this manufacturers'  outlet center on June 15, 1998 as
     a result of its merger with Horizon Group, Inc.
(3)  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.  An unrelated third
     party holds a 35% limited partnership  interest and the Company holds a 65%
     general partnership  interest in the partnership that owns Phase II of this
     property.  Phase I of this mixed-use  development  includes  154,000 square
     feet of office  space and Phase II  includes  5,000  square  feet of office
     space.  The total  office  space of 159,000  square feet is not included in
     this table and such space was 76% leased as of March 31, 1999.
(4)  The  Company  owns  50% of this  manufacturers'  outlet  center  in a joint
     venture partnership with an unrelated third party.
(5)  The  Company  operates  this  manufacturers'  outlet  center  pursuant to a
     long-term  ground  lease  under  which the Company  receives  the  economic
     benefit of a 100% ownership interest.
(6)  The Company  also owns three  community  centers not included in this table
     containing 424,000 square feet of GLA in the aggregate that were 88% leased
     as of March 31, 1999.
<PAGE>

Results of Operations

Comparison  of the three  months  ended March 31, 1999 to the three months ended
March 31, 1998

Summary

The Company  reported net income of $9,298 and $1,990 for the three months ended
March 31,  1999 and 1998,  respectively.  For the three  months  ended March 31,
1999, the net income applicable to common shareholders was $17,098, or $0.40 and
$0.06 per common share on a basic and diluted basis, respectively. For the three
months ended March 31, 1998, the net loss applicable to common  shareholders was
$2,176, or $0.08 per common share on a basic and diluted basis.

Revenues

Total  revenues  were $78,584 for the three months ended March 31, 1999 compared
to $37,508 for the three months ended March 31, 1998, an increase of $41,076, or
109.5%.  Base rents increased  $26,219,  or 113.6%,  in 1999  compared  to 1998.
Straight-line  rents  (included in base rents) were $209 and $(26) for the three
months  ended  March  31,  1999 and  1998,  respectively.  These  increases  are
primarily due to the Portfolio Expansion and the Horizon Merger.

Percentage  rents,  which  represent rents based on a percentage of sales volume
above a  specified  threshold,  increased  $1,197,  or 138.4%,  during the three
months ended March 31, 1999  compared to the same period in 1998.  This increase
was  attributable  to the Portfolio  Expansion and the Horizon  Merger.  For the
three  months  ended March 31, 1999,  same-space  sales in centers  owned by the
Company increased 0.9% compared to the same period in 1998.  "Same-space  sales"
is defined as the weighted  average  sales per square foot reported by merchants
for space open since  January 1, 1998.  The Company's  same-space  sales for the
year ended  December 31, 1998 were $248.44 per square foot. For the three months
ended March 31, 1999,  same-store  sales  increased by 0.2% compared to the same
period in 1998.  "Same-store sales" is defined as the weighted average sales per
square foot  reported by  merchants  for stores  opened  since  January 1, 1998.
Tenant reimbursements,  which represent the contractual recovery from tenants of
certain operating expenses,  increased by $12,928,  or 120.3%,  primarily due to
the Portfolio Expansion and the Horizon Merger.

Interest and other  income  increased by $732,  or 26.0%,  to $3,549  during the
three  months  ended March 31,  1999 as compared to $2,817 for the three  months
ended March 31,  1998. The increase  reflects higher (i) temporary tenant income
of $440, (ii) municipal  assistance income of $250, (iii) leasing commissions of
$191, and (iv) other ancillary  income of $80 partially  offset by a decrease in
interest  income of $229.  The  reduction in interest  income was  primarily the
result of the use of a portion of the Company's expansion loan escrow account to
fund certain of its development  activities  during 1998 and 1999. The expansion
loan escrow account is included in restricted cash in the  Consolidated  Balance
Sheets.

Expenses

Property operating expenses increased by $10,568,  or 126.5%, to $18,921 for the
three  months  ended  March 31,  1999  compared to $8,353 for the same period in
1998. Real estate taxes  increased by $2,711,  or 94.9%, to $5,567 for the three
months  ended  March 31,  1999  from  $2,856 in the same  period  for 1998.  The
increases in property operating expenses and real estate taxes are primarily due
to the  Portfolio  Expansion  and the  Horizon  Merger.  As  shown  in  TABLE 2,
depreciation  and  amortization  expense  increased  by $10,534,  or 134.7%,  to
$18,357 for the three months  ended March 31, 1999  compared to $7,823 for 1998.
This  increase   results  from  the  depreciation  and  amortization  of  assets
associated with the Portfolio Expansion and the Horizon Merger.
<PAGE>

TABLE 2 - Components of Depreciation and Amortization Expense

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

--------------------------------------------------------------------------------

Three months ended March 31,                            1999               1998
--------------------------------------------------------------------------------
 
Building and improvements                               $10,122          $ 4,324
Land improvements                                         1,378              830
Tenant improvements                                       6,184            2,075
Furniture and fixtures                                      488              282
Leasing commissions                                         185              312
                                                        -------          -------
    Total                                               $18,357          $ 7,823
                                                        =======          =======
================================================================================

TABLE 3 - Components of Interest Expense

The components of interest expense are summarized as follows:

--------------------------------------------------------------------------------

Three months ended March 31,                                      
                                                             1999           1998
--------------------------------------------------------------------------------
 
Interest incurred                                           $21,686      $9,253
Interest capitalized                                         (1,074)     (1,388)
Amortization of deferred financing costs                        593         167
Amortization of interest rate protection contracts               57         342
                                                            -------      ------
    Total                                                   $21,262      $8,374
                                                            =======      ======
================================================================================

As shown in TABLE 3, interest  expense for the three months ended March 31, 1999
increased  by  $12,888,  or 153.9%,  to $21,262  compared to $8,374 for the same
period in 1998.  This increase reflects (i) higher interest incurred of $12,433,
(ii) an increase in amortization of deferred financing costs of $335 and (iii) a
reduction in the amount of interest  capitalized in connection with  development
projects  of  $314.   Partially   offsetting  these  items  was  a  decrease  in
amortization of interest rate protection contracts of $194.

The increase in interest  incurred is primarily  attributable  to an increase of
$703,844 in the Company's average debt outstanding during the three months ended
March 31, 1999  compared to the same period in 1998 offset by a slight  decrease
in the weighted  average interest rate for the three months ended March 31, 1999
compared to the same period in 1998.  The weighted  average  interest rates were
7.17% and 7.20% for the 1999 and 1998 periods, respectively.

Other charges increased by $1,433, or 149.4%, to $2,392.  This increase reflects
(i) a higher  provision for  uncollectible  accounts  receivable  of $748,  (ii)
increased  selling and  marketing  costs of $416  associated  with the Company's
operation  of the outlet  store known as Designer  Connection,  (iii)  increased
ground lease expense of $196, and (iv) increased other miscellaneous  charges of
$73.
<PAGE>

In connection with re-leasing space to new merchants,  the Company incurred $786
and $195 in capital  expenditures  during the three  months ended March 31, 1999
and 1998, respectively.

Liquidity and Capital Resources

Sources and Uses of Cash

For the three  months  ended March 31,  1999,  net cash  provided  by  operating
activities was $22,581,  cash used in investing  activities was $19,659, and net
cash used in financing activities was $8,357.

The primary uses of cash for investing  activities during the three months ended
March  31,  1999  included:  (i)  costs  associated  with  the  development  and
construction  of  two  expansions  to  existing  manufacturers'  outlet  centers
aggregating  102,000  square feet of GLA which are  expected to open during 1999
(of which 21,000  square feet of GLA opened  during the first  quarter of 1999),
(ii) costs  associated  with the  completion  of two new  manufacturers'  outlet
centers and expansions to existing  manufacturers'  outlet  centers  aggregating
931,000  square  feet of GLA which  opened  during  1998,  and  (iii)  costs for
pre-development activities associated with future developments.

The primary uses of cash for financing  activities during the three months ended
March 31, 1999 were (i) principal  repayments on notes payable of $19,600,  (ii)
preferred and common stock  distributions  of $19,650,  (iii)  distributions  to
minority interests (including distributions to limited partners of the Operating
Partnership)  of $3,250,  and (iv) deferred  financing  costs of $444. Such uses
were  partially  offset by proceeds from new  borrowings  of $34,587  during the
period.

The  Company  anticipates  that  cash  flow  from  (i)  certain  line of  credit
facilities,  (ii) operations,  (iii) new borrowings, (iv) refinancing of certain
existing  debt,  (v) the potential  sale of a joint venture  interest in certain
manufacturers'  outlet  centers,  and (vi) the potential  sale of equity or debt
securities  in the public or  private  capital  markets  will be  sufficient  to
satisfy  its  debt  service  obligations,  expected  distribution  and  dividend
requirements  and  operating  cash  needs  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
March 31, 1999, unused  commitments  available for borrowings under various loan
facilities were $18,436 in the aggregate.

Debt Repayments and Preferred Stock Dividends

The Company's aggregate  indebtedness was $1,265,494 and $1,217,507 at March 31,
1999 and December 31, 1998,  respectively.  At March 31, 1999, such indebtedness
had a weighted  average  maturity  of 5.7 years and bore  interest at a weighted
average interest rate of 7.21% per annum. At March 31, 1999, $982,007, or 77.6%,
of such  indebtedness  bore interest at fixed rates and $283,487,  or 22.4%,  of
such  indebtedness,  including  $28,250 of  tax-exempt  bonds,  bore interest at
variable rates.

The Company is obligated to repay $124,550 of indebtedness  during the remainder
of 1999 and $45,345 in 2000.  In  addition,  the Company is  obligated  to repay
$10,636 of  indebtedness on September 30, 1999 in connection with its repurchase
of  the  remaining  outstanding  Series  C  Cumulative   Convertible  Redeemable
Preferred Stock ("Series C Preferred Stock"). Annualized cumulative dividends on
the Company's  Series A Senior  Cumulative  Preferred  Stock ("Senior  Preferred
Stock"), Series B Cumulative Participating  Convertible Preferred Stock ("Series
B Convertible  Preferred Stock"), and Series C Preferred Stock outstanding as of
March 31, 1999 are $6,038,  $16,635, and $1,255,  respectively.  These dividends
are paid quarterly, in arrears. 

<PAGE>

Repurchase of Shares of Series C Preferred Stock

On March 31, 1999,  the Company  entered into an agreement  pursuant to which it
will  repurchase all of its  outstanding  shares of Series C Preferred Stock for
$43,636 or $10.00 per share. The agreement  provides for the repurchase to occur
in two stages.  In the first stage,  on March 31, 1999, the Company  repurchased
3,300,000 shares of the Series C Preferred Stock in exchange for the issuance of
a $33,000  unsecured  promissory  note.  The  unsecured  promissory  note  bears
interest at a rate of 12.0% per annum,  matures on September 30, 1999,  requires
monthly  interest-only  payments  and may be prepaid by the  Company at any time
without  penalty.  Second,  the Company will repurchase the remaining  1,063,636
shares of its  Series C  Preferred  Stock  for an  aggregate  purchase  price of
$10,636 on or before  September  30, 1999.  In addition,  the sole holder of the
Series C Preferred Stock irrevocably  waived the Company's  obligation to comply
with the financial  covenants  contained in its charter relating to the Series C
Preferred  Stock, as well as the rights of such holder to require the Company to
repurchase the Series C Preferred Stock in certain circumstances at its original
issuance price of $13.75 per share, plus accrued but unpaid distributions.

Debt and Equity Offerings

Management intends to continually have access to capital resources  necessary to
expand and develop its business and, accordingly,  may seek to obtain additional
funds through the potential  sale of equity or debt  securities in the public or
private capital markets.  On December 17, 1998, the Company  registered with the
Securities and Exchange  Commission  $400,000 of equity securities pursuant to a
universal shelf registration statement on Form S-3.

Property Acquisitions

During 1999,  the Company will explore  acquisitions  of  manufacturers'  outlet
centers in the United  States and Western  Europe as well as  consider  possible
strategic  acquisitions  of other assets in the retail  sector.  The Company has
evaluated and is evaluating such  opportunities  and prospects and will continue
to do so throughout  1999. The Company cannot predict if any transaction will be
consummated, nor the terms or form of consideration required.


Debt Transactions

On April  27,  1999,  the  Company  closed on a $63,000  debt  financing  with a
financial institution that provided  approximately $27,900 of net proceeds.  The
$63,000  note is (i)  collateralized  by a first  mortgage  on Prime  Outlets at
Niagara Falls USA, (ii) bears interest at a fixed rate of 7.604%, (iii) requires
monthly   principal  and  interest  payments  of  $450  pursuant  to  a  30-year
amortization schedule, and (iv) matures in 10 years. In connection with the debt
refinancing,  the Company  paid a  pre-payment  penalty of $2,640  which it will
record as an extraordinary  loss on early  extinguishment  of debt in its second
quarter results.

On December 31, 1998, the Company entered into an agreement to purchase,  at its
option,  its joint venture  partner's 50% ownership  interest in Arizona Factory
Shops Partnership for total  consideration of approximately  $3,600.  The option
expires on May 27, 1999. If the Company  exercises its option,  the Company will
own 100% of Prime  Outlets at New River  which  contains  approximately  326,000
square feet and was 90% leased at March 31, 1999.

As of March 31, 1999,  the Company is a guarantor or  otherwise  obligated  with
respect  to an  aggregate  of  $35,383  of  the  indebtedness  of  HGP  and  its
affiliates.  As of March 31, 1999, the components of such indebtedness  included
(i) a mortgage loan with an outstanding  balance of $11,793 which bears interest
at a rate of prime,  matures  in June  1999,  and is  collateralized  by a first
mortgage on Phases II and III of property located in Patchogue, New York; (ii) a
mortgage loan with an  outstanding  balance of $10,684 which bears interest at a
rate of 10.25%,  matures in July 2018, and is collateralized by a first mortgage
on Phase I of property  located in  Patchogue,  New York;  (iii) a mortgage loan
with an  outstanding  balance of $2,629 which bears  interest at a rate of LIBOR
plus 2.50%,  matures in December 2002, and is collateralized by a first mortgage
on a  office  building  in  Muskegon,  Michigan;  (iv) a  secured  loan  with an
outstanding balance of $277 which bears interest at a rate of prime,  matures in
December  2000 and is  collateralized  by  furniture  and  fixtures;  and (v) an
unsecured  revolving credit facility with an outstanding balance of $3,000 which
bears a rate of interest of prime and was repaid on April 30, 1999. In addition,
the  Company is a  guarantor  of $10,000 of  obligations  under  HGP's  $108,205
secured  credit  facility  which  bears a rate of  interest of LIBOR plus 1.90%,
matures in July 2001, and is collateralized by 13 properties  located throughout
the United  States.  The Company is pursuing an  agreement  with HGP pursuant to
which  it  would  purchase  HGP's  and  its  affilaites'   general  and  limited
partnership  interests  and a portion  of a third  party's  limited  partnership
interest  in the  Bellport  Outlet  Center and  undeveloped  parcels  located in
Patchogue,  New York. If the agreement is  consummated,  it is expected that the
aggregate  indebtedness of HGP for which the Company remains contingently liable
as a guarantor would be reduced to $12,906.
<PAGE>

Planned Development

The Company's goal is to continue to develop new centers and expand its existing
centers if such  development  would be  accretive  based on the current  cost of
capital.  Management believes that there is demand for continued  development of
new   manufacturers'   outlet  centers  and   expansions  of  certain   existing
manufacturers'   outlet  centers.   The  Company  previously  expected  to  open
approximately  555,000 square feet of GLA during 1999.  However,  because of the
Company's current cost of capital, management may elect to delay construction of
certain  projects  until such time that it is reasonably  confident that minimum
returns on total  development cost and equity can be achieved.  In March 1999, a
21,000  square foot  expansion  opened at Prime Outlets at Lebanon and an 81,000
square foot expansion at Prime Outlets at San Marcos is under  construction  and
will open in the third quarter of 1999. In addition,  construction  continues at
Prime Outlets of Puerto Rico, the first outlet center in Puerto Rico, which will
contain  175,000 square feet of GLA. At March 31, 1999,  the remaining  budgeted
capital expenditures for projects under construction  including Prime Outlets at
Lebanon aggregated approximately $29,400, while anticipated capital expenditures
related to the  completion  of  expansions  of  existing  manufacturers'  outlet
centers opened during 1998 (aggregating 931,000 square feet of GLA) approximated
$16,100.

In addition to the projects  currently under  construction,  management plans to
begin  development  of  two  new  manufacturers'   outlet  centers  and  several
expansions  during  the  next  fifteen  months,  if such  projects  achieve  the
Company's minimum return on total development cost and equity. Such projects are
expected to contain  approximately 844,000 square feet of GLA, in the aggregate,
and have a total expected  development  cost of  approximately  $113,700.  As of
March  31,  1999,  there  were  no  material  commitments  with  regard  to  the
construction of these projects.

The Company  expects to fund the  development  cost of these  projects  from (i)
certain line of credit facilities,  (ii) joint venture partners,  (iii) retained
cash flow from operations,  (iv) construction  loans, and (v) the potential sale
of equity or debt securities in the public or private capital markets. There can
be no assurance  that the Company will be  successful  in obtaining the required
amount of equity capital or debt financing for the planned development  projects
or that the terms of such capital raising activities will be as favorable as the
Company  has  experienced  in prior  periods.  If  adequate  financing  for such
development  and  expansion  is not  available,  the  Company may not be able to
develop new centers or expand existing centers at currently planned levels.

Legal Proceedings

In the  ordinary  course of  business  the  Company is subject to certain  legal
actions.  While any litigation  contains an element of  uncertainty,  management
believes the losses, if any,  resulting from such matters,  including the matter
described  below,  will not have a material  adverse effect on the  consolidated
financial statements of the Company.

The  Company  is  defendant  in a  lawsuit  filed on July  27,  1998 in the U.S.
District  Court for the Central  District of  California  whereby the  plaintiff
alleges that the Company and its related entities overcharged tenants for common
area maintenance expenditures. The outcome of, and the ultimate liability of the
Company,  if any, from, this lawsuit cannot  currently be predicted.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously.

Economic Conditions

Substantially  all 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.  Substantially  all 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.

The  Company  intends to reduce  operating  and leasing  risks by  managing  its
existing  portfolio of  properties  with the goal of  improving  its tenant mix,
rental rates and lease terms and attracting high fashion,  upscale manufacturers
and national brand-name manufacturers as merchants.

Year 2000

The year 2000 ("Y2K") issue refers generally to computer applications using only
the last two digits to refer to a year rather than all four digits. As a result,
these applications could fail or create erroneous results if they recognize "00"
as the  year  1900  rather  than  the year  2000.  The  Company  has  taken  Y2K
initiatives in the following three general areas:

Information Technology

The Company has focused  its  efforts on the  high-risk  areas of the  corporate
office  computer  hardware,  operating  systems and software  applications.  The
principal  risks to the  Company  relating  to its  information  technology  are
failure to  correctly  bill tenants and pay  invoices.  However,  the  Company's
assessment and testing of existing equipment revealed that its hardware, network
operating systems and software applications are Y2K compliant.
<PAGE>

Non-information Technology

Non-information technology consists mainly of facilities management systems such
as  telephone,  utility and security  systems for the  corporate  office and the
outlet  centers.  Based on the  Company's  inquiry of the  building  owner,  the
corporate office's non-information technology is expected to be Y2K compliant by
mid-1999.  The Company is in the process of identifying  date sensitive  systems
and equipment at its outlet centers. To date, the Company has not identified any
critical  non-compliant  systems.  Assessment  and  testing  of  non-information
technology  at the  Company's  outlet  centers is  expected to be  completed  by
mid-1999.

Third Parties

The  Company has  third-party  relationships  with  tenants  and  suppliers  and
contractors.  Many of these third parties are  publicly-traded  corporations and
subject to disclosure  requirements.  The Company has begun  assessment of major
third  parties' Y2K  readiness  including  tenants,  key suppliers of outsourced
services  including  stock  transfer,  debt  servicing,  banking  collection and
disbursement,  payroll and benefits,  while  simultaneously  responding to their
inquiries regarding the Company's readiness.  The principal risks to the Company
in its relationships  with third parties are the failure of third-party  systems
used to conduct  business  such as (i) tenants being unable to stock stores with
merchandise,  use cash registers,  and pay invoices;  (ii) banks being unable to
process receipts and disbursements;  (iii) vendors being unable to supply needed
materials  and  services  to the  centers;  and (iv)  processing  of  outsourced
employee payroll.  Based on Y2K compliance work done to date, the Company has no
reason  to  believe  that  key  tenants,  banks  and  suppliers  will not be Y2K
compliant in all material  respects or cannot be replaced  within an  acceptable
timeframe.  Additionally,  the  Company  has  obtained  or is in the  process of
obtaining compliance certification from suppliers of key services.

Contingency Plans

Contingency  plans  generally  involve  the  development  and  testing of manual
procedures  or the  use of  alternate  systems.  Viable  contingency  plans  are
difficult  to develop  for  potential  third  party Y2K  failures.  Based on the
Company's   current   assessment  of  Y2K  readiness   relating  to  information
technology,  non-information  technology, and third parties, the Company has not
implemented a Y2K contingency plan to date.  However, we will continue to assess
the need for such a plan.

Currently, the Company believes its cost to successfully mitigate the Y2K issue,
estimated at less than $250, has not been and is not  anticipated to be material
to the Company's  financial  position or results from operations.  However,  the
Company's  description  of its Y2K  compliance  issue is based upon  information
obtained by management through evaluations of internal business systems and from
inquiries of key tenants and major vendors concerning their compliance  efforts.
If key tenants or major  vendors  with whom the Company  does  business  fail to
adequately address their Y2K issues, the Company's financial position or results
from operations could be materially adversely affected.

Funds from Operations

Management  believes that to facilitate a clear  understanding  of the Company's
operating  results,  funds  from  operations  ("FFO")  should be  considered  in
conjunction  with net income  (loss)  presented  in  accordance  with  generally
accepted accounting principles ("GAAP"). In March 1995, the National Association
of Real Estate Investment Trusts ("NAREIT")  established  guidelines  clarifying
the  definition  of FFO.  FFO is  defined as net income  (loss)  (determined  in
accordance with GAAP) excluding  gains (or losses) from debt  restructuring  and
sales of property,  plus  depreciation  and amortization  after  adjustments for
unconsolidated partnerships and joint ventures.
<PAGE>

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 4 provides a  reconciliation  of income  before  allocations  to  minority
interests and preferred shareholders to FFO for the three months ended March 31,
1999 and 1998. FFO increased  $12,220,  or 79.1% to $27,675 for the three months
ended March 31, 1999 from  $15,455 for the three  months  ended March 31,  1998.
This  increase was  primarily  due to the  Portfolio  Expansion  and the Horizon
Merger.

TABLE 4 - Funds from Operations

--------------------------------------------------------------------------------

Three months ended March 31,                             1999               1998
--------------------------------------------------------------------------------

Income before allocations to minority interests and
  preferred shareholders                             $  9,298           $  7,451
FFO adjustments:
Real estate depreciation and amortization              18,122              7,701
Unconsolidated joint venture adjustments                  255                303
FFO before allocations to minority interests and     --------           --------
  preferred shareholders                             $ 27,675           $ 15,455
                                                     ========           ========
================================================================================
<PAGE>

Item 3. 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.  Variable  interest rates are
based on the weighted average rates of the portfolio at March 31, 1999.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                        Year of Maturity
------------------------------------------------------------------------------------------------------------------------------------
                                        1999        2000         2001        2002          2003        2004  Thereafter        Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>         <C>          <C>          <C>         <C>       <C>          <C>

Fixed rate:
Principal......................      $44,954     $43,174     $ 50,746     $88,976      $348,720    $15,526   $389,911     $982,007
Average interest rate..........        10.72%       7.07%        7.39%       6.97%         7.76%      7.79%      7.01%        7.48%
Variable rate:
Principal......................      $79,596     $ 2,171     $142,000     $   427      $    778    $30,265   $ 28,250     $283,487
Average interest rate..........         7.00%       6.90%        6.41%       6.46%         6.46%      6.46%      3.03%        6.25%

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


PART II:  OTHER INFORMATION

Item 1.           Legal Proceedings

In the  ordinary  course of  business  the  Company is subject to certain  legal
actions.  While any litigation  contains an element of  uncertainty,  management
believes the losses, if any,  resulting from such matters,  including the matter
described  below,  will not have a material  adverse effect on the  consolidated
financial statements of the Company.

The  Company  is  defendant  in a  lawsuit  filed on July  27,  1998 in the U.S.
District  Court for the Central  District of  California  whereby the  plaintiff
alleges that the Company and its related entities overcharged tenants for common
area maintenance expenditures. The outcome of, and the ultimate liability of the
Company,  if any, from, this lawsuit cannot  currently be predicted.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously.

Item 2.           Changes in Securities

                  None

Item 3.           Defaults Upon Senior Securities

                  None

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  3.3 - Amended and Restated By-Laws of Prime Retail,
                                   Inc. 

                    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: 

                    On April 6, 1999, the Company filed a Current Report on Form
                    8-K, dated March 31, 1999,  announcing  the Company  entered
                    into an agreement to repurchase  its  outstanding  shares of
                    Series C Cumulative  Convertible Redeemable Preferred Stock.
                    No financial statements were included.
<PAGE>

                                   SIGNATURES



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



                                                         PRIME RETAIL, INC.
                                                         Registrant



Date: May 14, 1999                                     /s/ Abraham Rosenthal
                                                       ---------------------   
                                                       Abraham Rosenthal
                                                       Chief Executive Officer



Date: May 14, 1999                                     /s/ Robert P. Mulreaney
                                                       ----------------------- 
                                                       Robert P. Mulreaney
                                                       Executive Vice President,
                                                       Chief Financial Officer
                                                       and Treasurer