SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
   OF 1934 (Fee Required)

For the fiscal year ended December 31, 2000

                                       OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (No Fee Required)

                         Commission file number: 001-13301

                               PRIME RETAIL, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

                 Maryland                                38-2559212
------------------------------------       -----------------------------------
     (State or other jurisdiction of         (IRS employer identification no.)
      incorporation or organization)

       100 East Pratt Street
       Baltimore, MD  21202                             (410) 234-0782
------------------------------------       -----------------------------------
 (Address of principal executive offices,      (Registrant's telephone number,
           including zip code)                       including area code)

           Securities registered pursuant to Section 12(b) of the Act:
           -----------------------------------------------------------
                          Common Stock, $0.01 par value
           10.5% Series A Cumulative Preferred Stock, $0.01 par value
8.5% Series B Cumulative  Participating  Convertible  Preferred Stock, $0.01 par
--------------------------------------------------------------------------------
value
-----
                                (Title of class)


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

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_____ No__X___

Indicate by check mark if 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  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. [ ]

The  aggregate  market value of the Common Stock held by  non-affiliates  of the
registrant was approximately $18,738,504 on March 26, 2001 (based on the closing
price  per  share  as  reported  on the New  York  Stock  Exchange  -  Composite
Transactions).

The number of shares of the  registrant's  Common Stock  outstanding as of March
26, 2001 was 43,577,916.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents of the registrant are incorporated herein by
reference:

                                                           Part of Form 10-K
                                                           Into Which Document
Document                                                   Is Incorporated
--------                                                   ---------------------
Proxy Statementfor the 2001 annual                         Part III of Form 10-K
meeting of shareholders
<PAGE>

                               PRIME RETAIL, INC.

                                    Form 10-K

                                December 31, 2000

                                TABLE OF CONTENTS


Part I                                                                      Page

Item 1. Business...............................................................1
Item 2. Properties.............................................................5
Item 3. Legal Proceedings.....................................................10
Item 4. Submission of Matters to a Vote of Security Holders...................10

Part II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.11
Item 6. Selected Financial Data...............................................13
Item 7. Management's Discussion and Analysis of Financial Condition and
         Results of Operations................................................15
Item 7A.Quantitative and Qualitative Disclosures About Material Risk..........36
Item 8. Financial Statements and Supplementary Data...........................37
Item 9. Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.................................................37

Part III

Item 10.Directors and Executive Officers of the Registrant....................38
Item 11.Executive Compensation................................................38
Item 12.Security Ownership of Certain Beneficial Owners and Management........38
Item 13.Certain Relationships and Related Transactions........................38

Part IV

Item 14.Exhibits, Financial Statement Schedules, and Reports on Form 8-K......38

        Signatures............................................................43
<PAGE>
                                     PART I

                               ITEM 1 -- BUSINESS

The Company

                Prime Retail, Inc. (the  "Company") was organized as a  Maryland
corporation on July 16,1993. The Company is a self-administered and self-managed
real estate  investment  trust ("REIT")  that  operates  primarily  within  one
business segment and develops,  acquires, owns and operates outlet centers.  The
Company's  outlet center  portfolio,  including five  outlet centers  owned
through joint venture  partnerships,  consists of 48 outlet centers in 26 states
(including Puerto Rico), which total 13,497,000 square feet of gross leasable
area ("GLA") at December 31, 2000. As a  fully-integrated  real estate firm, the
Company  provides  development, construction,  accounting,  finance,  leasing,
marketing, and management services for all of its properties (the "Properties").
The Properties  are held and  substantially  all of its business and  operations
are  conducted  through  Prime  Retail, L.P.(the "Operating Partnership").  The
Company  controls  the  Operating  Partnership  as its  sole general partner and
is  dependent  upon  the  distributions  or  other  payments  from the Operating
Partnership to meet its financial obligations.

        Unless the context otherwise requires, all  references to  the "Company"
herein  mean  Prime Retail Inc.,  and those  entities  owned  or  controlled by
Prime Retail, Inc., including the Operating Partnership.

        The  Company's  executive  offices are located at 100 East Pratt Street,
19th Floor, Baltimore, Maryland 21202 (telephone 410-234-0782).

Tax Status

        The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal  Revenue Code of 1986, as amended (the  "Code").  As a REIT,
the  Company  generally  is not subject to federal  income tax at the  corporate
level on income it distributes to its  stockholders so long as it distributes at
least  95%  (90% for years  beginning  after  December 31, 2000) of  its taxable
income  (excluding  any net  capital  gain) each year.  Since its initial public
offering ("IPO") on March 22, 1994, the Company  believes that  it  has complied
with the tax  regulations  to maintain its REIT status.  If the Company fails to
qualify as a REIT in any taxable  year,  the Company  will be subject to federal
income tax  (including any  applicable  alternative  minimum tax) on its taxable
income at regular  corporate rates. Even if the Company qualifies as a REIT, the
Company  may be  subject  to  certain  state and local  taxes on its  income and
property.

Business of the Company

         The  Company  is  engaged  primarily  in  the  ownership,  development,
construction,  leasing,  marketing  and  management  of outlet  centers.  Outlet
centers  are  an   established   segment  of  the  retail   industry,   enabling
value-oriented  shoppers to purchase  designer and brand-name  products directly
from manufacturers at discounts.

         Since  entering  the  outlet  center  business  in  1988 (as the retail
division of The Prime Group, Inc. ("PGI"), from which the Company later acquired
certain   Properties  and  simultaneously  assumed  management  and  development
operations  with  the  completion  of  the  IPO),  the  Company   has  become  a
significant  operator  and  developer  in  its  business  sector.  The Company's
outlet   centers   feature   a   diversified    mix   of  nationally  recognized
manufacturers  of  designer  and  brand-name  merchandise with which the Company
and its employees have established long-standing  relationships.  As of December
31,  2000, the Company's outlet center  portfolio consisted of 48 outlet centers
in  26  states  (including Puerto Rico)  totaling 13,497,000 square feet of GLA.
The  average outlet center in  the Company's portfolio  contained  approximately
281,000  square feet  of  GLA  at December  31, 2000.

Business Strategy

        The  Company's  strategy is to use its cash flow from the  Properties to
fund property level  improvements  and reduce debt levels over time. The Company
will also pursue,  on a selective basis,  the sale of properties,  including (i)
outlet  centers,  (ii) community  centers and (iii) land  holdings,  in order to
reduce the overall leverage of the Company over time.
<PAGE>
        The Company actively manages the Properties in an effort to increase the
sales and profitability of  its  tenants and ultimately improve occupancy levels
and rental income.  In this regard  the  Company will employ various strategies,
including the following:

o    Tenant Mix. The Company  will  continue  to  evaluate the tenant mix at the
     Properties  and seek to enhance, if possible,  the representation  of those
     tenants considered the biggest and best draws in the outlet  industry.  The
     Company  believes  that  an  increase in the representation of such tenants
     will positively affect consumer traffic  and  lead  to overall higher sales
     for all  tenants. Additionally,  the Company  will  continue to explore the
     addition of new tenants to the outlet  sector to strengthen the competitive
     position of the Company.
o
     Marketing  Strategies.  During  1998, the  Company  adopted  a  nation-wide
     branding strategy with the goal of enhancing sales  by  improving  customer
     awareness and loyalty.  Under  this  strategy,  the  Company  renamed  the
     majority of its current  outlet center  portfolio with the "Prime  Outlets"
     brand name.  While the Company intends to retain the "Prime  Outlets" brand
     name, the Company adopted more individualized,  property specific marketing
     programs developed by on-site management  teams during  2000.  In addition,
     the  Company  augmented  marketing  dollars  received  from  tenants with a
     contribution  of  its  own  of approximately $3.5 million during 2000.  The
     Company will continue to evaluate its marketing  programs in 2001 and  make
     enhancements as appropriate. Furthermore, the Company will continue to seek
     strategic marketing alliances with companies seeking access to the customer
     base of the Company's outlet center portfolio.

o    Operating  Expenses.  The  Company manages and  leases  its properties with
     in-house   personnel,  thereby   reducing   its  reliance  on   third-party
     service  providers and enabling it to continually  monitor and  control the
     expenses associated with these functions.  The Company strives to  minimize
     the occupancy cost of its tenants through active  management  of  operating
     expenses at the property, regional and corporate levels. Whenever possible,
     the  Company  leverages  the  size of its  portfolio  to  obtain  favorable
     rates from vendors and suppliers.

Competition

        The  Company's  outlet  centers  compete for  customers  primarily  with
traditional  shopping  malls,  "off-price"  retailers  and other outlet centers.
Traditionally the merchants of outlet centers generally avoid direct competition
with  major  retailers  and  their  own  full-price  stores. Generally, this  is
accomplished  by  locating  outlet  centers  at least 20 miles from the  nearest
regional mall.  For this reason,  the Company's outlet centers compete only to a
limited  extent with traditional retail malls in or near metropolitan areas.  In
addition  to  the  traditional  sources  of  competition  faced by the Company's
outlet  centers,  the Company's outlet centers  also compete for customers  with
web-based and catalogue retailers.

        Because  a  number  of the  Company's  outlet  centers  are  located  in
relatively  undeveloped  areas,  there are often other  potential sites near the
Company's   outlet  centers  that  may  be  developed  into  outlet  centers  by
competitors.  The  existence  or  development  of an outlet  center  with a more
convenient  location or lower rents may attract the Company's merchants or cause
them to seek more  favorable  lease terms at or prior to renewal of their leases
and, accordingly, may affect adversely the business, revenues  and sales  volume
of the Company's outlet centers.

        The Company's  community shopping centers compete with similar community
shopping centers located in the same geographic trade areas.

Environmental Matters

        Under various federal, state and local laws and regulations, an owner of
real  estate is liable  for the  costs of  removal  or  remediation  of  certain
hazardous substances on their property. Such laws often impose liability without
regard to whether the owner knew of, or was responsible for, the presence of the
hazardous  substances.  The costs of remediation or removal may be  substantial,
and the  presence  of the  hazardous  substances,  or the  failure  to  promptly
remediate them, may adversely affect the owner's ability to sell the real estate
or to  borrow  using the real  estate  as  collateral.  In  connection  with its
ownership and operation of the Properties, the Company may be potentially liable
for the costs of removal or remediation of hazardous substances.

        The Company has no  knowledge,  nor has the Company been notified by any
governmental  authority,  of any  material  noncompliance,  liability  or  claim
relating to hazardous  substances in connection with any properties in which any
of such entities now has or heretofore had an interest.  However,  no assurances
can be given that (i) future laws, ordinances or regulations will not impose any
material environmental  liability or (ii) the current environmental condition of
the  Properties  will  not  be  affected  by  merchants  and  occupants  of  the
Properties,  by the condition of  properties  in the vicinity of the  Properties
(such  as the  presence  of  underground  storage  tanks)  or by  third  parties
unrelated to the Company.
<PAGE>
Insurance

        Management  believes that each of the  Properties is covered by adequate
fire, flood, earthquake  and  property insurance provided by reputable companies
and with commercially reasonable deductibles and limits.

Employees

        As of December 31, 2000,  the Company had 1,027  employees.  The Company
believes that its relations with its employees are satisfactory.

Executive Officers

        The  following  table  sets  forth  the  name,  position  and age (as of
December 31, 2000) of the current executive officers of the Company:

--------------------------------------------------------------------------------
Name                  Position                                               Age
--------------------------------------------------------------------------------
Glenn D. Reschke      President and Chief Executive Officer,
                        Chairman of the Board                                 49

Robert A. Brvenik     Executive Vice President - Chief Financial
                        Officer and Treasurer                                 45

C. Alan Schroeder     Executive Vice President - General Counsel
                        and Secretary                                         43

Steven S. Gothelf     Executive Vice President - Finance                      40

John S. Mastin        Executive Vice President - Leasing                      55

David G. Phillips     Executive Vice President                                39

R. Kelvin Antill      Senior Vice President - Assistant General Counsel       41
                        and Assistant Secretary

W. Daniel Brown       Senior Vice President - Human Resources                 50

Frederick J. Meno     Senior Vice President - Operations                      43
================================================================================

        Glenn D.  Reschke.  Glenn D.  Reschke is President  and Chief  Executive
Officer and Chairman of the Board of the Company. Mr. Reschke's responsibilities
with the Company include oversight and responsibility for the Company's leasing,
marketing, operations, finance and administrative functions.  Mr. Reschke joined
PGI  in  1983  and,  since  that  time,  served  as  Vice President, Senior Vice
President and Executive Vice  President of PGI, and  was  responsible  for PGI's
multi-family, senior  housing,  single  family and land  development  divisions.
Mr.  Reschke received a Masters in Business Administration from Eastern Michigan
University  with  a  specialization  in  finance  after  receiving a Bachelor of
Science degree with honors in Chemical Engineering from Rose Hulman Institute of
Technology in Terre Haute, Indiana.

     Robert A. Brvenik.  Robert A. Brvenik is Executive  Vice  President - Chief
Financial  Officer and Treasurer of the Company.  Mr. Brvenik joined the Company
in 2000. Mr. Brvenik's  responsibilities with the Company include capital market
activities,   corporate  budgeting,  financial  reporting,  investor  relations,
accounting,  taxation,  treasury,  and management  information systems. Prior to
joining the  Company,  Mr.  Brvenik  was  associated  for 13 years with  Pyramid
Management Group, Inc. where he served in several key capacities including Chief
Financial Officer,  Chief Operating Officer,  Director of Development and Senior
Leasing  Representative in addition to liaison with several large commercial and
investment  banks.  Mr. Brvenik has also held positions at Arthur Andersen & Co.
and Citicorp.  He received his B.S. in Accounting from Utica College of Syracuse
University and is a Certified Public Accountant.

     C. Alan Schroeder.  C. Alan Schroeder is Executive Vice President - General
Counsel and Secretary of the Company. Mr. Schroeder has been General Counsel and
Secretary  of the  Company  since the  initial  public  offering of stock in the
Company in 1994.  From 1990 to 1994,  Mr.  Schroeder  was an  Assistant  General
Counsel of PGI and was  responsible  for legal  matters  relating  to the retail
division of PGI.  Prior to joining PGI, Mr.  Schroeder was  associated  for four
years with Hopkins & Sutter,  a Chicago,  Illinois based law firm. Mr. Schroeder
received a Juris Doctorate degree from The University of Chicago Law School. Mr.
Schroeder  received an A.B.  degree in  Economics  and  Sociology  from  Bowdoin
College in  Brunswick,  Maine.  Mr.  Schroeder  is licensed  to practice  law in
Illinois.
<PAGE>
     Steven S. Gothelf.  Steven S. Gothelf is Executive Vice President - Finance
of the Company.  Mr. Gothelf joined PGI in 1990 and, since that time,  served as
Vice   President   of  Asset   and   Development   Management.   Mr.   Gothelf's
responsibilities with the Company include financing,  capital market activities,
and the review and analysis of potential  outlet  center  acquisitions.  For two
years  prior to joining  PGI,  Mr.  Gothelf  was Vice  President  of Finance and
Administration  of Clarion  Development Inc. Before joining Clarion  Development
Inc., Mr. Gothelf was a Market Maker for financial  futures at the Chicago Board
of Trade and prior to that was a Manager of Real Estate Tax and  Consulting  for
KPMG Peat Marwick LLP. Mr. Gothelf  received his B.S.  degree in Accounting from
the University of Illinois and is a certified public accountant.

     John S. Mastin. John S. Mastin is Executive Vice President - Leasing of the
Company. Mr. Mastin's  responsibilities  with the Company include supervision of
leasing and  merchandising  for all of the Company's outlet centers.  Mr. Mastin
joined the Company in June of 1996.  Prior to joining the  Company,  Mr.  Mastin
spent 24 years with The Rouse Company.  At The Rouse  Company,  Mr. Mastin began
his career as a Junior Leasing Representative and was promoted to Vice President
and Assistant  Director of Leasing.  Mr.  Mastin led the leasing  effort for The
Rouse Company with numerous regional malls as well as inner-city festival market
places  which  include  Bayside  in Miami,  Florida,  and the  redevelopment  of
Underground  Atlanta  in  Atlanta, Georgia.  Mr. Mastin was also involved in the
releasing and  remerchandising  effort for the operating  properties division of
The Rouse Company.  Prior to The Rouse  Company,  Mr. Mastin was a Naval Aviator
for four years. Mr. Mastin received his Bachelor of Arts in English from Niagara
University. Mr. Mastin is a member of the ICSC.

     David G. Phillips.  David  G. Phillips is  President of Prime Retail Europe
and  an  Executive Vice  President  of  the Company.  Mr. Phillips oversees  the
Company's  development,  marketing,  leasing  and  operations efforts in Europe.
Mr.  Phillips  joined  PGI in  1989  and served  as Vice President,  Senior Vice
President,  and Executive Vice  President,  Operations, Marketing  and  Leasing.
Prior  to  joining  PGI,  Mr.  Phillips  was a  leasing representative  at  D.I.
Realty,  Inc.,  leasing  a variety  of retail  projects including outlet centers
and  traditional  and  specialty  malls.  Mr.  Phillips received  a  Masters  of
Science in Real  Estate  Development  at Johns  Hopkins University  and received
a Bachelor of Science degree in  Business  Administration from the University of
Vermont.  Mr. Phillips is a  member of  the  ICSC with  a CLS (Certified Leasing
Specialist) designation and the Urban Land Institute.

         R.  Kelvin  Antill.    R. Kelvin  Antill  is  Senior Vice  President -
Assistant General Counsel and  Assistant  Secretary  of the Company.  Mr. Antill
joined the Company in 1995.  Mr. Antill's responsibilities include legal matters
(other than leasing)  relating  to  the  operating  properties  of  the Company,
project financings and other capital transactions, as well as  development  and
re-development  matters.    Mr. Antill  received   a  Juris Doctorate  from  the
University of Virginia and a Bachelor of Arts  in Economics from  the University
of  Maryland  at  College Park.  Mr.  Antill  is licensed to practice law in the
state of Maryland.

        W. Daniel Brown.   W. Daniel  Brown  is  Senior  Vice  President - Human
Resources  of the Company.  Mr. Brown  joined  the  Company  to lead  the  Human
Resources  function  in 1998.   From 1994  through  1998,  Mr. Brown  was a Vice
President  in  Human  Resources at T. Rowe Price  Associates.  Prior  to joining
T. Rowe Price,  Mr. Brown was a member of the  Principle  Professional  Staff of
the  Johns  Hopkins  University  Applied  Physics  Laboratory  where he led  the
compensation,  benefits,  employment,  human resource  information  systems, and
training  and  development  functions.  Before  beginning  his  career  in Human
Resources  in 1983, Mr. Brown  played  Principal Tuba  for nine  years  with the
Baltimore Symphony Orchestra.  Mr. Brown received  an  MBA  from  the University
of Maryland and  a  Bachelor  of  Music  degree  from  the Peabody Conservatory.
He  holds professional certifications in both human resources and compensation.

        Frederick  J.  Meno.  Frederick  J.  Meno is  Senior  Vice  President  -
Operations  of  Prime  Retail,  where  he is  responsible  for  supervising  the
management,  operations,  outdoor advertising and specialty leasing programs for
Prime's nationwide portfolio of outlet centers. Prior to joining Prime, Mr. Meno
was Executive  Director of Insignia/ESG,  Inc., where he was responsible for all
management,   leasing,   construction   management,   and  business  development
activities  for  Insignia/ESG's  10 million  square foot national  enclosed mall
portfolio,  as well as Insignia/ESG's  Dallas/Fort Worth office,  industrial and
non-enclosed retail portfolio. For 10 years prior to joining Insignia/ESG, Inc.,
Mr. Meno was  President  of the  Woodmont  Property  management  Company in Fort
Worth, Texas. A 1979 graduate of Ohio State University,  having majored in Urban
Land  Development  and Economics with a degree in Business  Administration,  Mr.
Meno is a member of the Institute of Real Estate  Management  and the ICSC.  Mr.
Meno has achieved the designations of Certified Property Manager,  Real Property
Administrator  and  Certified  Shopping  Manager  and is a licensed  Real Estate
Salesman in the State of Texas.  Mr. Meno is also on the  Advisory  Board of the
Shopping  Center  Management  Insider  Publication  and he is the 2001  Dean for
ICSC's University of Shopping Centers School of Outlet Retailing,  ValueOrientor
and Community Centers.
<PAGE>
                              ITEM 2 -- PROPERTIES

General

        As  a  fully-integrated   real  estate  company,  the  Company  provides
development,   construction,   finance,  leasing,   accounting,   marketing  and
management  services  for all of its  properties.  At  December  31,  2000,  the
Company's portfolio  consisted of (i) 48 outlet centers  aggregating  13,497,000
square feet of GLA  (including  1,764,000  square feet of GLA at outlet  centers
owned through joint venture partnerships), (ii) three community shopping centers
aggregating  424,000  square feet of GLA and (iii) 154,000 square feet of GLA of
office space.

        The table set forth below summarizes certain information with respect to
the Company's  outlet  centers as of December 31, 2000 (see "Note 6 -- Bonds and
Notes Payable" of the Notes to the Consolidated  Financial  Statements contained
herein for  information  with respect to mortgage  indebtedness on the Company's
properties).

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

Prime Outlets at Fremont (2)-- Fremont, Indiana........................             October 1985            229,000              95%

Prime Outlets at Birch Run (3)-- Birch Run, Michigan...................           September 1986            724,000              95

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

Prime Outlets at Williamsburg (4)-- Williamsburg, Virginia.............               April 1988            274,000              99

Prime Outlets at Pleasant Prairie (2)-- Kenosha, Wisconsin.............           September 1988            269,000              96

Prime Outlets at Silverthorne-- Silverthorne, Colorado.................            November 1988            258,000              97

Prime Outlets at Edinburgh (2)-- Edinburgh, Indiana....................           September 1989            298,000              99

Prime Outlets at Burlington (2)-- Burlington, Washington ..............                 May 1989            174,000              93

Prime Outlets at Queenstown (2)-- Queenstown, Maryland.................                June 1989            221,000             100

Prime Outlets at Hillsboro (2)-- Hillsboro, Texas......................             October 1989            359,000              96

Prime Outlets at Oshkosh (2)-- Oshkosh, Wisconsin......................            November 1989            260,000              98

Prime Outlets at Warehouse Row (5)-- Chattanooga, Tennessee............            November 1989             95,000              91

Prime Outlets at Perryville (2)-- Perryville, Maryland.................                June 1990            148,000              93

Prime Outlets at Sedona-- Sedona, Arizona .............................              August 1990             82,000              93

Prime Outlets at San Marcos-- San Marcos, Texas........................              August 1990            549,000              98

Prime Outlets at Anderson-- Anderson, California.......................              August 1990            165,000              98

Prime Outlets at Post Falls-- Post Falls, Idaho .......................                July 1991            179,000              77

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

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

Prime Outlets at Naples-- Naples/Marco Island, Florida.................            December 1991            146,000              91

Prime Outlets at Conroe (2)-- Conroe, Texas............................             January 1992            282,000              95

Bellport Outlet Center (6)-- Bellport, New York--  Phase I.............                 May 1992             95,000              87
Bellport Outlet Center (6)-- Bellport, New York--  Phases II/III.......            November 1996            197,000              70
                                                                                                            -------             ---
                                                                                                            292,000              76
</TABLE>
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                           Grand              GLA          Occupancy
Outlet Centers                                                                      Opening Date         (Sq. Ft.)        Percentage
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                    <C>                    <C>
Prime Outlets at Niagara Falls USA-- Niagara Falls, New York...........                July 1992            534,000              94%

Prime Outlets at Woodbury (2)-- Woodbury, Minnesota....................                July 1992            250,000              78

Prime Outlets at Calhoun (2)-- Calhoun, Georgia........................             October 1992            254,000              93

Prime Outlets at Castle Rock-- Castle Rock, Colorado...................            November 1992            480,000             100

Prime Outlets at Bend-- Bend, Oregon...................................            December 1992            132,000              97

Prime Outlets at Jeffersonville II (2)-- Jeffersonville, Ohio..........               March 1993            314,000              54

Prime Outlets at Jeffersonville I-- Jeffersonville, Ohio...............                July 1993            407,000              97

Prime Outlets at Gainesville-- Gainesville, Texas......................              August 1993            316,000              86

Prime Outlets at Loveland-- Loveland, Colorado.........................                 May 1994            328,000              95

Oxnard Factory Outlet (7)-- Oxnard, California.........................                June 1994            148,000              88

Prime Outlets at Grove City-- Grove City, Pennsylvania.................              August 1994            533,000             100

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

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

Prime Outlets at Pismo Beach (2)-- Pismo Beach, California.............            November 1994            148,000              95

Prime Outlets at Tracy  (2)-- Tracy, California........................            November 1994            153,000              94

Prime Outlets at Vero Beach (2)-- Vero Beach, Florida..................            November 1994            326,000              91

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

Prime Outlets at Darien (8)-- Darien, Georgia..........................                July 1995            307,000              86

Prime Outlets at New River (7)-- Phoenix, Arizona......................           September 1995            326,000              95

Prime Outlets at Gulfport (9)-- Gulfport, Mississippi..................            November 1995            306,000              89

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

Prime Outlets at Gaffney (9) -- Gaffney, South Carolina................            November 1996            305,000              99

Prime Outlets at Lee (2)-- Lee, Massachusetts..........................                June 1997            224,000             100

Prime Outlets at Lebanon--  Lebanon, Tennessee.........................               April 1998            229,000              99

Prime Outlets at Hagerstown-- Hagerstown, Maryland.....................              August 1998            487,000              96

Prime Outlets of Puerto Rico-- Barceloneta, Puerto Rico................                July 2000            176,000              82
                                                                                                         ----------             ---

Total Outlet Centers (10)                                                                                13,497,000              93%
                                                                                                         ==========             ===
====================================================================================================================================
</TABLE>
<PAGE>
Notes:
(1)  Percentage  reflects occupied space as of December 31, 2000 as a percent of
     available square feet of GLA.
(2)  The Company acquired this outlet center on June 15, 1998 as a result of its
     merger with Horizon Group, Inc.
(3)  The Company acquired this outlet center on June 15, 1998 as a result of its
     merger with Horizon Group, Inc. On November 19, 1999, the Company sold this
     outlet center to a joint venture  partnership in which  the  Company owns a
     30.0% interest.
(4)  The Company acquired this outlet center on June 15, 1998 as a result of its
     merger with Horizon Group, Inc. On February 23, 2000, the Company sold this
     outlet center to a joint  venture partnership  in  which the Company owns a
     30.0% interest.
(5)  The Company owns a 2% partnership  interest as the sole general  partner in
     Phase I of this property but is entitled to 99% of the property's operating
     cash  flow and net  proceeds  from a sale or  refinancing.  This  mixed-use
     development  includes  154,000 square feet of office space, not included in
     this table, which was 94% occupied as of December 31, 2000.
(6)  On September 1, 1999, the Company acquired 50% of Phase I and 51% of Phases
     II  and  III  of  this  outlet  center  which  it  owns  in  joint  venture
     partnerships.
(7)  The Company owns 50% of this outlet center in a joint  venture partnership.
(8)  The Company  operates  this outlet  center  pursuant to a long-term  ground
     lease under  which the  Company  receives  the  economic  benefit of a 100%
     ownership interest.
(9)  The real  property on which this  outlet  center is located is subject to a
     long-term ground lease.
(10) The Company  owns three  community  centers,  not  included in this table,
     containing  424,000  square  feet of GLA in the  aggregate  that  were  81%
     occupied as of December 31, 2000.

Lease Terms

        In general,  the leases relating to the Company's  outlet centers have a
term of three to five years.  Most leases  provide for the payment of percentage
rents for annual sales in excess of certain thresholds. In addition, the typical
lease agreement  provides for the recovery of all of a merchant's  proportionate
share of actual common area maintenance ("CAM"), refuse removal,  insurance, and
real estate taxes as well as a collection for  advertising  and promotion and an
administrative fee. CAM includes such items as common area utilities,  security,
parking  lot  cleaning,   maintenance  and  repair  of  common  areas,   capital
replacement  reserves,   landscaping,   seasonal  decorations,  public  restroom
maintenance and certain administrative expenses.

        The following  table sets forth,  as of December 31, 2000,  tenant lease
expirations for the next 10 years at the Company's outlet centers (assuming that
none of the tenants  exercise any renewal option and including  leases at outlet
centers owned through joint venture partnerships):

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                             Lease Expirations -- Outlet Centers
                                             -----------------------------------

                                                                                                                       % of Total
                         Number of                 Approximate                       Annualized                        Annualized
                          Leases                       GLA                         Minimum Rent of                   Minimum Rent of
 Year                    Expiring                    (Sq. Ft.)                     Expiring Leases                   Expiring Leases
 ----                   ----------                 ------------                   ----------------                   ---------------
 <S>                       <C>                        <C>                            <C>                                   <C>
 2001                      786                        2,659,230                      $31,724,614                           18.72%
 2002                      610                        2,157,642                       29,408,660                           17.35
 2003                      573                        2,418,648                       34,804,345                           20.54
 2004                      385                        1,477,771                       22,210,898                           13.11
 2005                      412                        1,732,497                       26,160,705                           15.44
 2006                      173                          779,539                        9,027,062                            5.33
 2007                       49                          211,059                        3,455,036                            2.04
 2008                       33                          169,350                        2,724,842                            1.61
 2009                       24                          156,828                        2,107,768                            1.24
 2010                       54                          275,685                        4,769,351                            2.81

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

        In management's  view,  tenant mix is an important factor in determining
an  outlet  center's  success.  The Company's  outlet  centers, are  managed  to
attract and retain, if possible, a diverse mix of nationally and internationally
recognized manufacturers of upscale designer and  brand-name  products.  Crucial
to the success of an outlet center is the presence of lead tenants. Lead tenants
are manufacturers that  may attract a large number of qualified consumers to the
outlet center due to the strength of their  brand  name and the value offered to
the consumer.  Lead tenants are placed in strategic  locations  designed to draw
customers into the outlet  center  and to  encourage  them to shop at  more than
one store.  The Company  continually  examines  the  placement of tenants within
each  center  and, in  collaboration  with its  tenants,  adjusts  the  size and
location  of  their  space  within each center in an effort to improve sales per
square foot.

        During the year  ended  December  31,  2000,  no group of tenants  under
common  control  accounted  for more  than  4.86% of the gross  revenues  of the
Company or leased more than 5.71% of the total GLA of the Company.

        The  following  list  includes some of the lead tenants in the Company's
outlet centers based on leases executed as of December 31, 2000:

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                          NUMBER OF                      % OF LEASED
TENANT                                                                                      STORES                            GLA
------                                                                                  ------------                    ------------
<S>                                                                                         <C>                             <C>

PHILLIPS-VAN HEUSEN
     BASS .............................................................................       45                               2.63%
     VAN HEUSEN .......................................................................       44                               1.52
     GEOFFREY BEENE ...................................................................       31                               1.05
     IZOD .............................................................................       28                               0.51
                                                                                           -----                              ------
        SUBTOTAL PHILLIPS-VAN HEUSEN...................................................      148                               5.71

NIKE...................................................................................       27                               2.79
GAP/OLD NAVY/BANANA REPUBLIC...........................................................       33                               2.73

DRESS BARN, INC.
     WESTPORT, LTD./WESTPORT WOMAN/DRESS BARN..........................................       45                               2.65
     SBX...............................................................................        2                               0.07
                                                                                           -----                              ------
        SUBTOTAL DRESS BARN, INC.......................................................       47                               2.72

LEVI'S/DOCKERS.........................................................................       37                               2.69
LIZ CLAIBORNE/ELISABETH................................................................       43                               2.67

JONES APPAREL GROUP
     JONES NEW YORK....................................................................       45                               1.33
     NINE WEST/BANISTER/EASY SPIRIT....................................................       27                               1.11
                                                                                           -----                              -----
        SUBTOTAL JONES APPAREL GROUP...................................................       72                               2.44

BROWN GROUP RETAIL, INC.
     FACTORY BRAND SHOES...............................................................       34                               1.46
     NATURALIZER.......................................................................       26                               0.60
     FAMOUS FOOTWEAR...................................................................        8                               0.37
                                                                                           -----                              ------
        SUBTOTAL BROWN GROUP...........................................................       68                               2.43

CASUAL CORNER GROUP, INC.
     CASUAL CORNER OUTLET..............................................................       31                               1.49
     PETITE SOPHISTICATE...............................................................       19                               0.42
     CASUAL CORNER WOMAN...............................................................       14                               0.39
                                                                                           -----                              ------
        SUBTOTAL CASUAL CORNER GROUP, INC. ............................................       64                               2.30

MIKASA.................................................................................       34                               2.17

REEBOK/ROCKPORT........................................................................       27                               1.94

SARA LEE
    L'EGGS/HANES/BALI/PLAYTEX..........................................................       40                               1.44
    COACH..............................................................................       13                               0.31
    SOCKS GALORE.......................................................................       10                               0.11
    SARA LEE BAKERY....................................................................        1                               0.02
                                                                                           -----                              ------
        SUBTOTAL SARA LEE..............................................................       64                               1.88
</TABLE>
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                          NUMBER OF                      % OF LEASED
TENANT                                                                                      STORES                            GLA
------                                                                                   ------------                      ---------

<S>                                                                                        <C>                                <C>
VANITY FAIR/BARBIZON...................................................................        9                               1.62%
POLO/RALPH LAUREN......................................................................       25                               1.59
BUGLE BOY..............................................................................       35                               1.57
OSHKOSH B'GOSH/GENUINE KIDS............................................................       34                               1.46
SPIEGEL................................................................................        6                               1.36
CARTERS CHILDRENSWEAR..................................................................       30                               1.25
TOMMY HILFIGER/WOMAN/JEANS.............................................................       29                               1.20
SPRINGMAID-WAMSUTTA....................................................................       20                               1.17
OFF 5TH-SAKS FIFTH AVENUE..............................................................        7                               1.17
SAMSONITE/AMERICAN TOURISTER...........................................................       44                               1.10
EDDIE BAUER............................................................................       16                               1.06
WELCOME HOME...........................................................................       35                               1.06
HOME COMPANY...........................................................................        2                               1.06
K*B TOY................................................................................       27                               1.04
BIG DOG SPORTSWEAR.....................................................................       42                               1.02
FAMOUS BRANDS HOUSEWARES...............................................................       33                               0.99
CORNING-REVERE.........................................................................       24                               0.91
RUE 21.................................................................................       30                               0.90
KITCHEN COLLECTION.....................................................................       33                               0.88
PAPER FACTORY/GREETINS `N MORE.........................................................       28                               0.80
BROOKS BROTHERS........................................................................       18                               0.80
JOCKEY.................................................................................       27                               0.78
J. CREW................................................................................       13                               0.71
NAUTICA/JEANS..........................................................................       22                               0.66
ANN TAYLOR/LOFT........................................................................        9                               0.53
BOSE...................................................................................       14                               0.46
AMERICAN EAGLE/OUTPOST.................................................................       12                               0.44
SONY...................................................................................        8                               0.40
DONNA KARAN............................................................................        7                               0.28
                                                                                           -----                              ------
TOTAL..................................................................................    1,303                              60.74%
                                                                                           =====                              ======

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

        During the year ended December 31, 2000 and 1999, total bad debt expense
was  approximately  $7.4 million, or 2.6%,  and $0.8 million,  or 0.3%, of total
revenues,  respectively.   The  increase  in  bad  debt  expense  was  primarily
attributable  to certain  tenant  bankruptcies, abandonments  and store closings
during 2000.
<PAGE>
                           ITEM 3 -- LEGAL PROCEEDINGS

        On October 13, 2000 and thereafter, eight complaints  were  filed in the
United  States  District Court for the District of Maryland  against the Company
and four individual defendants.  The  four  individual defendants  are:  William
H.  Carpenter,  Jr.,  the  former  President  and  Chief Operating Officer and a
current director of the Company;  Abraham Rosenthal, the former Chief  Executive
Officer  and a former director  of the  Company;  Michael W. Reschke, the former
Chairman  of  the  Board  and  a  current director of the Company; and Robert P.
Mulreaney,  the  former  Executive Vice  President - Chief Financial Officer and
Treasurer of the Company.  The  complaints  were brought by alleged stockholders
of the Company,  individually  and purportedly as class actions on behalf of all
other  stockholders of  the Company.  The complaints allege that the  individual
defendants  made  statements  about the Company  that  were in  violation of the
federal  securities  laws. The  complaints  seek  unspecified  damages and other
relief.  The  Lead  plaintiffs  and  lead  counsel were recently appointed.  The
Company expects a  consolidated  complaint to  be filed within the next 60 days.
The  Company believes  that the  complaints  are  without  merit and  intends to
defend  them  vigorously.  The  outcome  of  these  lawsuits, and  the  ultimate
liability of the defendants, if any, cannot be predicted.

        The Company and its  affiliates  were  defendants  in a lawsuit filed on
August 10, 1999 in the  Circuit  Court for  Baltimore  City and removed to U. S.
District  Court for the  District of  Maryland  (the "U.S.  District  Court") on
August 20, 1999. The plaintiff alleged that the Company and its related entities
overcharged  tenants for common area  maintenance  charges  and  promotion  fund
charges.  The U.S.  District  Court  dismissed the lawsuit on June 19, 2000. The
plaintiff  has  filed a notice  of its  appeal  from the U.S.  District  Court's
decision  and  a  briefing  schedule  has  been  issued by the court. Management
believes that the Company has acted properly and intends to defend  this lawsuit
vigorously.  While  any  litigation  contains  an  element  of uncertainty,  the
Company  believes  the losses, if any,  resulting from this case will not have a
material adverse effect on the consolidated financial statements of the Company.

        Several entities (the "Plaintiffs") have filed or stated an intention to
file lawsuits (the  "Lawsuits")  against the Company and its affiliates in which
the Plaintiffs are seeking to hold them responsible under various legal theories
for  liabilities  incurred by  primeoutlets.com,  inc.,  also known as eOutlets,
including the theory that the Company guaranteed the obligations of eOutlets and
the theory  that the Company  was the alter ego of  eOutlets.  primeoutlets.com,
inc. is also a defendant  in some,  but not all,  of the  Lawsuits.  The Company
believes  that it is not  liable to the  Plaintiffs  as there was no  privity of
contract  between it and the various  Plaintiffs.  The Company intends to defend
all Lawsuits  vigorously.  primeoutlets.com  inc. filed  for  protection   under
Chapter 7 of  the  United  States  Bankruptcy  Code  during  November 2000 under
the  name  E-Outlets  Resolution  Corp.  The  trustee  for E-Outlets  Resolution
Corp. has notified the Company that he is contemplating  an  action against  the
Company  and  the Operating  Partnership in which  he may  assert that E-Outlets
Resolutin Corp. was the "alter-ego" of the Company and the Operating Partnership
and that, as  a  result, the  Company and  the Operating  Partnership are liable
for the  debts of  E-Outlets Resolution Corp.  If  the  trustee  pursues such an
action, the  Company  and  the  Operating  Partnership  will  defend  themselves
vigorously.  In the case captioned Convergys Customer  Management Group, Inc. v.
Prime Retail, Inc. and primeoutlets.com, inc., currently  pending  in  the Court
of  Common Pleas for Hamilton County (Ohio), the Company  prevailed in  a motion
to dismiss Plaintiff's claim that  the Company was  liable for primeoutlets.com,
inc.'s  breach  of  contract  based  on  the  doctrine of piercing the corporate
veil. The outcome of these Lawsuits, and  the ultimate liability of the Company,
if any,  cannot  be  predicted.  While  any  litigation contains  an  element of
uncertainty,  the  Company  believes  the  losses, if  any, resulting  from  the
Lawsuits  will  not have a material adverse effect on the consolidated financial
statements of the Company.

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

           ITEM 4 -- SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

        No matters  were  submitted  to a vote of  security  holders  during the
quarter ended December 31, 2000.
<PAGE>
                                     PART II

 ITEM 5-- MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

        The Company's  Common Stock trades on the NYSE under the trading  symbol
"PRT".

        The following table sets forth the quarterly high, low and end of period
closing sales prices per share of the Company's  Common Stock as reported on the
NYSE as well as the cash distributions paid during the periods indicated:

<TABLE>
     Market Price of Common Stock and Cash Dividends Paid Per Common Share
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                2000                                                   1999
                           -------------------------------------------------    ----------------------------------------------------
                             Fourth        Third       Second        First        Fourth          Third        Second          First
                            Quarter      Quarter      Quarter      Quarter       Quarter        Quarter       Quarter        Quarter
                           -------------------------------------------------    ----------------------------------------------------
<S>                           <C>          <C>          <C>          <C>          <C>            <C>           <C>           <C>
Market price per common
   share:
   High..................     $0.69        $1.63        $2.13        $6.63        $ 7.94         $ 8.94        $ 9.94        $ 10.19
   Low...................      0.25         0.22         0.94         1.94          5.13           6.44          7.94           7.38
   End of period close...      0.47         0.34         1.27         2.19          5.63           7.38          8.69           8.75

Cash dividends paid per
   common share..........     $   -        $   -        $   -        $   -        $0.295         $0.295        $0.295        $ 0.295
====================================================================================================================================
</TABLE>

        In  order  to  qualify  as  a  REIT for federal income tax purposes, the
Company   is  required  to  pay   distributions  to  its  common  and  preferred
shareholders  of at least 95% (90% for  years beginning after December 31, 2000)
of  its  REIT  taxable  income  in  addition to satisfying  other  requirements.
Although  the  Company  intends  to  make  distributions  in accordance with the
requirements  of the Code,  necessary  to remain  qualified  as a REIT,  it also
intends to retain such amounts as it considers  necessary  from time to time for
capital and liquidity needs of the Company.

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

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

        The Company is prohibited from paying dividends or distributions  except
to the extent  necessary  to  maintain  its REIT  status  under the terms of its
$90,000  Mezzanine   Loan   (see   "Dividends  and   Distributions" of Item 7  -
Management's  Discussions  and  Analysis  of  Financial Condition and Results of
Operations   and  Note  6  -  "Bonds  and   Notes  Payable"  of  the  Notes  to
Consolidated  Financial  Statements).  In  addition,  the  Company  may  make no
distributions  to its common  shareholders  or its  holders  of common  units of
limited  partnership  interest in the Operating Partnership unless it is current
with respect to distributions to its preferred  shareholders. As of December 31,
2000, unpaid  dividends for the  period November 16, 1999  through  December 31,
2000  on  the  Senior  Preferred Stock and Series B Convertible  Preferred Stock
aggregated  $6.8  million  and   $18.7  million,  respectively.  The  annualized
dividends  on  the Company's 2,300,000 shares  of  Senior  Preferred  Stock  and
7,828,125 shares of  Series B  Convertible  Preferred  Stock  outstanding  as of
December 31, 2000 are  $6.0 million ($2.625 per share) and $16.6 million ($2.125
per share), respectively.

        The approximate  number of holders of record of the Common Stock was 605
including participants in security position listings as of March 21, 2001.
<PAGE>
     On December 22, 2000,  the Company  issued  warrants  (the  "Warrants")  to
Fortress Investment Fund LLC and Greenwich Capital Financial  Products,  Inc. to
purchase an aggregate  one million  shares of the  Company's  common stock at an
exercise price of $1.00 per share.  The Warrants were issued in connection  with
the December 22, 2000  refinancing  of the Company's assets  and sale of four of
its  outlet  centers.  See "Debt  Transactions  and Debt Compliance" of Item 7 -
Management's  Discussion  and  Analysis  of  Financial  Condition and Results of
Operations   and  Note 6 - "Bonds   and  Notes  Payable" of  the  Notes  to  the
Consolidated  Financial  Statements  for  additional  information.  The Warrants
were  issued  in  a  transaction  exempt from  registration  pursuant to Section
4(2) of the Securities Act of 1933, as amended.

     The Company has  received notification from the  NYSE  that it believes the
Company is "below  criteria" for continued  listing  of its  common stock on the
NYSE.  In  order to avoid delisting for its common stock, the Company intends to
seek  shareholder  approval  for a  reverse stock split at its annual meeting of
shareholders expected to held in the summer of 2001.
<PAGE>
                        ITEM 6 -- SELECTED FINANCIAL DATA
                (Amounts in thousands, except per share amounts)
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                       Years ended December 31
                                                              ----------------------------------------------------------------------
                                                                     2000           1999           1998           1997         1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>            <C>          <C>
Revenues
Base rents...........................................          $  178,830     $  193,979     $  148,376     $   78,046   $   54,710
Percentage rents.....................................               6,369          8,085          6,384          3,277        1,987
Tenant reimbursements................................              83,350         90,063         67,152         37,519        5,254
Interest and other...................................              14,801         13,829          9,897         10,288        7,089
                                                               ----------     ----------     ----------     ----------   ----------
           Total revenues............................             283,350        305,956        231,809        129,130       89,040
Expenses
Property operating...................................              68,537         70,862         52,684         29,492       20,421
Real estate taxes....................................              21,776         22,405         16,705          9,417        5,288
Depreciation and amortization........................              67,556         73,640         52,727         26,715       19,256
Corporate general and administrative.................              20,847         12,687          7,980          5,603        4,018
Interest.............................................              98,234         93,934         60,704         36,122       24,485
Provision for abandoned projects.....................                   -         16,039              -              -            -
Provision for asset impairment.......................              68,663         15,842              -              -            -
Loss on eOutlets.com.................................              14,703              -              -              -            -
Loss on Designer Connection..........................               1,815          6,561          1,067              -            -
Other charges........................................              17,555          6,918          4,495          3,234        8,586
                                                               ----------     ----------     ----------     ----------   ----------
           Total expenses............................             379,686        318,888        196,362        110,583       82,054
                                                               ----------     ----------     ----------     ----------   ----------
Income (loss) before loss on sale of real
   estate, minority interests
   and extraordinary loss............................             (96,336)       (12,932)        35,447         18,547        6,986
Loss on sale of real estate..........................             (42,648)       (15,153)       (15,461)             -            -
                                                               ----------     ----------     ----------     ----------   ----------
Income (loss) before minority interests and
    extraordinary loss...............................            (138,984)       (28,085)        19,986         18,547        6,986
(Income) loss allocated to minority interests........                 738         (3,226)        (2,456)       (10,581)       2,092
                                                               ----------     ----------     ----------     ----------   ----------
Income (loss) before extraordinary loss..............            (138,246)       (31,311)        17,530          7,966        9,078
Extraordinary loss...................................              (4,206)        (3,518)             -         (2,061)      (1,017)
                                                               ----------     ----------     ----------     ----------   ----------
Net income (loss)....................................            (142,452)       (34,829)        17,530          5,905        8,061
Income allocated to preferred shareholders...........             (22,672)        (9,962)       (24,604)       (12,726)     (14,236)
                                                               ----------     ----------     ----------     ----------   ----------
Net loss applicable to common shares.................          $ (165,124)    $  (44,791)    $   (7,074)    $   (6,821)  $   (6,175)
                                                               ==========     ==========     ==========     ==========   ==========
Net loss per common share - basic....................          $    (3.79)    $    (1.04)    $    (0.20)    $    (0.36)  $    (0.75)
                                                               ==========     ==========     ==========     ==========   ==========
Net loss per common share - diluted.........                   $    (3.79)    $    (1.30)    $    (0.20)    $    (0.36)  $    (0.75)
                                                               ==========     ==========     ==========     ==========   ==========
Other Data
Funds from operations (1)............................          $   57,967     $   84,163     $   90,020     $   46,718   $   27,637
Net cash provided by operating activities............          $   32,450     $   97,815     $   59,182     $   49,856   $   45,191
Net cash provided by (used in) investing activities..          $    1,095     $  (56,666)    $ (145,596)    $ (229,956)  $ (232,290)
Net cash provided by (used in) financing activities..          $  (31,982)    $  (39,571)    $   85,806     $  182,549   $  176,096
Distributions declared per common share (2) (3)......          $        -     $     0.89     $     1.68     $     1.18   $     1.33
Reported merchant sales..............................          $2,745,923     $3,286,917     $3,169,268     $1,434,163   $1,044,348
Total outlet GLA at end of period (4)................              13,497         14,699         14,348          7,217        5,780
Number of outlet centers at end of period (4)........                  48             51             50             28           21


                                                                                             December 31
                                                              ----------------------------------------------------------------------
                                                                     2000           1999           1998           1997         1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>            <C>          <C>
Balance Sheet Data
Rental property (before accumulated depreciation)....          $1,493,107     $1,826,551     $2,015,722     $  904,782   $  640,759
Net investment in rental property....................           1,275,538      1,642,597      1,887,975        822,749      583,085
Total assets.........................................           1,462,021      1,856,058      1,976,464        904,183      666,803
Bonds and notes payable..............................           1,030,153      1,260,670      1,217,507        515,265      499,523
Total liabilities and minority interests.............           1,107,533      1,359,371      1,332,730        559,655      527,594
Shareholders' equity.................................             354,488        496,687        643,734        344,528      139,209

====================================================================================================================================
</TABLE>
<PAGE>
Notes:
(1)  Management  believes  that  to  facilitate  a  clear  understanding  of the
     Company's  operating  results,  funds  from  operations  ("FFO")  should be
     considered in conjunction with net income (loss) as presented in accordance
     with generally accepted accounting  principles  ("GAAP").  FFO, pursuant to
     guidelines   established  by  the  National   Association  of  Real  Estate
     Investment Trusts  ("NAREIT"),  represents net income (loss) (determined in
     accordance with GAAP) excluding provisions for asset impairment,  gains (or
     losses)  from  debt  restructuring,  sales  of  property  and  discontinued
     operations,   plus  real  estate   depreciation  and   amortization   after
     adjustments  for  unconsolidated  joint  venture  partnerships.  Management
     believes  that FFO is an important and widely used measure of the operating
     performance  of  equity  real  estate  investment  trusts  ("REITs")  which
     provides a relevant basis for comparison to other REITs. Therefore,  FFO is
     presented to assist  investors in analyzing the performance of the Company.
     The Company's FFO is not  comparable to FFO reported by other REITs that do
     not  define  the term using the NAREIT  definition  or that  interpret  the
     NAREIT definition differently than does the Company. Therefore, the Company
     cautions that the  calculation of FFO may vary from entity to entity and as
     such the  presentation of FFO by the Company may not be comparable to other
     similarly  titled  measures  of  other  reporting  companies.  FFO does not
     represent  cash  generated  from operating  activities in accordance  with
     GAAP and should not be considered as  an  alternative to net  income  as an
     indication  of  the  Company's performance or to cash flows as a measure of
     liquidity or ability  to  make distributions.  A  reconciliation  of income
     (loss) before allocations to  minority interests and preferred shareholders
     to FFO is as follows:

<TABLE>
<CAPTION>
                                                                                         Years ended December 31
                                                        ----------------------------------------------------------------------------
                                                                      2000           1999             1998         1997         1996
  ----------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>              <C>          <C>          <C>
  Income (loss) before minority interests and
     extraordinary loss................................          $(138,984)      $(28,085)        $ 19,986     $ 18,547     $  6,986
  FFO adjustments:
     Loss on sale of real estate.......................             42,648         15,153           15,461            -            -
     Real estate depreciation and amortization.........             65,853         73,053           52,295       26,413       18,703
     Unconsolidated joint venture adjustments..........              3,269          1,639            1,211        1,758        1,948
     Discontinued operations - Designer Connection.....              1,815          6,561            1,067            -            -
     Discontinued operations - eOutlets.com............             14,703              -                -            -            -
                                                                 ---------       --------         --------     --------      -------
  FFO before adjustment for asset impairment...........            (10,696)        68,321           90,020       46,718       27,637
     Provision for asset impairment - operating properties          61,222         15,842                -            -            -
     Provision for asset impairment - land.............              7,441              -                -            -            -
                                                                 ---------       --------         --------     --------      -------
  FFO before allocations to minority interests
     and preferred shareholders........................          $  57,967       $ 84,163         $ 90,020     $ 46,718     $ 27,637
                                                                 =========       ========         ========     ========      =======
  ==================================================================================================================================
</TABLE>

(2)  Includes a special cash distribution  during 1998 of $0.50 per common share
     relating to the Company's  merger with Horizon  completed in June 1998 (see
     Note 3 --  "Acquisitions  and  Dispositions"  of the Notes to  Consolidated
     Financial Statements).
(3)  Includes a special cash distribution during 1996 of $0.145 per common share
     relating to a stock exchange offer completed by the Company in June 1996.
(4)  Includes  outlet  centers  operated under joint venture  partnerships  with
     unrelated third parties as follows:
<TABLE>
<CAPTION>
                                                                                             December 31
                                                              ----------------------------------------------------------------------
                                                                     2000          1999          1998            1997           1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>           <C>             <C>             <C>            <C>
Aggregate GLA........................................               1,764         1,490           595             595            800
Number of outlet centers.............................                   5             4             3               3              4

====================================================================================================================================
</TABLE>
<PAGE>
                ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Introduction

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

Cautionary Statements

     The  following  discussion  in  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations" contains certain  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 which reflect  management's current views with respect to future events and
financial  performance.  These  statements  are subject to  potential  risks and
uncertainties  and,  therefore,  actual  results  may  differ  materially.  Such
forward-looking  statements  are  subject  to certain  risks and  uncertainties;
including, but not limited to, risks associated with the Company's high level of
leverage and its ability to refinance such  indebtedness  as it becomes due; the
risk that the Company or its  subsidiaries  will not remain in  compliance  with
existing loan covenants; the effects of future events on the Company's financial
performance;  risks related to the retail industry in which the Company's outlet
centers  compete,  including the potential  adverse impact of external  factors,
such as inflation,  consumer confidence,  unemployment rates and consumer tastes
and preferences;  risks associated with tenant bankruptcies, store closings and
the   non-payment  of  contactual  rents;  risk  associated  with  the Company's
potential  asset sales; the risk of potential  increase in market interest rates
from current levels;  risks associated with real estate  ownership,  such as the
potential  adverse impact of  changes  in local economic climate on the revenues
and the value of the Company's properties;   risks  associated  with litigation;
and  risks  associated  with competition from web-based and catalogue retailers.

Outlet Center Portfolio

     The Company's  outlet center portfolio grew to its present size through the
development and acquisition of outlet centers and through expansions to existing
outlet centers.  The Company's outlet  portfolio  consisted of 48 outlet centers
totaling  13,497,000 square feet of ("GLA") at December 31, 2000, compared to 51
outlet centers totaling  14,699,000  square feet of GLA at December 31, 1999 and
50 outlet centers totaling 14,348,000 square feet of GLA at December 31, 1998.

     During 2000, the Company opened (i) Prime Outlets of Puerto Rico, the first
outlet center in Puerto Rico, which contains 176,000 square feet of GLA and (ii)
four expansions to existing outlet centers  totaling 214,000 square feet of GLA.
During 1999,  the Company (i) opened two  expansions to existing  outlet centers
totaling  85,000  square feet of GLA and (ii)  acquired in  September  1999 from
Horizon  Group  Properties,  Inc.  ("HGP")  ownership  interests in the Bellport
Outlet Center which  consists of 292,000  square feet of GLA.  During 1998,  the
Company opened two outlet centers and nine expansions to existing outlet centers
totaling  931,000 square feet of GLA in the  aggregate.  These  development  and
acquisition   activities  are   collectively   referred  to  as  the  "Portfolio
Expansion."

     On December 22, 2000, the Company completed the sale of four outlet centers
aggregating  1,592,000  square  feet  of  GLA  to a  joint  venture  partnership
comprised of Chelsea Property Group, Inc. and Fortress  Investment Group, L.L.C.
The four outlet  centers,  which were sold,  are located in Gilroy,  California,
Michigan City, Indiana, Waterloo, New York and Kittery, Maine. The sale of these
outlet centers is  collectively  referred to as the "Permanent  Loan  Properties
Sale." See "Liquidity and Capital Resources - Sale of Permanent Loan Properties"
for additional information.

     On November 19, 1999,  the Company sold Prime  Outlets at Birch Run,  which
contains  724,000  square  feet of GLA,  to a joint  venture  partnership,  (the
"Prime/Estein  Venture").  Additionally,  on February 23, 2000, the Company sold
Prime Outlets at Williamsburg, which contains 274,000 square feet of GLA, to the
Prime/Estein  Venture.  The  Company  owns a 30%  interest  in the  Prime/Estein
Venture.  Commencing on the dates of disposition,  the Company  accounts for the
operating  results of these outlet centers in accordance  with the equity method
of accounting. The sales of these outlet centers are collectively referred to as
the   "Prime/Estein   Transaction."  See  "Liquidity  and  Capital  Resources  -
Prime/Estein Joint Venture Transaction" for additional information.
<PAGE>
     On June 15,  1998,  the merger and other  transactions  (collectively,  the
"Merger  Transactions")  between the Company and Horizon Group, Inc. ("Horizon")
were  consummated  for  an  aggregate  consideration  of  $1,134,682,  including
liabilities  assumed and related transaction costs. The merger was accounted for
using the purchase method of accounting and the purchase price of $1,134,682 was
allocated to the assets acquired and the liabilities  assumed based on estimates
of their respective fair values.  Accordingly,  the operating  results of the 22
properties   acquired   from  Horizon  have  been   included  in  the  Company's
consolidated  results of operations  commencing on June 15, 1998.  See "Note 3 -
Acquisitions and Dispositions" of the Notes to Consolidated Financial Statements
for additional information. In connection with the June 15, 1998 consummation of
the Merger Transactions, the Company (i) acquired and integrated 22 of Horizon's
outlet centers into its existing  portfolio  adding 6,626,000 square feet of GLA
in the aggregate and (ii) sold two outlet centers to HGP totaling 426,000 square
feet of GLA.

     The Company's outlet center  portfolio was 92.5%,  93.5% and 95.9% occupied
on December 31, 2000, 1999, and 1998, respectively.  For the year ended December
31, 2000,  weighted-average  occupancy in the outlet center portfolio was 91.5%,
compared to 93.4% and 93.9% for the same period in 1999 and 1998,  respectively.
The year 2000 decline in weighted  average and year-end  occupancy was primarily
attributable to certain tenant bankruptcies, abandonments and store closings.
<PAGE>
Results of Operations

Table 1--Consolidated Statements of Operations
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended December 31,                                                                       2000            1999            1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>             <C>             <C>
 Revenues

 Base rents.....................................................................          $ 178,830       $ 193,979       $ 148,376
 Percentage rents...............................................................              6,369           8,085           6,384
 Tenant reimbursements..........................................................             83,350          90,063          67,152
 Interest and other.............................................................             14,801          13,829           9,897
                                                                                          ---------       ---------       ---------
   Total revenues...............................................................            283,350         305,956         231,809

 Expenses

 Property operating.............................................................             68,537          70,862          52,684
 Real estate taxes..............................................................             21,776          22,405          16,705
 Depreciation and amortization..................................................             67,556          73,640          52,727
 Corporate general and administrative...........................................             20,847          12,687           7,980
 Interest.......................................................................             98,234          93,934          60,704
 Provision for abandoned projects...............................................                  -          16,039               -
 Provision for asset impairment.................................................             68,663          15,842               -
 Loss on eOutlets.com...........................................................             14,703               -               -
 Loss on Designer Connection....................................................              1,815           6,561           1,067
 Other charges..................................................................             17,555           6,918           4,495
                                                                                          ---------       ---------       ---------
    Total expenses..............................................................            379,686         318,888         196,362
                                                                                          ---------       ---------       ---------
 Income (loss) before loss on sale of real estate, minority interests and
     extraordinary loss.........................................................            (96,336)        (12,932)         35,447
 Loss on sale of real estate....................................................            (42,648)        (15,153)        (15,461)
                                                                                          ---------       ---------       ---------
 Income (loss) before minority interests and extraordinary loss.................           (138,984)        (28,085)         19,986
(Income) loss  allocated to minority interests..................................                738          (3,226)         (2,456)
                                                                                          ---------       ---------       ---------
 Income (loss) before extraordinary loss........................................           (138,246)        (31,311)         17,530
 Extraordinary loss on early extinguishment of debt,
   net of minority interests in the amount of $887 in 1999......................             (4,206)         (3,518)              -
                                                                                          ---------       ---------       ---------
 Net income (loss)..............................................................           (142,452)        (34,829)         17,530
 Income allocated to preferred shareholders.....................................            (22,672)         (9,962)        (24,604)
                                                                                          ---------       ---------       ---------
 Net loss applicable to common shares...........................................          $(165,124)      $ (44,791)      $  (7,074)
                                                                                          ==========      =========       =========
 Earnings per common share - basic:
    Loss before extraordinary loss..............................................          $   (3.69)      $   (0.96)      $   (0.20)
    Extraordinary loss..........................................................              (0.10)          (0.08)              -
                                                                                          ---------       ---------       ---------
    Net loss....................................................................          $   (3.79)      $   (1.04)      $   (0.20)
                                                                                          =========       =========       =========
 Earnings per common share - diluted:
    Loss before extraordinary loss..............................................          $   (3.69)      $   (1.22)      $   (0.20)
    Extraordinary loss..........................................................              (0.10)          (0.08)              -
                                                                                          ---------       ---------       ---------
    Net loss....................................................................          $   (3.79)      $   (1.30)      $   (0.20)
                                                                                          =========       =========       =========
 Weighted average common shares outstanding
     Basic......................................................................             43,517          43,196          35,612
                                                                                          =========       =========       =========
     Diluted....................................................................             43,517          44,260          35,612
                                                                                          =========       =========       =========

====================================================================================================================================
</TABLE>
<PAGE>
Table 2--Statements of Operations on a Weighted Average per Square Foot Basis

        A summary of the  operating  results  for the years ended  December  31,
2000,  1999 and 1998 is presented in the following  table,  expressed in amounts
calculated on a weighted average occupied GLA basis.

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended December 31,                                                                  2000               1999               1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                <C>                <C>

GLA at end of period (1)........................................................        12,322             13,787             14,457
Weighted average occupied GLA (1)...............................................        12,483             13,599             10,390
Outlet centers in operation at end of period (2)................................            48                 51                 50
New outlet centers opened and acquired (2)......................................             1                  1                 24
Outlet centers expanded (2).....................................................             2                  2                  9
Community centers in operation at end of period.................................             3                  3                  3
States (including Puerto Rico) operated in at end of period.....................            26                 26                 26

Portfolio weighted average per square foot (3):

Revenues
Base rents......................................................................        $14.33             $14.26             $14.28
Percentage rents................................................................          0.51               0.59               0.61
Tenant reimbursements...........................................................          6.68               6.62               6.46
Interest and other..............................................................          1.19               1.02               1.06
                                                                                        ------             ------             ------
   Total revenues...............................................................         22.71              22.49              22.41

Expenses (4)
Property operating..............................................................          5.49               5.21               5.07
Real estate taxes...............................................................          1.74               1.65               1.61
Depreciation and amortization...................................................          5.41               5.42               5.10
Corporate general and administrative (5)........................................          1.36               0.93               0.77
Interest........................................................................          7.87               6.91               5.84
Other charges (6)...............................................................          1.32               0.51               0.63
                                                                                        ------             ------             ------
   Total expenses...............................................................         23.19              20.63              19.02
                                                                                        ------             ------             ------
Income (loss) before loss on sale of real estate,
   minority interests and extraordinary loss....................................        $(0.48)             $1.86              $3.39
                                                                                        ======             ======             ======

Outlet center weighted average per square foot (3):

Revenues
Base rents......................................................................        $14.61             $14.51             $14.66
Percentage rents................................................................          0.53               0.62               0.68
Tenant reimbursements...........................................................          6.85               6.76               6.67
Interest and other..............................................................          1.07               0.85               0.85
                                                                                        ------             ------             ------
   Total revenues...............................................................         23.06              22.74              22.86

Expenses (4)
Property operating..............................................................          5.60               5.31               5.17
Real estate taxes...............................................................          1.75               1.65               1.62
Depreciation and amortization...................................................          5.45               5.53               5.09
Interest........................................................................          6.92               6.42               5.95
Other charges...................................................................          1.13               0.26               0.33
                                                                                        ------             ------             ------
   Total expenses...............................................................         20.85              19.17              18.16
                                                                                        ------             ------             ------

Income before corporate general and administrative
   expenses,loss on sale of real estate, minority
   interests and extraordinary loss.............................................        $ 2.21             $ 3.57             $ 4.70
                                                                                         =====             ======             ======

====================================================================================================================================
</TABLE>
<PAGE>
Notes:
(1)  Includes  total GLA in which the Company receives substantially  all of the
     economic benefit.
(2)  Includes  outlet  centers   operated  under unconsolidated   joint  venture
     partnerships.
(3)  Based on occupied GLA weighted by months of operation.  The occupied GLA on
     a weighted  average basis for (i) the four outlet  centers sold on December
     22,  2000 are  included  in the  weighted  average  GLA through the date of
     disposition  and (ii) the 22 properties  the Company  acquired from Horizon
     and the two  properties  sold to HGP on June 15, 1998 have been included in
     the weighted average GLA commencing on the date the acquisition and through
     the date of disposition, respectively.
(4)  Excludes the following non-recurring items:
<TABLE>
 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 Years ended December 31,                                                                  2000             1999               1998
 -----------------------------------------------------------------------------------------------------------------------------------
     <S>                                                                                <C>              <C>               <C>
     Provision for asset impairment.............................................        $68,663          $15,842           $      -
     Provision for abandoned projects...........................................              -           16,039                  -
     Loss on eOutlets.com.......................................................         14,703                -                  -
     Loss on Designer Connection................................................          1,815            6,561                  -
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(5)  Excludes   non-recurring   corporate  general  and   administrative   costs
     aggregating  $3,876,  including (i) severance and other  compensation costs
     totaling   $2,421   and  (ii)  professional  fees  of  $1,455  relating  to
     refinancing activities.
(6)  Excludes  non-recurring  other charges of $1,100 related to the termination
     of the sale of a joint venture  interest in Prime Outlets at Hagerstown and
     an expansion to Prime Outlets at Williamsburg, which was not constructed.
<PAGE>
Comparison of the year ended December 31, 2000 to the year ended
 December 31, 1999

Summary

        The  Company  reported  net losses of $142,452 and $34,829 for the years
ended December 31, 2000 and 1999, respectively.  For the year ended December 31,
2000, the net loss applicable to common shareholders was $165,124,  or $3.79 per
common share on a basic and diluted basis. For the year ended December 31, 1999,
the net loss applicable to common  shareholders was $44,791,  or $1.04 and $1.30
per common share on a basic and diluted basis, respectively.

        The 2000 results reflect certain  non-recurring  items,  including (i) a
loss on the  sale  of  real  estate  of  $42,648,  (ii) a  provision  for  asset
impairment of $68,663, (iii) a loss on eOutlets.com of $14,703, (iv) general and
administrative  expenses  consisting of severance and other  compensation  costs
aggregating  $2,421  and  professional  fees of $1,455  related  to  refinancing
activities,  (v) a gain on the sale of  outparcel  land of  $2,472  included  in
interest and other income, (vi) a loss on Designer  Connection of $1,815,  (vii)
other charges of $1,100  incurred in connection with the termination of the sale
of joint venture  interests in certain  properties  and (viii) an  extraordinary
loss of  $4,206  related  to the  prepayment  and  modification  to the terms of
certain long-term debt.

        The 1999 results reflect certain  non-recurring  items,  including (i) a
provision  for  abandoned  projects  of  $16,039,  (ii) a  provision  for  asset
impairment of $15,842,  (iii) a loss on the sale of real estate of $15,153, (iv)
a loss on Designer  Connection of $6,561 and (v) an extraordinary loss of $3,518
(net of minority  interests  of $887)  relating to the early  extinguishment  of
certain long-term debt.

Revenues

        Total  revenues  were  $283,350  for the year ended  December  31, 2000,
compared  to  $305,956  for the year ended  December  31,  1999,  a decrease  of
$22,606,  or 7.4%.  Base rents decreased  $15,149,  or 7.8%, in 2000 compared to
1999.  These  decreases are primarily due to the  Prime/Estein  Transaction  and
reduced  portfolio   occupancy,  partially  offset  by  the  PortfolioExpansion.
Straight-line rent income (expense), included in base rent were $(94) and $1,181
for the years ended  December  31, 2000 and 1999,  respectively.

        Percentage  rents,  which represent rents based on a percentage of sales
volume above a specified threshold,  decreased $1,716, or 21.2%, during the year
ended  December 31, 2000  compared to the same period in 1999.  This decline was
primarily attributable to the Prime/Estein Transaction.

     As summarized in TABLE 3, merchant sales reported for centers  remaining in
the Company's  outlet center  portfolio at  period-end  were $2,746  million and
$3,287  million for the years ended  December 31, 2000 and 1999. The decrease in
total reported merchant sales is primarily due to the sale of the Permanent Loan
Properties  on December  22,  2000.  The  reported  merchant  sales data for the
Permanent  Loan  Properties  are excluded from the 2000 sales data  presented in
TABLE 3. The weighted average reported  merchant sales per square foot decreased
to $245 per  square  foot in 2000  from  $257  per  square  foot in 1999.  Total
merchant  occupancy cost per square foot increased  slightly from $21.90 in 1999
to $22.03 in 2000 and as a  percentage  of  reported  sales from 8.54% to 8.99%,
respectively.

Table 3--Summary of Reported Merchant Sales(1)

        A summary of reported  outlet  merchant sales and related data for 2000,
1999 and 1998 follows:
<TABLE>

 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 Years ended December 31,                                                                 2000                 1999            1998
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                  <C>              <C>
 Total reported merchant sales (in millions)(1).................................       $ 2,746              $ 3,287         $ 3,169
                                                                                      =========            =========       =========
 Weighted average reported merchant sales per square foot(2):
    All store sales.............................................................       $   245              $   257         $   255
                                                                                      =========            =========       =========
    Same-space sales............................................................       $   251              $   249
                                                                                      =========            =========
 Total merchant occupancy cost per square foot(3)...............................       $ 22.03              $ 21.90         $ 21.30
                                                                                      =========            =========       =========
 Cost of merchant occupancy to reported sales(4)................................          8.99%                8.54%           8.37%
                                                                                      =========            =========       =========
 Cost of merchant occupancy (excluding marketing contributions)
   to reported sales(5).........................................................          8.26%                7.84%           7.65%
                                                                                      =========            =========       =========

 ===================================================================================================================================
</TABLE>
<PAGE>
Notes:
(1)  Total reported merchant sales summarizes gross sales generated by merchants
     and includes  changes in merchant  mix and the effect of new space  created
     from the  acquisition  and  opening  of new and  expanded  outlet  centers.
     Several of the  Company's  outlet  centers  were  constructed,  expanded or
     acquired  during  the time  periods  contained  in  TABLE 3 and  therefore,
     reported  sales for such new openings,  expansions  and  acquisitions  were
     reported  only for the  partial  period  and were not  annualized.  TABLE 3
     should be read in conjunction  with the  information  summarized  under the
     caption "Properties--Portfolio of Properties".
(2)  Weighted  average reported sales per square foot is based on reported sales
     divided by the weighted  average square  footage  occupied by the merchants
     reporting those sales.  Same-space sales is defined as the weighted average
     reported  merchant sales per square foot for space open since the beginning
     of the prior year.
(3)  Total  merchant  occupancy  cost  per  square  foot  includes  base  rents,
     percentage rents and tenant  reimbursements which includes tenant marketing
     contributions.
(4)  Computed as follows: total merchant occupancy cost per square foot divided
     by total weighted average reported merchant sales per square foot.
(5)  Computed as follows: total merchant  occupancy cost per square foot
     (excluding  marketing  contributions  paid by merchants) divided by total
     weighted average reported merchant sales per square foot.

     Tenant  reimbursements,  which  represent  the  contractual  recovery  from
tenants of certain operating expenses,  decreased by $6,713, or 7.5%, to $83,350
in 2000  compared  to $90,063 in 1999.  This  decrease is  primarily  due to the
Prime/Estein  Transaction and reduced occupancy in 2000, partially offset by the
Portfolio Expansion.

        As  shown  in  TABLE  4,  tenant   reimbursements  as  a  percentage  of
recoverable  property operating expenses and real estate taxes was 92.3% in 2000
compared to 96.6% in 1999. This decline is partially attributable to the reduced
occupancy  during 2000.  TABLE  4  sets  forth  recoveries  from  merchants as a
percentage  of total  recoverable  expenses for 2000,  1999,  and 1998:

Table 4--Tenant Recoveries as a Percentage of Total Recoverable Expenses

--------------------------------------------------------------------------------
                                                           Expenses Recovered
Year                                                          from Tenants(1)
--------------------------------------------------------------------------------
2000...............................................                92.3%
1999...............................................                96.6%
1998...............................................                96.8%

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

Note:
(1)  Total  recoverable expenses include property operating expenses and real
     estate taxes.

        Interest  and other  income  increased   by $972,  or 7.0%,  to  $14,801
during  the  year  ended  December 31, 2000  as compared to $13,829 for the year
ended  December  31, 1999.  This  increase  reflects (i)  a  nonrecurring  first
quarter  2000  gain  on  sale  of outparcel land of $2,472,  (ii) an increase in
amortization   of  deferred  income  of  $809,  (iii)  higher lease  termination
income  of $721, (iv) higher  property  management  fee  income of  $694 and (v)
higher interest income of $434.  These were partially  offset by (i) a reduction
in  equity  earnings  from  investment  in  partnerships  of $2,036,  (ii) lower
temporary  tenant  income of $1,269,  (iii) reduced  municipal assistance income
of $313 and (iv) decreases in all other miscellaneous income of $540.

Expenses

        Property  operating expenses decreased by $2,325, or 3.3%, to $68,537 in
2000 compared to $70,862 in 1999.  Real estate taxes expense  decreased by $629,
or 2.8%,  to $21,776 in 2000 from  $22,405 in 1999.  The  decrease  in  property
operating expenses is primarily due to the Prime/Estein  Transaction,  partially
offset  by the  Portfolio  Expansion.  As shown in  TABLE  5,  depreciation  and
amortization  expense decreased by $6,084, or 8.3%, to $67,556 in 2000, compared
to  $73,640  in  1999.  This decrease results from the Prime/Estein  Transaction
partially offset  by the  depreciation  and  amortization  of assets  associated
with the Portfolio Expansion.

Table 5--Components of Depreciation and Amortization Expense

        The components of depreciation and  amortization  expense for 2000, 1999
and 1998 are summarized as follows:

<TABLE>
 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 Years ended December 31,                                                                          2000          1999           1998
 -----------------------------------------------------------------------------------------------------------------------------------
 <S>                                                                                            <C>           <C>            <C>
 Building and improvements......................................................                $35,536       $40,184        $30,299
 Land improvements..............................................................                  6,197         5,779          3,609
 Tenant improvements............................................................                 22,134        25,374         16,616
 Furniture and fixtures.........................................................                  2,988         1,540          1,084
 Leasing commissions............................................................                    701           763          1,119
                                                                                                -------       -------        -------
       Total....................................................................                $67,556       $73,640        $52,727
                                                                                                =======       =======        =======
====================================================================================================================================
</TABLE>
<PAGE>
        As shown in TABLE 6, interest expense  increased by $4,300,  or 4.6%, to
$98,234 in 2000 compared to $93,934 in 1999.  This increase  reflects (i) higher
interest  incurred of $2,942,  (ii) a reduction in amortization of debt premiums
of  $1,247  and  (iii) a  decrease  in the  amount of  interest  capitalized  in
connection with development projects of $1,234. Partially offsetting these items
was (i) a decrease in  amortization  of deferred  financing  costs of $1,114 and
(ii) a decrease in amortization of interest rate protection contracts of $9.

        The  increase  in  interest  incurred is  primarily  attributable  to an
increase in the weighted average contractual interest rate on long-term debt for
the year ended  December  31,  2000  compared  to the same  period in 1999.  The
weighted  average  contractual  interest  rates for 2000 and 1999 were 8.46% and
7.90%, respectively.  Partially  offsetting  the  impact  of  the interest  rate
increase  was  a reduction  of $48,209 in  the  Company's  weighted average debt
outstanding, excluding debt premiums, during 2000 compared to 1999.

Table 6--Components of Interest Expense

        The  components  of  interest  expense  for  2000,  1999  and  1998  are
summarized as follows:

<TABLE>
 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 Years ended December 31,                                                                         2000           1999          1998
 -----------------------------------------------------------------------------------------------------------------------------------
 <S>                                                                                          <C>           <C>            <C>
 Interest incurred..............................................................              $101,549       $ 98,607      $ 65,783
 Amortization of debt premiums..................................................                (3,159)        (4,406)       (2,153)
 Interest capitalized...........................................................                (3,412)        (4,646)       (5,793)
 Amortization of deferred financing costs.......................................                 3,188          4,302         1,715
 Amortization of interest rate protection contracts.............................                    68             77         1,152
                                                                                              --------       --------      --------

       Total....................................................................              $ 98,234       $ 93,934      $ 60,704
                                                                                              ========       ========      ========
 ===================================================================================================================================
</TABLE>

        Other charges  increased  by  $10,637, or 153.8% to $17,555 for the year
ended  December 31, 2000  compared  to  $6,918  for  the  same  period  in 1999.
The 2000  results  reflect  costs  of $1,100  incurred  in  the third quarter in
connection with the  discontinuance  of the proposed sale of a 70% joint venture
interest in Prime Outlets at Hagerstown and a future  expansion to Prime Outlets
at   Williamsburg.   The  1999  results  reflect  the   write-off  of $3,100  of
capitalized costs associated  with the Company's  expired option to purchase its
joint venture partner's 50.0% ownership  interest in Prime Outlets at New River.
Excluding  these items, other  charges  increased  $12,637  due to (i) a  higher
provision  for  uncollectible  accounts  receivable  of $6,664 resulting in part
from   certain  tenant  bankruptcies  and  abandonments,  (ii) higher  marketing
expenses of  $4,263,  (iii) increased non-capitalized  pre-development  costs of
$791,  (iv) an  increase in  all other  miscellaneous charges of $596 and (v) an
increase in ground  lease  expense of $323.

        During 2000,  management  established a formal plan to sell three of its
wholly-owned properties (Prime Outlets at Silverthorne; Prime Northgate Plaza, a
community center;  and land previously held for development)  and,  accordingly,
reclassified  their  respective   carrying  values  to  assets  held  for  sale.
Total revenues and expenses for the operating  properties classified as held for
sale were $6,354 and $6,697, respectively, for the year ended December 31, 2000.
Additionally,  the Company also determined that certain events and circumstances
had occurred  during  2000,  including  reduced  occupancy  and limited  leasing
success,  which indicated that four  wholly-owned  properties  (Prime Outlets at
Odessa, Prime Outlets at Woodbury, Prime Outlets at Post Falls and Prime Outlets
at  Latham)  and two joint  venture  properties  (Bellport  Outlet  Center I and
Bellport Outlet Center II) were permanently impaired.

        In accordance with the requirements of Statement of Financial Accounting
Standards ("SFAS") No. 121,  "Accounting for the Impairment of Long-Lived Assets
and Long-Lived  Assets to be Disposed of", the Company  incurred a provision for
asset impairment of $28,047 to reduce the carrying value of the three properties
classified  as held  for sale to  their  estimated  sales  value,  less  cost to
dispose.  The aggregate  carrying  value of these  properties as of December 31,
2000 was $43,230.  Furthermore,  the Company's  results of  operations  for 2000
include a provision for asset impairment  aggregating  $40,616  representing the
write-down of the carrying values of the six permanently  impaired properties to
their estimated fair value in accordance with SFAS No. 121

        When  accounting for 1999, the Company  determined that  certain  events
and  circumstances had  occurred  during 1999, including limited leasing success
and  revised  occupancy  estimates,  which indicated one  wholly-owned  property
(Prime  Outlets  at  Jeffersonville II)  and  one  joint venture property (Prime
Outlets  at  Oxnard)  were  permanently  impaired.  Accordingly,  the results of
operations  for  1999  include  a  provision  for asset  impairment  of  $15,842
representing  the  write-down of  the  carrying  values of these assets to their
estimated  fair  value  in  accordance  with  SFAS No. 121.  Additionally,  when
accounting for  1999, the Company  recorded a  provision for  abandoned projects
of $16,039 based on  management's  determination  that as of  December 31, 1999,
the  Company's  pre-development efforts associated with certain projects were no
longer viable.
<PAGE>
        The  operating  results for the  Company's  Designer  Connection  outlet
stores  are  reflected  in  loss  on  Designer  Connection  in the  Consolidated
Statements of Operations  for all periods  presented.  When accounting for 1999,
because  the  Company  decided  to  discontinue  the  operations of its Designer
Connection outlet stores, the Company recorded non-recurring charges aggregating
$3,659,  including (i) $1,659 related to the write-off of costs associated  with
a  web-site  for Designer  Connection  and (ii) $2,000 of  costs  to  cover  the
expected  cash and  non-cash  costs of the closure.  The cash and non-cash costs
of  the  closure  primarily  consisted of (i) employee  termination  costs, (ii)
lease  obligations, and (iii) the write-down  of  assets to their net realizable
value.  The Company ceased  operations of its Designer Connection  outlet stores
in 2000.

Table 7--Capital Expenditures

        The  components  of  capital  expenditures  for 2000,  1999 and 1998 are
summarized as follows:
<TABLE>

------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended December 31,                                                                2000               1999                 1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>              <C>                  <C>
New developments................................................................    $ 17,715         $   37,553           $   43,459
Property acquisitions, net (1)..................................................           -                  -            1,013,231
Expansions and renovations......................................................      26,068             49,934               99,585
Re-leasing tenant allowances....................................................       8,050              2,482                2,130
                                                                                    --------         ----------           ----------

             Total..............................................................    $ 51,833         $   89,969           $1,158,405
                                                                                    ========         ==========           ==========
====================================================================================================================================
</TABLE>
Note:
(1)  Includes the assets acquired by the Company during 1998 in connection with
     its merger with Horizon, net of the spin-off of HGP.
<PAGE>
Table 8--Consolidated Quarterly Summary of Operations
<TABLE>

------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                              2000                                                1999
------------------------------------------------------------------------------------------------------------------------------------
                                         Fourth       Third     Second       First       Fourth       Third      Second        First
                                        Quarter     Quarter     Quarter     Quarter     Quarter     Quarter     Quarter      Quarter
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>         <C>         <C>         <C>         <C>         <C>         <C>
Total revenues (1)                     $ 70,517    $ 71,408    $ 68,584    $ 72,841    $ 75,137    $ 76,902    $ 75,574    $ 78,343
Total expenses (2) (3) (4) (5) (6)      135,056      75,759      84,343      84,528     111,496      70,450      67,897      69,045
                                      ---------    --------    --------    --------    --------    --------    --------    --------
Income before loss on sale of real
   estate, minority interests and
   extraordinary loss                   (64,539)     (4,351)    (15,759)    (11,687)    (36,359)      6,452       7,677       9,298
Loss on sale of real estate             (42,648)          -           -           -     (15,153)          -           -           -
                                      ---------    --------    --------    --------    --------    --------    --------    --------
Income (loss) before minority
   interests and extraordinary loss    (107,187)     (4,351)    (15,759)    (11,687)    (51,512)      6,452       7,677       9,298
Income (loss) allocated to minority
   interests                                  3         767           -         (32)     (2,770)         78        (534)          -
                                      ---------    --------    --------    --------    --------    --------    --------    --------
Income (loss) before extraordinary
loss                                   (107,184)     (3,584)    (15,759)    (11,719)    (54,282)      6,530       7,143       9,298
Extraordinary loss on early
   extinguishment of debt                (4,206)          -           -           -      (1,412)          -      (2,106)          -
                                      ---------    --------    --------    --------    --------    --------    --------    --------
Net income (loss)                      (111,390)     (3,584)    (15,759)    (11,719)    (55,694)      6,530       5,037       9,298
Income (loss) allocated to
   preferred shareholders                (5,668)     (5,668)     (5,668)     (5,668)     (5,668)     (6,048)     (6,046)      7,800
                                      ---------    --------    --------    --------    --------    --------    --------    --------
Net income (loss) applicable
   to common shares                   $(117,058)    $(9,252)   $(21,427)   $(17,387)   $(61,362)   $    482     $(1,009)   $ 17,098
                                      =========    ========    ========    ========    ========    ========    ========    ========

Earnings per Common Share-Basic:
Income (loss) before
   extraordinary loss                  $  (2.59)    $ (0.21)   $  (0.49)   $  (0.40)   $  (1.39)   $   0.01    $   0.03    $   0.40
Extraordinary loss                        (0.10)          -           -           -       (0.03)          -       (0.05)          -
                                      ---------    --------    --------    --------    --------    --------    --------    --------
Net income (loss)                      $  (2.69)    $ (0.21)   $  (0.49)   $  (0.40)   $  (1.42)   $   0.01      $(0.02)   $   0.40
                                      =========    ========    ========    ========    ========    ========    ========    ========

Earnings per Common Share-Diluted:
Income (loss) before
   extraordinary loss                  $  (2.59)    $ (0.21)   $  (0.49)   $  (0.40)   $  (1.39)   $   0.01    $   0.03    $   0.06
Extraordinary loss                        (0.10)          -           -           -       (0.03)          -       (0.05)          -
                                      ---------    --------    --------    --------    --------    --------    --------    --------
Net income (loss)                      $  (2.69)    $ (0.21)   $  (0.49)   $  (0.40)   $  (1.42)   $   0.01    $  (0.02)   $   0.06
                                      =========    ========    ========    ========    ========    ========    ========    ========

Weighted Average Common Shares
   Outstanding:
Basic                                    43,578      43,578      43,532      43,379      43,357      43,286      43,186      42,951
                                      =========    ========    ========    ========    ========    ========    ========    ========
Diluted                                  43,578      43,578      43,532      43,379      43,357      43,286      43,186      58,376
                                      =========    ========    ========    ========    ========    ========    ========    ========
Distributions paid per common share    $      -     $     -    $      -    $      -    $  0.295    $  0.295    $  0.295    $  0.295
                                      =========    ========    ========    ========    ========    ========    ========    ========
====================================================================================================================================
</TABLE>
 Notes:
(1)  The first quarter of 2000 revenues reflect a non-recurring gain on the sale
     of outparcel land of $2,472.
(2)  The first  quarter  of 2000  expenses  reflect  non-recurring  charges  and
     expenses  aggregating  $14,714  including (i) a loss of $12,964  associated
     with the discontinuance of the Company's  eOutlets.com  subsidiary and (ii)
     severance and other compensation costs totaling $1,750.
(3)  The second  quarter of 2000  expenses  reflect  non-recurring  charges  and
     expenses aggregating $11,979 including (i) a provision for asset impairment
     of $8,538,  (ii) a loss of $1,315 associated with the discontinuance of the
     Company's  eOutlets.com  subsidiary,  (iii)  professional  fees  related to
     refinancing  activities of $1,455 and (iv) severance and other compensation
     costs totaling $671.
(4)  The third  quarter  of 2000  expenses  reflect  non-recurring  charges  and
     expenses  aggregating  $1,524  including (i) costs of $1,100 related to the
     termination  of the sale of a joint  venture  interest in Prime  Outlets at
     Hagerstown and an expansion to Prime Outlets at Williamsburg, which was not
     constructed,  and (ii) a loss of $424 related to the  discontinuance of the
     Company's eOutlets.com subsidiary.
(5)  The fourth quarter of 2000 expenses reflect a non-recurring  provision  for
     asset impairment of $60,125.  Included is $20,547 related to the  Company's
     decision to reclassify three properties to assets held for sale and $39,578
     related to five  properties where  significant tenants filed for bankruptcy
     in  the  late 2000  and early 2001 and  the Company  has limited  releasing
     opportunities.
(6)  The fourth  quarter of 1999  expenses  reflect  non-recurring  charges  and
     expenses aggregating $42,088 including (i) a provision for asset impairment
     of $15,842,  (ii) a provision for abandoned projects of $16,039,  (iii) the
     write-off of $3,100 of  capitalized  costs  associated  with the  Company's
     expired  option to purchase its joint  venture  partner's  50.0%  ownership
     interest in Prime Outlets at New River, (iv) $3,659 of costs related to the
     discontinuance  of the operations of Designer  Connection and (v) $3,448 of
     start-up  and  organizational   expenses   associated  with  the  Company's
     eOutlets.com subsidiary.
<PAGE>
Comparison of the year ended December 31, 1999 to the year ended
 December 31, 1998

Summary

        For the year ended December 31, 1999,  the Company  reported net loss of
$34,829.  The 1999 results include (i) a fourth quarter loss on the sale of real
estate of $15,153,  (ii) a provision for abandoned projects of $16,039,  (iii) a
provision for asset  impairment of $15,842,  (iv) a loss on Designer  Connection
outlet stores of $6,561,  and (v) an extraordinary loss of $3,518 related to the
pre-payment of certain long-term debt. For the year ended December 31, 1999, the
net loss applicable to common  shareholders was $44,791,  or $1.04 and $1.30 per
common  share on a basic and  diluted  basis,  respectively.  For the year ended
December 31, 1998, the Company reported net income of $17,530.  The 1998 results
include  (i) a second  quarter  loss on the sale of real  estate of  $15,461  in
connection with the Merger  Transactions and (ii) a loss on Designer  Connection
outlet  stores of $1,067.  For the year ended  December 31,  1998,  the net loss
applicable  to common  shareholders  was $7,074,  or $0.20 per common share on a
basic and diluted basis.

Revenues

        Total  revenues  were  $305,956  for the year ended  December  31, 1999,
compared  to  $231,809  for the year ended  December  31,  1998,  an increase of
$74,147,  or 32.0%. Base rents increased $45,603,  or 30.7%, in 1999 compared to
1998.  These increases were  primarily  due to the  Portfolio  Expansion and the
Horizon  Merger.  Straight-line  rents  (included in base rents) were $1,181 and
$1,229 for the years ended December 31, 1999 and 1998, respectively. The average
base rent per square foot for new outlet leases  negotiated  and executed by the
Company  was $17.67 and $16.12 for the years ended  December  31, 1999 and 1998,
respectively.

        Percentage  rents,  which represent rents based on a percentage of sales
volume above a specified threshold,  increased $1,701, or 26.6%, during the year
ended  December 31, 1999 compared to the same period in 1998.  This increase was
attributable to higher reported  merchant sales in 1999 as well as the Portfolio
Expansion and the Merger Transactions.

        As  summarized  in TABLE  3,  merchant  sales  reported  to the  Company
increased  by  $118 million,  or 3.7%, to $3,287 million from $3,169 million for
the  years  ended  December 31, 1999 and  1998,  respectively.  The increase  in
total reported  merchant  sales is primarily due to the Portfolio  Expansion and
the Merger Transactions. The weighted average reported merchant sales per square
foot  increased  by 0.8% to $256.50  per square  foot in 1999 from  $254.56  per
square foot in 1998.  Total  merchant  occupancy  cost per square foot increased
slightly  from $21.30 in 1998 to $21.90 in 1999 and increased as a percentage of
reported sales from 8.37% to 8.54%, respectively.

        Tenant  reimbursements,  which represent the  contractual  recovery from
tenants of certain operating  expenses,  increased by $22,911, or 34.1%, in 1999
over 1998.  This increase was primarily due to the  Portfolio  Expansion and the
Merger Transactions.

        As  shown  in  TABLE  4,  tenant   reimbursements  as  a  percentage  of
recoverable  property operating expenses and real estate taxes was 96.6% in 1999
compared to 96.8% in 1998.

        Interest and other  income  increased  by $3,932,  or 39.7%,  to $13,829
during the year ended December 31, 1999 as compared to $9,897 for the year ended
December 31, 1998. The increase reflected higher (i) temporary  tenant income of
$1,677, (ii) lease termination income of $717, (iii) municipal assistance income
of $506,  (iv) parking  garage income of $360, (v) property  management  fees of
$270,  (vi) gift  certificate  program income of $241, and (vii) other ancillary
income of $161.

Expenses

        Property operating expense increased by $18,178, or 34.5%, to $70,862 in
1999 compared to $52,684 in 1998. Real estate taxes expense increased by $5,700,
or 34.1%,  to $22,405 in 1999 from  $16,705 in 1998.  The  increases in property
operating  expenses and real estate  taxes were primarily  due to the  Portfolio
Expansion  and the Merger  Transactions.  As show in TABLE 5,  depreciation  and
amortization  expense  increased  by  $20,913,  or 39.7%,  to  $73,640  in 1999,
compared to $52,727 in 1998.  This increase  resulted from the depreciation  and
amortization of assets  associated with the Portfolio  Expansion and the Horizon
Merger.

        As shown in TABLE 6, interest expense increased by $33,230, or 54.7%, to
$93,934 in 1999 compared to $60,704 in 1998.  This increase  reflects (i) higher
interest  incurred  of  $32,824,  (ii) a  decrease  in the  amount  of  interest
capitalized  in  connection  with  development  projects  of $1,147 and (iii) an
increase  in  amortization  of  deferred  financing  costs of $2,587.  Partially
offsetting  these items was (i) an increase in  amortization of debt premiums of
$2,253 and (ii) a decrease in amortization of interest rate protection contracts
of $1,075.

        The  increase  in  interest  incurred was primarily  attributable  to an
increase of $387,408  in the  Company's  average  debt  outstanding  during 1999
compared to 1998 and (ii) higher interest rates on variable - rate  indebtedness
due to increased market rates.
<PAGE>
        Other  charges  increased by $2,423 to $6,918 in 1999 compared to $4,495
for 1998.  This  increase  reflects (i) the  write-off of $3,100 of  capitalized
costs associated with the Company's expired option to purchase its joint venture
partner's  50.0% ownership  interest in Prime Outlets at New River,  and (ii) an
increase in other  miscellaneous  charges of $389.  Partially  offsetting  these
items was (i) a decrease in the provision for uncollectible  accounts receivable
of $608 and (ii) lower marketing costs of $458.

        When  accounting for 1999, the Company  determined that  certain  events
and  circumstances had occurred during 1999  including, limited leasing  success
and  revised  occupancy  estimates,  which  indicated  one wholly-owned property
(Prime  Outlets  at  Jeffersonville II) and  one  joint  venture property (Prime
Outlets  at Oxnard)  were  permanently  impaired.  Accordingly,  the  results of
operations  for  1999  include  a  provision  for  asset  impairment  of $15,842
representing  the  write-down  of  the carrying  values of these assets to their
estimated  fair  value  in  accordance  with  SFAS No. 121.  Additionally,  when
accounting for 1999, the Company  recorded a provision for abandoned projects of
$16,039  based  on   management's  determination  that as of  December 31, 1999,
the Company's pre-development efforts  associated  with certain projects were no
longer viable.

        The  operating  results for the  Company's  Designer  Connection  outlet
stores  are  reflected  in  loss  on  Designer  Connection  in the  Consolidated
Statements of Operations  for all periods  presented.  When accounting for 1999,
because  the  Company  decided  to  discontinue  the  operations of its Designer
Designer Connection  outlet stores, the  Company recorded non-recurring  charges
aggregating  $3,659  including (i) $1,659  related  to  the  write-off  of costs
associated  with a web-site for Designer  Connection and (ii) $2,000 of costs to
cover  the  expected  cash  and  non-cash  costs  of  the closure.  The cash and
non-cash  costs of the closure  primarily  consisted of (i) employee termination
costs, (ii) lease  obligations, and (iii) the  write-down of assets to their net
realizable value.

Liquidity and Capital Resources

Sources and Uses of Cash

        For the year ended  December  31, 2000,  net cash  provided by operating
activities  was $32,450,  net cash provided by investing  activities was $1,095,
and net cash used in financing activities was $31,982.

        The gross cash  provided by investing  activities  during the year ended
December  31, 2000 was $67,089  which  consisted  of (i) $51,403 of net proceeds
from the sale of four  outlet  centers in  December  2000,  (ii)  $11,063 of net
proceeds  from the  February  2000  sale of a 70.0%  joint  venture  partnership
interest in Prime Outlets at Williamsburg  and (iii) $4,623 of net proceeds from
the sale of outparcel land.  Substantially  offsetting theses sources were gross
uses of cash totaling  $65,994  comprised of (i)  $51,833 of additions to rental
property,  (ii)  $11,161 of costs  related to  eOutlets.com  and (iii) $3,000 of
capital  contributions  to joint venture  partnerships.  The additions to rental
property are primarily  attributable to (i) the development and  construction of
Prime Outlets of Puerto Rico,  which  consists of 176,000 square feet of GLA and
opened  in July 2000  and (ii) four expansions to existing  centers  aggregating
approximately  389,000  square feet of GLA which opened during the first half of
2000.

        The gross uses of cash for financing  activities of $166,479 during 2000
consisted  of (i)  principal  repayments  on notes  payable of $155,120 and (ii)
deferred  financing  costs of  $11,359.  Partially  offsetting  these items were
proceeds from new borrowings of $134,497.

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

Dividends and Distributions

        In  order to  qualify  as  a  REIT  for federal income tax purposes, the
Company  is  required   to  pay  distributions   to  its  common  and  preferred
shareholders  of  at least 95% (90% for years beginning after December 31, 2000)
of  its  REIT  taxable  income in addition  to  satisfying  other  requirements.
Although  the  Company  intends  to  make  distributions  in accordance with the
requirements  of  the  Code necessary  to remain  qualified  as a REIT,  it also
intends to retain such amounts as it considers  necessary  from time to time for
capital and liquidity needs of the Company.

        The Company's current policy is to pay distributions  only to the extent
necessary  to  maintain  its status as a REIT for federal  income tax  purposes.
Based on the Company's  current federal income tax projections for 2001, it does
not  expect to pay any  distributions  on its 10.5%  Series A Senior  Cumulative
Preferred   Stock  ("Senior   Preferred   Stock"),   8.5%  Series  B  Cumulative
Participating  Convertible  Preferred  Stock  ("Series B  Convertible  Preferred
Stock"),  common stock or common  units  of limited partnership  interest in the
Operating Partnership during 2001.
<PAGE>
        The Company is currently in arrears on five quarters of preferred  stock
distributions due February 15, 2000 through February 15, 2001, respectively. The
holders of the Senior Preferred Stock and Series B Convertible  Preferred Stock,
voting  together as a single class, will  have the right to elect two additional
members to the Company's Board of Directors if the equivalent of six consecutive
quarterly  dividends on these series of preferred stock are in arrears.  Each of
such  directors  would be elected to serve until the earlier of (i) the election
and  qualification  of  such  director's  successor,  or (ii)  payment  of  the
dividend arrearage.

        The Company is prohibited from paying dividends or distributions  except
to the extent  necessary  to  maintain  its REIT  status  under the terms of its
$90,000 Mezzanine Loan (see  Note 6 -  "Bonds and Notes  Payable"  of the  Notes
to Consolidated  Financial  Statements).  In  addition,  the Company may make no
distributions  to its common  shareholders  or its  holders  of common  units of
limited  partnership  interest in the Operating Partnership unless it is current
with respect to  distributions to its preferred shareholders. As of December 31,
2000, unpaid  dividends  for the  period November 16, 1999 through  December 31,
2000  on  the Senior  Preferred Stock and Series B Convertible  Preferred  Stock
aggregated $6,792 and $18,714,  respectively.  The  annualized  dividends on the
Company's  2,300,000  shares  of Senior Preferred  Stock and 7,828,125 shares of
Series B  Convertible  Preferred Stock  outstanding  as of December 31, 2000 are
$6,038 ($2.625 per share) and $16,636 ($2.125 per share), respectively.

Debt Service Obligations

        The  Company's  aggregate   indebtedness,   excluding  unamortized  debt
premiums,  was  $1,016,009  and  $1,243,367  at  December  31,  2000  and  1999,
respectively.  At December 31, 2000, such  indebtedness  had a weighted  average
maturity of 4.03 years and bore interest at a weighted  average interest rate of
9.43% per annum. At December 31, 2000,  $828,769, or 81.6%, of such indebtedness
bore interest at fixed rates and $187,240,  or 18.4%, of such  indebtedness bore
interest  at  variable  rates.   The  Company  utilizes   derivative   financial
instruments to manage its interest rate risk associated with variable rate debt.
See "Interest Rate Risk" for additional  information.  The  Company is obligated
to repay  $67,712  and $64,914 of  mortgage  indebtedness  during 2001 and 2002,
respectively.

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

Debt Transactions and Debt Compliance

        On December  22, 2000,  the Company  closed a major  refinancing  of its
assets  and  the  sale of  four  of its  outlet  centers  through  a  series  of
transactions   (collectively,   the  "December  22, 2000   Transactions").   The
principal  lenders  involved  in  the  December 22, 2000  Transactions  were  an
affiliate  of  Fortress  Investment  Fund  LLC  ("Fortress");  Greenwich Capital
Financial Products,  Inc.  ("Greenwich");  and Mercantile-Safe Deposit and Trust
Company  ("Mercantile").  The sale of its outlet centers  was to a joint venture
partnership  comprised  of Fortress  and  Chelsea GCA Realty,  Inc.  ("Chelsea")
(see "Sale of Permanent Loan Properties"  for additional information).  Fortress
and  Greenwich (collectively, the "Lending Group")  provided  a  mezzanine  loan
in  the  amount  of  $90,000  (the "$90,000 Mezzanine Loan").  Greenwich  funded
a  $20,000 first  mortgage  loan (the "Puerto Rico First Mortgage  Loan") on the
Company's  outlet  center  that  recently  opened  in Puerto Rico and Mercantile
provided a $10,000 second  mortgage loan (the "Hagerstown Second Mortgage Loan")
on  the  Company's  outlet center in Hagerstown, Maryland.  The Company executed
agreements to extend the maturity date of two of its existing loans,  a $112,000
first mortgage loan (the "Bridge  Loan") from  Nomura  Asset Capital Corporation
("Nomura") and a $19,378 first mortgage loan (the "Lebanon First Mortgage Loan")
from KeyBank National Association.

        The $90,000  Mezzanine Loan is secured by pledges of equity interests in
certain outlet centers.  The loan is for a term of  three-years;  requires fixed
monthly  principal amortization  commencing on February 1, 2001 of $1,000 during
the first year,  $1,667 during the second year and $2,333 during the third year;
requires  the payment of certain exit fees; and is pre-payable at any time after
one  year.  The $90,000  Mezzanine  Loan requires that the Company's excess cash
flow from operations and assets sales above  certain  thresholds  be  applied to
principal reductions. The interest rate is a floating rate based on 30-day LIBOR
plus  9.50%, but  not less than 14.50%.  The loan contains  financial  and other
covenants  that restrict,  among  other  things,  the ability of  the Company to
incur additional indebtedness or pay dividends (other than dividends to maintain
the Company's status as a REIT).  In addition,  in connection with the financing
the  Company  issued  warrants (recoreded  at  fair  value  at  the  date of the
transaction)  to  the  Lending  Group  to  purchase  one  million  shares of the
Company's common stock at an exercise price of $1.00 per share.
<PAGE>
        The Puerto Rico First Mortgage  Loan is secured by the  Company's outlet
center  in  Puerto Rico.  The  Puerto Rico First Mortgage Loan is  for a term of
three-years, requires monthly  amortization of $15 based upon a 25-year schedule
for the first year and $51 based upon a 15-year schedule thereafter.  The Puerto
Rico First Mortgage Loan is non-recourse and is pre-payable  at any time subject
to certain prepayment and exit fees.  The interest rate is a floating rate based
on  30-day LIBOR plus  3.50%.  In addition, the  Puerto Rico First Mortgage Loan
provides  for a  commitment  to fund up to  an additional $5,000  subject to the
satisfaction of certain conditions, including the achievement of minimum  sales,
occupancy  and debt service coverage ratio thresholds no later than December 31,
2001.

        The Hagerstown  Second Mortgage Loan is secured by the Company's  outlet
center in Hagerstown,  Maryland and has a term of 30- months that is co-terminus
with  Mercantile's  existing  $48,863  first  mortgage  loan on the same center.
The  Second  Mortgage Loan requires monthly amortization starting in the seventh
month of $164 per month and is pre-payable  at any time without  penalty or fee.
The interest rate is a floating rate based on 30-day LIBOR plus 2.50%.

        On December  22,  2000,  the term of the Bridge  Loan,  which was due to
mature on June 11, 2001, was extended until December 31, 2003. In  consideration
for the extension,  the interest rate was converted from 30-day LIBOR plus 1.35%
to a fixed-rate of 13.00%; the monthly interest-only  payments were converted to
monthly interest and principal payments (principalm  amortization of the greater
of (i) 50% of excess cash flow from  properties  collateralizing the Bridge Loan
or (ii) $50);  and a loan extension fee of  $1,120 was  paid.  The  loan  may be
prepaid  at any  time.  In  connection  with  the modification of  the  terms of
the   Bridge  Loan,  the  Company  incurred  an extraordinary   loss  of  $1,345
during  2000.   The extraordinary  loss  consisted of (i) the  $1,120  extension
fee and  (ii) the write-off of unamortized deferred financing costs and expenses
aggregating $225.

        On December  22,  2000,  the term of the Lebanon  First  Mortgage  Loan,
secured by the Company's outlet center in Lebanon,  Tennessee,  which was due to
mature on December 31, 2000,  was extended for a period of six months until June
30,  2001,  with  an  additional  three-month  extension  available  if  certain
conditions are met. In  consideration  for the extension,  the interest rate was
increased  by 1.25% to 30-day LIBOR  plus 3.00% and the loan balance was reduced
to $18,378 through a $1,000 principal payment.  The  loan  may be prepaid at any
time.   The net proceeds  from the December 22, 2000  Transactions  were used to
(i) pay off  $125,000  of  short-term  indebtedness  as  described  below;  (ii)
pay-down $3,500 of other  indebtedness  (the $1,000  principal  reduction on the
Lebanon First Mortgage Loan and a $2,500 principal reduction on a first mortgage
loan on Phases II and III of the outlet center  located in Bellport,  New York),
and (iii) pay the $1,120  extension  fee on the Bridge  Loan.  The  remainder of
the  proceeds  have  been  and  will be used (i) for general corporate purposes,
including the funding of certain  programs to attract and retain tenants through
increased  marketing  and  capital  improvements  and (ii)  to  fund  remaining
development costs for Prime Outlets of Puerto Rico (see "Development Activities"
for additional information).

        The Company used $125,000 of the net proceeds from the December 22, 2000
Transactions  for  the  repayment  of  (i)  a  $20,000  subordinated  loan  (the
"Subordinated  Loan")  made by FBR Asset  Investment  Corporation  that  matured
August  14,  2000,  (ii) a  $25,000  unsecured  corporate  line of  credit  from
Mercantile  which  was due to  mature  on  December  31,  2000,  (iii) a $37,000
unsecured revolving loan (the "Unsecured  Revolving Loan") from Nomura which was
scheduled to mature on September  11, 2001 and (iv) the  prepayment of a $43,000
term loan (the "Term  Loan") from  Greenwich  which was  scheduled  to mature on
December 10, 2001. In connection with the prepayment of the Unsecured  Revolving
Loan and the Term Loan, the Company incurred an extraordinary  loss on the early
extinguishment  of  debt aggregating $2,861 during 2000. The extraordinary  loss
consisted  of  (i)  a  $1,700  prepayment  penalty  and  (ii)  the  write-off of
unamortized  deferred  financing  costs and  expenses  aggregating $1,161.

        The  Company  had  been in  default  of the  Subordinated  Loan and such
default had triggered  certain  cross-default  provisions  with respect to other
Company  debt  facilities.  In  addition,  the  Company  previously  was  not in
compliance with financial covenants contained in certain of its debt facilities.
As a result of the debt repayments and the various  restructuring  and extension
agreements  completed on December 22, 2000,  the Company had cured or eliminated
all  financial  covenant  defaults  under its recourse loan agreements. However,
there  can  be  no  assurance  that  the Company will be in compliance  with its
financial debt covenants in future periods since the Company's  future financial
performance  is subject to various risks and  uncertainties,  including  but not
limited  to, the  effects  of  increases  in  market interest rates from current
levels,  the  risk  of  potential increases  in  vacancy rates and the resulting
impact on the Company's  revenue,  and risks  associated  with  refinancing  the
Company's  current debt  obligations  or obtaining new  financing under terms as
favorable as the Company has experienced in prior periods.
<PAGE>
2001 Sales Transactions

        On February 2, 2001, the Company completed the sale of Northgate  Plaza,
a community  center located in Lombard,  Illinois to Arbor  Northgate,  Inc. for
aggregate  consideration  of $7,050.  The net cash  proceeds from  the sale were
$510, after the repayment of mortgage  indebtedness of $5,966  and closing costs
and fees.  The net  proceeds  from the sale were  applied  against  the  $90,000
Mezzanine  Loan  in  accordance  with the terms of the loan agreement (see "Debt
Transactions and Debt Compliance" for  additional information).

        On March 16, 2001,  the Company  completed  the sale of Prime Outlets at
Silverthorne, an outlet center comprising  257,000 square  feet  of  GLA located
in  Silverthorne,  Colorado to Silverthorne  Factory  Stores, LLC for  aggregate
consideration  of  $29,000.  The net cash proceeds from  the  sale  were $8,992,
after  the  repayment  of  mortgage  indebtedness  of  $18,154  related  to  the
collateral  substitution  (see below)  and closing  costs  and  fees.   The  net
proceeds  from  the  sale  were  applied  against the $90,000  Mezzanine Loan in
accordance with the terms of the loan agreement (see "Debt Transactions and Debt
Compliance" for additional information).

        Prime  Outlets  at  Silverthorne  was  one  of  fifteen  properties that
cross-collateralized The First  Mortgage and Expansion Loan, (see  Note 6 "Bonds
and  Notes Payable" of  the  Notes  to the Consolidated Financial Statements for
additional information), which contains collateral substitution  provisions that
permit  the exchange of specific assets  pledged as  collateral upon approval by
the lender.  In  conjunction  with  the sale  of Prime  Outlets at Silverthorne,
the Company substituted Prime Outlets at Lebanon (located in Lebanon, Tennessee)
and subsequently paid-off the Lebanon First Mortgage Loan.

Commitments & Contingencies

        Subsidiaries of the Company have suspended  regularly  scheduled monthly
debt service  payments on two  non-recourse  mortgage loans aggregating  $34,890
which are  cross-collateralized  by Prime Outlets at  Jeffersonville II, located
in  Jeffersonville, Ohio, and  Prime Outlets at Conroe, located in Conroe, Texas
The Company  is currently  discussing  potential  restructuring  with the holder
of the mortgage loans; however, there can be no  assurance that such discussions
will lead to a  modification  of the  mortgage loans and that the two properties
will not be  foreclosed.  Because the  two  mortgage loans are non-recourse, the
Company does  not believe  the existing defaults or any related foreclosure will
have a material impact on its results of operations and financial position.

        Various  mortgage  loans, related  to  projects  in  which  the Company,
through subsidiaries,  indirectly owns joint venture interests, have matured and
are in default.  The mortgage  loans are (i) a  $10,389  first  mortgage loan on
Phase I of the outlet center in Bellport,  New  York,  held  by Union Labor Life
Insurance Company ("Union Labor");  (ii) mortgage  loans  aggregating $29,670 on
Prime  Outlets  at  New  River  located  in  New River, Arizona, held by Fru-Con
Development Corporation ("Fru-Con"); and (iii) a $13,639  first mortgage loan on
the outlet center in Oxnard, California,  also held by Fru-Con.  Fru-Con and the
Company are each 50.0% partners in both the New River and Oxnard outlet centers.

     Union Labor has filed for  foreclosure  on Phase I of the  Bellport  outlet
center and Fru-Con has filed for  foreclosure  on Prime Outlets at New River The
Company  is  currently  negotiating  the terms of a  transfer  of its  ownership
interest in the Oxnard  outlet center to Fru-Con.  The Company  believes none of
these mortgage loans are recourse to the Company. Therefore the Company does not
believe the existing  defaults under these loans or any related  foreclosures on
the  mortgaged  properties  will  have  a  material  impact  on its  results  of
operations or financial position.

        The Company,  through  affiliates,  holds a 51% interest in the owner of
Phases II and III of an outlet center in Bellport,  NY. The owner failed to make
a  required $3,000  principal  payment on a $10,795 first mortgage loan when due
on November 1, 2000.  The Company  paid,  on behalf of the owner,  the  required
payment  through  a series  of  payments  during  November  and  December  2000,
including a $2,500  payment  made from the net  proceeds  from the  December 22,
2000 Transactions.  The  maturity date of  the first mortgage loan of $7,795 was
extended  to  May 1, 2001.  The Company  plans to either refinance or extend the
maturity of this  mortgage  indebtedness.  In the event the Company is unable to
refinance or extend the  maturity  of  such  indebtedness,  it will consider the
repayment of the outstanding balance through proceeds from potention sale of the
property.  There  can  be no assurance  that  the Company  will be successful in
obtaining the required amount of funds for the maturity indebtedness or that the
terms of the refinancing  or extension of the maturing, if it should occur, will
be as favorable  as the Company has experienced in prior periods.  Although this
loan is recourse, the  Company  believes  that  any default or foreclosure under
this  loan  will  not  have  a  material  impact on its results of operations or
financial position.

       As of  December  31,  2000,  the  Company  is a  guarantor  or  otherwise
obligated with respect to an aggregate of $12,722 of the indebtedness of Horizon
Group Properties, Inc. and its affiliates ("HGP") including a $10,000 obligation
under HGP's secured credit facility which bears a rate of interest of LIBOR plus
1.90%,  matures in July 2001, and is collateralized by seven properties  located
throughout  the  United  States.  As  of December 31, 2000,  no claims  had been
made againt the Company's guaranty by the lender.
<PAGE>
       On April 1, 1998,  Horizon  consummated  an agreement with Castle & Cooke
Properties,  Inc. which released Horizon from its future  obligations  under its
long-term  lease of the Dole  Cannery  outlet  center in  Honolulu,  Hawaii,  in
connection  with the  formation of a joint  venture with certain  affiliates  of
Castle & Cooke,  Inc.  ("Castle & Cooke") to operate  such  property.  Under the
terms of the  agreement,  Castle & Cooke  Properties,  Inc., the landlord of the
project and an affiliate of Castle & Cooke, released Horizon from any continuing
obligations  under the lease,  which  expires in 2045, in exchange for Horizon's
conveyance to the joint venture of its rights and obligations  under such lease.
The  agreement  also  provided  that  Horizon  transfer  to such  joint  venture
substantially  all of Horizon's  economic  interest in its outlet center in Lake
Elsinore,  California  together  with  legal  title to vacant  property  located
adjacent  to the center. The Company held a small minority interest in the joint
venture but has no  obligation or  commitment  with respect to the  post-closing
operations  of  the  Dole  Cannery  project.  On  August 15, 2000, the  Company
exercised  its  option  under  the  operating agreement of the joint venture and
transferred  its  entire  interest  in  the  joint  venture  to a Castle & Cooke
subsidiary.

Sale of Permanent Loan Properties

        In connection with the December 22, 2000 Transactions,  the Company sold
four of its outlet centers aggregating  1,592,000  square feet of GLA to a joint
venture   partnership   comprised   of   Fortress Investment Group L.L. C.   and
Chelsea Property Group, Inc. for  aggregate consideration of $239,500, including
the  assumption  of first  mortgage debt of $174,235.   The  four outlet centers
(collectively,   the "Permanent  Loan Properties")  that  were  sold are located
in Gilroy,  California,  Michigan City, Indiana, Waterloo, New York and Kittery,
Maine.  In connection  with  the  sale  of  the  Permanent Loan  Properties, the
Company  incurred a loss on sale of real estate of $42,648 in the fourth quarter
of  2000. The  net  proceeds from the sale, after closing costs and fees and the
required purchase  by the Company of land in the amount of $7,325 related to the
outlet  center in Gilroy,  California,  was $51,403.  The net proceeds were used
for  the  prepayment  of  certain  long-term debt.  The operating results of the
Permanent Loan Properties  are  included in the  Company's results of operations
through the date of disposition.

Prime/Estein Joint Venture Transaction

        On  August  6,  1999,  the  Company   entered  into  an  agreement  (the
"Prime/Estein  Joint Venture  Agreement") to sell three factory outlet  centers,
including two future  expansions,  to a joint venture (the "Venture") between an
affiliate of Estein & Associates USA, Ltd. ("Estein"),  a real estate investment
company,  and the Company. The Prime/Estein Joint Venture Agreement provided for
a  total   purchase   price  of  $274,000,   including  (i)  the  assumption  of
approximately $151,500 of first mortgage indebtedness, (ii) an $8,000 payment to
the     Company     for     a     ten-year      covenant-not-to-compete     (the
"Covenant-not-to-Compete")  and  (iii) a $6,000  payment  to the  Company  for a
ten-year  licensing  agreement (the "Licensing  Agreement")  with the Venture to
continue the use of the "Prime Outlets" brand name. The  Covenant-not-to-Compete
and the  Licensing  Agreement  are  collectively  referred  to as the  "Deferred
Income".
<PAGE>
        On November 19, 1999, the Company  completed the initial  installment of
the Prime/Estein Joint Venture Agreement consisting of the sale of Prime Outlets
at Birch Run to the Venture for aggregate consideration of $117,000, including a
$64,500 "wrap-around" first mortgage provided by the Company. In connection with
the sale of Prime  Outlets at Birch Run, the Company  received  cash proceeds of
$33,303,  net of  transaction  costs,  and  recorded  a loss on the sale of real
estate of $9,326.  Effective November 19, 1999, the Company commenced accounting
for its 30.0%  ownership  interest in Prime  Outlets at Birch Run in  accordance
with the equity method of accounting.  The "wrap-around" first mortgage provided
by the Company to the Venture has a ten-year  term at a fixed  interest  rate of
7.75% requiring monthly payments of principal and interest pursuant to a 25-year
amortization  schedule.  The Company's net investment in the "wrap-around" first
mortgage as of December 31, 2000 and 1999 was $10,731 and $10,745, respectively,
which  is  included  in  other  assets  in  the   Consolidated   Balance  Sheet.
Additionally,  the Venture assumed $53,755 of outstanding mortgage indebtedness.
Included  in the  aggregate  consideration  was $8,500 of Deferred  Income.  The
Deferred Income was initially included in accounts payable and other liabilities
in the Consolidated Balance Sheet and was being amortized into other income over
its ten-year life.  Effective on the date of disposition,  the Company  accounts
for its ownership  interest in Prime Outlets at Birch Run in accordance with the
equity method of accounting.

     During the fourth quarter of 1999, the Company  recorded a loss on the sale
of real estate of $5,827  related to the  write-down  of the  carrying  value of
Prime  Outlets  at  Williamsburg  based on the terms of the  Prime/Estein  Joint
Venture  Agreement.  On February  23,  2000,  the Company  completed  the second
installment of the Prime/Estein  Joint Venture Agreement  consisting of the sale
of Prime Outlets at Williamsburg to the Venture for aggregate  consideration  of
$59,000,  including (i) the assumption of mortgage  indebtedness  of $32,500 and
(ii) $2,750 of Deferred Income.  In connection with the sale of Prime Outlets at
Williamsburg,  the  Company  received  (i)  cash  proceeds  of  $11,063,  net of
transaction  costs, and (ii) a promissory note in the amount of $10,000 from the
Venture (of which Estein's  obligation is $7,000).  The promissory note requires
the  monthly  payment of  interest in arrears at an annual rate of 7.75% and the
outstanding principal amount was payable on or before December 15, 2000, subject
to satisfaction of certain conditions. As a result of the Company's inability to
refinance  or  convert  the  Venture's  mortgage  indebtedness  of  $32,500 to a
permanent loan at a fixed rate of interest,  the December 15, 2000 maturity date
of the  promissory  note was  extended  until such time as such  refinancing  is
obtained.  In addition,  since the refinancing or conversion did not occur on or
before  December 15,  2000,  the Company is obligated to pay Estein $250 and the
Company is not entitled to receive operating  distributions arising out of Prime
Outlets at Williamsburg until such refinancing or conversion  occurs.  Effective
on the date of disposition,  the Company accounts for its ownership  interest in
Prime Outlets at Williamsburg in accordance with the equity the equity method of
accounting.

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

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

     During 2000, the Company  reclassified  $61,908  representing the aggregate
carrying value of the Hagerstown  Center from assets held for sale to investment
in rental  property in the  Consolidated  Balance Sheet.  In connection with the
reclassification,  the Company  recorded $1,967 of depreciation and amortization
expense  related to the Hagerstown  Center  comprising the period from January 1
through  September 30, 2000,  the date of  reclassification.  As of December 31,
1999, the Company classified  $97,639  representing the aggregate carrying value
of Prime Outlets at Williamsburg  and Prime Outlets at Hagerstown as assets held
for sale in its Consolidated Balance Sheet.

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

        Prime  Outlets of Puerto Rico,  the first outlet  center in Puerto Rico,
which  contains   176,000  square  feet  of  GLA,   opened  on  July  27,  2000.
Additionally,  the Company opened two expansions aggregating 166,000 square feet
of GLA at Prime Outlets at Hagerstown in March and April 2000. Furthermore,  the
Company opened two expansions aggregating 48,000 square feet at Prime Outlets at
San Marcos in May of 2000. At December 31, 2000, the remaining  expected capital
expenditures for these projects  aggregated $6,133. As of December 31, 2000, the
Company had $5,142 of lender escrow reserves to fund development costs for Prime
Outlets of Puerto Rico and $199 of remaining  availability  under a construction
loan for Prime Outlets at Hagerstown.  The Company expects to fund the remaining
development  costs  related  to Prime  Outlets at  Hagerstown  of $217 and Prime
Outlets at San Marcos of $575 from retained cash flow from operations.

eOutlets.com

        On April 12,  2000,  the  Company  announced  that it had been unable to
conclude an  agreement  to transfer  ownership  of its  wholly-owned  e-commerce
subsidiary,   primeoutlets.com   inc.,   also  known  as   eOutlets.com,   to  a
management-led  investor group comprised of eOutlets.com  management and outside
investors.  Effective April 12, 2000,  eOutlets.com ceased all operations and on
November 6, 2000 filed for  bankruptcy  under Chapter 7. In connection  with the
discontinuance  of eOutlets.com,  the Company  incurred a non-recurring  loss of
$14,703 which includes (i) the write-off of $3,497 of costs  capitalized  during
1999 and (ii) $11,206 of costs incurred during the year ended December 31, 2000.
During the year ended December 31, 1999, the Company incurred expenses of $3,500
related to organizational and other start-up expenditures for eOutlets.com which
are  reflected  in  corporate   general  and   administrative   expense  in  the
Consolidated Statements of Operations.

Interest Rate Risk

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

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

        The interest rate caps specifically  limit the Company's  interest costs
with an upper limit on the  underlying  interest  rate  index.  The cost of such
contracts  are  included  in  deferred  charges  and are  being  amortized  as a
component of interest  expense over the life of the  contracts.  Amounts  earned
from interest rate protection contracts,  if any, are recorded as a reduction of
interest  expense.  The  Company  is  exposed  to credit  losses in the event of
counterparty  nonperformance,  but does not  anticipate any such losses based on
the creditworthiness of the counterparties.

        On December 22, 2000, the Company  purchased an interest rate cap with a
notional  amount of $90,000 to hedge its $90,000  Mezzanine Loan that was funded
on the same date.  The  interest  rate cap has a  three-year  term with a strike
price of 8.00% based on 30-day LIBOR.  The notional amount of this interest rate
cap  amortizes  monthly based on estimated  principal  repayments on the $90,000
Mezzanine Loan. Additionally, on December 22, 2000, the  Company also  purchased
an  interest rate cap with a  notional  amount of $20,000 to  hedge its  $20,000
Puerto  Rico First  Mortgage Loan that was funded on the same date. The interest
rate cap has a three-year  term  with a strike  price of 8.00%  based on  30-day
LIBOR.   In addition, the Company held an additional  undesignated interest rate
protection  cap with  a notional amount of $44,000 with a strike price of 7.00%,
based on  30-day  LIBOR, which matures in  November 2001. The notional amount of
this  interest  rate  cap  amortizes $1,000 monthly.  See  Note 2 -- "Summary of
Significant  Accounting Policies" and Note 6 -- "Bonds and Notes Payable" of the
Notes to Consolidated Financial Statements for additional information.

        Although derivative financial  instruments are an important component of
the Company's  interest rate management  program,  their  incremental  effect on
interest  expense for the years ended  December 31, 2000,  1999 and 1998 was not
material.

Economic Conditions

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

        The  Company  from  time  to  time  enters into interest rate protection
agreements  to  effectively  convert  floating  rate  debt to a fixed rate basis
and/or  limit  the  Company's  exposure to interest rate fluctuations.  Fees and
premiums paid for the Company's interest rate protection agreements are included
in  deferred  financing  costs  and  are  amortized ratably over the term of the
respective  interest  rate  protection  agreement.  Settlement  amounts  paid or
received in  connection  with  terminated  interest rate  protection  agreements
are deferred  and  amortized  over  the remaining term  of the related financing
transaction   using  the  straight-line  method.  In  the  event  of  the  early
extinguishments  of the related  financing,  any realized or unrealized  gain or
loss  on the related interest rate protection  agreement is recognized in income
coincident  with  the  extinguishments.  The  Company  believes  it  has limited
exposure  to  the  extent of  non-performance  by the counter  parties  of  each
protection  agreement  since each counter party is a major financial institution
and the Company does not  anticipate  their  non-performance.  The fair value of
the  interest  rate  protection  agreements  is  not recognized in the financial
statements  as the  agreements  qualify as hedges of the Company's interest rate
risk.  Interest  rate  protection  agreements  or  specific  notional components
thereof that do not qualify as a hedge of the Company's interest rate risk would
be recorded at fair value.

        In June 2000, the Financial  Accounting  Standards Board ("FASB") issued
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which amends SFAS No. 133, "Accounting for  Derivative  Instruments
and  Hedging  Activities."  SFAS No. 133  was  previously  amended  by  SFAS No.
137,  "Accounting  For  Derivative Instruments and Hedging  Activities--Deferral
of the Effective  Date of FASB Statement  No. 133," which deferred the effective
date  of  SFAS No. 133  to  fiscal  years  beginning  after  June 15, 2000. The
Company  will  adopt SFAS No. 138 and SFAS No. 133 effective January 1, 2001 and
believes  such  adoption  will  not  have  a  material  impact on its results of
operations  or  financial position.  SFAS No. 133 and SFAS No. 138 will  require
the Company to recognize all derivatives  on  the  balance  sheet at fair value.
Derivatives  that are not hedges must be adjusted to fair value through  income.
If the  derivative is a hedge,  depending on the nature of the hedge, changes in
the fair value of  derivatives  will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized  in other comprehensive income until the hedged item is recognized in
earnings.  The ineffective  portion of a derivative's change  in fair value will
be recognized immediately in earnings.

        In  December  1999,  the   Securities  and  Exchange   Commission   (the
"Commission")  issued  Staff  Accounting  Bulletin  ("SAB")  No.  101,  "Revenue
Recognition  in  Financial  Statements."  SAB  101  summarizes  certain  of  the
Commission's  views in applying  generally  accepted  accounting  principles  to
revenue recognition in financial statements.  The  Company's adoption of SAB 101
retroactive to January 1, 2000 did not have a  material impact on its results of
operations and financial position.

Taxability of Distributions

        The  Company  did  not  make  any  distributions  during  the year ended
December 31, 2000.   TABLE 9 summarizes  the  taxability of  distributions  paid
during (i) the year ended  December  31, 1999 (ii) the period from  January 1 to
June  15, 1998,  and  (iii)  the  period  from  June  16  to December  31, 1998.
Distributions  paid by the Company  out of its current or  accumulated  earnings
and  profits (and not designated  as capital  gains dividends)  will  constitute
taxable  distributions  to  each  holder.   To  the  extent  the  Company  makes
distributions  (not  designated  as capital gains  dividends) in  excess  of its
current  and  accumulated  earnings and  profits,  such  distributions  will  be
treated  first as a  tax-free  return of  capital  to each  holder, reducing the
adjusted  basis  which  such  holder has in his shares of stock by the amount of
such  distributions  (but  not below zero), with  distributions  in excess  of a
holder's adjusted basis in his stock taxable as capital gains (provided that the
shares have been held as a capital asset).
<PAGE>
Table 9--Taxability of Distributions
<TABLE>
 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                    Year ended       Period from   Period from June
                                                                                  December 31,      January 1 to     16 to December
                                                                                          1999     June 15, 1998           31, 1998
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>               <C>                 <C>
 Senior Preferred Stock
     Ordinary income............................................................        100.0%            100.0%              100.0%
 Series B Convertible Preferred Stock
     Ordinary income............................................................        100.0%            100.0%               63.7%
     Return of capital..........................................................            -                 -                36.3%
 Series C Preferred Stock
     Ordinary income............................................................        100.0%             18.7%                  -
     Return of capital..........................................................            -              81.3%              100.0%
 Common Stock
     Ordinary income............................................................         23.0%                -                   -
     Return of capital..........................................................         77.0%            100.0%              100.0%

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

        No  assurance  can be made that future  distributions,  if any,  will be
treated similarly.  Each holder of stock may have a different basis in its stock
and, accordingly, each holder is advised to consult with a tax advisor.

Funds from Operations

        Industry analysts generally  consider Funds from Operations,  as defined
by the National  Association of Real Estate  Investment  Trusts  ("NAREIT"),  an
alternative  measure of performance  of an equity REIT. In October 1999,  NAREIT
issued a new white paper  statement and  redefined how funds from  operations is
calculated,  effective  January 1, 2000. Funds from Operations is now defined by
NAREIT as net income (loss) determined in accordance with GAAP,  excluding gains
or losses from  provisions for  impairment  and sales of  depreciable  operating
property,  plus  depreciation  and  amortization  (other  than  amortization  of
deferred  financing costs and  depreciation of non-real estate assets) and after
adjustment for unconsolidated partnership and joint ventures.

        Management  believes that FFO is an important and widely-used measure of
the  operating  performance  of  REITs  which  provides  a  relevant  basis  for
comparison to other REITs.  Therefore,  FFO is presented to assist  investors in
analyzing the performance of the Company. The Company's FFO is not comparable to
FFO reported by other REITs that do not define the term using the current NAREIT
definition or that interpret the current NAREIT definition differently than does
the Company.  Therefore,  the Company  cautions that the  calculation of FFO may
vary from  entity to entity and as such the  presentation  of FFO by the Company
may not be  comparable to other  similarly  titled  measures of other  reporting
companies.   The  Company   believes   that  in  order  to  facilitate  a  clear
understanding  of its operating  results,  FFO should be examined in conjunction
with net income  determined in accordance with GAAP. FFO does not represent cash
generated  from operating  activities in accordance  with GAAP and should not be
considered  as an  alternative  to net income as an  indication of the Company's
performance  or to cash  flows as a measure  of  liquidity  or  ability  to make
distributions.

        TABLE 10  provides a  reconciliation  of income  before  allocations  to
minority  interests  and  preferred  shareholders  to FFO  for the  years  ended
December 31, 2000, 1999 and 1998. FFO decreased $26,196, or 31.1% to $57,967 for
the year ended  December 31, 2000 from  $84,163 for the year ended  December 31,
1999.

        The 2000 FFO results reflect  non-recurring  items totaling  ($2,504) as
follows:

o    a  first quarter gain on the sale of outparcel land of $2,472;
o    severance and other compensation costs aggregating $2,421 through the first
     two quarters;
o    second   quarter   professional  fees  of  $1,455  related  to  refinancing
     activities; and
o    third  quarter costs  aggregating  $1,100  incurred in connection  with the
     termination of the sale of a 70% joint venture interest in Prime Outlets at
     Hagerstown  and the sale of a 70%  joint  venture  interest  in a  proposed
     expansion to Prime Outlets at Williamsburg which was not constructed.
<PAGE>
        The 1999 FFO results  reflect fourth quarter  non-recurring  charges and
other expenses totaling ($22,587) as follows:

o    a  provision for abandoned development projects of $16,039 and
o    other charges and other expenses totaling $6,548 comprised of the write-off
     of capitalized  costs  associated with an expired option for the Company to
     purchase  its joint  venture  partner's  50%  ownership  interest  in Prime
     Outlets at New River and start-up and  organizational  expenses  associated
     with the Company's former eOutlets.com subsidiary.

     Excluding  the impact of these  significant  non-recurring  items,  FFO was
$60,471 and  $106,750,  for the fiscal  years ended  December 31, 2000 and 1999,
respectively.

        The change in FFO for year ended  December 31, 2000 compared to the same
period in 1999 are primarily attributable to the following factors:

o    the loss of net operating  income offset by decreased  interest expense due
     to the sale of a 70% joint  venture  interest in Prime Outlets at Birch Run
     in November 1999 and Prime Outlets at Williamsburg in February 2000;
o    reduced  average  occupancy in  the  outlet center portfolio (91.5% for the
     2000 compared to 93.4% for 1999);
o    higher interest expense  resulting from  increased short-term  indebtedness
     and higher financing costs;
o    increased corporate  general and  administrative  expenses  attributable to
     lower  capitalization  of overhead costs due to reduced development
     activities; and
o    an  increase  in  the  provision  for  uncollectible   accounts  receivable
     resulting in part from certain tenant bankruptcies, abandonments  and store
     closings.

Table 10--Funds from Operations
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended December 31,                                                                       2000              1999          1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>               <C>            <C>
Income (loss) before minority interests and extraordinary loss..................          $(138,984)        $ (28,085)     $ 19,986
FFO adjustments:
  Loss on sale of real estate...................................................             42,648            15,153        15,461
  Real estate depreciation and amortization.....................................             65,853            73,053        52,295
  Unconsolidated joint venture adjustments......................................              3,269             1,639         1,211
  Discontinued operations - eOutlets.com........................................             14,703                 -             -
  Discontinued operations - Designer Connection.................................              1,815             6,561         1,067
                                                                                          ---------         ---------      --------
FFO before adjustment for asset impairment......................................            (10,696)           68,321        90,020
  Provision for asset impairment - operating properties.........................             61,222            15,842             -
  Provision for asset impairment - land.........................................              7,441                 -             -
                                                                                          ---------         ---------      --------
FFO before allocations to minority interests and preferred shareholders.........          $  57,967         $  84,163      $ 90,020
                                                                                          =========         =========      ========
Other Data:
Net cash provided by operating activities.......................................          $  32,450         $  97,815      $ 59,182
Net cash provided by (used in)  investing activities............................              1,095           (56,666)     (145,596)
Net cash provided by (used in) financing activities.............................            (31,982)          (39,571)       85,806
====================================================================================================================================
</TABLE>
        The pay-out ratios based on distributions made by the Company divided by
FFO for 1999 and 1998 were 97.4% and 92.9%, respectively.
<PAGE>
Table 11--Consolidated Quarterly Summary of Funds from Operations
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                 2000                                       1999
                                              --------------------------------------------------------------------------------------
                                                      Fourth    Third      Second      First     Fourth     Third   Second    First
                                                     Quarter   Quarter    Quarter    Quarter    Quarter   Quarter  Quarter  Quarter
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>       <C>        <C>        <C>        <C>      <C>      <C>
Income (loss) before minority interests and
   extraordinary loss......................        $(107,187)  $(4,351)  $(15,759)  $(11,687)  $(51,512)  $ 6,452  $ 7,677  $ 9,298
FFO adjustments:
   Loss on sale of real estate.............           42,648         -          -          -     15,153         -        -        -
   Real estate depreciation and
     amortization..........................           17,222    17,179     15,400     16,052     17,318    19,188   18,435   18,112
   Unconsolidated joint venture
     adjustments...........................              640       915      1,128        586        737       473      174      255
   Discontinued operations - eOutlets.com..                -       424      1,315     12,964          -         -        -        -
   Discontinued operations - Designer
     Connection............................                4      (274)     1,006      1,079      5,553       120      543      345
                                                   ---------   -------   --------   --------   --------   -------  -------  -------
FFO before adjustment for asset
    impairment.............................          (46,673)   13,893      3,090     18,994    (12,751)   26,233   26,829   28,010
   Provision for asset impairment -
     operating properties..................           52,684         -      8,538          -     15,842         -        -        -
   Provision for asset impairment - land...            7,441         -          -          -          -         -        -        -
                                                   ---------   -------   --------   --------   --------   -------  -------  -------
FFO before allocations to minority
   interests and preferred shareholders.....       $  13,452   $13,893   $ 11,628   $ 18,994   $  3,091   $26,233  $26,829  $28,010
                                                   =========   =======   ========   ========   ========   =======  =======  =======
Other Data:
Net cash provided by (used in)
   operating activities....................        $(15,708)   $16,184  $  22,990     $8,984    $23,992  $ 25,959  $26,589  $21,275
Net cash provided by (used in)
   investing activities....................          38,465    (11,070)   (13,265)   (13,035)     1,265   (11,079) (27,193) (19,659)
Net cash provided by (used in)
   financing activities....................         (19,838)    (5,732)    (3,896)    (2,516)   (21,298)  (13,102)   1,880   (7,051)

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

     ITEM 7A -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MATERIAL RISK

Market Risk Sensitivity

Interest Rate Risk

       In the ordinary course of business,  the Company is exposed to the impact
of  interest  rate  changes.   The  Company  employs  established  policies  and
procedures to manage its exposure to interest  rate changes.  See "Interest Rate
Risk"  and  "New Accounting Pronouncements" of Item 7 - Management's  Discussion
and  Analysis  of  Financial  Condition and Results of Operations for additional
information.  The Company  uses  a  mix of  fixed and variable  rate debt to (i)
limit the impact of  interest rate changes on its results  from  operations  and
cash  flows and (ii) to lower its  overall borrowing costs.  The following table
provides a summary   of  principal cash flows and  related  contractual interest
rates by fiscal year of maturity.    Variable interest  rates  are based on  the
weighted average rates of the portfolio at December 31, 2000.

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                         Year of Maturity
------------------------------------------------------------------------------------------------------------------------------------
                                           2001          2002          2003           2004          2005     Thereafter       Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>          <C>             <C>           <C>          <C>          <C>
Fixed rate:
Principal...........................    $36,167       $41,694      $454,142        $11,264       $50,330      $235,172     $828,769
Average interest rate...............       9.77%         9.19%         9.06%          8.61%         8.05%         7.34%        8.54%
Variable rate:
Principal...........................    $31,545       $23,220       $80,321        $52,154                                 $187,240
Average interest rate...............      11.47%        15.18%         9.87%          8.40%                                    8.20%

====================================================================================================================================
</TABLE>
<PAGE>
              ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Information required by this Item is set forth at the pages indicated in
Item 14(a) below.

             ITEM 9 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.
<PAGE>
                                    PART III

        The  information  required  by Items  10,  11,  12 and 13  (except  that
information regarding executive officers called for by Item 10 that is contained
in Part I) is  incorporated  herein  by  reference  from  the  definitive  proxy
statement that the Company  intends to file pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, on or before April 30, 2001.

                                     PART IV

   ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   1. Financial Statements

       Report of Independent Auditors                                        F-1

       Consolidated Balance Sheets as of December 31, 2000 and 1999          F-2

       Consolidated  Statements of Operations for the years ended
       December 31, 2000,  1999 and 1998                                     F-3

       Consolidated  Statements of Cash Flows for the years ended
       December 31, 2000,  1999 and 1998                                     F-4

       Consolidated  Statements of Shareholders'  Equity for the years ended
       December 31, 2000, 1999 and 1998                                      F-6

       Notes to Consolidated Financial Statements                            F-7

      2.  Financial Statement Schedules

         The following financial statement schedule is included in Item 14 (d):

         Report of Independent Auditors on Schedule (included with consent filed
         as Exhibit 23)

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

         Notes to Schedule III                                              F-29

        All  other  schedules  for  which  provision  is made in the  applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related  instructions  or are  inapplicable,  and therefore  have been
omitted.

      3.  Exhibits

Exhibit
Number     Description

    3.1    Amended and Restated  Articles of  Incorporation  of Prime Retail,
            Inc.  [Incorporated  by reference to the same titled  exhibit in the
            Company's  Annual  Report on Form 10-K for the  fiscal  year ended
            December 31, 1998, as amended (File No. 0-23616).]

    3.2    Articles Supplementary  of Prime Retail,  Inc.  relating to Series B
            Preferred  Stock.  [Incorporated  by reference  to the same  titled
            exhibit  in the  Company's  Annual  Report  on Form 10-K for the
            fiscal year ended December 31, 1998, as amended (File No. 0-23616).]

    3.3    Second Amended and Restated By-Laws of Prime Retail, Inc.
            [Incorporated by reference to the same titled exhibit in the
            Company's Annual Report on Form 10-K for the fiscal year ended
            December 31, 1999 (File No. 0-23616).]

    4.1    Form of Series A Preferred Stock Certificate [Incorporated by
            reference to the same titled exhibit in the Company's  Annual Report
            on Form 10-K for the fiscal year ended December 31, 1996
            (File No. 0-23616).]

    4.2    Form of Series B Preferred Stock Certificate [Incorporated by
            reference to the same titled exhibit in the Company's  Annual Report
            on Form 10-K for the fiscal year ended December 31, 1996
            (File No. 0-23616).]
<PAGE>
    4.3    Form of Common Stock  Certificate  [Incorporated by reference to the
            same  titled  exhibit  in the  Company's  Annual Report on Form 10-K
            for the fiscal  year ended  December 31, 1996 (File No. 0-23616).]

    4.4    Warrant to Purchase Common Stock of the Company dated December 22,
            2000 issued to FRIT PRT Lending LLC.

    4.5    Warrant to Purchase Common Stock of the Company dated December 22,
            2000 issued to Greenwich Capital Financial Products, Inc.

   10.1    Third  Amended and Restated Agreement of Limited Partnership of Prime
            Retail, L.P. dated as of October 15, 1998 and effective as of
            June 15, 1998. [Incorporated by reference to the same titled exhibit
            in the  Company's  Annual  Report on Form 10-K for the fiscal year
            ended  December 31,  1998,  as amended  (File No. 0-23616).]

   10.1A   Amendment No. 1 to Third Amended and Restated  Agreement of Limited
            Partnership  of Prime Retail, L.P. dated as of September 28, 1999.
            [Incorporated by reference to the same titled exhibit in the
            Company's Annual Report on Form 10-K for the fiscal year ended
            December 31, 1999 (File No. 0-23616).]

#  10.2    1994 Stock Incentive Plan  [Incorporated  by reference to the same
            titled exhibit in the Company's registration statement on Form S-11
            (Registration No. 33-68536).]

#  10.3    1995 Stock Incentive Plan  [Incorporated  by reference to the same
            titled exhibit in the Company's registration statement on Form S-11
            (Registration No. 333-1666).]

#  10.5    Separation Agreement dated February 23, 2000 by and between Prime
            Retail, Inc. and Abraham Rosenthal. [Incorporated by reference to
            the same titled exhibit in the Company's Annual Report on Form 10-K
            for the fiscal year ended December 31, 1999 (File No. 0-23616).]

#  10.6    Employment Agreement dated October 6, 1999 by and among
            primeoutlets.com  inc,  Prime  Retail, L.P., Prime Retail, Inc. and
            William H. Carpenter, Jr.  [Incorporated by reference to the same
            titled exhibit in the Company's Annual Report on Form 10-K
            for the fiscal year ended December 31, 1999 (File No. 0-23616).]

#  10.7    Form of Executive  Employment  Agreement  (David G.  Phillips)
            [Incorporated  by reference to the same titled exhibit in the
            Company's  registration  statement on Form S-11  (Registration  No.
            33-68536).]

#  10.8    Employment Agreement dated June 11, 2000 between Prime  Retail,  Inc.
            and Robert A.  Brvenik.  [Incorporated  by reference to the same
            titled exhibit in the Company's  Quarterly Report on Form 10-Q/A for
            the quarterly period ended September 30, 2000 (File No. 001-13301).]

#  10.9    Employment Agreement dated May 3, 2000 between Prime  Retail, Inc.
            and C.  Alan  Schroeder.  [Incorporated  by reference to the same
            titled exhibit in the Company's Quarterly Report on Form 10-Q/A for
            the quarterly period ended September 30, 2000 (File No. 001-13301).]

#  10.10   Employment Agreement dated May 3, 2000 between Prime Retail, Inc. and
            Steven S. Gothelf.

#  10.11   Employment Agreement dated May 3, 2000 between Prime Retail, Inc. and
            John S. Mastin.

#  10.12   Separation  Agreement  dated  August 24, 2000  by  and  between Prime
            Retail, Inc., Prime Retail, L.P. and William H. Carpenter Jr.

   10.15   Registration  Rights  Agreement  dated June 15, 1998 by and between
            Prime  Retail,  Inc. and Prime Retail,  L.P.  for the benefit of
            holders of common  units of Prime  Retail,  L.P. and certain
            stockholders of Prime Retail,  Inc.  [Incorporated  by reference to
            the same titled exhibit in the  Company's Annual Report on Form 10-K
            for the fiscal year ended December 31, 1998, as amended
            (File No. 0-23616).]

   10.16   Form of Property  Level  General  Partnership  Agreement
            [Incorporated by reference to the same titled exhibit in the
            Company's   registration  statement  on  Form  S-11
            (Registration No. 33-68536).]

   10.17   Form of Property  Level  Limited  Partnership  Agreement
            [Incorporated by reference to the same titled exhibit in
            the  Company's   registration  statement  on  Form  S-11
            (Registration No. 33-68536).]
<PAGE>
   10.18   Noncompetition and Restriction Agreement with Michael W.  Reschke of
            PGI  [Incorporated  by  reference to the same titled  exhibit in the
            Company's  Annual Report on Form 10-K for the fiscal year ended
            December  31,  1994,  as amended (File No. 0-23616).]

#  10.21   Consulting  Agreement  between the Company and Marvin  Traub
            Associates,  Inc.  [Incorporated  by reference  to the same  titled
            exhibit in the  Company's  Annual  Report on Form 10-K for the
            fiscal year ended December 31, 1996 (File No. 0-23616).]

   10.28   Waiver,  Recontribution  and Indemnity  Agreement by the
            Limited Partners  [Incorporated by reference to the same titled
            exhibit in the  Company's  Annual Report on Form 10-K for the fiscal
            year ended  December  31,  1994,  as amended (File No. 0-23616).]

   10.29   Indemnity Agreement  made by the Company in favor of The Prime Group,
            Inc. and Prime Group Limited Partnership [Incorporated  by reference
            to the same titled exhibit in the Company's registration statement
            on Form S-11 (Registration No. 333-1666).]

   10.30   Promissory Note dated October 31, 1996 by and between Prime Retail,
            L.P. and Nomura Asset Capital Corporation [Incorporated by reference
            to the same titled exhibit in the Company's  Annual Report on Form
            10-K for the fiscal year ended December 31, 1996
            (File No. 0-233616).]

   10.30A  Form of Deed of Trust, Security Agreement, Assignment of Rents and
            Fixture Filings with Nomura Asset Capital Corporation  [Incorporated
            by reference to the same titled exhibit in the Company's Annual
            Report on Form 10-K for the fiscal year ended  December  31, 1996
            (File No. 0-23616).]

   10.32   Consulting Agreement between the Company and Financo,  Inc.
            [Incorporated by reference to the same titled exhibit in the
            Company's  Annual  Report on Form 10-K for the fiscal year ended
            December 31, 1996 (File No. 0-23616).]

   10.33   Amended and Restated Agreement and Plan of Merger among Prime Retail,
            Inc., Prime Retail,  L.P., Horizon Group,  Inc., Sky Merger Corp.,
            Horizon Group  Properties,  Inc.,  Horizon Group  Properties,
            L.P.,  and  Horizon/Glen  Outlet Centers Limited  Partnership dated
            as of February 1, 1998 [Incorporated by reference to the same titled
            exhibit in the Company's  Current Report on Form 8-K dated
            February 1, 1998 (File No. 0-23616).]

   10.34   Agreement among Prime Retail, Inc.,  Horizon Group,  Inc.,
            Mr. David H. Murdock,  Castle & Cooke  Properties, Inc., and Pacific
            Holding Company dated as of February 1, 1998 [Incorporated by
            reference to the same titled  exhibit in the Company's  Current
            Report on Form 8-K dated  February 1, 1998 (File No. 0-23616).]

#  10.35   Letter Agreement with David G. Phillips regarding the purchase of
            units in Prime Retail, L.P. dated August 6, 1996.  [Incorporated  by
            reference to the same titled exhibit in the Company's  Annual Report
            on Form 10-K for the fiscal year ended December 31, 1997
            (File No. 0-23616).]

#  10.36   Non-employee  Director  Stock Plan  [Incorporated  by  reference  to
            Appendix I in the  Company's registration statement on Form S-4
            (File No. 333-51285).]

#  10.37   1998 Long-Term  Stock  Incentive Plan  [Incorporated  by reference to
            Appendix J in the Company's registration statement on Form S-4
            (File No. 333-51285).]

#  10.38   Description  of  the  1999  Long-Term   Incentive
            Program.  [Incorporated  by reference to the same titled exhibit in
            the Company's  Annual Report on Form 10-K for the fiscal  year ended
            December  31,  1998,  as amended (File No. 0-23616).]

#  10.39   Master Modification Agreement dated as of December  22, 2000  between
            Buckeye  Factory  Shops Limited  Partnership, Latham Factory  Stores
            Limited  Partnership,  Carolina  Factory Shops Limited Partnership,
            Shasta Outlet Center Limited  Partnership,  The Prime Outlets at
            Calhoun Limited  Partnership  and The Prime Outlets at Lee Limited
            Partnership,  Nomura Asset Capital Corporation, Prime Retail, Inc.
            and Prime Retail, L.P.
<PAGE>
#  10.40   The Agreement for Purchase and Sale, dated December 22, 2000, by and
            between  Finger  Lakes  Outlet Center, L.L.C., The Prime Outlets at
            Michigan  City  Limited  Partnership, The  Prime  Outlets at Gilroy
            Limited  Partnership  and  Outlet  Village  of  Kittery  Limited
            Partnership as seller and F/C Waterloo Development LLC, F/C Michigan
            City  Development  LLC,  F/C  Gilroy  Development LLC, F/C  Kittery
            Development LLC and F/C Michigan Parking LLC as buyer. [Incorporated
            by reference to the same titled  exhibit  in  the Company's  Amended
            Current   Report   on   Form    8-K/A  dated       December 22, 2000
            (File No. 001-13301).]

#  10.41   Loan Agreement dated as of June 15, 1998 between Buckeye Factory
            Shops Limited Partnership, Latham Factory Stores Limited
            Partnership,  Carolina  Factory Shops Limited Partnership,  Shasta
            Outlet Center Limited Partnership,  The  Prime  Outlets  at  Calhoun
            Limited Partnership   and  The  Prime  Outlets  at  Lee  Limited
            Partnership and Nomura Asset Capital Corporation (Bridge Loan)
            [Incorporated by reference to Exhibit 10.3 in the Company's Current
            Report on Form 8-K dated June 15, 1998 (File No. 001-13301).]

#  10.42   Guaranty  dated  as of June  15, 1998  by  Prime Retail, Inc.  to and
            for the  benefit  of Nomura  Asset Capital Corporation [Incorporated
            by  reference  to Exhibit 10.4 in the Company's Current Report on
            Form 8-K dated June 15, 1998 (File No. 001-13301).]

#  10.43   Guaranty  dated  as of June  15, 1998  by  Prime Retail, L.P.  to and
            for the benefit of Nomura Asset Capital  Corporation  [Incorporated
            by  reference  to Exhibit 10.5 in the Company's Current Report on
            Form 8-K dated June 15, 1998 (File No. 001-13301).]

#  10.44   Guaranty and Indemnity Agreement dated as of June 15, 1998 by and
            among Horizon Group Properties, Inc., Horizon Group Properties,
            Inc., Horizon Group  Properties, L.P., Prime Retail,  Inc. and Prime
            Retail,  L.P.  [Incorporated  by  reference  to Exhibit  10.6 in the
            Company's Current Report on Form 8-K dated June 15, 1998
            (File No. 001-13301).]

#  10.45   Contribution  Agreement dated as of June 15,1998 by and among Horizon
            Group,  Inc.,  Sky Merger Corp., Horizon/Glen Outlet Centers Limited
            Partnership,  Horizon Group Properties,  Inc., and Horizon Group
            Properties,  L.P. [Incorporated  by reference to Exhibit 10.7 in the
            Company's Current Report on Form 8-K dated June 15, 1998
            (File No. 001-13301).]

   10.46   Series C Preferred Share Repurchase  Agreement dated as of
            March 31, 1999 among Security Capital Preferred Growth Incorporated,
            Prime Retail, Inc., and Prime Retail, L.P. [Incorporated by
            reference to Exhibit 10.1 in the Company's Current Report on Form
            8-K dated March 31, 1999 (File No. 0-23616).]

#  10.47   Purchase and Sale Agreement,  dated as of August 6, 1999,  among The
            Prime Outlets at Birch Run,  L.L.C.,  The Prime Outlets at
            Williamsburg,  L.L.C.,  and Outlet Village of Hagerstown  Limited
            Partnership and Welp Triple Outlet,  L.C. [Incorporated by reference
            to Exhibit 10.1 in the Company's  Current Report on Form 8-K
            dated August 11, 1999 (File No. 001-13301).]


#  10.48   Loan Agreement dated as of December 22, 2000 between FRIT PRT Lending
            LLC and Prime Retail, L.P.

   12      Statement re: Computation of Ratio Earnings to Combined Fixed Charges
            and Preferred Stock Dividends

   21      Subsidiaries of Prime Retail, Inc.

   23      Consent of Ernst & Young LLP

Note:
# Management contract or compensatory plan or arrangement required to be filed
pursuant to Item 14(c).
<PAGE>
(b)     Reports on Form 8-K

        On  January 8, 2001, the  Company  filed  a  Report  on  Form 8-K  dated
December  22, 2000  announcing  the Company closed on a major refinancing of its
assets  and the sale of four outlet  centers  through a series of  transactions.
The  filing  included  (i)  unaudited  pro forma financial information  pursuant
to  Article 11 of  Regulation  S-X; and (ii) the  press  release  issued  by the
Company  on  December 22, 2000 regarding (a) closing of loans totaling $120,000,
(b) completion of the sale of four outlet centers and (c) extension of the terms
of two other loans.  On January 25, 2001, the Company filed an Amended Report on
Form 8-K/A dated December 22, 2000 that included  the The Agreement for Purchase
and Sale,  dated  December 22, 2000, by  and between Finger Lakes Outlet Center,
L.L.C.,  The Prime  Outlets  at  Michigan City Limited  Partnership,  The  Prime
Outlets  at  Gilroy Limited  Partnership and Outlet  Village of  Kittery Limited
Partnership  as  seller and F /C Waterloo  Development  LLC, F/C  Michigan  City
Development  LLC, F/C Gilroy  Development LLC, F/C  Kittery  Development LLC and
F/C Michigan  Parking  LLC as buyer.

(c)     Exhibits

        The list of exhibits  filed with this report is set forth in response to
Item 14  (a)(3).  The  required  exhibits  have been filed as  indicated  in the
Exhibit  Index.  The  Company  agrees to  furnish a copy of any  long-term  debt
instrument  wherein the  securities  authorized  do not exceed 10 percent of the
registrant's  total  assets on a  consolidated  basis  upon the  request  of the
Securities and Exchange Commission.

(d)     Financial Statements and Schedules

        Schedule III -- Real Estate and Accumulated Depreciation attached hereto
is hereby incorporated by reference to this Item.
<PAGE>

                                   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.

                               PRIME RETAIL, INC.

Dated: March 30, 2001          /s/ Robert A. Brvenik
                               ---------------------
                               Robert A. Brvenik
                               Executive Vice President, Chief Financial Officer
                               and Treaurer

        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 date indicated.


         /s/Glenn D. Reschke                                      March 30, 2001
         --------------------------------------
         Glenn D. Reschke
         Chairman of the Board
         President and Chief Executive Officer

         /s/William H. Carpenter, Jr.                             March 30, 2001
         --------------------------------------
         William H. Carpenter, Jr.
         Director

         /s/William P. Dickey                                     March 30, 2001
         --------------------------------------
         William P. Dickey
         Director

         /s/Kenneth A. Randall                                    March 30, 2001
         --------------------------------------
         Kenneth A. Randall
         Director

         /s/Sharon Sharp                                          March 30, 2001
         --------------------------------------
         Sharon Sharp
         Director

         /s/Marvin S. Traub                                       March 30, 2001
         --------------------------------------
         Marvin S. Traub
         Director
<PAGE>
                         Report of Independent Auditors



To the Board of Directors and Shareholders
Prime Retail, Inc.


We have audited the  accompanying  consolidated  balance sheets of Prime Retail,
Inc.  (the  "Company")  as of  December  31,  2000  and  1999,  and the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
each of the three years in the period ended December 31, 2000.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements 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 the Company at
December 31, 2000 and 1999, and the  consolidated  results of its operations and
its cash flows for each of the three  years in the  period  ended  December  31,
2000, in conformity with accounting  principles generally accepted in the United
States.




                                                           /s/ Ernst & Young LLP



Baltimore, Maryland
March 21, 2001
<PAGE>
                               PRIME RETAIL, INC.

                           Consolidated Balance Sheets

                (Amounts in thousands, except share information)

<TABLE>
 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 December 31,                                                                                     2000                         1999
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                           <C>
 Assets
 Investment in rental property:
    Land........................................................................            $  151,941                   $  181,854
    Buildings and improvements..................................................             1,322,368                    1,560,710
    Property under development..................................................                 3,573                       66,581
    Furniture and equipment.....................................................                15,225                       17,406
                                                                                            ----------                   ----------
                                                                                             1,493,107                    1,826,551
    Accumulated depreciation....................................................              (217,569)                    (183,954)
                                                                                            ----------                   ----------
                                                                                             1,275,538                    1,642,597
 Cash and cash equivalents......................................................                 8,906                        7,343
 Restricted cash................................................................                54,920                       28,131
 Accounts receivable, net.......................................................                13,480                       18,926
 Deferred charges, net.........................................................                 19,533                       13,503
 Investment in partnerships.....................................................                22,372                       18,941
 Assets held for sale...........................................................                43,230                       97,639
 Due from affiliates, net.......................................................                 2,432                        4,140
 Other assets...................................................................                21,610                       24,838
                                                                                            ----------                   ----------
          Total assets..........................................................            $1,462,021                   $1,856,058
                                                                                            ==========                   ==========
 Liabilities and Shareholders' Equity
 Bonds payable (see Note 6).....................................................            $   32,455                   $   32,900
 Notes payable (see Note 6).....................................................               997,698                    1,227,770
 Accrued interest...............................................................                 5,267                        8,033
 Real estate taxes payable......................................................                 8,555                       10,700
 Construction costs payable.....................................................                 1,850                        5,123
 Accounts payable and other liabilities.........................................                60,213                       73,340
                                                                                            ----------                   ----------
          Total liabilities.....................................................             1,106,038                    1,357,866
 Minority interests.............................................................                 1,495                        1,505
 Shareholders' equity:
    Shares of preferred stock, 24,315,000 shares authorized:
       10.5% Series A Senior Cumulative Preferred Stock, $.01 par value
         (liquidation preference of $64,292), 2,300,000 shares issued and
         outstanding............................................................                    23                           23
       8.5% Series B Cumulative Participating Convertible Preferred Stock,
         $.01 par value (liquidation preference of $214,417), 7,828,125
         shares issued and outstanding..........................................                    78                           78
    Shares of common stock, 150,000,000 shares authorized:
       Common stock, $.01 par value, 43,577,916 and 43,368,620 shares
        issued and outstanding, respectively....................................                   436                          434
    Additional paid-in capital..................................................               709,373                      709,122
    Distributions in excess of net income.......................................              (355,422)                    (212,970)
                                                                                            ----------                   ----------
          Total shareholders' equity............................................               354,488                      496,687
                                                                                            ----------                   ----------
          Total liabilities and shareholders' equity............................            $1,462,021                   $1,856,058
                                                                                            ==========                   ==========

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

                      Consolidated Statements of Operations

              (Amounts in thousands, except per share information)

<TABLE>
 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 Years ended December 31,                                                                         2000           1999          1998
 -----------------------------------------------------------------------------------------------------------------------------------
 <S>                                                                                         <C>            <C>            <C>
 Revenues
 Base rents.....................................................................             $ 178,830      $ 193,979      $148,376
 Percentage rents...............................................................                 6,369          8,085         6,384
 Tenant reimbursements..........................................................                83,350         90,063        67,152
 Interest and other.............................................................                14,801         13,829         9,897
                                                                                             ---------      ---------      --------
       Total revenues...........................................................               283,350        305,956       231,809
 Expenses
 Property operating.............................................................`               68,537         70,862        52,684
 Real estate taxes..............................................................                21,776         22,405        16,705
 Depreciation and amortization..................................................                67,556         73,640        52,727
 Corporate general and administrative...........................................                20,847         12,687         7,980
 Interest.......................................................................                98,234         93,934        60,704
 Provision for abandoned projects...............................................                     -         16,039             -
 Provision for asset impairment.................................................                68,663         15,842             -
 Loss on eOutlets.com...........................................................                14,703              -             -
 Loss on Designer Connection....................................................                 1,815          6,561         1,067
 Other charges..................................................................                17,555          6,918         4,495
                                                                                             ---------      ---------      --------
       Total expenses...........................................................               379,686        318,888       196,362
                                                                                             ---------      ---------      --------
 Income (loss) before loss on sale of real estate, minority interests
    and extraordinary loss......................................................               (96,336)       (12,932)       35,447
 Loss on sale of real estate....................................................               (42,648)       (15,153)      (15,461)
                                                                                             ---------      ---------      --------
 Income (loss) before minority interests and extraordinary loss.................              (138,984)       (28,085)       19,986
 (Income) loss allocated to minority interests..................................                   738         (3,226)       (2,456)
                                                                                             ---------      ---------      ---------
 Income (loss) before extraordinary loss........................................              (138,246)       (31,311)       17,530
 Extraordinary loss on early extinguishment of debt,
    net of minority interests in the amount of $887 in 1999.....................                (4,206)        (3,518)            -
                                                                                             ---------      ---------      --------
 Net income (loss)..............................................................              (142,452)       (34,829)       17,530

 Income allocated to preferred shareholders.....................................               (22,672)        (9,962)      (24,604)
                                                                                             ---------      ---------      --------
 Net loss applicable to common shares...........................................             $(165,124)     $ (44,791)     $ (7,074)
                                                                                             =========      =========      ========
 Earnings per common share - basic:
       Loss before extraordinary loss...........................................             $   (3.69)     $   (0.96)     $  (0.20)
       Extraordinary loss.......................................................                 (0.10)         (0.08)            -
                                                                                             ---------      ---------      --------
       Net loss.................................................................             $   (3.79)     $   (1.04)     $  (0.20)
                                                                                             =========      =========      ========
 Earnings per common share - diluted:
       Loss before extraordinary loss...........................................             $   (3.69)     $   (1.22)      $ (0.20)
       Extraordinary loss.......................................................                 (0.10)         (0.08)            -
                                                                                             ---------      ---------      --------
       Net loss.................................................................             $   (3.79)     $   (1.30)       $(0.20)
                                                                                             =========      =========      ========
 Weighted average common shares outstanding:
       Basic....................................................................                43,517         43,196        35,612
                                                                                             =========      =========      ========
       Diluted..................................................................                43,517         44,260        35,612
                                                                                             =========      =========      ========

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

                      Consolidated Statements of Cash Flows

                             (Amounts in thousands)

<TABLE>

 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 Years ended December 31,                                                                      2000            1999            1998
 -----------------------------------------------------------------------------------------------------------------------------------

 Operating Activities
<S>                                                                                       <C>              <C>              <C>
 Net income (loss)..............................................................          $(142,452)       $(34,829)        $17,530
 Adjustments to reconcile net income (loss) to net cash provided by operating
       activities:
       Loss allocated to minority interests.....................................                738           3,226           2,456
       Loss on sale of real estate..............................................             42,648          15,153          15,461
       Extraordinary loss, net of minority interests............................              4,206           3,518               -

       Depreciation.............................................................             66,855          72,877          51,638
       Amortization of deferred financing costs and interest rate
       protection contracts.....................................................              3,256           4,379           2,867
       Amortization of debt premiums............................................             (3,159)         (4,406)         (2,153)
       Amortization of leasing commissions......................................                701             763           1,119
       Provision for uncollectible accounts receivable..........................              7,443             779           1,387
       Provision for abandoned projects.........................................                  -          16,039               -
       Loss on eOutlets.com.....................................................             14,703               -               -
       Loss on Designer Connection..............................................              1,815           3,659               -
       Provision for asset impairment...........................................             68,663          15,842               -
       Gain on sale of land.....................................................             (2,472)            (72)           (274)
 Changes in operating assets and liabilities:
    (Increase) decrease in accounts receivable..................................             (4,903)          2,155         (17,605)
    (Increase) decrease in restricted cash......................................            (28,151)          7,044           7,538
    (Increase) decrease in other assets.........................................              3,285            (669)        (11,441)
    Increase (decrease) in accounts payable and other liabilities...............              2,796          (7,285)        (14,496)
    Increase (decrease) in real estate taxes payable............................             (2,145)           (513)          2,876
    Increase (decrease) in accrued interest.....................................             (1,377)            155           2,279
                                                                                            -------         -------         -------
       Net cash provided by operating activities................................             32,450          97,815          59,182
                                                                                            -------         -------         -------
 Investing Activities
 Additions to investment in rental property.....................................            (51,833)        (85,977)       (136,052)
 Payments for eOutlets.com......................................................            (11,161)         (3,992)              -
 Contribution to joint venture partnership......................................             (3,000)              -               -
 Acquisition of Horizon, net of cash acquired and spin-off of HGP...............                  -               -         (35,559)
 Proceeds from sale of outlet centers and land..................................             67,089          33,303          26,015
                                                                                            -------         -------         -------
       Net cash provided by (used in) investing activities......................              1,095         (56,666)       (145,596)
                                                                                            -------         -------         -------
 Financing Activities
 Redemption of Series C preferred stock.........................................                  -         (45,054)              -
 Proceeds from notes payable....................................................            134,497         304,342         467,998
 Principal repayments on notes payable..........................................           (155,120)       (200,026)       (281,653)
 Deferred financing fees........................................................            (11,359)        (10,321)         (3,277)
 Distributions and dividends paid...............................................                  -         (75,536)        (79,451)
 Distributions to minority interests............................................                  -         (12,976)        (17,811)
                                                                                            -------         -------         -------
       Net cash provided by (used in) financing activities......................            (31,982)        (39,571)         85,806
                                                                                            -------         -------         -------
 Increase (decrease) in cash and cash equivalents...............................              1,563           1,578            (608)
 Cash and cash equivalents at beginning of year.................................              7,343           5,765           6,373
                                                                                            -------         -------         -------
 Cash and cash equivalents at end of year.......................................            $ 8,906         $ 7,343         $ 5,765
                                                                                            =======         =======         =======
 ===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
                               PRIME RETAIL, INC.
                Consolidated Statements of Cash Flows (continued)
                             (Amounts in thousands)

Supplemental Disclosure of Noncash Investing and Financing Activities:

The following  assets and  liabilities  were sold in connection with the sale of
the Permanent Loan Properties on December 22, 2000:

    Book value of assets disposed, net............................... $ 268,286
    Cash received....................................................   (51,403)
    Loss on sale.....................................................   (42,648)
                                                                       --------
    Debt disposed.................................................... $ 174,235
                                                                       ========

The following  assets and liabilities were sold in connection with the sale of a
70% joint  venture  interest in Prime  Outlets at  Williamsburg  on February 23,
2000:

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

The following  assets and liabilities were sold in connection with the sale of a
70% joint venture interest in Prime Outlets at Birch Run on November 19, 1999:

    Book value of assets disposed, net...............................  $ 96,384
    Cash received....................................................   (33,303)
    Loss on sale.....................................................    (9,326)
                                                                       --------
    Debt disposed....................................................  $ 53,755
                                                                       ========

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

Acquisition of Horizon, net of spin-off of HGP:
    Fair value of assets acquired....................................$1,014,973
    Cash paid, net of cash and cash equivalents acquired.............   (35,559)
    Common shares issued.............................................  (214,282)
    Common units issued..............................................   (56,023)
    Series B convertible preferred shares issued.....................  (118,735)
                                                                      ---------
    Fair value of liabilities assumed................................$  590,374
                                                                      =========

Disposition of Prime Transferred Properties:
    Book value of assets disposed.................................... $  42,218
    Cash received....................................................   (26,015)
    Loss on sale.....................................................   (15,461)
                                                                      ---------
    Liabilities disposed............................................. $     742
                                                                      =========
================================================================================

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

                 Consolidated Statements of Shareholders' Equity

                (Amounts in thousands, except share information)
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                    Series A   Series B   Series C          Additional  Distributions          Total
                                                   Preferred  Preferred  Preferred  Common     Paid-in   in Excess of  Shareholders'
                                                       Stock      Stock      Stock   Stock     Capital     Net Income        Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>        <C>        <C>     <C>      <C>            <C>           <C>

Balance, January 1, 1998............................. $   23     $   30     $   36  $  273   $ 398,188       $(54,022)    $ 344,528
Issuance of 14,466,329 shares of common stock, net
   of issuance cost..................................      -          -          -     145     214,137              -       214,282
Issuance of 4,846,325 shares of Series B preferred
   Stock, net of issuance
   cost..............................................      -         48          -       -     118,687              -       118,735
Exchange of 975,462 common units for common
    Stock ...........................................      -          -          -       9      18,754              -        18,763
Exchange of 727,273 Series C preferred units for
   727,273 shares of Series C preferred stock........      -          -          8       -       9,339              -         9,347
Net income...........................................      -          -          -       -           -         17,530        17,530
Common distributions ($1.680 per share)..............      -          -          -       -           -        (54,750)      (54,750)
Preferred distributions and dividends:
     Series A ($2.625 per share).....................      -          -          -       -           -         (6,037)       (6,037)
     Series B ($2.725 per share).....................      -          -          -       -           -        (13,275)      (13,275)
     Series C ($1.680 per share).....................      -          -          -       -           -         (5,389)       (5,389)
                                                       -----      -----      -----   -----    --------      ---------    ----------

Balance, December 31, 1998...........................     23         78         44     427     759,105       (115,943)      643,734
Issuance of 160,585 restricted shares of
    common stock ....................................      -          -          -       2       1,380              -         1,382
Exchange of 471,293 common units for common
    stock ...........................................      -          -          -       5       6,985              -         6,990
Redemption of 4,363,636 shares of Series C
    preferred stock..................................      -          -        (44)      -     (58,348)        13,338       (45,054)
Net loss.............................................      -          -          -       -           -        (34,829)      (34,829)
Common distributions ($1.180 per share)..............      -          -          -       -           -        (50,948)      (50,948)
Preferred distributions and dividends:
     Series A ($2.625 per share).....................      -          -          -       -           -         (6,038)       (6,038)
     Series B ($2.125 per share).....................      -          -          -       -           -        (16,635)      (16,635)
     Series C ($0.885 per share).....................      -          -          -       -           -         (1,915)       (1,915)
                                                       -----      -----      -----   -----    --------      ---------    ----------

Balance, December 31, 1999..........................      23         78          -     434     709,122       (212,970)      496,687
Issuance of 180,000 restricted shares of
     common stock....................................      -          -          -       2         251              -           253
Exchange of 29,296 common units for
     common stock....................................      -          -          -       -           -              -             -
Net loss.............................................      -          -          -       -           -       (142,452)     (142,452)
                                                       -----      -----      -----   -----    --------      ---------    ----------

Balance, December 31, 2000........................... $   23     $   78      $   -  $  436    $709,373      $(355,422)     $354,488
                                                       =====      =====       ====   =====    ========      =========      ========
====================================================================================================================================
</TABLE>
  See accompanying notes to financial statements.
<PAGE>
                               PRIME RETAIL, INC.

                   Notes to Consolidated Financial Statements

            (Amounts in thousands, except share and unit information)


Note 1 -- Organization and Basis of Presentation

Organization

     Prime Retail, Inc. (the "Company") was organized as a Maryland  corporation
on July 16,  1993.  The Company is a  self-administered  and  self-managed  real
estate  investment  trust ("REIT") that operates  primarily  within one business
segment and develops,  acquires, owns and operates outlet centers. The Company's
outlet  center  portfolio,  including  five outlet  centers  owned through joint
venture  partnerships,  consists  of 48 outlet  centers in 26 states  (including
Puerto Rico),  which total 13,497,000 square feet of gross leasable area ("GLA")
at December  31,  2000.  As a  fully-integrated  real estate  firm,  the Company
provides development, construction, accounting, finance, leasing, marketing, and
management services for all of its properties (the "Properties").  The Company's
Properties  are held and  substantially  all of its business and  operations are
conducted through Prime Retail, L.P. (the "Operating Partnership").  The Company
controls the Operating  Partnership as its sole general partner and is dependent
upon the distributions or other payments from the Operating  Partnership to meet
its financial  obligations.

     At December 31, 2000, the Company owned 2,300,000 Senior Preferred Units of
the Operating  Partnership (the "Senior  Preferred  Units"),  7,828,125 Series B
Convertible  Preferred  Units  of  the  Operating  Partnership  (the  "Series  B
Convertible  Preferred  Units"),  and  43,577,916  Common  Units of  partnership
interest  in  the  Operating  Partnership  (the  "Common  Units").  Each  Senior
Preferred  Unit, and Series B Convertible  Preferred  Unit,  (collectively,  the
"Preferred  Units")  entitles  the  Company  to receive  distributions  from the
Operating  Partnership in an amount equal to the dividend  declared or paid with
respect to a share of the Company's Series A Senior  Cumulative  Preferred Stock
("Senior  Preferred  Stock") and Series B Cumulative  Convertible  Participating
Preferred Stock ("Series B Convertible Preferred Stock"), respectively, prior to
the payment by the Operating  Partnership of  distributions  with respect to the
Common  Units.  Series  B  Convertible  Preferred  Units  will be  automatically
converted  into  Common  Units  to the  extent  of any  conversion  of  Series B
Convertible  Preferred  Stock into Common  Stock.  The  Preferred  Units will be
redeemed by the Operating  Partnership to the extent of any redemption of Senior
Preferred Stock or Series B Convertible Preferred Stock.

     A  summary  of the  holders  of units in the  Operating  Partnership  as of
December 31, 2000 is as follows:

--------------------------------------------------------------------------------
                                                   Number of Units
                                     -------------------------------------------
Holder                                Series A         Series B           Common
--------------------------------------------------------------------------------

Prime Retail, Inc.................   2,300,000        7,828,125       43,577,916
Affiliates of The Prime Group, Inc.,
 management and others(1).........           -                -       10,810,912
                                     ---------        ---------       ----------
                                     2,300,000        7,828,125       54,388,828
                                     =========        =========       ==========

================================================================================
Note:
(1)  Includes 251,300 units beneficially owned directly by an executive officer.

       As of  December  31,  2000,  the Company  has an 80% general  partnership
interest in the Operating  Partnership  with full and complete  control over the
management of the Operating  Partnership as the sole general partner not subject
to removal by the limited partners.

     Unless the context otherwise requires, all references to the Company herein
mean Prime Retail,  Inc. and those entities owned or controlled by Prime Retail,
Inc., including the Operating Partnership.
<PAGE>
Basis of Presentation

     The consolidated  financial statements include the accounts of the Company,
the  Operating  Partnership  and the  partnerships  in  which  the  Company  has
operational  control.  Profits and losses are allocated in  accordance  with the
terms of the  Operating  Partnership  agreement.  The  preparation  of financial
statements in conformity with accounting  principles generally  accepted  in the
United States  ("GAAP")  requires  management to make estimates and  assumptions
that affect the reported  amounts of assets and  liabilities  and  disclosure of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

     Investments in partnerships in which the Company does not have  operational
control are  accounted  for on the equity  method of  accounting.  Income (loss)
applicable to minority interests of the Operating  Partnership and common shares
as presented in the consolidated  statements of operations is allocated based on
income  (loss) before  minority  interests  after income  allocated to preferred
shareholders.

     Significant  intercompany accounts and transactions have been eliminated in
consolidation.  Certain  amounts in prior  years have been  reclassified  to the
current year presentation.

Note 2 -- Summary of Significant Accounting Policies

Rental Property

        Depreciation is calculated on the straight-line basis over the estimated
useful lives of the assets which are as follows:

  Land improvements....................................                 20 years
  Buildings and improvements...........................     Principally 40 years
  Tenant improvements..................................    Term of related lease
  Furniture and equipment..............................                  5 years

     Rental property is generally  carried at historical cost net of accumulated
depreciation.  Development  costs,  which  include  fees and costs  incurred  in
developing  new  properties,  are  capitalized as incurred.  Upon  completion of
construction,  development  costs are  amortized  over the  useful  lives of the
respective  properties  on a  straight-line  basis.  Expenditures  for  ordinary
maintenance  and repairs are expensed to  operations  as  incurred.  Significant
renovations  and  improvements  which  improve  and/or extend the useful life of
assets are capitalized and depreciated over their estimated useful lives.

     In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed Of," the Company records  impairment  losses on long-lived
assets used in operations when events and circumstances indicate that the assets
might be impaired and the  undiscounted  cash flows estimated to be generated by
those  assets are less than the  carrying  amounts of those  assets.  Impairment
losses are measured as the difference  between carrying value and fair value for
assets to be held in portfolio. For assets to be sold, impairment is measured as
the difference  between  carrying  value and fair value,  less costs to dispose.
Fair value is based on estimated cash flows  discounted at a risk-adjusted  rate
of interest.

Cash Equivalents

     The Company  considers  highly liquid  investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying value of cash
and cash equivalents and restricted cash as reported in the Consolidated Balance
Sheets approximates their fair value.

     The Company  maintains its cash and cash equivalents and restricted cash at
various financial institutions. The combined account balances at each insitution
periodically  exceed  FDIC  insurance  coverage,  and  as  result,  there  is  a
concentration  of credit  risk  related  to amounts on deposit in excess of FDIC
insurance coverage. The Company believes that the risk is not significant.
<PAGE>
Accounts Receivable

     Management   regularly  reviews  accounts   receivable  and  determines  an
appropriate  range for the allowance for doubtful accounts based upon the impact
of  economic  conditions  on the  merchants'  ability  to pay,  past  collection
experience  and such other factors  which,  in  management's  judgment,  deserve
current  recognition.  In turn, a provision is charged against earnings in order
to maintain the  allowance  level within this range.  The allowance for doubtful
accounts at December 31, 2000 and 1999 was $7,383 and $7,008, respectively.

     Accounts  receivable due after one year  representing  straight-line  rents
were $6,837 and $8,285 at December 31, 2000 and 1999, respectively.

Deferred Charges

        Deferred  charges consist of leasing  commissions  and financing  costs.
Deferred leasing commissions  representing costs incurred to originate and renew
operating  leases are deferred and amortized on a  straight-line  basis over the
term of the  related  lease.  Fees and costs  incurred to obtain  financing  are
deferred and are being  amortized  as a component  of interest  expense over the
terms of the respective loans on a basis that approximates the interest method.

Due from Affiliates, Net

        Due from  affiliates,  net  consists of amounts  due from joint  venture
partnerships  related to the reimbursement of costs paid by the Company on their
behalf.

Revenue Recognition

     Leases with tenants are accounted for as operating  leases.  Minimum rental
income is  recognized  on a  straight-line  basis over the term of the lease and
unpaid  rents  are  included  in  accounts   receivable   in  the   accompanying
Consolidated  Balance Sheets.  Certain lease agreements contain provisions which
provide for rents based on a  percentage  of sales or based on a  percentage  of
sales  volume  above a  specified  threshold.  These  contingent  rents  are not
recognized until the required  thresholds are exceeded.  In addition,  the lease
agreements  generally  provide  for  the  reimbursement  of real  estate  taxes,
insurance,   advertising  and  certain  common  area  maintenance  costs.  These
additional  rents and tenant  reimbursements  are  accounted  for on the accrual
basis.

Interest Rate Protection Contracts

        The Company uses interest rate protection contracts,  including interest
rate caps and corridors,  to manage  interest rate risk associated with floating
rate debt. These contracts  generally  involve  limiting the Company's  interest
costs with an upper limit or specified  range on the  underlying  interest  rate
index. The cost of such contracts are included in deferred charges and are being
amortized on a straight-line  basis as a component of interest  expense over the
life of the contracts.  Amounts earned from interest rate  protection  contracts
are  recorded as a  reduction  of  interest  expense.  The Company is exposed to
credit  losses  in the  event  of  counterparty  nonperformance,  but  does  not
anticipate any such losses based on the creditworthiness of the counterparties.

Earnings per Share

        Basic  earnings per share  ("EPS") is  calculated by dividing net income
available  to  common  shareholders  by the  weighted  average  number of shares
outstanding  during the period.  Diluted EPS includes the  potentially  dilutive
effect,  if any, which would occur if outstanding (i) options to purchase Common
Stock were  exercised,  (ii) Common Units were  converted  into shares of Common
Stock,  (iii) shares of Series C Preferred  Stock were  converted into shares of
Common  Stock,  and (iv)  shares of Series B  Convertible  Preferred  Stock were
converted into shares of Common Stock. For the year ended December 31, 2000, the
effect of all  exercises  and  conversions  was  anti-dilutive  and,  therefore,
dilutive EPS is equivalent  to basic EPS. For the year ended  December 31, 1999,
(i) a  redemption  discount and  dividends  aggregating  $12,710  related to the
Company's  repurchase  of its Series C Preferred  Stock were  excluded  from the
numerator  and  (ii)  incremental  shares  of  1,064,  related  to  the  assumed
conversion of Series C Preferred Stock,  were included in the denominator of the
computation  of diluted EPS. For the year ended December 31, 1999, the effect of
all other  exercises and  conversions  was  anti-dilutive  and,  therefore,  was
excluded from the  computation  of diluted EPS. For the year ended  December 31,
1998,  the  effect of all  exercises  and  conversions  was  anti-dilutive  and,
therefore, dilutive EPS is equivalent to basic EPS.
<PAGE>
        The  following  table sets forth the  computation  of basic and  diluted
earnings per share:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                      2000             1999            1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                <C>             <C>
Numerator:
    Income (loss) before minority interests and extraordinary loss..................     $(138,984)        $ (28,085)      $ 19,986
    Loss (income) allocated to minority interests...................................           738            (3,226)        (2,456)
                                                                                          --------         ---------       -------
    Net income (loss) before extraordinary loss.....................................      (138,246)          (31,311)        17,530
    Income allocated to preferred shareholders......................................       (22,672)           (9,962)       (24,604)
                                                                                          --------         ---------       -------
    Numerator for basic earnings per share -
     Loss before extraordinary loss available to common shareholders................      (160,918)          (41,273)        (7,074)

    Effect of dilutive securities:
    Series C preferred dividends....................................................             -               628              -

    Series C preferred stock redemption discount....................................             -           (13,338)             -
                                                                                          --------         ---------       --------
       Numerator for diluted earnings per share -
     Loss before extraordinary loss available to common shareholders................     $(160,918)        $ (53,983)      $ (7,074)
                                                                                         =========         =========       ========

Denominator:
    Denominator for basic earnings before extraordinary loss per share -
      Weighted average common shares outstanding....................................        43,517            43,196         35,612

    Effect of dilutive securities:
    Series C preferred shares.......................................................             -             1,064              -
                                                                                          --------         ---------       --------
    Denominator for diluted earnings before extraordinary loss per share -
      Adjusted weighted average common shares outstanding...........................        43,517            44,260         35,612
                                                                                          ========         =========       ========

    Basic earnings before extraordinary loss per common share ......................     $   (3.69)        $   (0.96)      $  (0.20)
                                                                                          ========         =========       ========

    Diluted earnings before extraordinary loss per common share .....................    $   (3.69)        $   (1.22)      $  (0.20)
                                                                                          ========         =========       ========
====================================================================================================================================
</TABLE>

Stock Based Compensation

     The Company  accounts for stock option grants in accordance with Accounting
Principles  Board  Opinion  ("APB")  No.  25,  "Accounting  for Stock  Issued to
Employees" and,  accordingly,  recognizes no  compensation  expense for employee
stock  option  grants.  The  Company  has  elected to adopt only the  disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."
<PAGE>
Income Taxes

     The Company has  elected to be taxed as a REIT under  Sections  856 through
860 of the Internal  Revenue Code of 1986,  as amended.  As a REIT,  the Company
generally  will not be subject to federal  income tax at the corporate  level on
income it distributes to its shareholders so long as it distributes at least 95%
(90%  for  years  beginning  after  December  31,  2000) of its  taxable  income
(excluding any net capital gain) each year. If the Company fails to qualify as a
REIT in any  taxable  year,  the Company  will be subject to federal  income tax
(including  any  applicable  alternative  minimum tax) on its taxable  income at
regular  corporate rates.  Even if the Company  qualifies as a REIT, the Company
may be subject to certain state and local taxes on its income and property.  The
Company  incurred  $197,  $234,  and $337 of state and local taxes for the years
ended  December 31, 2000,  1999 and 1998,  respectively.  The Company paid $235,
$68, and $424 of state and local taxes during the years ended  December 31, 2000
and 1999, and 1998, respectively.

     The Company did not make any  distributions  during the year ended December
31, 2000.  The  following  table  summarizes  the  taxability  of dividends  and
distributions  paid during (i) the year ended December 31, 1999, (ii) the period
from January 1 to June 15,  1998,  and (iii) the period from June 16 to December
31, 1998:

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                                         Period from    Period from
                                                                                           Year ended   January 1 to     June 16 to
                                                                                         December 31,       June 15,   December 31,
                                                                                                 1999           1998           1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>             <C>            <C>
 Senior Preferred Stock
    Ordinary income ...................................................................       $ 2.625        $1.3125        $1.3125
                                                                                               ======         ======         ======
 Series B Convertible Preferred Stock
    Ordinary income ...................................................................       $ 2.125         $1.663        $ 0.922
    Return of capital..................................................................             -              -          0.525
                                                                                                -----          -----          -----
                                                                                              $ 2.125         $1.663         $1.447
                                                                                               ======          =====          =====
 Series C Preferred Stock
    Ordinary income ...................................................................       $ 0.885         $0.167         $    -
    Return of capital..................................................................             -          0.725          0.912
                                                                                                -----          -----          -----
                                                                                              $ 0.885         $0.892         $0.912
Common Stock
    Ordinary............................................................................      $ 0.271         $    -         $    -
    Return of capital...................................................................        0.909          1.090          0.912
                                                                                                -----          -----          -----
                                                                                              $ 1.180         $1.090         $0.912
====================================================================================================================================
</TABLE>

Risks and Uncertainties

     The Company's  results of  operations  are  significantly  dependent on the
overall health of the retail  industry.  The Company's  tenant base is comprised
almost  exclusively of merchants in the retail industry.  The retail industry is
subject to external factors such as inflation, consumer confidence, unemployment
rates and  consumer  tastes and  preferences.  A decline in the retail  industry
could reduce merchant sales,  which could adversely affect the operating results
of the Company.

     In  addition to  traditional  sources of risks to  retailers  and owners of
outlet centers,  which are mentioned above, the Company's outlet centers compete
for customers with web-based and catalogue retailers.

New Accounting Pronouncements

     The  Company  from  time to  time  enters  into  interest  rate  protection
agreements  to  effectively  convert  floating  rate debt to a fixed  rate basis
and/or limit the  Company's  exposure to interest  rate  fluctuations.  Fees and
premiums paid for the Company's interest rate protection agreements are included
in  deferred  financing  costs and are  amortized  ratably  over the term of the
respective  interest  rate  protection  agreement.  Settlement  amounts  paid or
received in connection with terminated  interest rate protection  agreements are
deferred  and  amortized  over  the  remaining  term  of the  related  financing
transaction  using  the  straight-line   method.  In  the  event  of  the  early
extinguishments  of the related  financing,  any realized or unrealized  gain or
loss on the related  interest rate protection  agreement is recognized in income
coincident  with  the  extinguishments.  The  Company  believes  it has  limited
exposure  to the  extent  of  non-performance  by the  counter  parties  of each
protection  agreement since each counter party is a major financial  institution
and the Company does not anticipate their non-performance. The fair value of the
interest  rate  protection   agreements  is  not  recognized  in  the  financial
statements as the  agreements  qualify as hedges of the Company's  interest rate
risk.  Interest  rate  protection  agreements  or specific  notional  components
thereof that do not qualify as a hedge of the Company's interest rate risk would
be recorded at fair value.
<PAGE>
     In June 2000, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 138,  "Accounting  for Certain  Derivative  Instruments  and Certain Hedging
Activities," which amends SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities."  SFAS No. 133 was previously  amended by SFAS No. 137,
"Accounting For Derivative Instruments and Hedging  Activities--Deferral  of the
Effective  Date of FASB Statement No. 133," which deferred the effective date of
SFAS No. 133 to fiscal years  beginning  after June 15,  2000.  The Company will
adopt SFAS No. 138 and SFAS No. 133 effective  January 1, 2001 and believes such
adoption  will not have a  material  impact  on its  results  of  operations  or
financial  position.  SFAS No. 133 and SFAS No. 138 will  require the Company to
recognize all derivatives on the balance sheet at fair value.  Derivatives  that
are not hedges must be adjusted to fair value through income.  If the derivative
is a hedge,  depending on the nature of the hedge,  changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion of a  derivative's  change in fair value will be recognized
immediately in earnings.

     In December 1999, the Securities and Exchange Commission (the "Commission")
issued  Staff  Accounting  Bulletin  ("SAB") No. 101,  "Revenue  Recognition  in
Financial  Statements." SAB 101 summarizes  certain of the Commission's views in
applying  generally  accepted  accounting  principles to revenue  recognition in
financial  statements.  The Company's adoption of SAB 101 retroactive to January
1,  2000 did  not  have a  material  impact  on its  results  of  operations  or
financial position.

Note 3 --Acquisitions and Dispositions

Sale of Permanent Loan Properties

        On December  22,  2000,  the Company  completed  the sale of four outlet
centers aggregating  1,592,000 square feet of GLA to a joint venture partnership
comprised  of  Fortress Investment Fund LLC ("Fortress") and Chelsea GCA Realty,
Inc., ("Chelsea")  for  aggregate   consideration  of  $239,500,  including  the
assumption  of  first  mortgage  debt  of  $174,235.  The  four  outlet  centers
(collectively, the "Permanent Loan Properties"),  that were sold, are located in
Gilroy, California,  Michigan City, Indiana,  Waterloo,  New York  and  Kittery,
Maine. In connection with the sale of the Permanent Loan Properties, the Company
incurred a loss on sale of real estate of $42,648 in the fourth quarter of 2000.
The net proceeds from the sale,  after  closing costs and fees and the  required
purchase of land in the amount  of $7,325  related  to the  outlet  center in
Gilroy,  California, was $51,403. Net  proceeds  from the sale were used for the
prepayment  of certain long-term  debt.  The operating  results of the Permanent
Loan  Properties are included in the Company's results of operations through the
date of disposition.

Prime/Estein Joint Venture Transaction

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

        On November 19, 1999, the Company  completed the initial  installment of
the Prime/Estein Joint Venture Agreement consisting of the sale of Prime Outlets
at Birch Run to the Venture for aggregate consideration of $117,000, including a
$64,500 "wrap-around" first mortgage provided by the Company. In connection with
the sale of Prime  Outlets at Birch Run, the Company  received  cash proceeds of
$33,303,  net of  transaction  costs,  and  recorded  a loss on the sale of real
estate of $9,326.  Effective November 19, 1999, the Company commenced accounting
for its 30.0%  ownership  interest in Prime  Outlets at Birch Run in  accordance
with the equity method of accounting.  The "wrap-around" first mortgage provided
by the Company to the Venture has a ten-year  term at a fixed  interest  rate of
7.75% requiring monthly payments of principal and interest pursuant to a 25-year
amortization  schedule.  The Company's net investment in the "wrap-around" first
mortgage as of December 31, 2000 and 1999 was $10,731 and $10,745, respectively,
which  is  included  in  other  assets  in  the   Consolidated   Balance  Sheet.
Additionally,  the Venture assumed $53,755 of outstanding mortgage indebtedness.
Included  in the  aggregate  consideration  was $8,500 of Deferred  Income.  The
Deferred Income was initially included in accounts payable and other liabilities
in the Consolidated Balance Sheet and was being amortized into other income over
its ten-year life.  Effective on the date of disposition,  the Company  accounts
for its ownership  interest in Prime Outlets at Birch Run in accordance with the
equity method of accounting.
<PAGE>
     During the fourth quarter of 1999, the Company  recorded a loss on the sale
of real estate of $5,827  related to the  write-down  of the  carrying  value of
Prime  Outlets  at  Williamsburg  based on the terms of the  Prime/Estein  Joint
Venture  Agreement.  On February  23,  2000,  the Company  completed  the second
installment of the Prime/Estein  Joint Venture Agreement  consisting of the sale
of Prime Outlets at Williamsburg to the Venture for aggregate  consideration  of
$59,000,  including (i) the assumption of mortgage  indebtedness  of $32,500 and
(ii) $2,750 of Deferred Income.  In connection with the sale of Prime Outlets at
Williamsburg,  the  Company  received  (i)  cash  proceeds  of  $11,063,  net of
transaction  costs, and (ii) a promissory note in the amount of $10,000 from the
Venture (of which Estein's  obligation is $7,000). The promissory  note requires
the  monthly  payment of  interest in arrears at an annual rate of 7.75% and the
outstanding principal amount was payable on or before December 15, 2000, subject
to satisfaction of certain conditions. As a result of the Company's inability to
refinance  or  convert  the  Venture's  mortgage  indebtedness  of  $32,500 to a
permanent loan at a fixed rate of interest,  the December 15, 2000 maturity date
of the  promissory  note was  extended  until such time as such  refinancing  is
obtained.  In addition,  since the refinancing or conversion did not occur on or
before  December 15,  2000,  the Company is obligated to pay Estein $250 and the
Company is not entitled to receive operating  distributions arising out of Prime
Outlets at Williamsburg until such refinancing or conversion  occurs.  Effective
on the date of disposition,  the Company accounts for its ownership  interest in
Prime  Outlets  at   Williamsburg  in  accordance  with  the  equity  method  of
accounting.

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

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

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

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

Merger Transactions

        On June 15, 1998, the merger and other transactions  (collectively,  the
"Merger  Transactions")  as set forth in the  agreement  and plan of merger (the
"Merger Agreement") between the Company and Horizon Group, Inc. ("Horizon") were
consummated for an aggregate consideration of $1,134,682,  including liabilities
assumed and related transaction costs.

        Pursuant to the terms of the Merger Agreement,  the Company acquired (i)
all of the outstanding shares of common stock of Horizon at an exchange ratio of
0.20 of a share of the Company's Series B Convertible  Preferred Stock and 0.597
of a share of the  Company's  Common  Stock for each  share of  common  stock of
Horizon,   and  (ii)  all  of  the  outstanding  limited  partnership  units  of
Horizon/Glen  Outlet Centers Limited Partnership  ("Horizon  Partnership") at an
exchange  ratio  of  0.9193  of a Common  Unit of  partnership  interest  in the
Operating  Partnership.  A total of  4,846,325  shares of  Series B  Convertible
Preferred Stock and 14,466,329 shares of Common Stock were issued by the Company
to the  shareholders  of Horizon and  3,782,121  Common Units were issued by the
Operating Partnership to the limited partners of Horizon Partnership.
<PAGE>
     Immediately prior to the merger, Horizon Partnership  contributed 13 of its
35 centers to Horizon Group Properties, L.P., of which Horizon Group Properties,
Inc.  ("HGP"),  a subsidiary of Horizon,  is the sole general  partner.  HGP was
spun-off from the Company on June 15, 1998.  The remaining 22 outlet  centers of
Horizon were integrated into the Company's existing portfolio. On June 19, 1998,
all of the common equity of HGP was distributed to the convertible preferred and
common shareholders and unitholders of the Company and its Operating Partnership
and the  shareholders  and limited  partners of Horizon and Horizon  Partnership
based on their ownership in the Company  immediately  following  consummation of
the merger. One share of common stock of HGP was distributed for every 20 shares
of Common  Stock and Series C  Preferred  Stock of the  Company and for every 20
Common Units of the Operating  Partnership.  Additionally,  approximately  1.196
shares of the common stock of HGP were distributed for every 20 shares of Series
B Convertible Preferred Stock of the Company.

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

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

        The  merger  has  been  accounted  for  using  the  purchase  method  of
accounting and the purchase  price was allocated to the assets  acquired and the
liabilities assumed based on estimates of their respective fair values.  Certain
assumptions  were made which management of the Company believed were reasonable.
The operating  results of these  properties  have been included in the Company's
consolidated  results of operations  commencing  on the date of the merger.  The
operating results of the Prime Transferred  Properties have been included in the
Company's consolidated results of operations through the date of disposition.

        The following unaudited pro forma information  presents a summary of the
Company's  consolidated  results  of  operations  as if these  acquisitions  and
dispositions had occurred on January 1, 1999:

--------------------------------------------------------------------------------
Years ended December 31,                                   2000            1999
--------------------------------------------------------------------------------

Total revenues....................................... $ 240,991        $244,693
                                                      =========        ========
Net loss from continuing operations.................. $ (96,091)       $(20,205)
                                                      =========        ========
Net loss applicable to common shares................. $(118,763)       $(30,167)
                                                      =========        ========
Loss per common share:
  Basic.............................................. $   (2.73)       $  (0.70)
                                                      =========        ========
  Diluted............................................ $   (2.73)       $  (0.68)
                                                      =========        ========
Weighted average common shares outstanding:
  Basic..............................................    43,517          43,196
                                                      =========        ========
  Diluted............................................    43,517          44,260
                                                      =========        ========
================================================================================

        These  unaudited pro forma  results have been  prepared for  comparative
purposes  only and do not purport to be  indicative of the results of operations
which actually would have resulted had the above  transactions been in effect on
January 1, 1999 or of future results of operations of the Company.

Note 4 -- Restricted Cash

        As of December 31, 2000 and 1999, $54,920 and $28,131 of cash was placed
in  various  escrows  and,  therefore,  classified  as  restricted  cash  in the
Consolidated Balance Sheet. Restricted cash generally consists of lender escrows
for  the  payment  of  debt  service,  real  estate  taxes,  insurance,  capital
expenditures and certain operating expenses.
<PAGE>
        Restricted  cash  also includes amounts relating  to future  development
costs. At December 31, 2000, $5,142  was held  in escrow for  the  completion of
Prime Outlets of Puerto  Rico.  At  December 31, 1999, $1,326 was held in escrow
for development costs  relating  to the completion of  expansions of  ten of the
Company's outlet centers.

Note 5 -- Deferred Charges

        Deferred charges were as follows:

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

  December 31,                                               2000          1999
  ------------------------------------------------------------------------------

  Leasing commissions..............................       $10,046      $ 11,307
  Financing costs..................................        28,062        21,466
                                                           ------        ------
                                                           38,108        32,773
  Accumulated amortization.........................       (18,575)      (19,270)
                                                           ------        ------
                                                          $19,533       $13,503
                                                           ======        ======
  ==============================================================================

Note 6 -- Bonds and Notes Payable

        Bonds payable consisted of the following:

<TABLE>
 -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 December 31,                                                                                    2000                           1999
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>                             <C>

Fixed rate tax-exempt revenue bonds (the "Fixed Rate Bonds"),  interest rates,
 ranging from 6.88% to 7.00%, interest-only  payments, due 2012 to 2014,
 collateralized by properties  in Chattanooga, TN and Knoxville, TN..............             $27,805                        $28,250

Urban  Development  Action  Grant  Loans,  3% through  August  31,  1997 and 6%
 thereafter, interest-only payments, due 2016 to 2019, collateralized by
 property in Chattanooga, TN.....................................................               4,650                          4,650
                                                                                              -------                        -------
                                                                                              $32,455                        $32,900
                                                                                              =======                        =======

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

        During   October   1999,   the   Company   refinanced   its  $28,250  of
variable-rate,  tax-exempt  revenue  bonds by  issuing  $28,250  of  fixed  rate
tax-exempt  revenue  bonds (the "Fixed Rate  Bonds").  The Fixed Rate Bonds bear
interest ranging from 6.875% to 7.0%, require semi-annual  interest payments and
mature from December 15, 2012 through December 1, 2014. The Fixed Rate Bonds are
redeemable by the Company commencing in December 2006 at 102% of the outstanding
principal  balance.  The  redemption  price  decreases  incrementally  each year
thereafter through December 2008, at which date the redemption price is fixed at
100%  of  the  outstanding  principal  balance.

     The Fixed Rate Bonds contain certain financial covenants, including minimum
debt  service  coverage  ratios and  cross-default  provisions  with  respect to
certain of the Company's other credit agreements. In the event of non-compliance
or  default,  the  holders  of the  Fixed  Rate  Bonds  may  elect  to put  such
obligations to the Company at a price equal to par plus accrued interest.

     Certain of the Fixed Rate Bonds require  mandatory sinking fund payments as
follows:

 -------------------------------------------------------------------------------
 Years ended December 31,
 -------------------------------------------------------------------------------

 2001............................................................       $   480
 2002............................................................           505
 2003............................................................           540
 2004............................................................           575
 2005............................................................           615
 Thereafter......................................................        18,090
                                                                        -------
                                                                        $20,805
                                                                        =======
 ===============================================================================

 During 2000, $445 of the Fixed Rate Bonds were redeemed from the sinking fund.
<PAGE>
        Notes payable consists of the following:
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31,                                                                                              2000                  1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                  <C>                 <C>
First Mortgage and Expansion Loan, LIBOR plus 1.51% through November 10, 1998,
  7.782% thereafter, monthly installments of $2,580 including interest, due
  November 11, 2003, collateralized by fifteen properties located throughout
     located throughout the United States.......................................                     $ 346,392           $   349,797
Permanent Loan, 6.99%, monthly installments of $1,248 including interest,  due
  July 11, 2008, collateralized by four properties located throughout
  the United States.............................................................                             -               176,734
Bridge Loan, LIBOR plus 1.35% with monthly interest-only payments at December
  31, 1999, 13% with monthly interest payments plus principal payments of the
  greater of $50 or 50% of excess cash flow at December 31, 2000, due December
  31, 2003, collateralized by six properties located throughout
  the United States.............................................................                       112,000               112,000
Mortgage, 6.927%, monthly installments of $565 including interest, due
  October 11, 2006, collateralized by four properties located throughout the
  United States.................................................................                        74,481                75,893
Mortgage, 6.927%, monthly installments of $527 including interest, due
  March 11, 2006, collateralized by four properties located throughout the
  United States.................................................................                        65,293                66,935
Mortgage, 7.60% monthly installments of $450 including interest, due
  May 10, 2009, collateralized by property located in Niagara Falls, NY.........                        62,120                62,693
Term loan, LIBOR plus 6.00%, 12.48% at December 31, 1999, monthly interest-only
  payments through January 10, 2000; monthly principal of $1,000 and interest
  thereafter, due December 10, 2001, collateralized by excess cash flow from
  fifteen properties located throughout the United States.......................                             -                55,000
Mortgage, 6.95%, monthly installments of $351 including interest, due
  November 1, 2005, collateralized by property located in Vero Beach, FL and
  Woodbury, MN..................................................................                        43,859                44,917
Unsecured  Revolving  Loan,  LIBOR plus  1.75%,  8.21% at December  31,  1999,
  monthly interest-only payments, quarterly principal payments of $1,000
  commencing March 31, 2000, due September 11, 2001.............................                             -                40,000
Construction  Mortgage  Loan,  LIBOR plus 1.50%,  8.30% at December  31, 2000,
  monthly interest-only payments through May 31, 2002; monthly principal and
  interest payments thereafter, due June 1, 2004, collateralized by property
  located in Hagerstown, MD.....................................................                        48,863                38,560
Mortgage, 6.915%, monthly installments of $357 including interest, due June 10,
  2002, collateralized by property located in Conroe, TX and
  Jeffersonville, OH............................................................                        34,890                36,696
Interim  loan,  LIBOR  plus  2.50%,   8.98%  at  December  31,  1999,  monthly
  interest-only payments, due January 11, 2002, collateralized by property
  located in Williamsburg, VA...................................................                             -                32,500
Mortgage, 8.35%, monthly installments of $215 including interest, due June 11,
  2007, collateralized by three properties located throughout the
  United States.................................................................                        25,740                26,113
Unsecured  Corporate  Line,  $25,000 at December 31,  1999,  LIBOR plus 2.50%,
  7.88% at December 31, 1999, monthly interest-only payments, due
  December 31, 2000.............................................................                             -                22,175
Subordinated Loan, 15.00%, monthly interest-only payments, due August 14, 2000,
  collateralized by a security interest and available cash flows of five
  properties located throughout the United States...............................                             -                20,000
Lebanon First Mortgage Loan,  LIBOR plus 3.00%, 8.56% at December 31, 2000,
  monthly interest plus $100 principal payments, due June 30, 2001,
  collateralized by property located in Lebanon, TN.............................                        18,378                19,951
Mortgage, 6.91%, monthly installments of $154 including interest, due June 10,
  2001, collateralized by property located in Edinburgh, IN.....................                        16,681                17,347
Mortgage, 6.95%, monthly installments of $81 including interest, due November 1,
  2005, collateralized by property located in Perryville, MD....................                         9,893                10,157
Note Payable, 13.50%, monthly interest-only payments, due November 1, 2001,
  collateralized by land located in Camarillo, CA...............................                         6,527                 7,400
Mortgage, 9.375%, monthly installments of $71 including interest, due March 1,
  2004, collateralized by property located in Lombard, IL.......................                         5,990                 6,239
Mortgage, 7.50%, monthly installments of $29 including interest, due
  October 31, 2001, collateralized by  property in Knoxville, TN................                         3,521                 3,590
Other notes payable.............................................................                         3,070                 3,073
Hagerstown Second Mortgage Loan,  LIBOR plus 2.50%,  9.30% at December 31, 2000,
  monthly interest-only payments through June 30, 2001; monthly principal of
  $164 and interest payments thereafter, due June 1, 2004, collateralized by
  property located in Hagerstown, MD............................................                        10,000                     -
Puerto Rico First Mortgage Loan, LIBOR plus 3.50%, 10.16% at December 31, 2000,
  monthly interest payments plus (i) principal installments based on a 25 year
  amortization schedule using an interest rate of 9% until January 1, 2002 and
  (ii) principal installments based on a 15 year amortization schedule using an
  interest rate of 9% thereafter, due December 31, 2003, collateralized by
  property located in Barceloneta, Puerto Rico..................................                        20,000                     -
$90,000 Mezzanine Loan, LIBOR plus 9.50% (minimum of 14.50%), 16.13% at December
  31, 2000, monthly principal and interest due December 31, 2003, collateralized
  by pledges of equity interests in certain properties. ........................                        90,000                     -
                                                                                                     ---------           -----------
                                                                                                     $ 997,698           $1,227,770
                                                                                                     =========           ===========
 ===================================================================================================================================
</TABLE>
<PAGE>
        Notes payable  include  unamortized  debt  premiums of  $14,144  in  the
aggregate  at December 31, 2000.  Debt premiums  are  being  amortized  over the
terms of the related debt instruments in accordance with the effective  interest
method.  Additionally,  interest incurred reflects amortization of debt premiums
of  $3,159  and  $4,406  for  the  years  ended  December  31,  2000  and  1999,
respectively.  The  aggregate  carrying  amount of bonds and  notes  payable  at
December 31, 2000  approximated  their fair value.  At December  31,  2000,  the
aggregate  carrying  amount of rental property  collateralizing  bonds and notes
payable was $1,316,490.

        Interest costs are summarized as follows:
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
 Years ended December 31,                                                                      2000           1999             1998
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                         <C>            <C>              <C>
 Interest incurred..............................................................            $98,390        $94,201          $63,630
 Interest capitalized...........................................................             (3,412)        (4,646)          (5,793)
 Amortization of deferred financing costs and interest
    rate protection contracts...................................................              3,256          4,379            2,867
                                                                                            -------        -------          -------

 Interest expense...............................................................            $98,234        $93,934          $60,704
                                                                                            =======        =======          =======

 Interest paid..................................................................            $99,611        $94,046          $61,114
                                                                                            =======        =======          =======

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

     The scheduled  principal  maturities of bonds and notes payable,  excluding
unamortized  debt  premiums,  and  related  average  interest  rates  by year of
maturity as of December 31, 2000 were as follows:

 -------------------------------------------------------------------------------
                                                       Average         Principal
Years ended December 31,                        Interest Rates          Maturity
 -------------------------------------------------------------------------------

 2001..............................................     10.56%        $   67,712
 2002..............................................     11.33             64,914
 2003..............................................      9.87            534,463
 2004..............................................      8.43             63,418
 2005..............................................      8.05             50,330
 Thereafter........................................      7.34            235,172
                                                        -----         ----------
                                                         9.16%        $1,016,009
                                                        =====         ==========
 ===============================================================================

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

     On December 22, 2000, the Company closed a major  refinancing of its assets
and the sale of four of its  outlet  centers  through a series  of  transactions
(collectively,  the "December  22, 2000  Transactions").  The principal  lenders
involved in the  December 22, 2000  Transactions  were an affiliate of Fortress;
Greenwich Capital Financial Products,  Inc.  ("Greenwich");  and Mercantile-Safe
Deposit and Trust Company ("Mercantile").  The sale of its outlet centers was to
a joint  venture  partnership  comprised  of Fortress  and Chelsea (see Note 3 -
"Acquisitions  and  Dispositions"  for  additional  information).  Fortress  and
Greenwich  (collectively,  the "Lending Group") provided a mezzanine loan in the
amount of $90,000 (the "$90,000  Mezzanine  Loan").  Greenwich  funded a $20,000
first  mortgage  loan (the "Puerto Rico First  Mortgage  Loan") on the Company's
outlet  center that  recently  opened in Puerto Rico and  Mercantile  provided a
$10,000 second  mortgage loan (the  "Hagerstown  Second  Mortgage  Loan") on the
Company's outlet center in Hagerstown, Maryland. The Company executed agreements
to extend the  maturity  date of two of its  existing  loans,  a $112,000  first
mortgage  loan  (the  "Bridge  Loan")  from  Nomura  Asset  Capital  Corporation
("Nomura") and a $19,378 first mortgage loan (the "Lebanon First Mortgage Loan")
from KeyBank National Association.
<PAGE>
     The $90,000  Mezzanine  Loan is secured by pledges of equity  interests  in
certain outlet centers.  The loan is for a term of  three-years;  requires fixed
monthly principal  amortization  commencing on February 1, 2001 of $1,000 during
the first year,  $1,667 during the second year and $2,333 during the third year;
requires the payment of certain exit fees;  and is pre-payable at any time after
one year.  The $90,000  Mezzanine  Loan requires that the Company's  excess cash
flow from  operations  and assets sales above  certain  thresholds be applied to
principal reductions. The interest rate is a floating rate based on 30-day LIBOR
plus 9.50%,  but not less than 14.50%.  The loan  contains  financial  and other
covenants that restrict, among other things, the ability of the Company to incur
additional  indebtedness or pay dividends  (other than dividends to maintain the
Company's  status as a REIT). In addition,  in connection with the financing the
Company issued warrants  (recorded at fair value at the date of the transaction)
to the Lending  Group to purchase  one million  shares of the  Company's  common
stock at an exercise price of $1.00 per share.

     The Puerto  Rico First  Mortgage  Loan is secured by the  Company's  outlet
center in Puerto  Rico.  The Puerto  Rico First  Mortgage  Loan is for a term of
three-years,  requires monthly amortization of $15 based upon a 25-year schedule
for the first year and $51 based upon a 15-year schedule thereafter.  The Puerto
Rico First Mortgage Loan is non-recourse  and is pre-payable at any time subject
to certain  prepayment and exit fees. The interest rate is a floating rate based
on 30-day LIBOR plus 3.50%.  In addition,  the Puerto Rico First  Mortgage  Loan
provides  for a commitment  to fund up to an  additional  $5,000  subject to the
satisfaction of certain conditions,  including the achievement of minimum sales,
occupancy and debt service  coverage ratio thresholds no later than December 31,
2001.

     The  Hagerstown  Second  Mortgage Loan is secured by the  Company's  outlet
center in  Hagerstown,  Maryland and has a term of 30-months that is co-terminus
with Mercantile's  existing $48,863 first mortgage loan on the same center.  The
Second Mortgage Loan requires monthly amortization starting in the seventh month
of $164 per month and is  pre-payable  at any time  without  penalty or fee. The
interest rate is a floating rate based on 30-day LIBOR plus 2.50%.

     On December 22, 2000, the term of the Bridge Loan,  which was due to mature
on June 11, 2001, was extended until December 31, 2003. In consideration for the
extension,  the interest  rate was  converted  from 30-day LIBOR plus 1.35% to a
fixed-rate  of 13.00%;  the monthly  interest-only  payments  were  converted to
monthly interest and principal payments  (principal  amortization of the greater
of (i) 50% of excess cash flow from the  properties  collateralizing  the Bridge
Loan or (ii) $50) and a loan  extension fee of $1,120 was paid.  The loan may be
prepaid at any time. In  connection  with the  modification  of the terms of the
Bridge Loan, the Company incurred an  extraordinary  loss of $1,345 during 2000.
The  extraordinary  loss consisted of (i) the $1,120  extension fee and (ii) the
write-off of unamortized deferred financing costs and expenses aggregating $225.

     On December 22, 2000, the term of the Lebanon First Mortgage Loan,  secured
by the Company's outlet center in Lebanon, Tennessee, which was due to mature on
December 31, 2000,  was extended for a period of six months until June 30, 2001,
with an additional  three-month  extension  available if certain  conditions are
met. In  consideration  for the  extension,  the interest  rate was increased by
1.25% to 30-day  LIBOR plus 3.00% and the loan  balance  was  reduced to $18,378
through a $1,000 principal payment. The loan may be prepaid at any time. The net
proceeds  from the  December  22,  2000  Transactions  were  used to (i) pay off
$125,000 of short-term  indebtedness as described below; (ii) pay-down $3,500 of
other indebtedness (the $1,000 principal reduction on the Lebanon First Mortgage
Loan and a $2,500 principal  reduction on a first mortgage loan on Phases II and
III of the outlet  center  located  in  Bellport,  New York),  and (iii) pay the
$1,120 extension fee on the Bridge Loan. The remainder of the proceeds have been
and will be used (i) for general  corporate  purposes,  including the funding of
certain programs to attract and retain tenants through  increased  marketing and
capital  improvements  and (ii) to fund  remaining  development  costs for Prime
Outlets of Puerto Rico.

     The Company used  $125,000 of the net  proceeds  from the December 22, 2000
Transactions  for  the  repayment  of  (i)  a  $20,000  subordinated  loan  (the
"Subordinated  Loan")  made by FBR Asset  Investment  Corporation  that  matured
August  14,  2000,  (ii) a  $25,000  unsecured  corporate  line of  credit  from
Mercantile  which  was due to  mature  on  December  31,  2000,  (iii) a $37,000
unsecured revolving loan (the "Unsecured  Revolving Loan") from Nomura which was
scheduled to mature on September  11, 2001 and (iv) the  prepayment of a $43,000
term loan (the "Term  Loan") from  Greenwich  which was  scheduled  to mature on
December 10, 2001. In connection with the prepayment of the Unsecured  Revolving
Loan and the Term Loan, the Company incurred an extraordinary  loss on the early
extinguishment of debt aggregating  $2,861 during 2000. The  extraordinary  loss
consisted  of  (i) a  $1,700  prepayment  penalty  and  (ii)  the  write-off  of
unamortized deferred financing costs and expenses aggregating $1,161.
<PAGE>
     The Company had been in default of the  Subordinated  Loan and such default
had triggered  certain  cross-default  provisions  with respect to other Company
debt facilities.  In addition, the Company previously was not in compliance with
financial covenants contained in certain of its debt facilities.  As a result of
the debt  repayments  and the various  restructuring  and  extension  agreements
completed  on  December  22,  2000,  the  Company  had cured or  eliminated  all
financial covenant defaults under its recourse loan agreements.  However,  there
can be no assurance  that the Company will be in  compliance  with its financial
debt  covenants  in  future  periods  since  the  Company's   future   financial
performance  is subject to various  risks and  uncertainties,  including but not
limited to, the  effects of  increases  in market  interest  rates from  current
levels,  the risk of  potential  increases  in vacancy  rates and the  resulting
impact on the Company's  revenue,  and risks  associated  with  refinancing  the
Company's  current debt  obligations  or obtaining new financing  under terms as
favorable as the Company has experienced in prior periods.

     During  1999,  the  Company  incurred  an  extraordinary  loss on the early
extinguishment of debt of $3,518, net of minority interests of $887.

2001 Sales Transactions

     On February 2, 2001, the Company  completed the sale of Northgate  Plaza, a
community  center  located in Lombard,  Illinois to Arbor  Northgate,  Inc.  for
aggregate  consideration  of $7,050.  The net cash  proceeds  from the sale were
$510,  after the repayment of mortgage  indebtedness of $5,966 and closing costs
and fees.  The net  proceeds  from the sale were  applied  against  the  $90,000
Mezzanine  Loan in accordance  the with terms of the loan  agreement.

     On March 16,  2001,  the  Company  completed  the sale of Prime  Outlets at
Silverthorne,  an outlet center comprising 257,000 square feet of GLA located in
Silverthorne,  Colorado  to  Silverthorne  Factory  Stores,  LLC  for  aggregate
consideration of $29,000. The net cash proceeds from the sale were $8,992, after
the  repayment of mortgage  indebtedness  of $18,154  related to the  collateral
substitution  (see below) and closing costs and fees.  The net proceeds from the
sale were applied  against the $90,000  Mezzanine  Loan in  accordance  with the
terms of the loan agreement.

     Prime  Outlets  at  Silverthorne   was  one  of  fifteen   properties  that
cross-collateralized  The First  Mortgage and  Expansion  Loan,  which  contains
collateral  substitution  provisions that permit the exchange of specific assets
pledged as collateral upon approval by the lender.  In conjunction with the sale
of Prime Outlets at Silverthorne,  by the Company  substituted  Prime Outlets at
Lebanon (located in Lebanon,  Tennessee) and  subsequently  paid-off the Lebanon
First Mortgage Loan.

Commitments & Contingencies

     Subsidiaries of the Company have suspended regularly scheduled monthly debt
service payments on two non-recourse  mortgage loans  aggregating  $34,890 which
are  cross-collateralized  by Prime  Outlets at  Jeffersonville  II,  located in
Jeffersonville, Ohio, and Prime Outlets at Conroe, located in Conroe, Texas. The
Company is currently discussing  potential  restructuring with the holder of the
mortgage loans;  however,  there can be no assurance that such  discussions will
lead to a modification  of the mortgage  loans and that the two properties  will
not be foreclosed.  Because the two mortgage loans are non-recourse, the Company
does not believe the existing  defaults or any related  foreclosure  will have a
material impact on its results of operations or financial position.

     Various mortgage loans,  related to projects in which the Company,  through
subsidiaries,  indirectly owns joint venture interests,  have matured and are in
default.  The mortgage loans are (i) a $10,389 first mortgage loan on Phase I of
the outlet  center in  Bellport,  New York,  held by Union Labor Life  Insurance
Company  ("Union  Labor");  (ii)  mortgage  loans  aggregating  $29,670 on Prime
Outlets at New River located in New River,  Arizona, held by Fru-Con Development
Corporation  ("Fru-Con");  and (iii) a $13,639 first mortgage loan on the outlet
center in Oxnard, California,  also held by Fru-Con. Fru-Con and the Company are
each 50.0% partners in both the New River and Oxnard outlet centers.

     Union Labor has filed for  foreclosure  on Phase I of the  Bellport  outlet
center and Fru-Con has filed for foreclosure on Prime Outlets at New River.  The
Company  is  currently  negotiating  the terms of a  transfer  of its  ownership
interest in the Oxnard  outlet center to Fru-Con.  The Company  believes none of
these  mortgage loans are recourse to the Company.  Therefore,  the Company does
not believe the existing defaults under these loans or any related  foreclosures
on the  mortgaged  properties  will have a  material  impact on its  results  of
operations or financial position.
<PAGE>
     The  Company,  through  affiliates,  holds a 51%  interest  in the owner of
Phases II and III of an outlet center in Bellport,  NY. The owner failed to make
a required $3,000 principal payment on a $10,795 first mortgage loan when due on
November 1, 2000. The Company paid, on behalf of the owner, the required payment
through a series of payments  during  November  and December  2000,  including a
$2,500   payment  made  from  the  net  proceeds  from  the  December  22,  2000
Transactions.  The  maturity  date of the  first  mortgage  loan of  $7,795  was
extended to May 1, 2001.  The Company  plans to either  refinance  or extend the
maturity of this  mortgage  indebtedness.  In the event the Company is unable to
refinance  or extend the  maturity of such  indebtedness,  it will  consider the
repayment of the outstanding balance through proceeds from potential sale of the
property.  There can be no  assurance  that the Company  will be  successful  in
obtaining the required amount of funds for the maturing indebtedness or that the
terms of the refinancing or extension of the maturity,  if it should occur, will
be as favorable as the Company has  experienced in prior periods.  Although this
loan is recourse,  the Company  believes that any default or  foreclosure  under
this loan  will not have a  material  impact on its  results  of  operations  or
financial position.

     As of December 31, 2000, the Company is a guarantor or otherwise  obligated
with  respect to an aggregate of $12,722 of the  indebtedness  of Horizon  Group
Properties, Inc. and its affiliates ("HGP") including a $10,000 obligation under
HGP's  secured  credit  facility  which  bears a rate of  interest of LIBOR plus
1.90%,  matures in July 2001, and is collateralized by seven properties  located
throughout the United  States.  As of December 31, 2000, no claims had been made
against the Company's guaranty by the lender.

     On April 1, 1998,  Horizon  consummated  an  agreement  with Castle & Cooke
Properties,  Inc. which released Horizon from its future  obligations  under its
long-term  lease of the Dole  Cannery  outlet  center in  Honolulu,  Hawaii,  in
connection  with the  formation of a joint  venture with certain  affiliates  of
Castle & Cooke,  Inc.  ("Castle & Cooke") to operate  such  property.  Under the
terms of the  agreement,  Castle & Cooke  Properties,  Inc., the landlord of the
project and an affiliate of Castle & Cooke, released Horizon from any continuing
obligations  under the lease,  which  expires in 2045, in exchange for Horizon's
conveyance to the joint venture of its rights and obligations  under such lease.
The  agreement  also  provided  that  Horizon  transfer  to such  joint  venture
substantially  all of Horizon's  economic  interest in its outlet center in Lake
Elsinore,  California  together  with  legal  title to vacant  property  located
adjacent to the center.  The Company held a small minority interest in the joint
venture but has no  obligation or  commitment  with respect to the  post-closing
operations  of the Dole  Cannery  project.  On  August  15,  2000,  the  Company
exercised  its option  under the  operating  agreement  of the join  venture and
transferred  its  entire  interest  in the  joint  venture  to a  Castle & Cooke
subsidiary.

Note 7 -- Minority Interests

        In  conjunction  with the  formation  of the Company  and the  Operating
Partnership,  the predecessor owners contributed interests in certain properties
to the  Operating  Partnership  and, in  exchange,  received  8,505,472  limited
partnership   interests  in  the   Operating   Partnership   ("Common   Units").
Additionally, 3,782,121 Common Units were issued in June 1998 in connection with
the Company's merger with Horizon.  Subject to certain  conditions,  each Common
Unit held by a Limited  Partner may be  exchanged  for one share of Common Stock
or, at the option of the Company, cash equal to the fair market value of a share
of Common Stock at the time of exchange.

     During 2000 and 1999, 29,296 and 471,923 Common Units,  respectively,  were
exchanged for shares of Common Stock. As of December 31, 2000, 10,810,912 Common
Units were issued and outstanding. Minority interests also includes interests in
two property  partnerships that are not wholly owned by the Company.  During the
years ended December 31, 2000, 1999 and 1998, expenses totaling $2,928, $11,752,
and $3,035,  respectively,  related  solely to the operation of the Company were
allocated only to the common  shareholders.  Such  allocation is consistent with
the federal and state tax treatment of these expenses.

        During the year ended  December 31, 2000, the loss allocated to minority
interests  totaled  $738.  During  the year  ended  December  31,  1999,  income
allocated to minority  interests  totaled  $2,339,  net of an $887 allocation of
extraordinary  losses.  In addition,  during 1999 cash  distributions and losses
allocated to minority interests reduced the minority  interests' balance related
to Common Units to zero. After reducing the minority interests' balance to zero,
cash  distributions,  if any,  related  to Common  Units are  treated  as income
allocated to minority interests.
<PAGE>
Note 8 -- Shareholders' Equity

        The  Company  is  authorized  to issue up to (i)  150,000,000  shares of
common  stock  and (ii)  24,315,000  shares  of  preferred  stock in one or more
series.  At December  31, 2000,  43,577,916  shares of common  stock,  2,300,000
shares of Senior  Preferred  Stock and 7,828,125  shares of Series B Convertible
Preferred Stock were issued and outstanding.

        The Senior Preferred Stock and Series B Convertible Preferred Stock have
a liquidation preference equivalent to $25.00 per share plus the amount equal to
any accrued and unpaid dividends thereon.

        Dividends  on the Senior  Preferred  Stock are payable  quarterly in the
amount of $2.625 per share per  annum.  Dividends  on the  Series B  Convertible
Preferred Stock are payable quarterly at the greater of (i) $2.125 per share per
annum or (ii) the dividends on the number of shares of Common Stock into which a
share  of  Series B  Convertible  Preferred  Stock  will be  convertible  at the
conversion  price of $20.90 per share of Common  Stock.  At December  31,  2000,
there were 9,363,786  shares of Common Stock  reserved for future  issuance upon
conversion of the Series B Convertible Preferred Stock.

        The Company has the right to redeem the Senior  Preferred  Stock and the
Series B Convertible  Preferred  Stock  beginning on and after March 31, 1999 at
$26.75 and $27.125 per share, respectively, plus the amount equal to any accrued
and unpaid dividends thereon. The redemption price decreases  incrementally each
year  thereafter  through March 31, 2004, at which date the redemption  price is
fixed at $25.00  per share  plus the  amount  equal to any  accrued  and  unpaid
dividends thereon.

        On March 31, 1999, the Company  entered into an agreement  providing for
the repurchase of all of its outstanding  shares of Series C Preferred Stock for
$43,636 or $10.00 per share. The agreement  provided for the repurchase to occur
in two stages.  In the first stage,  on March 31, 1999, the Company  repurchased
3,300,000 shares of the Series C Preferred Stock in exchange for the issuance of
a 12.0%  fixed  rate  $33,000  unsecured  promissory  note  which was  repaid on
September 29, 1999. In the second stage,  the Company  repurchased the remaining
1,063,636  outstanding  shares of its Series C Preferred  Stock for an aggregate
purchase price of $10,636 on September 29, 1999.

        During the year ended  December  31,  1999,  a  redemption  discount  of
$13,388 representing the excess of the carrying amount of the Series C Preferred
Stock over its redemption amount is reflected in the Consolidated  Statements of
Operations as a loss allocated to preferred shareholders.

     In order to qualify as a REIT for federal income tax purposes,  the Company
is required to pay distributions to its common and preferred  shareholders of at
least 95% (90% for years  beginning after December 31, 2000) of its REIT taxable
income in  addition  to  satisfying  other  requirements.  Although  the Company
intends  to make  distributions  in  accordance  with  the  requirements  of the
Internal  Revenue Code of 1986, as amended,  necessary to remain  qualified as a
REIT, it also intends to retain such amounts as it considers necessary from time
to time for capital and liquidity needs of the Company.

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

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

        The Company is prohibited from paying dividends or distributions  except
to the extent  necessary  to  maintain  its REIT  status  under the terms of its
$90,000 Mezzanine Loan (see Note 6 -  "Bonds and  Notes Payable".  In  addition,
the  Company  may  make no  distributions  to  its  common  shareholders  or its
holders  of  common  units  of limited  partnership  interest  in the  Operating
Partnership  unless it is current with respect to distributions to its preferred
shareholders. As of December 31, 2000, unpaid  dividends for the period November
16, 1999 through  December 31, 2000 on  the Senior  Preferred Stock and Series B
Convertible  Preferred Stock  aggregated $6,792 and $18,714,  respectively.  The
annualized dividends on the Company's 2,300,000 shares of Senior Preferred Stock
and 7,828,125 shares of Series B  Convertible Preferred  Stock outstanding as of
December 31, 2000 are $6,038 ($2.625 per share) and $16,636, ($2.125 per share),
respectively.
<PAGE>
Note 9 -- Stock Incentive Plans

        Under  various  plans,  the Company  may grant  stock  options and other
awards  to  executive  officers,  other key  employees,  outside  directors  and
consultants. The exercise  price for stock  options  granted is no less than the
fair market value of the Company's common stock on the date of grant.

        In general, stock options are fully vested on the date of grant and have
a term of 10 years.  In certain  cases stock  options granted become exercisable
over periods up to six years.

        During 2000, the Company granted options to executive officers and other
key employees to purchase  1,087,600  shares of common stock at $2.00 per share.
These options, which have a term of 10 years, were 50% vested as of December 31,
2000 and will  fully  vest on June 30,  2001.  Additionally,  during  2000,  the
Company awarded 180,000 shares of restricted common stock and granted options to
outside  directors  to  purchase  420,0000  shares of common  stock at $1.69 per
share. The restricted common stock was fully vested as of September 1, 2000. The
options, which have a term of 10 years, vest pro-ratably on a monthly basis from
May 1, 2000 through February 1, 2001.

        During 1999, the Company  awarded  135,955  shares of restricted  common
stock to certain executive officers. These awards were 25% vested on the date of
grant. The restricted shares vest an additional 25% annually until fully vested.
In 1999, the Company also awarded  24,000 shares of restricted  common stock and
granted  options to outside  directors to purchase 85,000 shares of common stock
at $9.85 per share.  These  awards  were  fully  vested at the grant  date.  The
options have a term of 10 years.

        The Company has adopted the disclosure-only  provisions of SFAS No. 123,
"Accounting for Stock Based Compensation."  Accordingly, no compensation expense
has been recognized for employee stock option grants. If the Company had elected
to  recognize  compensation  based on the fair value of the  options  granted at
grant date as prescribed by SFAS No. 123,  unaudited pro forma net income (loss)
and earnings per share would have been as follows:

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended December 31,                                                                     2000           1999              1998
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                     <C>             <C>               <C>
Income (loss) before extraordinary loss.........................................        $(139,910)      $(31,376)         $ 15,348
Extraordinary loss..............................................................           (4,206)        (3,518)                -
                                                                                       ----------       --------          --------
Net income (loss)...............................................................        $(144,116)      $(34,894)         $ 15,348
                                                                                       ==========       ========          ========
Net loss applicable to common shares............................................        $(166,788)      $(44,856)         $ (9,256)
                                                                                       ==========       ========          ========

Basic earnings per common share:
    Loss before extraordinary loss..............................................         $  (3.73)      $  (0.96)         $  (0.26)
    Extraordinary loss..........................................................            (0.10)         (0.08)                -
                                                                                         --------       --------          --------
    Net loss....................................................................         $  (3.83)      $  (1.04)         $  (0.26)
                                                                                         ========       ========          ========
Diluted earnings per common share:
    Loss before extraordinary loss..............................................         $  (3.73)      $  (1.22)         $  (0.26)
    Extraordinary loss..........................................................            (0.10)         (0.08)                -
                                                                                         --------       --------          --------
    Net loss....................................................................         $  (3.83)      $  (1.30)         $  (0.26)
                                                                                         ========       ========          ========
====================================================================================================================================
</TABLE>

        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:

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended December 31,                                                                  2000               1999              1998
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                       <C>                <C>               <C>
Risk-free interest rate.........................................................           5.0%               6.4%              5.0%
Dividend yield..................................................................             -%              21.0%             12.0%
Volatility factor...............................................................          0.87               0.37              0.36
Weighted average life (in years)................................................          10.0               10.0              10.0

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

        The  Black-Scholes  option  valuation  model  was  developed  for use in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.   Because  the   Company's   stock   options  have   characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.
<PAGE>
        A summary  of the  Company's  stock  option  plans  for the years  ended
December 31 are as follows:

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                            2000                             1999                               1998
                                -----------------------------    -----------------------------   -----------------------------------
                                                    Weighted                         Weighted                               Weighted
                                                     Average                          Average                                Average
                                                    Exercise                         Exercise                               Exercise
                                       Shares          Price            Shares          Price               Shares             Price
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>               <C>            <C>               <C>               <C>                  <C>
Beginning of year..........         3,280,317         $14.12         3,811,067         $14.90            1,148,250            $15.64
Granted....................         1,507,600           1.91            85,000           9.85            1,724,575             13.10
Transferred (Horizon)......                 -              -                 -              -              959,742             18.62
Cancelled..................          (656,861)         12.13          (615,750)         18.37              (21,500)            12.64
                                    ---------         ------          --------         ------            ---------            ------
End of year................         4,131,056         $ 9.98         3,280,317         $14.12            3,811,067            $14.90
                                    =========         ======         =========         ======            =========            ======
Exercisable -
   end of year.............         3,276,987         $11.84         2,900,314         $14.22            3,083,570            $15.24
                                    =========         ======         =========         ======            =========            ======

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

------------------------------------------------------------------------------------------------------------------------------------
                                                      Options Outstanding                                Options Exercisable
                                     -------------------------------------------------------     -----------------------------------
                                                                Weighted           Weighted                                 Weighted
                                                                 Average            Average                                  Average
             Range of                                          Remaining           Exercise                                 Exercise
          Exercise Price                     Shares        Life in Years              Price                 Shares             Price
------------------------------------------------------------------------------------------------------------------------------------
$ 1.69 to $ 2.00...............           1,459,550               9.3                $ 1.91                665,481            $ 1.85
          $ 8.50...............              60,000               8.6                  8.50                 60,000              8.50
$11.15 to $13.09...............           1,970,606               5.2                 12.51              1,970,606             12.51
$13.60 to $14.19...............             262,490               6.8                 13.91                202,490             13.82
          $19.00...............              30,000               3.2                 19.00                 30,000             19.00
          $23.53...............              13,788               5.3                 23.53                 13,788             23.53
$24.55 to $26.53...............             334,622               0.3                 26.11                334,622             26.11
                                          ---------               ---                ------              ---------            ------
                                          4,131,056               6.4                $ 9.98              3,276,987            $15.24
                                          =========               ===                ======              =========            ======
====================================================================================================================================
</TABLE>

        The  weighted  fair value of  options  granted  during  the years  ended
December 31, 2000, 1999 and 1998 was $0 per share, $0.96  per  share,  and $0.96
per share, respectively. Under the Company's  various plans there were 1,428,686
and 2,279,425 shares reserved for future grants at  December  31, 2000 and 1999,
respectively.

Note 10 -- Lease Agreements

        The  Company is the lessor of retail and office  space  under  operating
leases with lease terms that expire from 2001 to 2017. Most leases are renewable
for five years at the lessee's  option.  Future minimum base rent to be received
under noncancelable operating leases as of December 31, 2000 were as follows:

 -------------------------------------------------------------------------------
 Years ended December 31,
 -------------------------------------------------------------------------------

 2001.............................................................      $143,387
 2002.............................................................       112,881
 2003.............................................................        84,961
 2004.............................................................        57,479
 2005.............................................................        36,421
 Thereafter.......................................................        65,272
                                                                        --------
                                                                        $500,401
                                                                        ========
 ===============================================================================
<PAGE>
        The Company leases certain land, buildings,  and equipment under various
noncancelable  operating lease  agreements.  Rental expense for operating leases
was $2,988,  $3,699, and $1,818 for the years ended December 31, 2000, 1999, and
1998,  respectively.  Future  minimum  rental  payments,  by  year  and  in  the
aggregate,  payable under these  noncancelable  operating leases with initial or
remaining  terms of one year or more as of December  31, 2000  consisted  of the
following:

 -------------------------------------------------------------------------------
 Years ended December 31,
 -------------------------------------------------------------------------------

 2001................................................................    $ 1,840
 2002................................................................      1,534
 2003................................................................      1,135
 2004................................................................        286
 2005................................................................        239
 Thereafter..........................................................      6,065
                                                                         -------
                                                                         $11,099
                                                                         =======
 ===============================================================================

Note 11-- Special Charges

        During 2000,  management  established a formal plan to sell three of its
wholly-owned properties (Prime Outlets at Silverthorne, Prime Northgate Plaza, a
community center;  and land previously held for development)  and,  accordingly,
reclassified  their  respective   carrying  values  to  assets  held  for  sale.
Total revenues and expenses for the operating  properties classified as held for
sale were $6,354 and $6,697, respectively, for the year ended December 31, 2000.
Additionally,  the Company also determined that certain events and circumstances
had occurred  during  2000,  including  reduced  occupancy  and limited  leasing
success,  which indicated that four  wholly-owned  properties  (Prime Outlets at
Odessa, Prime Outlets at Woodbury, Prime Outlets at Post Falls and Prime Outlets
at  Latham)  and two joint  venture  properties  (Bellport  Outlet  Center I and
Bellport Outlet Center II) were permanently impaired.

        In  accordance  with the  requirements  of SFAS  No.  121,  the  Company
incurred a  provision  for asset  impairment  of $28,047 to reduce the  carrying
value of the three  properties  classified  as held for sale to their  estimated
sales  value,  less  cost to  dispose.  The  aggregate  carrying  value of these
properties  as of December  31, 2000 was  $43,230.  Furthermore,  the  Company's
results  of  operations  for 2000  include  a  provision  for  asset  impairment
aggregating  $40,616  representing  the write-down of the carrying values of the
six permanently  impaired properties to their estimated fair value in accordance
with SFAS No. 121

        On April 12,  2000,  the  Company  announced  that it had been unable to
conclude an  agreement  to transfer  ownership  of its  wholly-owned  e-commerce
subsidiary,   primeoutlets.com   inc.,   also  known  as   eOutlets.com,   to  a
management-led  investor group comprised of eOutlets.com  management and outside
investors.  Effective April 12, 2000,  eOutlets.com ceased all operations and on
November 6, 2000 filed for  bankruptcy  under Chapter 7. In connection  with the
discontinuance  of eOutlets.com,  the Company  incurred a non-recurring  loss of
$14,703 which includes (i) the write-off of $3,497 of costs  capitalized  during
1999 and (ii) $11,206 of costs incurred during the year ended December 31, 2000.
In addition,  the Company incurred  expenses of $3,500 related to organizational
and  start-up  expenditures  of  eOutlets.com  which are  reflected in corporate
general  and   administrative   expenses  in  the  Consolidated   Statements  of
Operations.

        When  accounting for 1999, the Company  determined that  certain  events
and  circumstances had occurred  during 1999  including, limited leasing success
and revised occupancy estimates,  which  indicated  two of the Company's  outlet
centers (Prime  Outlets at Jeffersonville  II and Prime Outlets at Oxnard)  were
permanently impaired.  Accordingly, the results of operations  for 1999  include
a  provision  for  asset  impairment  of  $15,842  representing  the  write-down
of  the  carrying  values of  these  assets to their  estimated  fair  value  in
accordance  with  SFAS  No.  121.  Additionally,  when accounting for  1999, the
Company  recorded  a  provision  for  abandoned  projects  of $16,039  based  on
management's   determination  that   as  of   December 31, 1999,  the  Company's
pre-development efforts associated with certain projects were no longer viable.

        The  operating  results for the  Company's  Designer  Connection  outlet
stores  are  reflected  in  loss  on  Designer  Connection  in the  Consolidated
Statements of Operations  for all periods  presented. When  accounting for 1999,
because  the  Company decided  to discontinue  the  operations of  its  Designer
Connection   outlet  stores,   the  Company   recorded   non-recurring   charges
aggregating  $3,659  including (i) $1,659  related  to  the  write-off of  costs
associated with a web-site for Designer  Connection and (ii)  $2,000 of costs to
cover the expected cash and non-cash costs of the closure. The cash and non-cash
costs of the closure primarily consisted of (i) employee termination costs, (ii)
lease  obligations,  and  (iii) the write-down of assets to their net realizable
value. The operations of Designer Connection outlet stores ceased in 2000.
<PAGE>
Note 12 -- Risk Management Activities

Interest Rate Risk

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

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

        The interest rate caps specifically  limit the Company's  interest costs
with an upper limit on the  underlying  interest  rate  index.  The cost of such
contracts  are  included  in  deferred  charges  and are  being  amortized  as a
component of interest  expense over the life of the  contracts.  Amounts  earned
from interest rate protection contracts,  if any, are recorded as a reduction of
interest  expense.  The  Company  is  exposed  to credit  losses in the event of
counterparty  nonperformance,  but does not  anticipate any such losses based on
the creditworthiness of the counterparties.

        On December 22, 2000, the Company purchased an interest  rate cap with a
notional  amount of $90,000 to hedge its $90,000  Mezzanine Loan that was funded
on the same date.  The  interest  rate cap has a  three-year  term with a strike
price of 8.00% based on 30-day LIBOR.  The notional amount of this interest rate
cap  amortizes  monthly based on estimated  principal  repayments on the $90,000
Mezzanine Loan.  Additionally,  on December 22, 2000, the Company also purchased
an  interest  rate cap with a notional  amount of  $20,000 to hedge its  $20,000
Puerto Rico First  Mortgage Loan that was funded on the same date.  The interest
rate cap has a  three-year  term  with a strike  price of 8.00%  based on 30-day
LIBOR. In addition,  the Company held an additional  undesignated  interest rate
protection  cap with a notional  amount of $44,000 with a strike price of 7.00%,
based on 30-day LIBOR,  which matures in November 2001.  The notional  amount of
this  interest  rate cap  amortizes  $1,000  monthly.  See Note 2 -- "Summary of
Significant  Accounting  Policies"  and Note 6 -- "Bonds and Notes  Payable" for
additional information.

        Although derivative financial  instruments are an important component of
the Company's  interest rate management  program,  their  incremental  effect on
interest  expense for the years ended  December 31, 2000,  1999 and 1998 was not
material.

Economic Conditions

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

Note 13 -- Legal Proceedings

     On October  13, 2000 and  thereafter,  eight  complaints  were filed in the
United States  District  Court for the District of Maryland  against the Company
and four individual  defendants.  The four individual defendants are: William H.
Carpenter,  Jr., the former President and Chief Operating  Officer and a current
director of the Company;  Abraham Rosenthal,  the former Chief Executive Officer
and a former director of the Company; Michael W. Reschke, the former Chairman of
the Board and a current  director of the Company;  and Robert P. Mulreaney,  the
former  Executive Vice President - Chief Financial  Officer and Treasurer of the
Company.  The complaints  were brought by alleged  stockholders  of the Company,
individually   and   purportedly  as  class  actions  on  behalf  of  all  other
stockholders  of  the  Company.   The  complaints  allege  that  the  individual
defendants  made  statements  about the Company  that were in  violation  of the
federal  securities  laws. The  complaints  seek  unspecified  damages and other
relief.  The Lead  plaintiffs  and lead counsel  were  recently  appointed.  The
Company  expects a  consolidated  complaint to be filed within the next 60 days.
The Company believes that the complaints are without merit and intends to defend
them vigorously.  The outcome of these lawsuits,  and the ultimate  liability of
the defendants, if any, cannot be predicted.
<PAGE>
     The Company and its affiliates were defendants in a lawsuit filed on August
10, 1999 in the Circuit Court for  Baltimore  City and removed to U. S. District
Court for the  District of Maryland  (the "U.S.  District  Court") on August 20,
1999.  The  plaintiff   alleged  that  the  Company  and  its  related  entities
overcharged  tenants for common area  maintenance  charges  and  promotion  fund
charges.  The U.S.  District  Court  dismissed the lawsuit on June 19, 2000. The
plaintiff  has  filed a notice  of its  appeal  from the U.S.  District  Court's
decision  and a  briefing  schedule  has  been  isued by the  Court.  Management
believes that the Company has acted  properly and intends to defend this lawsuit
vigorously. While any litigation contains an element of uncertainty, the Company
believes the losses,  if any,  resulting from this case will not have a material
adverse effect on the consolidated financial statements of the Company.

     Several  entities (the  "Plaintiffs")  have filed or stated an intention to
file lawsuits (the  "Lawsuits")  against the Company and its affiliates in which
the Plaintiffs are seeking to hold them responsible under various legal theories
for  liabilities  incurred by  primeoutlets.com,  inc.,  also known as eOutlets,
including the theory that the Company guaranteed the obligations of eOutlets and
the theory that the Company was the alter ego of eOutlets. primeoutlets.com inc.
is also a defendant in some, but not all, of the Lawsuits.  The Company believes
that it is not liable to the  Plaintiffs  as there was no  privity  of  contract
between  it and the  various  Plaintiffs.  The  Company  intends  to defend  all
Lawsuits vigorously.  primeoutlets.com inc. filed for protection under Chapter 7
of the  United  States  Bankruptcy  Code  during  November  2000  under the name
E-Outlets  Resolution  Corp.  The trustee for  E-Outlets  Resolution  Corp.  has
notified the Company that he is  contemplating an action against the Company and
the Operating Partnership in which he may assert that E-Outlets Resolution Corp.
was the "alter-ego" of the Company and the Operating  Partnership and that, as a
result,  the Company and the Operating  Partnership  are liable for the debts of
E-Outlets  Resolution  Corp. If the trustee pursues such an action,  the Company
and the Operating  Partnership will defend  themselves  vigorously.  In the case
captioned  Convergys Customer  Management Group, Inc. v. Prime Retail,  Inc. and
primeoutlets.com  inc.,  currently  pending  in the  Court of  Common  Pleas for
Hamilton County (Ohio), the Company prevailed in a motion to dismiss Plaintiff's
claim that the Company was liable for primeoutlets.com inc.'s breach of contract
based on the  doctrine  of piercing  the  corporate  veil.  The outcome of these
Lawsuits,  and  the  ultimate  liability  of the  Company,  if  any,  cannot  be
predicted. While any litigation contains an element of uncertainty,  the Company
believes  the  losses,  if any,  resulting  from  the  Lawsuits  will not have a
material adverse effect on the consolidated financial statements of the Company.

     The New York Stock Exchange and the Securities and Exchange Commission have
notified the Company that they are  reviewing  transactions  in the stock of the
Company  prior to the  Company's  January  18,  2000  press  release  concerning
financial matters.
<PAGE>
                               Prime Retail, Inc.
             Schedule III - Real Estate and Accumulated Depreciation
                                December 31, 2000
                                 (in thousands)
<TABLE>
<CAPTION>
                                                       Costs Capitalized
                                       Initial Cost       Subsequent to       Gross Amount at Which
                                        to Company         Acquisition     Carried at Close of Period
                                     ----------------  ----------------   ----------------------------
                                              Bldgs &             Bldgs &             Bldgs &              Accum.    Constructed (C)
Description            Encumbrances  Land     Improve   Land      Improve    Land     Improve   Total    Depreciation   Acquired (A)
------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>       <C>        <C>       <C>       <C>     <C>      <C>       <C>        <C>             <C>
Prime Outlets at
 Anderson                $  8,755  $  1,125   $ 11,036  $     -   $   460 $  1,125 $  11,496 $ 12,621   $  955           Dec 1997(A)
Prime Outlets at
 Bend                       7,627     2,560      8,476    1,101     4,676    3,661    13,152   16,813    1,366           Feb 1997(A)
Prime Outlets at
 Burlington                14,214     3,694     21,370        -       (56)   3,694    21,314   25,008    2,177           Jun 1998(A)
Prime Outlets at
 Calhoun                   17,816     3,839     24,551        -       (58)   3,839    24,493   28,332    2,844           Jun 1998(A)
Prime Outlets at
 Castle Rock               34,973     4,424     47,200    2,717    15,214    7,141    62,414   69,555   13,309           Mar 1994(A)
Prime Outlets at
 Conroe                    16,541       405     18,714        -       152      405    18,866   19,271    2,207           Jun 1998(A)
Prime Outlets at
 Darien                    24,648         -          -    3,004    30,875    3,004    30,875   33,879    7,197           Jul 1995(C)
Prime Outlets at
 Edinburgh                 16,681     2,726     37,952        -     1,378    2,726    39,330   42,056    4,257           Jun 1998(A)
Prime Outlets at
 Ellenton                  28,644         -          -    5,457    49,542    5,457    49,542   54,999   11,234           Oct 1991(C)
Prime Outlets at
 Florida City              15,210         -          -    4,275    21,572    4,275    21,572   25,847    5,331          Sept 1994(C)
Prime Outlets at
 Fremont                   13,661     3,250     24,096        -        48    3,250    24,144   27,394    2,396           Jun 1998(A)
Prime Outlets at
 Gaffney                   31,209         -          -    1,886    33,262    1,886    33,262   35,148    6,263           Nov 1996(C)
Prime Outlets at
 Gainesville               20,263         -          -    1,100    30,420    1,100    30,420   31,520    8,195           Aug 1993(C)
Prime Outlets at
 Grove City                40,191     1,123     58,630      789     2,546    1,912    61,176   63,088    8,412           Nov 1996(A)
Prime Outlets at
 Gulfport                  19,429         -          -        -    35,282       -     35,282   35,282    7,494           Oct 1995(C)
Prime Outlets at
 Hagerstown                58,863         -          -    3,507    58,687    3,507    58,687   62,194    5,391           Aug 1998(C)
Prime Outlets at
 Hillsboro                 30,162     7,121     50,894        -       493    7,121    51,387   58,508    4,611           Jun 1998(A)
Prime Outlets at
 Huntley                   17,320         -          -    1,970    35,278    1,970    35,278   37,248    7,900          Sept 1994(C)
Prime Outlets at
 Jeffersonville I          25,813       843     31,084      250    14,788    1,093    45,872   46,965    9,968           Mar 1994(A)
Prime Outlets at
 Jeffersonville II         18,349       174     21,058        -   (13,399)     174     7,659    7,833    2,279           Jun 1998(A)
Prime Outlets at
 Kenosha                   23,355     6,995     39,558       50     2,930    7,045    42,488   49,533    4,224           Jun 1998(A)
Prime Outlets at
 Latham                     1,453       507      1,476        -    (1,015)     507       461      968       99           Oct 1997(A)
Prime Outlets at
 Lebanon                   18,378         -          -    2,689    32,098    2,689    32,098   34,787    4,354           Apr 1998(C)
Prime Outlets at
 Lee                       26,855     8,035     31,656        -     1,338    8,035    32,994   41,029    5,101           Jun 1998(A)
Prime Outlets at
 Lodi                      25,912     1,013     21,455      707    14,059    1,720    35,514   37,234    5,620          Sept 1997(A)
Prime Outlets at
 Loveland                  22,192     6,400     33,244        -       253    6,400    33,497   39,897    6,680           Nov 1996(A)
Melrose Place               1,970         -          -      499     1,891      499     1,891    2,390      867           Aug 1987(C)
Prime Outlets at
 Morrisville                9,166         -          -    2,502    21,221    2,502    21,221   23,723    6,244           Oct 1991(C)
Prime Outlets at
 Naples                    10,547     2,753     15,602        5     2,874    2,758    18,476    1,234    3,128           Mar 1994(A)
</TABLE>

<PAGE>
                               Prime Retail, Inc.
             Schedule III - Real Estate and Accumulated Depreciation
                                December 31, 2000
                                 (in thousands)

<TABLE>
<CAPTION>
                                                       Costs Capitalized
                                       Initial Cost       Subsequent to       Gross Amount at Which
                                        to Company         Acquisition     Carried at Close of Period
                                     ----------------  ----------------   ----------------------------
                                              Bldgs &             Bldgs &             Bldgs &              Accum.    Constructed (C)
Description            Encumbrances  Land     Improve   Land      Improve    Land     Improve   Total    Depreciation   Acquired (A)
------------------------------------------------------------------------------------------------------------------------------------
<S>                      <C>       <C>        <C>       <C>       <C>     <C>      <C>       <C>        <C>             <C>
Prime Outlets at
 Niagara Falls USA       $ 62,120  $  7,247   $ 82,842  $    - $  1,475  $  7,247 $   84,317 $    91,564 $   6,823       Dec 1997(A)
Prime Outlets at
 Odessa                    14,211       815     31,311       -  (12,510)      815     18,801      19,616     6,065       Nov 1996(A)
Prime Outlets at
 Oshkosh                   14,063     2,160     26,895       -      230     2,160     27,125      29,285     3,268       Jun 1998(A)
Prime Outlets at
 Perryville                 9,893     3,089     16,287       -      (65)    3,089     16,222      19,311     1,497       Jun 1998(A)
Prime Outlets at
 Pismo Beach               12,755     9,048     17,617       -      (50)    9,048     17,567      26,615     1,853       Jun 1998(A)
Prime Outlets at
 Post Falls                11,344     3,100     12,163       -   (7,728)    3,100      4,435       7,535     1,354       Feb 1997(A)
Prime Outlets of
 Puerto Rico               20,000         -          -   4,748   41,306     4,748     41,306      46,054       523       Jul 2000(C)
Prime Outlets at
 Queenstown                18,571     4,422     35,592       -      395     4,422     35,987      40,409     2,985       Jun 1998(A)
Prime Outlets at
 San Marcos                38,470         -          -   1,995    5,766     1,995      5,766       7,761    14,237       Aug 1990(C)
Prime Outlets at
 San Marcos                 2,992         -          -   4,468   17,680     4,468     17,680      22,148       796       Nov 1999(C)
Prime Outlets at
 Sedona                     6,769     1,924      9,099     750      427     2,674      9,526      12,200       974       Feb 1997(A)
Prime Outlets at
 Tracy                     12,994     6,170     16,715       -       66     6,170     16,781      22,951     2,053       Jun 1998(A)
Prime Outlets at
 Vero Beach                26,315     4,530     41,878       -    1,873     4,530     43,751      48,281     4,862       Jun 1998(A)
Prime Outlets at
 Warehouse Row             23,485         -          -   1,174   33,309     1,174     33,309      34,483    13,354       Nov 1989(C)
Western Plaza              10,521         -          -   2,000    7,395     2,000      7,395       9,395     1,744       Jun 1993(A)
Prime Outlets at
 Woodbury                  17,544     2,528     27,645       -  (14,281)    2,528     13,364      15,892     2,361       Jun 1998(A)
Property Under
 Development                    -         -          -   2,278    3,573     2,278      3,573       5,851         -             Under
                                                                                                                            Constru-
                                                                                                                               ction
Other Property             90,079         -      1,588       -    7,812         -      9,400       9,400     2,717       Mar. 1994 -
                                                                                                                        Dec. 1999(A)
                         --------  --------   -------- ------- --------  -------- ----------- ---------- ---------
                         $992,323  $102,020   $817,684 $49,921 $523,482  $151,941 $1,341,166  $1,493,107 $ 217,569
                         ========  ========   ======== ======= ========  ======== =========== ========== =========
</TABLE>
     At December 31, 2000, the Company had three  encumbered  properties,  Prime
Outlets at Silverthorne  (encumbrance of $25,314),  Northgate Plaza (encumbrance
of $5,990) and certain land  previously  held for  development  (encumbrance  of
$6,527),  classified  as held  for  sale  with an  aggregate  carrying  value of
$43,230.
<PAGE>


                               PRIME RETAIL, INC.

        Notes to Schedule III - Real Estate and Accumulated Depreciation

                                December 31, 2000

                                 (in thousands)

        Depreciation   on  building  and   improvements   is   calculated  on  a
straight-line basis over the estimated useful lives of the asset as follows:

             Land improvements..........................................20 years
             Buildings and improvements.....................Principally 40 years
             Tenant improvements...........................Term of related lease
             Furniture and equipment.....................................5 years

The aggregate  cost for federal  income tax purposes was  $1,498,106 at December
31, 2000.

<TABLE>
<CAPTION>
                                                                                                   Investment in Rental Property
                                                                                                       Year Ended December 31
                                                                                      ----------------------------------------------
                                                                                               2000            1999            1998
                                                                                      --------------  --------------  --------------
<S>                                                                                      <C>             <C>             <C>
Balance, beginning of year......................................................         $1,826,551      $2,015,722      $  904,782
Retirements.....................................................................             (6,281)         (4,727)           (880)
Acquisitions....................................................................                  -               -       1,013,231
Improvements....................................................................             51,833          89,969         145,174
Dispositions....................................................................           (309,942)       (138,321)        (46,585)
Transfer (to) from assets held for sale, net....................................             (4,513)       (108,968)              -
Provision for asset impairment on rental properties.............................            (64,541)        (13,572)              -
Provision for abandoned projects................................................                  -         (13,552)              -
                                                                                         ----------      ----------      ----------
Balance, end of year............................................................         $1,493,107      $1,826,551      $2,015,722
                                                                                         ==========      ==========      ==========


                                                                                                     Accumulated Depreciation
                                                                                                      Year Ended December 31
                                                                                      ----------------------------------------------
                                                                                               2000            1999            1998
                                                                                      --------------   -------------  --------------
Balance, beginning of year......................................................         $  183,954      $  127,747      $   82,033
Retirements.....................................................................             (6,281)         (4,727)           (880)
Other...........................................................................               (818)            346             134
Dispositions....................................................................            (23,469)         (6,787)         (5,178)
Transfer (to) from assets held for sale, net....................................             (2,672)         (5,502)              -
Depreciation for the year.......................................................             66,855          72,877          51,638
                                                                                         ----------      ----------      ----------
Balance, end of year............................................................         $  217,569      $  183,954      $  127,747
                                                                                         ==========      ==========      ==========
</TABLE>