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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to ______________Commission File No. 1-12328

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CHELSEA PROPERTY GROUP, INC.(Exact name of registrant as specified in its charter)

|Maryland(State or other jurisdiction
of incorporation or organization) |  | 22-3251332(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------- |  | ----------------------------------------------

103 Eisenhower Parkway, Roseland, New Jersey 07068(Address of principal executive offices - zip code)(973) 228-6111(Registrant's telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:

|Title of each class
Common stock, $0.01 par value |  | Name of each exchange onwhich registered
New York Stock Exchange
|------------------------------------------------- |  | ----------------------------------------------------------------

Securities registered pursuant to Section 12 (g) of the Act:  None

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 period 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 by check mark if the disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [x]

Based on the closing sales price on February 27, 2002 of $52.30
per share the aggregate market value of the voting stock held by non-affiliates
of the registrant was $975,722,544.

The number of shares outstanding of the registrant's common stock, $0.01 par
value was 18,780,579 at February 27, 2002.

Documents incorporated by reference:

Portions of the registrant's definitive Proxy Statement
relating to its 2002 Annual Meeting of Shareholders are incorporated by
reference into Part III as set forth herein.

PART I

Item 1.  Business

The Company
Chelsea Property Group, Inc. ("the Company") is a self-administered and
self-managed real estate investment trust ("REIT"). The Company made its initial
public offering of common stock on November 2, 1993 (the "IPO") and
simultaneously became the managing general partner of CPG Partners, L.P. (the
"Operating Partnership" or "OP"), a partnership that specializes in owning,
developing, redeveloping, leasing, marketing and managing upscale and
fashion-oriented manufacturers' outlet centers (the "Premium Portfolio"). On
September 25, 2001, as part of a transaction with Konover Property Trust Inc.
and affiliates ("Konover"), the Company acquired 32 retail centers, 30 of which
constitute other retail centers ("Other Retail Centers") containing 4.3 million
square feet of gross leasable area ("GLA") (see "Recent Developments") (the
Premium Portfolio and Other Retail Centers are collectively the "Properties").
As of December 31, 2001, the Company wholly or partially owned 57 centers in 29
states and Japan containing approximately 12.6 million square feet of GLA
represented by more than 700 tenants in approximately 2,900 stores. The
Company's Premium Portfolio includes 27 properties containing 8.3 million square
feet of GLA. These centers generally are located near metropolitan areas
including New York City, Los Angeles, Boston, Washington, D.C., San Francisco,
Sacramento, Cleveland, Atlanta, Dallas, Portland (Oregon), Tokyo and Osaka,
Japan, which have a population of at least one million people within a 30-mile
radius, with average annual household income of greater than $50,000. Some
Premium Portfolio centers are also located within 20 miles of major tourist
destinations including Palm Springs, the Napa Valley, Orlando, and Honolulu.
During 2001, the Company's Premium Portfolio generated weighted average tenant
sales of $379 per square foot, defined as total sales reported by tenants
divided by their gross leasable area weighted by months in operation.

The Company's executive offices are located at 103 Eisenhower
Parkway, Roseland, New Jersey 07068 (telephone 973-228-6111). The Company was
incorporated in Maryland on August 24, 1993.

The Company is taxed as a REIT under the provisions of the
Internal Revenue Code. The Company generally will not be taxed at the corporate
level on income it currently distributes to its shareholders, provided it
distributes at least 90% of its taxable income (95% prior to 2001).

Recent Developments

On September 25, 2001, the Company acquired a total of 32 retail
centers from Konover. The purchase price was $182.5 million, including the
assumption of $131.0 million of non-recourse mortgage debt. One of these centers
was acquired subject to a repurchase agreement and was sold back to Konover on
December 3, 2001 at the established cost basis of $2.5 million. Another 21,000
square foot center in Kittery, Maine, was classified as a Premium Portfolio
property. The remaining 30 Other Retail Centers contain 4.3 million square feet
of GLA represented by 180 tenants in approximately 700 stores. The Company
expects that within two years three additional Other Retail Centers will be
classified as Premium Portfolio properties as a result of its re-tenanting
efforts and the centers' locations. Certain centers that do not meet the
Company's strategic criteria for long term hold will be identified for sale. The
30 Other Retail Centers were 91% leased as December 31, 2001.

In October 2001, the Company sold Mammoth Premium Outlets to a
third party for a net sales price that approximated the carrying value.

The following table sets forth a summary of expansions, acquisitions and
dispositions from January 1 through December 31, 2001:

`GLA        Number
Property                                  % Owned     Date(1)     (Sq. Ft.)    of Stores   Tenants(2)
--------                                  ----------  ----------  -----------  ---------  ----------------------------------

As of January 1, 2001..................                            8,159,000    2,141

Expansions:

    Allen Premium Outlets, Allen, TX...      100   3/&11/01          146,000       33     Adidas, Brooks Brothers,
                                                                                          Lenox

    Other (net)........................                                4,000      (14)

                                                                    ----------  ----------
Total expansions:                                                    150,000       19

Acquisitions:

Kittery Premium Outlets II, formerly
 Factory Stores at Kittery
Kittery, ME............................      100        09/01         21,000        5
Factory Stores at Vacaville,
Vacaville, CA..........................      100        09/01        447,000      107     Carter's, Eddie Bauer, Gap,
                                                                                          L'eggs/Hanes/Bali/Playtex,
                                                                                          Nike, OshKosh B' Gosh,
                                                                                          Reebok
Carolina Outlet Center,
 Smithfield ,NC........................      100        09/01        443,000       51     Carter's, Casual Corner,
                                                                                          Gap, Liz Claiborne,
                                                                                          L'eggs/Hanes/Bali/Playtex,
                                                                                          Nike, Polo, Tommy Hilfiger
Factory Stores at North Bend
North Bend, WA.........................      100        09/01        223,000       49     Factory Brand Shoe, Gap,
                                                                                          Lenox, Nike

Other Retail Centers acquired..........      100        09/01      3,166,000      490     VF Factory Outlet
                                                                  -----------  --------
Total acquisitions:.................                               4,300,000      702

Dispositions: ........................
     Mammoth Premium Outlets,
         Mammoth, CA..................       100        10/01        (35,000)     (11)    Polo Ralph Lauren
                                                                  -----------  ----------
Total for 2001......................                               4,415,000      710
                                                                  -----------  ----------

As of December 31, 2001...............                            12,574,000    2,851
                                                                  ===========  ==========`

___________________________

| | (1)
(2) | Expansion, acquisition or disposition date.
Consists of tenants who lease at least 5,000 square feet of GLA or have
estimated sales of more than $300 per square foot. Most tenants pay a fixed base
rent based on the square feet leased and also pay a percentage rent based on
sales.
| | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Some of the most recent newly acquired or expanded centers are
discussed below:

Allen Premium Outlets, Allen, Texas. Allen Premium
Outlets, a 352,000 square foot center containing 81 stores, opened its initial
phase in October 2000. Expansions in 2001 consisted of the 28,000 square foot
completion of Phase I and 118,000 square feet on Phase II . The center is
located approximately 30 miles north of Dallas on US Highway 75. The populations
within a 15-mile, 30-mile and 60-mile radius are approximately 0.6 million, 2.4 million and
5.0 million, respectively. Average household income within a 30-mile
radius is approximately $73,000.

Kittery Premium Outlets (II), Kittery, Maine.Kittery
Premium Outlets,a 21,000 square foot center containing 5 stores was
acquired in September 2001. The center is located approximately 60 miles north
of Boston (MA) and 60 miles south of Portland (ME). The populations within a
15-mile, 30-mile and 60-mile radius are approximately 0.2 million, 0.5 million
and 3.8 million, respectively. Average household income within a 30-mile radius
is approximately $60,000. The center is adjacent to Kittery Premium Outlets I.

Factory Stores at Vacaville, Vacaville, California.Factory Stores at Vacaville, a 447,000 square foot center containing 107
stores was acquired in September 2001. The center is located approximately 50
miles east of San Francisco and 25 miles west of Sacramento. The populations
within a 15-mile, 30-mile and 60-mile radius are approximately 0.2 million, 1.4
million and 7.0 million, respectively. Average household income within a 30-mile
radius is approximately $69,000.

Carolina Outlet Center, Smithfield, North Carolina.Carolina Outlet Center, a 443,000 square foot center containing 51 stores
was acquired in September 2001. The center is located approximately 30 miles
southeast of Raleigh/Durham. The populations within a 15-mile, 30-mile and
60-mile radius are approximately 0.1 million, 0.8 million, and 2.3 million,
respectively. Average household income within a 30-mile radius is approximately
$55,000.

Factory Stores at North Bend, North Bend, Washington.Factory Stores at North Bend, a 223,000 square foot center containing 49
stores was acquired in September 2001. The center is located approximately 36
miles southeast of Seattle. The populations within a 15-mile, 30-mile and
60-mile radius are approximately 0.1 million, 1.7 million, and 3.4 million,
respectively. Average household income within a 30-mile radius is approximately
$77,000.

The Company continues construction on additional phases of
three existing centers totaling 57,000 square feet. These projects, along with
others, are in various stages of development and there can be no assurance they
will be completed or opened, or that there will not be delays in opening or
completion.

During 2000, the Company developed a new technology-based
e-commerce platform through an unconsolidated investment, Chelsea Interactive,
Inc., ("Chelsea Interactive") that provides fashion and other retail brands with
their own customized direct-to-the-consumer Internet online store, incorporating
e-commerce design, development, fulfillment and customer services. In
consideration for such services, Chelsea Interactive is receiving a percentage
of each brand's online sales. To date, the Company has invested approximately
$43 million in Chelsea Interactive to build the platform. There is no assurance
that this concept will be successful or its future impact on the Company's
financial condition or results of operations.

Strategic Alliance and Joint Ventures

In June 1999, the Company signed a definitive agreement with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own
and operate premium outlet centers in Japan. The joint venture, known as Chelsea
Japan Co., Ltd. ("Chelsea Japan"), developed its initial projects in the cities
of Gotemba and Izumisano, outside of Tokyo and Osaka, respectively. Subject to
governmental and other approvals, Chelsea Japan expects to announce additional
projects during 2002.

In May 1997, the Company formed a strategic alliance with Simon
to develop and acquire high-end outlet centers with GLA of 500,000 square feet
or more in the United States. The Company and Simon are co-managing general
partners, each with 50%-ownership of the joint venture and any entities formed
with respect to specific projects; the Company will have primary responsibility
for the day-to-day activities of each project. Simon is one of the largest
publicly traded real estate companies in North America as measured by market
capitalization, and at February 2002 owned, had an interest in and/or managed
approximately 193 million square feet of retail and mixed-use properties in 36
states and Europe. The strategic alliance is currently scheduled to terminate on
December 31, 2002. The 50/50 Orlando Premium Outlets joint venture is the only
project under this alliance to date.

In October 1998 the Company sold its interest in and terminated
the development of Houston Premium Outlets, a joint venture project with Simon.
Under the terms of the agreement, the Company received non-compete payments
totaling $21.4 million from The Mills Corporation; $3.0 million was received at
closing and all four annual installments of $4.6 million were received,
including the final January 2002 payment which had a $0.3 million legal reserve
withheld.

The Company has made several investments through joint
ventures with others. Joint venture investments may involve risks not otherwise
present for investments solely by the Company, including the possibility its
co-venturers might become bankrupt, its co-venturers might at any time have
different interests or goals than the Company, and that the co-venturers may
take action contrary to the Company's instructions, requests, policies or
objectives, including its policy with respect to maintaining the qualification
of Chelsea Property Group, Inc. as a REIT. Other risks of joint venture
investments include impasse on decisions, such as a sale, because neither its
co-venturer nor the Company would have full control over the joint venture.
There is no limitation under the Company's organizational documents as to the
amount of funds that may be invested in partnerships or joint ventures.

Organization of the Company

Virtually all of the Company's assets are held by, and all of
its business activities conducted through, the Operating Partnership. The
Company is the sole general partner of the Operating Partnership (which owned
85.6% in the Operating Partnership as of December 31, 2001) and has full and
complete control over the management of the Operating Partnership and each of
the Properties, excluding joint ventures.

The Manufacturers' Outlet Business

Manufacturers' outlets are manufacturer-operated retail stores
that sell primarily first-quality, branded goods at significant discounts from
regular department and specialty store prices. Manufacturers' outlet centers
offer numerous advantages to both consumer and manufacturer; by eliminating the
third party retailer, manufacturers are often able to charge customers lower
prices for brand name and designer merchandise; manufacturers benefit by being
able to sell first quality in-season, as well as out-of-season, overstocked or
discontinued merchandise without compromising their relationships with
department stores or hampering the manufacturers' brand name. In addition,
outlet stores enable manufacturers to optimize the size of production runs while
maintaining control of their distribution channels.

Business Strategy

The Company believes its strong tenant relationships,
high-quality property portfolio and managerial expertise give it significant
advantages in the manufacturers' outlet business.

Strong Tenant Relationships. The Company maintains strong
tenant relationships with high-fashion, upscale manufacturers and retailers that
have a selective presence in the outlet industry, such as Armani, Brooks
Brothers, Chanel, Coach Leather, Cole-Haan, Donna Karan, Gap/Banana Republic,
Gucci, Jones New York, Nautica, Polo Ralph Lauren, Tommy Hilfiger and Versace,
as well as with national brand-name manufacturers such as Adidas, Carter's,
Nike, Phillips-Van Heusen (Bass, Izod, Geoffrey Beene, Van Heusen) and
Timberland. The Company believes that its ability to draw from both groups is an
important factor in providing broad customer appeal and higher tenant sales.

High Quality Property Portfolio. The Company's 25 Premium
domestic centers generated weighted average reported tenant sales during 2001,
of $379 per square foot, the highest among the three publicly traded outlet
companies. As a result, the Company has been successful in attracting some of
the world's most sought-after brand-name designers, manufacturers and retailers
and each year has added new names to the outlet business and its centers. The
Company believes that the quality of its centers gives it significant advantages
in attracting customers and negotiating multi-lease transactions with tenants.

Management Expertise. The Company believes it has a
competitive advantage in the manufacturers' outlet business as a result of its
experience in the business, long-standing relationships with tenants and
expertise in the development and operation of manufacturers' outlet centers.
Management developed a number of the earliest and most successful outlet centers
in the industry, including Liberty Village Premium Outlets (one of the first
manufacturers' outlet centers in the U.S.) in 1981, Woodbury Common Premium
Outlets in 1985 and Desert Hills Premium Outlets in 1990. Since its IPO, the
Company has added significantly to its senior management in the areas of
development, leasing and property management without increasing general and
administrative expenses as a percentage of total revenues; additionally, the
Company intends to continue to invest in systems and controls to support the
planning, coordination and monitoring of its activities.

Growth Strategy

The Company seeks growth through increasing rents in its
existing centers; developing new centers and expanding existing centers; and
acquiring and re-developing centers.

Increasing Rents at Existing Centers. The Company's
leasing strategy includes aggressively marketing available space and maintaining
a high level of occupancy; providing for inflation-based contractual rent
increases or periodic fixed contractual rent increases in substantially all
leases; renewing leases at higher base rents per square foot; re-tenanting space
occupied by under performing tenants; and continuing to sign leases that provide
for percentage rents.

Developing New Centers and Expanding Existing Centers.
The Company believes that there continue to be significant opportunities to
develop manufacturers' outlet centers across the United States and
internationally. The Company intends to undertake such development selectively,
and believes that it will have a competitive advantage in doing so as a result
of its development expertise, tenant relationships and access to capital. The
Company expects that the development of new centers and the expansion of
existing centers will continue to be a substantial part of its growth strategy.
The Company believes that its development experience and strong tenant
relationships enable it to determine site viability on a timely and
cost-effective basis. However, there can be no assurance that any development or
expansion projects will be commenced or completed as scheduled.

International Development.The Company continues to
develop, own and operate premium outlet centers in Japan through its joint
venture company, Chelsea Japan. In 2000, Chelsea Japan developed its first two
outlet centers, one in Gotemba, located outside Tokyo, and the other in
Izumisano, outside Osaka, Japan. The Company believes that there are significant
opportunities to develop additional manufacturers' outlet centers in Japan and
intends to pursue these opportunities as viable sites are identified.

The Company has minority interests ranging from 5% to 15% in
several outlet centers and outlet development projects in Europe. Five outlet
centers, containing approximately 900,000 square feet of GLA, including Bicester
Village outside of London, England, La Roca Company Stores outside of Barcelona,
Spain, Las Rozas Village outside Madrid, Spain, La Vallee near Disneyland Paris
and Maasmechelen Village in Belgium are currently open and operated by Value
Retail PLC and its affiliates. There is more new center development planned and
one new European project is under construction and expected to open in Spring
2003.

Acquiring and Redeveloping Centers. The Company intends
to selectively acquire individual properties and portfolios of properties that
meet its strategic investment criteria as suitable opportunities arise. The
Company believes that its extensive experience in the outlet center business,
access to capital markets, familiarity with real estate markets and advanced
management systems will allow it to evaluate and execute its acquisition
strategy successfully. Furthermore, management believes that the Company will be
able to enhance the operation of acquired properties as a result of its strong
tenant relationships with both national and upscale fashion retailers and
development, marketing and management expertise as a full-service real estate
organization. Additionally, the Company may be able to acquire properties on a
tax-advantaged basis through the issuance of Operating Partnership units.
However, there can be no assurance that any acquisitions will be consummated or,
if consummated, will result in an advantageous return on investment for the
Company.

Operating Strategy

The Company's primary business objective is to enhance the value
of its properties and operations by increasing cash flow. The Company plans to
achieve these objectives through continuing efforts to improve tenant sales and
profitability, and to enhance the opportunity for higher base and percentage
rents.

Leasing. The Company pursues an active leasing strategy
through long-standing relationships with a broad range of tenants including
manufacturers of men's, women's and children's ready-to-wear, lifestyle apparel,
footwear, accessories, tableware, housewares, linens and domestic goods. Key
tenants are placed in strategic locations to draw customers into each center and
to encourage shopping at more than one store. The Company continually monitors
tenant mix, store size, store location and sales performance, and works with
tenants to improve each center through re-sizing, re-location and joint
promotion.

Market and Site Selection. To ensure a sound long-term
customer base, the Company generally seeks to develop sites near
densely-populated, high-income metropolitan areas, and/or at or near major
tourist destinations. While these areas typically impose numerous restrictions
on development and require compliance with complex entitlement and regulatory
processes, the Company believes that these areas provide the most attractive
long-term demographic characteristics. The Company generally seeks to develop
sites that can support at least 400,000 square feet of GLA and that offer the
long-term opportunity to dominate their respective markets through a critical
mass of tenants.

Marketing. The Company pursues an active,
property-specific marketing strategy using a variety of media including
newspapers, television, radio, billboards, regional magazines, guide books and
direct mailings. The centers are marketed to tour groups, conventions and
corporations; additionally, each property participates in joint destination
marketing efforts with other area attractions and accommodations. Virtually all
consumer marketing expenses incurred by the Company are reimbursable by tenants.

Property Design and Management. The Company believes that
effective property design and management are significant factors in the success
of its properties and works continually to maintain or enhance each center's
physical plant, original architectural theme and high level of on-site services.
Each property is designed to be compatible with its environment and is
maintained to high standards of aesthetics, ambiance and cleanliness in order to
promote longer visits and repeat visits by shoppers. The Company has 569
full-time and 153 part-time employees. Of these employees, 434 full-time and 149 part-time
are involved in on-site maintenance, security, administration and marketing.
Centers are generally managed by an on-site property manager with oversight from
a regional operations director.

Financing

The Company seeks to maintain a strong, flexible financial
position by: (i) maintaining a moderate level of leverage, (ii) extending and
sequencing debt maturity dates, (iii) managing floating interest rate exposure
and (iv) maintaining liquidity. Management believes these strategies will enable
the Company to access a broad array of capital sources, including bank or
institutional borrowings, secured and unsecured debt and equity financings. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Competition

The Properties compete for retail consumer spending on the basis
of the diverse mix of retail merchandising and value oriented pricing.
Manufacturers' outlet centers have established a niche capitalizing on
consumers' desire for value-priced goods. The Properties compete for customer
spending with other outlet locations, traditional shopping malls, off-price
retailers, and other retail distribution channels. The Company believes that the
Premium Portfolio Properties generally are the leading manufacturers' outlet
centers in each market. The Company carefully considers the degree of existing
and planned competition in each proposed market before deciding to build a new
center.

Environmental Matters

The Company is not aware of any environmental liabilities
relating to the Properties that would have a material impact on the Company's
financial position and results of operations.

Personnel

As of December 31, 2001, the Company had 569 full-time and 153
part-time employees. None of the employees are subject to any collective
bargaining agreements, and the Company believes it has good relations with its
employees.

Item 2. Properties

The Company's Premium Portfolio consists of 27 upscale,
fashion-oriented manufacturers' outlet centers located in or near New York City,
Los Angeles, Boston, Washington, D.C., San Francisco, Sacramento, Cleveland,
Atlanta, Dallas, Portland (Oregon), Tokyo and Osaka, Japan, or at or near
tourist destinations including Palm Springs, the Napa Valley, Orlando, and
Honolulu. The Premium Portfolio was 98% leased as of December 31, 2001 and
contained approximately 2,200 stores with more than 500 different tenants. The
Company's Other Retail Centers were 91% leased as of December 31, 2001 and
contained approximately 700 stores with more than 180 different tenants. As of
December 31, 2001, the Company had 57 centers in 29 states and
Japan containing approximately 12.6 million square feet of gross leasable area.
Of the 57 centers, 50 are owned 100% (45 in fee and five under a
long-term lease); and seven are partially owned through joint ventures (four in
fee and three under long-term leases). The Company manages all 55 of its
domestic centers and Chelsea Japan Co., Ltd., a 40%-owned joint venture, manages
the two centers in Japan.

The Company believes the Properties are adequately covered by insurance.

Premium Portfolio

The Company does not consider any single store lease to be
material; no individual tenant, combining all of its store concepts, accounts
for more than 5% of the Company's gross revenues or total GLA; and only one
tenant occupies more than 4% of the Company's total GLA. As a result, and
considering the Company's past success in re-leasing available space, the
Company believes the loss of any individual tenant would not have a significant
effect on future operations.

Approximately 22% of the Company's Premium Portfolio revenues
for the year ended December 31, 2001 and 21%, 23% and 24% of the Company's total
revenues for the years ended December 31, 2001, 2000, and 1999 respectively,
were derived from the Company's center with the highest revenues, Woodbury
Common Premium Outlets. The loss of this center or a material decrease in
revenues from the center for any reason might have a material adverse effect on
the Company. In addition, approximately 29% of the Company's Premium Portfolio
revenues for the year ended December 31, 2001 and 28% of the Company's revenues
for the years ended December 31, 2001, and 2000 and 30% for the year ended
December 31, 1999, were derived from the Company's centers in California.

Woodbury Common Premium Outlets contributed more than 10% of the
Company's aggregate gross revenues during 2001 and had a book value of more than
10% of the total assets of the Company at year-end 2001. No tenant at this
center leases more than 10% of the center's GLA. The following chart shows
certain information for Woodbury Common.

`Avg. Annual
Fiscal                                    Occupancy              Rent
Year                                         Rate             per sq ft
----
                                        ---------------     ---------------

1997..............................          100.0%               $31.42
1998..............................          100.0                 33.16
1999..............................           99.5                 35.61
2000..............................          100.0                 38.55
2001..............................           98.8                 38.63`

Woodbury Common Premium Outlets opened in four phases in 1985,
1993, 1995 and 1998 and contains 847,000 square feet of GLA. As of December 31,
2001, the center was leased to 212 tenants. Woodbury Common is located
approximately 50 miles north of New York City at the Harriman exit of the New
York State Thruway. The populations within a 30-mile, 60-mile and 100-mile
radius are approximately 2.5 million, 17.3 million and 25.2 million,
respectively. Average household income within the 30-mile radius is
approximately $83,000.

The following table shows lease expiration data as of December
31, 2001 for Woodbury Common Premium Outlets for the next ten years (assuming
that none of the tenants exercise renewal options).

`Contractual                         % of Annual
                                                         Base Rents ("CBR")          No. of          "CBR"
                                                  --------------------------------- Leases       Represented by
Expiration Year                            GLA       per sq ft           Total      Expiring     Expiring Leases
                                      ----------- ----------------  --------------- -----------  ----------------
2002...................................   67,095       $33.08          $2,220,000       19            7.2
2003...................................  234,469        33.59           7,876,000       59           25.4
2004...................................   35,051        33.12           1,161,000       10            3.7
2005...................................  117,378        36.98           4,341,000       29           14.0
2006...................................   43,020        44.85           1,929,000       17            6.2
2007...................................   32,997        47.00           1,551,000       11            5.0
2008...................................  124,790        38.90           4,855,000       24           15.7
2009...................................   43,801        51.53           2,257,000       16            7.3
2010...................................   32,702        49.34           1,614,000       10            5.2
2011...................................   54,303        46.75           2,539,000       13            8.2`

Depreciation on Woodbury Common Premium Outlets is calculated
using the straight line method over the estimated useful life of the real
property and land improvements which ranges from 10 to 40 years. At December 31,
2001, the Federal tax basis in this center was $124.0 million.

The realty tax rate on Woodbury Common Premium Outlets is
approximately $5.39 per $100 of assessed value. Estimated 2002 taxes are $3.9
million.

Other Retail Centers

30 Other Centers lease approximately 25% of the centers' GLA,
or 8% of the Company's total GLA, to VF Corporation (Vanity Fair). This tenant
is also responsible for approximately 15% of the annualized revenue derived from
Other Retail Centers, which constitutes approximately 3% of the Company's total
revenues. The Company attempts to mitigate the risk of loss from this tenant by
attempting to extend lease expiration dates.

Set forth in the table below is certain property information as of December 31,
2001:

`GLA
                                                 Year          (Sq.        No. of
Name/Location                                    Opened        Ft.)        Stores         Tenants
---------------------------------------          -----------  ---------   ---------   ------------------------------------

Premium Portfolio:
Woodbury Common Premium Outlets............      1985          847,000      212       Banana Republic, Brooks Brothers,
  Central Valley, NY (New York City area)                                             Coach,  Giorgio Armani, Gucci, Neiman
                                                                                      Marcus Last Call, Polo Ralph Lauren,
                                                                                      Salvatore Ferragamo

Wrentham Village Premium Outlets...........      1997          601,000      158       Barneys New York, Donna Karan,
  Wrentham, MA (Boston/Providence area)                                               Hugo Boss, Kenneth Cole, Nike,
                                                                                      Polo Ralph Lauren, Sony, Versace

Gilroy Premium Outlets....................       1990(1)       577,000      141       Brooks Brothers, Coach, J. Crew, Nike,
  Gilroy, CA (40 miles south of San Jose)                                             Polo Ralph Lauren, Timberland,
                                                                                      Tommy Hilfiger, Versace

North Georgia Premium Outlets.............       1996          537,000      132       Coach, Crate & Barrel, Escada,
  Dawsonville, GA (Atlanta metro area)                                                Liz Claiborne, Polo Ralph Lauren,
                                                                                      Tommy Hilfiger, Williams-Sonoma

Lighthouse Place Premium Outlets..........       1987(1)       491,000      122       Burberry, Coach, Crate & Barrel,
  Michigan City, IN (50 miles east of Chicago)                                        Gap, Liz Claiborne, Polo Ralph Lauren,
                                                                                      Tommy Hilfiger

Desert Hills Premium Outlets...............       1990         475,000      122       Burberry, Coach, Giorgio Armani, Gucci,
  Cabazon, CA (Palm Springs-Los Angeles)                                              Max Mara, Polo Ralph Lauren, Versace,
                                                                                      Zegna

Leesburg Corner Premium Outlets...........        1998          463,000     103       Barneys New York, Kenneth Cole,
  Leesburg, VA (Washington DC area)                                                   Liz Claiborne, Nike, Polo Ralph Lauren,
                                                                                      Williams-Sonoma

Camarillo Premium Outlets..................       1995          454,000     122       Banana  Republic, Barneys New York,
  Camarillo, CA (Los Angeles metro area)                                              Coach, Donna Karan, Nautica, Polo
                                                                                      Ralph Lauren, Versace

Orlando Premium Outlets....................       2000 (2)      428,000     114       Barneys New York, Coach, Escada,
  Orlando, FL (between Sea World & Epcot)                                             Giorgio Armani, Hugo Boss, Max Mara,
                                                                                      Nike, Polo Ralph Lauren

Waterloo Premium Outlets...................       1995 (1)      392,000     100       Brooks Brothers, Coach, Eddie Bauer,
  Waterloo, NY (Finger Lakes Region)                                                  Gap, J. Crew, Jones New York, Liz
                                                                                      Claiborne, Mikasa, Polo Ralph Lauren

Allen Premium Outlets......................       2000          352,000      81       Barneys New York, Brooks Brothers,
   Allen, TX (20 miles north of Dallas)                                               Cole-Haan, Crate & Barrel, Liz
                                                                                      Claiborne, Polo Ralph Lauren, Tommy
                                                                                      Hilfiger

Folsom Premium Outlets.....................       1990          299,000      80       Bass, Eddie Bauer, Gap, Kenneth Cole,
  Folsom, CA (Sacramento metro area)                                                  Liz Claiborne, Nike, Off 5th-Saks
                                                                                      Fifth Avenue

Aurora Premium Outlets.....................       1987          297,000      67       Brooks Brothers, Gap, Liz  Claiborne,
  Aurora, OH (Cleveland metro area)                                                   Off 5th-Saks Fifth Avenue, Polo
                                                                                      Ralph Lauren, Tommy Hilfiger

Clinton Crossing Premium Outlets...........       1996          272,000      66       Barneys New York, Coach, Escada,
  Clinton, CT(I-95/NY-New England corridor)                                           Gap, Kenneth Cole, Liz Claiborne,
                                                                                      Polo Ralph Lauren

Gotemba Premium Outlets....................       2000 (3)      220,000      78       Brooks Brothers, Coach, Eddie Bauer,
 Gotemba, Japan (60 miles west of Tokyo) (4)                                          Gap, J. Crew, L.L. Bean, Nautica,
                                                                                      Nike, Timberland

Waikele Premium Outlets....................       1997          213,000      51       Banana Republic, Barneys New York,
  Waipahu, HI (Honolulu area)                                                         Brooks Brothers, Guess, Kenneth Cole,
                                                                                      Max Mara

Petaluma Village Premium Outlets..........        1994          196,000      51       Brooks Brothers, Coach, Gap,
  Petaluma, CA (San Francisco metro area)                                             Jones New York, Liz Claiborne,
                                                                                      Off 5th-Saks Fifth Avenue

Rinku Premium Outlets......................       2000 (3)      180,000      71       Brooks Brothers, Coach, Dolce &
 Rinku, Japan (30 miles South of Osaka) (4)                                           Gabbana, Eddie Bauer, Gap,
                                                                                      Nautica, Nike, Timberland

Napa Premium Outlets.......................       1994          171,000      49       Barneys New York, J. Crew,
 Napa, CA (Napa Valley)                                                               Jones New York, Kenneth Cole,
                                                                                      Nautica, Tommy Hilfiger, TSE

Columbia Gorge Premium Outlets.............       1991          164,000      45       Adidas, Bass, Carter's, Gap,
 Troutdale, OR (Portland metro area)                                                  Mikasa, Samsonite

Liberty Village Premium Outlets............       1981          154,000      55       Ellen Tracy, Jones New York,
  Flemington, NJ (New York-Phila. metro area)                                         Polo Ralph Lauren, Tommy Hilfiger,
                                                                                      Timberland, Waterford Wedgwood

American Tin Cannery Premium Outlets.......       1987          135,000      45       Bass, Geoffrey Beene, Nine West,
  Pacific Grove, CA (4) (Monterey Peninsula)                                          Reebok, Samsonite, WestPoint Stevens

Kittery Premium Outlets....................       1984(1)       131,000      26       Banana Republic, Coach, Crate &
  Kittery, ME (60 miles north of Boston) (4)                                          Barrel, Polo Ralph Lauren, Reebok

Santa Fe Premium Outlets...................       1993          125,000      38       Brooks Brothers, Coach, Donna Karan,
  Santa Fe, NM                                                                        Jones New York, Liz Claiborne,
                                                                                      Van Heusen

Patriot Plaza Premium Outlets..............       1986           77,000      11       Lenox, Polo Ralph Lauren,
  Williamsburg, VA  (Norfolk-Richmond area)                                           WestPoint Stevens

St. Helena Premium Outlets.................       1992           23,000       9       Brooks Brothers, Donna Karan, Coach,
  St. Helena, CA (Napa Valley)                                                        Escada

Kittery Premium Outlets (II)...............       2001           21,000       5       Factory Brand Shoes
 Kittery, ME (60 miles north of Boston)

Other Retail Centers:
Factory Stores at Vacaville................       2001          447,000     107       Adidas, Carter's, Eddie Bauer,
  Vacaville, CA                                                                       Gap, Mikasa, Nike, OshKosh B' Gosh,
                                                                                      Reebok,

Carolina Outlet Center.....................       2001          443,000     51        Brooks Brothers, Gap, Liz Claiborne,
  Smithfield, NC(4)                                                                   Nike, Polo, Ralph Lauren,
                                                                                      Tommy Hilfiger

Factory Shoppes at Branson Meadows.........       2001          287,000     44        Dress Barn, Easy Spirit, Speigel,
  Branson, MO                                                                         VF Factory Outlet

Factory Stores at North Bend ..............       2001          223,000     49        Adidas, Eddie Bauer, Bass, Carters,
  North Bend, WA                                                                      Nike, Oshkosh B'Gosh, Samsonite

Factory Stores of America..................       2001          184,000     31        Adidas, Dress Barn, Samsonite,
  Draper, UT                                                                          VF Factory Outlet

Factory Stores of America..................       2001          177,000     27        Bass, Dress Barn, Levi's, Van Heusen
  Georgetown, KY

Factory Stores of America.................        2001          176,000     43        Bass, Levi's, Van Heusen, West
  La Marque, TX                                                                       Point Stevens

Factory Stores of America ................        2001          167,000     30        Bass, Dress Barn, Fieldcrest Cannon,
  Mesa, AZ                                                                            Samsonite, VF Factory Outlet

North Ridge Shopping Center................       2001          165,000     33        Ace Hardware, Kerr Drugs, Winn
  North Ridge, Raleigh, NC                                                            Dixie

Factory Stores of America .................       2001          151,000     30        Bass, Corning Revere, Fieldcrest
  Crossville, TN                                                                      Canon, VF Factory Outlet, Van Heusen

Mac Gregor Village.........................       2001          142,000     45        Spa Health Club, Tuesday Morning
  Cary, NC

Factory Stores of America..................       2001          133,000     16        L'eggs/Hanes/ Bali/ Playtex,
  Tri-Cities, TN                                                                      Tri-Cities Cinemas

Factory Stores of America..................       2001          131,000     18        Bass, Easy Spirit, VF Factory Outlet,
  Iowa, LA (4)                                                                        Van Heusen

Factory Stores of America..................       2001          129,000     12        Banister Shoes, VF Factory Outlet,
  Tupelo, MS                                                                          Van Heusen

Factory Stores of America..................       2001          127,000     20        Book Warehouse, Banister Shoes,
  Tucson, AZ                                                                          Samsonite, VF Factory Outlet

Dare Center................................        2001         115,000     15        Fashion Bug, Food Lion
  Kill Devil, NC (4)

Factory Stores of America..................        2001         112,000     17        Dress Barn, Factory Brand Shoes,
  Story City, IA                                                                      VF Factory Outlet, Van Heusen

Factory Stores of America..................        2001         105,000     18        Banister Shoes, Paper Factory, VF
  Boaz, AL (4)                                                                        Factory Outlet

Factory Stores of America..................        2001          91,000     10        VF Factory Outlet
  West Frankfort, IL

Factory Stores of America..................        2001          90,000     11        Bass, Dress Barn, VF Factory Outlet,
  Arcadia, LA                                                                         Van Heusen

Factory Stores of America..................        2001          90,000     10        Bass, Dress Barn, VF Factory Outlet
  Nebraska City, NE

Factory Stores of America..................        2001          86,000     13        Dress Barn, VF Factory Outlet
  Lebanon, MO

Factory Stores of America..................        2001          84,000     13        Factory Brand Shoes, VF Factory Outlet,
  Graceville, FL                                                                      Van Heusen

Factory Stores of America..................        2001          64,000      4        VF Factory Outlet
  Corsicana, TX

Factory Stores of America..................        2001          64,000      4        Banister Shoes, VF Factory Outlet
  Hanson, KY

Factory Stores of America..................        2001          64,000      3        VF Factory Outlet
  Hempstead, TX

Factory Stores of America..................        2001          64,000      4        VF Factory Outlet
  Livingston, TX

Factory Stores of America..................        2001          64,000      4        VF Factory Outlet
  Mineral Wells, TX

Factory Stores of America..................        2001          60,000      4        Bass, VF Factory Outlet
  Union City, TN

Factory Stores of America..................        2001          44,000     11        Levi's, L'eggs/ Hanes/Bali/Playtex
  Lake George, NY
                                                             ----------  ------
   Total...................................                  12,574,000  2,851
                                                             ==========  =======`

Notes to Property Data:

|(1) | 49%-interest through a joint venture with
Fortress Registered Investment Trust
|--- | ------------------------------------------------------------------------------

|(2) | 50%-owned through a joint venture with
Simon Property Group, Inc.
|--- | -----------------------------------------------------------------

|(3) | 40%-owned through a joint venture with
Mitsubishi Estate Co., Ltd. and Nissho Iwai Corporation
|--- | ----------------------------------------------------------------------------------------------

|(4) | Property held under long term land lease
expiring as follows: Kittery Premium Outlets, October 2009; Gotemba Premium
Outlets, October 2019; Rinku Premium Outlets, March 2020; American Tin Cannery
Premium Outlets, December 2004; Factory Stores of America at Smithfield (87,000
sq. ft), January 2029; Factory Stores of America at Iowa, September 2087;
Factory Stores of America at Boaz, January 2007; Dare Center, September 2058
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company rents approximately 36,000 square feet of office space in its
headquarters facility in Roseland, New Jersey; approximately 5,600 square feet
at Chelsea Interactive's office in Reston, Virginia; 3,500 square feet at its
office in New York; and 2,000 square feet at its office in Mission Viejo,
California.

Item 3.  Legal Proceedings

The Company is not presently involved in any material litigation other than
routine litigation arising in the ordinary course of business and that is either
expected to be covered by liability insurance or to have no material impact on
the Company's financial position and results of operations.

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

None.

Directors and Executive Officers of the Company
The following table sets forth the directors and executive officers of the Company:

|Name | Age | Position
|---- | --- | --------

|David C. Bloom | 45 | Chairman of the Board (term expires in 2002)
and Chief Executive Officer
|-------------- | -- | ------------------------------------------------------------------------

|William D. Bloom | 39 | Vice Chairman
and Director (term expires in 2003)
|---------------- | -- | -------------------------------------------------

|Brendan T. Byrne
Robert Frommer
Barry M. Ginsburg
Philip D. Kaltenbacher
Reuben S. Leibowitz
Leslie T. Chao
Thomas J. Davis
Michael J. Clarke
Bruce Zalaznick
Anthony J. Galvin
John R. Klein
Christina M. Casey
Denise M. Elmer
Philip E. Ende
Eric K. Helstrom
Daniel L. Kelly
Gregory C. Link
Michele Rothstein
Catherine A. Lassi
Sharon M. Vuskalns | 77
66
64
64
54
45
46
48
45
42
43
46
45
31
43
36
52
43
42
38 | Director (term expires in 2004)
Director (term expires in 2003)
Director (term expires in 2002)
Director (term expires in 2002)
Director (term expires in 2003)
President
Chief Operating Officer
Senior Vice President and Chief Financial Officer
Executive Vice President-International
Senior Vice President-Leasing
Senior Vice President-Real Estate
Vice President-Human Resources
Vice President, General Counsel and Secretary
Vice President - Leasing
Vice President-Architecture and Construction
Vice President- International Leasing
Vice President-Operations
Vice President-Marketing
Treasurer
Controller
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

David C. Bloom, Chairman of the Board and Chief Executive
Officer since 1993. Mr. Bloom was a founder and principal of Chelsea, and was
President of Chelsea from 1985 to 1993. As Chairman of the Board and Chief
Executive Officer of the Company, he sets policy and coordinates and directs all
the Company's primary functions. Prior to founding Chelsea, he was an equity
analyst with The First Boston Corporation (now Credit Suisse First Boston
Corporation) in New York. Mr. Bloom graduated from Dartmouth College and
received an MBA from Harvard Business School.

William D. Bloom, Vice Chairman since 2000 and Director since 1995. Mr. Bloom
joined The Chelsea Group in 1986 with responsibility for leasing of Company's
projects and was appointed Executive Vice President-Leasing in 1993 and
Executive Vice President-Strategic Relationships in 1996. Mr. Bloom's current
responsibilities include day to day operations of Chelsea Interactive, Inc.
Prior to joining Chelsea, he was an institutional bond broker with Mabon Nugent
in New York. Mr. Bloom graduated from Boston University School of Management.

Brendan T. Byrne, Director since 1993. Since 1982, Mr.
Byrne has been a senior partner in the law firm of Carella, Byrne, Bain,
Gilfillan, Cecchi, Stewart & Olstein. He previously served as Governor of
New Jersey from 1974 to 1982, Prosecutor of Essex County (New Jersey), President
of the Public Utility Commission and Assignment Judge of the New Jersey Superior
Court. He has also served as Vice President of the National District Attorneys
Association; Trustee of Princeton University; Chairman of the Princeton
University Council on New Jersey Affairs; Chairman of the United States Marshals
Foundation; and Chairman of the National Commission on Criminal Justice
Standards and Goals (1977). He serves on a Board of the National Judicial
College, is a former Commissioner of the New Jersey Sports and Exposition
Authority, and was a member of the board of directors of New Jersey Bell
Telephone Company, Elizabethtown Water Company, Ingersoll-Rand Company and a
former director of The Prudential Insurance Company of America. He is a member
of the Board of Mack-Cali, Inc. Mr. Byrne graduated from Princeton University
and received an LL.B. from Harvard Law School.

Robert Frommer, Director since 1993. Mr. Frommer is currently a Managing Member
of Chatham Development Partners, LLC in San Francisco. From 1991 to 2000, he was
a principal of Robert Frommer Associates, a real estate consulting firm. He has
been responsible for developing major commercial, residential and mixed-use real
estate projects in New York, Philadelphia, Washington, DC, Chicago and Seattle.
He has served as President of the Pebble Beach Co., the Ritz-Carlton Hotel of
Chicago and PG&E Properties in California. Mr. Frommer is a graduate of the
Wharton School of the University of Pennsylvania, and received an LL.B. Degree
from Yale Law School.

Barry M. Ginsburg, Director since 1993. Mr. Ginsburg was a founder and principal
of Ginsburg Craig Associates and its predecessor companies from 1986 to 1993 and
Vice Chairman of the Company from 1993 to 1999 at which time he retired. From
1966 through 1985, he was employed by Dansk International Designs, Ltd. and was
corporate Chief Operating Officer and Director from 1980 to 1985. Dansk operated
a chain of 31 manufacturers' outlet stores. He is currently a Director of Liz
Lange Maternity and New Milford (Connecticut) Hospital. Mr. Ginsburg graduated
from Colby College and received an MBA from Cornell University.

Philip D. Kaltenbacher, Director since 1993. Since 1974, Mr. Kaltenbacher
has been Chairman of the Board of Directors and Chief Executive Officer of Seton
Company, a manufacturer of leather and chemicals. Mr. Kaltenbacher was a
Commissioner of The Port Authority of New York and New Jersey from September
1985 through February 1993, and served as Chairman from September 1985 through
April 1990. Mr. Kaltenbacher graduated from Yale University and received an
LL.B. from Yale Law School.

Reuben S. Leibowitz, Director since 1993. Mr. Leibowitz is a Managing
Director of E. M. Warburg Pincus & Co., LLC, a private equity investment firm. He has
been associated with Warburg Pincus since 1984. Mr. Leibowitz currently serves
as Chairman of the Board of Directors of Grubb & Ellis Company, a Director of
Price Legacy Corporation and is a Director of a number of private companies. Mr.
Leibowitz graduated from Brooklyn College, received an MBA from New York
University, a JD from Brooklyn Law School, and an LL.M. from New York University
School of Law.

Leslie T. Chao, President since April 1997. As President of the Company, Mr.
Chao oversees the corporate finance, international development, legal,
administrative, investor relations and human resource functions of the Company.
He joined Chelsea in 1987 as Chief Financial Officer. Prior to joining Chelsea,
he was a Vice President in the corporate finance/treasury area of Manufacturers
Hanover Corporation (now J.P. Morgan Chase & Co.), a New York bank holding
company. Mr. Chao graduated from Dartmouth College and received an MBA from
Columbia Business School.

Thomas J. Davis, Chief Operating Officer since April
1997. As Chief Operating Officer, Mr. Davis oversees the asset management
activities of the domestic outlet portfolio including leasing, operations and
marketing as well as development and construction. Mr. Davis joined Chelsea in
1996 as Executive Vice President-Asset Management. From 1988 to 1995, he held
various senior positions at Phillips-Van Heusen Corporation, most recently as
Vice President-Real Estate. Mr. Davis has over twenty years of factory outlet
industry experience and has served the industry in various trade association
positions including Chairman of Manufacturers Idea Exchange as well as a board
member of the Steering Committee for FOMA (Factory Outlet Marketing
Association). Mr. Davis received the 1995
Value Retail News Award of Excellence for individual achievement in the
outlet industry.

Michael J. Clarke, Senior Vice President and Chief
Financial Officer since 1999. Since joining the Company in 1994, Mr. Clarke has
held various senior level financial positions. As Chief Financial Officer, he is
responsible for Chelsea's financial functions including reporting, treasury,
accounting, budgeting, banking and rating agency relations. From 1985 to 1993,
he held various senior positions at a NYSE-listed operator of hotels, most
recently as Executive Vice President & Chief Financial Officer. Mr. Clarke
graduated from Seton Hall University and is a certified public accountant.

Bruce Zalaznick, Executive Vice President-International
since 1999. Mr. Zalaznick is responsible for the Company's development
activities outside the United States as Executive Vice President-International.
He joined the Company in 1994 as Vice President-Acquisitions responsible for the
Company's domestic site acquisition activities. From 1996 to 1999 he served as
Executive Vice President-Real Estate, responsible for the domestic site
selection, development, design and construction activities of the Company. From
1990 to 1994, he was Senior Vice President-Site Acquisition at Prime Retail,
Inc., a publicly traded REIT, and in that capacity was responsible for the
acquisition and entitlement of approximately three million square feet of outlet
space in ten states. Mr. Zalaznick graduated from Cornell University and
received an MBA from the Wharton School at the University of Pennsylvania.

Anthony J. Galvin,Senior Vice President-Leasing since
2001. Mr. Galvin joined the Company in 1997 as Vice President-Leasing and was
named Senior Vice President-Leasing in January 2001. Mr. Galvin is responsible
for the management of all aspects of the Company's domestic leasing activities.
From 1995 to 1997, he was Director of Real Estate for Coach Leather, a division
of Sara Lee Corporation. From 1987 to 1995 he held positions in both real estate
and construction at Phillips-Van Heusen Corporation. Mr. Galvin has served the
industry in various trade association positions including Chairperson of the
Northeast Merchants Association and the Board of Directors of ORMA (Outlet
Retail Merchants Association). Mr. Galvin is a graduate of Glassboro State
College (now Rowan University), where he serves on the Executive Committee of
the Alumni Advisory Council for the School of Business.

John R. Klein, Senior Vice President-Real Estate, since 2001. Mr. Klein
joined the Company in 1995 as Director-Acquisitions, was named Vice
President-Acquisitions and Development in 1996, and named Senior Vice
President-Real Estate in January 2001. He oversees the Company's domestic
acquisitions, development and construction activities. From 1991 to 1995, he
held various positions at Prime Retail, Inc., most recently as Vice
President-Site Acquisition. At Prime, Mr. Klein was involved in the acquisition
and entitlement of over two million square feet of manufacturers' outlet space
in nine states. Mr. Klein graduated from Columbia University and received an MBA
from George Washington University School of Business.

Christina M. Casey,Vice President-Human Resources since
1998. Ms. Casey joined the Company in 1996 as Director of Human Resources. As
Vice President-Human Resources, she oversees all aspects of the Company's human
resource activities, including recruitment, benefits, compensation, policy
development, training and employee relations. From 1987 to 1996 she held various
positions in Human Resources with Boise Cascade Corporation, Specialty
Paperboard and Rock-Tenn Company. Ms. Casey graduated from Villanova University
and received a Masters in Social Service from Bryn Mawr Graduate School.

Denise M. Elmer, Vice President, General Counsel and
Secretary since 1993. Ms. Elmer joined Chelsea as General Counsel in 1993. As
Vice President, General Counsel and Secretary, she oversees the legal activities
of the Company, including those related to property acquisition and development,
leasing, finance and operations. From 1988 to 1993, she was an attorney in the
New York law firm of Stadtmauer Bailkin Levine & Masur, where she
specialized in commercial real estate law and became a partner in 1990. Ms.
Elmer graduated from St. Lawrence University and received a JD from Duke
University School of Law.

Philip Ende, Vice President-Leasing since 2001. Mr. Ende joined the
Company in 1993 and has held various positions with increasing responsibility in
leasing and construction prior to being named Vice President-Leasing in March
2001. Mr. Ende is responsible for the management of all aspects of the
day-to-day leasing activities of the Company's domestic portfolio. Mr. Ende
graduated from the University of Florida.

Eric K. Helstrom, Vice President-Architecture and Construction, since
1996. Mr. Helstrom joined the Company in 1995 as Director-Development and was
named Vice President-Architecture and Construction in 1996. He oversees the
design, engineering and construction activities of the Company. From 1987 to
1995, he held various positions including Director-Architecture/Construction
with Alexander Haagen Properties, an AMEX-listed REIT. Mr. Helstrom graduated
from California Polytechnic San Luis Obispo and received a Masters in Real
Estate Development from the University of Southern California. Mr. Helstrom is a
licensed architect and general contractor.

Daniel L. Kelly, Vice President  International Leasing
since 2001. Since joining the Company in 1993, Mr. Kelly has held various
positions in the leasing area. From July 1999 to August 2001, Mr. Kelly served
as Senior Managing Director of Chelsea Japan in Tokyo before being named Vice
President-International Leasing.  Mr. Kelly received his MBA in International
Business from Rutgers University and a BA in Mathematics from Providence
College.

Gregory C. Link, Vice President-Operations since 1996.
Mr. Link joined the Company in 1994 as Vice President-Leasing responsible for
the management of the Company's leasing activities. In January 1996, Mr. Link
was appointed Vice President-Operations and is responsible for supervising
property management activities at the Company's operating properties. From 1987
to 1994, he was Chairman, President and Chief Executive Officer of The Ribbon
Outlet, Inc., an affiliate of the world's largest ribbon manufacturer, and in
that capacity opened over 100 factory outlet stores across the United States.
From 1971 to 1987 he held various senior merchandising positions with
Phillips-Van Heusen Corporation, Westpoint Pepperell Corporation, May Department
Stores and Associated Dry Goods Corporation. Mr. Link graduated from the College
of Business and Public Administration of the University of Arizona at Tucson.

Michele Rothstein, Vice President-Marketing since 1993.
Ms. Rothstein joined Chelsea in 1989 as Vice President-Marketing. As Vice
President-Marketing of the Company, she oversees all aspects of the Company's
marketing and promotion activities. From 1987 to 1989, she was a product manager
at Regina Company and, prior to 1987, was with Waring & LaRosa Advertising
in New York. Ms. Rothstein graduated from the School of Business at the State
University of New York at Albany.

Catherine A. Lassi, Treasurer since 1997. Ms. Lassi joined Chelsea in
1987, became Controller in 1990 and Treasurer in January 1997. As Treasurer, she
oversees budgeting, forecasting, contract administration, cash management,
banking, information systems and lease accounting activities for the Company.
Ms. Lassi is a certified public accountant and graduated from the University of
South Florida.

Sharon M. Vuskalns, Controller since 1997. Ms. Vuskalns
joined the Company in 1995 as Director of Accounting Services. As Controller,
she oversees the accounting and financial reporting activities for the Company.
Prior to joining Chelsea, she was a Senior Audit Manager with Ernst & Young,
LLP. Ms. Vuskalns graduated from Indiana University and is a certified public
accountant.

David C. Bloom and William D. Bloom are brothers.

PART II

Item 5. Market for the Registrant's Common Stock and
Related Security Matters

The common stock of the Company is traded on the New York Stock
Exchange under the ticker symbol CPG. As of February 27, 2002 the closing market
price of the Company's stock was $52.30 and there were 521 shareholders of
record. The Company believes it has more than 14,000 beneficial holders of
common stock. The following table sets forth the quarterly high and low closing
sales price per share (as derived from the Wall Street Journal) and the
cash distributions declared in 2001 and 2000:

`Sales Price ($)
                                        ---------------        Distributions
            Quarter Ended                High       Low           ($)
            -------------               ------    -------      -------------

            December 31, 2001           50-7/8     44-1/4          0.78
            September 30, 2001          52-3/4     43              0.78
            June 30, 2001               46-15/16   41-9/16         0.78
            March 31, 2001              42-1/4     36-15/16        0.78

            December 31, 2000           38-7/16    36-1/2          0.75
            September 30, 2000          36-5/8     32-5/16         0.75
            June 30, 2000               36         28-5/8          0.75
            March 31, 2000              31-7/16    25-13/16        0.75`

While the Company intends to continue paying regular quarterly
dividends, future dividend declarations will be at the discretion of the Board
of Directors and will depend on the cash flow and financial condition of the
Company; capital requirements; annual distribution requirements under the REIT
provisions of the Internal Revenue Code; covenant limitations under the Senior
Credit Facility and the Term Notes; and such other factors as the Board of
Directors deems relevant.

PART II

Item 6: Selected Financial Data

Chelsea Property Group, Inc.
(In thousands except per share, and number of centers)

`Year Ended December 31,
                                                              --------------------------------------------------------------
  Operating Data:                                                  2001         2000        1999        1998        1997
  ---------------                                               -------      ---------   ---------   ---------   ---------

  Rental revenue.............................................   $145,278      $125,824   $114,485    $99,976      $81,531
  Total revenues.............................................    206,855       179,903    162,618    139,315      113,417
  Loss on writedown of assets................................          -             -        694     15,713            -
  Total expenses.............................................    150,640       123,876    114,676     98,166       78,262
  Income from unconsolidated investments ....................     15,642         6,723        308          -            -
  Loss from Chelsea Interactive .............................     (5,337)       (2,364)         -          -            -
  Income before minority interest and
      extraordinary item.....................................     66,520        60,386     47,556     25,436       35,155

  Minority interest..........................................    (14,706)      (14,606)    (9,275)    (3,803)      (6,595)

  Income before extraordinary item...........................     51,814        45,780     38,281     21,633       28,560

  Extraordinary item - loss on retirement of debt............          -             -          -       (283)        (204)

  Net income.................................................     51,814        45,780     38,281     21,350       28,356

  Preferred dividend.........................................     (4,188)       (4,188)    (4,188)    (4,188)        (907)

  Net income available to common shareholders................    $47,626       $41,592    $34,093    $17,162      $27,449
  Income per common share before
      extraordinary item (diluted) (1).......................      $2.74         $2.58      $2.14      $1.12        $1.86

  Net income per common share (diluted) (1)..................      $2.74         $2.58      $2.14      $1.10        $1.85

  Ownership Interest:
  REIT common shares.........................................     17,355        16,126     15,908     15,672       14,866
  Operating Partnership units................................      3,179         3,356      3,389      3,431        3,435
                                                                --------     ---------  ---------  ---------    ---------
  Weighted average shares/units outstanding..................     20,534        19,482     19,297     19,103       18,301

  Balance Sheet Data:
  Rental properties before accumulated depreciation.......... $1,127,906      $908,344   $848,813   $792,726     $708,933
  Total assets...............................................  1,099,308       901,314    806,055    773,352      688,029
  Total liabilities  ........................................    624,246       528,752    426,198    450,410      342,106
  Minority interest..........................................    115,639       101,203    102,561     42,551       48,253
  Stockholders'/owners' equity...............................    359,423       271,359    277,296    280,391      297,670
  Distributions declared per common share....................      $3.12         $3.00      $2.88      $2.76        $2.58

  Other Data:
  Funds from operations available to common shareholders (1).   $108,862       $93,556    $79,980    $67,994      $57,417
  Cash flows from:
     Operating activities....................................   $121,723      $106,658    $87,502    $78,731      $56,594
     Investing activities....................................   (112,551)     (121,479)   (77,490)  (119,807)    (199,250)
     Financing activities....................................     (2,604)       23,995    (10,781)    36,169      143,308

  GLA at end of period (2)...................................     12,574         8,159      5,216      4,876        4,308
  Weighted average GLA (3)...................................      9,349         5,703      4,995      4,614        3,935
  Centers in operation at end of the period..................         57            27         19         19           20
  New centers opened.........................................          -             4          -          1            1
  Centers expanded...........................................          1             3          4          7            5
  Center sold................................................          1             1          1          -            -
  Centers held for sale......................................          8             -          1          2            -
  Centers acquired...........................................         31             4          -          -            1`

Notes to Selected Financial Data:

| | 1) | The Company believes that FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flow from operating
activities, financing activities and investing activities, it provides investors
with an indication of the ability of the Company to incur and service debt, to
make capital expenditures and to fund other cash needs. The Company computes FFO
in accordance with the current standards established by NAREIT which may not be
comparable to FFO reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. FFO does not represent cash
generated from operating activities in accordance with GAAP and should not be
considered as an alternative to net income (determined in accordance with GAAP)
as an indication of the Company's financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund
the Company's cash needs, including its ability to make cash distributions.
See Management's Discussion and Analysis for definition of FFO.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | Includes seven centers containing 2.4 million square
feet of GLA in which the Company has a joint venture interest.
| | -- | -------------------------------------------------------------------------------------------------------------------

| | 3) | GLA weighted by months in operation.
| | -- | ------------------------------------

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion should be read in connection with the
financial statements and notes thereto appearing elsewhere in this annual
report.

Certain comparisons between periods have been made on a
percentage or weighted average per square foot basis. The latter technique
adjusts for square footage changes at different times during the year.

General Overview

At December 31, 2001 the Company operated 57
centers, compared to 27 and 19 at the end of 2000 and 1999, respectively. Between
January 1, 2001 and December 31, 2001, the Company added approximately 4.4
million square feet of GLA to its portfolio as a result of acquiring 30 Other
Retail Centers and one Premium Outlet Center comprising 4.3 million square feet
of GLA and expanding one existing wholly-owned center by 146,000 square feet.
The Company also sold a 35,000 square foot center in Mammoth, California in
October 2001.

From January 1, 1999 to December 31, 2001, the Company grew by
increasing rents at its operating centers, opening four new centers, expanding
six centers and acquiring thirty-five centers. Increasing rents at operating
centers resulted in base and percentage rent revenue growth of $18.8 million.
The opening of one wholly-owned new center and expansion of six wholly-owned
centers increased base and percentage rent revenues by $3.7 million and $13.4
million, respectively, during the three year period ended December 31, 2001. The
acquisition of 31 retail centers (exclusive of the four centers in which the
Company acquired a 49% interest) increased base and percentage rent revenues by
$9.4 million during the three year period ended December 31, 2001. Income from
unconsolidated investments aggregated $22.7 million during the three year period
ended December 31, 2001 increasing from $0.3 million in 1999 to $15.6 million in
2001 primarily as a result of opening three new centers developed by joint
ventures during 2000 and by acquiring a 49% interest in four centers through a
joint venture in December 2000. The Company operated gross leasable area at
December 31, 2001 and 2000 of 12.6 million square feet and 8.2 million square
feet, respectively, including wholly and partially-owned GLA, compared to 5.2
million square feet of wholly-owned GLA at December 31, 1999. The 7.7 million
square feet ("sf") of net GLA added during the three year period is detailed as
follows:

`Since
                                                            January
                                                            1, 1999         2001             2000          1999
                                                           -----------   ----------        ---------    ----------
Changes in GLA (sf in 000's):

New centers developed:
     Allen Premium Outlets.............................        206            -              206             -
     Orlando Premium Outlets (50%-owned) ..............        428            -              428             -
     Gotemba Premium Outlets (40%-owned) ..............        220            -              220             -
     Rinku Premium Outlets (40%-owned) ................        180            -              180             -
                                                           -----------   -----------      -----------     --------
Total new centers......................................      1,034            -            1,034              -

Centers expanded:
     Allen Premium Outlets.............................        146          146                -             -
     Wrentham Village..................................        247            -              127           120
     Leesburg Corner...................................        193            -              138            55
     Folsom Premium Outlets............................         54            -               54             -
     North Georgia Premium Outlets.....................        103            -                -           103
     Camarillo Premium Outlets.........................         45            -                -            45
     Other.............................................         20            4               (1)           17
                                                           -----------   -----------      -----------     ----------
Total centers expanded.................................        808          150              318           340

Centers acquired:
     Gilroy Premium Outlets (49%-owned)................        577            -              577             -
     Lighthouse Place Premium Outlets(49%-owned).......        491            -              491             -
     Waterloo Premium Outlets (49%-owned)..............        392            -              392             -
     Kittery Premium Outlets I  (49%-owned) ...........        131            -              131             -
     Kittery Premium Outlets II (1)....................         21           21                -             -
     Other Retail Centers (2)..........................      4,279        4,279                -             -
                                                           -----------   -----------     -----------      -----------
Total centers acquired.................................      5,891        4,300            1,591             -

Center sold:
     Mammoth Premium Outlet............................        (35)         (35)               -             -
                                                           -----------  ------------     -----------      ------------

Net GLA added during the period........................      7,698        4,415            2,943            340

Other Data:
GLA at end of period..................................                   12,574            8,159          5,216
Weighted average GLA..................................                    9,349            5,703          4,995
Centers in operation at end of period.................                       57               27             19
New centers opened....................................                        -                4              -
Centers expanded......................................                        1                3              4
Centers sold..........................................                        1                1              1
Centers acquired......................................                       31                4              -`

|(1) | Acquired in the September 25, 2001 Konover transaction
and formerly Factory Stores of America at Kittery.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | Acquired in the September, 25, 2001 Konover transaction
and excludes Vegas Pointe Plaza which was repurchased by Konover on December 3,
2001.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

The Company's domestic Premium Outlet Centers produced weighted average reported
tenant sales of approximately $379 per square foot in 2001, $400 per square foot
in 2000 (excluding the four 49%-owned centers acquired on December 22, 2000),
and $377 per square foot in 1999. Weighted average sales is a measure of tenant
performance that has a direct effect on base and percentage rents that can be
charged to tenants over time.

One of the Company's centers, Woodbury Common Premium Outlets, generated
approximately 21%, 23% and 24% of the Company's total revenues for the years
2001, 2000 and 1999 respectively. In addition, approximately 28% of the
Company's revenues for the years ended December 31, 2001 and 2000 and 30% for
the year ended December 31, 1999, were derived from the Company's centers in
California.

The Company does not consider any single store lease to be material; no
individual tenant, combining all of its store concepts, accounts for more than
5% of the Company's gross revenues. VF Corporation occupied 8% of the Company's
total GLA at December 31, 2001 and was the only tenant that occupied more than
5% of GLA at year end. In view of these statistics and the Company's past
success in re-leasing available space, the Company believes that the loss of any
individual tenant would not have a significant effect on future
operations.

The discussion below is based upon operating income before minority interest.
The minority interest in net income varies from period to period as a result of
changes in Operating Partnership interests.

Comparison of year ended December 31, 2001 to year ended
December 31, 2000.

Income before interest, depreciation and amortization and minority interest
increased $30.0 million, or 22.7%, to $162.0 million in 2001 from $132.0 million
in 2000. This increase was primarily the result of expansions and new center
openings during the latter part of 2000, higher rents on releasing and renewals
during 2001, income from unconsolidated investments that commenced operations in
the latter part of 2000 and the September 25, 2001 acquisition of 31 retail
centers. These increases were partially offset by the loss from Chelsea
Interactive, and increases in interest and operating and maintenance expenses.
Income before interest expense and minority interest increased $18.6 million to
$103.4 million in 2001 from $84.8 million in 2000 due to the addition of GLA
while stabilizing overhead costs. Base rentals increased $19.1 million, or
17.7%, to $127.2 million in 2001 from $108.1 million in 2000 due to expansions
of wholly-owned centers and a new center opening in 2000, higher average rents
and the acquisition of the 31 retail centers in September 2001. Base rental
revenue per weighted average square foot in the Premium Portfolio increased to
$20.39 in 2001 from $20.23 in 2000 as a result of higher rental rates on new
leases and renewals.

Percentage rents increased $0.3 million, or 2.0%, to $18.0 million in 2001 from
$17.7 million in 2000 primarily due to the acquisition of the 31 retail centers
in 2001. Percentage rents per weighted average square foot on the Company's
wholly-owned centers decreased to $2.60 in 2001 from $3.31 in 2000. The decrease
is due to much lower sales per square foot from the Other Retail Centers
acquired in September 2001. The Company's wholly-owned Premium Portfolio's
percentage rents per weighted average square foot decreased to $3.08 in 2001
from $3.31 in 2000 due to changes of some tenants from overage to base rents and
lower sales.

Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $6.5 million, or 14.6%, to $50.6 million in 2001
from $44.1 million in 2000, due to the recovery of operating and maintenance
costs from increased GLA. Excluding the 31 retail centers acquired in 2001, on a
weighted average square foot basis, expense reimbursements increased 0.7% to
$8.32 in 2001 from $8.26 in 2000. The average recovery of reimbursable expenses
for the wholly-owned Premium Portfolio was 90.8% in 2001 compared to 90.0% in
2000. The average recovery of reimbursable expense for the Other Retail Centers
was 51.1% in 2001.

Other income increased $1.0 million to $11.0 million in 2001 from $10.0 million
in 2000. The increase was due to increased interest and ancillary income,
partially offset by lower pad sale gains in 2001 versus 2000.

Operating and maintenance expenses increased $8.8 million, or 18.0%, to $57.8
million in 2001 from $49.0 million in 2000. The increase was primarily due to
costs related to increased GLA and the acquisition of the 31 new retail centers.
Excluding the 31 retail centers acquired in 2001, on a weighted average square
foot basis, operating and maintenance expenses decreased to $9.16 in 2001 from
$9.17 in 2000.

Depreciation and amortization expense increased $5.6 million to $48.6 million in
2001 from $43.0 million in 2000. The increase was due to depreciation of
expansions of wholly-owned and new centers opened in 2000 and the acquisition of
the 31 retail centers in September 2001.

General and administrative expenses were $4.6 and $4.8 million
in 2001 and 2000, respectively.

Other expenses were $2.8 million and $2.7 million in 2001 and
2000, respectively. Increased 2001 bad debt and legal expenses were greater than
the non-recurring write-off of development costs related to inactive projects in
2000.

Income from unconsolidated investments increased $8.9 million to $15.6 million
in 2001 from $6.7 million in 2000. This resulted from full years results of
equity-in-earnings and fees earned from joint venture investments that were
opened or acquired in the latter part of 2000.

The loss from Chelsea Interactive was $5.3 million in 2001 and $2.4 million in
2000. The increase was due to a full year of operations in 2001 versus a partial
year in 2000.

Interest, in excess of amounts capitalized, increased $12.4 million to $36.9
million in 2001 from $24.5 million in 2000, due to higher debt balances from
acquisitions and lower construction activity in 2001.

Comparison of year ended December 31, 2000 to year ended
December 31, 1999.

Income before interest, depreciation and amortization and minority interest
increased $19.8 million, or 17.7%, to $132.0 million in 2000 from $112.2 million
in 1999. This increase was primarily the result of expansions and new center
openings, higher rents on releasing and renewals during 2000 and 1999 and income
from unconsolidated investments that commenced operations in the latter part of
2000. These increases were partially offset by the loss from Chelsea Interactive
and increases in operating and maintenance expenses. Income from operations
increased $8.8 million, or 18.5%, to $56.0 million in 2000 from $47.2 million in
1999. Increased revenues from expansions of wholly-owned centers and new center
openings in 2000 and 1999 were offset by increases in operating and maintenance
expenses and depreciation expense due to the expansions and new center openings.

Base rentals increased $9.3 million, or 9.3%, to $108.1 million in 2000 from
$98.8 million in 1999 due to expansions of wholly-owned centers, a new center
opening in 2000 and higher average rents. Base rental revenue per weighted
average square foot increased to $20.23 in 2000 from $19.79 in 1999 as a result
of higher rental rates on new leases and renewals.

Percentage rents increased $2.0 million, or 13.1%, to $17.7 million in 2000 from
$15.7 million in 1999. The increase was primarily due to increased tenant sales
and a higher number of tenants contributing percentage rents.

Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $4.4 million, or 11.0%, to $44.1 million in 2000
from $39.7 million in 1999, due to the recovery of operating and maintenance
costs from increased GLA. On a weighted average square foot basis, expense
reimbursements increased 3.8% to $8.26 in 2000 from $7.96 in 1999. The average
recovery of reimbursable expenses was 90.0% in 2000 compared to 90.8% in 1999.

Other income increased $1.6 million to $10.0 million in 2000 from $8.4 million
in 1999. The increase was due to pad sale gains in 2000 and increased interest
and ancillary income.

Operating and maintenance expenses increased $5.2 million, or 11.9%, to $49.0
million in 2000 from $43.8 million in 1999. The increase was primarily due to
costs related to increased GLA. On a weighted average square foot basis,
operating and maintenance expenses increased 4.7% to $9.17 in 2000 from $8.76 in
1999 as a result of increased maintenance costs and real estate taxes.

Depreciation and amortization expense increased $3.3 million to $43.0 million in
2000 from $39.7 million in 1999. The increase was due to depreciation of
expansions of wholly-owned and new centers opened in 2000 and 1999.

General and administrative expenses were $4.8 million in 2000 and 1999 due to
stabilized overhead costs.

Other expenses increased $0.6 million to $2.7 million in 2000 from $2.1 million
in 1999. The increase was primarily due to the write-off of development costs
related to inactive projects in 2000.

The loss on write down of assets of $0.7 million in 1999 was attributable to the
re-valuation of a center held for sale at its estimated fair value.

Income from unconsolidated investments increased $6.4 million to $6.7 million in
2000 from $0.3 million in 1999. This resulted from equity-in-earnings and fees
totaling $4.4 million earned from Orlando Premium Outlets, a 50%-joint venture
center that opened in May 2000; Gotemba Premium Outlets and Rinku Premium
Outlets, two 40%-joint venture centers that opened in July 2000 and November
2000, respectively; and to a lesser extent from four 49%-joint venture centers
that were acquired in December 2000. Other items in 2000 include a gain from an
Orlando pad sale of $1.1 million and opening consulting fees from the two
centers in Japan of $1.3 million.

The loss from Chelsea Interactive in 2000 of $2.4 million was related to
depreciation, selling, general, administrative and maintenance expenses, offset
by nominal revenue.

Interest, in excess of amounts capitalized, increased $0.3 million to $24.5
million in 2000 from $24.2 million in 1999, due to higher interest rates in 2000
that were offset by higher average debt balances in 1999.

Liquidity and Capital Resources

The Company believes it has adequate financial resources to fund operating
expenses, distributions, and planned development, construction and acquisition
activities over the short term, which is less than 12 months and the long term,
which is 12 months or more. Operating cash flow for the year ended December 31,
2001 of $121.7 million is expected to increase with a full year of operations of
the 4.4 million square feet of GLA added during 2001 and scheduled openings of
approximately 127,000 square feet in 2002, representing additional phases of
three existing centers (57,000 square feet) and Rinku Premium Outlets (70,000
square feet). As of December 31, 2001, the Company has adequate funding sources
to complete and open all current development projects, including those of its
e-commerce affiliate, Chelsea Interactive, Inc. This will be accomplished with
available cash of $24.6 million and $160 million available under the Senior
Credit Facility. The Company also has the ability to access the public markets
through its $450 million debt shelf registration and its $185 million equity
shelf registration.

Operating cash flow is expected to provide sufficient funds for dividends and
distributions in accordance with REIT federal income tax requirements. In
addition, the Company anticipates retaining sufficient operating cash to fund
re-tenanting and lease renewal tenant improvement costs, as well as capital
expenditures to maintain the quality of its centers, and meet funding
requirements for Chelsea Interactive.

Common distributions declared and recorded in 2001 were $62.8 million, or $3.12
per share or unit. The Company's dividend payout ratio as a percentage of net
income before minority interest, depreciation and amortization (exclusive of
amortization of deferred financing costs ("FFO")) was 57.7%. The Senior Credit
Facility limits aggregate dividends and distributions to the lesser of (i) 90%
of FFO on an annual basis or (ii) 100% of FFO for any two consecutive quarters.

The Company's ratio of earnings-to-fixed charges for each of the three years
ended December 31, 2001, 2000 and 1999 was 2.6, 2.6 and 2.5, respectively. For
purposes of computing the ratio, earnings consist of income from continuing
operations after depreciation and before minority interest and fixed charges,
exclusive of interest capitalized and amortization of loan costs capitalized.
Fixed charges consist of interest expense, including interest costs capitalized,
the portion of rent expense representative of interest and total amortization of
debt issuance costs expensed and capitalized.

The OP has a $160 million senior unsecured bank line of credit (the "Senior
Credit Facility") and has an annual right to request a one-year extension that
may be granted at the option of the lenders. The Senior Credit Facility was
extended until March 30, 2004. The Senior Credit Facility bears interest on the
outstanding balance, payable monthly, at a rate equal to the London Interbank
Offered Rate ("LIBOR") plus 1.05% (4.21% at December 31, 2001) or the prime
rate, at the OP's option. The LIBOR rate spread ranges from 0.85% to 1.25%
depending on the Company's Senior Debt rating. A fee on the unused portion of
the Senior Credit Facility is payable quarterly at rates ranging from 0.15% to
0.25% depending on the balance outstanding. At December 31, 2001, the entire
$160 million of the Senior Credit Facility was available.

During the year ended December 31, 2001, the Company acquired 31
retail centers, completed a new unsecured debt financing transaction totaling
$150 million, and repaid $100 million unsecured term notes and $65.2 million
mortgage loan assumed in the Konover acquisition. The Company's balance sheet
was significantly enhanced by two common stock offerings in 2001, the first in
August and the second in October that aggregated 2.5 million new common shares
and net proceeds of $110 million. These proceeds plus cash on hand were more
than sufficient to fund the closing of the Konover transaction and pay-off the
assumed $65.2 million mortgage loan, which the Company was obligated to pre-pay
in December 2001.

In February 2002 the Company redeemed and retired 136,500 shares of 8.375%
Series A Cumulative Redeemable Preferred Stock at $47 per share using available
cash of $6.4 million.

In January 2001, the OP completed a $150 million offering of 8.25% Senior
unsecured term notes due February 2011 (the "8.25% Notes"). The 8.25% Notes were
priced to yield 8.396% to investors. Net proceeds from the offering were used to
repay $100 million of 7.75% unsecured notes due January 26, 2001, to repay all
borrowings outstanding under the Company's Senior Credit Facility and for
general corporate purposes. The Company utilized $150 million of its $600
million debt shelf registration for this offering.

Development activity for real estate operations as of December 31, 2001 includes
additional phases of three existing centers, totaling 57,000 square feet
scheduled to open in mid-2002, and the 70,000 square foot second phase of Rinku
Premium Outlets, located outside Osaka, Japan, scheduled to open in March of
2002. The Company is also in the predevelopment stage of domestic projects
outside Las Vegas, NV scheduled to open in the fall of 2003; Chicago, IL
scheduled to open in late 2003; and Seattle, WA scheduled to open in 2004; and an
international project north of Toyko in Sano scheduled to open in mid-2003.
These projects are under development and there can be no assurance that they
will be completed or opened, or that there will not be delays in opening or
completion. All current development activity is fully financed either through
project specific secured construction financing, the yen denominated line of
credit, available cash or through the Senior Credit Facility. The Company will
seek to obtain permanent financing once the projects are completed and income
has been stabilized.

The Company has minority interests ranging from 5% to 15% in several outlet
centers and outlet development projects in Europe. Five outlet centers,
containing approximately 900,000 square feet of GLA, including Bicester Village
outside of London, England, La Roca Company Stores outside of Barcelona, Spain,
Las Rozas Village outside Madrid, Spain, La Vallee near Disneyland Paris and
Maasmechelen Village in Belgium are currently open and operated by Value Retail
PLC and its affiliates. There is additional new center development planned and
one new European project is under construction and expected to open in Spring
2003. In 2001, the Company sold a portion of its Bicester Village holding to a
third party, for a gain of $1.8 million. The Company's total investment in
Europe as of December 31, 2001 was $3.7 million. The Company has also agreed to
provide up to $24.1 million in limited debt service guarantees under a standby
facility for loans arranged by Value Retail PLC, to construct outlet centers in
Europe. The term of the standby facility for new guarantees expired in November,
2001 and these guarantees shall not be outstanding for longer than five years
after project completion. In October 2001 the guarantee was increased to $24.1
million from $22.0 million until April 2002. The Company received $2.1 million
in restricted cash collateral for this short-term increase, which will revert
back to Value Retail in April 2002.

The 50/50 Orlando Premium Outlets joint venture with Simon Property Group, Inc.
has a $58.5 million construction loan (maximum commitment of $62.0 million) that
originally matured in February 2002 and which was recently extended to August
2002. The loan, which has three additional six month extension options, bears
interest at LIBOR plus 1.30% (3.32% at December 31, 2001). The loan is 10%
guaranteed by each of the Company and Simon as of December 31, 2001.

In June 1999, the Company entered into an agreement with Mitsubishi Estate Co.,
Ltd. and Nissho Iwai Corporation to jointly develop, own and operate premium
outlet centers in Japan. The joint venture is known as Chelsea Japan Co., Ltd.
("Chelsea Japan"). In conjunction with the agreement, the Company contributed
$1.7 million in equity. In addition, an equity investee of the Company entered
into a 4 billion yen (approximately US $35.0 million) line of credit guaranteed
by the Company and OP to fund its share of construction costs. The line of
credit bears interest at yen LIBOR plus 1.35% (1.45% at December 31, 2001) and
matures April 2002 and has two one-year extensions. At December 31, 2001, 1.08
billion yen (approximately US $8.2 million) was outstanding under the line of
credit. In March 2000, Chelsea Japan entered into a 3.8 billion yen
(approximately US $28.9 million) loan with a Japanese bank to fund construction
costs. As of December 31, 2001, the entire facility was outstanding and bears
interest at 2.20%. The loan is secured by two operating properties and is 40%
guaranteed by the Company. Subject to governmental and other approvals, Chelsea
Japan expects to announce additional projects during 2002. Funding for such
construction is anticipated to be through partner loans or a loan with a
Japanese bank.

In July 2000, the Company developed an e-commerce venture through its affiliate,
Chelsea Interactive. The Company's investment in this venture was approximately
$43 million at December 31, 2001. The Board of Directors has approved funding up
to $60.0 million that is expected to be provided from operating cash flow over
the next several years. The Company anticipates funding approximately $10 to $15
million of development costs during the next twenty four months, however there
can be no assurance that future revenue will be adequate to recover the
Company's investment.

To achieve planned growth and favorable returns in both the short and long-term,
the Company's financing strategy is to maintain a strong, flexible financial
position by: (i) maintaining a conservative level of leverage; (ii) extending
and sequencing debt maturity dates; (iii) managing exposure to floating interest
rates; and (iv) maintaining liquidity. Management believes these strategies will
enable the Company to access a broad array of capital sources, including bank or
institutional borrowings and secured and unsecured debt and equity offerings,
subject to market conditions.

Net cash provided by operating activities was $121.7 million and $106.7 million
for the years ended December 31, 2001 and 2000, respectively. The increase was
primarily due to the growth of the Company's GLA to 12.6 million square feet in
2001 from 8.2 million square feet in 2000. Net cash used in investing activities
decreased $8.9 million for the year ended December 31, 2001 compared to the
corresponding 2000 period, as a result of decreased joint venture investing
activity, proceeds from sale of a center and partial sale of a joint venture
investment offset by the acquisition of the 31 retail centers. For the year
ended December 31, 2001, net cash provided by financing activities decreased by
$26.6 million compared to the corresponding period in 2000 as a result of
reduced borrowing and increased debt repayments offset by offerings of the
Company's common stock.

Net cash provided by operating activities was $106.7 million and $87.5 million
for the years ended December 31, 2000 and 1999, respectively. The increase was
primarily due to the growth of the Company's GLA to 8.2 million square feet in
2000 from 5.2 million square feet in 1999. Net cash used in investing activities
increased $41.9 million for the year ended December 31, 2000 compared to the
corresponding 1999 period, as a result of $40.0 million investments in various
joint ventures and Chelsea Interactive. For the year ended December 31, 2000,
net cash provided by financing activities increased by $34.8 million primarily
due to higher net borrowings during 2000 offset in part by an increase in
distributions of $7.1 million in 2000 and the sale of preferred units and common
stock in 1999. Borrowings were used to invest in joint ventures and fund center
expansions and developments.

Funds from Operations

Management believes that funds from operations ("FFO") should be considered in
conjunction with net income, as presented in the statements of operations
included elsewhere herein, to facilitate a clearer understanding of the
operating results of the Company. The White Paper on Funds from Operations
("FFO") approved by the Board of Governors of NAREIT in October 1999 defines FFO
as net income (loss) (computed in accordance with GAAP), excluding gains (or
losses) from debt restructuring and sales of properties, plus real estate
related depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. The Company believes that FFO is helpful to
investors as a measure of the performance of an equity REIT because, along with
cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures and to fund
other cash needs. The Company computes FFO in accordance with the current
standards established by NAREIT which may not be comparable to FFO reported by
other REITs that do not define the term in accordance with the current NAREIT
definition or that interpret the current NAREIT definition differently than the
Company. FFO does not represent cash generated from operating activities in
accordance with GAAP and should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make cash distributions.

Funds from Operations (continued)

`Year Ended December 31,
                                                                        2001          2000          1999
                                                                   ------------  ------------  -------------

Income available to common shareholders .......................      $47,626       $41,592       $34,093
Add:
  Depreciation and amortization-wholly-owned...................       48,554        42,978        39,716
  Depreciation and amortization-joint ventures................         5,964         2,024             -
  Amortization of deferred financing costs and  depreciation
    of non-rental real estate assets...........................       (1,807)       (1,796)       (1,849)
 Gain(loss) on sale or writedown of assets.....................         (333)            -           694
  Minority interest............................................       14,706        14,606         9,275
  Preferred unit distribution..................................       (5,848)       (5,848)       (1,949)
                                                                   ------------  ------------  -------------
FFO............................................................     $108,862       $93,556       $79,980
                                                                   ============  ============  =============
Average shares/units outstanding...............................       20,534        19,482        19,297
Dividends declared per share...................................        $3.12         $3.00         $2.88`

Recent Accounting Pronouncements

In June 2001, the FASB issued Statements of Financial Accounting
Standards No. 141 "Business Combinations" ("SFAS 141") and No. 142 "Goodwill and
Other Intangible Assets" ("SFAS 142") which are effective January 1, 2002. SFAS
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Under SFAS 142, amortization of
goodwill, including goodwill recorded in past business combinations, will
discontinue upon adoption of this standard. All goodwill and intangible assets
will be tested for impairment in accordance with the provisions of the
Statement. The adoption of these statements will have no impact on the Company's
results of operations or its financial position.

In August 2001, FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS 143") which is effective January 1, 2003. SFAS
143 requires the recording of the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. The Company does
not expect this pronouncement to have a material impact on the Company's results
of operations or financial position.

In October 2001, the FASB issued Statement of Financial
Accounting Standard No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. This standard harmonizes the
accounting for impaired assets and resolves some of the implementation issues as
originally described in SFAS 121. The new standard becomes effective for the
Company for the year ending December 31, 2002. The Company does not expect this
pronouncement to have a material impact on the Company's results of operations
or financial position.

Critical Accounting Policies and Estimates

The Company's discussion and analysis of its financial condition
and results of operations are based upon the Company's consolidated financial
statements which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. The Company
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies
affect its more significant judgments and estimates used in the preparation of
its consolidated financial statements.

Bad Debt

The Company maintains an allowance for doubtful accounts for
estimated losses resulting from the inability of its tenants to make required
rent payments. If the financial condition of the Company's tenants were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

Foreign Exchange Exposure

From time to time, the Company may enter into hedging contracts
to protect against fluctuations in foreign exchange rates. Receivables from
Chelsea Japan are recorded in the accompanying financial statements at the
exchange rate on the date of valuation. Significant changes in the exchange rate
may result in changes to the receivable realized.

Valuation of Investments

The Company reviews its investments in unconsolidated affiliates
for impairment wherever events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable. The Company recorded a $1.2
million loss in 2001 for an impairment writedown of its investment in an outlet
center in Guam.

Economic Conditions

Substantially all leases contain provisions, including
escalations of base rents and percentage rentals calculated on gross sales, to
mitigate the impact of inflation. Inflationary increases in common area
maintenance and real estate tax expenses are substantially all reimbursed by
tenants.

Virtually all tenants have met their lease obligations and the
Company continues to attract and retain quality tenants. The Company intends to
reduce operating and leasing risks by continually improving its tenant mix,
rental rates and lease terms, and by pursuing contracts with creditworthy
upscale and national brand-name tenants.

Item 7-A. Quantitative and Qualitative Disclosures
about Market Risk

The Company is exposed to changes in interest rates primarily
from its floating rate debt arrangements. In December 2000, the Company
implemented a policy to protect against interest rate and foreign exchange risk.
The Company's primary strategy is to protect against this risk by using
derivative transactions as appropriate to minimize the variability that floating
rate interest and foreign currency fluctuations could have on cash flow. In
December 2000 a wholly-owned subsidiary of the Company entered into an interest
rate swap agreement effective January 2, 2001 with a financial institution for a
notional amount of $69.3 million amortizing to $64.1 million to hedge against
unfavorable fluctuations in the LIBOR rates of its secured mortgage loan
facility. The hedge has a 5.7625% fixed rate plus the 1.50% spread results in a
fixed interest rate of 7.2625% until January 1, 2006. At December 31, 2001 a
hypothetical 100 basis point adverse move (increase) in US Treasury and LIBOR
rates applied to unhedged debt would adversely affect the Company's annual
interest cost by approximately $0.3 million annually.

Following is a summary of the Company's debt obligations at
December 31, 2001 (in thousands):

`Expected Maturity Date
                          ------------------------------------------------------------------
                             2002      2003       2004      2005       2006    Thereafter      Total    Fair Value
                             ----      ----       ----      ----       ----    ----------    -------    ----------
Fixed Rate Debt:                -         -          -   $49,892         -    $395,830       $445,722    $459,970
Average Interest Rate:          -         -          -     8.38%         -        7.88%          7.93%
Variable Rate Debt:             -   $29,531     $5,034         -         -     $68,250       $102,815    $102,815
Average Interest Rate:          -     3.33%      4.21%         -         -        5.56%          4.85%`

Item 8. Financial Statements and Supplementary Data

The financial statements and financial information of the
Company for the years ended December 31, 2001, 2000 and 1999 and the Report of
the Independent Auditors thereon are included elsewhere herein. Reference is
made to the financial statements and schedules in Item 14.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

None.

PART III

Items 10, 11, 12 and 13.

The required information in the following items will appear in
the Company's Proxy Statement furnished to shareholders in connection with the
2002 Annual Meeting, and is incorporated by reference in this Form 10-K Annual
Report.

Item 10. Directors and Executive Officers of the Registrant*

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

* Certain information regarding Directors and Officers is
included at the end of Part I.

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)    1 and 2. The response to this portion of
Item 14 is submitted as a separate section of this report.

| | 3. | Exhibits
| | -- | --------

| | 3.1 | Articles of Incorporation of the Company, as amended,
including Articles Supplementary relating to 8 3/8% Series A Cumulative
Redeemable Preferred Stock and Articles Supplementary relating to 9% Series B
Cumulative Redeemable Preferred Stock. Incorporated by reference to Exhibit 3.1
to Form 10-K for the year ended December 31, 1999. ("1999 10-K")
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | By-laws of the Company. Incorporated by reference to
Exhibit 3.2 to Registration Statement filed by the Company on Form S-11 under
the Securities Act of 1933 (file No. 33-67870) ("S-11").
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.3 | Agreement of Limited Partnership for the Operating Partnership. Incorporated by
reference to Exhibit 3.3 to S-11.
| | --- | -----------------------------------------------------------------------------------------------------------------

| | 3.4 | Amendments No. 1 and No. 2 to Partnership Agreement dated March 31, 1997 and
October 7, 1997. Incorporated by reference to Exhibit 3.4 to Form 10-K for the
year ended December 31, 1997. ("1997 10-K")
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.5 | Amendment No. 3 to Partnership Agreement dated
September 3, 1999. Incorporated by reference to Exhibit 3.5 to 1999 10-K.
| | --- | ------------------------------------------------------------------------------------------------------------------------

| | 4.1 | Form of Indenture among the Company, Chelsea GCA Realty Partnership, L.P., and
State Street Bank and Trust Company, as Trustee. Incorporated by reference to
Exhibit 4.4 to Registration Statement filed by the Company on Form S-3 under the
Securities Act of 1933 (File No. 33-98136).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | Registration Rights Agreement among the Company and recipients of Units.
Incorporated by reference to Exhibit 4.1 to S-11.
| | ---- | --------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Term Loan Agreement dated November 3, 1998 among Chelsea GCA Realty Partnership,
L.P., BankBoston, N.A., individually and as an agent, and other Lending
Institutions listed therein. Incorporated by reference to Exhibit 10.2 to Form
10-K for the year ended December 31, 1998 ("1998 10-K").
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 | Credit Agreement dated March 30, 1998 among Chelsea GCA Realty Partnership,
L.P., BankBoston, N.A, individually and as an agent, and other Lending
Institutions listed therein. Incorporated by reference to Exhibit 10.3 to 1998
10-K.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.4 | Limited Liability Company Agreement of Simon/Chelsea Development Co., L.L.C.
dated May 16, 1997 between Simon DeBartolo Group, L.P. and Chelsea GCA Realty
Partnership, L.P. Incorporated by reference to Exhibit 10.3 to 1997 10-K.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5 | Contribution Agreement by and among an institutional investor and Chelsea GCA
Realty Partnership, L.P. and Chelsea GCA Realty, Inc. dated September 3, 1999.
Incorporated by reference to Exhibit 10.8 to 1999 10-K.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.6 | Joint Venture Agreement among Chelsea GCA Realty Partnership, L.P., Mitsubishi
Estate Co., Ltd. and Nissho Iwai Corporation dated June 16, 1999. Incorporated
by reference to Exhibit 10.9 to 1999 10-K.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.7 | Agreement for Purchase and Sale of Assets dated December 22, 2000. Incorporated
by reference to Exhibit 2.1 to current report on Form 8-K reporting on an event
which occurred December 22, 2000.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.8 | Limited Liability Company Agreement of F/C Acquisition Holdings LLC.
Incorporated by reference to Exhibit 2.2 to current report on Form 8-K reporting
on an event which occurred December 22, 2000
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.9 | Agreement for Purchase and Sale of Assets dated July 12, 2001. Incorporated by
reference to Exhibit 2 to current report on Form 8-K reporting on an event which
occurred on September 25, 2001.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 21 | List of Subsidiaries
| | -- | --------------------

| | 23.1 | Consent of Ernst & Young LLP.
| | ---- | -----------------------------

| | (b) | Reports on Form 8-K.
None
| | --- | -------------------------

| | (c) | Exhibits
See (a) 3
| | --- | ------------------

| | (d) | Financial Statement Schedules - The response to this portion of Item 14 is
submitted as a separate schedule of this report.
| | --- | ---------------------------------------------------------------------------------------------------------------------------

Item 8, Item 14(a)(1) and (2) and Item 14(d)

(a)1.   Financial Statements

| | Form 10-KReport Page
| | --------------------

|Consolidated Financial Statements-Chelsea Property
Group, Inc. | 
|-------------------------------------------------------------- | 

|Report of Independent Auditors | F-1
|------------------------------ | ---

|Consolidated Balance Sheets as of December 31, 2001 and 2000 | F-2
|------------------------------------------------------------ | ---

|Consolidated Statements of Income for the years ended December 31, 2001,
     2000 and 1999 | F-3
|------------------------------------------------------------------------------------------- | ---

|Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 2001, 2000 and 1999 | F-4
|--------------------------------------------------------------------------------------------------------- | ---

|Consolidated Statements of Cash Flows for the years ended December 31, 2001,
     2000 and 1999 | F-5
|----------------------------------------------------------------------------------------------- | ---

|Notes to Consolidated Financial Statements | F-6
|------------------------------------------ | ---

|(a)2 and (d) Financial Statement Schedule | 
|----------------------------------------- | 

|Schedule III-Consolidated Real Estate and Accumulated Depreciation | F-27
|------------------------------------------------------------------ | ----

All other schedules are omitted since the required information
is not present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
consolidated financial statements and notes thereto.

Report of Independent Auditors

Board of Directors
Chelsea Property Group, Inc.

We have audited the accompanying consolidated balance sheets of
Chelsea Property Group, Inc. as of December 31, 2001 and 2000, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 2001. Our audits also
included the financial statement schedule listed in the Index as Item 14(a).
These financial statements and schedule are the responsibility of the management
of Chelsea Property Group, Inc. Our responsibility is to express an opinion on
the financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Chelsea Property Group, Inc. as of December 31, 2001 and 2000, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

Ernst & Young LLP

New York, New York
February 15, 2002

Chelsea Property Group, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)

`December 31,
                                                                       2001               2000
                                                                   -------------       ------------
Assets
Rental properties:
     Land........................................................     $160,458          $ 118,238
     Depreciable property........................................      967,448            790,106
                                                                   -------------       ------------
Total rental property............................................    1,127,906            908,344
Accumulated depreciation.........................................     (217,462)          (175,692)
                                                                   -------------       ------------
Rental properties, net...........................................      910,444            732,652
Cash and cash equivalents........................................       24,604             18,036
Restricted cash- escrows.........................................        3,347                  -
Investments in unconsolidated affiliates.........................       93,689             91,629
Notes receivable-related parties.................................        3,281              2,216
Deferred costs, net..............................................       22,534             14,886
Other assets.....................................................       41,409             41,895
                                                                    ------------      -------------
Total assets.....................................................    $1,099,308         $ 901,314
                                                                   =============       ============

Liabilities and stockholders' equity
Liabilities:
     Unsecured bank debt.........................................      $ 5,035           $ 35,035
     Unsecured notes.............................................      373,294            324,542
     Mortgage debt...............................................      170,209             90,776
     Construction payables.......................................        8,001             10,001
     Accounts payable and accrued expenses.......................       47,039             43,507
     Obligation under capital lease..............................        2,141              2,714
     Accrued dividend and distribution payable...................        3,851              3,910
     Other liabilities...........................................       14,676             18,267
                                                                   -------------       ------------
Total liabilities................................................      624,246            528,752

Commitments and contingencies

Minority interest................................................      115,639            101,203

Stockholders' equity:
    8.375% series A cumulative redeemable preferred stock, $0.01
      par value, authorized 1,000 shares, issued and outstanding
      1,000 shares in 2001 and 2000 (aggregate liquidation
      preference $50,000)........................................           10                 10
    Common stock, $0.01 par value, authorized 50,000 shares,
      issued and outstanding 18,770 in 2001 and 15,957 in 2000...          190                160
    Paid-in-capital..............................................      444,344            348,141
    Distributions in excess of net loss..........................      (82,142)           (76,829)
    Accumulated other comprehensive loss.........................       (2,979)              (123)
                                                                      -----------       ------------
Total stockholders' equity.......................................      359,423            271,359
                                                                      ------------      ------------
Total liabilities and stockholders' equity.......................      $1,099,308       $ 901,314
                                                                      =============     ============`

The accompanying notes are an integral part of the financial statements.

Chelsea Property Group, Inc.
Consolidated Statements of Income
(In thousands, except per share data)

`Year ended December 31,
                                                             2001                2000             1999
                                                         -------------       ------------      -------------
Revenues:
     Base rent......................................        $127,229            $108,123            $98,838
     Percentage rent................................          18,049              17,701             15,647
     Expense reimbursements.........................          50,559              44,116             39,748
     Other income...................................          11,018               9,963              8,385
                                                         -------------       -------------     --------------
Total revenues......................................         206,855             179,903            162,618

Expenses:
     Operating and maintenance......................          57,791              48,992             43,771
     Depreciation and amortization..................          48,554              42,978             39,716
     General and administrative.....................           4,611               4,784              4,853
     Other..........................................           2,819               2,663              2,128
                                                         -------------       -------------     --------------
Total  expenses.....................................         113,775              99,417             90,468

Income before unconsolidated investments, interest
expense and minority interest.......................          93,080              80,486             72,150
Income from unconsolidated investments..............          15,642               6,723                308
Loss from Chelsea Interactive.......................          (5,337)             (2,364)                 -
Loss on writedown of assets.........................               -                   -               (694)
Interest expense....................................         (36,865)            (24,459)           (24,208)
                                                         -------------       -------------     --------------

Income before minority interest.....................          66,520              60,386             47,556
Minority interest...................................         (14,706)            (14,606)            (9,275)
                                                         -------------       -------------     --------------

Net income..........................................          51,814              45,780             38,281
Preferred dividend requirement......................          (4,188)             (4,188)            (4,188)
                                                         -------------       -------------     --------------

Net income available to common shareholders.........         $47,626             $41,592            $34,093
                                                         =============       =============     ==============

Earnings per share
Basic:
Net income per common share...........................         $2.83               $2.61              $2.17
                                                         ==============      =============     ==============
Weighted average common shares outstanding                    16,839              15,940             15,742
                                                         ==============      =============     ==============

Diluted:
Net income per common share...........................         $2.74               $2.58              $2.14
                                                         ===============     ==============    ==============

Weighted average common shares outstanding                    17,355              16,126             15,908
                                                         ===============     ==============    ==============`

The
accompanying notes are an integral part of the financial
statements.

Chelsea Property Group, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except per share data)

`Preferred    Common Stock                   Distrib. in       Accum.        Total
                                            Stock At          At          Paid-in-       Excess of     Other Comp.    Stockholders'
                                            Par Value      Par Value       Capital      Net Income        Loss          Equity

Balance December 31, 1998..................     $10           $156        $339,490      ($59,265)           $ -         $280,391

Net income.................................       -              -              -         38,281              -          38,281
Preferred dividend requirement.............       -              -              -         (4,188)             -          (4,188)
Cash distributions declared ($2.88 per
     common share of which $0.86
     represented a return of capital
     for federal income tax purposes)......       -              -              -        (45,426)             -          (45,426)
Exercise of stock options..................       -              -           1,286             -              -            1,286
Shares issued through dividend
     reinvestment program..................       -              3           5,987             -              -            5,990
Shares issued in exchange for units
     of the Operating Partnership..........       -              -             903             -              -              903
Shares issued through Employee Stock
     Purchase Plan (net of costs)..........       -              -              59             -              -               59
                                             -----------    ----------     -----------   -----------    ------------ --------------
Balance December 31, 1999..................      10            159         347,725       (70,598)                        277,296

Net income.................................       -              -               -        45,780              -           45,780
Other comprehensive income
     Foreign currency translation..........       -              -               -             -           (123)            (123)
                                                                                                                      -------------
Total comprehensive income.................       -              -               -             -                          45,657
                                                                                                                      -------------

Preferred dividend requirement.............       -              -               -        (4,188)             -           (4,188)
Cash distributions declared ($3.00 per
     common share of which $0.33
     represented a return of capital for
     federal income tax purposes)..........       -              -               -       (47,823)             -          (47,823)
Exercise of stock options..................       -              1             310             -              -              311
Shares issued in exchange for units
     of the Operating Partnership..........       -              -              48             -              -               48
Shares issued through Employee Stock
     Purchase Plan (net of costs)..........       -              -              58             -              -               58
                                             -----------    ----------     -----------   -----------    -------------  ------------
Balance December 31, 2000..................      10            160         348,141        (76,829)          (123)         271,359

Net income.................................       -              -               -         51,814              -           51,814
Other comprehensive income
     Foreign currency translation .........       -              -               -              -           (198)           (198)
     Interest rate swap....................                                                               (2,658)         (2,658)
                                                                                                                       -------------
Total comprehensive income.................       -              -               -              -              -           48,958
                                                                                                                       -------------
Preferred dividend requirement.............       -              -               -         (4,188)             -           (4,188)
Cash distributions declared ($3.12 per
     common share, all ordinary income)....       -              -               -        (52,939)             -          (52,939)
Exercise of stock options..................       -              2           2,020              -              -            2,022
Shares issued through offerings by the
      Company..............................       -             26         109,975              -              -          110,001
Shares issued in exchange for units
     of the Operating Partnership..........       -              2           2,289              -              -            2,291
Shares issued through Employee Stock
     Purchase Plan (net of costs)..........       -              -             128              -              -              128
Revaluation of minority interest...........       -              -         (18,209)             -              -          (18,209)
                                             -----------    ----------     -----------   -----------    -------------  ------------
Balance December 31, 2001..................     $10           $190        $444,344       ($82,142)       ($2,979)        $359,423
                                             ===========    ==========    ============   ===========    =============  ============`

The accompanying notes are an integral part of the financial statements.

Chelsea Property Group, Inc.
Consolidated Statements of Cash Flows
(In thousands)

`Year ended December 31,
                                                                   2001               2000              1999
                                                              ---------------    ---------------   -------------
Cash flows from operating activities
Net income..................................................       $51,814            $45,780           $38,281
Adjustments to reconcile net income to
  net cash provided by operating activities:
     Depreciation and amortization..........................        48,554             42,978            39,716
      (Gain) loss on sale or write down of assets...........          (333)                 -               694
     Equity in earnings of unconsolidated investments
             in excess of distributions received............        (2,215)            (1,375)              (88)
     Loss from Chelsea Interactive..........................         5,337              2,364                 -
     Minority interest in net income........................        14,706             14,606             9,275
     Write-off of development costs.........................             -                869                 -
     Proceeds from non-compete receivable...................         4,600              4,600             4,600
     Amortization of non-compete revenue....................        (5,136)            (5,136)           (5,136)
     Additions to deferred lease costs......................        (1,869)            (2,708)           (2,771)
     Other operating activities.............................          (570)              (531)              511
     Changes in assets and liabilities:
      Straight-line rent receivable.........................        (1,761)            (1,536)           (1,554)
      Other assets..........................................           965             (5,995)           (3,076)
      Due from affiliates...................................        (1,924)            (2,878)                -
      Accounts payable and accrued expenses.................         9,555             15,620             7,050
                                                              ---------------    ---------------   ---------------
Net cash provided by operating activities...................       121,723            106,658            87,502

Cash flows from investing activities
Additions to rental properties..............................      (103,521)           (59,980)          (62,119)
Proceeds from sale of center................................         7,100              3,372             4,483
Additions to investments in unconsolidated affiliates.......       (14,763)           (64,837)          (21,388)
Distributions from investments in unconsolidated
   affiliates in excess of earnings.........................         5,079                  -                 -
Proceeds from sale of investment in unconsolidated
     affiliate..............................................         2,839                  -                 -
Loans to related parties....................................        (2,750)                (3)           (2,213)
Payments from related parties...............................         1,685                  -             4,500
Additions to deferred development costs.....................        (8,220)               (31)             (753)
                                                              ---------------    ---------------   ---------------
Net cash used in investing activities.......................      (112,551)          (121,479)          (77,490)

Cash flows from financing activities
Debt proceeds...............................................       177,538            246,526            49,000
Repayments of debt..........................................      (217,318)          (151,750)          (69,000)
Distributions...............................................       (72,873)           (67,830)          (60,752)
Additions to deferred financing costs.......................        (2,102)            (3,320)             (679)
Net proceeds from sale of common stock......................       112,151                369             7,335
Net proceeds from sale of preferred units...................             -                  -            63,315
                                                              ---------------    ---------------   ---------------
Net cash (used in) provided by financing activities.........        (2,604)            23,995           (10,781)

Net increase (decrease) in cash and cash equivalents........         6,568              9,174              (769)
Cash and cash equivalents, beginning of period..............        18,036              8,862             9,631
                                                              ---------------    ---------------   ---------------
Cash and cash equivalents, end of period....................       $24,604            $18,036            $8,862
                                                              ===============    ===============   ===============`

The accompanying notes are an integral part of the
financial statements.

Notes to Financial Statements

1.  Organization and Basis of Presentation

Organization

Chelsea Property Group, Inc. (the "Company"), formerly Chelsea
GCA Realty, Inc., is a self-administered and self-managed real estate investment
trust ("REIT"). The Company is the managing general partner of CPG Partners,
L.P., (the "Operating Partnership" or "OP"), formerly Chelsea GCA Realty
Partnership, L.P., an operating partnership that specializes in owning,
developing, leasing, marketing and managing upscale and fashion-oriented
manufacturers' outlet centers (the "Premium Portfolio") and 30 centers acquired
on September 25, 2001, containing approximately 4.3 million square feet of gross
leasable area ("Other Retail Centers") (collectively the "Properties"). As of
December 31, 2001, the Company wholly or partially owned 57 centers in 29 states
and Japan containing approximately 12.6 million square feet of gross leasable
area("GLA"). The Company's Premium Portfolio included 27 properties containing
8.3 million square feet of GLA. These properties generally are located near
metropolian areas including New York City, Los Angeles, Boston, Washington,
D.C., San Francisco, Sacramento, Cleveland, Atlanta, Dallas, Portland (Oregon),
Tokyo and Osaka, Japan. Some Premium properties are also located within 20 miles
of major tourist destinations including Palm Springs, the Napa Valley, Orlando,
and Honolulu.

During 2000 the Company developed a technology-based e-commerce
platform through an unconsolidated affiliate, Chelsea Interactive, Inc.
("Chelsea Interactive"). This platform provides fashion and other retail brands
with their own customized direct-to-the-consumer Internet online stores,
incorporating e-commerce design, development, fulfillment and customer services.

Basis of Presentation

Virtually, all of the Company's assets are held by, and all of
its operations conducted through, the Operating Partnership. Due to the
Company's ability, as the sole general partner, to exercise financial and
operational control over the Operating Partnership, the Operating Partnership is
consolidated in the accompanying financial statements. All significant
intercompany transactions and accounts have been eliminated in consolidation.

Basis of Presentation (continued)

Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 2001 and 2000,
using available market information and appropriate valuation methodologies.
Although management is not aware of any factors that would significantly affect
the reasonable fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since such date and current
estimates of fair value may differ significantly from the amounts presented
herein.

2.  Summary of Significant Accounting Principles

Rental Properties

Rental properties are presented at cost net of accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the assets. The Company uses 25-40 year estimated
lives for buildings, and 15 and 5-7 year estimated lives for improvements and
equipment, respectively. Expenditures for ordinary maintenance and repairs are
charged to operations as incurred, while significant renovations and
enhancements that improve and or extend the useful life of an asset are
capitalized and depreciated over the estimated useful life. The Company reviews
real estate assets for impairment wherever events or changes in circumstances
indicate that the carrying value of assets to be held and used may not be
recoverable. Impaired assets are reported at the lower of cost or fair value.
Assets to be disposed of are reported at the lower of cost or fair value less
cost to sell. No impairment write downs were required in 2001 or 2000.

Gains and losses from sales of real estate are recorded when
title is conveyed to the buyer, subject to the buyer's financial commitment
being sufficient to provide economic substance to the sale.

Cash and Equivalents

All demand and money market accounts and certificates of deposit
with original terms of three months or less from the date of purchase are
considered cash equivalents. At December 31, 2001 and 2000, cash equivalents
consisted of repurchase agreements, commercial paper, U.S. Government agency
securities, bank liabilities and other corporate and municipal obligations that
mature between January and March of the following year. The carrying amount of
such investments approximated fair value.

Development Costs

Development costs, including interest, taxes, insurance and
other costs incurred in developing new properties, are capitalized. Upon
completion of construction, development costs are amortized on a straight-line
basis over the useful lives of the respective assets. Development costs related
to inactive projects are expensed at such time as the project is deemed
abandoned.

Capitalized Interest

Interest, including the amortization of deferred financing costs
for borrowings used to fund development and construction, is capitalized as
construction in progress and allocated to individual property costs.

Notes to Financial Statements (continued)

2.  Summary of Significant Accounting Principles (continued)

Foreign Currency Translation

The Company conforms to the requirements of the Statement of
Financial Accounting Standards No. 52 entitled "Foreign Currency
Translation." Accordingly, assets and liabilities of foreign equity investees
are translated at prevailing year-end rates of exchange.

Rental Expense

Rental expense is recognized on a straight-line basis over the
initial term of the lease.

Deferred Lease Costs

Deferred lease costs consist of fees and direct internal costs
incurred to initiate and renew operating leases, and are amortized on a
straight-line basis over the initial lease term or renewal period as
appropriate.

Deferred Financing Costs

Deferred financing costs are amortized as interest costs over
the terms of the respective agreements. Unamortized deferred financing costs are
expensed when the associated debt is retired before maturity.

Revenue Recognition

Leases with tenants are accounted for as operating leases. Base
rent revenue is recognized on a straight-line basis over the lease term
according to the provisions of the lease. The excess of rents recognized over
amounts contractually due and unpaid rents are included in other assets in the
accompanying balance sheets. Certain lease agreements contain provisions for
rents that are calculated on a percentage of sales and recorded on the accrual
basis. These rents are accrued monthly once the required thresholds per the
lease agreement are exceeded. Virtually all lease agreements contain provisions
for additional rents representing reimbursement of real estate taxes, insurance,
advertising and common area maintenance costs.

Bad Debt Expense

Bad debt expense included in other expense totaled $1.2 million,
$0.9 million and $0.8 million for the years ended December 31, 2001, 2000 and
1999, respectively. The allowance for doubtful accounts included in other assets
totaled $1.7 million and $1.0 million at December 31, 2001 and 2000,
respectively.

Income Taxes

The Company is taxed as a REIT under Section 856(c) of the
Internal Revenue Code of 1986, as amended, commencing with the tax year ended
December 31, 1993. As a REIT, the Company generally is not subject to federal
income tax. To maintain qualification as a REIT, the Company must distribute at
least 90% of its REIT taxable income to its stockholders (95% prior to January
1, 2001) and meet certain other requirements. If the Company fails to qualify as
a REIT in any taxable year, the Company will be subject to federal income tax on
its taxable income at regular corporate rates. The Company may also be subject
to certain state and local taxes on its income and property. Under certain
circumstances, federal income and excise taxes may be due on its undistributed
taxable income. At December 31, 2001 and 2000, the Company was in compliance
with all REIT requirements and was not subject to federal income taxes.

Notes to Financial Statements (continued)

2.  Summary of Significant Accounting Principles (continued)

Net Income Per Common Share

Basic earnings per common share is computed using the weighted
average number of shares outstanding. Diluted earnings per common share is
computed using the weighted average number of shares outstanding adjusted for
the incremental shares attributed to outstanding options to purchase common
stock of 0.5 million in 2001 and 0.2 million in 2000 and 1999.

The following table sets forth the computation of basic and
diluted earnings per share for the periods indicated:

`(In thousands, except per share amounts)                          2001           2000            1999
   Numerator
   Numerator for basic and diluted earnings per share -
   net income available to common shareholders.............           $47,626        $41,592         $34,093

   Denominator
   Denominator for basic earnings per share - weighted
   average shares..........................................            16,839         15,940          15,742
   Effect of dilutive securities:
      Stock options........................................               516            186             166
   Denominator for diluted earnings per share - adjusted
   weighted-average share and assumed conversions..........            17,355         16,126          15,908
   Per share amounts:

      Net income - basic...................................             $2.83          $2.61           $2.17

      Net income - diluted.................................             $2.74          $2.58           $2.14`

Stock Option Plan

The Company follows Accounting Principles Board Opinion No. 25
(Accounting for Stock Issued to Employees) and the related interpretations in
accounting for its employee stock options. In accordance with SFAS No. 123
(Accounting for Stock-Based Compensation), the Company has provided the required
footnote disclosure for the compensation expense related to the fair value of
the outstanding stock options.

Notes to Financial Statements (continued)

2.  Summary of Significant Accounting Principles (continued)

Concentration of Company's Revenue and Credit Risk

Approximately 21%, 23% and 24% of the Company's total revenues
for the years ended December 31, 2001, 2000 and 1999, respectively, was derived
from Woodbury Common Premium Outlets. The loss of this center or a material
decrease in revenues from the center for any reason may have a material adverse
effect on the Company. In addition, approximately 28% of the
Company's total revenues for the years ended December 31, 2001 and 2000 and 30% for the
year ended December 31, 1999 were derived from the Company's centers in California.

Management of the Company performs ongoing credit evaluations of
its tenants and requires certain tenants to provide security deposits. Although
the Company's tenants operate principally in the retail industry, there is no
dependence upon any single tenant.

Use of Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

Minority Interest

Minority interest is comprised of the following:

| |  |  | The common unitholders' interest in the OP which was issued in exchange for the
assets contributed to the OP on November 2, 1993 and additional units exchanged
for property acquisitions during 1997. The unitholders' interest at December 31,
2001 and 2000, was 14.4% and 17.4% (3,150,000 units and 3,352,000 units),
respectively. Common shares are reserved for the potential conversion of the
units. Units may be exchanged for shares of the Company's common stock on a one
for one basis. Upon exchange, shares are valued at the book value of the units
on the date of the exchange. During the years ended December 31, 2001, 2000 and
1999, the Company made the following distributions per unit:
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`2001         2000        1999
                                            --------     --------    ---------
            Distributions per unit            $3.12        $3.00       $2.88
            Return of capital                  -           (0.33)      (0.86)
                                            --------     --------    ---------
            Ordinary income                   $3.12       $ 2.67       $2.02
                                            ========     ========    =========`

| |  |  | The preferred unitholder's interest in the OP which was issued in a private sale
of $65 million of Series B Cumulative Redeemable Preferred Units to an
institutional investor in September 1999.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Notes to Financial Statements (continued)

2.  Summary of Significant Accounting Principles (continued)

Comprehensive Income

In 1997, the FASB issued Statement No. 130, "Reporting
Comprehensive Income" ("Statement 130"). Statement 130 established standards for
reporting comprehensive income and its components in a full set of
general-purpose financial statements. Statement 130 requires that all components
of comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. At December 31, 2001,
other comprehensive loss included as a reduction to stockholders equity and
minority interest was a $3.1 million loss related to an interest rate swap and
a $0.4 million loss related to a foreign currency exchange rate on
receivables.

Derivative/Financial Instruments

In the normal course of business, the Company uses a variety of derivative
financial instruments to manage, or hedge, interest rate and foreign currency
risk. The Company requires that hedging derivative instruments are effective in
reducing the interest rate or foreign currency risk exposure as they are
designated. This effectiveness is an essential for hedge accounting under
accounting principles generally accepted in the United States. Derivative
instruments may be associated with the hedge of an anticipated transaction. In
those cases, hedge effectiveness criteria also require that it be probable that
the underlying transaction occurs. Instruments that meet these hedging criteria
are formally designated as hedges at the inception of the derivative contract.
When the terms of an underlying transaction are modified, or when the underlying
hedged item ceases to exist, all changes in the fair value of the instrument are
marked-to-market with changes in value included in net income each period until
the instrument matures or is terminated or assigned. Any derivative instrument
used for risk management that does not meet the hedging criteria is
marked-to-market each period in net income.

To determine the fair values of derivative instruments, the Company uses a
variety of methods and assumptions that are based on market conditions and risks
existing at each balance sheet date. For the majority of financial instruments
including most derivatives, long-term investments and long-term debt, standard
market conventions and techniques such as discounted cash flow analysis, option
pricing models, replacement cost, and termination cost are used to determine
fair value. All methods of assessing fair value result in a general
approximation of value, and such value may never actually be realized.

Recently Issued Accounting Pronouncements

In June 2001, the FASB issued Statements of Financial Accounting Standards No.
141 "Business Combinations" ("SFAS 141") and No. 142 "Goodwill and Other
Intangible Assets" ("SFAS 142") which are effective January 1, 2002. SFAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Under SFAS 142, amortization of
goodwill, including goodwill recorded in past business combinations, will
discontinue upon adoption of this standard. The Statement requires goodwill and
intangible assets be tested for impairment. The adoption of these statements
will have no impact on the Company's results of operations or its financial position.

Notes to Financial Statements (continued)

2.  Summary of Significant Accounting Principles (continued)

Recently Issued Accounting Pronouncements (continued)

In August 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS 143") which is effective January 1, 2003. SFAS 143 requires
the recording of the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. The Company does not expect
this pronouncement to have a material impact on the Company's results of
operations or financial position.

In October 2001, the FASB issued Statement of Financial Accounting Standard No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This standard harmonizes the accounting for impaired assets
and resolves some of the implementation issues as originally described in SFAS
121. The new standard becomes effective for the Company January 1, 2002. The
Company does not expect this pronouncement to have a material impact on the
Company's results of operations or financial position.

Reclassifications

Certain amounts in the 2000 financial statements have been reclassified to
conform to the 2001 presentation.

3.  Acquisitions and Dispositions

On September 25, 2001, the Company acquired 32 shopping centers
from Konover Property Trust, Inc. and its affiliates ("Konover"). The purchase
price was $182.5 million, including the assumption of $131.0 million of
non-recourse debt. This purchase price was preliminarily allocated to each of the
centers. One of these centers was acquired subject to a repurchase agreement and
was sold back to Konover on December 3, 2001, at the established cost basis of
$2.5 million. One of the centers acquired meets the Company's criteria for
classification as a Premium Portfolio center. The other 30 centers contain 4.3
million square feet and are classified as Other Retail Centers. The accompanying
financial statements include the operations of the acquired centers from the
acquisition date.

The following condensed pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 2000 and that the sale of 545,000 common
shares also occurred on January 1, 2000:

`Year Ended December 31,
                                                       2001             2000
                                                    -----------      -----------

Total revenue....................................    $242,726          $228,679

Net income to common shareholders................      53,948            51,736

Earnings per share:
Basic:
Net income to common shareholders................       $3.14             $3.14
Weighted average common shares outstanding.......      17,157            16,485

Diluted:
Net income to common shareholders................       $3.05             $3.10
Weighted average common shares outstanding.......      17,673            16,671`

In October 2001 the OP sold the 35,000 square feet center,
Mammoth Premium Outlets to a third party and recognized a loss of approximately
$0.3 million which is included in other income in the accompanying financial
statements.

4.  Rental Properties

The following summarizes the carrying values of rental
properties as of December 31 (in thousands):

`2001           2000
                                                    -------------    -----------
Land and improvements............................       $328,324       $281,400
Buildings and improvements.......................        775,309        608,730
Construction-in-progress.........................          9,356          5,587
Equipment and furniture..........................         14,917         12,627
                                                    -------------    -----------
Total rental property............................      1,127,906        908,344
Accumulated depreciation and amortization........       (217,462)      (175,692)
                                                    -------------    -----------
Total rental property, net.......................       $910,444       $732,652
                                                    =============    ===========`

Interest costs capitalized as part of buildings and improvements
were $2.0 million, $5.4 million and $3.1 million for the years ended December
31, 2001, 2000 and 1999, respectively.

Commitments for land, new construction, development, and
acquisitions, excluding separately financed joint venture activity, totaled
approximately $6.3 million and $12.8 million at December 31, 2001 and 2000,
respectively.

Depreciation expense (including amortization of the capital
lease) amounted to $42.9 million, $38.5 million and $35.6 million for the years
ended December 31, 2001, 2000 and 1999, respectively.

5.  Restricted Cash-Escrows

Restricted cash escrows includes $1.2 million of escrows and
reserve funds for real estate taxes, property insurance, capital and tenant
improvements and leasing costs established pursuant to certain mortgage
financing agreements and $2.1 million funds held in escrow pursuant to certain
loan guarantee arrangements with an unconsolidated investee of the Company.

6.  Investments in Affiliates

The OP holds interests in several domestic and international
joint ventures. Non-controlling investments are accounted for under the equity
method. Equity in earnings or losses of these affiliates and related management
advisory, license and guarantee fees earned are included in income from
unconsolidated investments and loss from Chelsea Interactive in the consolidated
financial statements.

On December 22, 2000, the OP and Fortress Registered Investment
Trust ("Fortress") acquired four outlet centers from a competitor, through a
joint venture known as F/C Acquisition Holdings, LLC ("F/C Acquisition") in
which the OP has a 49% interest. The total purchase price was $240 million,
including the assumption of approximately $174 million of 6.99% fixed-rate
non-recourse mortgage debt due in 2008. In connection with the acquisition, the
OP made an initial capital contribution of $32.0 million and subsequently made
an additional $0.9 million contribution. The four premium outlet centers contain
approximately 1.6 million square feet of gross leasable area and are located in
Gilroy, California, Michigan City, Indiana, Waterloo, New York and Kittery,
Maine. The Kittery, Maine center is subject to a ground lease that terminates in
October 2009 with eight extension options of five years each. The OP is
primarily responsible for the day-to-day operations of the joint venture. Under
the terms of the three-year renewable Property Management Agreement, the OP and
its subsidiary are compensated for management and leasing services. Under the
terms of the Partnership Agreement with Fortress net income or loss and
distributions are allocated in accordance with the members' equity interests.

Notes to Financial Statements (continued)

6.  Investments in Affiliates (continued)

In June 1999, the OP entered into an agreement with Mitsubishi
Estate Co., Ltd. and Nissho Iwai Corporation to jointly develop, own and operate
premium outlet centers in Japan. The OP has a 40% interest in the joint venture
that is known as Chelsea Japan Co., Ltd. ("Chelsea Japan"). In conjunction with
the agreement, the OP contributed $1.7 million in equity and will provide its
share of construction financing and/or loan guarantees. Chelsea Japan opened its
initial project, the 220,000 square-foot first phase of Gotemba Premium Outlets,
on July 13, 2000. Gotemba is located on the Tomei Expressway, approximately 60
miles west of Tokyo and midway between Mt. Fuji and the Hakone resort area.
Chelsea Japan opened its second project, the 180,000 square-foot first phase of
Rinku Premium Outlets on November 23, 2000. The center is located outside Osaka,
the second-largest city in Japan.

In May 1997, the OP and Simon Property Group, Inc. ("Simon")
entered into a joint venture agreement to develop and acquire high-end outlet
centers in the United States. The OP and Simon agreed to be co-managing general
partners, each with 50% ownership interest in the joint venture and any entities
formed with respect to a specific project. Orlando Premium Outlets ("OPO"), a
428,000 square foot 50/50 joint venture that was completed in May 2000, is the
only project completed pursuant to this agreement. OPO is located on Interstate
4, midway between Walt Disney World/EPCOT and Sea World in Orlando. The OP has
primary responsibility for the day-to-day operations of the center for which it
receives a management fee.

The Company has minority interests ranging from 5 to 15% in
several outlet centers and outlet development projects in Europe. Five outlet
centers, containing approximately 900,000 square feet of GLA, including Bicester
Village, outside London, England, La Roca Company Stores outside of Barcelona,
Spain, Las Rozas Village outside Madrid, Spain and La Vallee near Disneyland
Paris and Maasmechelen Village in Belgium are currently open and operated by
Value Retail PLC and its affiliates. One new European project and expansions of
two existing centers are in various stages of development and are expected to
open within the next two years. The Company sold a portion of its Bicester
Village holding to a third party, resulting in a gain of $1.8 million which is
included in earnings from unconsolidated investments in the accompanying
financial statements.

The Company has a 15% minority interest in a partnership that
owns an outlet center located in Guam. The center has been generating operating
losses and the Company does not anticipate recovering its investment. In
December 2001, the Company wrote down its investment in Guam and recognized a
loss of $1.2 million which is included in earnings from unconsolidated
investments in the accompanying financial statements. The Company continues to
be a partner in the Guam outlet center.

The Company owns 100% of the non-voting preferred stock
of Chelsea Interactive, Inc. ("Chelsea Interactive"). The Company also owns 50%
of the non-voting common stock representing 40% of the total common stock.
Chelsea Interactive, as an unconsolidated investment, has been developing a new
technology-based e-commerce platform that provides fashion and other retail
brands their own customized direct-to-the-consumer Internet online stores,
incorporating e-commerce design, development, fulfillment and customer services.
In consideration for such services, Chelsea Interactive is receiving a
percentage of each brand's online sales. There is no assurance that this concept
will be successful or the future impact on the Company's financial condition or
results of operations.

Notes to Financial Statements (continued)

6.  Investments in Affiliates (continued)

The following is a summary of investments in and amounts due from affiliates
during the years ended December 31, 2001 and 2000(in thousands):

`Chelsea                Chelsea
                                  F/C        Japan       Simon    Interactive      Other       Total
                               ----------  ----------  ---------  -----------     ---------    ---------
Balance 12/31/99..........           -      $ 2,010     $12,536     $ 3,217        $ 6,065      $23,828
Initial investment........      $32,009           -           -           -              -       32,009
Additional Investment.....          917       2,133         510      29,046            384       32,990
Income (loss) from
   unconsolidated
    investments...........          188       3,211       2,991      (2,364)           333        4,359
Distribution
    and fees..............          (35)     (2,426)     (2,667)          -           (333)      (5,461)
Advances (net)............           35       1,317       2,552           -              -        3,904
                               ----------    ----------  ---------   -----------    ----------  ----------

Balance 12/31/00..........       33,114       6,245      15,922      29,899          6,449       91,629
Additional
      Investment..........        1,528         674           -       9,934              -       12,136
Income (loss) from
   unconsolidated
    investments...........        6,522       3,286       5,492      (5,337)          (275)       9,688
Distribution
and fees..................       (6,088)     (2,222)    (10,745)          -              -      (19,055)
Sale of investment........            -           -           -           -         (2,839)      (2,839)
Gain on sale and (impairment
   loss)...................           -           -           -           -            617          617
Advances (net).............       1,042       1,313        (946)        360           (256)       1,513
                               ----------   ----------  ---------  -----------     ---------  ----------
Balance 12/31/01               $ 36,118       9,296      $9,723    $ 34,856         $3,696     $ 93,689
                               ==========    =========  =========  ============    =========  ==========`

The Company's share of income before depreciation, depreciation
expense and income from unconsolidated investments for the years ended December
31, 2001 and 2000 are as follows (in thousands):

`2001                                     2000
                       --------------------------------------------    ---------------------------------------
                                                          Inc.                                      Inc.
                         Income                          (loss)          Income                    (loss)
                         (loss)                           from           (loss)                     from
                         Before                         Unconsol.        Before                    Unconsol.
                          Depr.            Depr.         Inv.             Depr.         Depr.        Inv.
                       -------------    ----------    ------------     ----------     ----------  -----------
F/C..................     $9,214          $2,692         $6,522           $259           $71         $188
Chelsea Japan........      4,676           1,390          3,286          3,905           694        3,211
Simon................      7,374           1,882          5,492          4,250         1,259        2,991
Other................        342               -            342            333             -          333
                       -------------    ----------    ------------     ----------    ---------    -----------
   Total.............    $21,606          $5,964        $15,642         $8,747        $2,024       $6,723
                       =============    ==========    ============     ==========    =========    ===========
Chelsea Interactive....  ($2,449)         $2,888       ($5,337)        ($1,719)         $645      ($2,364)
                       =============    ==========    ============     ==========    ==========   ===========`

The Company had $0.3 million income from unconsolidated investments during the
year ended December 31, 1999 from its other investments.

Notes to Financial Statements (continued)

6.  Investments in Affiliates (continued)

Condensed financial information as of December 31, 2001 and for the
year then ended for F/C, Chelsea Japan and Simon (which are included in Retail)
and Chelsea Interactive is as follows:

`Chelsea
                                                       Retail        Interactive
                                                    ------------   ------------

Property, plant and equipment (net)................   $355,427       $29,923
Total assets.......................................    409,944        34,963
Long term debt.....................................    282,057(1)          -
Total liabilities..................................    321,854         2,665
Net income (loss)..................................     20,812       (11,976)
Company's share of net income (loss)...............     10,013        (5,337)
Fee income.........................................      5,286             -`

(1) Includes long-term debt of $170.5 million in F/C, $58.5
million in Simon and $53.1 million in Chelsea Japan.

7.  Deferred Costs

The following summarizes the carrying amounts for deferred costs
as of December 31, 2001 and 2000 (in thousands):

`2001          2000
                                                     -----------  ------------

Lease costs........................................    $24,152       $22,546
Financing costs....................................     16,977        14,875
Development costs..................................      8,349           129
Other..............................................        871           871
                                                     ------------  ------------
Total deferred costs...............................     50,349        38,421
Accumulated amortization...........................    (27,815)      (23,535)
                                                     ------------  ------------
Total deferred costs, net..........................    $22,534       $14,886
                                                     ============  ============`

Notes to Financial Statements (continued)

8.  Non-Compete Agreement

In October 1998 the Company sold its interest in and terminated
the development of Houston Premium Outlets, a joint venture project with Simon.
Under the terms of the agreement, the Company received non-compete payments
totaling $21.4 million from The Mills Corporation; $3.0 million at closing and
four annual installments of $4.6 million, terminating in January 2002. The
revenue is being recognized on a straight-line basis over the term of the
non-compete agreement and the Company recognized income of $5.1 million during
the years ended December 31, 2001, 2000 and 1999. Such amounts are included in
other income in the accompanying financial statements.

9.  Debt

Unsecured Bank Debt

The Company has a $160 million senior unsecured bank line of
credit (the "Senior Credit Facility"). The Senior Credit Facility had an initial
expiration date of March 30, 2001 and was extended through March 2004. The
Company has an annual right to request a one-year extension of the Senior Credit
Facility that may be granted at the option of the lenders. The Senior Credit
Facility bears interest on the outstanding balance, payable monthly, at a rate
equal to the London Interbank Offered Rate ("LIBOR") plus 1.05% (4.21% at
December 31, 2001) or the prime rate, at the Company's option. The LIBOR rate
spread ranges from 0.85% to 1.25% depending on the Company's Senior Debt rating.
A fee on the unused portion of the Senior Credit Facility is payable quarterly
at rates ranging from 0.15% to 0.25% depending on the balance outstanding. At
December 31, 2001, the entire $160 million was available under the Senior Credit
Facility.

The Company also has a $5 million term loan (the "Term Loan") that carries the
same interest rate and maturity as the Senior Credit Facility.

Unsecured Notes

A summary of the terms of the unsecured notes outstanding as of
December 31, 2001 and 2000 is as follows:

`December 31,    Effective
                                                   2001       2000     Yield (1)
                                                ---------   --------  ----------

7.75% Unsecured Notes due January 2001.....       $  -       $99,987     7.85%
8.375% Unsecured Notes due August 2005.....     49,892        49,877     8.44%
7.25% Unsecured Notes due October 2007.....    124,809       124,776     7.29%
8.625% Unsecured Notes due August 2009.....     49,923        49,902     8.66%
8.25% Unsecured Notes due February 2011....    148,670             -     8.40%
                                               ----------   ----------
   Total                                        $373,294     $324,542
                                               ==========   ==========`

(1)      Including discount on the
notes

Mortgage Debt

A summary of the terms of the mortgage debt outstanding as of December 31, 2001
and 2000, and the related Net Book Value of the associated collateral ("NBV")
and interest rate as of December 31, 2001 are as follows:

Notes to Financial Statements (continued)

9.  Debt (continued)

Mortgage Debt

`December 31,                        Interest
                                      2001          2000         Due Date        Rate       NBV
                                --------------  -------------  --------------- ---------- ----------
Construction Loan (1)               $29,531       $21,526      February 2003     3.33%     $45,625
Bank Mortgage Loan (2)               68,250        69,250         April 2010     7.26%      74,462
Mortgage Loan (3)                    72,428             -      December 2012     7.67%      75,421
                                --------------  -------------                            ----------
                                   $170,209         $90,776                               $195,508
                                ==============  =============                            ==========`

|(1) |  | In February 2000 Chelsea Allen entered into a $40.0
million Construction Loan used to fund the Allen Premium Outlets project. The
Construction Loan bears interest equal to LIBOR plus 1.375% (3.33% at December
31, 2001) and is guaranteed by the Company and the OP.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | In April 2000 Chelsea Financing entered into a $70.0 million Bank Mortgage Loan
secured by its four properties. The Bank Mortgage Loan bears interest equal to
LIBOR plus 1.50% (3.64% at December 31, 2001) or prime rate plus 1.0% and calls
for quarterly principal amortization of $ 0.3 million through April 2005 and
thereafter $0.5 million per quarter until maturity. In December 2000, the
Company entered into an interest rate swap agreement effective January 2, 2001
to hedge against unfavorable fluctuations in LIBOR rates by fixing the interest
rate at 7.26% until January 2006. As of December 31, 2001, the Company
recognized net interest expense of $1.2 million on the hedge that is included in
interest expense in the accompanying financial statements.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | The Mortgage Loan was assumed as part of the September 25, 2001, Konover
acquisition. The stated interest rate of 9.1% was greater than that available to
the Company in the public debt markets. Accordingly the Company recorded a $6.9
million debt premium that will be amortized over the period of the loan and
which reduces the effective interest rate to 7.67%. The loan calls for fixed
monthly debt service payments of $0.5 million for interest plus principal based
on a 26-year amortization schedule. The Mortgage Loan matures in March 2028 but
can be prepaid beginning December 2012. As of December 31, 2001, the Company
recognized $0.1 million in debt premium amortization that is included in
interest expense in the accompanying financial statements.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In connection with the September 25, 2001, Konover acquisition, the Company
assumed $65.2 million in REMIC loans that included Class A, B and C Loans with a
blended stated fixed interest rate of 7.85%. The Company received a $0.5 million
interest rate spread credit at closing, reducing the effective annual interest
rate to 3.71%. The Loans were repaid on December 3, 2001.

Following is a schedule of the estimated fair value of the Company's debt using
current broker quotations at December 31, 2001 (in thousands):

`Carrying         Principal     Estimated
      Description                  Value           Balance       Fair Value
      ----------------------   --------------    ------------   ------------
      Fixed Rate Debt              $445,722        $440,678       $459,970
      Variable Rate Debt           $102,816        $102,816       $102,816`

Interest paid, excluding amounts capitalized, was $34.5 million, $21.7 million
and $24.1 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

Notes to Financial Statements (continued)

9.  Debt (continued)

Following is a schedule of the Company's debt maturities, including debt premium
amortization, as of December 31, 2001:

`2002............       $1,945
           2003............       31,553
           2004............        7,123
           2005............       52,834
           2006............        3,288
           Thereafter......      451,795
                             ------------
                               $548,538
                             ============`

10.  Financial Instruments: Derivatives and Hedging

In the normal course of business, the Company is exposed to the
effect of interest rate changes. The Company limits these risks by following
established risk management policies and procedures including the use of
derivatives. For interest rate exposures, derivatives are used primarily to
align rate movements between interest rates associated with the Company's
leasing income and other financial assets with interest rates on related debt,
and manage the cost of borrowing obligations. For foreign currency exposures,
derivatives are used primarily to align movements between currency rates to
protect forecasted returns of fees to the U.S.

The Company has a policy of only entering into contracts with
major financial institutions based upon their credit ratings and other factors.
When viewed in conjunction with the underlying and offsetting exposure that the
derivatives are designed to hedge, the Company has not sustained a material loss
from those instruments nor does it anticipate any material adverse effect on its
net income or financial position in the future from the use of derivatives.

To manage interest rate and foreign currency risk, the Company
may employ options, forwards, interest rate swaps, caps and floors or a
combination thereof depending on the underlying exposure. The Company undertakes
a variety of borrowings: from lines of credit, to medium- and long-term
financings. To reduce overall interest cost, the Company uses interest rate
instruments, typically interest rate swaps, to convert a portion of variable
rate debt to fixed rate debt, or even a portion of its fixed-rate debt to
variable rate. Interest rate differentials that arise under these swap contracts
are recognized in interest expense over the life of the contracts. The resulting
cost of funds is usually lower than that which would have been available if debt
with matching characteristics was issued directly.

Interest rate swaps that are designated as cash flow hedges
hedge the future cash outflows on debt. Interest rate swaps that convert
variable payments to fixed payments, interest rate caps, floors, collars, and
forwards are cash flow hedges. Unrealized gains and losses in the fair value of
cash flow hedges are reported on the balance sheet with a corresponding
adjustment to Accumulated Other Comprehensive Income to the extent they are
offsetting and otherwise qualify in the period for cash flow hedge accounting.
Over time, the unrealized gains and losses held in Accumulated Other
Comprehensive Income will be reclassified to earnings. This reclassification
occurs over the same time period in which the hedged items affect earnings. The
Company hedges its exposure to variability in future cash flows for forecasted
transactions other than those associated with existing floating-rate debt over a
maximum period of 12 months. During the forecast period, unrealized gains and
losses in the hedging instrument will be reported in Accumulated Other
Comprehensive Income. Once the hedged transaction takes place, the hedge gains
and losses will be reported in earnings during the same period in which the
hedged item is recognized in earnings.

Notes to Financial Statements (continued)

10.  Financial Instruments: Derivatives and Hedging (continued)

The notional value and fair value of the swap provide an
indication of the extent of the Company's involvement in financial derivative
instruments at December 31, 2001. It does not represent exposure to credit,
interest rate or market risks. At year end, the swap was reported at its fair
value and classified as other liabilities of $3.1 million. As of December 31,
2001, there were $3.1 million in deferred losses, and represented in other
comprehensive income, a shareholder's equity account and minority interest.
Within the next twelve months, the Company expects to reclassify to earnings
approximately $0.8 million of the current balance held in accumulated other
comprehensive loss and minority interest related to the interest rate swap.

`As of December 31, 2001
                           -- -----------------------------------------------
          Hedge Type       Notional Value    Rate      Maturity    Fair Value
          ---------        --------------    ----      --------    ----------
        Swap, Cash Flow     $68.3 mil       5.7625%    1/1/06     ($3.1 mil)`

In March 2001, the Company entered into a yen forward contract with a
notional value of $1.4 million and a fair value of $0.04 million as a hedge
against its yen-denominated receivable. On June 21, 2001 the receivable and yen
forward contract were settled and the Company received $1.4 million.

11.  Preferred Units

In September 1999, the OP completed a private sale of $65
million of Series B Cumulative Redeemable Preferred Units ("Preferred Units") to
an institutional investor. The private placement took the form of 1.3 million
Preferred Units at a stated value of $50 each. The Preferred Units may be called
at par on or after September 2004, have no stated maturity or mandatory
redemption and pay a cumulative quarterly dividend at an annualized rate of
9.0%. The Preferred Units are exchangeable into Series B Cumulative Redeemable
Preferred Stock of the Company after ten years. The proceeds from the sale were
used to pay down borrowings under the Senior Credit Facility. Activity related
to the Preferred Units is included in minority interest.

12.  Preferred Stock

In October 1997, the Company issued 1.0 million shares of
non-voting 8.375% Series A Cumulative Redeemable Preferred Stock (the "Preferred
Stock"), par value $0.01 per share, having a liquidation preference of $50 per
share. The Preferred Stock has no stated maturity and is not convertible into
any other securities of the Company. The Preferred Stock is redeemable on or
after October 15, 2027 at the Company's option. Net proceeds from the offering
were used to repay borrowings under the Company's Credit Facilities. On February
15, 2002 the Company redeemed and retired 136,500 shares of Preferred Stock at a
net price of $47 per share.

13.  Common Stock

In July 2001, the Company completed the sale of 545,000
shares of common stock to an institutional investor at a net price of $46 per
share, yielding net proceeds of $24.8 million that were used to partially fund
the acquisition of the Konover assets and for general corporate purposes.

In October 2001, the Company sold two million shares of common
stock at a price of $45 per share, yielding net proceeds of $85.2 million, which
were used to repay borrowings under the Company's Senior Credit Facility and for
general corporate purposes.

14.  Lease Agreements

The Company is the lessor and sub-lessor of retail stores under
operating leases with term expiration dates ranging from 2002 to 2020. Most
leases are renewable for five years after expiration of the initial term at the
lessee's option. Future minimum lease receipts under non-cancelable operating
leases as of December 31, 2001, exclusive of renewal option periods, were as
follows (in thousands):

`2002............     $141,156
        2003............      127,544
        2004............      106,834
        2005............       82,691
        2006............       59,433
        Thereafter......      147,328
                           ------------
                             $664,986
                           ============`

In 1987, a predecessor partnership entered into a lease
agreement for property in California. Land was estimated to be approximately 37%
of the fair market value of the property, and accordingly the portion of the
lease attributed to land is classified as an operating lease. The portion
attributed to building is classified as a capital lease as the present value of
payments related to the building exceeded 90% of its fair value at inception of
the lease. The initial lease term was 25 years with two options of 5 and 4 1/2
years, respectively. The lease provides for additional rent based on specific
levels of income generated by the property. No additional rental payments were
incurred during 2001, 2000 or 1999. The Company has the option to cancel the
lease upon six months written notice and six months advance payment of the then
fixed monthly rent. If the lease is canceled, the building and leasehold
improvements revert to the lessor. In August 1999, the Company amended its
capital lease to reduce rent payments through December 2004 resulting in a
writedown of the asset and obligation of $2.7 million and $6.0 million,
respectively. The difference of $3.3 million will be recognized on a
straight-line basis over the remaining term of the amended lease that ends
December 2004.

Operating Leases

Future minimum rental payments under operating leases for land and
administrative offices as of December 31, 2001 are as follows (in thousands):

`2002...........        $1,546
         2003...........         1,473
         2004...........         1,480
         2005...........           917
         2006...........            52
                             -----------
                                $5,468
                             ===========`

Rental expense amounted to $0.8 million, $0.6 million and $0.9 million for the
years ended December 31, 2001, 2000 and 1999, respectively.

Notes to Financial Statements (continued)

14.  Lease Agreements (continued)

Capital Lease

A leased property included in rental properties at December 31
consists of the following (in thousands):

`2001           2000
                                          ---------------   -------------

Building...............................        $6,796          $6,796
Less accumulated amortization..........        (5,520)         (5,175)
                                          ---------------   -------------
Leased property, net...................        $1,276          $1,621
                                          ===============   =============`

Amortization expense on capital lease of $0.3 million for the
years ended December 31, 2001, 2000 and 1999, is included in depreciation and
amortization expense in the financial statements.

Future minimum payments under the capitalized building lease,
including the present value of net minimum lease payments as of December 31,
2001 are as follows (in thousands):

`2002...................................................         $   819
2003...................................................             819
2004...................................................             819
                                                           --------------
Total minimum lease payments...........................           2,457
Amount representing interest...........................            (316)
                                                           --------------
Present value of net minimum capital lease payments....          $2,141
                                                           ==============`

Ground Lease

In connection with the Konover acquisition the OP acquired four
properties subject to ground leases that were assumed by the OP. These ground
leases have termination dates ranging from 2007 to 2087 and allow for renewal
terms of 4 to 30 years.

Future minimum lease payments under ground leases as of December 31, 2001
exclusive of renewal option periods were as follows (in thousands):

`2002...............  $ 398
                  2003..............     409
                  2004..............     415
                  2005..............     415
                  2006..............     415
                  Thereafter........  17,241
                                    ---------
                                     $19,293
                                    =========`

15.  Commitments and Contingencies

The 50/50 OPO joint venture with Simon has a $58.5 million
(maximum commitment $62.0 million) construction facility that was to mature in
February 2002 and which was extended to August 2002. The loan has three
additional six-month extension options. The loan bears interest at LIBOR plus
1.30% (3.32% at December 31, 2001) and is 10% guaranteed by each of the Company
and Simon. Changes in debt service coverage ratio provide for a guarantee
ranging from 10% to 25% per guarantor and a LIBOR interest rate spread ranging
from 130 to 150 basis points.

Notes to Financial Statements (continued)

15.  Commitments and Contingencies (continued)

In October 1999, an equity investee of the Company entered into
a 4 billion yen (approximately US $30.4 million) line of credit guaranteed by
the Company and OP to fund its share of Chelsea Japan's construction costs. The
line of credit bears interest at yen LIBOR plus 1.35% (1.45% at December 31,
2001) is due April 2002 and has two one-year extensions. At December 31, 2001,
1.08 billion yen (approximately US $8.2 million) was outstanding under the loan.
In March 2000, Chelsea Japan entered into a 3.8 billion yen (approximately US
$28.9 million) loan with a bank to fund construction costs. As of December 31,
2001, the entire facility was outstanding and bears interest at 2.20%. The loan
is secured by the two operating properties and is 40% guaranteed by the Company.

The Company has agreed under a standby facility to provide up to
$22.0 million in limited debt service guarantees for loans provided to Value
Retail PLC and affiliates, to construct outlet centers in Europe. The term of
the standby facility expired in November 2001 and guarantees shall not be outstanding for
longer than five years after project completion. As of December 31, 2001, the
Company had provided limited debt service guarantees of approximately $17.0
million to Value Retail PLC. In October 2001, the guarantee limit was increased to
$24.1 million until April 2002 at which time it will revert to $22.0 million.
The Company received $2.1 million collateral for this short-term increase that
will revert back to Value Retail in April 2002. Such escrow is included in
restricted cash-escrows and other liabilities in the accompanying financial
statements.

Accrued expenses and other liabilities include $14.4 million and
$10.5 million at December 31, 2001 and 2000, respectively, related to a five
year deferred incentive compensation program that ended as of December 31, 2001.
Certain key officers will be paid on March 1, 2002.

The Company is not presently involved in any material litigation
nor, to its knowledge, is any material litigation threatened against the Company
or its properties, other than routine litigation arising in the ordinary course
of business. Management believes the costs incurred by the Company related to
any of its litigation will not be material and have been adequately provided for
in the consolidated financial statements.

16.  Related Party Information

In 1999, the OP established a $6.0 million secured loan facility
that will expire on June 2004 for the benefit of certain unitholders. Each unit
holder issued a note that is secured by OP units, bears interest at a rate of
LIBOR plus 200 basis points per annum, payable quarterly and is due by the
facility expiration date. At December 31, 2001 and 2000, loans made to two
unitholders, who are also affiliates of management of the Company, totaled $3.2
million and $2.2 million respectively. During 2001 the Company received a $1.2
million repayment of one loan and $0.5 million pay down on the other loan
outstanding at December 31, 2000. On January 31, 2002 the Company received an
additional $0.3 million against one of the two loans. In September 2001 the Company
advanced $2.7 million to another unitholder to acquire approximately a 10%
non-voting equity interest in Chelsea Interactive from the non-affiliated joint
venture partner. The carrying amount of such loans approximated fair value at
December 31, 2001.

Notes to Financial Statements (continued)

16.  Related Party Information (continued)

The Company leased space to related parties of approximately
56,000 square feet during the years ended December 31, 2001, 2000 and 1999.
Rental income from those tenants, including reimbursement for taxes, common area
maintenance and advertising, totaled $2.1 million, $1.9 million and $1.8
million during the years ended December 31, 2001, 2000 and 1999, respectively.

At December 31, 2001 and 2000 the Company had receivables from
equity investees of $0.9 million and $4.2 million, respectively, that is
included in other assets.

In August 1997, the Company and one of its directors entered
into a Consulting Agreement pursuant to which the director agreed to perform
services for the Company in connection with the development and operation of
manufacturers outlet centers in Japan and Hawaii. The agreement provided for
payments to the director of $10,000 per month and was terminated by the Company
in December 1999. In addition, during the agreement and for four years after the
termination of the agreement, the director will be entitled to a fee of 1% of
the development costs, up to a maximum amount of $0.5 million per project, on
all projects in which he was involved in Japan or Hawaii. Fees paid under this
agreement totaled $0.5 million for each of the years ended December 31, 2001 and
2000 and $0.1 million for the year ended December 31, 1999. These fees are
included in the investment in affiliates in the accompanying financial
statements.

Certain Directors and unitholders guarantee Company obligations,
which existed prior to the formation of the Company, under leases for one of the
properties. The Company has indemnified these parties from and against any
liability that they may incur pursuant to these guarantees.

17.  Dividend Reinvestment Plan

Shareholders who own at least 100 shares of the Company's common
stock are eligible to reinvest dividends quarterly. Administration costs
associated with the plan are paid by the Company.

18.  Stock Option Plans

The Company elected Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB No. 25") and related Interpretations in
accounting for its employee stock options. Under APB No. 25, no compensation
expense is recognized because the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant.

The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value estimate,
management believes the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

The Company's 1993 Stock Option Plan (the "1993 Plan") provides
for an aggregate of 1.4 million authorized shares reserved for issuance. The
Company's 2000 Stock Option Plan (the "2000 Plan") was adopted by the Board of
Directors in March 2000 and also provides for an aggregate of 1.4 million
authorized shares reserved for issuance. Under both Plans, the exercise price
per share of initial grants of non-qualified options will be fixed by the
Compensation Committee on the date of grant. The exercise price per share of
incentive stock options will not be less than the fair market value of the
common stock on the date of grant, except in the case of incentive stock options
granted to individuals owning more than 10% of the total
voting shares of the Company. Their exercise price will be at least 110% of the
fair market value at the date of grant. Non-qualified and incentive stock
options are exercisable for a period of ten years from the date of grant. Under
the 1993 Plan, 20% of the options may be exercised on the first anniversary of
the grant date and an additional 20% may be exercised on or after each of the
second through fifth anniversaries. Under the 2000 Plan, options shall be
exercisable by the holder at such times as may be fixed by the Compensation
Committee.

Pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 2001,
2000 and 1999; respectively: risk- free interest rate of 5% for 2001 and 6% for
2000 and 1999; volatility factor of the expected market price of the Company's
common stock based on historical results of 0.236, 0.397 and 0.164 and dividend
yield of 7% in 2001 and 8% in 2000 and 1999, respectively, and an expected life
option of four years for the 1993 Plan and three years for the 2000 Plan. The
Company granted options in 2001 of 70,000 shares at $41.25 on March 14, 2001
under the 2000 Plan and in 2000 granted 15,000 shares at $30.25 on January 3,
2000 under the 1993 Plan and 480,000 shares at $27.81 on April 1, 2000 under the
2000 Plan. The options issued in 2001 will expire in 2011 and those issued in
2000 will expire in 2010. No options were granted during 1999.

For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands except for earnings per
share information):

`2001        2000        1999
                                             ----        ----        ----
         Pro forma net income               $46,657     $40,467     $33,853
         Pro forma earnings per share:
           Basic                              $2.77       $2.54       $2.15
           Diluted                            $2.69       $2.51       $2.13`

A summary of the Company's stock option activity, and related
information for the years ended December 31 follows:

`2001                    2000                     1999
                                             ----                    ----                     ----
                                      Options     Wtd-avg     Options      Wtd-avg     Options     Wtd-avg
                                      (000's)    Ex. price    (000's)     Ex. price    (000's)    Ex. price

Outstanding beginning of year         1,486.1      $28.87    1,009.2       $29.26     1,061.6       $28.97
Granted                                 70.0        41.25      495.0       $27.89          -            -
Exercised                              (62.1)       34.95      (18.1)      $23.38       (52.4)      $23.38
                                    ------------------------------------------------------------------------
Outstanding end of year              1,494.0       $29.36    1,486.1       $28.87     1,009.2       $29.26

Exercisable at end of year             955.0       $28.04      786.1       $27.40       695.2       $26.35

Weighted average fair value of
options granted during the year        $5.08                   $5.26                       -`

Exercise prices for options outstanding as of December 31, 2001 ranged from
$23.38 to $41.25 per share. The weighted average remaining contractual life of
the options was 5.7 years.

19.  Employee Stock Purchase Plan

The Company's Board of Directors and shareholders approved an Employee Stock
Purchase Plan (the "Purchase Plan"), effective July 1, 1998. The Purchase Plan
covers an aggregate of 500,000 shares of common stock. Eligible employees have
been in the employ of the Company or a participating subsidiary for six months
or more and customarily work more than 20 hours per week. The Purchase Plan
excludes employees who are "highly compensated employees", as defined, or own 5%
or more of the voting power of the Company's stock. Eligible employees will
purchase shares through automatic payroll deductions up to a maximum of 10% of
weekly base pay. The Purchase Plan will be implemented by consecutive
three-month offerings (each an "Option Period"). The price at which shares may
be purchased shall be the lower of (a) 85% of the fair market value of the stock
on the first day of the Option Period or (b) 85% of the fair market value of the
stock on the last day of the Option Period. As of December 31, 2001, 45
employees were enrolled in the Purchase Plan and $5,100 expense has been
incurred and is included in the Company's general and administrative expense.
The Purchase Plan will terminate after five years unless terminated earlier by
the Board of Directors.

20.  401(k) Plan

The Company maintains a defined contribution 401(k) savings plan (the "Plan"),
which was established to allow eligible employees to make tax-deferred
contributions through voluntary payroll withholdings. All employees of the
Company are eligible to participate in the Plan after completing six months of
service and attaining age 21. Employees who elect to enroll in the Plan may
elect to have from 1% to 15% of their pre-tax gross pay contributed to their
account each pay period. As of January 1, 1998 the Plan was amended to include
an employer discretionary matching contribution in an amount not to exceed 100%
of each participant's first 6% of yearly compensation to the Plan. Matching
contributions of approximately $128,000 in 2001, $141,000 in 2000 and $97,000 in
1999 are included in the Company's general and administrative expense.

21.  Quarterly Financial Information (Unaudited)

The following summary represents the results of operations, expressed in
thousands except per share amounts, for each quarter during 2001 and 2000:

`March 31         June 30        September 30     December 31
                                                  ------------     ----------      ---------------     -----------
2001
Base rental revenue............................       $28,751         $28,651          $30,528          $39,299
Total revenues.................................        44,824          46,297           49,065           66,669
Net income available to common shareholders....         8,506           9,474           11,838           17,808
Net income per weighted average
     common share (diluted)....................         $0.53           $0.57            $0.69            $0.93
2000
Base rental revenue............................       $26,252         $26,607          $26,867          $28,397
Total revenues.................................        39,595          42,050           44,566           53,692
Net income available to common shareholders....         7,781           8,720           10,894           14,197
Net income per weighted average
     common share (diluted)....................         $0.49           $0.54            $0.67            $0.88`

22.  Segment Information

The Company is principally engaged in the development,
ownership, acquisition and operation of manufacturers' outlet centers and has
determined that under SFAS No.131 "Disclosures About Segments of an Enterprise
and Related Information" it has three reportable retail real estate segments:
premium domestic, other domestic and international in 2001. The Company evaluates real
estate performance and allocates resources based on Net Operating Income ("NOI")
defined as total revenue less operating and maintenance expense. The primary
sources of revenue are generated from tenant base rents, percentage rents and
reimbursement revenue. Operating expenses primarily consist of common area
maintenance, real estate taxes and promotional expenses. The retail real estate
business segments meet the quantitative threshold for determining reportable
segments.

`For the year ended    Domestic     Domestic
December 31, 2001     Premium      Other      International  Other    Total
-------------------  ----------  ----------  -------------- --------  --------
                                     (1)          (2)         (3)
Total revenues....    $187,588     $ 12,196     $    -      $ 7,071   $  206,855
Interest income...         848           45          -        1,913        2,806
Interest from
 unconsolidated
 investments......      12,014            -       3,628      (5,337)      10,305
NOI...............     148,570        5,021       6,562       1,849      162,002
Fixed assets
  additions.......      36,848      181,729           -       1,159      219,736
Total assets......     866,738      194,406      15,092      23,072    1,099,308`

|(1) | Approximately 25% of the Retail Domestic Other GLA is leased
to one tenant from which approximately 15% of the annualized revenues are
derived.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Principally comprised of the Company's equity interest in
Chelsea Japan.
|--- | ------------------------------------------------------------------------

|(3) | Includes results of corporate assets and Chelsea Interactive.
|--- | -------------------------------------------------------------

The Company operated in one segment in 2000.

Following is a reconciliation of net operating income to net income for the year
ended December 31, 2001 (in thousands):

`Segment NOI                                                    $162,002
Interest expense - consolidated                                (36,865)
Interest expense - unconsolidated investments                     (597)
Depreciation expense - consolidated                            (48,554)
Depreciation expense - unconsolidated investments               (5,964)
Depreciation expense - Chelsea Interactive                      (2,888)
Income tax - unconsolidated investments                           (947)
Loss on Sale - Retail Domestic Premium                            (284)
Gain/ (loss) on sale or write down-Retail
       International                                                617
Minority interest                                              (14,706)
                                                           ---------------
Net income                                                      $51,814
                                                           ===============`

23.  Non-Cash Financing Activities

In December 2001, 2000 and 1999, the Company declared quarterly distributions
per share of $0.78, $0.75 and $0.72, respectively. The limited partners'
distributions were paid in January of each subsequent year.

In connection with the Konover acquisition the Company assumed approximately
$131.0 million in REMIC and mortgage loans payable.

Chelsea Property Group, Inc.
Schedule III-Consolidated Real Estate and Accumulated Depreciation
for the year ended December 31, 2001 (in thousands)

`Cost
                                             Capitalized
                                             (Disposed of)
                                Initial       Subsequent     Step-Up Related                                               Life
                                Cost          to              to Acquisition Gross Amount Carried                           Used
                                to            Acquisition     of Partnership at Close of Period                             to
                              Company        (Improvements)   Interest (1)    December 31, 2001                            Compute
                           ----------------- -------------- --------------   --------------------                         Deprecia-
                                  Buildings,     Buildings,      Buildings,     Buildings,                        Date     tion in
                                  Fixtures       Fixtures        Fixtures       Fixtures                          of       Latest
Description        Encum-          and             and           and Equi-       and                 Accumulated Construc- Income
Outlet Center Name brances  Land  Equipment  Land Equipment  Land ment      Land Equipment   Total  Depreciation tion     Statement
------------------ -------  ----- ---------  ----- --------- ---- --------- ---- ---------   -----  ------------ -------  ---------

Woodbury Common, NY   -    $4,448  $16,073  $4,967  $126,631     $-    $-   $9,415  $142,704  $152,119  $44,383  '85,'93,
                                                                                                                 '95,'98       30
Wrentham, MA          -       157    2,817   4,109    79,318      -     -    4,266    82,135    86,401   15,273  '95,'00       40
Waikele, HI           -    22,800   54,357       -     2,052      -     -   22,800    56,409    79,209    9,095    '98         40
Leesburg, VA          -     6,296        -    (811)   71,375      -     -    5,485    71,375    76,860   11,048  '96-'00       40
Desert Hills, CA      -       975        -   2,376    61,912    830 4,936    4,181    66,848    71,029   24,752  '90,'94-
                                                                                                                 '95,'97,-'98  40
Camarillo, CA         -     4,000        -  12,431    54,262      -     -   16,431    54,262    70,693   13,541   '94-'99      40
North Georgia, GA     -     2,960   34,726    (191)   21,484      -     -    2,769    56,210    58,979   14,633   '95-'99      40
Clinton, CT           -     4,124   43,656       -     1,665      -     -    4,124    45,321    49,445   14,008   '95-'96      40
Vacaville, CA(6)      -     9,683   38,850       -        51      -     -    9,683    38,901    48,584      242     (5)        40
Allen, TX       $29,531     8,938    2,068    (836)   37,455      -     -    8,102    39,523    47,625    2,000    99-'01      40
Folsom, CA            -(2)  4,169   10,465   2,692    26,082      -     -    6,861    36,547    43,408   10,433  '90,'92,'93,
                                                                                                                  '96-'97,'00  40
Carolina (I), NC(6)   -(3)  6,220   24,860       -        48      -     -    6,220    24,908    31,128      154     (5)        40
Carolina(II), NC(6)   -(4)      -    7,862       -        14      -     -        -     7,876     7,876       49     (5)        40
Petaluma Village, CA  -     3,735        -   2,949    31,218      -     -    6,684    31,218    37,902    9,349  '93,'95-'96   40
Liberty Village, NJ   -       345      405   1,499    19,812 11,015 2,195   12,859    22,412    35,271    7,362  '81,'97-'98   30
Napa, CA              -(2)  3,456    2,113   7,908    19,378      -     -   11,364    21,491    32,855    6,647  '62,'93,'95   40
Aurora, OH            -       637    6,884     880    20,438      -     -    1,517    27,322    28,839    8,056  '90,'93,'94,
                                                                                                                   '95         40
North Bend, WA(6)     -     4,735   18,925       -        35      -     -    4,735    18,960    23,695      118     (5)        40
Columbia Gorge, OR    -(2)    934        -     428    13,595    497 2,647    1,859    16,242    18,101    5,327  '91,'94       40
Santa Fe, NM          -        74        -   1,300    12,098    491 1,772    1,865    13,870    15,735    3,820  '93,'98       40
American Tin
 Cannery, CA      2,141         -    8,621       -     5,458      -     -        -    14,079    14,079   10,263  '87,'98        5
Patriot Plaza, VA     -       789    1,854     976     4,274      -     -    1,765     6,128     7,893    2,418  '86,'93',
                                                                                                                    '95        40
Corporate Offices,
 NJ, CA               -(4)      -       60       -     5,683      -     -        -     5,743     5,743    3,424      -          5
St. Helena, CA        -(2)  1,029    1,522     (25)      572     38    78    1,042     2,172     3,214      709     '83        40
Kittery, ME(6)        -       567    2,265       -         -      -     -      567     2,265     2,832       14     (5)        40
Chicago, IL           -       465        -       -         -      -     -      465         -       465        -      -         40
Las Vegas, NV         -       405        -       -         -      -     -      405         -       405        -      -         40
Other retail(6)     (3)(4) 14,968   62,512      26        15      -     -   14,994    62,527    77,521      344     (5)        40
Mammoth, CA           -     1,180      530  (2,174)   (1,960)    994  1,430      -         -         -        -     '78        40
                    ------ -------- -------- ------- -------- ------- ------- -------  -------- ---------- --------
             $172,350(2)(3)$108,089 $341,425 $38,504 $612,965 $13,865 $13,058 $160,458 $967,448 $1,127,906 $217,462
             ========      ======== ======== ======= ======== ======= ======= ======== ======== ========== ========`

The aggregate cost of the land, buildings, fixtures and
equipment for federal tax purposes was approximately $1,103.5 million at December
31, 2001.

|(1) | As part of the formation transaction
assets acquired for cash have been accounted for as a purchase. The step-up
represents the amount of the purchase price that exceeds the net book value of
the assets acquired.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Projects encumbered by mortgage totaling
$68.3 million at December 31, 2001.
|--- | ----------------------------------------------------------------------------

|(3) | Projects encumbered by mortgage totaling
$72.4 million at December 31, 2001.
|--- | ----------------------------------------------------------------------------

|(4) | Project held under long term land
lease.
|--- | ----------------------------------------

|(5) | Acquired on September 25, 2001 from
Konover Property Trust.
|--- | -----------------------------------------------------------

|(6) | Purchase Price has been preliminarily allocated.
|--- | ------------------------------------------------

Chelsea Property Group, Inc.
Schedule III-Consolidated Real Estate
and Accumulated Depreciation (continued)
(in thousands)

The changes in total real estate:

`Year ended December 31,
                                         2001             2000           1999
                                      -----------       -----------    ----------

Balance, beginning of period........    $908,344         $848,813       $792,726
Additions...........................     229,339           61,188         59,334
Dispositions and other..............      (9,777)          (1,657)        (3,247)
                                      -----------       -----------    -----------
Balance, end of period..............  $1,127,906         $908,344       $848,813
                                      ===========       ===========    ===========`

The changes in accumulated depreciation:

`Year ended December 31,
                                         2001             2000           1999
                                      -----------       -----------    ----------

Balance, beginning of period........    $175,692         $138,221       $102,851
Additions...........................      44,071           38,539         35,619
Dispositions and other..............      (2,301)          (1,068)          (249)
                                      -----------       -----------    ----------
Balance, end of period..............    $217,462         $175,692       $138,221
                                      ===========       ===========    ==========`

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 8th of March,
2002.

| | CHELSEA PROPERTY GROUP, INC.
By:/s/ David C. Bloom
      David C. Bloom, Chief Executive Officer
| | ------------------------------------------------------------------------------------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

|Signature | Title | Date
|--------- | ----- | ----

|/s/ David C. Bloom
       David C. Bloom | Chairman of the Board
and Chief Executive Officer | March 8, 2002
|---------------------------------------- | ------------------------------------------------- | -------------

|/s/ William D. Bloom
      William D. Bloom | Vice Chairman | March 8, 2002
|------------------------------------------- | ------------- | -------------

|/s/ Leslie T. Chao
      Leslie T. Chao | President | March 8, 2002
|--------------------------------------- | --------- | -------------

|/s/ Michael J. Clarke
      Michael J. Clarke | Chief Financial Officer | March 8, 2002
|--------------------------------------------- | ----------------------- | -------------

|/s/ Brendan T. Byrne
      Brendan T. Byrne | Director | March 8, 2002
|------------------------------------------- | -------- | -------------

|/s/ Robert Frommer
     Robert Frommer | Director | March 8, 2002
|-------------------------------------- | -------- | -------------

|/s/ Barry M. Ginsburg
      Barry M. Ginsburg | Director | March 8, 2002
|--------------------------------------------- | -------- | -------------

|/s/ Philip D. Kaltenbacher
      Philip D. Kaltenbacher | Director | March 8, 2002
|------------------------------------------------------- | -------- | -------------

|/s/ Reuben S. Leibowitz
      Reuben S. Leibowitz | Director | March 8, 2002
|------------------------------------------------- | -------- | -------------