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 June 30, 1998

                                       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 333-50139
                                            ---------

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

                        Delaware                       52-1844882
--------------------------------------------   ---------------------------------
       (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 August 12, 1998, the issuer had outstanding 54,048,873 Common Units.
<PAGE>
                               Prime Retail, L.P.
                                    Form 10-Q

                                      INDEX

PART I:  FINANCIAL INFORMATION                                              PAGE
                                                                            ----

Item 1.  Financial Statements (Unaudited)

     Consolidated Balance Sheets as of June 30, 1998 and
     December 31, 1997                                                         1

     Consolidated Statements of Operations for the three and
     six months ended June 30, 1998 and 1997                                   2

     Consolidated Statements of Cash Flows for the six
     months ended June 30, 1998 and 1997                                       3

     Notes to the Consolidated Financial Statements                            5

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                   9


PART II:  OTHER INFORMATION

Item 1.  Legal Proceedings                                                    25
Item 2.  Changes in Securities                                                25
Item 3.  Defaults Upon Senior Securities                                      25
Item 4.  Submission of Matters to a Vote of Security Holders                  25
Item 5.  Other Information                                                    26
Item 6.  Exhibits or Reports on Form 8-K                                      26

Signatures                                                                    27


<PAGE>
<TABLE>

PART I:  FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)

                               Prime Retail, L.P.
                           Consolidated Balance Sheets
                    (in thousands, except unit information)
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                            June 30, 1998             December 31, 1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                       <C>    
Assets
Investment in rental property:
     Land                                                                   $    199,357              $     66,277
     Buildings and improvements                                                1,660,909                   779,191
     Property under development                                                   65,505                    53,139
     Furniture and equipment                                                       6,459                     5,911
                                                                           -------------             -------------
                                                                               1,932,230                   904,518
Accumulated depreciation                                                         (93,732)                  (82,016)
                                                                           -------------             -------------
                                                                               1,838,498                   822,502
Cash and cash equivalents                                                         18,455                     6,277
Restricted cash                                                                   38,690                    41,736
Accounts receivable, net                                                          14,478                     9,745
Deferred charges, net                                                             13,991                    16,206
Due from affiliates, net                                                          11,928                     9,982
Investment in partnerships                                                         4,674                     3,278
Other assets                                                                       2,343                     2,108
                                                                            ------------             -------------
     Total assets                                                            $ 1,943,057              $    911,834
                                                                            ============             =============


Liabilities and shareholders'equity
Bonds payable                                                               $    32,900              $      32,900
Notes payable                                                                 1,119,233                    482,365
Accrued interest                                                                  5,559                      3,767
Real estate taxes payable                                                        11,304                      4,639
Construction costs payable                                                        5,631                      5,849
Accounts payable and other liabilities                                           67,182                     19,022
                                                                            -----------             --------------
     Total liabilities                                                        1,241,809                    548,542

Minority interests                                                                3,816                      3,911

Redeemable equity:
Series A Senior Cumulative Preferred Units,
    2,300,000 units issued 
    and outstanding                                                              60,926                     60,525
Series B Cumulative Participating 
    Convertible Preferred Units,
    7,828,125 and 2,981,800 units 
    issued and outstanding, respectively                                        199,159                     78,949
Series C Cumulative Participating 
    Convertible Redeemable Preferred
    Units, 4,363,636 units issued 
    and outstanding                                                              60,000                     60,000
                                                                             ----------              -------------
Total redeemable equity                                                         320,085                    199,474
 
Partners' capital (deficit):              
  General partner                                                               466,563                    269,239
  Limited partners                                                              (69,216)                  (109,332)
                                                                             ----------              -------------
Total partners' capital (deficit)                                               377,347                    159,907
                                                                             ----------              -------------
    
Total liabilities, minority 
  interests, redeemable equity
  and partners' capital (deficit)                                          $  1,943,057              $     911,834
                                                                             ==========              =============       
    
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>

<PAGE>
<TABLE>

                               Prime Retail, L.P.
                      Consolidated Statements of Operations
                  (in thousands, except per unit information)
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                Three months                         Six months
                                                               ended June 30                        ended June 30
                                                           -----------------------             ----------------------
                                                              1998          1997                     1998         1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>                     <C>          <C>

Revenues
Base rents                                                $ 28,077      $ 19,006                $ 51,181     $ 37,072
Percentage rents                                             1,174           721                   2,039        1,390
Tenant reimbursements                                       13,234         8,969                  23,977       17,918
Interest and other                                           2,139         2,517                   4,843        4,995
                                                           -------       -------                 -------      -------
    Total revenues                                          44,624        31,213                  82,040       61,375

Expenses
Property operating                                          10,272         7,022                  18,625       13,655
Real estate taxes                                            3,364         2,399                   6,220        4,789
Depreciation and amortization                                9,894         6,541                  17,685       12,867
Corporate general and administrative                         1,430           904                   2,853        2,018
Interest                                                    10,939         9,703                  19,313       18,872
Other charges                                                  923           694                   1,505        1,493
                                                           -------       -------                 -------      -------
  Total expenses                                            36,822        27,263                  66,201       53,694
                                                           -------       -------                 -------      -------

Income before loss on sale of
  real estate and allocation to
  minority interest                                           7,802        3,950                  15,839        7,681

Loss on sale of real estate                                 (15,461)           -                 (15,461)           -
                                                            -------       ------                 -------      -------
Income (loss) before allocation to
 minority interest                                          (7,659)        3,950                     378        7,681
(Income) loss allocated to minority
 interests                                                       7           (52)                    (40)         (82)
                                                           -------       -------                 -------      -------
Net income (loss)                                           (7,652)        3,898                     338        7,599
Income allocated to preferred unitholders                    3,661         3,200                   8,042        6,293
Adjustment to reflect redeemable equity
  at redemption value                                        1,290           554                   1,876        1,130
                                                           -------       -------                 -------      -------
Net loss applicable to common units                       $(12,603)     $    144               $  (9,580)   $     176
                                                           =======       =======                 =======      =======
Earnings per common unit:
 General partner                                          $  (0.32)     $   0.01               $   (0.26)   $    0.01
                                                           =======       =======                 ========     =======
 Limited partners                                         $  (0.32)     $   0.01               $   (0.26)   $    0.01
                                                           =======       =======                 ========     =======
Net income applicable to common units:
 General partner                                          $ (9,647)     $     94               $  (7,319)   $     113
 Limited partners                                           (2,956)           50                  (2,261)          63
                                                           -------       -------                 -------      -------
   Total                                                  $(12,603)     $    144               $  (9,580)   $     176
                                                           =======       =======                 ========     =======
Weighted average common units
 outstanding:
  General partner                                           29,859        15,795                  28,584       15,073
  Limited partners                                           9,150         8,505                   8,830        8,505
                                                           -------       -------                 -------       ------
    Total                                                   39,009        24,300                  37,414       23,578
                                                           =======       =======                 =======      =======
Distributions declared per common unit:
 General partner                                          $  0.795      $  0.295               $   1.090    $   0.590
                                                           =======       =======                 =======       ======
 Limited partners                                         $  0.795      $  0.295               $   1.090    $   0.590
                                                           =======       =======                 =======       ======
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
                               Prime Retail, L.P.
                      Consolidated Statements of Cash Flows
                                 (in thousands)
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
                                                                              Six months ended June 30
                                                                        ------------------------------------
                                                                        1998                             1997
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                           <C>

Operating Activities
Net income                                                         $     338                    $       7,599
Adjustments to reconcile net income to
 net cash provided by operating activities:
   Income allocated to minority interests                                 40                               82
   Loss on sale of real estate                                        15,461                                -
   Depreciation                                                       17,047                           11,936                       
   Amortization of deferred financing costs and
    interest rate protection contracts                                 1,329                            1,925
   Amortization of leasing commissions                                   638                              931
   Provision for uncollectible accounts receivable                       530                              475
Changes in operating assets and liabilities:
   Increase in accounts receivable                                   ( 6,030)                          (1,803)                      
   Decrease in due from affiliates, net                               (1,840)                          (1,247)
   (Increase) decrease in other assets                                 3,375                           (2,923)                      
   Increase in accrued interest                                          570                              191                       
   Decrease in accounts payable and other liabilities                (13,922)                          (1,427)
                                                                   ---------                         --------
      Net cash provided by operating activities                       17,536                           15,739

Investing Activities
Proceeds from sale of Prime Transferred Properties                    26,015                                -                       
Acquisition of Horizon, net of cash acquired                                                                               
  and spin-off of HGP                                                (35,124)                               -                       
Purchase of buildings and improvements                               (23,225)                          (8,214)                      
Increase in property under development                               (45,448)                         (19,157)                      
Acquisition of outlet centers                                              -                          (37,658)
                                                                   ---------                         --------
  Net cash used in investing activities                              (77,782)                         (65,029)

Financing Activities
Contributions from general partner:
   Common units                                                            -                           28,130
   Series B preferred units                                                -                            3,800
Principal repayments on notes payable                               (241,512)                         (35,868)                      
Deferred financing fees                                               (2,730)                            (857)                      
Distributions paid                                                   (51,327)                         (19,405)                     
Distributions to minority interests                                     (135)                            (233)                      
                                                                   ---------                         --------                       
  Net cash provided by financing activities                           72,424                           46,351
                                                                   ---------                         --------                       
Increase (decrease) in cash and cash equivalents                      12,178                           (2,939)                      
Cash and cash equivalents at beginning of period                       6,277                            3,918                       
                                                                   ---------                         --------                       
Cash and cash equivalents at end of period                         $  18,455                       $      979
                                                                   =========                         ========
====================================================================================================================================
See accompanying notes to financial statements.
</TABLE>

<PAGE>
                               Prime Retail, L.P.
               Consolidated Statements of Cash Flows (continued)
                                 (in thousands)
--------------------------------------------------------------------------------
                                                                      Six months
                                                                   ended June 30
                                                                        1998
                                                                   -------------

Supplemental Disclosure of Noncash Investing and Financing Activities:

The following assets and liabilities were acquired and sold in connection with
the consummation of the Merger Transactions on June 15, 1998:

Acquisition of Horizon, net of spin-off of HGP:
   Fair value of assets acquired                                     $1,007,329
   Cash paid, net of cash and cash equivalents acquired                 (35,124)
   Common units issued                                                 (270,305)
   Series B convertible preferred units issued                         (118,735)
                                                                    -----------
   Fair value of liabilities assumed                                 $  583,165
                                                                    ===========

Disposition of Prime Transferred Properties:
   Book value of assets disposed                                     $   42,201
   Cash received                                                        (26,015)
   Loss on sale                                                         (15,461)
                                                                    -----------
   Liabilities disposed                                              $      725
                                                                    ===========
================================================================================
See accompanying notes to financial statements.
<PAGE>

                               Prime Retail, L.P.
                   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 L.P.'s
(the "Partnership")  Registration Statement on Form S-4 (File No. 333-50139) for
the year ended December 31, 1997.

Unless the context requires otherwise,  all references to the Partnership herein
mean Prime Retail,  L.P. and those entities owned or controlled by Prime Retail,
L.P.  The  consolidated   financial  statements  include  the  accounts  of  the
Partnership  and the  partnerships  in which  the  Partnership  has  operational
control.  Profits and losses are allocated in  accordance  with the terms of the
agreement of limited partnership of the Partnership. Investments in partnerships
in which the  Partnership  does not have  operational  control are accounted for
under the equity  method of  accounting.  Income  (loss)  applicable to minority
interests  and common  units as  presented  in the  consolidated  statements  of
operations is allocated based on income (loss) before  minority  interests after
income allocated to preferred unitholders.

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  assets and 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  interPartnership  accounts and  transactions  have been
eliminated in consolidation.  Certain prior year financial statement amounts and
related footnote  information have been reclassified to conform with the current
year presentation.

Note 2 - Business Combination

On June 15, 1998, the merger and other transactions  (collectively,  the "Merger
Transactions")  as set forth in the  agreement  and plan of merger (the  "Merger
Agreement") between Prime Retail, Inc. (the Partnership's "General Partner") and
Horizon Group, L.P. ("Horizon") were consummated for an aggregate  consideration
of  approximately   $1,083,100,   including   liabilities  assumed  and  related
transaction costs.

Pursuant to the terms of the Merger Agreement,  the General Partner acquired (i)
all of the outstanding shares of common stock of Horizon at an exchange ratio of
0.20 of a share of the General  Partner's  Series B Convertible  Preferred Stock
and 0.597 of a share of the Partnership's  Common Stock for each share of common
stock of Horizon,  and (ii) all of the outstanding  limited partnership units of
Horizon/Glen  Outlet Centers Limited Partnership  ("Horizon  Partnership") at an
exchange ratio of 0.9193 of a unit of the Partnership's Common Units. A total of
4,846,325 shares of Series B Convertible  Preferred Stock and 14,466,329  shares
of Common  Stock  were  issued by the  General  Partner to the  shareholders  of
Horizon and 3,782,121 Common Units were issued by the Partnership to the limited
partners of Horizon Partnership.
<PAGE>

Immediately prior to the merger,  Horizon  Partnership  contributed 13 of its 35
centers to Horizon Group  Properties,  L.P.,  of which Horizon Group  Properties
L.P.  ("HGP"),  a subsidiary of Horizon,  is the sole general  partner.  HGP was
spun-off from the  Partnership on June 15, 1998. The remaining 22 outlet centers
of Horizon were integrated into the Partnership's  existing  portfolio.  On June
19, 1998,  all of the common equity of HGP was  distributed  to the  convertible
preferred and common shareholders and unitholders of the General Partner and the
Partnership  and the  shareholders  and limited  partners of Horizon and Horizon
Partnership  based  on  their  ownership  in  the  General  Partner  immediately
following  consummation  of the  merger.  One share of  common  stock of HGP was
distributed  for  every 20  shares of  Common  Stock  and  Series C  Convertible
Preferred  Stock of the  General  Partner  and for every 20 Common  Units of the
Partnership. Additionally, approximately 1.196 shares of the common stock of HGP
were distributed for every 20 shares of Series B Convertible  Preferred Stock of
the General Partner.

In connection with the Merger Transactions, the Partnership sold Indiana Factory
Shops and Nebraska Crossing Factory Shops (collectively,  the "Prime Transferred
Properties") to HGP for an aggregate  consideration  of $26,015,  resulting in a
loss of $15,461. Proceeds from the sale of the Prime Transferred Properties were
used to repay indebtedness associated with the Horizon properties.

Concurrent with the closing of the merger, a special cash  distribution was made
aggregating  $21,871 consisting of $0.50 per unit to holders of Common Units and
Series C Preferred  Units and $0.60 per unit to holders of Series B  Convertible
Preferred  Units.  Shareholders  of  Horizon  and  limited  partners  of Horizon
Partnership did not participate in these distributions.

The merger has been  accounted for using the purchase  method of accounting  and
the purchase  price of $1,083,100  was allocated to the assets  acquired and the
liabilities assumed based on estimates of their respective fair values.  Certain
assumptions  were  made  which  management  of  the  Partnership   believes  are
reasonable.  The Partnership  expects to finalize the purchase price  allocation
before  the  end of  1998.  The  final  allocation  is not  expected  to  differ
materially from the allocation made at June 30, 1998.

The  operating  results of those  properties  acquired have been included in the
Partnership's  consolidated  results  of  operations  commencing  on the date of
acquisition. The operating results of the Prime Transferred Properties have been
included in the  Partnership's  consolidated  results of operations  through the
date of disposition.

The following unaudited pro forma summary financial  information gives effect to
the Merger Transactions as if they had occurred on January 1, 1997.
 <PAGE>


--------------------------------------------------------------- ----------------
                                                       Six months ended June 30
                                                       ------------------------
                                                         1998              1997
--------------------------------------------------------------------------------

Total revenues                                       $ 135,620        $ 126,862
                                                     =========        ==========
Net income from continuing operations                $  20,330        $  17,014
                                                     =========        ==========
Net income applicable to common units:               
     General partner                                 $     361        $  (2,538)
     Limited partners                                      106           (1,054)
                                                     ---------        ----------
          Total                                      $     467        $  (3,592)
                                                     =========        ==========
Earnings (loss) per common unit:
     General partner                                 $    0.01        $   (0.09)
                                                     =========        ==========
     Limited partner                                 $    0.01        $   (0.09)
                                                     =========        ==========
Weighted average units outstanding:
     General                                            41,772            29,551
     Limited parnters                                   12,277            12,277
                                                     ---------        ----------
          Total                                         54,049            41,828
                                                     =========        ==========
================================================================================

These  unaudited pro forma results are presented for  comparative  purposes only
and are not necessarily indicative of what the Partnership's actual consolidated
results  of  operations  would  have  been  for  the  periods  presented  if the
Transactions  had been  completed  at January 1,  1997,  nor do they  purport to
represent the Partnership's future consolidated results of operations.

Note 3 - Notes Payable

On June 15, 1998, the  Partnership  closed on $292,000 of loan  facilities  with
Nomura  Asset  Capital  Corporation.  The  transaction  provided  (i) a $180,000
nonrecourse  permanent  loan (the  "Permanent  Loan") and (ii) a  $112,000  full
recourse  bridge  loan of which  $95,000  was funded (the  "Bridge  Loan").  The
Permanent Loan is (i)  collateralized  by first mortgages on four factory outlet
centers,  (ii) bears a fixed rate of interest of 6.99%,  (iii) requires  monthly
principal and interest payments pursuant to an approximate 26-year  amortization
schedule,   and  (iv)  matures  on  June  15,  2008.  The  Bridge  Loan  is  (i)
collateralized  by first mortgages on six factory outlet  centers,  (ii) bears a
variable  rate of  interest  equal to 30-day  LIBOR plus 1.35%,  (iii)  requires
monthly interest-only payments, and (iv) matures on June 15, 2001.

As of June 30, 1998, the Partnership is a guarantor or otherwise  obligated with
$41,857 of HGP's  indebtedness,  including  $12,200 of  obligations  under HGP's
$108,205  three-year  secured  credit  facility.  The  Partnership  and  HGP are
continuing  to seek the consent of certain  parties to the  assumption by HGP or
its affiliates of $13,864 of indebtedness in connection with the spin-off.

On  April  1,  1998,  Horizon  consummated  an  agreement  with  Castle  & Cooke
Properties,  Inc. which released Horizon from its forward  obligations under its
long-term  lease of the Dole  Cannery  outlet  center in  Honolulu,  Hawaii,  in
connection  with the  formation of a joint  venture with certain  affiliates  of
Castle & Cooke,  Inc.  ("Castle & Cooke") to operate  such  property.  Under the
terms of the agreement, Castle 
<PAGE>

& Cooke Properties, Inc., the landlord of the project and an affiliate of Castle
& Cooke,  released Horizon from all forward  obligations under the lease,  which
expires in 2045,  in exchange for  Horizon's  conveyance to the joint venture of
its rights and  obligations  under such lease.  The agreement also provided that
Horizon transfer to such joint venture  substantially all of Horizon's  economic
interest in its outlet center in Lake Elsinore,  California  together with legal
title to vacant property  located  adjacent to the center.  As of June 30, 1998,
the Partnership  holds a small minority interest in the joint venture but has no
obligation or commitment with respect to the post-closing operations of the Dole
Cannery project.  However,  the Partnership is legally  obligated for $30,906 of
mortgage  indebtedness  outstanding at June 30, 1998 which is secured by a first
mortgage on the Lake Elsinore  outlet  center.  In addition,  Castle & Cooke has
provided the  Partnership a guaranty,  without  limitation,  of the  obligations
under the $30,906 mortgage note.

Note 4 - Legal Proceedings

In the ordinary  course of business the  Partnership 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 Partnership.

The  Partnership  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 Partnership and its related  entities  overcharged  tenants for
common area maintenance expenditures. The outcome of, and the ultimate liability
of the  Partnership,  if any, from, this lawsuit cannot  currently be predicted.
Management  believes  that the  Partnership  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 unit and square foot information)


Introduction

The following  discussion and analysis of the consolidated  financial  condition
and results of operations of Prime Retail,  L.P. (the  "Partnership")  should be
read in  conjunction  with  the  Consolidated  Financial  Statements  and  Notes
thereto.  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.  Such forward-looking  statements are subject to certain
risks and  uncertainties;  including,  but not limited to, the effects of future
events on the Partnership's financial performance; the risk that the Partnership
may be unable to finance its planned  acquisition  and  development  activities;
risks related to the retail industry in which the  Partnership's  outlet centers
compete,  including the potential  adverse impact of external  factors,  such as
inflation,  consumer  confidence,  unemployment  rates and  consumer  tastes and
preferences; risks associated with the Partnership's property acquisitions, such
as  the  lack  of  predictability  with  respect  to  financial  returns;  risks
associated with the Partnership'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;  and 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
Partnership's properties.

Merger with Horizon Group, Inc.

On June 15, 1998, the merger and other transactions  (collectively,  the "Merger
Transaction")  between Prime Retail, Inc. (the Partnership's  "General Partner")
and  Horizon  Group,   Inc.   ("Horizon")  were  consummated  for  an  aggregate
consideration of approximately  $1,083,100,  including  liabilities  assumed and
related  transaction costs. The merger has been accounted for using the purchase
method of accounting  and the purchase  price of $1,083,100 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  Partnership's  consolidated
results of operations  commencing on June 15, 1998.  See  "Liquidity and Capital
Resources -- Business Combination" for further information.

Portfolio Growth

The Partnership has grown by developing and acquiring factory outlet centers and
expanding  certain of its existing  factory  outlet  centers.  As  summarized in
TABLE 1,  the Partnership's  factory outlet portfolio  consisted of 49 operating
factory outlet centers  totaling  13,706,000  square feet of gross leasable area
("GLA") at June 30,  1998,  compared  to 24  operating  factory  outlet  centers
totaling 6,138,000 square feet of GLA at June 30, 1997.
<PAGE>

During  the six months  ended  June 30,  1998,  the  Partnership  opened one new
factory  outlet center and four  expansions to existing  factory  outlet centers
totaling  289,000  square feet of GLA in the aggregate.  In connection  with the
Merger  Transactions,  the  Partnership  acquired and integrated 22 of Horizon's
factory outlet centers into its existing  portfolio adding 6,626,000 square feet
of  GLA  in  the  aggregate.   Additionally,   in  connection  with  the  Merger
Transactions,  the Company  sold two  factory  outlet  centers to Horizon  Group
Properties,  Inc. ("HGP") totaling 426,000 square feet of GLA. During the period
July 1, 1997 through  December 31, 1997, the Partnership  purchased four factory
outlet  centers  totaling  863,000  square feet of GLA and opened  expansions to
existing   factory  outlet  centers   totaling   224,000  square  feet  of  GLA.
Additionally, the Partnership acquired its joint venture partner's 25% ownership
interest in Buckeye Factory Shops Limited  Partnership  ("Buckeye") on September
2, 1997,  and now owns 100% of this factory  outlet  center with 205,000  square
feet of GLA.

The significant increase in the number of the Partnership's operating properties
and total GLA since June 30, 1997 are collectively referred to as the "Portfolio
Expansion and the Horizon Merger".
<PAGE>
<TABLE>


TABLE 1 - Portfolio of Properties as of June 30, 1998
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Grand           GLA      Percentage
Factory Outlet Centers                                                     Phase          Opening Date      (Sq. Ft.)      Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>               <C>           <C>

Prime Outlets at Niagara Falls USA (2) - Niagara Falls, New York.......        I             July 1992        300,000            98%
                                                                              II           August 1995        234,000            87
                                                                                                              -------           ---
                                                                                                              534,000            93

Prime Outlets at Kittery (3) - Kittery Maine...........................        I            April 1984         25,000           100
                                                                              II              May 1984         78,000            99
                                                                             III           August 1989         18,000            99
                                                                              IV              May 1998         10,000           100
                                                                                                              -------           ---
                                                                                                              131,000            99

Prime Outlets at Fremont (4) - Fremont, Indiana........................        I          October 1985        118,000           100
                                                                              II         November 1993         51,000           100
                                                                             III          October 1994         60,000            96
                                                                                                              -------           ---
                                                                                                              229,000            99

Prime Outlets at Birch Run (4) - Birch Run, Michigan...................    I-XIV               Various        583,000            99
                                                                              XV             June 1996          6,000           100
                                                                            XVII             June 1996          2,000           100
                                                                            XVII                  1997         15,000            99
                                                                           XVIII                  1997        118,000           100
                                                                                                              -------           ---
                                                                                                              724,000            99

Prime Outlets at Latham (3) - Latham, New York.........................        I           August 1987         43,000           100

Prime Outlets at Michigan City (4) - Michigan City, Michigan...........        I         November 1987        199,000            98
                                                                              II              May 1988        130,000           100
                                                                             III             July 1991         36,000            85
                                                                              IV             July 1994         42,000           100
                                                                               V         December 1994         26,000            98
                                                                              VI              May 1995         58,000            99
                                                                                                              -------           ---
                                                                                                              491,000            98

Prime Outlets at Williamsburg (4) - Williamsburg, Virginia.............        I            April 1988         67,000            99
                                                                              II         November 1988         60,000           100
                                                                             III          October 1990         49,000           100
                                                                              IV                  1995         98,000           100
                                                                                                              -------           ---
                                                                                                              274,000           100

Prime Outlets at Kenosha (4) - Kenosha, Wisconsin......................        I        September 1988         89,000           100
                                                                              II             July 1989         65,000            97
                                                                             III              May 1990        115,000            99
                                                                                                              -------           ---
                                                                                                              269,000            99


Prime Outlets at Silverthorne (4) - Silverthorne, Colorado.............        I         November 1988         95,000            96
                                                                              II         November 1990         75,000            98
                                                                             III         November 1993         88,000            91
                                                                                                              -------           ---
                                                                                                              258,000            95

Prime Outlets at Edinburgh (4) - Edinburgh, Indiana....................        I                  1988        156,000            99
                                                                              II         November 1994        142,000           100
                                                                                                              -------           ---
                                                                                                              298,000            99

Prime Outlets at Burlington (4) - Burlington, Washington ..............        I              May 1989         89,000            96
                                                                              II          October 1989         36,000            94
                                                                             III            April 1993         49,000           100
                                                                                                              -------           ---
                                                                                                              174,000            97
</TABLE>

<PAGE>
<TABLE>

TABLE 1 - Portfolio of Properties as of June 30, 1998
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Grand            GLA     Percentage
Factory Outlet Centers                                                     Phase          Opening Date        (Sq. Ft.)    Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>                 <C>         <C>
Prime Outlets at Queenstown (4) - 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

Prime Outlets at Hillsboro (4) - Hillsboro, Texas......................        I          October 1989         95,000            92
                                                                              II          January 1992        101,000           100
                                                                             III              May 1995        163,000            98
                                                                                                              -------           ---
                                                                                                              359,000            97

Prime Outlets at Oshkosh (4) - Oshkosh, Wisconsin......................        I         November 1989        215,000            95
                                                                              II             July 1991         45,000            99
                                                                                                              -------           ---
                                                                                                              260,000            95

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

Prime Outlets at Gilroy (4) - Gilroy, California.......................        I          January 1990         94,000            95
                                                                              II           August 1991        109,000           100
                                                                             III          October 1992        137,000            97
                                                                              IV             July 1994        170,000            97
                                                                               V         November 1995         69,000           100
                                                                                                              -------           ---
                                                                                                              579,000            97

Prime Outlets at Perryville (4) - Perryville, Maryland.................        I             June 1990        148,000            95

Prime Outlets at Sedona (6) - Sedona, Arizona .........................        I           August 1990         82,000           100

Prime Outlets at San Marcos - San Marcos, Texas........................        I           August 1990        177,000            98
                                                                              II           August 1991         70,000           100
                                                                             III           August 1993        117,000           100
                                                                            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 (2) - Anderson, California...................        I           August 1990        165,000            97

Prime Outlets at Post Falls (6) - Post Falls, Idaho ...................        I             July 1991        111,000            93
                                                                              II             July 1992         68,000            84
                                                                                                              -------           ---
                                                                                                              179,000            89

Prime Outlets at Ellenton - Ellenton, Florida..........................        I         October 1991         187,000            99
                                                                              II          August 1993         123,000            99
                                                                             III         October 1996          30,000           100
                                                                                                              -------           ---
                                                                                                              340,000            99

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            91
                                                                              II        December 1992          32,000           100
                                                                             III           March 1998          20,000            98
                                                                                                              -------           ---
                                                                                                              146,000            94
</TABLE>

<PAGE>
<TABLE>
TABLE 1 - Portfolio of Properties as of June 30, 1998
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand              GLA      Percentage
Factory Outlet Centers                                                     Phase          Opening Date      (Sq. Ft.)      Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>               <C>           <C>
Prime Outlets at Conroe (4) - Conroe, Texas............................        I         January 1992          93,000            88%
                                                                              II            June 1994         163,000            96
                                                                             III         October 1994          26,000            99
                                                                                                              -------           ---
                                                                                                              282,000            93

Prime Outlets at Woodbury (4) - Woodbury, Minnesota....................        I            July 1992         129,000            87
                                                                              II        November 1993         100,000            93
                                                                             III          August 1994          21,000           100
                                                                                                              -------           ---
                                                                                                              250,000            90

Prime Outlets at Calhoun (4) - Calhoun, Tennessee......................        I         October 1992         123,000           100
                                                                              II         October 1995         131,000            98
                                                                                                              -------           ---
                                                                                                              254,000            99

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

Prime Outlets at Bend (6) - Bend, Oregon...............................        I        December 1992          97,000            94

Prime Outlets at Jeffersonville II (4) - Jeffersonville, Ohio..........        I           March 1993         126,000            84
                                                                              II          August 1993         123,000            70
                                                                             III         October 1994          65,000            77
                                                                                                              -------           ---
                                                                                                              314,000            77

Prime Outlets at Jeffersonville I - Jeffersonville, Ohio................       I            July 1993         186,000            97
                                                                              II        November 1993         100,000           100
                                                                             IIB        November 1994          13,000            75
                                                                            IIIA          August 1996          35,000           100
                                                                            IIIB           March 1997          73,000            88
                                                                                                              -------           ---
                                                                                                              407,000            96

Prime Outlets at Gainesville - Gainesville, Texas......................        I           August 1993        210,000            85
                                                                              II         November 1994        106,000            95
                                                                                                              -------           ---
                                                                                                              316,000            88

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

Prime Outlets at Oxnard (7) - Oxnard, California.......................        I             June 1994        148,000            91

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

Prime Outlets at Huntley - Huntley, Illinois...........................        I           August 1994        192,000            96
                                                                              II         November 1995         90,000            88
                                                                                                              -------           ---
                                                                                                              282,000            94


Prime Outlets at Florida City - Florida City, Florida..................        I        September 1994        208,000            93

Prime Outlets at Pismo Beach (4) - Pismo Beach, California..............       I         November 1994        148,000            98
</TABLE>

<PAGE>
<TABLE>


TABLE 1 - Portfolio of Properties as of June 30, 1998
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand            GLA        Percentage
Factory Outlet Centers                                                     Phase          Opening Date      (Sq. Ft.)      Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>            <C>                <C>           <C>

Prime Outlets at Tracy  (4) - Tracy, California........................        I         November 1994        153,000            97%

Prime Outlets at Vero Beach (4) - Vero Beach, Florida..................        I         November 1994        210,000            93
                                                                              II           August 1995        116,000            96
                                                                                                             --------           ---
                                                                                                              326,000            94

Prime Outlets at Waterloo (4) - Waterloo, New York.....................        I            March 1995        208,000            99
                                                                              II        September 1996        115,000           100
                                                                             III            April 1997         68,000            90
                                                                                                             --------           ---
                                                                                                              391,000            98

Prime Outlets at Odessa - Odessa, Missouri.............................        I             July 1995        191,000           100
                                                                              II         November 1996        105,000            56
                                                                                                             --------           ---
                                                                                                              296,000            84

Prime Outlets at Darien (8) - Darien, Georgia..........................        I             July 1995        238,000            88
                                                                             IIA         November 1995         49,000            99
                                                                             IIB             July 1996         20,000           100
                                                                                                             --------           ---
                                                                                                              307,000            91

Prime Outlets at New River (9) - Phoenix, Arizona......................        I        September 1995        217,000            95
                                                                              II        September 1996        109,000            93
                                                                                                             --------           ---
                                                                                                              326,000            95

Prime Outlets at Gulfport (10) - Gulfport, Mississippi.................        I         November 1995        228,000           100
                                                                             IIA         November 1996         40,000            91
                                                                             IIB         November 1997         38,000            83
                                                                                                             --------           ---
                                                                                                              306,000            97

Prime Outlets at Lodi (11) - Burbank, Ohio.............................        I         November 1996        205,000            95
                                                                             IIA              May 1998         33,000            93
                                                                                                             --------           ---
                                                                                                              238,000            95

Prime Outlets at Gaffney - Gaffney, South Carolina.....................        I         November 1996        235,000            95

Prime Outlets at Lee (4) - Lee, Massachusetts..........................        I             June 1997        224,000            99

Prime Outlets at Lebanon -  Lebanon, Tennessee.........................        I            April 1998        208,000            89
                                                                                                             --------           ---
Total Factory Outlet Centers (12)                                                                          13,706,000            95%
                                                                                                           ==========           ====
====================================================================================================================================
</TABLE>

Notes:
 (1) Percentage  reflects fully executed leases as of June 30, 1998 as a percent
     of square feet of GLA.
(2) The Company  acquired this factory  outlet center on December 2, 1997 from
    an unrelated third party.
(3) The Company  acquired this factory  outlet center on October 29, 1997 from
    an unrelated  third party.
(4) The Company acquired this factory outlet center on June 15, 1998 as a result
    of its merger with Horizon.
(5) 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 69% leased as of June 30, 1998.
(6)   The Company acquired this factory outlet center on February 13, 1997 from
      an unrelated third party.
(7)   On February 7, 1997,  the Company  purchased an additional  20% interest
      from a joint venture  partner,  increasing the Company's ownership
      interest in this property to 50%.
(8)   The Company  operates  this  property  pursuant  to a long-term  ground
      lease under which the Company  receives  the economic benefit of a 100%
      ownership interest.
(9)   The Company owns 50% of this factory outlet center in a joint venture
      partnership with an unrelated third party.
(10)  The real  property  on which this  outlet  center is located is subject to
      a  long-term  ground  lease.  The  Company receives the economic benefit
      of a 100% ownership interest.
(11)  On September 2, 1997, the Company purchased its joint venture  partner's
      25% partnership  interest in Buckeye Factory Shops Limited  Partnership
      and now owns 100% of this factory outlet center.
(12)  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 June 30, 1998.
<PAGE>

Results of Operations

Comparison  of the three  months  ended June 30, 1998 to the three  months ended
June 30, 1997

Summary

The Partnership  reported net income (loss) of $(7,652) and $3,898 for the three
months ended June 30, 1998 and 1997,  respectively.  The 1998 results  include a
second quarter loss on the sale of real estate of $15,461 in connection with the
Merger  Transactions.  For the three months  ended June 30,  1998,  the net loss
applicable to common unitholders was $12,603,  or $0.32 per common unit. For the
three months ended June 30, 1997,  net income  applicable to common  unitholders
was $144, or $0.01 per common unit.

Revenues

Total revenues were $44,624 for the three months ended June 30, 1998 compared to
$31,213 for the three  months ended June 30,  1997,  an increase of $13,411,  or
43.0%.  Base  rents  increased  $9,071,  or  47.7%,  in 1998  compared  to 1997.
Straight-line  rents  (included  in base rents) were $286 and $127 for the three
months ended June 30, 1998 and 1997, 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 $453, or 62.8%, during the three months
ended June 30,  1998  compared  to the same period in 1997.  This  increase  was
attributable to the Portfolio  Expansion and the Horizon  Merger.  For the three
months ended June 30, 1998, same-space sales in centers owned by the Partnership
increased  1.0%  compared  to the same  period  in 1997.  "Same-space  sales" is
defined as the weighted  average sales per square foot reported by merchants for
space open since January 1, 1997. The  Partnership's  pro forma same-space sales
for the year ended December 31, 1997 were $255.00 per square foot. For the three
months ended June 30, 1998, same-store sales increased 2.0% compared to the same
period in 1997.  "Same-store sales" is defined as the weighted average sales per
square foot  reported by  merchants  for stores  opened  since  January 1, 1997.
Tenant reimbursements,  which represent the contractual recovery from tenants of
certain  operating  expenses,  increased by $4,265,  or 47.6%,  during the three
months ended June 30, 1998 over the same period in 1997.  These  increases  were
primarily due to the Portfolio Expansion and the Horizon Merger.

Interest and other  income  decreased by $378,  or 15.0%,  to $2,139  during the
three  months  ended June 30, 1998 as  compared  to $2,517 for the three  months
ended June 30, 1997. The decrease reflects reductions in (i) interest income of
$474, (ii) gains on outlot sales of $456, (iii) property management fees of $36,
and (iv) other ancillary  income of $60.  Partially  offsetting these reductions
were   higher  (i)  lease   termination   income  of  $315,   (ii)  income  from
unconsolidated  investment  partnerships of $175, and (iii) push cart, temporary
tenant  and late fee  income of $158.  The  reduction  in  interest  income  was
primarily  the  result  of the use of a portion  of the  expansion  loan  escrow
account to fund certain of its development  activities during 1997 and 1998. The
expansion loan escrow account is included in restricted cash in the Consolidated
Balance Sheets.
<PAGE>
Expenses

Property  operating  expenses  increased by $3,250, or 46.3%, to $10,272 for the
three months ended June 30, 1998 compared to $7,022 for the same period in 1997.
Real estate taxes  increased by $965,  or 40.2%,  to $3,364 for the three months
ended June 30, 1998,  from $2,399 in the same period for 1997.  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 $3,394, or 51.9%, to $9,894 for the three
months ended June 30, 1998,  compared to $6,541 for 1997. This increase  results
from the depreciation  and amortization of assets  associated with the Portfolio
Expansion and the Horizon Merger.

TABLE 2 - Components of Depreciation and Amortization Expense

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

--------------------------------------------------------------------------------
                                                              Three months ended
                                                                    June 30
                                                     ---------------------------
                                                             1998           1997
--------------------------------------------------------------------------------

Building and improvements                                  $5,669         $3,450
Land improvements                                             889            727
Tenant improvements                                         2,743          1,649
Furniture and fixtures                                        267            198
Leasing commissions(1)                                        326            517
                                                           ------         ------
Total                                                      $9,894         $6,541
                                                          ========        ======
================================================================================

Note:
 (1) In accordance  with  generally  accepted  accounting  principles  ("GAAP"),
     leasing  commissions  are  classified  as  intangible  assets.  Therefore
     the amortization of leasing  commissions is reported as a component of
     depreciation and amortization expense.

TABLE 3 - Components of Interest Expense

The components of interest expense are summarized as follows:

--------------------------------------------------------------------------------
                                                              Three months ended
                                                                   June 30
                                                     ---------------------------
                                                             1998           1997
--------------------------------------------------------------------------------

Interest incurred                                         $11,508        $9,721
Interest capitalized                                       (1,389)         (975)
Interest earned on interest rate protection contracts           -           (24)
Amortization of deferred financing costs                      481           622
Amortization of interest rate protection contracts            339           359
                                                          -------        ------
Total                                                     $10,939        $9,703
                                                         ========        ======
================================================================================


As shown in TABLE 3,  interest  expense for the three months ended June 30, 1998
increased by $1,236, or 12.7%, to $10,939 compared to $9,703 for the same period
in 1997.  This increase reflects (i) higher interest incurred of $1,787 and (ii)
a reduction in interest  earned on interest  rate  protection  contracts of $24.
Partially  offsetting these items were (i) an increase in the amount of interest
capitalized in 
<PAGE>

connection with development projects of $414 and (ii) a decrease in amortization
of deferred financing costs of $161.

The increase in interest  incurred is primarily  attributable  to an increase of
approximately  $104,463 in the Partnership's average debt outstanding during the
three months ended June 30, 1998  compared to the same period in 1997  partially
offset by a slight decrease in the weighted  average interest rate for the three
months  ended June 30, 1998  compared to the same period in 1997.  The  weighted
average  interest  rates  were  7.25% and  7.32% for the 1998 and 1997  periods,
respectively.

Other charges  increased by $229,  or 33.0%,  to $923.  This  increase  reflects
higher ground lease expense of $29,  marketing costs of $69, and other ancillary
charges of $131.

In connection with re-leasing space to new merchants,  the Partnership  incurred
$245 and $89 in capital expenditures during the three months ended June 30, 1998
and 1997, respectively.

Loss on Sale of Real Estate

In connection with the closing of its merger with Horizon,  the Partnership sold
Indiana Factory Shops and Nebraska  Crossing  Factory Shops  (collectively,  the
"Prime  Transferred  Properties") to Horizon Group  Properties,  L.P. ("HGP") on
June 15, 1998 for an aggregate  consideration of $26,015  resulting in a loss of
$15,461.

Comparison of six months ended June 30, 1998 to six months ended June 30, 1997

Summary

The Partnership  reported net income of $338 and $7,599 for the six months ended
June 30, 1998 and 1997, respectively.  The 1998 results include a second quarter
loss on the sale of real estate of $15,461 in connection with the Company's sale
of the Prime  Transferred  Properties  to HGP. For the six months ended June 30,
1998, the net loss  applicable to common  unitholders  was $9,580,  or $0.26 per
common unit. For the six months ended June 30, 1997,  the net income  applicable
to common unitholders was $176, or $0.01 per common unit.

Revenues

Total  revenues  were $82,040 for the six months ended June 30, 1998 compared to
$61,375 for the six months  ended June 30,  1997,  an  increase  of $20,665,  or
33.7%.  Base  rents  increased  $14,109,  or 38.1%,  in 1998  compared  to 1997.
Straight-line  rents  (included  in base  rents)  were $261 and $252 for the six
months ended June 30, 1998 and 1997, 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  $649, or 46.7%,  during the six months
ended June 30,  1998  compared  to the same period in 1997.  This  increase  was
attributable  to the  Portfolio  Expansion and the Horizon  Merger.  For the six
months ended June 30, 1998, same-space sales in centers owned by the Partnership
increased by 0.5% compared to the same period in 1997.  For the six months ended
June 30, 1998,  same-store  sales were flat compared to the same period in 1997.
Tenant reimbursements,  which represent the contractual recovery from tenants of
certain operating expenses, increased by $6,059, or 33.8%, during the six months
ended June 30, 1998 over the same period in 1997. These increases were primarily
due to the Portfolio Expansion and the Horizon Merger.

Interest and other income  decreased by $152,  or 3.0%, to $4,843 during the six
months  ended June 30, 1998 as compared to $4,995 for the six months  ended June
30, 1997. The decrease reflects reductions in 
<PAGE>

Expenses

Property  operating  expenses  increased by $4,970, or 36.4%, to $18,625 for the
six months ended June 30, 1998  compared to $13,655 for the same period in 1997.
Real estate taxes  increased by $1,431,  or 29.9%,  to $6,220 for the six months
ended June 30, 1998,  from $4,789 in the same period for 1997.  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 $4,887, or 38.0%, to $17,758 for the six
months ended June 30, 1998,  compared to $12,871 for 1997. This increase results
from the depreciation  and amortization of assets  associated with the Portfolio
Expansion and the Horizon Merger.

TABLE 4 -  Components of Depreciation and Amortization Expense

 The  components of  depreciation  and  amortization  expense are  summarized as
 follows:
--------------------------------------------------------------------------------
                                                              Six months ended
                                                                  June 30
                                                            --------------------
                                                             1998           1997
--------------------------------------------------------------------------------

Building and improvements                                  $9,993       $  6,708
Land improvements                                           1,719          1,354
Tenant improvements                                         4,818          3,476
Furniture and fixtures                                        517            398
Leasing commissions(1)                                        638            931
                                                          -------        -------
Total                                                     $17,685        $12,867
                                                          =======        =======
================================================================================

Note:
(1)   In accordance  with  generally  accepted  accounting  principles  ("GAAP")
      leasing  commissions  are  classified as intangible assets.  Therefore,
      the amortization of leasing commissions is reported as a component of
      depreciation and amortization expense.
<PAGE>

TABLE 5 - Components of Interest Expense

The components of interest expense are summarized as follows:

--------------------------------------------------------------------------------
                                                                Six months ended
                                                                     June 30
                                                     ---------------------------
                                                             1998           1997
--------------------------------------------------------------------------------

Interest incurred                                         $20,784       $18,830
Interest capitalized                                       (2,777)       (1,820)
Interest earned on interest rate protection contracts         (23)          (63)
Amortization of deferred financing costs                      648         1,230
Amortization of interest rate protection contracts            681           695
                                                           ------        -------
Total                                                     $19,313       $18,872
                                                          =======        =======
================================================================================

As shown in TABLE 5,  interest  expense  for the six months  ended June 30, 1998
increased by $441, or 2.3%,  to $19,313  compared to $18,872 for the same period
in 1997. This increase  reflects (i) higher interest incurred of $1,954 and (ii)
a reduction in interest  earned on interest  rate  protection  contracts of $40.
Partially  offsetting these items were (i) an increase in the amount of interest
capitalized in connection with development  projects of $957 and (ii) a decrease
in amortization of deferred financing costs of $596.

The increase in interest  incurred is primarily  attributable to (i) an increase
of approximately  $54,483 in the Partnership's  average debt outstanding  during
the six months ended June 30, 1998  compared to the same period in 1997 and (ii)
a slight increase in the weighted average interest rate for the six months ended
June 30, 1998 compared to the same period in 1997. The weighted average interest
rates were 7.22% and 7.18% for the 1998 and 1997 periods, respectively.

In connection with re-leasing space to new merchants,  the Partnership  incurred
$441 and $140 in capital  expenditures during the six months ended June 30, 1998
and 1997, respectively.

Loss on Sale of Real Estate

In connection  with the closing of its merger with Horizon on June 15, 1998, the
Partnership  sold  the  Prime  Transferred  Properties  to HGP for an  aggregate
consideration of $26,015 resulting in a loss of $15,461.

Liquidity and Capital Resources

Sources and Uses of Cash

For the six  months  ended  June  30,  1998,  net  cash  provided  by  operating
activities was $17,536,  cash used in investing  activities was $77,782, and net
cash provided by financing activities was $72,424.

The primary uses of cash for  investing  activities  during the six months ended
June  30,  1998  included:   (i)  costs  associated  with  the  development  and
construction  of new factory outlet  centers and expansions to existing  factory
outlet centers aggregating 751,000 square feet of GLA which are expected to open
during 1998, (ii) costs associated with the completion of expansions to existing
factory  outlet  centers  aggregating  224,000  square feet of GLA which  opened
during 1997,  and (iii) costs for  pre-development  activities  associated  with
future developments.

<PAGE>

The primary source of cash from financing activities during the six months ended
June 30, 1998 was proceeds from new  borrowings of $368,128.  Such proceeds were
partially offset by (i) principal repayments on notes payable of $241,512,  (ii)
distributions of $51,462, and (iii) deferred financing costs of $2,730.

Property Acquisitions

During 1998, the Partnership will explore acquisitions of factory outlet centers
in the  United  States  and  Europe  as  well  as  consider  possible  strategic
acquisitions of other assets in the retail sector. The Partnership has evaluated
and is evaluating  such  opportunities  and prospects and will continue to do so
throughout  1998.  The  Partnership  cannot predict if any  transaction  will be
consummated, nor the terms or form of consideration required.

Business Combination

On June 15, 1998, the merger and other transactions  (collectively,  the "Merger
Transactions")  as set forth in the  agreement  and plan of merger (the  "Merger
Agreement")   between  the  Partnership's   General  Partner  and  Horizon  were
consummated  for  an  aggregate   consideration  of  approximately   $1,083,100,
including liabilities assumed and related transaction costs.

Pursuant to the terms of the Merger Agreement,  the General Partner acquired (i)
all of the outstanding shares of common stock of Horizon at an exchange ratio of
0.20 of a share of the General  Partner's  Series B Convertible  Preferred Stock
and 0.597 of a share of the  General  Partner's  Common  Stock for each share of
common stock of Horizon,  and (ii) all of the  outstanding  limited  partnership
units of Horizon/Glen Outlet Centers Limited Partnership ("Horizon Partnership")
at an exchange  ratio of 0.9193 of a unit of the  Partnership's  Common Units. A
total of 4,846,325 shares of Series B Convertible Preferred Stock and 14,466,329
shares of Common Stock were issued by the General Partner to the shareholders of
Horizon and 3,782,121 Common Units were issued by the Partnership to the limited
partners of Horizon Partnership.

Immediately prior to the merger,  Horizon  Partnership  contributed 13 of its 35
centers to Horizon  Group  Properties,  L.P.,  of which  HGP,  a  subsidiary  of
Horizon,  is the sole general partner.  HGP was spun-off from the Partnership on
June 15, 1998. The remaining 22 outlet centers of Horizon were  integrated  into
the Partnership's existing portfolio. On June 19, 1998, all of the common equity
of HGP was distributed to the convertible  preferred and common shareholders and
unitholders of the General Partner and the Partnership and the  shareholders and
limited partners of Horizon and Horizon  Partnership based on their ownership in
the General Partner immediately following  consummation of the merger. One share
of common stock of HGP was  distributed  for every 20 shares of Common Stock and
Series C  Convertible  Preferred  Stock of the General  Partner and for every 20
Common Units of the Partnership. Additionally, approximately 1.196 shares of the
common stock of HGP were distributed for every 20 shares of Series B Convertible
Preferred Stock of the General Partner.

In  connection  with the Merger  Transactions,  the  Partnership  sold the Prime
Transferred  Properties  to  HGP  for an  aggregate  consideration  of  $26,015,
resulting in a loss of $15,461.  Proceeds from the sale of the Prime Transferred
Properties  were  used  to  repay  indebtedness   associated  with  the  Horizon
properties.

Concurrent with the closing of the merger, a special cash  distribution was made
aggregating  $21,871 consisting of $0.50 per unit to holders of Common Units and
Series C Preferred  Units and $0.60 per unit to holders of Series B  Convertible
Preferred  Units.  Shareholders  of  Horizon  and  limited  partners  of Horizon
Partnership did not participate in these distributions.
<PAGE>

The merger has been  accounted for using the purchase  method of accounting  and
the purchase  price of $1,083,100  was allocated to the assets  acquired and the
liabilities assumed based on estimates of their respective fair values.  Certain
assumptions  were  made  which  management  of  the  Partnership   believes  are
reasonable.  The Partnership  expects to finalize the purchase price  allocation
before  the  end of  1998.  The  final  allocation  is not  expected  to  differ
materially from the allocation made at June 30, 1998.

The  operating  results of those  properties  acquired have been included in the
Partnership's  consolidated  results  of  operations  commencing  on the date of
acquisition. The operating results of the Prime Transferred Properties have been
included in the  Partnership's  consolidated  results of operations  through the
date of disposition.

Legal Proceedings

In the ordinary  course of business the  Partnership 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 Partnership.

The  Partnership  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 Partnership and its related  entities  overcharged  tenants for
common area maintenance expenditures. The outcome of, and the ultimate liability
of the  Partnership,  if any, from, this lawsuit cannot  currently be predicted.
Management  believes  that the  Partnership  has acted  properly  and intends to
defend this lawsuit vigorously.

Debt Transactions

On June 15, 1998, the  Partnership  closed on $292,000 of loan  facilities  with
Nomura  Asset  Capital  Corporation.  The  transaction  provided  (i) a $180,000
nonrecourse  permanent  loan (the  "Permanent  Loan") and (ii) a  $112,000  full
recourse  bridge  loan of which  $95,000  was funded (the  "Bridge  Loan").  The
Permanent Loan is (i)  collateralized  by first mortgages on four factory outlet
centers,  (ii) bears a fixed rate of interest of 6.99%,  (iii) requires  monthly
principal and interest payments pursuant to an approximate 26-year  amortization
schedule,   and  (iv)  matures  on  June  15,  2008.  The  Bridge  Loan  is  (i)
collateralized  by first mortgages on six factory outlet  centers,  (ii) bears a
variable  rate of  interest  equal to 30-day  LIBOR plus 1.35%,  (iii)  requires
monthly interest-only payments, and (iv) matures on June 15, 2001.

As of June 30, 1998, the Partnership is a guarantor or otherwise  obligated with
$41,857 of HGP's  indebtedness,  including  $12,200 of  obligations  under HGP's
$108,205  three-year  secured  credit  facility.  The  Partnership  and  HGP are
continuing  to seek the consent of certain  parties to the  assumption by HGP or
its affiliates of $13,864 of indebtedness in connection with the spin-off.

On  April  1,  1998,  Horizon  consummated  an  agreement  with  Castle  & Cooke
Properties,  Inc. which released Horizon from its forward  obligations under its
long-term  lease of the Dole  Cannery  outlet  center in  Honolulu,  Hawaii,  in
connection  with the  formation of a joint  venture with certain  affiliates  of
Castle & Cooke,  Inc.  ("Castle & Cooke") to operate  such  property.  Under the
terms of the  agreement,  Castle & Cooke  Properties,  Inc., the landlord of the
project and an  affiliate of Castle & Cooke,  released  Horizon from all forward
obligations  under the lease,  which  expires in 2045, in exchange for Horizon's
conveyance to the joint venture of its rights and obligations  under such lease.
The  agreement  also  provided  that  Horizon  transfer  to such  joint  venture
substantially  all of Horizon's  economic  interest in its outlet center in Lake
Elsinore,  California  together  with  legal  title to vacant  property  located
adjacent to the  center.  As of June 30,  1998,  the  Partnership  holds a small
minority  interest in the joint venture but has no obligation or commitment with
respect to the post-closing 
<PAGE>

operations of the Dole Cannery  project.  However,  the  Partnership  is legally
obligated  for $30,906 of  mortgage  indebtedness  outstanding  at June 30, 1998
which is secured by a first  mortgage on the Lake  Elsinore  outlet  center.  In
addition,  Castle & Cooke has  provided  the  Partnership  a  guaranty,  without
limitation, of the obligations under the $30,906 mortgage note.

Planned Development

Management believes that there is sufficient demand for continued development of
new factory  outlet centers and  expansions of certain  existing  factory outlet
centers.  The Partnership now expects to open  928,000 square feet of GLA during
1998  including  the Prime Outlets at Lebanon which opened on April 17, 1998 and
Prime  Outlets at  Hagerstown  which opened on August 7, 1998.  Prime Outlets at
Lebanon  is  located  in  Lebanon,  Tennessee,  approximately  25 miles  east of
Nashville, and contains 208,000 square feet of GLA. Prime Outlets at Lebanon was
approximately  89% occupied at June 30, 1998.  Prime  Outlets at  Hagerstown  is
located in Hagerstown,  Maryland, west of Baltimore and northwest of Washington,
D.C.  Prime Outlets at Hagerstown  was  approximately  95% occupied on its grand
opening. At June 30, 1998, the remaining budgeted capital  expenditures for 1998
planned developments aggregated approximately $57,900, while anticipated capital
expenditures  related to the completion of expansions of existing factory outlet
centers opened during 1997 (aggregating 224,000 square feet of GLA) approximated
$2,265.

Management  believes that the  Partnership  has  sufficient  capital and capital
commitments to fund the remaining capital expenditures  associated with its 1997
and 1998 development  activities.  These funding requirements are expected to be
met, in large part, with the proceeds from various loan facilities including the
financing of certain  unencumbered  properties.  If adequate  financing for such
development  and expansion is not available,  the Partnership may not be able to
develop new centers or expand existing centers at currently planned levels.

The  Partnership  currently  plans to open one new  factory  outlet  center  and
several  expansions in 1999 that are expected to contain  approximately  700,000
square feet of GLA, in the aggregate, and have a total expected development cost
of approximately  $95,000.  The Partnership expects to fund the development cost
of these projects from (i) certain line of credit facilities, (ii) retained cash
flow from operations,  (iii) construction loans, and (iv) contributions from the
General Partner. As of June 30, 1998, the Partnership had committed $11,241 with
regard to the  construction  of the new  factory  outlet  center and  expansions
scheduled to open in 1999.  There can be no assurance that the Partnership  will
be  successful  in  obtaining  the  required  amount of equity  capital  or debt
financing  for the  1999  planned  openings  or that the  terms of such  capital
raising  activities  will be as favorable as the  Partnership has experienced in
prior periods.

Debt Repayments and Preferred Unit Distributions 

The Partnership's aggregate indebtedness was $1,152,133 and $515,265 at June 30,
1998 and December 31,  1997,  respectively.  At June 30, 1998, such indebtedness
had a weighted  average  maturity  of 6.3 years and bore  interest at a weighted
average interest rate of 7.02% per annum. At June 30, 1998, $592,704,  or 51.4%,
of such  indebtedness  bore interest at fixed rates and $559,429,  or 48.6%,  of
such  indebtedness,  including  $28,250 of  tax-exempt  bonds,  bore interest at
variable-rates.  Of the variable rate indebtedness outstanding at June 30, 1998,
$354,498 is scheduled to convert to a fixed rate of 7.782% in November  1998 for
the remaining five year term of such indebtedness.

At June 30, 1998, the Partnership held interest rate protection contracts on all
$28,250 of its floating rate  tax-exempt  indebtedness  which expire in 1999 and
approximately  $354,498 of other  floating  rate  indebtedness  which  expire in
November 1998 (or approximately  68.4% of its total floating rate indebtedness).
In addition,  the Partnership held additional interest rate protection contracts
on $43,900 
<PAGE>
(of which $22,000 expired in July 1998 and $21,900 expires in April 1999) of the
$354,498 floating rate indebtedness to further reduce the Partnership's exposure
to increases in interest rates.

The Partnership's ratio of debt to total market  capitalization at June 30, 1998
(defined as total debt divided by the sum of: (a) the  aggregate market value of
the  outstanding  shares  of  Common  Units,   assuming  the  full  exchange  of
Partnership Series C Preferred Units into Common Units; (b) the aggregate market
value of the outstanding units of Series B Convertible  Preferred Units; (c) the
aggregate  liquidation  preference of the Series A Senior  Cumulative  Preferred
Units ("Senior  Preferred  Units") at $25.00 per unit; and (d) the total debt of
the Partnership) was 55.7%.

The  Partnership is obligated to repay $11,025 of mortgage  indebtedness  during
the remainder of 1998 and $76,887 in 1999. Annualized  cumulative  distributions
on the  Partnership's  Senior  Preferred Units,  Series B Convertible  Preferred
Units  and  Series C  Preferred  Units  outstanding  June 30,  1998 are  $6,038,
$16,635, and $5,149, respectively. These distributions are payable quarterly, in
arrears.

The Partnership  anticipates that cash flow from operations,  together with cash
available from  borrowings and other sources,  will be sufficient to satisfy its
debt service obligations,  expected distribution requirements and operating cash
needs for the next year.

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  Partnership  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  Partnership's  exposure to increased costs and operating  expenses
resulting from inflation.  At June 30, 1998, the Partnership maintained interest
rate protection  contracts to protect against significant  increases in interest
rates on certain floating rate  indebtedness (see "Debt Repayments and Preferred
Unit Distributions").

The  Partnership  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

Recognizing  the need to ensure that the  Partnership's  operations  will not be
adversely impacted by year 2000 software  failures,  management has assessed the
potential  impact  of  the  year  2000  on  the  processing  of   date-sensitive
information by the Partnership's computerized information systems. Based on this
assessment,  management  believes that the  Partnership's  primary  computerized
information  systems are year 2000  compliant and the  Partnership's  operations
will not be adversely impacted by year 2000 software failures.

Funds from Operations

Management   believes   that  to  facilitate  a  clear   understanding   of  the
Partnership's  operating  results,  funds  from  operations  ("FFO")  should  be
considered in conjunction  with net income (loss)  presented in accordance  with
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.

The Partnership  generally  considers FFO an appropriate measure of liquidity of
an equity REIT  because  industry  analysts  have  accepted it as a  performance
measure of equity REITs. The 
<PAGE>

Partnership'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 Partnership.  Therefore, the
Partnership  cautions that the calculation of FFO may vary from entity to entity
and as such the  presentation of FFO by the Partnership may not be comparable to
other similarly  titled measures of other reporting  companies.  The Partnership
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  Partnership's  performance or
to cash flows as a measure of liquidity or ability to make distributions.

TABLE 6  provides a  reconciliation  of income  before  allocation  to  minority
interests to FFO for the three and six months ended June 30, 1998 and 1997.  FFO
increased  $6,300, or 57.5%, to $17,253 for the three months ended June 30, 1998
from $10,953 for the three months ended June 30, 1997. FFO increased $12,495, or
58.3%,  to $33,938 for the six months  ended June 30, 1998 from  $21,443 for the
six months ended June 30, 1997.  These  increases are primarily  attributable to
the Portfolio Expansion and the Horizon Merger.

<TABLE>

TABLE 6 - Funds from Operations
<CAPTION>

--------------------------------------------------------------------------------------------- -------------------------------
                                                                    Three months ended                Six months ended
                                                                          June 30                           June 30
                                                             --------------------------------      --------------------------
                                                                1998              1997                 1998             1997
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>               <C>             <C>

Income (loss) before allocation to minority
  interests                                                     $(7,659)        $  3,950          $    378       $    7,681
FFO adjustments:
Loss on sale of real estate                                      15,461                -            15,461                -
Real estate depreciation and amortization                         9,791            6,473            17,493           12,747
Unconsolidated joint venture adjustments                            303              530               606            1,015
                                                                -------         --------          --------        ---------

FFO before allocation to minority interests                     $17,253          $10,953           $33,938         $ 21,443
                                                                =======          =======           =======        =========
====================================================================================================================================
</TABLE>
<PAGE>

PART II:  OTHER INFORMATION

Item 1.           Legal Proceedings


In the ordinary  course of business the  Partnership 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 Partnership.

The  Partnership  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 Partnership and its related  entities  overcharged  tenants for
common area maintenance expenditures. The outcome of, and the ultimate liability
of the  Partnership,  if any, from, this lawsuit cannot  currently be predicted.
Management  believes  that the  Partnership  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

At the Partnership's  Annual Meeting held on June 12, 1998, the following matter
was voted upon.

(a)  The proposed merger of the  Partnership  and Horizon  Partnership and other
     transactions  contemplated by the Merger Agreement were approved. The votes
     cast for these items were as set forth below:

                       For                   Against             Abstain
                 ---------------  ----------------------  ----------------------
                    8,448,740                   0                   0


Item 5.        Other Information

               None

Item 6.        Exhibits or Reports on Form 8-K

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

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

                  (b)      Reports on Form 8-K:
                           On June 25, 1998, the  Partnership  filed a Current
                           Report on Form 8-K, dated June 23, 1998,  reporting
                           (i) the merger and other transactions (collectively,
                           the "Transactions") as set forth in the agreement and
                           plan of merger between the General Partner an
                           Horizon Group,  L.P. was consummated on June 15, 1998
                           and (ii) the General  Partner  completed a $292.
                           million  debt  financing  with Nomura  Asset  Capital
                           Corporation  in connection with the Transactions.  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.



                                                       BY: PRIME RETAIL, L.P.
                                                           Registrant
                         
                                                       BY: PRIME RETAIL, INC.
                                                           its general partner



Date: August 13, 1998                                  /s/ Abraham Rosenthal
      ---------------                                  ---------------------
                                                       Abraham Rosenthal
                                                       Chief Executive Officer





Date: August 13, 1998                                  /s/ Robert P. Mulreaney
      ---------------                                  -----------------------
                                                       Robert P. Mulreaney
                                                       Executive Vice President,
                                                       Chief Financial Officer
                                                       and Treasurer